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Guess what: It's the Settlements!

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Author Info
Thorsten Koeppl () (Department of Economics, Queen's University)
Cyril Monnet () (DG Research, European Central Bank)

Additional information is available for the following registered author(s):

Abstract

Exchanges and other trading platforms are often vertically integrated to carry out trading and settlement as one operation. We show that these vertical silos can prevent the full realization of efficincy gains from horizontal consolidation of trading and settlement platforms. Independent of the gains from such consolidation, when costs of settlement are private information, a merger of vertical silos cannot be designed to always ensure efficient trading and settlement after the merger. Furthermore, we show that efficiency can nevertheless be guaranteed either by delegating the operation of settlement platforms to agents or by forcing competition across vertical silos through cross-listings.

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1051.pdf
File Format: application/pdf
File Function: First version 2005
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1051.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 30 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:qed:wpaper:1051

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Related research
Keywords: Clearing and Settlement Cross-listing Vertical and Horizontal Integration Mechanism Design

Other versions of this item:

Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
G20 - Financial Economics - - Financial Institutions and Services - - - General
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Francisco Maeso-Fernandez & Chiara Osbat & Bernd Schnatz, 2004. "Towards the estimation of equilibrium exchange rates for CEE acceding countries: methodological issues and a panel cointegration perspective," Working Paper Series 353, European Central Bank. [Downloadable!]
  2. Tano Santos & Joséa. Scheinkman, 2001. "Competition Among Exchanges," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1027-1061, August. [Downloadable!] (restricted)
    Other versions:
  3. Shy, Oz & Tarkka, Juha, 2001. "Stock exchange alliances, access fees and competition," Research Discussion Papers 22/2001, Bank of Finland. [Downloadable!]
  4. A Matas-Mir & D R Osborn, 2003. "Seasonal Adjustment and the Detection of Business Cycle Phases," The School of Economics Discussion Paper Series 0304, Economics, The University of Manchester. [Downloadable!]
    Other versions:
  5. Athanasios Orphanides & John C. Williams, 2004. "The decline of activist stabilization policy: Natural rate misperceptions, learning and expectations," Working Paper Series 337, European Central Bank. [Downloadable!]
    Other versions:
  6. 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. [Downloadable!]
  7. Catherine Fuss & Philip Vermeulen, 2004. "Firms' investment decisions in response to demand and price uncertainty," Research series 200404-2, National Bank of Belgium. [Downloadable!]
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  8. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
    Other versions:
  9. Marcel Fratzscher & Matthieu Bussiere, 2004. "Financial openness and growth: Short-run gain, long-run pain?," Working Paper Series 348, European Central Bank. [Downloadable!]
  10. Kauko, Karlo, 2003. "Interlinking securities settlement systems: A strategic commitment?," Research Discussion Papers 26/2003, Bank of Finland. [Downloadable!]
  11. Alistair Dieppe & Keith Küster & Peter McAdam, 2004. "Optimal monetary policy rules for the euro area: an analysis using the area wide model," Working Paper Series 360, European Central Bank. [Downloadable!]
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  12. Robert G. King & Alexander L. Wolman, 2004. "Monetary discretion, pricing complementarity and dynamic multiple equilibria," International Finance Discussion Papers 802, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  13. Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration and securities trading and settlement," Working Paper Series 387, European Central Bank. [Downloadable!]
    Other versions:
  14. repec:fth:bfdipa:22/2001 is not listed on IDEAS
  15. Michael Ehrmann & Marcel Fratzscher, 2002. "Interdependence between the euro area and the US: what role for EMU?," Working Paper Series 200, European Central Bank. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jens Tapking & Jing Yang, . "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England. [Downloadable!]
    Other versions:
  2. Jens Tapking, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 710, European Central Bank. [Downloadable!]
  3. Baris Serifsoy & Marco Weiß, 2007. "Settling for Efficiency - A Framework for the European Securities Transactions Industry," Working Paper Series: Finance and Accounting 151, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
    Other versions:
  4. Cornelia Holthausen & Jens Tapking, 2004. "Raising rival's costs in the securities settlement industry," Working Paper Series 376, European Central Bank. [Downloadable!]
    Other versions:
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