Future Prospects for National Financial Markets and ... · Future Prospects for National Financial...

37

Future Prospects for National Financial Marketsand Trading Centres*

I. Introduction

Financial markets are a significant means by which savings, public or private,are transformed into productive investments. Therefore efficient, well-functioningfinancial markets contribute to stable economic growth, and significant fluctuationsin those markets can give rise to macroeconomic shocks. This is the primary reasonthat experts in monetary and fiscal policy have long been keenly interested infinancial market developments. Technological advances, deregulation andincreasing competition are radically transforming financial markets in the OECDarea. Technological change has vastly lowered information handling and othertransaction costs, thereby creating the foundation for enormous and fundamentalchanges in the structure and functioning of financial markets as substantial newopportunities are opened up and exploited. To some degree, new developmentshave supported further consolidation and centralization of financial markets. Thegrowing importance of global financial trading centers, along with increased use ofthe Internet and other electronic trading platforms, portend heightened competi-tion for “national” financial markets, thereby raising questions about their long-run viability. It appears that the one certainty is that as we move into the future,financial markets will resemble those in the past less and less.

The purpose of this study is to examine the nature and effects of the changescurrently affecting financial markets on the future viability of national financialmarkets, and the access to global financial markets from smaller countries. The

* This article was prepared by Charles Gaa, Robert Ogrodnick and Peter Thurlow, Financial MarketDepartment, Bank of Canada, and Stephen A. Lumpkin, Financial Affairs Division, OECD. Theauthors owe a great debt of gratitude to a number of people, too many to mention, at the Bankof Canada and the OECD’s Financial Market Committee for very useful discussions and comments.The authors are responsible for any remaining shortcomings. The views expressed in this paperare those of the authors, and are not necessarily shared by the OECD, or by the Bank of Canada.

© OECD 2001

Financial Market Trends, No. 78, March 2001

38

paper will first briefly review the various financial markets. Subsequently the studywill evaluate the net effect of developments, primarily technological, on variousaspects of financial markets, which include their structure, their location, and theirparticipants. The following section outlines back-office developments in the OECDarea. The sixth section begins with a view on where these developments seem tobe taking financial markets. This, then, gives some basis from which to discuss var-ious issues that could be associated with these developments as well as possiblepolicy options and recommendations, which also appear in section six. Conclu-sions follow.

Obviously, it is hazardous to predict the future, particularly when there is somuch flux at present. The authors do not write this paper to suggest that they haveany certainty of what the future could bring. They write simply with the intention ofstimulating debate.

II. Basic Types of Financial Markets

a) Fixed Income Markets

Most fixed-income markets, which are dominated by the secondary market forgovernment debt securities, have historically been decentralized and quote-driven.Until recently, transactions have largely been arranged over-the-counter throughtelephone contact. In many countries, at the core of the market are a relativelysmall number of large broker-dealers, which act as market makers, offering to tradesecurities at bid and ask prices. This arrangement characterizes most markets ingovernment securities, or (in the case of some smaller countries) through largesyndicates of investment banks. These broker-dealers not only help to market agovernment’s primary issues to investors but also maintain two-way markets insecondary trading. Secondary market activity tends to be driven in large part bythe investment activities of large institutional investors, who approach some or allof the dealers in series, obtaining quotes, and trading with the dealer who offersthem the best price.1 Institutional investors are also major participants in repomarkets, either as direct counterparties or through the services of third-party cus-todians. This is the customer sphere of activity. For their part, dealers also tradeamongst themselves, often to neutralize or hedge the large positions that theytake on in their trades with customers. Dealers trade with each other directly, orthrough inter-dealer brokers (IDB). This is the dealer sphere of activity, and theseparation of the two spheres is generally complete; that is, customers do notdirectly transact with other customers, although steps have been taken recently toestablish electronic systems to provide for direct customer-to-customer trading inselected securities. In addition to risk-sharing, the inter-dealer market also facili-tates the price discovery process for dealers.2

© OECD 2001

Future Prospects for National Financiol Markets and Trading Centres

39

In most countries, the largest single issuer of debt securities is the govern-ment. Recently, however, a number of countries, notably Canada, the UnitedStates and the United Kingdom, have entered a phase of declining governmentborrowing needs, and corporate borrowing has grown in relative importance. Thedecline in government borrowing has “crowded in” private sector borrowing in theform of corporate bonds, commercial paper and asset-backed securities.

b) Equity Markets

Equity markets are generally thought to be centralized for a number of rea-sons. The very existence of a central exchange in a single physical location is one.Membership, or the ownership of one or more seats on the exchange, entitlesmembers to have access to the exchange’s trading facilities. A second reasonrelates to the fact that a significant amount of information is publicly available on aconsolidated basis. This can include both pre-trade information (bid and askquotes) and post-trade information (data on completed trades in the market).

However, in some ways the structure of some equity markets are less central-ized and more fragmented than might at first appear to be the case. In addition tocentral exchanges, it is also a multiple dealer market in which a limited number ofdealers attempt to supply their customers with liquidity. When the dealer receivesan order from a customer, before trading on the exchange he may attempt to fillthe order by cross-matching the orders of buying and selling customers, by draw-ing upon the (generally small) inventories of the firm or by temporarily borrowingthe securities from custodians. Examples of this type of market are the “upstairs”markets that operate alongside many stock exchanges including the New YorkStock Exchange and the Toronto Stock Exchange.

Many traditional exchanges have invested heavily in modern trading technol-ogy such that everything but the final order execution is automated. Moreover, anumber of major exchanges have demutualised, and most others are expected tofollow suit. In some cases, exchanges have merged with their derivatives counter-parts, and many Continental European exchanges have vertically integrated theirclearing and settlement platforms. Recently, in most regions there has been aspate of new ventures and strategic alliances between brokerages and alternativetrading systems (ATS), as well as between various exchanges (Figure 1). Competi-tion among traditional exchanges and ATS has increased markedly, both domesti-cally and internationally, depending on the product traded.

c) Matching versus Intermediated Markets

Although there appear to be many variants and hybrids, financial marketsseem to fall into one of two general categories; matching or intermediated markets.

© OECD 2001


40

Figure 1. Electronic Trading Landscape – Ownership

Source: NASDAQ, March 2000.

SoftBank

Optimark

Polaris

Tradescape.com

Morgan StanleyDean Witter Tradepoint

UBS

Dow Jones

PCX

Nasdaq

Knight/Trimark

ASC/Sun Gard

Brut

Hull

Salomon SmithBarney

Goldman Sachs

Merrill Lynch

Market XT

Madoff

Primex

Archipelago

Herzog

Oliver Wyman

Warburg

Dresner

CSFB

Reuters

Spear Leeds

Fidelity

Schwab

TD Watherhouse

JP Morgan+ American

Century

Instinet

Redibook

BNP Cooper Neff

Pacific StockExchange

E*Trade Jerry Putnam SW Securities CNBC TownsendAnalytics

PaineWebber

DLJ

Lehman

Strike18 Additional Firms -Bear Steams, Herzog

NDB, Prudential,Susquehanna, etc.

Lattice Island Attain Tradebook Posit Nextrade

State Street Datek All-Tech Bloomberg ITG JohnSchaible

Mark YeggeIndividuals

Proposed Merger



SoftBank

Optimark

Polaris

Tradescape.com


UBS

Dow Jones

PCX

Nasdaq

Knight/Trimark

ASC/Sun Gard

Brut

Hull

Salomon SmithBarney

Goldman Sachs

Merrill Lynch

Market XT

Madoff

Primex

Archipelago

Herzog

Oliver Wyman

Warburg

Dresner

CSFB

Reuters

Spear Leeds

Fidelity

Schwab

TD Watherhouse

JP Morgan+ American

Century

Instinet

Redibook

BNP Cooper Neff



PaineWebber

DLJ

Lehman






Proposed Merger



SoftBank

Optimark

Polaris

Tradescape.com


UBS

Dow Jones

PCX

Nasdaq

Knight/Trimark

ASC/Sun Gard

Brut

Hull

Salomon SmithBarney

Goldman Sachs

Merrill Lynch

Market XT

Madoff

Primex

Archipelago

Herzog

Oliver Wyman

Warburg

Dresner

CSFB

Reuters

Spear Leeds

Fidelity

Schwab

TD Watherhouse

JP Morgan+ American

Century

Instinet

Redibook

BNP Cooper Neff



PaineWebber

DLJ

Lehman






Proposed Merger

© OECD 2001


41

Matching markets are those in which security buyers and sellers search for, and findeach other, and subsequently conduct trades. There is some coordinating mecha-nism to facilitate the search and to create transparency (for example, a centralizedtrading floor, an order book, or a computer network). This type of system tends tobe in place where there is more intrinsic liquidity, that is, where there are largenumbers of buyers and sellers (that are not of grossly different sizes) and wherestandardized or commoditized products are traded. Many equity markets arebased on the matching of trades. Intermediated markets are those in which anintermediary (market maker) stands by ready to buy or sell securities, earning areturn for its services from the bid-ask spread. This latter type of market tends tohold sway where there is less intrinsic liquidity; that is, there are fewer traders,trades tend to be large and choppy and more specialized or illiquid productstraded. Most fixed-income and, although it is now changing, foreign exchange mar-kets have tended to be based on intermediation.

III. Financial Market Location

The concept of the “location” or “nationality” of a financial market can be elu-sive. Obviously, there is little doubt where there is a floor trading system wheremost of the traders are of the same nationality, the products traded relate to thatnationality, and the regulator is of the same nationality. However, the situation isless clear-cut when the trading system is based on a computer network, and trad-ers and products are of various nationalities. For example, most electronic tradingsystems could, in principle, accommodate trades from anywhere in the world. Inthis sense, some commentators suggest that financial markets are evaporating intocyberspace. However, physical markets still exist, and perhaps more importantly,financial centres very much exist, with specific locations. It is probably more usefulto examine the location of trading centres than of financial markets.

Financial centres are locations where major participants trade liquid bench-mark products on relatively efficient markets and provide wholesale financialservices to the rest of the economy. There are a number of critical elements in atrading centre, including market infrastructure, professional participants andattractive financial products. Market infrastructure refers to the rules and cus-toms that govern securities transactions and all associated businesses. Thisinfrastructure is provided at relatively low cost. All trading centres attract profes-sional participants, often including market makers, who trade the financial prod-ucts. Attractive products to trade are also necessary in financial centres. Theseinclude a full range of domestic products and often benchmark internationalproducts. In addition, the existence of a healthy, stable macroeconomy helps togenerate a stable demand for financial services, as does a healthy regulatoryenvironment.

© OECD 2001


42

a) Economic Forces of Consolidation

Why should trading centres, be they regional, national, or international,develop in the first place? They are such an integral part of society that we may notthink to raise this question. Yet, only by explicitly identifying the underlying fac-tors, as obvious as they may seem, can we then go on to look at how trading cen-tres are evolving in the present day.

Search Costs

Those who wish to buy or sell securities must first find counterparties withwhom to trade. The time and money that they must spend in doing so are referredto as search costs. Search costs are reduced if potential buyers and sellers canagree to meet at a single geographic (or, more lately, notional) location. Thegreater the number of market participants with which traders can interact, the bet-ter the chances of finding suitable counterparties quickly.

The desire to minimize search costs is a very good explanation for the exist-ence of large centralized trading centres. In years past, after all, it was sometimesnecessary to be in the physical presence of those with whom one wished to dobusiness. To the extent that the minimization of search costs is a good explana-tion for the existence of centralized trading centres, they betray themselves asanachronisms.

Transportation Costs

Ultimately the demand for, and the supply of, savings is geographically widelydispersed. A trading centre’s location is important in that its location may deter-mine how far a market participant in a different location will have to go to getthere. In the absence of transportation costs, we might expect to see the minimiza-tion of search costs followed to its logical extreme: a world with just one interna-tional trading centre. Given that transportation costs do exist, it would suggestsome dispersion of financial markets. Moreover, it would be in the market partici-pants’ best interests if the trading centres were located in large urban areas withaccess to excellent transportation facilities. Notably, all major and most minorfinancial markets are so located.

Economies of Scale

As the magnitude of trading and market activity in a given trading centreincreases, benefits accrue to market participants and to their operations. There area number of possible examples. Financial intermediation is an industry whichrequires a skilled and specialized work force. An international trading centre

© OECD 2001


43

attracts a large pool of suitable employees. Businesses which provide services tothe financial sector, (such as accounting, information technology, travel, and legalservices), become more specialized and enjoy their own economies of scale as thecentre grows. These benefits are passed on in the form of lower costs to the tradingcentre’s customers – the market participants.

Liquidity

One final consideration is liquidity. Investors everywhere prize markets inwhich they can trade cheaply, quickly, and without large price reactions.3 Liquidmarkets are more efficient than illiquid markets as prices reflect information morerapidly and reliably in liquid markets. Moreover, liquid markets are more stablethan illiquid markets as idiosyncratic trades of a given size have less of an effect onprice in a liquid market. This creates a feedback effect, since participants will pre-fer to trade in markets that are liquid. As a market attracts participants by virtue ofits liquidity, it becomes even more liquid, and therefore even more attractive topotential participants, and so on.

Competitive pressures and the desire to deepen liquidity have driven a num-ber of stock markets to realign themselves so that each market can focus on certainniches, and thereby deepen the liquidity in those niches. This has been behindrealignments of the Canadian stock exchanges based in Vancouver, Montreal andToronto, and also the realignment of the Paris, Amsterdam and Brussels bourses,and the realignment of the Madrid and Barcelona stock exchanges. However, thesesteps may ultimately be only stopgap measures on the road to global inter-linkage.

All of the factors examined here, with the exception of transportation costs,seem to imply a certain momentum to the evolution of trading centres, in otherwords, a trend towards fewer and larger centres. Those centres that are large andliquid at the outset should continue to dominate, leaving little or no scope forregional or small national centres. Thus, in order to explain the observed profusionof small centres on the world stage, we must look to other factors.

b) Economic Forces of Segmentation and Fragmentation

The preceding discussion laid out some of the theoretical reasons why onemight expect only very highly centralized global trading centers to exist. However,there is a further question: Why do regional and national trading centres continueto exist? The most obvious explanation is that this is the structure that best servesthe needs of market participants. But why is that the case?

Segmented markets are ones in which the rate of return to capital differs fromthe global rate of return. In short, free capital flows do not, or are not allowed to,

© OECD 2001


44

equalize rates of return between countries. Unlike the framework that we pre-sented in the section on fixed-income markets, in the real world markets are sim-ply not allowed to evolve according to the dictates of pure, cost minimizinginvestor behaviour.

Information Barriers

Differences in language, accounting standards, and incomplete knowledgeregarding foreign investment opportunities all serve to dissuade investors frominvesting in foreign securities. At the most basic level, investors will be much morelikely to invest in a company if they can read its financial statements. Nationals of agiven country generally have superior knowledge about their own markets andfirms, just as the residents of other countries have superior knowledge abouttheirs. Since domestic investors are at a relative disadvantage as investors in for-eign markets, they will see foreign securities as being riskier, all else being equal,and will therefore require a higher risk premium. The end result is that less will beallocated to the less attractive foreign securities than would perhaps be optimal.

Illiquidity and Small Country Bias

When institutional investors consider various possible investments, theliquidity of a market is very important. They must be able to liquidate their hold-ings quickly, and without a severe price reaction. Moreover, when publicly listedcompanies decide which exchange(s) to list on, the liquidity of the market is veryimportant. Small countries are at a disadvantage in this respect, while deep andliquid markets benefit greatly.

With respect to equity markets, internal fragmentation or “upstairs trading”occurs when an investment dealer matches customer orders internally within thefirm rather than on the central order book of the stock exchange. This practicestems from at least two factors. First, institutional trading has grown rapidly reflect-ing the huge increase in the assets of mutual funds and pension plans. The tradingof a large block of shares can have an adverse effect on price (from the perspectiveof the account) that far outweighs the fee cost of executing the transaction, particu-larly as the market becomes aware of a large offer to buy or sell. By internalizingthe transaction, a large dealer can provide anonymity, and therefore eliminatemuch of the price risk, for the institutional investor. The second factor is that regu-latory changes have permitted investment dealers to trade as principals and inter-nalize orders. While this practice provides liquidity with anonymity, it does so atthe expense of the liquidity of the central order book. It may also impair centralprice discovery as not all buyers and sellers are included in the same process.4

© OECD 2001


45

Specific attributes of a country’s financial markets, which may be directly orindirectly related to small size, can serve to harm liquidity, and thereby dissuadeforeign investment. Relative deficiencies in innovative financial products andsophisticated credit rating services are two possible results of small market size,and its consequent lack of liquidity. Another result might be the practice of issuingcorporate debt in the form of medium term notes (i.e. small, frequent, and there-fore extremely illiquid issues).

Regulatory Barriers

Governments may erect regulatory barriers for a variety of reasons, some ofwhich may be perfectly justified, but their effect is sometimes to either discourageforeign investment by domestic investors, or to discourage domestic investmentby foreign investors. Thus, the result is a segmented financial market, with domes-tic savings over- allocated to domestic financial markets. In some cases this maybe the original intent, as an intention may be to support the national market.

c) The Primacy of Sovereign Debt

As the largest issuer of domestic currency debt securities, and as the ultimatesource of regulatory authority, the government is often the most important playerin the domestic fixed-income market. Therefore, another factor affecting locationwhich cannot be ignored is the fact that, all other things being equal, the govern-ment might prefer that the market be domestically located. To the extent that thegovernment uses regulation to achieve this goal, this factor might be an example ofa regulatory barrier.

The importance of government debt is related not only to its size, but to othermeasures of liquidity as well. Government securities are often the most frequentlytraded, and as the most liquid fixed-income securities (and therefore presumablythe most efficiently priced), their prices are the benchmarks against which otherdebt securities are compared.

A Domestic Currency

With respect to the continued existence of national financial markets, oneshould neither overlook nor underestimate the importance of having a separatecurrency. If a firm, government or individual were to raise or invest funds in thedomestic currency, the domestic financial market would be the “place to be” andthere would be no foreign exchange risk for domestic issuers and investors. Themarket for the domestic currency, the critical mass and liquidity, and the issuerand investor base are all located in the home country. If the home country were to

© OECD 2001


46

adopt a different currency, there would not necessarily be an inherent advantagein having the financial markets in the home country. Although the market can belost due to inefficiency, there is a certain critical mass of domestic currency payinstruments in the home country simply because it is the home of the domesticcurrency. It will be interesting to observe and compare the development of finan-cial markets in smaller European countries inside and outside of the euro zone.

