Rafah Hanna Head of MTS Data EuroMTS Rafah Hanna Head of MTS Data EuroMTS Tuesday 2 nd December 2008

A Definition of Transparency The Oxford English Dictionary defines transparency as: 1.Being transparent Transparent: (of disguise, pretext, etc) easily seen through attempted disguise; evident, obvious (transparent sincerity); easily understood; free from affectation or disguise, frank. Interestingly, a web search for the terms pre- and post-trade transparency produce the following numbers of results: pre-trade transparency:309,000 results post-trade transparency: 475,000 results

Demands for Transparency? Today’s transparency levels have been driven by the market – demand for specific data products have been met by many exchanges and data distributors. Demands for efficient price dissemination – quality and accuracy – positive impact transparency may have on price discovery, price efficiency and integration of financial markets. Is there a demand for greater transparency? Do those looking to trade government bonds have trouble sourcing price information or a trading venue? Should market participants be allowed to continue to drive the evolution of what data is available, to whom, how quickly and at what cost? Levels of transparency need to also be based on fairness and efficiency grounds, not on purely competitive grounds.

Transparency Today The growth of electronic trading has provided a way for greater transparency to be provided to the market. Electronic platforms have helped to improve price formation for the bonds traded and to reduce transaction costs. Information can differ in quality – indicative vs. firm prices. Part of the success of MTS is based on the cross transparency we provide and the executable prices we distribute. We are able to provide timely pre-trade transparency for price formulation – both for market makers and the market as a whole.

From a Data Perspective What are the challenges of providing this data in a timely manner? How do we get the information to market as quickly as possible? We all work to overcome the typical exchange & vendor technology challenges: lowering latency vs. cost? How many messages can your system support every second? Are the end-users seeing price information at the same time as their competitors? Demand for faster pricing information has driven the exchanges and vendors to cut latency in every possible way. How much faster can we get before new cutting edge technology is required for further improvements? Will the cost justify the improvements we may be able to make?

From a Data Perspective … At MTS our vendors are plugged into the platform in the same way as participants (with observer status) –> dramatically lowered latency. How do the end-users answer the challenge of collating information from the number of available sources? Efficient and timely pre-trade data is demanded and freely available. The large number of dealers that contribute prices to most platforms adds to the transparency and quality of the price discovery process. Most agree pre-trade transparency in principle supports liquidity and reduces spreads.

From a Data Perspective … In less liquid markets, will excessive price transparency discourage market making and prevent the further development of liquidity? Is there a trade-off between transparency and liquidity? No consensus has been reached on the impact of post-trade transparency on liquidity. An often put forward argument is that excessive transparency could prevent the provision of liquidity by dealers on less frequently traded bonds if the transaction immediately becomes known to competitors. For many sovereign issues, trading is active for a period of time after bond is first issued. Then, trading drops sharply and the considerable majority of outstanding bonds trade very occasionally. We still demand pre and post trade transparency in these cases due to high number of Government bonds issued in Europe.

Merci