(In)efficiencies of current financial market infrastructures: an empirical assessment

Author:

Guggenheim BasilORCID,Kraenzlin Sébastien,Meyer Christoph

Abstract

AbstractWe use unique individual bank-to-bank repo transaction data to empirically assess the efficiency of the existing Swiss financial market infrastructure (FMI) for executing delivery versus payment transactions. This approach enables us to identify its current benefits and drawbacks as well as where new technologies, such as distributed ledger technology, could provide a remedy. We find that the fastest settlement time for repo transactions is 12 s, but that settlements are often delayed by more than 10 min due to the lack of collateral availability. We conclude that the cross-border availability of securities needs to be addressed by either improving interoperability of existing infrastructures or using new technologies.

Publisher

Springer Science and Business Media LLC

Subject

Economics and Econometrics,Statistics and Probability

Reference22 articles.

1. Auer, R., & Kraenzlin, S. (2011). International liquidity provision during the financial crisis: A view from Switzerland. Federal Reserve Bank of St. Louis Review, 93(6), 409–418.

2. Bartolini, L., Hilton, S., & McAndrews, J. J. (2010). Settlement delays in the money market. Journal of Banking and Finance, 34, 934–945.

3. Bech., M., & Jenny, H. (2020). Tara Rice and Amber Wadsworth (2020): On the future of securities settlement. BIS Quarterly Review.

4. Bullmann, D., & Pinna, A. (2020). The future of European financial market infrastructure: A business case for distributed ledger technology. Journal of Securities Operations and Custody, 9(1), 2020.

5. Committee on Payments and Market Infrastructures and International Organization of Securities Commissions. (2012). Principles for financial market infrastructures (April 2012).

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