IV. Global Trends Impacting on Financial Markets

a) Globalisation

Globalisation generally refers to the increasing integration of nations’ econo-mies. Key elements include rising trade in goods and services, rapid dissemina-tion of technologies and rising cross-border capital flows. In this study, the term“globalisation” refers to the reduction of market segmentation on a worldwidescale. In general, one can say that over the past number of years, investors havebecome much more savvy with respect to international financial markets. Thevalue of international portfolio diversification has been fully incorporated into thecollective consciousness. Also, English has become the official language of interna-tional finance, which makes the conduct of business easier for some, and morehomogenous in any case. Finally, while international accounting standards are notyet ironed out, certain conventions and disclosure requirements are becomingubiquitous, and the exceptions are widely recognized.

Regulatory barriers are also coming down. Some countries have not had uni-versally positive experiences with opening up their markets (particularly in Asiaand Latin America), but there seems to be no signs of backing down among themajor industrial economies. Indeed, with the creation of the euro zone and theimplementation of NAFTA, deregulation appears to be proceeding apace.

The globalisation of financial markets goes hand in hand with the increasingprimacy of a few international financial centres, although electronic trading sys-tems may be altering the equation somewhat. Given the choice, investors of allnationalities will seek out the lowest cost and most liquid markets. The only way tostop them, and preserve the importance of one’s national market, is to either makethe market more attractive, or to deny investors the choice.

How might financial market participants react to this general trend of globalizedfinancial markets? First of all, consider the behaviour of domestic fixed-income inves-tors. Even though it is now a relatively simple matter for domestic retail investors togain exposure to foreign bonds, they are not likely to move en masse into foreign debtsecurities in response, for instance, to the easing of foreign content restrictions. Inves-tors who desire foreign exposure tend to express this through equities. Similarly, for-

© OECD 2001


47

eign investors are unlikely to move into domestic fixed-income product as part of theglobalisation trend. The decision to invest in domestic debt is often largely a productof the interest rate spread and expected currency movements, with the latter poten-tially being the more important of the two.

In countries such as Canada, and the non-euro member European countries,the behaviour of domestic corporate issuers might be seen as relatively sensitiveto globalisation, with a larger proportion of foreign (particularly US dollar or euro)issuance by domestic firms being a likely scenario. As the domestic economy ingeneral becomes more internationally-linked, domestic firms may have increasedincentives for foreign currency borrowing. This would be particularly the casewhere large foreign markets have greater capacity to absorb larger and more fre-quent issuances. International deregulation (such as NAFTA), better informationflows (facilitated by, for example, the Internet), and continuing financial marketinnovation can only serve to accelerate this trend.

Ultimately, it is issuers and investors, not financial institutions, that are theprimary driving force behind the globalisation of the financial intermediation pro-cess. National economies and major corporations are becoming increasingly globalin orientation and more internationally interconnected. Corporations are seekingto align their capital or investor base to the location of their business activities.They want their stocks to be listed and traded in the countries in which most oftheir products are sold and their production activities are located, and where theyare, therefore, most well-known. At the same time, investors are pursuing globaldiversification strategies to both lower risk and enhance return. Similarly, techno-logical advances such as more rapid telecommunications and the development ofelectronic trading systems are ultimately being driven by the demands of inves-tors, both small and large, for more instant access to information and for faster,cheaper execution of trades.

Both issuers and investors should benefit from the forces of globalisation andtechnological advancement that are occurring in financial markets. Most obviously,large corporations with global orientations will have greater access to pools of cap-ital internationally. Smaller companies should not, however, see a diminution ofservice as a result of the trends that are impacting the industry. While complaintsabout shortages of venture capital, for example, are perennial (particularly bythose who cannot find it), companies’ access to the junior and senior domesticstock exchanges, bank loans etc. is greater now than it was prior to globalisationand the technological advancements in financial intermediation.

Company stocks will be interlisted or stock and derivative exchanges will belinked internationally giving investors a worldwide list of stocks and derivativeproducts from which to choose. Investors will be able to trade stocks and otherproducts internationally as easily as they used to trade locally. With ATS, the

© OECD 2001


48

potential exists for lower execution costs, greater investor anonymity and enhancedmarket transparency. Trading hours will be extended, to perhaps as much as24 hours per day, seven days per week.

Although there is a danger with ATS that markets could become more frag-mented, particularly in the shorter-term, in the long run there is the potential formarkets to become more liquid and for the price discovery process to becomemore transparent and fair as it is centralized electronically.5 For these benefits toaccrue to issuers and investors, domestic capital markets will need to adapt to glo-bal and technological developments so that they remain as or more efficient thenlarger, competitor markets.

b) Institutionalisation of Savings

Recent years have seen a marked increase in the institutionalisation of savings,as the population ages and national “pay-as-you-go” pension programs lose theirlong-term credibility. In many countries private pension funds and mutual fundshave experienced very rapid growth recently. Another factor may be the increasedknowledge of, and therefore heightened appetite for, markets and market exposure.Institutional investors are changing the landscape somewhat. One aspect, related toglobalisation, is that institutional investors are well aware of the risk-return benefitsof a diversified international portfolio. Particularly in smaller markets, moves bylarge institutional investors can provoke significant price movements. The marketsare simply not sufficiently liquid for this scale of investor. While any moves towardthe globalisation of markets that deepens liquidity will alleviate this situation, theinstitutional investors will support, with their business, more liquid markets.

While full transparency of market information may not be appropriate for allmarkets and market segments, there is widespread agreement that improvementsare needed, particularly in traditionally opaque fixed-income markets. Electronictrading systems have the potential to offer much greater transparency than is nowavailable, and this may be an important factor in any future movement of tradingto those systems.

c) Technology

The rapid pace of advances in computer and communications technology hashad a dramatic effect on financial markets. The possible implications of electronictrading are important and far-reaching. The advent of electronic trading platformshas the potential to open a whole new dimension to the competition faced byregional and national trading centres, making previously static markets and marketactivities much more mobile. Computer and communications technology is nowsuch that market functions, even those within a particular firm, need not be physi-

© OECD 2001


49

cally close. The potential is that we will see individual activities migrating to sepa-rate locations based on comparative advantage.

In equity markets, the spread of ATS and electronic communications networks(ECNs) can be traced back to the mid 1990s, when regulatory changes in the UnitedStates authorized non-traditional players to set up trading platforms.6 Initially thesesystems were limited to institutional investors, broker-dealers, specialists and othermarket professionals, but recent advances in information technology and telecom-munications have placed ECNs within reach of the average retail investor. For one,technological advances have reduced the costs of establishing new trading systems,thereby making it easier for new entrants to create new points of access to the mar-ket, while making possible the construction of novel types of trading systems. ATShave also been constructed in order to respond to a demand from institutionalinvestors, who are attracted to the lower trading costs and anonymity of ECNs, butdo not require the instant execution that exchanges normally provide. A few of thealternative exchanges are nearing sufficient trading volume to accommodate all butthe largest block trades. ECNs in the United States account for an estimate 30 percent of trading in securities listed on NASDAQ (see Table 1), and the forecasts werecalling for online trading to capture nearly half of all NASDAQ retail equity trades asearly as the end of 2000. In June 2000, three ECNs (Bloomberg Tradebook, BRUTand MarketXT) agreed to join the electronic market NASDAQ runs for tradingexchange-listed stocks, which includes those listed one the NYSE.7

In Europe, ECNs still account for less than 5 per cent of the turnover of equitytrading at present. However, while costs on the national exchanges have declined,they remain well above those on most ECNs and many observers suggest thatcompetitive pressures from ECNs are mounting very rapidly. At the same time,

Table 1. Share of ECNs in NASDAQ Trading Volume: July 2000

US$ billion1

ATS % of trades% of share

volume% of dollar

volume

Archipelago 1.2 1.0 1.1Attain 0.0 0.0 0.0B-Trade 1.6 1.5 1.6Brut 2.1 1.5 1.5Instinet 10.5 11.8 14.3Island 11.6 5.8 8.5Next Trade 0.0 0.0 0.0Redi-Book 3.6 2.8 3.3ATS Total 30.6 24.4 30.3

Source: http:\\www.marketdata.nasdaq.com

© OECD 2001


50

other competitors are threatening to create pan-European trading systems of theirown. As is true of other structural developments in the financial services sector inEurope, the single currency has been a major catalyst for change. With the elimina-tion of currency barriers inside the euro zone, there is less benefit for companiesto have their shares listed on different national exchanges and many have begunto concentrate their stocks on fewer exchanges. On the customer side, institutionalinvestors are increasingly replacing investment strategies based on currencieswith a sector-based approach. One step in the direction of pan- European tradingis the cross-border exchange created by the recent merger of the Paris, Amsterdamand Brussels bourses to form Euronext. This step toward pan-European trading isbased on the assumption that trading would be most efficient if it were concen-trated in several large traditional exchanges (and perhaps eventually only one),with a vertically integrated clearing and settlement platform. The recent battle forthe London Stock Exchange raises another possibility, involving competitionamong exchanges with an emphasis on cost cutting and improved trading technolo-gies, with clearing and settlement provided by a consolidated, but separate system.

Electronic trading systems in fixed-income markets have not achieved quitethe same success as those in equities or foreign exchange, but their use is growingrapidly. For example, the United States Bond Market Association’s 1999 “Review ofElectronic Transaction Systems” identified 68 such systems for institutional tradingof bonds compared with just 11 only three years ago. The figures include five suchsystems that operate only in Europe.8 Electronic trading of bonds by retail inves-tors, mostly via the Internet, also appears to be growing rapidly. Much of the elec-tronic trading in bonds has taken place in the relatively large markets of theUnited States and euro-zone sovereigns, but other types of fixed-income securi-ties are also traded electronically, including federal agency securities, asset-backedand mortgage-backed securities, corporate bonds, money market instruments andmunicipal bonds. Electronic trading in such instruments has been technically fea-sible for some time, but recent advances in computer software have made it easierto categorize and match the many types of bonds that issuers have outstanding,while other technological advances (e.g. open architecture access) have made iteasier to link different trading services. The Internet has been particularly note-worthy, enabling even small retail investors access to the same information flowsthat previously had been the sole province of broker-dealers and large institu-tional investors.

