And doing so would not even help address the various issues in any case. I see three main reasons to support this view. First, central banks do not have effective instruments for successfully pursuing structural policy objectives such as tackling climate change over the long term. Their tools are designed to influence factors relevant for monetary policy, such as interest rates and exchange rates. By contrast, the influence of our investment policy on the global financing conditions for ‘green’ or ‘brown’ companies over the long term, for example, is low. While buying green investments may increase their price, when we sell the corresponding securities for monetary policy reasons, their market price will decline again. When it comes to inequality, again central banks do not have the instruments to bring about lasting change beyond the positive impact of a stability-oriented monetary policy. An expansionary monetary policy may mitigate income inequality in the short term in that it provides support to low-income households in particular or promotes the creation of jobs in the low-wage sector. However, an expansionary monetary policy also stimulates asset prices, which then tends to exacerbate wealth inequality. The biggest problem for the more vulnerable sections of society that central banks can influence is inflation. Concentrating on price stability thus inherently constitutes the greatest contribution a central bank can make to social cohesion. While central banks do not have effective instruments for achieving structural policy objectives, other state institutions do, for example in the form of fiscal policy and regulatory measures.

Trading pits have given way to electronic trading engines in many jurisdictions. Central counterparties can no longer operate without sophisticated IT-based risk management systems. Technology has allowed exchanges to offer different types of instruments - equities, bonds, futures and options - on a single platform. It has enabled improvements in risk management processes, and open access by participants and alliance partners. BIS Review 22/2004  1  The cost of investments in technology, however, is high and can only be justified if it is supported by a large volume of trades. Shareholders will also demand that these exchanges earn competitive returns on their investments in technology. Small exchanges will thus, find it difficult to make the necessary investments to compete. This has been a key driver behind the formation of mega-exchanges, and will continue to fuel their drive for expansion. Another key driver is the need for economies of scale. Exchanges and clearing houses thrive on liquidity and scale. The likelihood of a cost efficient execution of a trader’s order is higher the larger the pool of traders on the same platform. Similarly, in the case of clearing houses, the benefits of netting and the efficiency of collateral management are greater the larger the number of counterparties using the facility. The pressure to seek economies of scale and competitive returns is accentuated for demutualised exchanges. Implications for regional exchanges Exchanges in this region are unlikely to be insulated from competitive pressures for long.