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European Commission TAIEX Workshop on regulation of the stock exchange activity Kyiv, 29 – 30 June 2011.

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Presentation on theme: "European Commission TAIEX Workshop on regulation of the stock exchange activity Kyiv, 29 – 30 June 2011."— Presentation transcript:

1 European Commission TAIEX Workshop on regulation of the stock exchange activity Kyiv, 29 – 30 June 2011

2 22 Disclaimer This presentation was prepared by Deutsche Börse AG. Any information contained herein has been obtained from company and external sources believed to be reliable, but not guaranteed as to its accuracy or completeness. All proprietary rights and interest in this presentation shall be vested in Deutsche Börse AG and all other rights including, but without limitation to patent, registered design, copyright, trade mark, service mark, connected with this presentation shall also be vested in Deutsche Börse AG. Whilst all reasonable care has been taken to ensure that the details contained in this presentation are accurate and not misleading at the time of presentation, no liability is accepted by Deutsche Börse AG for the use of information contained herein in any circumstances connected with actual trading or otherwise. Neither Deutsche Börse AG, nor its servants or agents, are responsible for any errors or omissions contained in this presentation which is published for general information only and shall not constitute an investment advice or an offer to sell or a solicitation to buy shares of Deutsche Börse AG. Neither Deutsche Börse AG, nor its servants or agents, are responsible for any errors or omissions contained in this presentation which is published for general information only and shall not constitute investment advice or an offer to sell or a solicitation to buy shares of Deutsche Börse AG or any other security traded on any marketplace in the Deutsche Börse Group. The marketplaces of Deutsche Börse AG reserve the right to modify any of their rules or product specifications

3 33 Deutsche Börse Overview

4 4 Deutsche Börse: Path of Innovation and Growth since 1585 1585Opening of Frankfurt Stock Exchange 1625First official quotations sheet 1820First stock issued in Frankfurt 1992 Founding of Deutsche Börse AG 1997 Introduction of Xetra ® 1998 Founding of Eurex 2000New stock-exchange building in Hausen 2001 IPO of Deutsche Börse AG 2002Acquisition of Clearstream International Deutsche Börse included in DAX ® 2003 Introduction of General Standard and Prime Standard 2005 Introduction of Entry Standard 2007Introduction of Deutsche Börse REITs 2008Introduction of First Quotation Board

5 5 Globally operating Provider of Financial Services: Locations of Deutsche Börse Group 9 locations in Europe 10 locations in Asia / North America Berlin Frankfurt / Eschborn London Luxembourg Madrid Moscow Paris Prague Zurich Beijing Chicago Dubai Hong Kong New York Ottawa Shanghai Singapore Tokyo Washington

6 6 Deutsche Börse – Integrated Business Model SettlementCustodyClearing Listing Physical custody of securities Related services, e.g. tax, corporate actions Delivery of securities (delivery vs. payment) Financing services Central counterparty (CCP) Verification of trade-related information Risk management Operation of open electronic order books Connectivity to international trading participants Information Technology Market Data & Analytics Indices, streaming data, data terminals, reference data Trading Assisting issuers on their way to listing Being public services Frankfurt GDRs Deutsche Börse 6

7 77 Deutsche Börse – Facts and Figures 20102009 Change in % Sales revenue € m2,1162,061.73 Earning before interest and tax (EBIT)€ m722637.813 Cash flow from operating activities€ m943.9801.518 Xetra Number of transactionsm189.4167.313 Trading volume (single-countered)€ bn61.460.02 Eurex Number of contractsm2,642.12,647.40 Cleastream Value of securities deposited (annual average)€ bn10,89710,3466 Number of transactionsm116.410216 Source: Deutsche Börse AG: Annual Report 2010, March 2011

