just this month, it was reported that the new york stock exchange may enter the derivatives market too. hardly a week passes without press reports of strategic moves by the exchanges. securities exchanges have not been spared from the competition. london stock exchange ( lse ) will launch its dutch trading service, eurosets, in may this year. this will allow the most liquid stocks listed on euronext - amsterdam to be traded through lse. this bold move is being watched closely by the industry, and may challenge conventional wisdom on the contestability of stock exchange liquidity. the outcome of these contests could significantly alter the competitive landscape for exchanges in the next few years. key drivers of consolidation and competition one key driver behind the consolidation and competition is technology. exchanges and clearing houses are very much technology businesses today. 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. 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. analysts are of the view that the cost of competition will drive greater consolidation in the u. s. and europe. once this wave of growth opportunities mature, the mega - exchanges will look to asia as the next frontier of growth. regional exchanges need to gear up for the competition and find ways of staying relevant to the international

jan f qvigstad : could the financial crisis have been avoided? challenges to international cooperation and conflict speech by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at a seminar on the financial crisis arranged by prio, oslo, 8 december 2009. * * * what happened? confidence between financial market participants collapsed in september last year following the lehman brothers bankruptcy. the price of credit jumped up both in money and bond markets. equity prices declined, increasing the cost of raising new equity capital. the authorities worldwide responded by supplying substantial liquidity to banks and central bank key rates were reduced. in many countries, the authorities provided extraordinary loans or took over banks to maintain confidence in institutions and market activity. in some countries, the authorities have purchased securities to bring down long - term interest rates. stimulus has also been provided through increased public sector demand and government budget deficits have grown to unprecedented levels in some countries. the reaction of households and businesses was to increase saving and private sector demand declined. credit standards were tightened and risk premiums soared. the drop in demand rapidly translated into a contraction in trade and output. in spring 2009, world trade was around 20 per cent below the level prevailing one year earlier. in many countries, the total value of goods and services production ( gdp ) declined over several consecutive quarters. countries that were heavily reliant on exports of manufactured goods were particularly hard hit. unemployment has increased sharply in countries not far from our own. given the high levels of available resources, there are prospects of lower than normal interest rates among our main trading partners for some time ahead. there are now signs that the stimulus measures are reviving growth, but production is still lower than it was prior to the crisis. the challenge going forward will be to address the problem of rising unemployment and high government debt in many countries. why did it happen? when the queen of england visited the london school of economics in november last year, she asked her host why no one had foreseen the financial crisis. in july this year, her question was answered by a panel of 33 prominent economists from british universities, government institutions and the business sector. the panel did not cite only a single cause, but a web of causation. an important factor behind the crisis can be found in global macroeconomic developments in the years preceding the crisis. in the 2000s, china made its grand entry into global trade with an attendant surge in production and income. this