Are there Economies of Scale in Stock Exchange Activities?

This is the first paper that examines economies of scale in stock exchanges. The data employed in the study include cost and output statistics for 37 stock exchanges in four continents around the world for the year 1997. I estimate two traditional cost functions and find that ray (overall) scale economies exist only in the very large stock exchanges but that there are significant scale economies with respect to one of the outputs, ie the processing of trades. On the other hand, there are not equally clear scale advantages related to activities involving company-specific information. There are thus opposing forces, some tending to increase standardization and scale and others favouring the continuization of more localized facilities. The outcome of increasing competition may be not be the amalgamation of exchanges but instead the centralization of certain functions, eg the trading function, and continued realization of others on a decentralized basis. There is nonetheless an obvious incentive for closer and deeper cooperation between European stock exchanges.stock exchanges; alliances; economies of scale; technology

Strategic Challenges for Exchanges and Securities Settlement

A common feature of major trends in securities and derivative markets is that they facilitate cross-border competition between financial institutions and markets. These trends include financial deregulation, technological developments that increase network externalities and the introduction of the single currency in Europe. This paper discusses future prospects for stock and derivative exchanges and securities settlement systems globally in the light of this analytical framework. The increased contestability of the financial markets opens the way for a completely new situation where economies of scale and network effects enable new systems to challenge existing exchanges and settlement systems. This has already led towards more integrated trading and settlement infrastructure via mergers, alliances, links, agreements and other forms of cooperation between existing infrastructure companies. At the same time new electronic communication networks and electronic exchanges operated by members of exchanges or off-exchange companies and Internet brokers have emerged. We expect that economies of scale and scope and network effects will foster global competition. The business conducted by brokers and exchanges will tend to converge, thus posing a major challenge for the management of these businesses. Trading and settlement services for the most liquid global trading products will, we believe, be provided by limited liability companies that employ efficient governance practices. We anticipate that US stock and derivative exchanges will have to adopt fully electronic trading systems. This might lead to intense competition between exchanges in the US and globally. We also anticipate that European alliances will be based on a more efficient operational model than the models proposed so far. An increase in Internet-routed equity and derivative trades will lead to partial fragmentation of liquidity. As technology advances, we expect pooling of liquidity in one of the networks.exchanges; settlement systems; technology; network externalities; economies of scale

Are Expansions Cost Effective for Stock Exchanges? A Global Perspective

This paper investigates the existence and extent of economies of scale and scope among stock exchanges. Evidence from 38 exchanges in 32 countries and 4 continents around the world for the years 1989-1998 indicates the existence of significant economies of scale and scope. The degree of such economies however differs by size of exchange and region. The largest stock exchanges show an increasing trend of cost effectiveness. Exchanges in North America and Europe report substantially larger economies of scale than those in the Asia-Pacific regions.stock exchanges; mergers; regional alliances; economies of scale

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

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.securities settlement, economies of scale, technological progress

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

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.securities settlement; economies of scale; technological progress

Technology, automation, and productivity of stock exchanges: International evidence

The paper stresses on the importance of understanding the operational choices, strategies, and performances of stock exchanges as regular operating firms (Arnold et al (1999), and Pirrong (1999)) Using unbalanced panel data on 49 stock exchanges over the period 1989–1998, the paper traces the productivity of stock exchanges over time and across different types and groups of exchanges. We find significant variability in respect of the productivity – revenue and cost efficiency – across these exchanges. On average, North American exchanges are found to be most cost and revenue efficient. However, our findings also indicate that European exchanges have improved the most, in respect of cost efficiency, while exchanges in South America and Asia-Pacific regions are found to be lagging as regards both cost and revenue estimations. The evidence also indicates that investment in technology-related developments effectively influenced cost and revenue efficiency. Moreover, organisational structure and market competition are found to be significantly associated with both cost and revenue efficiency for the exchanges studied, whereas market size and quality are related only to revenue efficiency.stock exchanges; technological progress; technical efficiency

A descriptive analysis of the Finnish treasury bond market 1991–1999

This paper presents a descriptive analysis of the primary and secondary market for Finnish treasury bonds. The paper focuses on three issues. First, we report basic descriptive statistics such as auction volumes and secondary market yields and volumes. Second, we estimate the revenues earned by primary dealers from the treasury bond market. Third, we analyse the development of the price of the auctioned bonds, relative to other benchmark bonds, around the time of the auction. We find evidence of a price decrease in the auctioned bond series before the auction and a price increase after the auction. This pattern is strongest for 1992–1994 when Treasury funding needs were heavy and secondary market trading volume of treasury bonds was modest.treasury bond auctions, secondary market

A descriptive analysis of the Finnish treasury bond market 1991–1999

This paper presents a descriptive analysis of the primary and secondary market for Finnish treasury bonds. The paper focuses on three issues. First, we report basic descriptive statistics such as auction volumes and secondary market yields and volumes. Second, we estimate the revenues earned by primary dealers from the treasury bond market. Third, we analyse the development of the price of the auctioned bonds, relative to other benchmark bonds, around the time of the auction. We find evidence of a price decrease in the auctioned bond series before the auction and a price increase after the auction. This pattern is strongest for 1992–1994 when Treasury funding needs were heavy and secondary market trading volume of treasury bonds was modest.treasury bond auctions; secondary market

Impacts of land use and land use changes on the resilience of beekeeping in Uruguay

Peer reviewe

Financial attractiveness of wood production in smallholder plantations of Central Vietnam in the context of developing carbon markets

In Vietnam, fast-growing Acacia hybrid dominates commercial smallholdings and is largely managed in short rotations for pulpwood. However, increasing demand for logwood implies growing Acacia hybrid in longer rotations. One way of encouraging smallholders to prolong the rotation would be payments for aboveground carbon storage. Thus, this study evaluated the financial attractiveness of shifting from pulpwood to logwood production, with and without hypothetical carbon payments of $5,$10 and $20 tCO(2)e ha(-1). The data were drawn from smallholder interviews, a plantation inventory and a market study. The growth models for a 5-year pulpwood regime and various logwood regimes used for financial modelling were developed in CO2FIX simulation software. With a financially optimal rotation length of 9-10 years, the study finds that growing Acacia hybrid for logwood is much more profitable than growing it for pulpwood. However, due to thinning in logwood regime, a financially optimal logwood regime stores only 15-16% more carbon than a 5-year pulpwood regime. Consequently, carbon payments at any of the three price levels would not shift the financially optimal rotation length. The study concluded that carbon payments alone are unlikely to be an effective means to encourage smallholders in central Vietnam to prolong the rotation.Peer reviewe