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Organizational Design, Competition, and Financial Exchanges

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  • Steffen Juranek
  • Uwe Walz

Abstract

We investigate the incentives for vertical and horizontal integration in the financial securities service industry. In a model with two exchanges and two central securities depositories (CSDs), we find that decentralized decisions might lead to privately and socially inferior industry equilibria with vertical integration of both CSDs with their respective exchanges. Allowing for horizontal integration of CSDs avoids privately inferior industry equilibria. However, we observe too little horizontal integration from the social perspective. We link our results to recent regulatory and institutional developments such as the emergence of multilateral trading facilities, over‐the‐counter regulation, and financial harmonization.

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  • Steffen Juranek & Uwe Walz, 2020. "Organizational Design, Competition, and Financial Exchanges," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 132-163, January.
    • Handle: RePEc:bla:scandj:v:122:y:2020:i:1:p:132-163
    DOI: 10.1111/sjoe.12325
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    References listed on IDEAS

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    1. Hans Degryse & Mark Van Achter & Gunther Wuyts, 2022. "Plumbing of Securities Markets: The Impact of Post-trade Fees on Trading and Welfare," Management Science, INFORMS, vol. 68(1), pages 635-653, January.

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