8 8 Stock Exchanges in Germany Regional Exchanges Berlin Düsseldorf Hamburg-Hanover Munich Stuttgart Xetra ® Fully electronic trading platform for securities (Xetra) Open order book Trading center: Xetra Xetra Frankfurt Specialist Trading supported by Xetra specialists Use of Xetra technology Trading center: Frankfurt The Frankfurt Stock Exchange is the market leader for domestic and international securities in Germany. Frankfurter Wertpapierbörse (FWB ®, the Frankfurt Stock Exchange) Tradegate Exchange Fully electronic trading platform Market specialists constantly quote continuously binding prices specially tailored to the requirements of private investors Deutsche Börse AG holds a majority interest in Tradegate Exchange as of January 2010. Source: monthly statistics – cash market Deutsche Börse AG, as at 31 March 2011

9 9 High liquidity High security High transparency International participant network Diversified product offering Best prices through high liquidity Additional liquidity through Designated Sponsors Equities, ETFs, ETCs, ETNs, funds, warrants, certificates Cost-efficient, Europe-wide access 247 market participants from 18 countries Open order book Regulatory authorities ensure trading on Xetra according to valid regulations Over 2.1 million transactions per day Round-trip time for orders with top speed of less than one millisecond High speed 99.99 percent network availability – even at maximum loads Electronic trading system Xetra ®

10 10 All European financial centers are linked to Deutsche Börse Over 250 international trading institutions admitted – more than 4,600 traders in 18 countries interlinked via the XETRA platform Direct access to investors representing 35% of the global institutional capital Main investors trading at Deutsche Börse Norges Bank Investment Management BlackRock Asset Management DWS Investment Qatar Investment Authority Allianz Global Investors Lyxor International Asset Management Capital World Investors Union Investment Privatfonds Deka Investment Fidelity Management & Research Pooling Liquidity at the Heart of Europe Companies have direct access to the widest pool of investors Spain 4 Italy 6 Luxembourg 2 Ireland 3 UK 40 Sweden 3 Greece 1 Netherlands 19 Germany 118 Hungary 4 France 12 Belgium 3 Gibraltar 3 Switzerland 10 Czech Republic 2 Austria 15 Cyprus 2 UAE 1 Source: FactSet, April 2011

11 11 Deutsche Börse Product Range Index Family 11,630 Equities 91% int. companies from 86 countries 77 Russian and Ukrainian GDRs / ADRs 162 REITs 26,114 Bonds 50% int. Listings 18 Russian and Ukrainian Bonds 1,143 Equity Derivatives 10 Futures of Russia 556,806 Certificates & Warrants 764 Exchange Traded Funds (ETF) 38% of European market share 6 Russian ETFs 35 Exchange Traded Notes (ETN) 2,798 Traded Active Funds 264 Russian and Ukrainian Funds 144 Index Futures and Options Source: Deutsche Börse, May 2011

12 12 Supervision of Stock Exchanges in Germany

13 13 Supervisory structure in Germany State Exchange Supervisory Authority (ESA) Börsenaufsichtsbehörde (located in each federal state, e.g. Hessen ) Trading Surveillance Offices of the Stock Exchanges (TSO) ( located at each exchange in Germany) Federal Financial Supervisory Authority (BaFin) Bundesanstalt für Finanzdienstleistungsaufsicht trading activities & market participants

14 14 Main tasks of the regulators Federal Financial Supervisory Authority (BaFin) [acc. to Securities Trading Act (Wertpapierhandelsgesetz) and German Banking Act (Kreditwesengesetz)] Market abuse - prohibition of insider dealing - prohibition of market manipulation Supervision of disclosure requirements Supervision of code of conduct in the exchanges International co-operation Supervision of credit institutions and financial services providers Exchange Supervisory Authority (ESA) [acc. to Exchange Act (Börsengesetz)] Supervision of legal provisions and proper conduct of the exchange Granting permission to operate exchanges and approval of their rules and regulations Supervision of facilities similar to exchanges

15 15 Assignments of Regional Exchange Supervisory Authority (ESA) (1)  Approval of the establishment and operation of exchanges, and to revoke such approval  Approval of the rules and regulations of exchanges  Adoption of Statutory Orders of the State of Hesse  Approval of the appointment of individuals to functions in certain exchange bodies (members of the Board of Management, Head of TSO, Head of Disciplinary Committee)

