However, one interesting question is what effect the change in population structure will have on savings and on the securities markets in a few years time, when those of us born in the 1940s retire. We are a fairly large group from the baby boom years. The life cycle hypothesis assumes that we will sell large parts of our assets, which will lead to negative net savings. However, some studies indicate that pensioners may not consume their capital to the extent assumed. And of course, some people actually have something left to pass on to their descendants. One decisive factor for the future development of savings is how the pension system will function in practice and what responsibility the individual will have in the future for other parts of the traditional welfare system. Technological developments Another important driving force behind the securities markets is technological developments. These occur in several ways. Look, for example, at the current procedure for a securities transaction, from start to finish. The process from placing the order to buy or sell until the transaction is finally settled has become increasingly automated. I don’t just mean the actual trading, which has become increasingly electronic, but also the processes following on from this, namely clearing and settlement. Straight through processing, usually referred to as STP, is becoming more common. This involves the entire chain from placing the order to clearing and settlement being implemented without manual intervention. The increased automation has led to transaction costs falling.
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  BIS Review 66/2004  3  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.