Deriving a Holistic Performance Measurement System for the European Clearing Industry

European clearing houses are facing competition on their home markets for the first time. In order to meet this new challenge, the management of a clearing house needs to identify its stakeholders and their interests and must define a strategy including financial and non-financial aims. We introduce the Balanced Scorecard as a funded and holistic approach for the management of a clearing house. To meet the specifics of the clearing industry, we present an adjustment and extension of Kaplan and Norton’s original concept. Particularly risk management requires detailed consideration. We therefore add risk management as a separate perspective and integrate competition and IT into the modified Balanced Scorecard. Furthermore, we outline our research model for the validation of the modifications

Organizing Equity Exchanges

In the last years equity exchanges have diversified their operations into business areas such as derivatives trading, posttrading services, and software sales. Securities trading and post-trading are subject to economies of scale and scope. The integration of these functions into one institution ensures efficiency by economizing on transactions costs. Using balanced panel data from major equity exchanges over the period 2005-2007, we examine empirically the presence of economies of scale in securities trading. Moreover, we analyze the impact of vertical integration of trading, clearing, and settlement, the impact of the size of an exchange, and the impact of diversification on the profitability of exchanges. The evidence confirms that a large number of transactions leads to low costs per trade. The evidence shows that the profitability of equity exchanges is highest for vertically integrated exchanges and that diversification and size have a negative impact on their profitability