16 16 Assignments of ESA (2)  Supervision of compliance with regulatory provisions (Exchange Act, Rules & Regs of the Exchange) by exchanges and their trading participants and issuers  Initiation of proceedings before the Disciplinary Committee of Frankfurt Stock Exchange  Supervision of the holding of significant participating interests in the operating company of the exchange (Deutsche Börse AG); e.g. to prohibit the acquisition or the execution of voting rights

17 17 Enforcement Powers of ESA  Demand information and submission of documents from everybody (e.g. disclosure of beneficial owners and the identities of other persons involved in trades, disclosure of any changes in the holdings of securities or derivatives traded on the exchange, submission of recordings of phone-conversations)  Issue orders to Frankfurt Stock Exchange and trading participants  On-site inspections of the premises of Frankfurt Stock Exchange and trading participants  Initiation of Disciplinary Committee proceedings at Frankfurt Stock Exchange  Impose fines up to 500’000 € for administrative offences (e.g. failure of submission of demanded information)

18 18 Tasks of the Trading Surveillance Offices (TSO) I  Systematic and comprehensive data recording and analysis of exchange data and the ensuing settlement  Supervision of trading on the exchanges and their settlement  Monitoring of alleged violations of trading rules  Supervision of other irregularities that could adversely affect the proper conduct of business on the exchanges and their settlement

19 19 Tasks of the TSO II  Reporting of findings of investigations to the BaFin  Investigation based on complaints (Investor-Hotline, e.g. private investors, whistleblowers)  Administrative assistance for other supervisory authorities (e.g. Federal / State Office of Criminal Investigation, BaFin, Secret Services)  Co-operation with supervisory authorities and other bodies responsible for the supervision of exchanges in Germany and abroad (data exchange, co-operation)

20 20 The TSO acts on alleged violations of the trading rules  pre-arranged trades  cross trades  irregularities adversely affecting proper conduct of trading  front-running  trading without admission Examples:

21 21 Area of competencies of the TSO Competencies to obtain and review documents to question market participants to visit market participants and to do on-site audits to request the disclosure of client data to impose fines for non-cooperation to co-operate with other supervisory authorities and to exchange data to initiate independent investigations The TSO of the Frankfurt Stock Exchange and Eurex Deutschland are empowered to:

22 22 Enforcement - + The Trading Surveillance Offices are not empowered to impose any sanctions. the Exchange Supervisory Authority and/or the Management Board and/or the Disciplinary Committee are empowered to impose sanctions.

23 23 Typical example for an enforcement action TSO‘s investigations justify probable cause of violations of exchange law. TSO notifies ESA and Board of Management. ESA and Board of Management decide whether disciplinary proceeding is appropriate. Disciplinary Committee of the Exchange conducts disciplinary proceeding and issues sanctions.

24 24 Enforcement Reprimand Administrative fine (up to € 250,000.-) Suspension from trading (temporary) Revocation of admission (admitted member, trader) Potential sanctions according to legal provisions (member, trader)

25 25 Legal frameworks for the Stock Exchange

26 26 Exchange Organisation Exchange Council Statutory catalogue of competence; e.g. appointment of Board of Management Deutsche Börse AG / Scoach Europa AG Legal entity under private law; Operating bodies of FSE Competent Supreme Federal State Authority as State Exchange Supervisory Authority in the State of Hesse: Ministry of Economy, Traffic and State Development Legal Supervision Exchange Bodies Operation of FSE by provision of financial and personnel resources and facilities Frankfurt Stock Exchange (FSE) Institution under public law with partial legal capacity; Capacity to be a party in administrative court proceedings Board of Management Exchange Management; Admission of securities Trading Surveillance Office Supervision of trading and settlement Disciplinary Committee Imposition of sanctions for breach of duty by trading participants and issuers

27 27 Exchange Structure: Civil Law meets Administrative Law administrative law civil law is the operating company of the TSO Management Board Exchange Council Deutsche Börse AG Frankfurt Stock Exchange Disciplinary Committee Supervisory Board Executive Committee

