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Economies of scale and technological development in securities depository and settlement systems

  • Schmiedel, Heiko
  • Malkamäki, Markku
  • Tarkka , Juha


    (Bank of Finland Research)

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    The paper investigates the existence and extent of economies of scale in depository and settlement systems. Evidence from 16 settlement institutions across different regions for the years 1993–2000 indicates the existence of significant economies of scale. The degree of such economies, however, differs by size of settlement institution and region. While smaller settlement service providers reveal high potential of economies of scale, larger institutions show an increasing trend of cost effectiveness. Clearing and settlement systems in countries in Europe and Asia report substantially larger economies of scale than those of the US system. European cross-border settlement seems to be more cost intensive than that on a domestic level, reflecting chiefly complexities of EU international securities settlement and differences in the scope of international settlement services providers. The evidence also reveals that investments in implementing new systems and upgrades of settlement technology continuously improved cost effectiveness over the sample period.

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    Paper provided by Bank of Finland in its series Research Discussion Papers with number 26/2002.

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    Length: 38 pages
    Date of creation: 13 Apr 2002
    Date of revision:
    Handle: RePEc:hhs:bofrdp:2002_026
    Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
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    1. Hasan, Iftekhar & Malkamaki, Markku, 2001. "Are expansions cost effective for stock exchanges? A global perspective," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2339-2366, December.
    2. Robert E. Litan & Alice M. Rivlin, 2001. "Projecting the Economic Impact of the Internet," American Economic Review, American Economic Association, vol. 91(2), pages 313-317, May.
    3. Schmiedel, Heiko, 2001. "Technological development and concentration of stock exchanges in Europe," Research Discussion Papers 21/2001, Bank of Finland.
    4. Pirrong, Craig, 1999. "The organization of financial exchange markets: Theory and evidence," Journal of Financial Markets, Elsevier, vol. 2(4), pages 329-357, November.
    5. Schmiedel, Heiko, 2002. "Total factor productivity growth in European stock exchanges: A non-parametric frontier approach," Research Discussion Papers 11/2002, Bank of Finland.
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