A variety of systems have been recently established to provide for fullyelectronic trading in fixed-income securities. Although each system in operationmay have its own design characteristics,9 the systems can loosely placed in threemajor categories: auction systems, cross-matching systems, and dealer systems,which include single-dealer systems, multiple-dealer systems, and interdealersystems.

© OECD 2001


51

● Auction Systems: As the name suggests, auction systems enable partici-pants to bid directly on issues. Some auction systems are designed fornew issues in the primary market. Many government borrowers have inplace such systems, enabling dealers, institutional investors, and even insome cases retail investors, to electronically place competitive and non-competitive bids for securities. Other issuers, including the World Bank,municipalities, and global corporations such as Ford have recently triedtheir hand. Other auction systems are used by investors and others toplace securities for sale in the secondary market. In both cases, details ofthe initial offering or securities for sale are posted in advance, and pro-spective bidders are also informed as to the auction format and awardtechnique (first-price versus second-price).

● Cross-matching systems: Also known as ECNs when there is ongoing dis-semination of price information or otherwise as ATS, matching systemsenable dealers and institutional investors to trade anonymously withmultiple counterparties. Participants place buy or sell orders, and tradesare executed automatically when a matching contra-order is entered atthe same price or when posed prices are “hit”. Order matching can bereal-time or periodic. These types of systems are generally able to accom-modate complex trading strategies that entail multiple orders placed forvarious securities. Consequently, these system represent the greatestpotential source of change to traditionally static fixed-income markets. Inespecially liquid markets, there is the potential (in theory) for dealers tobe disintermediated.

● Dealer Systems: Dealer systems allow customers to execute transactionsdirectly with one or more dealers, but not with each other. They representessentially a modernization of the old, decentralized, telephone-basedsystem that prevails to this day, although there are certainly potentialefficiency gains. There are three variants. Single-dealer systems allow inves-tors to trade directly with a single dealer of choice, which acts as principalon all trades. The customer contacts the dealer, via the dealer’s propri-etary network, through third-party providers, or increasingly via the Inter-net, and obtains price quotes. The trade is executed if the quotes aredeemed to be acceptable. These systems have been widely used bymajor fixed-income dealers (especially in the United States). Multi-dealersystems carry this concept one step further, allowing customers to examinequotes from two or more dealers simultaneously and to execute transac-tions as they see fit from among the multiple quotes. Some systems dis-play the “best” bid or offer price for a given security among those placedby all participating dealers. These systems are used for trading in a vari-ety of fixed-income securities, although mainly for trading in United

© OECD 2001


52

States and European government securities. Interdealer systems restrictaccess to the dealer community, enabling dealers to execute transactionselectronically with other dealers anonymously through the services ofinterdealer brokers. These systems have existed for some time as tele-phone-based systems, although they generally now operate as electronicplatforms.

d) Disintermediation

The role of financial institutions in the capital intermediation process haschanged significantly over the years. In the past, funds were intermediatedthrough banks and other savings institutions. The savings of individuals weredeposited in these institutions which subsequently lent the funds out as businessand consumer loans. The advent of direct market financing for large borrowers,techniques such as securitization, and the institutionalisation of savings has led tothe disintermediation of financial institutions. In response to these forces, the larg-est banks have shifted into other lines of business. They have entered the securitiesbusiness and have developed more sophisticated products such as over-the-counteror custom-designed derivatives.

As securities dealers, the largest banks serve both institutional investors andcapital-raising corporate clients by providing access to information, advisory andanalytic services, trading/execution, market making and liquidity, and sophisti-cated products like derivatives. However, even this paradigm is now shifting. Forexample, at one time dealers had the best direct access to the news services andcould supply information and interpretation of market developments to their cli-ents. With advancements in telecommunications, however, institutional investorsand corporate treasuries also have direct and instantaneous access to this informa-tion. In fact, a large proportion of this information can now be obtained for freeover the Internet.

Similarly, with technological advances and the development of ATS, securitiesexecution is available from numerous sources and the price of that service is beingdriven down relentlessly. Dealers already recognize that there is little money to bemade and no long-term future in the simple execution of trades, a process that isreadily amenable to automation. The electronic trading systems of the future maybe owned independently, by the investment dealers, or the exchanges maydevelop their own systems. What is certain, however, is that investment dealerswill have to add value beyond execution through other services such as advice andanalytics, the design of derivative products, etc.

It is particularly difficult to predict how the electronic trading platforms willplay out in the shorter term. They have the capability to either fragment or central-

© OECD 2001


53

ize market liquidity, although given the underlying preference of institutionalinvestors for centralized liquidity, there are clearly forces toward centralizationover the longer term. Electronic trading platforms can impact not only regional butalso global financial markets. For example, even Nasdaq and the NYSE are beingimpacted by them. However, the development costs of these systems can behuge, which may give an advantage to larger markets and dealers. As alreadynoted, however, as a commoditized service, trade execution is becoming less andless important in the financial intermediation process, even though it is an essen-tial element of intermediation.

Fixed-income markets everywhere currently rely heavily on dealers to inter-mediate. This is generally thought to be a product of both the heterogeneousnature of fixed-income securities, and of the relatively large and infrequent natureof customer order flow. In terms of secondary market trading, the chance that twoinvestors will happen to have matching requirements to buy and sell a certainsecurity over any reasonable amount of time seems remote. In the primary marketas well, dealers traditionally act as intermediaries between issuers and investors.

However, electronic trading systems have the potential to reduce the market’sneed for intermediary services. In large and liquid government securities markets,for instance, some customer orders could cross without the need for a mar-ket-maker’s services. At the very least, there is the prospect for some disinterme-diation among market-makers, in at least some market segments. Broker-dealersseem to be cognizant of this risk and are actively forming consortia to develop sys-tems that would essentially compete with their own services. Disintermediation inthis sense also implies some degree of centralization. The precise effects of such afundamental shift in market structure are unknown, but one could easily imaginean improvement in liquidity as search costs fall.

e) Transparency

There is an increasing desire among investors for transparency. This is espe-cially true for the traditionally opaque fixed-income markets. The trend towardsInstitutionalisation of savings, and the consequent shift in the balance of powertowards institutional investors that this implies, has pushed this issue to the fore-front. Electronic trading systems definitely have the potential to increase transpar-ency. If increased transparency leads investors to feel more comfortable withtrading, perhaps they will do so more frequently. This development would resultin improved liquidity.

At the same time, however, some fixed-income market participants havevoiced concerns that transparency taken too far could actually harm liquidity. Theargument is that, in especially illiquid securities, market-makers would be less

© OECD 2001


54

inclined to offer liquidity if other market participants were immediately apprisedof the results of the trade. Anonymity of trading is also seen as important by bondmarket participants.10

f) Alliances Among Stock Exchanges

One development that is well under way and can be predicted with virtualcertainty to continue is the trend toward alliances among exchanges. The ultimategoal is to provide firms that do business on a worldwide basis with the opportunityto be listed on exchanges around the world. In the same way that many currenciesare traded 24 hours per day, investors around the world will have the opportunityto trade the stocks of international companies after the home exchange of thecompany has closed.

There now appear to be four different models for linking exchanges. The firstis that being developed by NASDAQ. The idea is to create markets in variouscountries with local partners using a common technology, for example, NASDAQEurope, NASDAQ Japan and NASDAQ Canada. Ultimately they will all be linked,creating a global electronic trading web. A second strategy is that of merger, asexampled by the proposed, until recently, union of the London and Frankfurt stockexchanges. Here the idea is that the large combined pool of liquidity would drawyet more from the continent. A third strategy is that of a hostile take-over bid, aswas attempted by OM Gruppen of Sweden for the London Stock Exchange. Thefourth strategy is being pursued by the NYSE in its creation of the Global EquityMarket (GEM), which currently includes ten other member exchanges. The ideahere is that the existing local exchanges would retain their identities, but wouldshare a common electronic interface whereby they could combine their order flowsof the largest companies. There are few details of this system yet, but more infor-mation should be forthcoming soon.

The ME will become the fifth member of, and will use the same automatedtrading system as, the Globex Alliance. The other Globex members are the Chi-cago Mercantile Exchange (CME), the Paris bourse, the Singapore InternationalMonetary Exchange (SIMEX) and Brazil’s Bolsa de Mercardorias & Futuros (BM&F).When operational, ME members will be able to trade the derivative products ofthe other exchanges of the Alliance through an electronic trading system. Similarly,members of the other exchanges will be able to trade ME products from the sameterminal they currently use to execute trades on their own exchange. This not onlyhelps the member exchanges to become a global exchange with respect to itsoffering of products, but also enables them to expand the market for its own prod-ucts. As well, it allows the member exchanges to share in the high cost of develop-ing and maintaining new technologies, which is necessary if they are to competewith alternative electronic trading systems. It is noteworthy that Globex spans all

© OECD 2001


55

three of the world’s major time zones. It is also the first integrated, continentalmarket of exchanges in the Americas (ME, CME and BM&F).

