Vertical integration, competition, and financial exchanges: Is there grain in the silo?
We investigate the incentives for vertical or horizontal integration in the financial security service industry, consisting of trading, clearing and settlement. We thereby focus on firms' decisions but also look on the implications of these decisions on competition and welfare. Our analysis shows that the incentives for vertical integration crucially depend on industry as well as market characteristics. A more pronounced demand for liquidity clearly favors vertical integration whereas deeper financial integration increases the incentives to undertake vertical integration only if the efficiency gains associated with vertical integration are sufficiently large. Furthermore, we show that market forces can suffer from a coordination problem that end in vertically integrated structures that are not in the best interest of the firms. We believe this problem can be addressed by policy measures such as the TARGET2-Securities program. Furthermore, we use our framework to discuss major industry trends and policy initiatives.
|Date of creation:||2010|
|Contact details of provider:|| Postal: House of Finance, Grüneburgplatz 1, HPF H5, D-60323 Frankfurt am Main|
Phone: +49 (0)69 798-30050
Fax: +49 (0)69 798-30077
Web page: http://www.ifk-cfs.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thierry Foucault & Christine A. Parlour, 2004.
"Competition for Listings,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(2), pages 329-355, Summer.
- Thierry Foucault & Christine a Parlour, "undated". "Competition for Listings," GSIA Working Papers 2000-E11, Carnegie Mellon University, Tepper School of Business.
- FOUCAULT, Thierry & PARLOUR, Christine A., 1999. "Competition for Listings," Les Cahiers de Recherche 666, HEC Paris.
- Foucault, Thierry & Parlour, Christine A, 1999. "Competition for Listings," CEPR Discussion Papers 2222, C.E.P.R. Discussion Papers.
- Thierry Foucault & Christine Parlour, 2011. "Competition for Listings," Working Papers hal-00599911, HAL.
- Thierry Foucault & Christine Parlour, 2004. "Competition for Listings," Post-Print hal-00481211, HAL.
- Kauko, Karlo, 2004. "The links between securities settlement systems: An oligopoly theoretic approach," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 585-600.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- 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.
- Koppl, Thorsten V. & Monnet, Cyril, 2007. "Guess what: It's the settlements! Vertical integration as a barrier to efficient exchange consolidation," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3013-3033, October.
- Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 91-116, January.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, July.
- Terrence Hendershott & Charles M. Jones & Albert J. Menkveld, 2011. "Does Algorithmic Trading Improve Liquidity?," Journal of Finance, American Finance Association, vol. 66(1), pages 1-33, 02.
- Hendershott, Terrence & Jones, Charles M. & Menkveld, Albert J., 2008. "Does algorithmic trading improve liquidity?," CFS Working Paper Series 2008/41, Center for Financial Studies (CFS).
- Michael Halling & Marco Pagano & Otto Randl & Josef Zechner, 2008. "Where Is the Market? Evidence from Cross-Listings in the United States," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 725-761, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:zbw:cfswop:201022. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.