costs are low. moreover, there are considerable network effects. if a marketplace has a high level of liquidity in an asset, many people will probably trade there, as they will be able to trade at the best, that is to say, the most correct prices. if a marketplace has liquid trading in one asset, it will often attract trade in other assets, as other companies want their instruments to be traded on a marketplace with many participants. in other words, there are natural tendencies towards concentration in financial instruments trading. the same applies to settlement and registration of ownership. however, technological developments have enabled increasing integration of the various parts of the transaction chain. this has also created incentives to establish automated systems all along the line, from order placement to settlement. the result is a vertical integration, where different stages of the value chain are integrated. integration requires cooperation between, or even a merger of, the various parts of the infrastructure. even if this, as i have mentioned earlier, leads to lower transaction costs, it is not certain that these cost reductions will benefit the end customers. when all of the stages of the chain are implemented automatically and ownership of the various parts may even lie with the same organisation, everyone will be dependent on a single supplier. this creates a risk that pricing will follow monopoly principles, which rarely benefits the economy. parallel with the move towards vertical integration, the internationalisation of the capital markets and harmonisation of laws and rules within the eu has led to increased pressure to consolidate operations across national borders. in many cases there have previously been legal barriers to international consolidation. now that the barriers are gradually being removed, competitive pressure on the existing national infrastructure companies is increasing. at the same time, there are stronger incentives for cooperation and even mergers between stock markets in different countries and also between clearing and settlement organisations. in other words, there are also tendencies towards horizontal integration. the question of what is most beneficial for the functioning of the economy as a whole - vertical integration or horizontal integration - is not an easy one. in both cases there are benefits from economies of scale. there are also concentration tendencies, which can in turn lead to deficiencies in competition in the markets for trading and clearing securities. i believe that it is extremely important that we authorities - and i mean here financial supervisory authorities, competition authorities, ministries of finance and central banks - closely monitor developments in this field. the public authorities'supervision and oversight of the financial infrastructure is also affected by how the infrastructure companies are owned.

woods, and fully floating exchange rates, would be intervention bands and controlled exchange rates between, for instance, the euro and the dollar. however, this would partly suffer from the same problems as a fully fixed regime. furthermore, we would encounter the same dilemma that characterised all semi - fixed, or fixed but adjustable exchange rate arrangements, which failed so miserably over the past ten years. the list is long, from sweden ’ s and the erm countries ’ crisis at the beginning of the 1990s, to the crises in mexico, asia, russia and brazil during the subsequent decade. all displayed some similar characteristics, which a controlled exchange rate between the dollar and euro would also be unable to escape. at some point in time, the market becomes aware that the political gains of avoiding painful real adjustments are probably less than the costs and loss of prestige associated with an exchange rate adjustment. once the market realises this, speculation follows and the costs of defending the exchange rate mount, at the same as the potential loss of prestige from adjustment diminishes. in the end, an exchange rate adjustment becomes economically unavoidable and politically acceptable regardless of whether politicians wanted it. of course, such a spiral is not possible with a single currency where adjustments must occur without devaluation and where speculation of this kind is impossible. do not these arguments lead us to conclude that china too should let its currency float? after all, china is one of the world ’ s largest economies that in spite of its increasing openness follows a course of its own. critics of the dollar peg believe that if the renminbi were allowed to float, it would appreciate, thus reducing china ’ s current account surplus and shrinking the us deficit. in the long term, i believe that it is right to allow the renminbi to float. in the short term, however, it is difficult to see this as the appropriate solution. the main reason for not floating the renminbi yet is the chinese financial system. the chinese banking system is still a long way from being adapted to market conditions, and a large proportion of its lending is still made to state - owned companies that are often unable to honour their payment obligations. if we take into account all the hidden and disclosed nonperforming loans in the banking system, these are estimated to be equal to as much as half of china ’ s gdp, and they are continuing to grow. were the currency allowed to float before addressing these problems, it is just as likely