1. How Euroclear manages the
interoperability with the different markets

2. Agenda The Euroclear group
Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group
Euroclear Bank’s links with the different markets

3. Euroclear Group structure

4. Turnover
Q2 2005
350
307.1
300
256.2
114.4
241.9
250
85.5
85.4
200
171.4
60.1
150
52.6 61 53
100
36.3
132.6
118.1
103.5 50
74.1
2002
2003
2004
2005
€ trillion
6 months
CRESTCo
Euroclear France
Euroclear Bank
ST005

5. Value of securities held
Q2 2005
14.6 14
0.8
13.1
11.9
0.8 3 12
10.9
0.7
2.6
0.7 10
2.4
4.1
2.2 8
3.8
3.5
3.2 6
6.7 4
5.9
5.3 2
4.8
2002
2003
2004
2005
€ trillion
30 June
Euroclear Nederland
Euroclear France
CRESTCo
Euroclear Bank
ST006

6. Agenda The Euroclear group
Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group
Euroclear Bank’s links with the different markets

7. European capital markets infrastructure The problem of fragmentation
Settlement is a key component of capital markets efficiency
National markets not a European market
At least one CSD per country
fragmentation has a major impact on efficiency, cost and risk
Both Harmonisation and Consolidation enable efficiency gains, and reduction of costs and risks
Consolidation of settlement is necessary to make European capital markets competitive
for issuers and investors

8. Our vision is full consolidation of markets within Euroclear Group
Customer
Agent
Common User Interface
CREST
Euroclear
France
Euroclear
Netherlands
CIK
Euroclear
Bank
Euroclear’s business model is based on a dual service structure, the Domestic Service for Group Securities, a CSD like service, and the Full Service, for the Group and Non-Group Securities, similar to Euroclear Bank service.
The business model will result in a consolidated platform for input, processing, and reporting, consolidated and harmonized service modules across (I)CSDs, flexible payment arrangements with choice between central bank and commercial bank money.
Put simply, the objective is to make cross-border activity as easy, efficient and cheap for our clients as domestic activity already is in most European markets. It is only thus that a single market can become a reality for the users of securities markets in Europe, and allow Europe to compete with the US capital markets.
In practice, this ‘Domestic Market for Europe’ can be achieved effectively only by combining two actions: substantial harmonisation of market practices across European markets and the consolidation of settlement platforms across the group markets. However, one can happen without the other but the implication on cost for the market will be massively different.
This is what Euroclear started in 2000 with the acquisition of Sicovam in France, in 2001 with the acquisition of Necigef in the Netherlands and more recently with the acquisition of Crest Co in the UK. Our objective is to complete this harmonisation and platform consolidation gradually over the next five years. The objective at the end is a ‘Domestic Market’ for the markets served by the group, where cross-border settlement and custody will be more effective and providing an improved price quality ratio.
Central Banks
&
Payment systems
Domestic Service
Full Service
Full integration of legacy systems and functionality
Single Settlement Engine

9. From today’s fragmentation towards consolidation
Step 1 SSE (2006)
Current situation
Step 2 ESES (2007)
CIK
E NL
E F
CREST
E B
CIK
E NL
E F
CREST
E B
CIK
E NL
E F
CREST
E B
ESES-CCI – e-RGV - E2A
ESES - RGV upgrade
ESES - SP component
SSE
SSE
STEP 1
At the end of 2006, the securities and cash positioning and booking sub-systems of
3 Euroclear group (I)CSDs will be consolidated in the SSE. This is the foundation
for further consolidation of all IT systems within the group. We do not include the Dutch and the Belgian market to avoid a double migration with the implementation of ESES in 2007.
STEP 2 ESES (2007)
At the end of 2007, when we will have delivered ESES, a combination of (i)
selective harmonisation on the CRESTCo and Euroclear Bank legacy platforms and
(ii) the first strategic components of the CCI and consolidated single platform for
the custody area will be available.
STEP 3 – Gradual steps to SAP
By early 2009, we will have expanded strategic components and consolidated all
group custody processing on the Euroclear single platform.
At the end of 2009, we will consolidate all group settlement processing. After this,
all common (I)CSD services (payments, custody and settlement) will be available
on multi-jurisdictional securities accounts, thereby delivering major benefits of the
Business Model.
Step 3 Single Platform
(in phases from 2008)
CIK
E NL
E F
CREST
E B
Legend
CCI
Client Communication Interface
Single Application
Platform
Positioning & booking
Core Processing
Legacy
SSE
Legal record
Country boundary

10. Conclusion Euroclear’s business model meets the challenges facing the European markets
Creating efficiency (e.g. reduce costs) and reduce risks while retaining choice and competition
Eliminating differences in technology – both standards and processes
Harmonising market practices and legal/regulatory framework
Offering a settlement model that allows choice of service levels to meet the needs of all issuers investors, and intermediaries

11. Agenda The Euroclear group
Creating a “European Domestic Market”, an exemple of cooperation and consolidation among the CSD’s of the Euroclear group
Euroclear Bank’s links with the different markets

12. Credit and Banking Services
Euroclear Bank’s services
Money Transfer
Settlement
services
Custody
services
Client Services and
Migration Team
Support.
Communications
Credit and Banking Services
Tri-Party
services
Lending & Borrowing
FundSettle
GE014B

13. Domestic debt Austria Luxembourg the Netherlands Belgium Australia
Denmark
Norway
Hong Kong
Argentina
Finland
Portugal
Indonesia
Canada
France
Russia
Japan
Mexico
Germany
South Africa
Malaysia
USA
Greece
Spain
New Zealand
Ireland
Sweden
the Philippines
Italy
Switzerland
Singapore
the United
Kingdom
Thailand
Against payment
Free of payment
CS205

14. Equities Austria Luxembourg Belgium the Netherlands Denmark the United
Kingdom
Argentina
Finland
Hong Kong
Malaysia
Singapore
Japan
Norway
Canada
France
Portugal
Mexico
Germany
Spain
USA
Greece
Sweden
Ireland
Switzerland
Italy
SE Settlement
CS206

15. “No client sector stands by itself”
Activity breakdown by market segment
“No client sector stands by itself”
26 %
8 %
Broker/dealers
Borrowers
Seller
Fixed income
Equities
Derivatives
52 %
4 %
Other participants
Lenders
Purchaser
10 %

16. Accessing new markets Issuance of eurobonds
-> acceptance of denomination currency
-> acceptance of settlement currency

17. Access to the national domestic securities markets
Major determining factors guiding the decision to
service a market
International flows
Sufficient international demand from international
investors justifying a link
Operational procedure
Service level agreements
Contractual relationship external agents
Operational Risk
Choice of agents – depositories
(settlement + payments, asset servicing)
Reputation Risk
Importance of high client satisfaction:
Increased competition
Move towards market infrastructure role
Funding of long term infrastructure projects
Difficult market conditions in recent years have led clients to become more demanding, with a strong focus on their costs (direct and indirect) and service quality
The Euroclear group IT budget allocated to long-term developments (SSE, DCS,CCI)
The Euroclear move to new products (e.g. equities, mutual funds) means increasing competition and demand for more flexibility
Free access to the currency
Credit Lines with cash correspondents (settlements +
payments)
Liquidity Risk
Asset protection
Enforceability of contracts
Legal Risk