1. The Creation of a Market : the Western European markets experience
Maria Ivanova / Andrea S. Tranquillini Presentation to the 2nd AECSD Conference
Moscow, 5 October 2005

2. Summary Our Company Conditions for an efficient market infrastructure
The scenario
Suggestions and Conclusions

3. Organisational Structure
Clearstream Banking S.A. Luxembourg
CBL
(ICSD)
Clearstream Banking AG Frankfurt
CBF
(CSD)
Name of presenter / Unit

4. Our company Global market coverage 41 markets
European coverage
Austria
Belgium
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Luxembourg
Netherlands
Norway
Russia (Jan.2006)
- Poland
- Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
South Korea
Canada
China
USA
Japan
Hong Kong
Mexico
Thailand
Singapore
Argentina
Malaysia
Uruguay
Indonesia
New Zealand
South Africa
Australia

5. Our company The size of our core activities
Clearstream:
Offers Settlement and Custody services to more than 2,500 customers world- wide (only regulated financial institutions, including 28 Central Banks), covering over 200,000 domestic and internationally-traded bonds and equities
Has securities on deposit worth EUR 8.3 trillion as at 30 June 2005
Settles transactions involving securities that are traded within Germany and internationally via a total of 17 platforms*
Settles more than 160,000 transactions daily across 41 domestic markets
Has been top rated as the industry provider for Tripartite Repo business
Reached sales revenues of EUR 578,8 Mio in 2004
Some core figures to show the importance of our role
As an intermediary, we process 120 million transactions per year
In Safe Custody, we take care of over 7 trillion Euros of our customers assets
In Banking, we offer extra services such as securities lending and have just been rated as No 1 rated industry service provider by the respected Global Custodian Magazine
Other roles include LuxClear for BCL
* Including Xetra, floor trading at FWB, regional German stock exchanges, US BrokerTec and MTS Group
Name of presenter / Unit

6. Our Company Our Objectives
Our objective is to improve the efficiency of securities services for global markets.
We deliver integrated securities services for financial institutions worldwide by creating competitive and innovative solutions to:
Remove market inefficiencies of today
Build business opportunities for market players
Deliver cost-efficiencies to the securities industry
We are committed to reducing costs for Market Participants

7. Conditions for an efficient market infrastructure Best Practice and regulatory bodies
International Best Practice Organisations
CPSS/IOSCO
Hague Convention
European Union
European Commission (Lamfalussy and Giovannini reports, WG Internal Market)
European Parliament
European Central Bank
National Regulators and Central Banks
Market Associations
The Group of 30
ECSDA
ICMA / ISSA

8. Conditions for an efficient market infrastructure The drivers - 1
1) CPSS IOSCO – Hague Convention
Formulates broad supervisory standards, gives guidelines, recommends statements of best practice
Hague Convention promotes harmonisation of financial market’s legislation
2) European Union – Lamfalussy Report - Giovannini Committee
Focus on harmonization of cross-border post-trade practises. The reports have identified the existing barriers prevent the efficient delivery of C&S services.
Consensus that the EU post-trade landscape could be significantly improved. Convergence initiatives
The removal of barriers related to taxation and legal certainty is clearly the responsibility of the public sector.
European Commission  Aims to propose legislation for the financial sector (FSAP, etc)
3) ECSDA
Represents the interest of its CSD and ICSD members and represents them at international level on technical, financial, legal & regulatory discussion.
Streamlines initiatives among its members to achieve harmonisation, increase efficiency and reduce risk in post-trade across Europe for the benefit of issuers, investors and market participants.

9. Conditions for an efficient market infrastructure The drivers - 2
4) “G30 Group” 20 Recommendations
Interoperability  Focus on creation of a single Financial market by creating cross border market links for both securities and cash, CCPs, Securities Lending, reference data, messaging and communications.
Risk management  Business Continuity and Disaster Recovery plans to avoid large-scale market disruption and minimize Operational risk.
Governance  Need of experienced and appropriate Board membership. Development of remote membership. Need of clear regulatory framework in each country.
5) ISSA – International Securities Services Association
Need of collecting and disseminating information on the developments in the rapidly changing international securities markets,
Need to offer securities operations professionals a forum to exchange ideas and issues of common interest.
100 member institutions world-wide and 2000 subscribers to its publications all over the world.
Out of the 44 Asian countries only 7 are members of the ISSA (Pakistan, China-HK, Japan, Korea, Malaysia,Taiwan, Thailand)

