Standardizing World Securities Clearance Systems

Ramon P. DeGennaro, Christopher J. Pike
2003 Social Science Research Network  
M. he international trading of corporate securities has flourished in the past decade. In just several years, the volume of this international trade has increased tenfold (see figure 1), accompanied by heavy investment in automated systems to handle the expanded sales and purchases of the securities. This automation, however, has had only a limited impact on the timeliness and accuracy of international settlement. Trading volumes continue to swell, and each country has continued to operate
more » ... ued to operate under its own settlement procedures. No two securities markets settle trades in precisely the same way; each adheres to unique standards and time frames. Without common standards or compatible clearance systems, the result has been an increasing difficulty in operating securities clearance systems, which match trades and transfer securities and funds-the nuts and bolts of securities exchange. Lack of coordination among securities exchange markets not only slows trade, but also is costly. Securities houses bear the risk of deals not being concluded on time-and the additional cost if they are not concluded at all. London exchanges, for example, spent $25 million to $33 million each in 1987 on the interest payments for borrowings against unsettled deals.
doi:10.2139/ssrn.374060 fatcat:cxt5fhtof5aidgtxfoj5izdzxm