As another example of alliance initiatives, the NYSE, the Deutsche Boerse andthe Tokyo Stock Exchange are set to announce with Standard & Poor’s the first glo-bal stock index to be traded on several exchanges. The new index is expected tobe a capitalization- weighted benchmark composed of 100 stocks from the U.S.,Japan, Canada, Australia, South Korea and others. It will offer individual investorsaround the world the opportunity to quickly and cheaply invest in a basket of glo-bal stocks.

V. Operating Services: Custody, Clearing and Settlement

The discussion thus far has focused on activities that occur at the front-end ofthe transaction chain: listing, information dissemination, order routing, and orderexecution. This section is concerned with the so-called back-office activities andother operating services through which the ultimate transfer of securities is accom-plished (e.g. matching, clearing, settlement, custody and other administrative ser-vices). The same forces that have been driving structural change in the financialservices sector broadly defined, namely technological advances, changing investordemographics, globalisation of the marketplace, etc., have had a pronouncedeffect on the evolution of operating services. In addition to these environmentalforces, formal mergers and other linkages between other financial service provid-ers, as well as between markets and exchanges have also had an effect on operat-ing services businesses, in part, through changes in the volume of transactions thatmust be processed externally.11 The combined effect of these various forces hasbeen a substantial degree of consolidation of the sector as less efficient or other-wise disadvantaged providers have exited the business.12

a) Forces encouraging consolidation in operating services

As indicated, several interrelated factors are driving changes in the operatingservices business. Some of the forces creating pressure for change (e.g. technologyand globalisation) are pervasive and are affecting the provision of operating ser-vices across a number of jurisdictions, while others tend to be confined to particu-lar jurisdictions. Furthermore, the initial conditions vary, which helps to partlyaccount for disparities in the developments in this sector across regions. Forinstance, consolidation among clearing and settlement firms has progressed fur-ther in the US than in Europe. However, as expected, the single currency hasspurred increased cross-border trading in the euro zone, and with the increasedcross-border activity has come growing pressures by institutional investors andbroker/dealers alike for a means of cutting the cost and complexity of completing

© OECD 2001


56

cross-border equity trades. High transaction fees for clearing and settling cross-bordertrades (by some accounts, ten to fifteen times higher than for comparable domes-tic transactions) are the main cost component. There are roughly thirty clearingand settlement systems in Europe, compared with just two in the US, with varyingsettlement cycles (e.g., monthly rolling settlement in Paris versus T+5 in London).For broker/dealers, maintaining a diversity of settlement systems is expensive.Thus, not surprisingly, many experts argue that pressures to rationalize the pay-ments infrastructures in the euro zone will inevitably lead to further consolidationof European settlement companies and securities depositories. Some observersfurther contend that the process will not stop there. Rather, they suggest that thetrading in “blue chip” stocks, especially shares of the top 500 or so companies, willultimately gravitate toward a single, shared global platform, with trading accessi-ble 24 hours a day, seven days a week. In response, clearing and settlement willnecessarily move closer to real time. Among the main drivers of these changes istechnology.

Technological advances

Technology, namely advances in the speed and quality of telecommunica-tions, computers and information services, has had both direct and indirect effectson operating services businesses. Direct effects of technology include:

● Economies of scale. Many operating services (e.g. custody, cash manage-ment, back-office services) entail high costs to build and maintain thenecessary technological infrastructure, but provide low margins, given theincreasingly demanding requirements of institutional clients for moresophisticated services at lower prices. Success requires a continuing abil-ity to achieve lower costs and provide value-added information servicesto clients (see Table 2). Competitive advantage in this area is largelydetermined by the scale of a provider’s operations, especially as regardsmarket share. A large firm size helps to counterbalance competitive pres-sures and provides the wherewithal for the continuous technology upgradesnecessary to achieve any unit cost advantage in pricing services that arebasically commodity products. Providers of these services often pursuemergers and acquisitions as a means of spreading the high set-up costs ofnew technological infrastructure over a larger customer base, thereby low-ering unit costs.

● Feasibility of remote processing. Modern information and telecommuni-cations technologies make it possible to conduct activities that don’trequire proximity to the client in remote locations to take advantage oflower labour or real estate costs. Accordingly, back-office operations canbe physically separated from the front-end with no loss of service quality.

© OECD 2001


57

There is also the potential for significant cost improvement if such activi-ties are outsourced to banks that benefit from economies of scale.13 Thisappears to be occurring already at the international level, where a consid-erable degree of specialization is taking place, resulting in the concentra-tion of correspondent banking and custody services in a small number ofglobal providers.14

● Enhanced payments processing and settlement alternatives. As a resultof the increased speed and lower costs of computing and telecommunica-tions equipment, financial service providers can, with the appropriatetechnology infrastructure, centralize payment and settlement systems.For example, large international banks now tend to concentrate most oftheir world-wide payment activities in one (or a few) processing centre(s).

Table 2. Custodian bank services

Service category Type of service Activities included

Basic Safekeeping Looking after entitlements, in paper or electronic form

Settlement Ensuring that buyers receive the securities purchased and sellers receive money owed. In most markets, the actual exchange of cash for securities takes place by electronic delivery versus payment in commercial or central bank money within a nationalor international central securities depository, to which custodians may be the sole means of access for non-bank participants

Income collection Ensuring that dividends and interest payments on holdingsof shares and fixed-income securities are collected and paidto investors

Reporting Delivering regular reports to institutional investors ontheir securities transactions and portfolios

Banking Foreign exchange Processing payments and receipts in foreign currencies

Cash management Re-investing the surplus cash of clients by placing it on depositor by investing it in a proprietary or third party money market fund

Asset servicing Corporate actions Receiving notification of corporate actions like rights issuesor takeovers from registrars and pass along to investors. Take responsibility for acting upon the instructions issued by clients

Proxy voting Exercising voting rights on behalf of investors

Tax reclaims Reclaiming withholding taxes from national tax authoritieson behalf of fund managers under double taxation treaties

Value added Securities lending Managing the lending for profit of the securities held inthe portfolios of investors, usually to broker/dealers needingthe securities to cover short positions or for general collateral purposes

Performance measurement

Reporting to investors on the performance of their portfolio against relevant benchmarks

Fund administration Providing valuation and other administrative services to investors who have funds domiciled in offshore locations

Source: Financial Times Survey, July 2000.

© OECD 2001


58

The trend among the global investment banks is to seek to concentrateliquidity in one place and to cut the cost and complexity of clearing andsettling. The cost savings realized through such internal reorganizationcan be substantial, in some cases sufficiently large that internal consoli-dation becomes a viable alternative to outsourcing.15

Advances in information and telecommunications technology, along with theInternet and increased broad-band connectivity, have affected the payments andsecurities settlement industry indirectly by helping facilitate the establishment ofnew systems to route, execute and monitor trades. The surge in on-line tradingvolume from institutional and retail investors, and the increase in direct electroniccross-border trading have put pressure on existing settlement systems. The pres-sures on settlement infrastructures are likely to be further exacerbated over thenext few years as initiatives to drastically shorten the settlement timetable comeon line and as trading hours extend further.

Demographics and changes in investor behaviour

In many countries, the need for retirement income has prompted growth ofprivate pension plans as alternatives to state-sponsored, pay-as-you- go systems,resulting in a rising demand for “retirement products” such as mutual funds.16

As part of the Institutionalisation of wealth occurring throughout the OECDarea, institutional investors increasingly hold and trade global portfolios onbehalf of retail and corporate clients. In fulfilling their mandates, institutionalinvestors have sought to diversify their trading through different markets andalternative trading facilities in the search for optimum combinations of transac-tions costs, liquidity and price discovery. For example, mutual fund families inthe US and elsewhere have begun to compete for funds under management byslashing fees, while they themselves have sought lower transactions costs in car-rying out their own trading activities. Their efforts to reduce trading costs havecontributed to disintermediation of traditional service providers. In turn, largerintermediaries have themselves become large institutional investors as theirproprietary trading activities have increased. Thus, despite different underlyingneeds (see Table 3), the actions of institutional investors and their service pro-viders have exerted similar pressure on the settlement system, resulting inincreasing levels of cross-border trading, creating competition among existingexchanges and encouraging the growth of ATS and ECNs. The move by exchangesto forge alliances or mergers is, in part, a reflection of the increased pressures onthem to reduce costs and to improve liquidity. Much of this cost reduction isoccurring at the clearing and settlement level, where some participants contendthe largest cost synergies lie.

© OECD 2001


59

Globalisation

These developments are becoming increasingly global. In response toincreased competition, cross-border strategic alliances have increased bothbetween firms and market infrastructures. This process is evident in virtually allindustries, with large numbers of international alliances and joint ventures as wellas full-scale mergers and acquisitions. Over the past decade or so, economieshave become much more interconnected, as governments around the globe haveopened up their markets to international participation and have reconsidered thelegal and regulatory frameworks in which financial institutions operate. Non-financialcompanies that operate globally expect financial intermediaries to provide prod-ucts and services attuned to the international nature of their operations. Today,global financial products are available in national markets and domestic investorsoperate increasingly in global markets. Competitive pressures are such that whole-sale service providers have been driven to establish a presence in each of themajor international financial centres. Service providers, in turn, have generatedspecial requirements of payment and securities settlement systems, as reflectedin their requests for direct remote access17 and a global collateral pool.18 Globalproviders normally participate in several systems and, thus, are generally in favourof a high degree of standardization across systems. Their demands for harmoniza-tion of systems may encompass technical aspects of payments processing such as

Table 3. The needs of financial intermediaries

Fund managers Broker/dealers Global custodians

Trading Maximum liquidity Low-cost executionArbitrage between cashand derivatives markets

Rapid communicationof transactions

Confirmation Electronic trade confirmation

Electronic trade confirmation

Straight-through processing

Clearing AnonymityKnown counterparty riskMinimum margin needs

Settlement Contractual settlement Settlement efficiencySame-day turnaroundLow settlement fees

Low settlement fees

Financing FinancingOptimal collateral usage

Yield-enhancing services

Custody Enhanced custody(core + contractual income services)

Low-cost core custody (basic + tax and market claims)

Low-cost basic custody (safekeeping, payment distributions, corporate actions)

Source: Euroclear, “The Hub and Spokes Clearance and Settlement Model: The Pan-European Settlement Solutionfor Efficient and Competitive Capital Markets”, May 1999.

