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Competition between clearing houses on the European market

Author

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  • Marie-Noëlle Calès

    () (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Laurent Granier

    () (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Nadège Marchand

    () (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

Abstract

For several years, European financial markets have been the place of important mutations. These mutations have hit both stock markets themselves as well as the infrastructures including all necessary services for the transactions on financial securities. Among the market services to which the investors appeal, is the clearing of the orders, the service which allows reducing exchanged flows while guaranteeing their safety. The market of clearing became strongly competitive with the arrival of new Pan European clearing houses. Confronted with aggressive pricing policies, "incumbent" clearing houses have to adopt new strategies : merger, simple or mutual links of interoperability. We develop a model of industrial organization to appreciate the consequences of these various strategies in terms of price and social welfare. The strategic incentives of clearing houses and their effects on their customers, i.e. investors, are observed by means of a sequential game. We show that the interoperability agreements are never reached at the equilibrium in spite of the fact that the "European code of good practice" of postmarkets incites them to accept this type of agreements. On the other hand, a merger between incumbent clearing houses can occur under some conditions. The merger is beneficial to these last ones as well as to the investors, but it is unfavourable to the Pan European clearing houses.

Suggested Citation

  • Marie-Noëlle Calès & Laurent Granier & Nadège Marchand, 2015. "Competition between clearing houses on the European market," Working Papers halshs-00690901, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00690901
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00690901v2
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Krahnen, Jan Pieter & Pelizzon, Loriana, 2016. ""Predatory" margins and the regulation and supervision of central counterparty clearing houses (CCPs)," SAFE White Paper Series 41, Goethe University Frankfurt, Research Center SAFE - Sustainable Architecture for Finance in Europe.

    More about this item

    Keywords

    bundling; clearing house; interoperability; merger; post-market organization; organisation des post-marchés; ventes liées; chambre de compensation; fusion;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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