1. Introduction

Digital securities settlement systems are technological infrastructures through which securities transactions are cleared, settled, recorded, reconciled, and transferred. They may include central securities depositories (CSDs), securities settlement systems (SSSs), central counterparties (CCPs), payment-versus-delivery mechanisms, distributed-ledger systems, tokenised securities platforms, and interconnected post-trade infrastructure.

Dominance in such infrastructure can create significant competition-law risks because settlement systems are often characterised by:

• network effects;
• high switching costs;
• regulatory barriers to entry;
• interoperability requirements;
• economies of scale;
• dependence of brokers, exchanges, banks and institutional investors;
• access to transaction and settlement data; and
• strong reputational and systemic-safety considerations.

A settlement operator that becomes indispensable may acquire the ability to exclude competitors, discriminate between participants, impose excessive or unfair conditions, restrict interoperability, leverage dominance into adjacent markets, or make technological standards function as barriers to entry.

The competition problem is therefore not simply whether a settlement provider has a large market share. It concerns whether control over essential post-trade infrastructure allows the operator to control access to financial markets themselves.

2. Meaning of Digital Securities Settlement-System Dominance

A securities settlement system performs the post-trade function of ensuring that the buyer receives securities and the seller receives payment, ordinarily through a delivery-versus-payment (DvP) mechanism.

Digitalisation has expanded this function into:

• electronic securities registers;
• automated settlement engines;
• API-based connectivity;
• distributed ledgers;
• tokenised securities;
• smart-contract settlement;
• real-time settlement;
• automated collateral management;
• securities lending interfaces;
• digital identity and participant authentication;
• cross-border settlement networks.

Dominance arises where one infrastructure provider possesses substantial and durable market power over a relevant settlement function.

The relevant market could potentially be defined as:

The market for securities settlement services for a particular category of securities or participants within a defined geographic or regulatory area.

However, market definition may become complicated where a single infrastructure supports several securities classes and multiple jurisdictions.

3. Why Settlement Systems Can Become Naturally Concentrated

A. Network Effects

The usefulness of a settlement system increases as more:

• exchanges;
• brokers;
• banks;
• custodians;
• institutional investors; and
• issuers

connect to it.

This creates a self-reinforcing cycle:

More participants → greater liquidity and connectivity → greater attractiveness → more participants → stronger incumbent position.

A new settlement platform may therefore struggle to attract participants even if it offers technically superior services.

B. Economies of Scale

Settlement infrastructure involves substantial fixed costs involving:

• cybersecurity;
• regulatory compliance;
• operational resilience;
• infrastructure;
• reconciliation;
• risk management;
• disaster recovery;
• legal compliance.

Average costs can decline significantly as transaction volumes increase.

Consequently, a dominant provider may possess structural cost advantages over new entrants.

C. Switching Costs

Changing settlement infrastructure may require participants to:

• rewrite APIs;
• change internal systems;
• obtain regulatory approvals;
• migrate securities records;
• retrain personnel;
• renegotiate custody arrangements;
• conduct cybersecurity testing; and
• establish new operational procedures.

These costs can make customers effectively captive.

4. Major Competition Risks

4.1 Refusal of Access

A dominant settlement operator may refuse access to:

• competing trading platforms;
• alternative clearing systems;
• fintech settlement providers;
• tokenisation platforms;
• foreign intermediaries.

If access to the incumbent infrastructure is indispensable, exclusion can prevent effective competition.

The competition-law question is whether the refusal is objectively justified or instead constitutes an exclusionary strategy.

5. Interoperability Restrictions

A dominant digital settlement system may restrict interoperability with competing infrastructures.

For example:

Dominant settlement platform

↓

Controls API/interface

↓

Controls connectivity standards

↓

Blocks competing settlement provider

↓

Participants remain dependent

↓

Competition declines.

Interoperability can therefore become a central competition-law remedy.

6. Excessive or Discriminatory Fees

A dominant settlement infrastructure may impose:

• excessive settlement fees;
• discriminatory access charges;
• minimum-volume requirements;
• connectivity fees;
• technology certification charges;
• data-access fees.

