Clearing Services for Global Markets Book contents
- Frontmatter
- Contents
- List of figures
- List of abbreviations
- Acknowledgements
- Foreword
- 1 Introduction
- 2 Setting the stage – definitions and industry setting
- 3 Defining the core issues – efficiency and network strategies
- 4 Collecting empirical insights – introduction to the empirical study
- 5 Analysing costs of derivatives clearing – transaction cost studies
- 6 Exploring theoretical basics – scale effects in clearing
- 7 What theory reveals – framework for efficiency analysis of network strategies
- 8 Checking theory against reality – case studies of network strategies
- 9 Quantifying the efficiency impact – European network strategies
- 10 Introducing the future network economy – development of the clearing industry
- 11 Summary, discussion and recommendations for future research
- Appendices
- Bibliography
- Index
6 - Exploring theoretical basics – scale effects in clearing
Published online by Cambridge University Press: 19 January 2010
- Frontmatter
- Contents
- List of figures
- List of abbreviations
- Acknowledgements
- Foreword
- 1 Introduction
- 2 Setting the stage – definitions and industry setting
- 3 Defining the core issues – efficiency and network strategies
- 4 Collecting empirical insights – introduction to the empirical study
- 5 Analysing costs of derivatives clearing – transaction cost studies
- 6 Exploring theoretical basics – scale effects in clearing
- 7 What theory reveals – framework for efficiency analysis of network strategies
- 8 Checking theory against reality – case studies of network strategies
- 9 Quantifying the efficiency impact – European network strategies
- 10 Introducing the future network economy – development of the clearing industry
- 11 Summary, discussion and recommendations for future research
- Appendices
- Bibliography
- Index
Summary
While the previous chapter delivered a number of quantitative and qualitative analyses of European derivatives clearing costs, this chapter explores and classifies possible scale effects in clearing. The insights provided by Chapters 5 and 6 serve as a basis for the subsequent analysis of the efficiency impact of different network strategies in Chapters 7, 8 and 9.
The economic literature distinguishes between demand- and supply-side scale effects. Demand-side scale effects are commonly referred to as network effects. Supply-side scale effects include economies of scale and scope.
In the following, these concepts are introduced and applied to clearing. Additionally, evidence for the existence of demand- and supply-side scale effects in clearing is explored. In a first step (section 6.1), demand-side scale effects and their economic implications are analysed. A second step (section 6.2) investigates supply-side effects. This includes insight to clearing houses' cost structures in order to identify the causes and nature of supply-side scale effects. Finally, this chapter's findings are summarised (section 6.3).
Demand-side scale effects
There exist various industries in which the utility that a user derives from a given product or service increases with the number of other consumers utilising the same product or service. In this case, the users of the product or service constitute a network. The most prominent example of this effect can be found in communication networks, such as the public telephone network.
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- Clearing Services for Global MarketsA Framework for the Future Development of the Clearing Industry, pp. 195 - 238Publisher: Cambridge University PressPrint publication year: 2009