The reform of European securities settlement systems : Towards an integrated financial market

Marie-Noëlle Calès (1) , Dominique Chabert (2) , Walid Hichri (1) , Nadège Marchand (1)

1 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
2 Université de Lyon

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.

Mots clés: Post-trading organisation; securities settlement; depositary services; compatibility

Domaines: Economies et finances

Marie-Noëlle Calès, Dominique Chabert, Walid Hichri, Nadège Marchand. The reform of European securities settlement systems : Towards an integrated financial market. 2011. ⟨halshs-00639957⟩