10. 1) CPSS IOSCO
(IOSCO) - International Organization of Securities Commissions has developed in 1998 the Objectives and Principles of Securities Regulation (CPSS) - Committee on Payment and Settlement Systems of the Central Banks of the Group of Ten Countries has produced in 2001 the final version of the Core Principles for Systemically Important Payment Systems.
 Building on the previous work, the CPSS and IOSCO have worked to contribute further to this process by jointly developing recommendations for securities settlement systems, to improve the safety and efficiency of these systems.
Hague Convention’s objectives
Law on cross border securities transfer or cross-border creation of interests iin securities held with an intermediary
Protection of market participants from legal and systemic risk
Protection of intl. Capital markets by « harmonisation of « conflict of law ».
Improvement of efficiency of capital markets
Cost reduction in cross border securities settlement and collateralisation.

11. 2) EUROPEAN UNION The Giovannini committee
Identification of inefficiencies in EU financial markets.
Definition of Barriers preventing market integration. Three main groups:
National differences in technical requirements and market practice;
National differences in tax procedures;
Issues relating to legal certainty.
Proposal of practical solutions to improve market integration.
DBAG endorses the results of the two Giovannini reports and, as a top priority, supports a quick and comprehensive removal of the barriers identified.
Despite the non-enforceability of the second report, Deutsche Börse Group has been willing to make sizeable efforts to remove those barriers individually and together with other market participants.
Deutsche Börse Group is actively participating with market associations, such as ECSDA, to develop viable solutions to barriers 4, 7 and 3, and has already implemented and comply with barrier 1 (implementation of ISO15002).

12. The 15 Giovannini Barriers (2nd Report) Implementation schedule
Barriers by deadline
Barrier 7
Harmonise operating hours
Barrier 1
Harmonise communication infrastructure
Barrier 4
Guarantee intra-day settlement
Barrier 6
Harmonise settlement periods
Barrier 3
Harmonise corporate actions rules
Barrier 8
Harmonise securities issuance
Barrier 11
Open tax withholding services
Barrier 12
Remove local tax collection
Barriers 13, 14, 15
Ownership of securities
Barrier 2 and 9
Openness of C&S services
Barrier 5
Remote access to C&S
Barrier 10
Remove primary dealers restrictions
2 years
2 y. & 3 m.
Within 3 years
2 years & 3 m.
NOTE: Due to the non-enforceability of the 2nd Giovannini Report, deadlines are only indicative and fixc expected completion date since start.

13. 3) ECSDA Working Groups
Barrier 7  Harmonisation of Operating Hours and Settlement Deadlines
Barrier 4  Intra-day settlement finality
Action: Addressed by ECSDA Working Group 5 through development of an inventory and a set of 10 harmonisation standards agreed that all 17 member CSDs have committed to acheive by April 2005.
Status: Targets reached at 75%. Considerable change expected over the next 6 month.
Barrier 3  Corporate Actions harmonisation
Action: Also assigned to ECSDA’s Working Group 5, which is currently finalising a solution for cash distribution suitable to all 17 member CSDs and in close collaboration with the European Banking Federation (EBF) and the the European Securities Forum /ESF)

14. 4) G30 Recommendations on C&S
Monitoring organisation 1
Eliminate paper and automate communication, data capture and enrichment
North American committee, European Monitor Committee, Asia/Pacific Regional Committee 2
Harmonise messaging standards and communication protocols
ISSA, SWIFT 3
Develop and implement reference data standards (ISIN numbering) 4
Synchronise timing between C&S systems and payment FX systems
North American committee,
European Monitor Committee, Asia/Pacific Regional Committee
Association Global Custodians 5
Automate ans standardsize institutional trade matching 6
Expand the use of Central counterparts
ISSA 7
Permit securities lending and borrowing to expedite settlement 8
Automate and standardise assets servicing processes, inclusing CA, Tax relief and restriction to foreign ownership 9
Ensure financial integrity of providers of C&S services
PriceWaterhouseCoopers 10
Reinforce risk mgmt practices of users of C&S services 11
Ensure final simultaneous transfer and availability of assets.
European Monitor Committee,
Asia/Pacific Regional Committee 12
Ensure effective business continuity and disaster recovery planning 13
Address the possible failure of a systematically important institution 14
Stengthen assessment of the enforceability of contracts
Legal Subcommittee – ISDA, EFMLG, CPSS/IOSCO 15
Advance letgal certainty over rights to securities, cash, or collateral
Legal Subcommittee, UNIDROIT, Hague Conference, CPSS/IOSCO, ISDA, EUPFL 16
Recognise and support improved valuation and closeout netting arrangements
Legal Subcommittee, ISDA, EFMLG, EUPFL 17
Ensure appointment of appropriately experienced and senior board members
Regional co-chairs 18
Promote fair access to securities C&S networks 19
Ensure equitable and effective attantion to stakeholders interests 20
Encourage consistent regulation and oversight of C&S service providers