28 28 Operational Body and Exchange in the German Exchange System Two-step (dualistic) Exchange system in Germany regulated by law Operational Body of Exchange (Deutsche Börse AG and Scoach Europa AG)  Legal entity under private law  Holds permission to operate the Exchange  Such permission comprises right and obligation to operate the Exchange Exchange (Frankfurt Stock Exchange)  Institution under public law  Self-administration competence, i.e. organisation autonomy, especially as regards rule-making and enactment of administrative acts  Partial legal capacity, i.e. no participation in legal relations outside the self- administration competence  Exchange acts through its bodies (Exchange Council, Board of Management, Trading Surveillance Office, Disciplinary Committee) Operation of Exchange by provision of necessary financial and personnel resources and facilities

29 29 Rules and Regulations for Frankfurt Stock Exchange  Exchange Act, Securities Trading Act enacted by Federal German Parliament  Statutory Order (Hessische Börsenverordnung) enacted by Ministry of Economics, Transport and Development of the State of Hesse  Exchange Rules, Conditions for Transactions, Fee Regulations enacted by Exchange Council of Frankfurt Stock Federal Regional Exchange

30 30 Exchange Council  Highest governing body of Frankfurt Stock Exchange  Representation of the exchange‘s trading participants and issuers  18 members, elected by trading participants and issuers  Main duties: Adoption of the exchange‘s rules and regulations Appointment of the Board of Management, the Head of Trading Surveillance Office and the Members of the Disciplinary Committee Supervision of the Board of Management

31 31 Board of Management  Management of Frankfurt Stock Exchange‘s business and operations  Representation of Frankfurt Stock Exchange vis-à-vis third parties, in and out of court  Main duties: Governing the exchange’s organisational structure and business operations Admission of companies and individuals to participate in trading on the exchange Admission of securities to be traded on the exchange

32 32 Disciplinary Committee Establishment, composition and procedure of the Disciplinary Committee governed by Statutory Order of the State of Hesse (Hessische Börsenverordnung) Competences: To issue sanctions against trading participants and issuers for violations of laws, rules and regulations of the exchange reprimand fines up to 250’000 € exclusion from trading for an maximum of 30 days (trading participants only

33 33 Activity Performance of Lead Brokers

34 34 Principles of the Market Model Specific provision of additional liquidity by Designated Sponsor High degree of transparency of order book and trading activity Creation of equal and decentralise d market access Concentration of total liquidity in one central order book per security Market Model Equities & Warrants

35 35 Approach for the Designated Sponsor Model is to attract liquidity and make an investment attractive Transparency Attractive Investment „LIQUIDITY ATTRACTS LIQUIDITY“ Multiplication of the liquidity effect through other market participants Competitive orders through Designated Sponsors‘ quote input Liquidity More Liquidity More transparency through the companies More transparency through Designated Sponsors (research) Xetra ® -Trading with open order book

36 36 Comparison Continuous Trading and Continuous Auction Description Continuous Trading Trading Member Executed Trades Trading Member Continuous Auction w/ Specialist  All involved trading parties treated equally (no privileges)  Full order book pre-trade transparency  Full pre- and post-trade anonymity*  Orders are matched immediately after becoming executable  Specialist has specific privileges, such as: Full order book pre-trade transparency No pre-trade anonymity Triggering of executions  For general trading members, trading is: Full pre-trade and post-trade anonymity* Pre-trade transparency only for Specialist quotes No possibility to trigger an execution  In return of privileges, Specialist is required to provide liquidity and make the market. Trading Member Specialist Executed Trades * Only for CCP eligible instruments Market Model: Continuous Trading vs. Continuous Auction

37 37 Trading Schedule Continuous Trading  Transparency with open or partially closed order book  Determination of an auction price corresponding to the highest executable order volume with the lowest surplus  Trading in an open order book with accumulated volumes displayed for individual limits  Continuous price determination and execution of orders by price / time priority Auctions Continuous Trading 9:00 13:00 17:30 CET Pre- trading Post- trading Continuous Trading Auction Display of indicative price, best bid /ask limit for equities. Market Order book balancing Call Phase Random end Price Determination

