The execution, clearing, and settlement of financial transactions are all subject to substantial scale and scope economies which make each of these complementary functions a natural monopoly. Integration of trade, execution, and settlement in an exchange improves efficiency by economizing on...

Vertical integration of the execution and clearing of financial trades is an efficiency-improving response to pervasive scale economies. That said, it is highly unlikely that integrated exchanges achieve a first-best, optimal outcome. Because of scale economies, it is very difficult to compete...

In the aftermath of the financial crisis, attention has turned to reducing systemic risk in the derivatives markets. Much of this attention has focused on counterparty risk in the over-the-counter market, where trades are bilaterally executed between dealers and derivative purchasers. One...