Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5091191 | Journal of Banking & Finance | 2007 | 21 Pages |
Abstract
Exchanges and other trading platforms are often vertically integrated to carry out trading and settlement as one operation. We show that these vertical silos can prevent the full realization of efficiency gains from horizontal consolidation of trading and settlement platforms. When costs of settlement are private information, a merger of vertical silos cannot be designed to always ensure efficient trading and settlement after the merger. We also show, however, that efficiency can be guaranteed either by merging the trading platforms and delegating the operation of settlement platforms to independent agents or by forcing competition across vertical silos through cross-listings.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Thorsten V. Köppl, Cyril Monnet,