The Reform of European Securities Settlement Systems: Towards an Integrated Financial Market

Groupe d’Analyse et de Théorie Économique Lyon‐St Étienne (GATE) Working Paper No. 1129

21 Pages Posted: 10 Nov 2011

See all articles by Marie-Noëlle Calès

Marie-Noëlle Calès

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Dominique Chabert

affiliation not provided to SSRN

Walid Hichri

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Nadege Marchand

Groupe d' Analyse et de Theorie Economique (GATE)

Date Written: November 1, 2011

Abstract

The European Central Bank (ECB) will offer to banks in 2013 an european shared platform for securities settlement, named TARGET 2 Securities (T2S), in order to open the national financial markets. The financial crisis did not change the ECB agenda. This paper develops a spatial competition model to understand the impact of this new organisation on european post-trading services. We analyse the incentives of the Central Securities Depositaries (CSD) to move to T2S when they become competitors in the market for settlement services and remain in a monopoly position for depository services. Settlement and depository services are complementary goods, because banks have to pay for these two services to buy or sell a security. We show that such a reform should induce a decrease in the settlement price and more generally in post-trading prices, but that prices depend strongly on market organisation. Under certain conditions, partial adhesion would make prices increase. This configuration appears as a Nash equilibrium. As CSDs are free to adhere to T2S, the ECB might be forced to regulate.

Keywords: Post-trading organisation, securities settlement, depositary services, compatibility

JEL Classification: D43, G15, G20

Suggested Citation

Calès, Marie-Noëlle and Chabert, Dominique and Hichri, Walid and Marchand, Nadege, The Reform of European Securities Settlement Systems: Towards an Integrated Financial Market (November 1, 2011). Groupe d’Analyse et de Théorie Économique Lyon‐St Étienne (GATE) Working Paper No. 1129. Available at SSRN: https://ssrn.com/abstract=1957565 or http://dx.doi.org/10.2139/ssrn.1957565

Marie-Noëlle Calès (Contact Author)

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

Dominique Chabert

affiliation not provided to SSRN ( email )

Walid Hichri

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33(0) 611 552 457 (Phone)
+33 (0) 472 866 090 (Fax)

HOME PAGE: http://www.gate.cnrs.fr

Nadege Marchand

Groupe d' Analyse et de Theorie Economique (GATE) ( email )

CNRS UMR 5824
93, chemin des Mouilles - B.P.167
69130 Ecully cedex
France

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