The reform of European securities settlement systems: Towards an integrated financial market

Marie-Noëlle Calès (), Dominique Chabert (), Walid Hichri and Nadège Marchand
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Marie-Noëlle Calès: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique
Dominique Chabert: Université de Lyon

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Abstract: The European Central Bank (ECB) will offer to banks in 2013 an european shared platform for securities settlement, named TARGET 2 Securities (T2S), in order to open the national financial markets. The financial crisis did not change the ECB agenda. This paper develops a spatial competition model to understand the impact of this new organisation on european post-trading services. We analyse the incentives of the Central Securities Depositaries (CSD) to move to T2S when they become competitors in the market for settlement services and remain in a monopoly position for depository services. Settlement and depository services are complementary goods, because banks have to pay for these two services to buy or sell a security. We show that such a reform should induce a decrease in the settlement price and more generally in post-trading prices, but that prices depend strongly on market organisation. Under certain conditions, partial adhesion would make prices increase. This configuration appears as a Nash equilibrium. As CSDs are free to adhere to T2S, the ECB might be forced to regulate.

Keywords: Post-trading organisation; securities settlement; depositary services; compatibility (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-fmk
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00639957v1
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Published in 2011

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Related works:
Working Paper: The reform of European securities settlement systems: Towards an integrated financial market (2013)
Working Paper: The reform of European securities settlement systems: Towards an integrated financial market (2011)
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