1. The Impact of MiFID on the European Exchange Landscape and the Future Of Market Structure Burçak Inel, Head of Regulatory Affairs, Federation of European Securities Exchanges London, 28 June 2006 inel@fese.org www.fese.org

2. Outline of Presentation Introduction to FESE What are the major structural changes brought on by the MiFID regime?  Key features of Level 1  A new framework for Regulated Markets  Greater competition among execution venues  Key features of Level 2  Issues to be tackled at Level 3 What are the opportunities and challenges for Europe’s markets?

3. Introduction to FESE Whom do we represent? Established in 1974 as a small forum of Stock Exchanges in Europe, FESE today has 24 Full Members, representing 36 Securities Exchanges from all the countries of the EU, Iceland, Norway and Switzerland as well as 6 Corresponding Members from other non-EU countries. What do we do? Interest representation Forum for dialogue and cooperation Statistics and Market research Sponsorship of research and conferences How are we organised? Secretary General: Judith Hardt Secretariat in Brussels, Belgium Representative member groups MiFID Task Force: Representatives from all FESE members Meeting on an ad hoc basis Chair: Ludovic Aigrot (Euronext)

4. FESE Members  24 Full Members  36 exchanges  6 Corresponding Members

5. Key figures  Market Value > 10,000 billion EUR  Turnover 1 > 17,000 billion EUR 1 Annual equity turnover Liquidity pool

6. Key Aspects - Level 1 Single passport for investment firms One set of conduct of business rules Rules applicable to trade execution venues Best execution Transparency/reporting rules Content Timing Channels

7. Major structural changes: A new framework for Regulated Markets  Definitions of Market Operator & Regulated Market: accommodating various market models  Operator’s requirements:  Management and controlling interests  Organizational requirements => Mainly best practice

8. A new framework for Regulated Markets – cont’d  Requirements regarding admission of financial instruments to trading & mechanisms to verify compliance with issuers’ transparency obligations  Requirements regarding pre- and post-trade transparency of RM  Requirements regarding membership in RMs  Monitoring of compliance by members with RM rules and identification of breaches of the rules, disorderly trading or market abuse => Some requirements that were in market rules are now at EU level (consequences for flexibility/innovation)

9. Competition Among Venues - MTFs MTF=RM for shares traded on RMs National regime for MTFs trading other instruments Two-way competition

10. Competition Among Venues - SIs For some jurisdictions, this represents a major change Differences with RMs/MTFs Duty to clients Commitment of capital Achieving a level playing field

11. Important features of Level 2 SI definition Best execution Post-trade transparency

12. Issues for Level 3 and beyond Level 3: Data consolidation Best execution for non-equities Others where common guidelines are useful Level 4: Transposition: Timeliness & accuracy Enforcement

13. Impact on European markets Opportunities:  Integration of markets  Greater competition  Cross-border investments  RMs can play a key role in assisting firms to comply with their obligations  RMs have incentives to innovate and to serve customers better  Context beyond MiFID also important Challenges:  Fragmentation of liquidity  Fragmentation of price data  Level playing field among venues  Global competitiveness of our markets is paramount!