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Organizational Design, Competition, and Financial Exchanges
Author(s) -
Juranek Steffen,
Walz Uwe
Publication year - 2020
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12325
Subject(s) - vertical integration , harmonization , competition (biology) , incentive , horizontal and vertical , horizontal integration , economics , industrial organization , perspective (graphical) , financial services , financial integration , business , financial market , finance , market economy , marketing , ecology , physics , geodesy , artificial intelligence , computer science , acoustics , biology , geography
We investigate the incentives for vertical and horizontal integration in the financial securities service industry. In a model with two exchanges and two central securities depositories (CSDs), we find that decentralized decisions might lead to privately and socially inferior industry equilibria with vertical integration of both CSDs with their respective exchanges. Allowing for horizontal integration of CSDs avoids privately inferior industry equilibria. However, we observe too little horizontal integration from the social perspective. We link our results to recent regulatory and institutional developments such as the emergence of multilateral trading facilities, over‐the‐counter regulation, and financial harmonization.