Über die Autorin bzw. den Autor

Ruben Lee is CEO of Oxford Finance Group. He was a fellow of Nuffield College, University of Oxford, and worked for Salomon Brothers International. He is the author of What is an Exchange?

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"How should the infrastructure underpinning today's volatile, rapidly evolving, and complex markets be run? Ruben Lee's extensive knowledge, superlative analysis, and practical guidance help answer this fundamental question."--Donald F. Donahue, chairman and CEO, The Depository Trust & Clearing Corporation

"Ruben Lee has used his deep understanding of the markets to produce a comprehensive analysis of governance issues. A must for every policymaker's bookshelf."--Ravi Narain, CEO, National Stock Exchange of India

"Ruben Lee has written the essential guide to the ownership, structure, and governance of the exchanges, clearing houses, and depositories constituting the essential infrastructure of financial markets throughout the world. Nobody understands or explains these vital, complex, and constantly evolving institutions better than Lee."--Henry B. Hansmann, Yale Law School

"Market infrastructures are based on an unusually strong combination of contradictory forces. In this complicated setting, Ruben Lee's book constitutes a major contribution, laying bare these complexities and offering perspectives for their efficient organization."--Eddy Wymeersch, chairman, Committee of European Securities Regulators

"While one may disagree with some of its conclusions, this book is an important contribution to the debate about the role and function of regulation and regulators, and the governance of financial market infrastructure."--Jane Diplock AO, chairman, New Zealand Securities Commission and chairperson, Executive Committee, International Organization of Securities Commissions

"Lee offers important policy analysis for governing the institutions that provide the basic infrastructure of the world's financial markets. He looks at crucial but underanalyzed organizations that sustain the critical trading, clearing, and settlement platforms for the world's massive cash and derivative markets. The well-developed policy proposals contained here would, if implemented, make the financial markets significantly safer and more efficient."--Jonathan Macey, Yale Law School

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"How should the infrastructure underpinning today's volatile, rapidly evolving, and complex markets be run? Ruben Lee's extensive knowledge, superlative analysis, and practical guidance help answer this fundamental question."--Donald F. Donahue, chairman and CEO, The Depository Trust & Clearing Corporation

"Ruben Lee has used his deep understanding of the markets to produce a comprehensive analysis of governance issues. A must for every policymaker's bookshelf."--Ravi Narain, CEO, National Stock Exchange of India

"Ruben Lee has written the essential guide to the ownership, structure, and governance of the exchanges, clearing houses, and depositories constituting the essential infrastructure of financial markets throughout the world. Nobody understands or explains these vital, complex, and constantly evolving institutions better than Lee."--Henry B. Hansmann, Yale Law School

"Market infrastructures are based on an unusually strong combination of contradictory forces. In this complicated setting, Ruben Lee's book constitutes a major contribution, laying bare these complexities and offering perspectives for their efficient organization."--Eddy Wymeersch, chairman, Committee of European Securities Regulators

"While one may disagree with some of its conclusions, this book is an important contribution to the debate about the role and function of regulation and regulators, and the governance of financial market infrastructure."--Jane Diplock AO, chairman, New Zealand Securities Commission and chairperson, Executive Committee, International Organization of Securities Commissions

"Lee offers important policy analysis for governing the institutions that provide the basic infrastructure of the world's financial markets. He looks at crucial but underanalyzed organizations that sustain the critical trading, clearing, and settlement platforms for the world's massive cash and derivative markets. The well-developed policy proposals contained here would, if implemented, make the financial markets significantly safer and more efficient."--Jonathan Macey, Yale Law School

