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Center for Financial Studies (CFS), Universität Frankfurt a. M. >
CFS Working Paper Series, Universität Frankfurt a. M. >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/43226
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| Title: | | Vertical integration, competition, and financial exchanges: Is there grain in the silo?  |
| Authors: | | Juranek, Steffen Walz, Uwe |
| Issue Date: | | 2010 |
| Series/Report no.: | | CFS Working Paper 2010/22 |
| Abstract: | | We investigate the incentives for vertical or horizontal integration in the financial security service industry, consisting of trading, clearing and settlement. We thereby focus on firms' decisions but also look on the implications of these decisions on competition and welfare. Our analysis shows that the incentives for vertical integration crucially depend on industry as well as market characteristics. A more pronounced demand for liquidity clearly favors vertical integration whereas deeper financial integration increases the incentives to undertake vertical integration only if the efficiency gains associated with vertical integration are sufficiently large. Furthermore, we show that market forces can suffer from a coordination problem that end in vertically integrated structures that are not in the best interest of the firms. We believe this problem can be addressed by policy measures such as the TARGET2-Securities program. Furthermore, we use our framework to discuss major industry trends and policy initiatives. |
| Subjects: | | Vertical Integration Horizontal Integration Competition Trading Settlement |
| JEL: | | G15 L13 L22 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CFS Working Paper Series, Universität Frankfurt a. M.
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