This development resulted in higher risks, since the failure to confirm a transaction jeopardises its enforceability, i.e. the possibility to net it with other transactions. This, in turn, can lead to financial intermediaries incorrectly measuring and controlling their market and counterparty risks. In the aforementioned example relating to credit derivatives, the US Federal Reserve and other leading bank supervisors had to intervene just over a year ago to oblige market participants to rapidly reduce the confirmation backlog and to promote the introduction of more efficient cross-sector procedures. Market participants should not focus exclusively on the lucrative trading aspect of future innovations, but they must also speed up the development of convincing solutions for the processing of these new transactions. Otherwise, financial stability will be jeopardised. Financial market infrastructures and banks increasingly share roles Differentiating between traditional financial market infrastructures and banks – which was straightforward 20 years ago – is becoming increasingly difficult. On the one hand, the major international banks, in particular, provide services that one would normally allocate to financial market infrastructures. For instance, their customer base is so large that it is possible for them to conclude and settle trade orders outside the stock exchange. The same holds true for the settlement of payment transactions: the larger a bank, the more payments it can settle directly through its own systems. These ‘in-house systems’ compete with the actual interbank payment system, especially if the banks’ customers are banks themselves.

Niklaus Blattner: Global trends in financial market infrastructures and their significance for financial stability Introductory remarks by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 14 December 2006. *  *  *  Developments at banks and financial markets are subject to extensive daily media analysis and commentary. By contrast, financial market infrastructures, i.e. stock exchanges, payment and securities settlement systems, only rarely make the headlines. I have decided to shift the focus today and concentrate on financial market infrastructures. In particular, I wish to highlight some interesting global trends and assess how these trends impact on the stability of the financial system. Internationalisation of financial market infrastructures Traditionally, most financial market infrastructures have a strong national focus. This made sense as long as the financial markets also had a strong domestic focus. However, the deregulation and liberalisation of financial markets and the associated increase in cross-border financial flows resulted in a widening gap between financial markets and financial market infrastructures, with the latter remaining constrained within national bounds. More internationalisation of financial market infrastructures became inevitable in order to avoid a loss of competitiveness due to inefficiencies. This process of opening up market infrastructures still continues today. We can differentiate between different types of internationalisation. First, direct access to infrastructures that used to be reserved exclusively to domestic participants is now being granted more frequently to foreign participants as well.