Where competitors cannot realistically bypass the infrastructure, pricing power can become substantial.

Competition authorities may examine whether the charges are:

1. excessive;
2. discriminatory;
3. objectively justified;
4. transparent; and
5. proportionate to the service provided.

7. Discriminatory Access

A settlement operator may favour its own affiliated:

• exchange;
• clearing house;
• brokerage service;
• custody platform;
• trading venue; or
• tokenisation service.

This creates a vertical foreclosure problem.

For example:

Settlement operator → gives faster API access to affiliated exchange → competing exchanges experience delays → liquidity migrates toward affiliated platform.

Such conduct may constitute an abuse of dominance where the necessary legal conditions are satisfied.

8. Data-Related Dominance

Digital settlement infrastructures possess valuable information concerning:

• securities ownership;
• transaction volumes;
• settlement patterns;
• institutional participation;
• collateral positions;
• securities lending;
• liquidity;
• failed settlements.

Control over such data can create an additional competitive advantage.

A dominant operator might potentially use settlement data to:

• identify emerging competitors;
• favour affiliated businesses;
• discriminate against participants;
• develop competing services;
• restrict data portability.

Thus, data concentration can reinforce infrastructure dominance.

9. Technological Lock-In

Digital settlement systems frequently rely on proprietary:

• APIs;
• protocols;
• data formats;
• authentication mechanisms;
• smart-contract architectures;
• ledger structures.

Where migration is technically difficult, proprietary technology can become a competitive barrier.

This creates the phenomenon of:

Technological interoperability → dependence → lock-in → durable market power.

Competition law may therefore need to examine technical standards as well as contractual conduct.

10. Leveraging Into Adjacent Markets

A dominant settlement infrastructure provider may extend its market power into:

• custody;
• securities lending;
• collateral management;
• trading;
• market data;
• tokenisation;
• digital asset settlement;
• clearing;
• post-trade analytics.

For example:

Settlement dominance

↓

Exclusive access to settlement data

↓

Development of competing custody service

↓

Preferential treatment for own custody business

↓

Foreclosure of independent custodians.

This can create ecosystem dominance rather than dominance confined to settlement alone.

11. Bundling and Tying

A dominant settlement provider may require participants to purchase additional services as a condition of settlement access.

Examples include:

• settlement + custody;
• settlement + data;
• settlement + compliance software;
• settlement + securities lending;
• settlement + digital identity.

The competition concern is whether the practice unnecessarily extends dominance from the settlement market into an adjacent competitive market.

12. Self-Preferencing

A settlement infrastructure controlled by a broader financial group may possess incentives to favour affiliated entities.

Potential practices include:

• faster settlement;
• preferential API access;
• lower fees;
• superior technical support;
• privileged data access;
• priority processing.

Such behaviour may disadvantage independent competitors.

13. Case Laws

The following cases are particularly useful for analysing the competition-law principles applicable to dominant digital securities-settlement infrastructure.

1. United Brands Company v Commission (Case 27/76)

The Court of Justice recognised that an undertaking occupying a position of economic strength enabling it to behave to an appreciable extent independently of competitors, customers and consumers may be dominant.

Relevance:
A securities-settlement infrastructure with indispensable connectivity and significant network effects could potentially possess such structural economic power.

The case is particularly useful for analysing:

• market power;
• economic dependence;
• excessive pricing;
• discriminatory conditions.

2. Commercial Solvents v Commission (Joined Cases 6/73 and 7/73)

The Court established important principles concerning refusal to supply by a dominant undertaking where access to an input is necessary for downstream competition.

Relevance:
A dominant settlement infrastructure could potentially become an indispensable upstream facility for brokers, exchanges or competing post-trade providers.

The case supports analysis of:

• refusal of access;
• vertical foreclosure;
• essential inputs;
• downstream competition.

3. Oscar Bronner GmbH & Co. KG v Mediaprint (Case C-7/97)

The Court established strict conditions for treating refusal of access to infrastructure as abusive under Article 102 TFEU.

