Scientific Monographs, Bank of Finland
No E:28/2004:
Performance of international securities markets
Heiko Schmiedel
Abstract: This study evaluates the performance of international
securities markets by analysing the efficiency, economies of scale, and
technological development in stock exchanges and securities settlement
systems. Implications for future policy and market design are also
addressed. This work provides empirical support for theoretical projections
in research on stock markets. At the heart of this study is an
international comparison that explores productivity, efficiency, and
innovation of a wide range of stock exchanges over recent years. There is
evidence of considerable variability in the efficiency of stock exchanges,
both within Europe and world-wide. The evidence also indicates a positive
relationship between the organisational structure and performance of the
stock exchanges. It also reveals that technological change is the key
driver of rising total productivity and appears to be advantageous for the
performance of international securities markets. Furthermore, the study
conveys how strategic interactions between stock exchanges are affected by
network activity, and examines its influence on stock market performance.
The adoption of network strategies was observed to be a promising tool for
creating added value in the provision of trading services, and appears to
be a crucial component in the strategic decision-making and performance of
stock exchanges. The study also examines how far consolidation of and
mergers among securities depository and settlement systems might go in the
face of economies of scale and technological advancements. The results
indicate substantial scale economies in settlement activities, although the
extent of such effects differs by size of settlement institution and
region. Overall, cost effectiveness has improved in recent years, partly
due to innovations and upgrades in settlement technologies. Finally, the
results are relevant for practitioners, policymakers, monetary and
regulatory authorities, as they suggest further equity market integration.
Networks, alliances, mergers and so forth seek to improve market
efficiency, explore the benefits of economies of scale, and reduce the
average transaction cost to end-users.
Keywords: exchanges; settlement systems; networks; economies of scale; efficiency; (follow links to similar papers)
JEL-Codes: C20; F30; G20; L20; O30; (follow links to similar papers)
276 pages, May 29, 2004
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