Research Discussion Papers, Bank of Finland
Interlinking securities settlement systems: A strategic commitment?
Abstract: Central securities depositories (CSDs) have opened mutual
links, but most of them are seldom used. Why are idle links established? By
allowing a foreign CSD to offer services through the link the domestic CSD
invites competition. The domestic CSD can determine the cost efficiency of
the rival by charging suitable fees, and prevent it from becoming more
competitive than the domestic CSD. By inviting the competitor the domestic
CSD can commit itself not to charge monopoly fees for secondary market
services. This enables the domestic CSD to charge high fees in the primary
market without violating investors’ participation constraints.
Keywords: securities settlement systems; central securities depositories; network industries; access pricing; (follow links to similar papers)
JEL-Codes: G29; L13; (follow links to similar papers)
43 pages, October 29, 2003
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