Research Discussion Papers, Bank of Finland
No 26/2002:
Economies of scale and technological development in securities depository and settlement systems
Heiko Schmiedel, Markku Malkamäki and Juha Tarkka ()
Abstract: The paper investigates the existence and extent of
economies of scale in depository and settlement systems. Evidence from 16
settlement institutions across different regions for the years 1993–2000
indicates the existence of significant economies of scale. The degree of
such economies, however, differs by size of settlement institution and
region. While smaller settlement service providers reveal high potential of
economies of scale, larger institutions show an increasing trend of cost
effectiveness. Clearing and settlement systems in countries in Europe and
Asia report substantially larger economies of scale than those of the US
system. European cross-border settlement seems to be more cost intensive
than that on a domestic level, reflecting chiefly complexities of EU
international securities settlement and differences in the scope of
international settlement services providers. The evidence also reveals that
investments in implementing new systems and upgrades of settlement
technology continuously improved cost effectiveness over the sample
period.
Keywords: securities settlement; economies of scale; technological progress; (follow links to similar papers)
JEL-Codes: D40; F36; G20; L22; O33; (follow links to similar papers)
38 pages, April 13, 2002
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