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Interlinking securities settlement systems: A strategic commitment?

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  • Kauko, Karlo

    ()
    (Bank of Finland Research)

Abstract

Central securities depositories (CSDs) have opened mutual links, but most of them are seldom used. Why are idle links established? By allowing a foreign CSD to offer services through the link the domestic CSD invites competition. The domestic CSD can determine the cost efficiency of the rival by charging suitable fees, and prevent it from becoming more competitive than the domestic CSD. By inviting the competitor the domestic CSD can commit itself not to charge monopoly fees for secondary market services. This enables the domestic CSD to charge high fees in the primary market without violating investors’ participation constraints.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0326.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 26/2003.

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Length: 43 pages
Date of creation: 29 Oct 2003
Date of revision:
Handle: RePEc:hhs:bofrdp:2003_026

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: securities settlement systems; central securities depositories; network industries; access pricing;

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References

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  2. Jean-Jacques Laffont & Jean Tirole, 1994. "Access Pricing and Competition," Working papers 94-31, Massachusetts Institute of Technology (MIT), Department of Economics.
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  9. Leinonen, Harry, 2003. "Restructuring securities systems processing – a blue print proposal for real-time/t+0 processing," Research Discussion Papers 7/2003, Bank of Finland.
  10. Claude Crampes & Jean-Jaques Laffont, 2001. "Transport Pricing in the Electricity Industry," Oxford Review of Economic Policy, Oxford University Press, vol. 17(3), pages 313-328.
  11. Heiko Schmiedel & Andreas Schönenberger, 2005. "Integration of securities market infrastructures in the euro area," Occasional Paper Series 33, European Central Bank.
  12. Barclay, Michael J. & Kandel, Eugene & Marx, Leslie M., 1998. "The Effects of Transaction Costs on Stock Prices and Trading Volume," Journal of Financial Intermediation, Elsevier, vol. 7(2), pages 130-150, April.
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  15. Schmiedel, Heiko & Malkamäki, Markku & Tarkka , Juha, 2002. "Economies of scale and technological development in securities depository and settlement systems," Research Discussion Papers 26/2002, Bank of Finland.
  16. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
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Citations

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Cited by:
  1. Thorsten Koeppl & Cyril Monnet, 2005. "Guess what: It's the Settlements!," Working Papers 1051, Queen's University, Department of Economics.
  2. Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 91-116, January.
  3. Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England.
  4. Martin, Antoine & McAndrews, James, 2010. "A study of competing designs for a liquidity-saving mechanism," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1818-1826, August.
  5. Dominique Chabert & Gisèle Chanel-Reynaud, 2006. "The evolution of central securities depositaries in Europe : stable functions in a changing environment," Revue d'Économie Financière, Programme National Persée, vol. 82(1), pages 203-220.
  6. Mercier, Fabien & Sauer, Stephan, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series 1549, European Central Bank.
  7. Koppl, Thorsten V. & Monnet, Cyril, 2007. "Guess what: It's the settlements! Vertical integration as a barrier to efficient exchange consolidation," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3013-3033, October.
  8. Tapking, Jens, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 0710, European Central Bank.
  9. Dominique Chabert & Gisèle Chanel-Reynaud, 2006. "L’évolution des dépositaires centraux de titres en Europe : des fonctions stables dans un espace mouvant," Revue d'Économie Financière, Programme National Persée, vol. 82(1), pages 221-239.
  10. Ende, Bartholomäus & Lutat, Marco, 2010. "Trade-throughs in European cross-traded equities after transaction costs: Empirical evidence for the EURO STOXX 50," CFS Working Paper Series 2010/15, Center for Financial Studies (CFS).

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