If the financial infrastructure does not function, payments and securities transactions cannot be made, which would bring the economy more or less to a halt. It would also prevent the Riksbank’s interest rate from exerting an impact on the economy. This means that the financial infrastructure and the ongoing changes in securities markets are relevant for the Riksbank’s two primary functions, namely to safeguard both financial stability and price stability. It is therefore important that we closely follow developments in these respects. Increased integration As many of you are already aware, major changes are currently in progress in the securities markets and the financial infrastructure. In recent years we have seen a number of tendencies whereby trading in financial instruments is becoming more integrated. Such tendencies have also been evident recently in clearing and settlement – the processing of securities transactions that follows the trade as such. 1 In a world conditioned by further globalisation, increased competition and advances in technology, companies use mergers and acquisitions to adjust. In the field of financial instruments, the creation of NASDAQ OMX Group in February 2008 has strengthened the links between Nordic, Baltic and American exchanges. The driving force behind this merger is primarily economic in that it confers considerable economies of scale. 1  Clearing involves balancing mutual claims and liabilities. Settlement involves the transfer of money and securities between transacting parties. BIS Review 153/2008  1  The changes in securities markets are also connected with regulations.
Besides these measures, aimed at getting the credit market to function more efficiently, the Riksbank has taken more conventional monetary policy measures. The repo rate has been lowered during the autumn by a total of one percentage point – starting with 0.5 percentage points on 8 October in a joint action with the Federal Reserve, the Bank of England, the ECB, the Swiss National Bank and the Bank of Canada, followed by another 0.5 percentage points on 22 October. The purpose of these interest rate cuts was to mitigate the ongoing financial crisis’ effects on output and employment in Sweden while continuing to target 2 per cent inflation. With the autumn’s serious disruptions to financial markets, however, we probably should not expect that policy rate adjustments will have the usual effects. The adjustments have not affected market interest rates in the same way as they do under normal circumstances. 9  ”Policy rate setting and the monetary policy steering system”, speech by Riksbank Governor Stefan Ingves at Handelsbank, 28 April 2008. BIS Review 153/2008  7  Conclusion Let me now conclude. Major changes are in progress in the securities markets and in the financial infrastructure. The systems for securities transactions in the Swedish financial infrastructure are becoming increasingly integrated with systems abroad. This places new demands on cross-border cooperation. Two problems to do with the infrastructure have, moreover, come to the fore this autumn: counterparty risks and insufficient market transparency.