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Horizontal and Vertical Integration in Securities Trading and Settlement

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  • Tapking, Jens
  • Yang, Jing

Abstract

This paper addresses a very European issue, the consolidation of securities trading and settlement infrastructures. In a two-country model, we analyze welfare implications of different types of consolidation. We find that in our model, full technical horizontal integration of settlement systems is better than vertical integration of exchanges and settlement systems, but vertical integration is still better than no consolidation. These findings have clear policy implications with regards to the highly fragmented European securities infrastructure.

Suggested Citation

  • Tapking, Jens & Yang, Jing, 2006. "Horizontal and Vertical Integration in Securities Trading and Settlement," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1765-1795, October.
  • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:7:p:1765-1795
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    References listed on IDEAS

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    1. Kauko, Karlo, 2007. "Interlinking securities settlement systems: A strategic commitment?," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2962-2977, October.
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    7. Monnet, Cyril & Koeppl, Thorsten Volker, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank.
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    Citations

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    Cited by:

    1. Holthausen, Cornelia & Tapking, Jens, 2004. "Raising rival's costs in the securities settlement industry," Working Paper Series 376, European Central Bank.
    2. Degryse, Hans & Van Achter, Mark & Wuyts, Gunther, 2012. "Internalization, Clearing and Settlement, and Liquidity," CEPR Discussion Papers 8765, C.E.P.R. Discussion Papers.
    3. 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.
    4. Alexandra Lai & Nikil Chande & Sean O'Connor, 2006. "Credit in a Tiered Payments System," Staff Working Papers 06-36, Bank of Canada.
    5. Li, Shaofang & Marinč, Matej, 2016. "Competition in the clearing and settlement industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 134-162.
    6. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Staff Working Papers 07-28, Bank of Canada.
    7. Milne, Alistair, 2007. "The industrial organization of post-trade clearing and settlement," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2945-2961, October.
    8. Tapking, Jens, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 710, European Central Bank.
    9. John P Jackson & Mark J Manning, 2007. "Comparing the pre-settlement risk implications of alternative clearing arrangements," Bank of England working papers 321, Bank of England.
    10. Monnet, Cyril & Koeppl, Thorsten Volker, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank.
    11. Sauer, Stephan & Mercier, Fabien, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series 1549, European Central Bank.
    12. 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.
    13. James T. E. Chapman, 2008. "Policy Coordination in an International Payment System," Staff Working Papers 08-17, Bank of Canada.
    14. Josanco Floreani & Maurizio Polato, 2010. "Consolidation and Business Strategies in the Securities Industry: How Securities Exchanges Create Value?," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 28-42, November.
    15. Serifsoy, Baris & Wei[ss], Marco, 2007. "Settling for efficiency - A framework for the European securities transaction industry," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3034-3057, October.
    16. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    17. Juranek, Steffen & Walz, Uwe, 2010. "Vertical integration, competition, and financial exchanges: Is there grain in the silo?," CFS Working Paper Series 2010/22, Center for Financial Studies (CFS).
    18. Frédéric Cherbonnier & Séverine Vandelanoite, 2007. "Enjeux économiques liés à l’intégration des industries du post-marché en Europe," Revue d'Économie Financière, Programme National Persée, vol. 89(3), pages 123-142.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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