Digital Transformation and Transaction Cost Drivers in European Financial Market Infrastructures: A Systematic Literature Review

Abstract

Aims: This study aims to systematically explore how Transaction Cost Economics (TCE) has been applied to Financial Market Infrastructures (FMI) – including clearing, settlement, and custody services. It seeks to identify theoretical gaps, assess empirical applications, and provide a structured research agenda to advance understanding of governance structures and transaction cost mechanisms in highly regulated financial markets. Study Design: This is a Systematic Literature Review (SLR) conducted in accordance with the PRISMA guidelines, guided by the TCCM (Theory-Context-Characteristics-Methodology) framework and the READ (Reconciliation-Examination-Alignment-Design) protocol for systematic analysis and conceptual mapping. Place and Duration of Study: The review was conducted between November 2024 to July 2025 as part of an ongoing doctoral research project based in Germany and Latvia, with a specific focus on EU-level financial market regulation and infrastructure. Methodology: Relevant literature from 1998 to 2023 was identified via Scopus using a transparent, replicable search strategy. The initial pool of over 52,180 records was screened through the PRISMA process, resulting in 77 peer-reviewed studies for full-text analysis. Documents were analyzed through coding grids along the TCCM and READ frameworks, identifying theoretical, contextual, and methodological patterns. Results: The analysis shows that while TCE is frequently referenced in discussions about FMI governance, only a small subset of studies rigorously apply its foundational constructs – such as asset specificity, bounded rationality, and opportunism. Key research clusters focus on market efficiency, cost allocation mechanisms, regulatory adaptation, and data governance. However, most studies lack coherent integration of TCE principles in empirical modeling, particularly in the context of the MiFID II regulatory regime and digital infrastructure transformation. Conclusion: This study provides the first systematic synthesis of TCE applications to FMI using a dual TCCM-READ approach. It highlights substantial fragmentation in the literature and calls for deeper interdisciplinary, theory-grounded research. The findings offer actionable insights for both academic inquiry and regulatory practice, especially as financial market infrastructures face growing pressures from digitalization, harmonization, and governance complexity in the post-MiFID II era. The review contributes to the research agenda by identifying testable relationships, unexplored comparative dynamics across post-MiFID II financial market infrastructures, and structural gaps related to cost drivers and competitive strategies within European financial market infrastructures.