WFE ANNUAL MEETINGVancouver, 7 October 2009

Judith HardtSecretary 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 liquidityb) of equity trading datac) of post-trading landscape

Structural changes a) Venues competing for equity order flowb) Level playing field: Regulated venues competing against unregulated

venues for order flow

4

a) FragmentationT

rad

ing

Cle

arin

gS

ettl

emen

t

Link Up Markets

European CSDs

NYSEEuronext

NasdaqOMX2 BMEDB

SIX Group Chi-x BATS

BBEquiduct

LSEBIT

1 In May 2009 announced competitive clearing agreements Chi-X, Bats, Turquoise and Nyse Arca.2 Expected launched of EMCF CCP for October 2009. Memorandum of understandings agreements with SIS X-Clear and Euro-CCP.

Turquoise

Citi

LCH1 SIS x-clear

EurexEMCF

NCSD

EECSD

LT CSD LV CSD

VPSS

ISD IberclearClearstreamEuroclear SISSega

M. Tit.

NYXArca

NasdaqOMX

Europe

Euro CCP

2 3 2 2 2 3 2

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 poolsLit Dark 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

Trading competing for Order Flow - Average of period from January 08 to August 09

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

RMs MTFs - Lit & Dark Systematic Internalisers OTC

EU

R m

illio

ns

LSE

NYSE Euronext

Deutsche Borse

BME

Borsa Italiana

NASDAQ OMX

SIX Swiss Exchange

Oslo BorsChi-X

Turquoise

BROKER-DEALER DARK POOLS.BNP Paribas

Credit Agricole. Citigroup

. Credit Suisse. Deutsche Bank. Goldman Sachs

. Knight Match. Merrill Lynch

. Morgan Stanley . Société Général

. UBS

OTC reported to the Exchanges

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

Evolution of trading in Europe - Period from Jan08 to Aug09

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09

Tu

rno

ver

(EU

R m

illio

n)

Regulated Markets MTFs - Lit & Dark Systematic Internalisers Total OTC TOTAL

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

SIMTFs

RMsOTC

Loss of trading due to the crisis

9

August 2009

Regulated Markets53% MTFs - Lit & Dark

13%

Systematic Internalisers

2%

OTC32%

January 2008

OTC40%

Regulated Markets56% Systematic

Internalisers3%

MTFs1%

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 MTFs Dark MTFsSystematic

InternalisersCrossing Networks

PRE- TRADE TRANSPARENCY YES YES

Only regulated waivers

Limited transparency

NO RULES

POST- TRADE TRANSPARENCY YES YES YES YES YES

11

Average of period from Jan08 to Aug09

Lit58%

Dark42%

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

RM MTF Broker-dealer dark poolsFair 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/ASurveillance 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