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Links between securities settlement systems: An oligopoly theoretic approach

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  • Karlo Kauko

    (Bank of Finland)

Abstract

This paper presents a duopoly model of the securities settlement industry. Because pooling a large amount of payments can help in using liquidity efficiently, issuers prefer systems where a large number of securities are issued. If the central securities depositories establish a mutual link that enables investors to make transactions with foreign securities, cost savings can be achieved. However, these links may have unexpected effects on CSDs’ pricing, and the issuers’ share of the fee burden can increase substantially. It is not advisable to ban additional fees for using the link, as the CSDs might simply increase the fee for domestic transactions.

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File URL: http://128.118.178.162/eps/io/papers/0405/0405003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0405003.

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Date of creation: 11 May 2004
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Handle: RePEc:wpa:wuwpio:0405003

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Web page: http://128.118.178.162

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Keywords: oligopoly; securities settlement systems;

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  1. Keloharju, Matti & Malkamäki, Markku & Nyborg, Kjell G. & Rydqvist, Kristian, 2002. "A descriptive analysis of the Finnish treasury bond market 1991–1999," Research Discussion Papers 16/2002, Bank of Finland.
  2. Paloviita , Maritta, 2002. "Inflation dynamics in the euro area and the role of expectations," Research Discussion Papers 20/2002, Bank of Finland.
  3. Välimäki, Tuomas, 2002. "Bidding in fixed rate tenders: theory and experience with the ECB tenders," Research Discussion Papers 1/2002, Bank of Finland.
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  5. Junttila, Juha, 2002. "Forecasting the macroeconomy with current financial market information: Europe and the United States," Research Discussion Papers 2/2002, Bank of Finland.
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  7. Honkapohja, Seppo & Mitra, Kaushik, 2002. "Performance of monetary policy with internal central bank forecasting," Research Discussion Papers 3/2002, Bank of Finland.
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  9. Iftekhar Hasan & Sudipto Sarkar, 2002. "Banks' option to lend, interest rate sensitivity, and credit availability," Review of Derivatives Research, Springer, vol. 5(3), pages 213-250, October.
  10. Hyytinen, Ari & Kuosa, Iikka & Takalo, Tuomas, 2002. "Law of finance: Evidence from Finland," Research Discussion Papers 8/2002, Bank of Finland.
  11. Kanniainen, Vesa & Leppämäki, Mikko, 2002. "Financial institutions and the allocation of talent," Research Discussion Papers 5/2002, Bank of Finland.
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Cited by:
  1. Holthausen, Cornelia & Tapking, Jens, 2004. "Raising rival's costs in the securities settlement industry," Working Paper Series 0376, European Central Bank.

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