Journal of Financial Market Infrastructures

In this first issue of the fourth volume of The Journal of Financial Market Infrastructures we go into an as yet unexplored area of the journal's scope: banknotes. A cashless society is still a long way off (if indeed it is ever to arrive) but some countries may be on the verge of a "less-cash" society. In the issue's first paper, "Banknote printing in a less-cash society: innovate or not?", Leo Van Hove investigates the following investment decision from the perspective of a central bank: at a time when the demand for banknotes is falling over time, how much should the central bank invest in new technology for banknotes, taking the note replacement rate into account? The author illustrates his findings using three Nordic economies that are potentially less-cash societies.

Our second paper, "Analysis of risk factors in the Korean repo market based on US and European repo market experiences during the global financial crisis" by Ronald Heijmans and Sung-guan Yun, evaluates the Korean repo market in the light of the global financial crisis. The authors provide an in-depth analysis of the bilateral and tri-party repo markets and compare these with unsecured interbank loan markets. The authors suggest a number of policies that could be implemented to increase the resilience of the Korean repo market.

The third paper in this issue, "Central counterparties: addressing their too important- to-fail nature" by Froukelien Wendt, argues that the current international policy measures with respect to central counterparties (CCPs) only partly address the systemic risk posed by CCPs. The challenges faced by CCPs in an increasingly interconnected world call for further analysis. The author recommends that CCPs and authorities perform network analyses to gauge potential losses when all feedback loops - such as multiple-CCP membership of a systemically important bank - are taken into account. In addition, the author proposes additional measures in order to diminish the dependency of CCPs on the services provided by commercial banks.

And finally, in our fourth paper, "Regulatory and supervisory deference in the context of Australia's over-the-counter derivative trade reporting and derivative trade repositories regimes", Laurence White, Jennifer Dolphin and Rhonda Luo take us into the world of over-the-counter (OTC) derivatives and trade repositories. They provide the Australian regulatory perspective on the OTC landscape and show how regulatory deference can play a facilitating role in the cross-border context. This is a practice by which local supervision takes into account foreign supervision on foreign participants that are active in the local market or in relevant infrastructures. The authors define two
kinds of deference: one at the level of legal powers and rules, and another at a more practical level. They also discuss the extent to which the Australian regime for OTC derivatives regulation can provide the basis for deference by other regulators. They illustrate the deference of the Australian Securities and Investments Commission in the licensing of a trade repository.

I hope you enjoy reading this issue of The Journal of Financial Market Infrastructures. I would also like to make you aware that we have sent out a survey asking for your feedback on Risk Journals.You can access the survey here. Your participation is appreciated.

Ron Berndsen
De Nederlandsche Bank and Tilburg University