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The reform of European securities settlement systems: Towards an integrated financial market

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  • Marie-Noëlle Calès

    () (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

  • Dominique Chabert

    (Université de Lyon, Lyon F-69007, France)

  • Walid Hichri

    () (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

  • Nadège Marchand

    () (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

Abstract

The European Central Bank (ECB) will offer to banks in 2013 an european shared platform for securities settlement, named TARGET 2 Securities (T2S), in order to open the national financial markets. The financial crisis did not change the ECB agenda. This paper develops a spatial competition model to understand the impact of this new organisation on european post-trading services. We analyse the incentives of the Central Securities Depositaries (CSD) to move to T2S when they become competitors in the market for settlement services and remain in a monopoly position for depository services. Settlement and depository services are complementary goods, because banks have to pay for these two services to buy or sell a security. We show that such a reform should induce a decrease in the settlement price and more generally in post-trading prices, but that prices depend strongly on market organisation. Under certain conditions, partial adhesion would make prices increase. This configuration appears as a Nash equilibrium. As CSDs are free to adhere to T2S, the ECB might be forced to regulate.

Suggested Citation

  • Marie-Noëlle Calès & Dominique Chabert & Walid Hichri & Nadège Marchand, 2011. "The reform of European securities settlement systems: Towards an integrated financial market," Working Papers 1129, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:1129
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    References listed on IDEAS

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    1. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. 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.
    4. Schönenberger, Andreas & Schmiedel, Heiko, 2005. "Integration of securities market infrastructure in the euro area," Occasional Paper Series 33, European Central Bank.
    5. Heiko Schmiedel & Andreas Schönenberger, 2005. "Integration of securities market infrastructures in the euro area," Occasional Paper Series 33, European Central Bank.
    6. Van Cayseele, Patrick & Wuyts, Christophe, 2007. "Cost efficiency in the European securities settlement and depository industry," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3058-3079, October.
    7. Schmiedel, Heiko & Malkamaki, Markku & Tarkka, Juha, 2006. "Economies of scale and technological development in securities depository and settlement systems," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1783-1806, June.
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    Cited by:

    1. Sauer, Stephan & Mercier, Fabien, 2013. "Optimal CSD reshaping towards T2S," Working Paper Series 1549, European Central Bank.

    More about this item

    Keywords

    Post-trading organisation; securities settlement; depositary services; compatibility;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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