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Horizontal and vertical integration and 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 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. JEL Classification: G21, G15, L13

Suggested Citation

  • Tapking, Jens & Yang, Jing, 2004. "Horizontal and vertical integration and securities trading and settlement," Working Paper Series 387, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2004387
    Note: 428113
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Degryse, H.A. & van Achter, M. & Wuyts, G., 2012. "Internalization, Clearing and Settlement, and Liquidity," Other publications TiSEM 3744cb8d-b4ce-47a1-9abd-f, Tilburg University, School of Economics and Management.
    3. Alexandra Lai & Nikil Chande & Sean O'Connor, 2006. "Credit in a Tiered Payments System," Staff Working Papers 06-36, Bank of Canada.
    4. Steffen Juranek & Uwe Walz, 2020. "Organizational Design, Competition, and Financial Exchanges," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 132-163, January.
    5. Alexandra Lai & Nikil Chande & Sean O'Connor, 2006. "Credit in a Tiered Payments System," Staff Working Papers 06-36, Bank of Canada.
    6. 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.
    7. Li, Shaofang & Marinč, Matej, 2018. "Economies of scale and scope in financial market infrastructures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 17-49.
    8. 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.
    9. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Staff Working Papers 07-28, 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. Seven Ipek & Cumhur Ekinci, 2022. "Cost efficiency in financial exchanges and post-trade infrastructures: a closer look at integration and product diversification," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 705-743, December.
    12. Tapking, Jens, 2007. "Pricing of settlement link services and mergers of central securities depositories," Working Paper Series 710, European Central Bank.
    13. 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.
    14. Monnet, Cyril & Koeppl, Thorsten Volker, 2004. "Guess what: it's the settlements!," Working Paper Series 375, European Central Bank.
    15. Sauer, Stephan & Mercier, Fabien, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series 1549, European Central Bank.
    16. 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.
    17. James Chapman, 2008. "Policy Coordination in an International Payment System," Staff Working Papers 08-17, Bank of Canada.
    18. 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.
    19. 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.
    20. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    21. Paolo Casini, 2010. "The industrial organization of financial services in developing and developed countries," ULB Institutional Repository 2013/210176, ULB -- Universite Libre de Bruxelles.
    22. 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).
    23. 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.

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    More about this item

    Keywords

    Securities trading and settlement; substitutes and complements.; vertical and horizontal integration;
    All these keywords.

    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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