WFE ANNUAL MEETING Vancouver, 7 October 2009 Judith Hardt Secretary General Federation of European Securities Exchanges

2 MiFID Objectives (not all met) Greater competition in trading Common transparency rules for all trading venues (including OTC) Greater investor protection Passporting across Europe for broker- dealers

3 Impact of MiFID at Macro Level Competition has triggered fragmentation and unexpected structural changes that could threaten price formation and market integrity Fragmentation a)of liquidity b)of equity trading data c)of post-trading landscape Structural changes a)Venues competing for equity order flow b)Level playing field: Regulated venues competing against unregulated venues for order flow

4 a) Fragmentation Trading Clearing Settlement Link Up Markets European CSDs NYSE Euronext Nasdaq OMX 2 BMEDB SIX Group Chi-xBATS BB Equiduct LSE BIT 1 In May 2009 announced competitive clearing agreements Chi-X, Bats, Turquoise and Nyse Arca. 2 Expected launched of EMCF CCP for October Memorandum of understandings agreements with SIS X-Clear and Euro-CCP. Turquoise Citi LCH 1 SIS x-clear Eurex EMCF NCSD EECSD LT CSDLV CSD VPSS ISD IberclearClearstream Euroclear SIS Sega M. Tit. NYX Arca Nasdaq OMX Europe Euro CCP INTEROPERABILITY AGREEMENTS

5 Venues competing for equity order flow… as required by MiFID Regulated Markets (RM) Multi-lateral Trading Facilities (MTF) Systematic Internalisers (SI) OTC as defined in Recital 53

6 Venues competing for order flow…unevenly Regulated Markets (RM) Multi-lateral Trading Facilities (MTF) Systematic Internalisers (SI) Unclassified Broker- dealer dark pools LitDark pools Athens Exchange BME Börse Berlin-Equiduct Bratislava SE Bucharest SE Budapest SE Bulgarian SE Cyprus SE Deutsche Börse Irish SE Ljubljana SE London SE Group Luxembourg SE Malta SE Nasdaq OMX NYSE Euronext Oslo Børs Plus Markets Prague SE SWX Europe SIX Swiss Exchange Warsaw SE Wiener Börse Chi-X BATS Europe Burgundy Nasdaq OMX Europe NYSE Arca Europe Quote MTF Turquoise Euro TLX PEX Baikal Chi-X Delta Euronext SmartPool SWX Swiss Block Instinet Block Match Liquidnet NYFIX Euro Millennium Pipeline Block Board Posit Turquoise Mid Point Cross Nasdaq OMX Europe Neuro Dark Plus Markets Dark ABN Amro Bank BNP Paribas Citigroup Global Citigroup UK Credit Suisse Danske Bank Deutsche Bank Goldman Sachs Knight Equity Markets International Nomura Nordea UBS UBS AG (London Branch) CA Chevreux Alternative Crossing Engine Citi LIQUIFI Credit Suisse CrossFinder Goldman Sachs SIGMA X Knight Match Merrill Lynch MLNX Morgan Stanley Pool Société Général Alpha x Europe UBS PIN Note: Table not exhaustive and is based on preliminary in-house research. For indicative purposes only.

7 A surprising result: Unclassified OTC five times bigger than MTFs & SI put together…. Deutsche Bank; ABN Amro; Citigroup; Credit Suisse; UBS; Merril Lynch; Goldman Sachs BNP Paribas; Knight Match; Chi-X; Turquoise; BATS Europe; Euro TLX; Liquidnet; Nasdaq OMX Europe; POSIT; NYFIX 53% 6% 3% 38% Note: Analysis based on different sources: FESE EEMR, Markit Boat and Thomson Reuters. Reviewed with the latest figures available.

8 Trend since the Lehman bankruptcy: OTC going strong despite the crisis… Note: Analysis based on different sources: FESE EEMR, Markit Boat and Thomson Reuters. Reviewed with the latest figures available. TOTAL SI MTFs RMs OTC Loss of trading due to the crisis

9 Impact on competition Note: Analysis based on different sources: FESE EEMR, Markit Boat and Thomson Reuters. Reviewed with the latest figures available.

10 Why operate and trade in unregulated dark pools? Regulated Market Lit MTFsDark MTFs Systematic Internalisers Crossing Networks PRE- TRADE TRANSPARENCY YES Only regulated waivers Limited transparency NO RULES POST- TRADE TRANSPARENCY YES

11 Impact on price formation Note: Estimates Lit vs. Dark are: RM 95% vs. 5%; MTFs 80% vs. 20%; Systematic Internalisers 100% vs. 0% & Crossing-Networks 0% vs. 100% Note: Estimates Lit vs. Dark are: RM 95% vs. 5%; MTFs 80% vs. 20%; Systematic Internalisers 100% vs. 0% & Crossing-Networks 0% vs. 100% Note: Analysis based on different sources: FESE EEMR, Markit Boat and Thomson Reuters.

12 Beyond transparency: Regulated dark pools vs. Unregulated dark pools RMMTFBroker-dealer dark pools Fair access and equal treatment of clients Transparent and non- discretionary execution system that ensures fair and orderly trading Pre-trade transparency to uphold competition among orders in the market Execution at a regulated reference price (CESR guidance on waivers) N/A Surveillance for market integrity by the venue CCP Clearing Structural measures against conflicts of interest between the operator of the venue and member/client

13 Impact on spreads Acording to recent data, spreads are widening on primary exchanges in Europe and the US Wider spreads means higher costs for investors across the board However there is too little evidence at this stage since prices have fallen and volatility has increased

14 Lack of fair access and equal treatment of clients Price discovery undermined – impact on liquidity Confidence in markets undermined Distortion of the competitive playing field Market abuse Conflicts of interest Risks due to absence of CCP clearing Impact on the broader market