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Interlinking securities settlement systems: a strategic commitment?

  • Kauko, Karlo

Central securities depositories (CSDs) have opened mutual links, but most of them are seldom used. Why are idle links established? By allowing a foreign CSD to offer services through the link the domestic CSD invites competition. The domestic CSD can determine the cost efficiency of the rival by charging suitable fees, and prevent it from becoming more competitive than the domestic CSD. By inviting the competitor the domestic CSD can commit itself not to charge monopoly fees for secondary market services. This enables the domestic CSD to charge high fees in the primary market without violating investors’ participation constraints. JEL Classification: G29, L13

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Paper provided by European Central Bank in its series Working Paper Series with number 0427.

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Date of creation: Jan 2005
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Handle: RePEc:ecb:ecbwps:20050427
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