© OECD 2001


60

message formats, as well as support for global cash management, delivery versuspayment procedures and professional information systems.

Financial sector consolidation

Financial sector consolidation leads to the emergence of large market players.In so doing, consolidation can affect the way in which payment and securities set-tlement activities are conducted and the resources that are needed to providethese services. This issue has been the subject of a growing body of research.19

One conclusion reached is that by reducing the number of market participants,consolidation can increase the efficiency of payment and settlement activities.When one bank is merged into another, payments between the institutions orbetween their customers can be processed internally and need not be passed onto the inter-bank system. Thus, even if there is no actual increase in the proficiencyof the merged entities to process transactions, overall system efficiency might stillincrease with a decline in the volume of payments or securities transfers to be pro-cessed. A reduction in the number of participants might also contribute to greatersystem efficiency if the remaining banks are better able to agree on common tech-nical standards and market conventions.20

Similarly, consolidation might lead to increased efficiency if payment and set-tlement activity shifts to more efficient payments processors, for example, byenabling larger service providers to form more efficient payments networks. Largerbanks would tend to have two main advantages over their smaller competitorswith regard to the efficient provision of payments and securities settlement ser-vices. First, they typically have the financial strength to invest in new, sometimescostly, technologies that might increase efficiency and reduce risk in payment andsecurities settlement. Second, they may be able to capture economies of scale.

b) Consolidation of market infrastructures

With the advent of electronic trading, financial firms now have a wider range ofalternatives for executing transactions and performing support functions. Underpressure from global market players, operating service providers face the need toenhance market infrastructures on an ongoing basis. These pressures have notbeen limited to institutions. Market infrastructures have also faced increased com-petition and the search for lower costs and increased efficiency has sparked around of consolidation. Linkages are being established both at the horizontal andat the vertical level, where the latter describes the process of integrating differentactivities taking place in the transaction chain (e.g. in the securities industry, theintegration of trading, clearing, settlement and custody services within a singleinstitution).21 The consolidation of securities settlement in the US has been char-

© OECD 2001


61

acterized by both horizontal and vertical consolidation. First, the Depository TrustCompany (DTC), already the largest securities depository in the US, merged withtwo regional depositories (the Midwest Securities Trust Company and the Phila-delphia Depository Trust Company) to create a single central securities depository(CSD). Second, in 1999, DTC and the National Securities Clearing Corp. (NSCC),which compares and nets almost all broker-to-broker corporate and municipalsecurities trades in the US, affiliated their organizations under a common holdingcompany – the Depository Trust & Clearing Corp. (DTCC).

In Europe, the consolidation of the securities settlement industry has pro-ceeded at a slower pace than in the US, although the pace has accelerated sincethe introduction of the euro. Consolidation is taking place partly through themerger of CSDs that operate securities settlement systems.22 For example, in Janu-ary 2000 the owners of Cedel, the Luxembourg-based international central securi-ties depository (ICSD), and the owners of Deutsche Börse Clearing, the GermanCSD, set up a new holding company called Clearstream International, which ownsboth depository institutions. The constituent entities will remain legally separatebut will use a common technical infrastructure. Subsequently, in March 2000, theboards of Euroclear, the Belgium-based ICSD, and Sicovam, the French CSD,announced their agreement in principle to fully merge the two organizations.Most observers expect to see further centralization for securities depositoriesgoing forward.

VI. Issues

To recap, the impact of technology differs somewhat depending on whetherthe market is a matching market or an intermediated market. In a low technologyworld, minimization of search costs would imply an exchange that physicallybrings traders together, and lets them match each other using their voices. Hightechnology means that computer systems can quietly do the matching, vastlyreducing the marginal search costs to essentially zero. The essence of an inter-mediated market is that the market makers carry an inventory. Technology mayallow inventories to become closer to a just-in-time inventory, but it still carriesa cost that must be recouped in the bid-ask spread. The net effect would seemto be that technology favours the matching type of market more than an interme-diated market. It would seem that, over time, highly liquid products wouldmigrate to matching markets, there would be a trend to commoditize less liquidproducts and that matching exchanges would go global (via alliances) to thedegree possible. So in the end there would be one global, 24 hours a day, match-ing market in the most liquid financial products. Moreover, the forces of competi-tion would generate a continuing commoditization of less liquid financialproducts (ABSs are an example.)

© OECD 2001


62

What does this mean for intermediated markets? There will always be less liq-uid markets, and there will be scope for market makers to provide liquidity tothose markets. Moreover, they will have a significant incentive to be on the cuttingedge of developing new customized innovative products, such as exotic derivativeproducts. There would likely be two elements of the intermediated sector; a glo-bal element that would specialize in new innovative products, and “national” or“regional” elements that would intermediate the trades of many highly specializedproducts (off-the-run bonds and small caps) which would be primarily of interestto local (national) participants. So, in the end there would be a highly liquid globalmatching market, and national intermediated markets.

To reiterate, global developments seem to point to greater tiering of markets.For example, it would appear at this point that financial market evolution is point-ing in the direction of a single large global matching market for the most global andliquid securities, based on linkages between regional and national stock markets.This market, which would be operational 24 hours a day, would involve the elec-tronic matching of buyers and sellers. Large-cap stocks and standardized debtobligations and derivatives would be handled by this market. This market wouldbe a virtual market composed of the participants in many trading centres aroundthe globe. Thus, there would be only limited relocation of portions of trading cen-tres. In addition, there would be a global intermediated market in highly special-ized derivative products. The market makers in this market would have a strongincentive to continue to develop new and innovative products to maintain theirmarket niche. Moreover, at a regional or national level there would continue to bescope for intermediated markets to trade less liquid securities that would largelybe of local interest, such as off-the-run bonds, less well known corporate obliga-tions and small-cap stocks (although indices of particularly the latter may be inter-nationally traded.) However, the more liquid products may gravitate toward the“global” market, leading to a shrinkage of this sector.

Although, for heuristic reasons, this view is presented in a static sense, but itis probably true that a steady-state view of the world is probably obsolete, or atleast hazardous. Even if financial markets resembled what is described above for atime, the entire structure is likely to be contestable, and very likely to give way atsome point to something different. One of the few certainties of the future is that itis bound to be at least as dynamic as the present. The world outlined above islikely to be but a waypoint along the road to something truly unimaginable.

The preceding discussion has given a characterization of where financial mar-kets are now, the forces that are influencing their development and some indica-tion of where they could be going. There are, however, a number of importantquestions that need to be addressed, including: What do these changes imply forthe efficiency, stability and safety of financial markets? What are the implications

© OECD 2001


63

for the future viability of national financial markets? What are the risks? Are thereany policy recommendations, and if so, what are they? These questions are brieflyaddressed in this section.

a) The Efficiency, Stability and Safety of Future Financial Markets

The overwhelming feature of a global matching market would be enormousliquidity; in fact, the maximum possible. This has many implications.

Efficiency has two meanings. In finance it refers to markets reflecting funda-mental news rapidly in the prices. Economists would refer to the resourcesrequired to fulfil the function. Massive and continuous liquidity would result inprices instantaneously reflecting fundamental information, much as the more liq-uid markets do today. Moreover, the advent of a single global market wouldensure that duplication of effort would be at a minimum. Thus, this market struc-ture would appear to be consistent with efficiency. However, there could be ineffi-ciencies in the less liquid local markets. Furthermore, these inefficiencies couldbe heightened if the more liquid products traded in these local markets are lost tothe global market.

Similarly the concept of stability has several aspects, which include volatility,contagion and overshooting. Higher liquidity will, in itself, reduce volatility. This isbecause single large idiosyncratic trades will have less effect on the market. Inexchanges the depth of the order book, and the speed of arrival of new limitorders that replace limit orders that have been consumed by large market ordersmitigate volatility. Many market makers act with notional order books and thedepth and resilience of their order books is an important element in determiningwhen and if there is any disruption of their market making function in the face of anegative shock. However, short-term volatility during relatively normal times is notthe major concern.

In terms of contagion, there does seem to be evidence that asset pricesare becoming more interrelated.23 The simple fact is that with global financialmarkets, market dynamics are global in scope. However, this is already a fact oflife, and further developments along these lines may not have a major impact.The concern is, of course, that the failure of a market or a payment and settle-ment system could have severe impacts elsewhere. Clearly the consolodationof institutional investors and other financial market participants leads to asmaller number of participants having a greater impact on market dynamics.Moreover, it has been suggested that increasing transparency could lead tomarket participants emulating the behaviour of major players, leading togreater herding behaviour.

© OECD 2001


64

Finally, although the structure of markets will undoubtedly change, the funda-mental manner in which participants behave is unlikely to change, so overshootingand undershooting, to the degree that they exist, are likely to continue.

