own instead of relying on bank loans. These economies of scale might also appear in other parts of the market and should in general favour large organized markets. One of the initial consequences of EMU might therefore be an increasing dichotomy between (mainly national) retail markets and a more and more unified wholesale market whose sheer size favours securitization and hence large organized exchanges.
At the wholesale level the reasons why some national idiosyncrasies are likely to persist are more subtle. The legal environment will continue to be different. A repo agreement in one member country might still have some different legal aspects from a similar agreement in another member country. Regulation of primary dealers is still subject to different national criteria. An additional reason, which is not always recognized, is that the common monetary policy might not be totally uniform. The reason for this lies in the federal organization of the ESCB, which leaves some room for differentiation by the national central banks which will continue to exist. A clear understanding of the structure and functioning of the ESCB is therefore required.
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