The infrastructure generally needs to be indispensable, and duplication must not be realistically possible.

Relevance:
This is highly important for digital securities settlement.

A competitor seeking access to a dominant settlement network would need to demonstrate that:

1. the infrastructure is indispensable;
2. there is no realistic substitute;
3. duplication is practically or economically impossible; and
4. refusal is capable of eliminating effective competition.

4. IMS Health GmbH & Co. KG v NDC Health (Case C-418/01)

The Court examined refusal to license an intellectual-property-related infrastructure and established stringent conditions for compulsory access.

Relevance:
Modern settlement systems can combine infrastructure with:

• proprietary software;
• technical standards;
• data structures;
• APIs;
• digital protocols.

IMS Health therefore provides an important framework for examining whether competition law can require access to proprietary technological infrastructure.

5. Microsoft Corp. v Commission (Case T-201/04)

The General Court upheld findings concerning Microsoft's refusal to provide interoperability information and the resulting foreclosure of competing products.

Relevance:
This case is especially valuable for digital settlement infrastructure.

A dominant settlement platform could potentially use proprietary:

• APIs;
• protocols;
• interoperability information;
• authentication systems;
• data formats

to prevent competitors from interoperating effectively.

The Microsoft reasoning illustrates why interoperability can have major competition-law significance in technology-driven markets.

6. Slovak Telekom a.s. and Deutsche Telekom AG v Commission (Joined Cases C-152/19 P and C-165/19 P)

The Court addressed abusive exclusionary conduct involving access to telecommunications infrastructure and discriminatory or restrictive access conditions.

Relevance:
Although the sector differs, the infrastructure economics are highly relevant.

Digital securities settlement systems similarly involve:

• network infrastructure;
• access requirements;
• downstream competitors;
• significant investment;
• technical interoperability.

The case demonstrates how control over an infrastructure layer can facilitate foreclosure in downstream markets.

7. Bronner / Deutsche Telekom Line of Cases

The broader European infrastructure jurisprudence demonstrates an important distinction:

Not every refusal by a dominant infrastructure operator is automatically abusive.

Competition law must balance:

Infrastructure investment incentives

against

the need to preserve downstream competition.

This balance is particularly important for securities settlement because excessive compulsory-access obligations could undermine incentives to invest in highly secure and resilient financial-market infrastructure.

8. CTS Eventim / Bundesverband der Konzert- und Veranstaltungswirtschaft (German competition-law proceedings)

The broader European digital-platform and ticketing infrastructure cases illustrate how contractual exclusivity and access restrictions can reinforce a platform's position where participants depend on a central digital infrastructure.

Relevance:
The same analytical concept can apply to settlement ecosystems where participants depend upon a central digital network.

14. Applying the Case Law to Securities Settlement

15. Special Problem of Essential Facilities

A digital securities settlement system may resemble an essential facility, but that conclusion should not be made merely because an infrastructure is important.

The stronger case arises where:

No realistic alternative exists

Duplication is technically/economically impracticable

Access is indispensable

Refusal threatens effective competition

Access can be provided without objectively justified harm to the infrastructure.

This distinction is essential because securities settlement systems are often subject to stringent financial-stability requirements.

16. Systemic Risk vs Competition Risk

A unique feature of securities settlement is that competition cannot be pursued without considering financial stability.

For example, forcing interoperability may create:

• settlement failures;
• cybersecurity vulnerabilities;
• reconciliation problems;
• operational risk;
• liquidity risk;
• systemic contagion.

Therefore, regulators may legitimately permit some degree of infrastructure exclusivity where necessary for:

• settlement finality;
• cybersecurity;
• operational resilience;
• investor protection;
• systemic stability.

The key principle should be:

Regulatory safety must not become a blanket justification for unnecessary exclusion.

17. Digital Ledger and Blockchain Competition Issues

Distributed-ledger settlement creates additional issues.

Multiple settlement networks may compete through:

• Ethereum-compatible infrastructures;
• permissioned ledgers;
• bank-operated ledgers;
• central-bank settlement interfaces;
• tokenised securities platforms.