The safety and soundness of the global market will, obviously, be of greatimportance. There appear, at present, to be two possible tacks to take on this. Thefirst would be to set up an international superregulator with powers to set stan-dards for the market infrastructure, oversee all international financial markets andenforce discipline as appropriate. Such an institution should hold as a core princi-ple that reliance on internal governance and market discipline is central, with min-imal invasiveness. Of course, the tricky question is what such an institution shoulddo in the event of a global financial crisis; respond on its own (and if so, how), rec-ommend responses by central banks and perhaps the IMF, or nothing, and thereare the moral hazard considerations of a response.24 The alternative would be con-tinued reliance on existing regulators and institutions, with some incrementalmodifications. The chief advantage of the former proposal is that comprehensiveregulation of all aspects of global markets could be internalized within a singleinstitution. The chief difficulty associated with this approach would be to generatesufficient international political consensus for many national governments to cedesufficient sovereignty to forge such an institution.25 A pessimistic pragmatist mightwell see the latter approach as being more fruitful within a reasonable timeframe.26 However, the latter approach smacks of a piecemeal structure, and thehealth of global financial markets are too important to be left to second-beststructures.

b) The Viability of National Financial Markets

From the point of view of a small open economy, there are three possible rea-sons why there could be concern about the future viability of national financialmarkets. These include; i) access of domestic investors to global capital markets,ii) the continued access of domestic issuers to reasonably priced capital, andiii) the employment and other spin- off benefits of having a developed domestictrading centre. The first of these concerns is perhaps the easiest to address. If theglobal market develops as a result of interlinkage of domestic markets, thendomestic investors would enjoy direct access to global markets. Perhaps the mostdifficult is the second concern. Particularly for smaller countries a domestic inter-mediated debt and small cap stock market may not be at a sufficient scale toafford a competitive market. Lack of reasonably priced capital, particularly forsmall and medium sized firms could slow economic growth from what would bepotentially possible. This would be a serious problem. (Although one could sug-gest that the banking system could fill this gap, the banking industry is undersome of the same pressures mentioned above, and it is conceivable that sector

© OECD 2001


65

could be facing a similar scenario as financial markets.) In this event, domesticauthorities would be faced with the possible choice of not allowing the necessaryconsolidation in the first place, to institute a regulated monopoly (both very heavyhanded approaches) or to deem the markets sufficiently contestable to mitigatethe inefficiencies caused by monopolistic pricing. The final potential problem isthe loss of employment if a portion of the financial sector relocates in a globalfinancial centre.27 However, this is not entirely negative. The loss of employmentthat is related to new-found efficiencies in the financial sector is positive. With lesssocietal effort devoted to the financial sector, resources are freed up for other pro-ductive uses.28 However, it is often difficult to disentangle job losses due to reloca-tion from those due to new-found efficiencies. Moreover, the fact of internationalboundaries makes it unlikely that the winners in these adjustments will everdirectly compensate the losers. It is likely that the only way for a small country toretain a portion of the global market would be if agents in that small country wereto find a niche in which they could offer exemplary service.29

c) Effects of consolidation of clearing and settlement30

Financial sector consolidation raises a number of interesting issues for policymakers, given its potential effects on competition and risk in payments and settle-ments infrastructures. There are many different effects, some of which pull inopposite directions, so it is difficult to state definitively whether the net effect ispositive or negative. Consider, for example, the implications of consolidation forcompetition. As noted before, the consolidation of financial institutions affects thenumber of participants to payments and securities settlement systems and,thereby, the volume of flows in those systems. There is the potential that the con-centration of payment and settlement flows within fewer institutions will increasethe efficiency of payment and settlement activities, which is a positive effect. How-ever, under normal market conditions, operating services and payment and settle-ment activities tend to be low margin businesses, which generally require highvolumes to generate adequate returns. Thus, should processing volumes on pay-ment and settlement systems decline too much as a result of consolidation amongsystem participants, processing fees might have to be increased in order to ensurethat revenues are sufficient to cover the high set-up and maintenance costs ofinfrastructures.

Consolidation in recent years has occurred not only among financial institu-tions, but has also involved market infrastructures. There is the potential, at least,that such a reduction in payment and settlement infrastructures will result inreduced competition, which could have a negative effect on fees charged for set-tlement services, as well as possibly reducing incentives for innovation on the partof service providers.

© OECD 2001


66

Assessing the relative weights of these various effects is difficult. For one, theprocess is dynamic. Effects that occur in the short run may not prevail over thelonger term.31 Moreover, there may be differences in the effects across differentsegments of the business (e.g. retail versus wholesale services). In the case ofwholesale services, many large market participants have argued that factors suchas the existence of economies of scale, increased use of book-entry registration ofsecurities, and the economic benefits of netting favour a high degree of consolida-tion. There have even been suggestions on the part of a few participants that amonopoly provider would be the preferred arrangement in some service areas(e.g. securities settlement). Others have countered that some measure of competi-tion via competing systems would be preferable to a single provider, but thereshould be linkages between the systems to preserve the benefits of a more inte-grated infrastructure.

In the case of retail payments, the net effect of consolidation on competitionis difficult to establish because the behaviour of individual institutions may offsetthe effects of consolidation of service infrastructures and vice-versa. In general,whether positive or negative effects dominate depends on the overall marketinfrastructure, whether consolidation occurs among individual financial institutionsor market infrastructures, the definition of the relevant market (e.g. local, national,regional, or global), and the existence of any entry barriers (e.g. high switchingcosts or compliance costs).

The implications of consolidation for risks arising in payments and securitiessettlement activities are also complex. To the extent that more efficient institu-tions acquire less efficient institutions, consolidation among financial institutionscan result in improvements in risk management. By the same token, as consolida-tion results in payment flows becoming more concentrated among fewer partici-pants, there is a greater likelihood that offsetting payments will arise, which couldreduce liquidity risk. However, the concentration of settlement flows within fewerparticipants also has the potential to cause significant liquidity problems for coun-terparties expecting payments and could have systemic risk consequences shoulda large payments processor encounter difficulties that preclude it from processingpayment orders. The move toward third-party service providers and the increasingnumber of multinational institutions with access to several payment and securitiessettlement systems in different countries also have implications for financial riskas well as giving rise to potential contagion effects.

d) Policy Recommendations

In general, the developments outlined above are very positive to the worldeconomy and especially to the economies of the OECD area. Therefore, the firstpolicy recommendation would be to not impede developments that improve the

© OECD 2001


67

efficiency or stability of the markets.32 Any policy proposals that go against thewishes of the vast majority of investors or other market participants are unlikely toimprove the efficiency or stability of financial markets and they are likely to moveto more advantageous jurisdictions in any event.

Naturally the loss of the more liquid elements of a nation’s financial marketswill be sorely felt by that country. Not only are the highly remunerated jobs and taxrevenues lost directly, but the demand for specialized services dries up, leadingto higher costs for the residual market.

The move toward global efficiency may be complicated by national borders.The main beneficiaries will be the receiving countries, and those experiencingmost of the costs will be the smaller countries losing portions of their financial cen-tres. If there is no diminution of services offered and costs are cut, globally finan-cial markets will become more efficient and all users of financial services willexperience a net gain. However, on an international scale, there are few opportuni-ties for the winners to compensate the losers. This could encourage countries atrisk to consider policies to hamper these developments, but ultimately such poli-cies will only create growing distortions and are doomed in the long run.33

The key risk, therefore, is that the economically efficient scale of the remain-ing residual national intermediated markets would potentially allow the exerciseof monopoly power. Since the correct policy recommendation depends upon thecosts and benefits of the various options that are available, and these vary on acase by case basis, it may be hazardous to make a single blanket recommenda-tion. However, it is recommended that regulatory authorities keep in mind thatresidual intermediated markets are likely to remain contestable and moreheavy-handed intervention may neither be necessary nor desirable.

National level regulatory bodies should support the appropriate, comprehen-sive international regulation of global financial markets, whether through an inter-national superregulator or through the evolution of existing structures. Nationalregulatory bodies should also seek to ensure an appropriate level of transparencyin markets and redundancy in the networks to support the efficiency and resiliencyof markets. Finally, and perhaps most importantly, the development of efficientand robust markets that participants are comfortable with is paramount asincreased trading leads to the positive externality of greater market liquidity, andhence, stability.

Any outstanding issues regarding clearing and settlement fall under the pur-view of central banks and competition authorities. They include questions con-cerning remote access, third-party specialists especially non-bank serviceproviders, the establishment of a global collateral pool, and the move towardmonopoly providers.

© OECD 2001


68

VII. Conclusions

This study has reviewed the structure of financial markets in the OECD areaand the forces acting upon them. An assessment was then made to suggest thatthe direction of change is in the direction of the generating of a single global mar-ket through the interlinkage of national equity markets. Domestic intermediatedmarkets would be undermined by this development as the standardized productstraded on these markets could be traded more efficiently and at lower cost on theglobal matching market. The domestic intermediated market would continue toexist, as there will always be relatively illiquid products and agents desiring totrade them. However the scale of the remaining “national” market may not be suf-ficient to allow for a competitive market. Authorities, particularly in smaller coun-tries should be aware of this possibility.

Overall, however, these developments are very positive from the standpointof the global economy. Governments should embrace these changes, and ensurethe development of an efficient, stable and safe global financial market.

© OECD 2001

69


Notes

1. This is a heuristic characterization. In fact, this is changing as TradeWeb allows for contem-poraneous contact with multiple dealers. These developments are discussed at greater lengthbelow.

