Horizontal integration, however, allows users to select between interlinked providers, exposing them to ongoing competition. Yet the feasibility of this model depends on whether there is a cost-efficient way for users to route transactions to their preferred provider. In any case, the emergence of poles around Euronext and Deutsche Börse shows that the consolidation process has begun. From a Swiss perspective, both SWX and SIS are engaged in the race - not really as hunters, given their relative size, but as partners with proven technology and know-how. Financial market infrastructures are also subject to higher competitive pressures. The driving forces behind these pressures are, without doubt, technological innovation and the expected profits resulting from the achievement of economies of scale and, possibly, economies of scope. Three kinds of competitors can be distinguished. First, competition among exchanges, clearing and settlement organisations within and across countries has increased. Indeed, for trading, clearing and settlement, physical location has become less and less relevant. As you are confronted with these pressures in your daily business, you certainly know better than any central banker what I am referring to. Second, non-financial institutions may provide trading, clearing and settlement services to financial markets. More precisely, I think here not only of alternative trading systems, but also of outsourcing partners such as payment and securities processing centres. Third, and maybe less visible, but of growing significance, are competitive pressures exerted by large custodians, especially by global custodians.

Since the inception of the euro, it has staged an impressive take-off, even though its institutional, legal and accounting environment is still far from optimal. Central bankers have good reason to welcome such developments. Not only because they probably make the saving-investment process more efficient, but also because they allow for a better distribution of credit and market risk which should - if anything - enhance the stability and robustness of financial systems. BIS Review 37/2002  3  Financial processes and markets will continue to become more and more internationalised with obvious impacts on securities operations, liquidity and collateral management procedures. What kinds of challenges will this create for market infrastructures on the one hand, and for oversight authorities on the other hand? Let me address these two questions in the following. Implications for financial market infrastructures A first requirement for financial market infrastructures is that they must be capable of coping not only with an increase in cross-border securities operations, but also with their time-critical nature. Therefore, particular efforts should be made to ensure intraday finality, to shorten settlement cycles, to co-ordinate operating hours among the individual systems and to standardize communication procedures as well as message formats. As you know better than I, this is easier said than done, since we still rely heavily on technologies and systems that are tailored to domestic needs and peculiarities. The current coexistence of several non-interoperable platforms implies an extensive amount of costly manual intervention.