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Economies of scale and technological development in securities depository and settlement systems

Author

Listed:
  • Heiko Schmiedel

    (HWWA-Hamburg Institute of International Economics & Research Department Bank of Finland)

  • Markku Malkamäki

    (Evli Bank Plc.)

  • Juha Tarkka

    (Research Department, Bank of Finland)

Abstract
The paper investigates the existence and extent of economies of scale in depository and settlement systems. Evidence from 16 settlement institutions across different regions for the years 1993–2000 indicates the existence of significant economies of scale. The degree of such economies, however, differs by size of settlement institution and region. While smaller settlement service providers reveal high potential of economies of scale, larger institutions show an increasing trend of cost effectiveness. Clearing and settlement systems in countries in Europe and Asia report substantially larger economies of scale than those of the US system. European cross-border settlement seems to be more cost intensive than that on a domestic level, reflecting chiefly complexities of EU international securities settlement and differences in the scope of international settlement services providers. The evidence also reveals that investments in implementing new systems and upgrades of settlement technology continuously improved cost effectiveness over the sample period.

Suggested Citation

  • Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0405001
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0405/0405001.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ms. Froukelien Wendt & Peter Katz & Alice Zanza, 2018. "Organizing Central Securities Depositories in Developing Markets—7 Considerations," IMF Working Papers 2018/066, International Monetary Fund.

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    More about this item

    Keywords

    securities settlement; economies of scale; technological progress;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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