38 38 Order types & specifications of order types * Max. validity of 90 days Market orders are unlimited bid or ask orders. They are to be executed at the next price determined. Iceberg Orders are large orders with quantities only partially visible in the order book. Normally used by the trader to avoid adverse price movements. Market-to-limit orders offer the high probability of execution of market orders combined with protection against unintended price impact. Limit Order Market Order Iceberg Order Market-to- Limit Order Limit orders are bid and ask orders which are to be executed at their specified limit or better. Validity Constraints Execution Conditions Good-for-day Good-till-date* Good-till-cancelled* Auction Only Opening Auction Only Accept Surplus Order Closing Auction Only Immediate-or-Cancel Fill-or-Kill Stop Limit Order Stop Market Order

39 39 The Designated Sponsor in Trading:  Enters bid/ask quotes continuously and in auctions  Quotes must satisfy certain quality criteria (minimum requirements)  Performance measurement through Deutsche B ö rse  Quarterly rating enhance the transparency of Designated Sponsor performance  Competitive approach: no monopolist, role open to all participants in each instrument

40 40 Obligations Designated Sponsors need to fulfill (Minimum requirements) Maximum Spread Minimum Quotation Volume Reaction Time Parameters  Largest permissible spread (on a percentage / absolute basis) between bid and ask limit Smallest permissible number of stocks obtained by dividing EUR amount through the stock price rounding up to the next multiple of 100 Requirements regarding entering a quote within a certain time period depending on trading form (continuous trading or auctions) Requirements for valid quotes (Trading parameters) Participation Rules in Auctions and Continuous Trading

41 41 Privileges and Motivation in becoming Designated Sponsor Financial incentives: Reimbursement of Xetra transaction fees, if performance requirements are fulfilled Commission from corporate finance deal with the issuer Reputation development through rating by Deutsche Börse Privileges Reputation development and opportunity to gain additional services (corporate finance) Stabilization or creation of customer relation Possible trading profits from market making and arbitrage Motivation

42 42 Add-On Services Designated Sponsors may offer to respective Listed Companies Designated Sponsor Trading Stock Analysis Issuing Establishment Services Sales Chinese Walls: Law to Prevent Compliance Infraction 1. Consulting and support to aid in the fulfillment of the disclosure duties Ad hoc disclosure Annual and interim reports Communication with international investors (roadshows, one-on-ones) 2. Consulting and support for communicating with investors Organisation of analyst conferences Conference calls Shareholder's letter Organisation of general meetings 3. Reports to issuers concerning trading Price development Block trading/market structure Comparison with benchmarks/peergroups Turnovers 4. Professionel consulting for all questions concerning capital markets Efficient placement of shares in the primary market Execution of further capital provisions Analysis of capital structure  Company Analysis  Sector Analysis Analysis of existing Information

43 43 Admission of the Brokers to the Stock Exchange

44 44 Basic Rule Admission to Trading on the Frankfurt Stock Exchange  People acting for the company have to be fit and proper and have professional qualifications to trade securities on the stock exchange  admission of at least one trader with XETRA examination  the orderly settlement of the trades has to be ensured →CSD, accounts with the German Central Bank  for non-banks evidence is provided for a minimum capital of 50.000 €  the company provides evidence that it fulfills the technical and legal requirements to access the IT trading systems and to participate in the margining system of the exchange  the company ensures settlement via EUREX Clearing or provides margins to the exchange Companies, who conduct purchasing or selling for their own account conduct purchasing or selling in their own name for the account of third parties do brokerage of purchase and sales contracts Prerequisits

45 45 Ongoing requirements Admission to Trading on the Frankfurt Stock Exchange Companies with registered office outside the EU or the EEA are admitted only if an exchange of information for the purpose of surveillance of insider trading is guaranteed between the relevant authorities. The company has to inform the Exchange Management about any facts that may lead to a loss of the admission, especially: Foreign Exchange Members criminal proceedings have been opened a trader has been effectively convicted insolvency procedures have been opened

46 46 Admission of Securities to the Frankfurt Stock Exchange

47 47 Prime StandardEntry Standard Issuers may choose between: Two ways to access the capital market Deutsche Börse primary market segments EU-Regulated Market Regulated Unofficial Market (Exchange-Regulated Market) Frankfurt Stock Exchange: Regulatory framework supplemented with transparency levels General Standard First Quotation Board (Open Market)

