| 来源类型 | Discussion paper
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| 规范类型 | 论文
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| 来源ID | DP5199
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| DP5199 Target Zones in Theory and History: Credibility, Efficiency, and Policy Autonomy |
| Marc Flandreau; John Komlos
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| 发表日期 | 2005-08-23
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| 出版年 | 2005
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| 语种 | 英语
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| 摘要 | This paper studies the potential impact on securities settlement systems (SSSs) of a major market disruption, caused by the default of the largest player. A multi-period, multi-security model with intraday credit is used to simulate direct and second round settlement failures triggered by the default, as well as the dynamics of settlement failures, arising from a lag in settlement relative to the date of trades. The effects of the defaulter's net trade position, the numbers of securities and participants in the market, and participants' trading behaviour are also analysed.
We show that in SSSs ? contrary to payment systems ? large and persistent settlement failures are possible even when ample liquidity is provided. Central bank liquidity support to SSSs thus cannot eliminate settlement failures due to major market disruptions. This is due to the fact that securities transactions involve a cash leg and a securities leg, and liquidity can affect only the cash side of a transaction. Whereas a broad program of securities borrowing and lending might help, it is precisely during periods of market disruption that participants will be least willing to lend securities.
Interestingly, settlement failures continue to occur beyond the period corresponding to the lag in settlement. This is due to the fact that, upon observation of a default, market participants must form expectations about the impact of the default, and these expectations affect current trading behaviour. If, ex post, fewer of the previous trades settle than expected, new settlement failures will occur. This result has interesting implications for financial stability. On the one hand, conservative reactions by market participants to a default - for example by limiting the volume of trades ? can result in a more rapid return of the settlement system to a normal level of efficiency. On the other hand, limitation of trading by market participants can reduce market liquidity, which may have a negative impact on financial stability. |
| 主题 | Financial Economics
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| 关键词 | Securities clearing and settlement
Liquidity risk
Systemic risk
Contagion
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| URL | https://cepr.org/publications/dp5199
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| 来源智库 | Centre for Economic Policy Research (United Kingdom)
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/534074
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推荐引用方式
GB/T 7714 |
Marc Flandreau,John Komlos. DP5199 Target Zones in Theory and History: Credibility, Efficiency, and Policy Autonomy. 2005.
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