Organizational Design,Competition, and Financial Exchanges |
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Authors: | Steffen Juranek Uwe Walz |
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Affiliation: | 1. Norwegian School of Economics (NHH), NO-5045 Bergen, Norway;2. Goethe University Frankfurt, DE-60323 Frankfurt, Germany |
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Abstract: | We investigate the incentives for vertical and horizontal integration in the financial securities service industry. In a model with two exchanges and two central securities depositories (CSDs), we find that decentralized decisions might lead to privately and socially inferior industry equilibria with vertical integration of both CSDs with their respective exchanges. Allowing for horizontal integration of CSDs avoids privately inferior industry equilibria. However, we observe too little horizontal integration from the social perspective. We link our results to recent regulatory and institutional developments such as the emergence of multilateral trading facilities, over-the-counter regulation, and financial harmonization. |
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Keywords: | Competition horizontal integration settlement trading vertical integration |
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