48 48 Tailored Market Segments Established Companies with focus on international Investors Entry-level segment for small- and mid Cap as well as high- growth companies Companies with focus on German Investors Companies with minimum transparency requirements + Respective corporate filings + Annual and interim report nat. GAAP or IFRS + Corporate Calendar online + Corporate Profile online Minimum Requirements defined by EU-Law: Insider Trading Rules Market Abuse Rules Takeover Rules + Quarterly Reports + English Language + Corporate Calendar + Analyst Conference Regulated Unofficial Market Regulated Market Minimum transparency defined by EU-Law: Annual and interim report based on IFRS Disclosure of Director‘s Dealings and Ad-hoc Disclosure Shareholder Stake and Takeover Reporting Increasing Transparency Overview market segments and target companies

49 49 Transaction Types approx. 300.000€ in 2-3 month Art of Transaction: Public OfferingPrivate Placement Admission Document: EU ProspectusIssuer Data Form Accessible Transparency Standards on Deutsche Börse: Prime Standard (PS) General Standard (GS) Entry Standard (ES) Preparation of Admission Document: approx 10.000 € in 4 weeks BaFin vetting process (EU Prospectus): n.a. Deutsche Börse admission procedure: max 5 Days All in costs for IPO: 7,5% - 9,5% All in costs for SPO: 3,3% Listing Fees (Flat rate independent of MarketCap) ES - 1.500€ Annual Fees (Flat rate independent of MarketCap) ES - 5.000€ max 20 days guaranteed by law 3,3% - 5,7 ES – 750 € GS – 3,000 € PS – 3,000 € ES – 5,000 € GS – 7,500 € PS – 10,000 €

50 50 Selection of advisors: Deutsche Börse Listing Partner Selection of investment bank Establishing legal preconditions within the company Establishing controlling and reporting preconditions Determination of a business plan Fastest Listing Process: IPO within 5 months possible Phase 1: Planning and Preparation Phase 2: Structuring Phase 3: Realization and Marketing Phase 4: 1 st Trading day Secondary Market Determination of a time table Planning of the conception of the public offering Financial, business and legal due diligence Preparation of the EU-security prospectus Preparation of investor relations activities Pre-marketing with investors and analysts Provide and publish EU-security prospectus Prepare und publish research coverage Application for admission of shares to trading Book building and pricing of IPO Initial price auction IPO event and TV- media coverage on the floor of the Frankfurt Stock Exchange Continuous trading on the floor and the electronic trading system XETRA

51 51 Organizati- onal shaping and document- ation Investment Case Business plan / Data preparation Business valuation Choice of banks / IPO concept Admission to trading / Pre-Marketing Book- building / placement Post- IPO Pre-IPO / Providing IPO-Readiness IPOBeing Public Is your company ready for the capital market? Does your corporate concept arouse the interest of investors? Can your investment case be communicated transparently? Which price can your share realize at the capital market? At which stock exchange shall the security be listed? How does your company communicate with banks, analysts and investors? Which requirements have to be met? How can a positive performance of the issued shares be provided? An exemplary IPO process Source: PricewaterhouseCoopers, May 2011 51

52 52 Key Information to be in the prospectus Risk factors Description of business Competitive position / strengths MD&A / OFR Material contracts Related party transactions Regulatory environment Financial statements Overall principle of disclosure ´ All facts which are material for the assessment of the Shares Ensure consistency and coherence Prospectus - Contents Source: Freshfields Bruckhaus Deringer LLP, May 2011 52

53 53 Listing and Trading like Original Shares No disadvantages compared to original shares – same in listing, trading and positioning on the capital market Depositary Receipts Handling of DR programs admitted to trading on Deutsche Börse: DRs can be listed and traded in the same segment and the same transparency level as original shares. DRs are traded on the same trading platforms as original shares. DRs are included in the same indices as original shares. DRs are subject to the same disclosure requirements and the same transparency standards as original shares. Optional types of DR programs on Deutsche Börse: ADR (American Depositary Receipts) GDR (Global Depositary Receipts) GDR CSC (Global Depositary Receipts within Collective Safe Custody) 53

