Latin American Capital Markets

PROMOTING REGIONAL CAPITAL MARKET INTEGRATION 199the basis of market capitalization not represented in the Euronext 100 index. TheNext Economy index allows market participants to follow trends in the new economysector And the Prime index improves the visibility of high-quality companies intraditional sectors.Genera/ CommentsOf the many attempts at cooperation between market infrastructure institutions thathave been proposed, few have been implemented; of those that have been realized,most have failed. 46 There are many ways in which such institutions can effect a linkage,joint venture, or merger with each other Any subset of the various functions undertakenby them can be shared, including marketing, listing, order routing, informationdissemination, order execution, matching, clearing, and settlement.There are alsodifferent contractual procedures by which shared delivery of these services can beimplemented. For example, one market structure institution could purchase servicesfrom another such institution, both might agree to subcontract delivery to a thirdparty, or one might buy the other Given their diversity, a general comparison of marketlinkages and other joint projects between market structure institutions would notbe useful, let alone feasible. However four important and closely associated aspectsof such schemes are common to many of them—costs, technology, governance, andcredible contractual commitments.CostsA prime aim of any market structure institution in entering a linkage, joint venture, ormerger is normally to reduce costs.The relevant costs are not simply those incurredby the institution itself, but also those borne by all its patrons. 47 The term patron isused here in broad terms to include, among others, the institution's owners, members,controllers, management, and consumers.Cost savings can arise from many sources. For example, an exchange may establishan order-routing mechanism or joint clearing arrangement with another exchangein order to offer some of its products to members of the other exchange,without requiring them either to buy a seat on its market or to deal through a localintermediary. This may allow traders who are not members of the first exchange46 This discussion draws on Lee (1999, pp. 61-65).47 This use of the term "patron" comes from Hansmann (1980).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub