IDEAS home Printed from
   My bibliography  Save this paper

Horizontal and vertical integration in securities trading and settlement


  • Jens Tapking
  • Jing Yang


This paper addresses a very European issue, the consolidation of securities trading and settlement infrastructures. In a two-country model, we analyse welfare implications of different types of consolidation. We find that 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 regard to the highly fragmented European securities infrastructure.

Suggested Citation

  • Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England.
  • Handle: RePEc:boe:boeewp:245

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Kauko, Karlo, 2007. "Interlinking securities settlement systems: A strategic commitment?," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2962-2977, October.
    2. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    3. Carmine di Noia, 1998. "Competition and Integration among Stock Exchanges in Europe: Network Effects, Implicit Mergers and Remote Access," Center for Financial Institutions Working Papers 98-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. 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.
    5. Nicholas Economides & Robert Schwartz,, "undated". "Electronic Call Market Trading," Financial Networks _001, Economics of Networks.
    6. John Vickers, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 1-17.
    7. Shy, Oz & Tarkka, Juha, 2001. "Stock exchange alliances, access fees and competition," Research Discussion Papers 22/2001, Bank of Finland.
    8. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
    9. Monnet, Cyril & Koeppl, Thorsten Volker, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank.
    10. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
    11. 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.
    12. Domowitz, Ian, 1995. "Electronic derivatives exchanges: Implicit mergers, network externalities, and standardization," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(2), pages 163-175.
    13. repec:reg:rpubli:279 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. James T. E. Chapman, 2008. "Policy Coordination in an International Payment System," Staff Working Papers 08-17, Bank of Canada.
    2. 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.
    3. 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.
    4. 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.
    5. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Staff Working Papers 07-28, Bank of Canada.
    6. Degryse, H.A. & van Achter, M. & Wuyts, G., 2012. "Internalization, Clearing and Settlement, and Liquidity," Discussion Paper 2012-001, Tilburg University, Tilburg Law and Economic Center.
    7. Holthausen, Cornelia & Tapking, Jens, 2004. "Raising rival's costs in the securities settlement industry," Working Paper Series 376, European Central Bank.
    8. Monnet, Cyril & Koeppl, Thorsten Volker, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank.
    9. Alexandra Lai & Nikil Chande & Sean O'Connor, 2006. "Credit in a Tiered Payments System," Staff Working Papers 06-36, Bank of Canada.
    10. Milne, Alistair, 2007. "The industrial organization of post-trade clearing and settlement," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2945-2961, October.
    11. Sauer, Stephan & Mercier, Fabien, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series 1549, European Central Bank.
    12. 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).
    13. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    14. 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.
    15. Tapking, Jens, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 710, European Central Bank.
    16. 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.
    17. 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.
    18. 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.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:245. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Media Team). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.