Links between securities settlement systems: An oligopoly theoretic approach

Karlo Kauko
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Karlo Kauko: Bank of Finland

Industrial Organization from EconWPA

Abstract: This paper presents a duopoly model of the securities settlement industry. Because pooling a large amount of payments can help in using liquidity efficiently, issuers prefer systems where a large number of securities are issued. If the central securities depositories establish a mutual link that enables investors to make transactions with foreign securities, cost savings can be achieved. However, these links may have unexpected effects on CSDs’ pricing, and the issuers’ share of the fee burden can increase substantially. It is not advisable to ban additional fees for using the link, as the CSDs might simply increase the fee for domestic transactions.

Keywords: oligopoly; securities settlement systems (search for similar items in EconPapers)
JEL-codes: L13 G20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2004-05-11
Note: Type of Document - pdf
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0405003

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