The Global Risks Alliance (GRA)
Concentration describes how much of a market's activity, holdings or infrastructure depends on a few firms. Large dealers, asset managers, custodians, index providers and clearing members bring scale and efficiency, and they also create nodes through which a single failure or a common decision can move the whole market. This page sets out how concentration and interconnectedness shape the propagation of risk, how they are measured, and who decides on their oversight.
GRA · Established · service level R0
Market concentration describes how much of a market's activity, holdings or infrastructure depends on a few firms. Large dealers, asset managers, custodians, index providers and clearing members bring scale and efficiency, and they also create nodes whose stress spreads widely through common holdings and shared providers.
How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.
Intermediaries, holdings and interconnectedness. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
When market making in a segment rests with a small number of dealers, the exit or constraint of one removes a large share of capacity. Liquidity that appeared ample can vanish when those dealers protect their own balance sheets at the same time.
Funds that track the same indices or hold similar portfolios respond to the same shocks with the same trades. Overlapping portfolios turn one fund's forced selling into price pressure on every holder of those assets.
Custody, clearing, market data, cloud computing and benchmark administration are concentrated in a few providers. An outage or failure at one of them can affect many firms that appear unconnected on their balance sheets.
Exposures through derivatives, securities lending, repo and cross-holdings link banks, insurers and funds. Where a few nodes are highly central, distress at one can propagate through direct losses, fire sales and lost confidence.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Interconnectedness | The links among institutions through exposures, holdings and services that let stress pass between them. |
| G-SIB | A global systemically important bank, identified by the FSB and Basel Committee using size, interconnectedness and other indicators. |
| Portfolio overlap | The similarity of holdings across funds, which creates common sellers in stress. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Herfindahl-Hirschman index of dealer market share | index | quarterly | Trade reports and regulatory transaction data | ESTIMATED |
| Volume share of the largest liquidity providers | share of segment volume | quarterly | Venue and transaction reporting data | ESTIMATED |
| Initial margin concentration among the largest clearing members | share of total initial margin | quarterly | CCP public quantitative disclosures | REPORTED |
| Portfolio overlap among investment funds | similarity index | quarterly | Fund holdings filings | ESTIMATED |
| Ownership share of the largest institutional holders | share of shares outstanding | quarterly | Institutional holdings filings | REPORTED |
| G-SIB systemic importance score | score in basis points by category | annual | Basel Committee G-SIB assessment disclosures | OFFICIAL |
| Network centrality of financial institutions | centrality score | per study | Exposure and holdings networks | MODELLED |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| SEC Form 13F holdings data | Quarterly equity holdings of US institutional investment managers | Public domain, US government records |
| SEC Form N-PORT data | Portfolio holdings of US registered investment funds | Public domain, US government records |
| Basel Committee G-SIB assessment framework and BIS-published indicators | Size, interconnectedness, substitutability, complexity and cross-jurisdictional activity of large banks | Free, BIS terms of use with attribution |
| SEC Private Funds Statistics from Form PF | Aggregated size, leverage, liquidity and concentration of private funds | Public domain, US government work |
| BIS OTC derivatives statistics | Notional amounts and market values of OTC derivatives by counterparty and risk category | Free, BIS terms of use with attribution |
| OFR Bank Systemic Risk Monitor | Indicators of systemic importance for large banks | Public domain, US government work |
| ECB Securities Holdings Statistics | Securities holdings by sector of holder in the euro area | Free, ECB reuse terms with attribution |
Capital Markets Nexus prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Financial Stability Board and Basel Committee | Which banks to identify as globally systemically important and what additional requirements apply | Systemic importance indicators and interconnectedness evidence |
| Securities regulators | Whether concentration among dealers, funds or index providers warrants rules on liquidity, disclosure or conduct | Market share, holdings and portfolio overlap indicators |
| Competition authorities | Whether mergers or practices among exchanges, data vendors or infrastructures reduce competition | Market share and service provider concentration evidence |
| Macroprudential authorities | Where interconnectedness creates channels that call for system-wide measures | Network and common exposure analysis with data gaps stated |
Scale economies in technology, capital and data push activity towards a few large providers. Concentration can lower costs and improve standardisation, but it also means that the failure or withdrawal of one firm can disrupt the system, and that operational risks are shared.
Common ownership through large asset managers and the growth of passive strategies mean many investors hold similar portfolios. When they rebalance or face redemptions at the same time, their trades are correlated. Interconnectedness through derivatives, repo and shared infrastructure can transmit losses.
Measuring shares in dealing, clearing and services, using financial economics and macro-finance. Shares vary by market segment.
Measuring portfolio overlap, using econometrics. Overlap does not always imply correlated selling.
Modelling exposures and contagion paths, with network science and contagion. Results depend on incomplete exposure data.
Identifying shared reliance on technology and data providers.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.