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Running the World's Markets

PRINCETON UNIVERSITY PRESS

Contents

Foreword and Acknowledgments.........................................................................................xiList of Acronyms.....................................................................................................xiiiIntroduction.........................................................................................................1Part One: Background Information and Analysis........................................................................7Chapter One Definitions..............................................................................................9Chapter Two Market Power.............................................................................................40Part Two: Survey Evidence............................................................................................83Chapter Three The Allocation of Regulatory Powers over Securities Markets............................................85Chapter Four Regulation and Governance of Market Infrastructure Institutions: Global Perspective.....................117Chapter Five Governance of Market Infrastructure Institutions: A Snapshot............................................145Part Three: Case Studies.............................................................................................167Chapter Six Exchanges................................................................................................169Chapter Seven CCPs and CSDs..........................................................................................201Part Four: Policy Analysis and Recommendations.......................................................................245Chapter Eight What Is the Most Efficient Governance Structure?.......................................................247Chapter Nine Who Should Regulate What?...............................................................................301Chapter Ten How Should Market Infrastructure Institution Governance Be Regulated?....................................339Authorities..........................................................................................................363Cases and Decisions..................................................................................................365Notes................................................................................................................367References...........................................................................................................395List of Contributors.................................................................................................433Index................................................................................................................437

Chapter One

To many people it is clear what are the "infrastructure institutions" in financial markets. They are the exchanges, CCPs, and CSDs that provide the trading, clearing, settlement, and sometimes other, core functions for cash and derivative markets. These institutions are indeed the focus of attention here. There are, however, also many reasons why the definitions of an infrastructure, an exchange, a CCP, and a CSD are all quite opaque. This is important, as the identification of a particular organization as one of these types of institutions can have significant commercial, regulatory, and policy consequences. This chapter aims to provide some basic insights into the definitions and nature of an infrastructure, an exchange, a CCP, and a CSD; and to explore the reasons why these concepts are sometimes ambiguous and controversial. A comprehensive examination of each of these different concepts would require a series of complex and broad analyses, and is not undertaken here.

The chapter is composed of three sections. In the first, the meaning and nature of what is an infrastructure is explored. Some comments on the definitions and nature of exchanges, CCPs, and CSDs, and on the functions they deliver, are provided in the second section. Brief conclusions are offered in the last section.

Infrastructure

Understanding how the term "infrastructure" has generally been employed and the key factors relevant for determining whether an institution is an infrastructure illuminates how the term may be used regarding institutions in financial markets, and the implications of doing so.

Meaning and Use of the Term

An examination of a broad range of definitions and uses of the term "infrastructure" highlights eight key nonexclusive factors and attributes that contribute towards identifying an institution as an infrastructure:

1. An infrastructure may be, or provide, the basic equipment, facility, foundation, framework, installation, system, or services that support or underly some form of structure, system, or activity, defined quite broadly. Such a structure, system, or activity may include a corporation, an organization, a productive process, a community, a city, an economy, a society, a nation, or a group of nations. The goods or services provided by an infrastructure are often both consumed directly and also used as inputs for a wide range of goods or services produced by users of the infrastructure institution. In this context, an infrastructure is often referred to as a "utility"—although this term, itself, is not easy to define.

2. An infrastructure may be critical, essential, or necessary, to support commerce, economic activity and development, or whatever other activities are facilitated by the system it operates. Given the critical nature of the basic goods or services that an infrastructure provides, there are frequently concerns about access to these goods or services.

3. An infrastructure may be, or provide, a network. In the economic sphere, such a network typically facilitates the delivery of goods and services, or links together the participants in a market, and is thus part of the structure underlying a market. The relationship between relevant producers and consumers takes place on, or via, the shared facilities or single medium provided by the infrastructure. A network is typically composed of both the physical structure linking market participants, and the associated commercial arrangements and rules for using this structure.

4. An infrastructure may exhibit economies of scale.

5. An infrastructure may require large, long-term, immobile, and sunk investments.

6. An infrastructure may be, or operate, a natural monopoly.

7. An infrastructure may provide beneficial public goods or services, in addition to the specific goods and services it delivers directly. There are two key attributes of a pure public good or service: it is nonrivalrous, so that its consumption by one person does not prevent other people from consuming it; and it is nonexcludable, so that it is not possible to stop somebody from consuming it. An often-cited example of a public good is good health, as facilitated by water and sanitation infrastructures.

8. An infrastructure may have some form of government or public sector involvement, defined very broadly. For this reason, the term "public works" is sometimes used interchangeably for the term "infrastructure." The role of government or public sector involvement in infrastructures has been quite...