If one network becomes dominant, it could potentially control:

• validator participation;
• transaction ordering;
• interoperability;
• token standards;
• smart-contract execution;
• settlement fees.

The competition concern therefore shifts from traditional infrastructure ownership to protocol governance.

18. Smart-Contract Settlement

Smart contracts can automate settlement conditions.

However, if the dominant settlement system controls the smart-contract architecture, it may determine:

• which securities can be tokenised;
• which counterparties can participate;
• which wallets are authorised;
• which settlement rules apply;
• which competing protocols can interoperate.

This can create code-based exclusion.

Competition law may consequently need to examine not only contracts and prices but also technical architecture.

19. Cross-Border Settlement Dominance

International securities transactions frequently require interaction among:

• CSDs;
• CCPs;
• custodians;
• payment systems;
• correspondent banks;
• foreign settlement infrastructures.

A dominant infrastructure in one jurisdiction may use interoperability arrangements to reinforce its position internationally.

Potential concerns include:

• discriminatory cross-border access;
• exclusive connectivity;
• high cross-border settlement charges;
• data localisation;
• technical incompatibility;
• discriminatory recognition of competing settlement systems.

20. Regulatory Capture Risks

A particularly serious concern is the possibility that a systemically important settlement operator becomes so important that regulators are reluctant to challenge it.

This may create:

Systemic importance → regulatory dependence → weak competitive discipline → greater infrastructure power.

Competition authorities therefore need mechanisms that distinguish:

legitimate systemic-risk safeguards

from

commercial restrictions disguised as systemic-risk measures.

21. Remedies

Possible competition remedies include:

Structural remedies

• divestiture in exceptional circumstances;
• separation of settlement and competing downstream businesses.

Behavioural remedies

• non-discriminatory access;
• transparent pricing;
• prohibition of exclusivity;
• fair-access obligations.

Interoperability remedies

• open APIs;
• standardised protocols;
• technical interface access;
• data portability.

Data remedies

• participant access to their own settlement data;
• restrictions on discriminatory use of participant data;
• functional separation of sensitive information.

Governance remedies

• independent technical committees;
• participant representation;
• transparent protocol changes;
• conflict-of-interest rules.

22. Competition Compliance Framework

A dominant digital settlement operator should consider a compliance framework based on:

Market Power Assessment
↓
Access & Interoperability Review
↓
Pricing Review
↓
Data-Governance Review
↓
Self-Preferencing Assessment
↓
Exclusivity Review
↓
Cybersecurity/Systemic-Risk Assessment
↓
Competition-Impact Monitoring

This is particularly important where the settlement operator also provides competing services.

23. Key Legal Issues for Examination

The principal questions are:

1. What constitutes the relevant settlement market?
2. Does the settlement operator possess dominance?
3. Is the infrastructure indispensable?
4. Are alternative settlement systems realistically available?
5. Is access being denied or restricted?
6. Are access conditions discriminatory?
7. Are fees excessive or exclusionary?
8. Does the operator control essential APIs or technical standards?
9. Is settlement data being used to favour affiliated businesses?
10. Does the operator leverage settlement dominance into custody, trading or data markets?
11. Are interoperability restrictions objectively justified?
12. How should competition law balance market access against systemic financial stability?

24. Conclusion

Digital securities settlement system dominance presents a distinctive competition-law problem because control over post-trade infrastructure can translate into control over access to financial markets.

Network effects, regulatory barriers, high switching costs, proprietary technology and systemic importance can produce durable market power. The most significant risks include refusal of access, discriminatory connectivity, excessive pricing, interoperability restrictions, technological lock-in, data exploitation, self-preferencing, tying, exclusivity and leveraging into adjacent financial markets.

The jurisprudence of United Brands, Commercial Solvents, Bronner, IMS Health, Microsoft, Slovak Telekom and Deutsche Telekom provides a useful legal framework for analysing these risks.

The central regulatory challenge is to maintain the delicate equilibrium between:

secure and resilient settlement infrastructure + fair competitive access + innovation + financial stability.