15. 5) ISSA (International Securities Services Association)
Barriers 6,7,8  Expand the use of Central counterparts, Facilitate Securities lending and borrowing, Automate and standardize assets servicing processes, including CA, Tax relief and restriction to foreign ownership.
Action: Within the framework of the Group of 30 recommendations, ISSA has received a mandate to assist with finding solutions for recommendations 6, 7, 8. ISSA has requested its members to join in a new project to address the subjects covered in these recommendations, by trying to assemble a useful source of information that is globally consolidated, yet provides details on an individual market level.
Status: Questionnaire to members in progress
Barrier 2,3  Harmonize messaging standards and communication protocols, develop and implement reference data standards (ISIN numbering).
Action: ISSA is supporting SWIFT presently in charge of the Barrier’s removal.
Status: SWIFT has established a Independent Advisory Group to solve Giovannini Barrier 1

16. Conditions for an efficient market infrastructure Preliminary steps
Central Securities Registry (alternative: the German option)
Certainty of ownership. Official entitlement compensation rules, Record date, Ex date, Pay date. Legal enforcment
Centralised source of Corporate Action information
CSD
Third party account recognition (Nominee, Omnibus)
Single numbering Agency
Real Time settlement (both cash and securities)
Primary market / New issues regulation (eg. IPOs)

17. The « G8 » markets experience compared to Russia
Russia
USA
Germany
France
United Kingdom
Japan
Canada
Italy
Official Ent.Comp. rules NO
YES
Record date
Ex date
Pay Date
Legal enforcment
Central Securities registry
Centralised source for CA
NO 
Central Securities Depository 2 1
Nominee account
omnibus-third party account
Single numbering Agency
New Issues regulation

18. The example of the German Market
Ministry of Finance
BAFIN
Bundesbank
Deutsche Börse AG
Stock Exchanges Stock Exchanges Stock Exchanges Stock Exchanges
Berlin
Bremen
Düssel- dorf
Frank-
furt
Xetra
Eurex
Hamburg
Hannover
Munich
Stuttgart
EUWAX
Clearstream Banking Frankfurt (CBF)
National Numbering Agency
Centralised source of
CA information
CBF as a router and
intermediary of market info
towards the Registrars.
No Central Securities Registry
Registrars WM

19. …and of the Russian Market (2007?)
Ministry of Finance
FSFM
Central Bank of Russian Federation
MICEX Group
Stock Exchanges Stock Exchanges Stock Exchanges Stock Exchanges
The Rostov
Currency
and Stock
Exchange
The Siberian
Interbank
Currency
Exchange
The Ural
Regional
Currency
Exchange
Russian
Trading
System
The St.
Petersburg
Stock
Exchange
The Asian
Pacific
Interbank
Currency
Exchange
The Nizhny
Novgorod
Stock and
Currency
Exchange
The Samara
Currency
Interbank
Exchange
MICEX
Stock
Exchange
MICEX
Settlement
House
National
Mercantile
Exchange
National Depository & Clearing Centre
National Numbering Agency
Centralised source of
CA information
CSD as a router and
intermediary of market info
towards the Registrars.
No Central Securities Registry
Registrars ?

20. Our approach and Conclusion
We seek efficiency through existing models.
We target market growth within a regulated environment (infrastructure and legislation).
We participate to international forums, associations, committees.
Clearstream and Deutsche Börse Group are supportive for the creation of new securities market infrastructure and available to provide the necessary knowledge.

21. Contacts Maria Ivanova Andrea S. Tranquillini
Customer Relations Management Network Relationship Management
Northern and Eastern Europe Central and Eastern European Countries
Tel: Tel:
Fax: Fax:
Mobile: Mobile: