Guess what: It's the Settlements!
Exchanges and other trading platforms are often vertically integrated to carry out trading and settlement as one operation. We show that these vertical silos can prevent the full realization of efficincy gains from horizontal consolidation of trading and settlement platforms. Independent of the gains from such consolidation, when costs of settlement are private information, a merger of vertical silos cannot be designed to always ensure efficient trading and settlement after the merger. Furthermore, we show that efficiency can nevertheless be guaranteed either by delegating the operation of settlement platforms to agents or by forcing competition across vertical silos through cross-listings.
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- Tapking, Jens & Yang, Jing, 2004.
"Horizontal and vertical integration and securities trading and settlement,"
Working Paper Series
0387, European Central Bank.
- Tapking, Jens & Yang, Jing, 2006. "Horizontal and Vertical Integration in Securities Trading and Settlement," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1765-1795, October.
- Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England.
- Shy, Oz & Tarkka, Juha, 2001. "Stock exchange alliances, access fees and competition," Research Discussion Papers 22/2001, Bank of Finland.
- Tano Santos & Jose A. Scheinkman, 2001.
"Competition among Exchanges,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 116(3), pages 1027-1061.
- T. Santos & J. Scheinkman, 2000. "Competition Among Exchanges," Princeton Economic Theory Papers 00s12, Economics Department, Princeton University.
- Tano Santos & José A. Scheinkman, 2000. "Competition Among Exchanges," CRSP working papers 514, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Kauko, Karlo, 2005.
"Interlinking securities settlement systems: a strategic commitment?,"
Working Paper Series
0427, European Central Bank.
- Kauko, Karlo, 2007. "Interlinking securities settlement systems: A strategic commitment?," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2962-2977, October.
- Kauko, Karlo, 2003. "Interlinking securities settlement systems : A strategic commitment?," Research Discussion Papers 26/2003, Bank of Finland.
- Schmiedel, Heiko & Malkamäki, Markku & Tarkka, Juha, 2002. "Economies of scale and technological development in securities depository and settlement systems," Research Discussion Papers 26/2002, Bank of Finland.
- Roger B. Myerson & Mark A. Satterthwaite, 1981.
"Efficient Mechanisms for Bilateral Trading,"
469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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