2. The structure of foreign exchange markets is largely similar.

3. Different groups of investors might have a preference for different attributes of exchanges andtrading systems. For example, some traders prefer anonymity, while others prefer systems inwhich the identities of traders are fully disclosed. Some participants prefer to trade on con-tinuous markets, while batch processing or periodic markets are sufficient for others. See thediscussion in Ruben Lee, Chapter 4, What is an Exchange, Oxford University Press (1998).

4. A spirited debate has been ongoing in the United States regarding which of the two approa-ches provides customers with the “best execution”. So-called “hard” central limit orderbooks (generally preferred by large full-service dealers) mandate that all limit orders be dis-played, subject to a first-come, first-served basis. “Soft” central limit order books provide forbest execution as to price, but with no time constraints. This practice enables the dealer tocross some trades internally. In a system with strict price-time priority, this practice wouldnot be allowed. Other variants enable dealers to withhold some orders, for example, by exe-cuting block trades.

5. Trading systems differ in the nature of the price discovery process. Some exchanges (e.g. retailtrading intermediaries offering a best execution guarantee) compare prices from other exchangesand offer the best available price. An intermediate step draws orders from an electronic bul-letin board, based on a point and click approach. More automated systems are auction tradingsystems that collect orders and execute them in intervals according to a specific turnovermaximizing principle (e.g. the Arizona Stock Exchange). Electronic CommunicationsNetworks, by contrast, provide for full dissemination of price information.

6. The Securities Exchange Commission’s (SEC) Order Handling Rule of January 1997 resultedin a distinction between ECNs and so-called “crossing systems”, which do not provide forongoing dissemination of price information. To qualify as an ECN, a trading system must satisfy thefollowing conditions: 1) continuous dissemination of price information; 2) limit book mana-gement or ongoing auctions; and 3) automatic matching of client orders and their execution.In addition, to gain access to the NASDAQ system, the operator must pledge to route thebest market maker orders available to him to NASDAQ, where they can be viewed and tradedpublicly.

© OECD 2001


70

7. Under the SEC’s regulation ATS of November 1998, private trading systems have the choiceof either registering as exchanges or meeting special requirements with respect to transpa-rency and supervision.

8. The largest of the European-based systems in terms of volume of activity is EuroMTS, whichbegan operation in April 1999 as a pan-European interdealer electronic trading system forbenchmark government bonds denominated in euros. EuroMTS works through the Telematicosystem developed by Mercato dei Titoli di Stato.

9. For example, the systems may be completely nontransparent regarding the identities of coun-terparties to other participants (e.g. EuroMTS, BrokerTec, and TradeWeb) or may providesome pre-trade and/or post- trade information (e.g. MTS Italy, Garban Intercapital). Some systemsdo not accept foreign participants.

10. Moreover, recent research is showing that transparency can inhibit liquidity as greater trans-parency obviates the need for interdealer trades to keep tabs on current market conditions.See Yang (2000) “Price Efficiency and Inventory Control in Two Interdealer Markets” (mimeo) Bankof Canada.

11. After a merger, payments between the merged counterparts become internal to the conso-lidated institution.

12. Changes in environmental factors can affect payments systems in a number of ways. To illus-trate this point, researchers have defined the concepts of “technical efficiency” and “allocativeefficiency” as benchmarks. Payments are said to be efficient if they lie on a frontier that mini-mizes costs for a given overall level of risk and minimizes risk for a given overall level of costs.Allocative efficiency exists when the point chosen on this frontier trades off risks and costsat the socially appropriate relative price. Environmental factors can affect the relationshipbetween payments system risks and costs in three ways: 1) they can move the risk-cost fron-tier, 2) affect the distance from the frontier (which may increase or decrease technical effi-ciency), or 3) change the relative prices for payments services (which may increase ordecrease allocative efficiency). For a complete discussion of these concepts, see Alan N. Berger,et al. “A Framework for Analyzing Efficiency, Risks, Costs, and Innovations in the Payments System”,Payment Systems Research & Public Policy Risk, Efficiency and Innovation. Federal ReserveConference held December 7-8, 1995. Journal of Money, Credit and Banking (Nov. 1996),Part 2, vol. 28, No. 4.

13. Historically, in many OECD countries, such activities have been out sourced to institutions inthe same sector as the client bank. However, recent years have witnessed the emergence of“transaction banks” that specialize in the provision of payment or back-office services toother banks. In some cases, these service providers are non-bank entities.

14. The term correspondent banking refers to an arrangement whereby one bank (the corres-pondent) provides payment and other services to a client bank, especially across nationalboundaries. Europe is a special case, where the euro has reduced substantially the number ofcorrespondent relationships needed to operate in the euro zone. This development has acceleratedthe trend towards concentration of the correspondent banking and custody businesses, cha-racterized by a shift of business from indigenous sub- custodians to more established globalproviders.

© OECD 2001


71

15. A frequently cited example from the public sector is the Federal Reserve’s consolidation ofthe IT platforms that supported Fedwire operations from 36 sites into the one main site withtwo back-up sites. The change enabled the Federal Reserve to eliminate redundant resourcesand reduce operating costs, leading to dramatic reductions in Fedwire fees over a three-yearperiod of roughly 50 per cent for funds transfers and 25 per cent for securities transfers. Thesesame sorts of savings may carry over to consolidation of private- sector processors.

16. In addition to record inflows to mutual funds, there has also been a surge in self-directed investmentsby individuals for retirement purposes, as reflected in the explosion of Internet-based trading.

17. Direct remote access to an inter-bank funds transfer system refers to the ability of a creditinstitution in one country to become a direct participant in an established payments systemin another country (“host country”) and, thereby, to have a settlement account in its ownname with the central bank (or other settlement agent) in the host country without neces-sarily having established a branch in the host country.

18. A global collateral pool would contain collateral denominated in several currencies thatwould be accepted by several central banks for purposes of collateralizing intra-day and/orovernight credit provided to eligible counterparties.

19. See the review by Allen N. Berger, Rebecca S. Demsetz, and Philip E. Strahan, “The consoli-dation of the financial services industry: Causes, consequences, and the implications for thefuture”, Journal of Banking and Finance 23 (1999), pp. 135-194. See also D. Hancock andD.B. Humphrey “Payment transactions, instruments, and systems: A Survey”. Journal of Bankingand Finance 21 (1998), pp. 1573- 1624. See, also, "Group of Ten: Report on consolidation inthe financial sector” 2001, The Ferguson Report, BIS available at: www.oecd.org.eco . An onlinelisting of payment system research is available at www.frbchi.org/paysys/database/ paysys.html.

20. See D.B. Humphrey, L.B. Pulley and J.M. Vesala, “Cash, paper and electronic payments: Across- country analysis”, Journal of Money, Credit and Banking, 28 (1996).

21. For example, most European exchanges offer an integrated dealing, clearing and settlementservice.

22. There are notable exceptions, however. For example, the proposed merger between the LondonStock Exchange and the Deutsche Börse did not include the two settlement companies: Crestin London and Clearstream in Frankfurt. Rather, the basic aim of the combination was to con-solidate the front-end through a common trading platform.

23. See, for example, BIS (forthcoming) “International financial markets and the implications formonetary and financial stability”, BIS Conference Papers, No. 8.This proposal has been put forward by Eatwell and Taylor (1998) and by Currie (1999).

24. Given the size and importance of global financial markets, moral hazard will be a problem regar-dless of the particular regulatory institution arrangements.

25. It has also been suggested that banking supervision is sufficiently micro-oriented that inter-national supervision would effectively be unmanageable, although banking supervision is notquite the same thing as financial market regulation.

26. White is clearly in this camp. See White (2000) “What have we learned from recent financialcrises and policy responses?” BIS Working Paper 84.

© OECD 2001


72

27. While it appears to us that the single global market will be a virtual market composed of manygeographically separate trading centres, some critics believe that the idea of a single marketmust necessarily lead to a single trading centre. We believe that a significant relocation of ma-jor trading centres unlikely, and in this section our assumption is that relocation is minimal.

28. Obviously, however, there are adjustment costs.

29. For instance: Ireland has a relatively cheap, skilled labour force, and a favourable tax environ-ment. In an age of almost instantaneous communication, what reason is there not to have allof an international firm’s back-office activities concentrated in Ireland? Why not then contractout to an Irish firm which handles the back-office computer work for any number of otherfinancial institutions? Technology has seemed to open the door to more regional specializa-tion in some sectors of the financial services industry.

30. See the discussion in "Group of Ten: Report on consolidation in the financial sector” 2001,The Ferguson Report, BIS, available at:.,The Ferguson Report, BIS.

31. A study by D. Hancock, D.B. Humphrey, and J.A. Wilcox, “Cost reductions in electronic pay-ments: The roles of consolidation, economies of scale, and technical change”. Journal of Bankingand Finance 23, (1999) pp. 391-421 found that, taking into account scale economies and de-clining costs of technology, substantial scale economies existed in Fedwire operations andthat consolidation resulted in improvements in cost efficiency in the long run, but there weresignificant transition costs.

32. Clearly there are important issues related to how the global market would be set up, whatwould be the nature of the linkages, how it would support liquidity, anonymity, transparency,how it would be regulated, and most of all, how its safety and soundness would be ensured.Although very important, these issues are beyond the scope of this study.

33. Moreover, heavy-handed policies could encourage relocation, and could thus be entirelyself-defeating. It may be preferable to create a policy environment that is very supportive ofthe trading centre(s).

© OECD 2001

Future Prospects for National Financial Markets and ... · Future Prospects for National Financial...

Documents

Transcript of Future Prospects for National Financial Markets and ... · Future Prospects for National Financial...