1 Technology and Financial Innovation For Government Securities Case of Inflation Linked Bonds Philippe RAKOTOVAO Chief Executive Officer EuroMTS

Contribution of Technology to the Government Securities Market  Permits the creation of market standards  Enhancement of liquidity  Standardization of trading patterns  Ensures transparency  Fosters market acceptance  Integration through technology  Organization resilient to external and endogenous shocks  Highly competitive market  Emergence of a new class of market data  Executable bids and offer prices  Real time prices  Value added data allowing the emergence of new financial products

The Inflation Linked Bonds Liquidity

One Compelling Example: The EuroMTS Inflation Linked Index  The EuroMTS Inflation index (EMTXi) measures the performance of euro zone inflation linked sovereign debt  Consists of all inflation linked euro zone government bonds  indexed to the euro zone HICP ex tobacco index or the France CPI ex tobacco index  listed on MTS platforms, with size of more than 2 billion euros, with a maturity of at least one year  The EuroMTS Index populates a so-far very limited supply side  Barclays Capital: has calculated own closing price for an inflation linked index on the following markets since 1997: Australia, Canada, France, Sweden, USA, Italy and South Africa.  Merrill Lynch: has calculated a closing price for an inflation linked index on the following markets since 1998: Australia, Canada, France, Sweden, USA, UK and New Zealand.  EuroMTS: has published the EMTXi Inflation Linked Index since 2004.

EuroMTS Inflation Linked index comparative advantages  This index is the one and only inflation linked bond index to offer the following advantages :  Real-time prices from the MTS platform: the index is published every thirty seconds from 9.00 am to 5.30 pm (Paris time)  Independence and reliability: the index is calculated using the bid & offer market prices of the bonds  Transparency: the methodology is public (available on )  The product innovation is mainly technology driven  Liquidity provision by the banks ensures recurrent growth of the market  Brings to the Fixed Income space the benefits of the Equity experience  Real Time calculation permit the launch of ETFs

 Easy-to-use instrument…..  Helps to limit costs and the time taken up in managing baskets replicating the benchmark index over time  Makes it possible to avoid constraints relating to the size of some government bond issues and their long-term liquidity.  Private Individuals can effectively purchase Inflation  ….. that complements the existing products  Makes it possible to implement arbitrage strategies: real rates vs nominal rates; Hedge against inflation risk; exposure to all inflation linked Euro zone government bonds  Paves the way to a future market: A new Inflation linked Future contract is about to be launched; Scheduled to be launched in fourth quarter 2007; Will be based on EMTXi Inflation index and its sub-indices The Lyxor EuroMTS Inflation Linked ETF

7 Stockholm, Thursday, March 29, 2007 Paris, Gateway to Euro Capital Markets