54 54 © Deutsche Börse Depositary Receipts Listing and Trading like Original Shares Source: Freshfields Bruckhaus Deringer LLP, May 2011

55 55 Reporting Obligations for Issuers from Non-EU Countries 1 Depending on a by-case basis by the BaFIN 2 Filing interim management statements for a period between ten weeks after the beginning and six weeks before the end of the relevant six- month period. Shares DRs Shares DRs Shares DRs Shares DRs 10 weeks before ending and 6 weeks before the end 2 (§37x WpHG) No regulation within the WpHG Not required 2 months after the end of the financial period (§37w WpHG) No regulation within the WpHG 4 months after the end of the financial period (§37v WpHG) 6 months exemptions possible for issuers from non-EU countries by BaFin 1 (§37z WpHG) General Standard 2 months after the end of the financial period (§66(5) BörsO) 3 months for shares that are represented by certain certificates (§66(5) BörsO) Quarterly financial report Not required Management interim statements 2 months after the end of the financial period (§66(5) BörsO) 3 months for shares that are represented by certain certificates (§66(5) BörsO) Half yearly financial report 4 months after the end of the financial period (§65(2) BörsO) 6 months exemptions possible for issuers from non-EU countries by BaFin 1 (§65 BörsO) Annual financial report Prime Standard Enhanced reporting periods for DRs address country specific demands Depositary Receipts Trading 55

56 56 Reducing risks: securities trading – Clearing House and Central Counterparty

57 57 Central counterparty of the original buyer and seller after matching of a buy and a sell order (execution) Risk management on both sides of the transaction Calculating margins for buy and sell side Collecting collateral from buy and sell side 24 hours or intraday risk management to ensure mark-to-market exposure management Delivery management and control to ensure fulfillment of obligations on both sides of the trade Functions of the Clearing House

58 58 Market participant A Trading Settlement Market participant B Trading Settlement Settlement confirmations, income and non-income events Settlement instructions, information on pending trades Order Settlement confirmations, risk data Disposition Settlement confirmations, risk data Trade confirmation Contract note Order Disposition FWB ® (Xetra ®, trading floor) Eurex Clearing AG (CCP) Clearstream Banking AG Trading data Trade confirmation Contract note Settlement confirmation Model of the Central Counterparty (CCP): Anonymous trading at low risk

59 59 Central Counterparty (CCP) clearing strengthens market integrity and increases processing efficiency Reduces credit risk Eurex Clearing AG becomes the legal counterparty for all trades and reduces credit risk by Multilateral netting Replacement of bilateral credit risk with standard credit risk of CCP Collateralisation of risk exposure and post-default backing Reduces capital requirement Privileged with a zero percent weighting in regard to the Solvency Regulation (SolvV) based on Basel II recommendations. Therefore Eurex clearing members are not required to back trades via the CCP with liable equity capital. Increases processing efficiency Standardised straight-through processing post-trading approach Netting of volumes and trades across trading locations reduces Back office complexity Fails and financing needs

60 60 Clearing volume NettingMarginingBufferCollateral deposited by clearing members 8,320 8,283 37 845 Eurex Clearing AG: Effective risk management by netting, margining and collateralisation Monthly average in € billions Source: Eurex Clearing AG, annual report 2010 Deutsche Börse AG, as at 31 December 2010

61 61 Advantages  Effective risk and collateral management  Reduction of cross-border settlements  Mitigation of counterparty risk  Straight-through processing (STP) Market participants Eurex exchanges (derivatives) Frankfurt Stock Exchange (equities) Irish Stock Exchange (equities) Eurex Bonds (bonds, basis) Eurex Repo (general collateral, specials) Eurex Clearing AG National central securities depositoriesInternational central securities depositories SIX SISClearstreamEuroclear Bank Euroclear UK & Ireland Ltd. Eurex Clearing AG: Central Counterparty for different trading platforms EEX 1) (emission rights) 1)European Energy Exchange

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