1. Z/Yen Limited Risk/Reward Managers 5-7 St Helen’s Place London EC3A 6AU United Kingdom tel: +44 (20) 7562-9562 www.zyen.com © Z/Yen Limited 2005 Z/Yen Limited FX JSC Operations Managers Conference 2005 Where is the FX Market going? Jeremy Smith jeremy_smith@zyen.com

2. www.zyen.com © Z/Yen Limited 2005 Current Market Trends Business Significant increase in volumes across major currencies pairs in both the Corporate and Interbank sectors Formation of consortiums to ensure no dominance by one player Prime Brokerage services now being offered to major clients More volume being generated from IR Swaps and Credit Derivative trading Market liquidity is increasing and bid-offer spreads are tightening. Market is more and more a high volume low margin business Regulation Active role by regulators to reduce structural risks in the market Processing STP rates are around 99.99% for Interbank (through implementation of CLS). This makes FX trading the most commoditised in the world and virtually volume independent. Cost per trade is falling but still a marked contrast between interbank and corporate workflows & costs (see over)

3. www.zyen.com © Z/Yen Limited 2005 FX – Average Cost per Trade The biggest cost decrease is in Operations costs for CLS trades. IT costs (per trade) have however stayed constant. Interbank Operations Cost $2.60 Corporate Operations Cost $6.40

4. www.zyen.com © Z/Yen Limited 2005 Future Trends Business Volumes will continue to increase in part driven by internal trades and the increasing availability of trading platforms. Market volatility will continue to increase creating on-going opportunities for good returns on investment. Regional banks will use existing ‘white labeled and ‘grey labeled’ products to market to their client base. Regulation Regulators will continue to apply pressure on the market to reduce systematic risk Corporate clients need to be given incentives to invest in technology Processing Cost per trade will decrease as the market continues to invest in and implement more sophisticated technology and through outsourcing/relocation.

5. www.zyen.com © Z/Yen Limited 2005 What do the clients want? (Z/Yen OPB Survey 2004) Core Transaction Processing is considered critical Particularly with the history of perceived simplicity and automation of FX/MM products Good Operational Performance protects business allocation but is unlikely to increase it. However: Client knowledge is desired to ensure a satisfactory relationship. The role of the CRM is considered important to clients, particularly as a single point of contact, an escalation point and as the provider of more detailed and frequent MIS. Most clients were aware of CLS, but not fully aware of potential benefits for them. 2005 Survey: Z/Yen will be interviewing 50+ clients in May to July