A DTCCThomson Reuters Company Omgeo Industry Relations Briefing on T+2 in Europe Thomas Trepanier Director of Relationship Management Americas Region

A DTCCThomson Reuters Company 2 Context Europe currently has 3 settlement cycles -T+2 (Germany), T+3 (most other markets) and T+5 (some minor markets) A reduced and harmonized settlement cycle discussion has been ongoing since 2009 and is driven by: -Credit risk: 2 days credit exposure is better than 3 or 5 days exposure -Harmonization: the creation of a truly harmonized single-market requires a single cycle -Operational risk: areas like corporate actions will enjoy reduced operational risk -T2S: the European Central Bank Target 2 Securities system (due for launch across Europe in 2014) will benefit from a single harmonized settlement cycle -Short-selling: policy-makers believe that abusive short-selling (especially naked short- selling) will be made more difficult within a T+2 environment -Automation: regulators believe T+2 will drive higher levels of post-trade automation with improved systemic operational resilience and better regulatory transparency The European Commission-sponsored industry working party, HSWG (or Harmonisation of Settlement Cycles Working Group), has been active throughout 2010 and is chaired by Paul Bodart of BNY Mellon Omgeo has contributed by providing data on the benefits of SDA (Same Day Affirmation) and central matching. In Europe, the Omgeo community achieved an 80% SDA rate, with AsiaPac at 90%+ and the US below 50%.

A DTCCThomson Reuters Company 3 Likely actions The HSWG will deliver its final report in January 2011 Informal consensus is that a mandated move to T+2 will be recommended T+2 is likely to be covered by the forthcoming legislation on CSD’s (central securities depositories). This will be a regulation and, therefore, mandatory in all 27 EU member states. A consultation on the CSD regulation will be published in January 2011 and final draft legislation will be ready in June It will then go to a 12 month legislative proposal for final adoption in mid The CSD legislation will define the scope (likely equity and fixed-income markets) and timing. It is expected that a phased implementation of T+2 will be required before implementation of T2S.

A DTCCThomson Reuters Company 4 Impact All market participants will need to review operational and IT capabilities in order to meet tighter timeframes. For example, -Impact on investment into Europe from the Americas and Asia Pacific needs to be reviewed -Impact on FX processing for x-border trades needs to be assessed -Intermediaries (such as global custodians) need to review cut-off timings and the transaction flow from clients into CSD’s US and AsiaPac markets are likely to examine benefits of a T+2 cycle SDA becomes more prevalent -Markets with low SDA rates need to review their industry operating models -How will non-automated buy-side firms respond? -Some market flows (such as Hedge Fund to Prime Broker instructions on T+1) will need to be upgraded

A DTCCThomson Reuters Company 5 Projected timetable Jan 2011: European Commission consultation paper issued (with 6-8 week response period) June 2011: Legislative proposal delivered to European Parliament Q : Legislative process completed Q : Phased implementation of T+2 in Europe Q3 2013: T2S 12 month testing phase starts September 2014: T2S live (phased approach)

A DTCCThomson Reuters Company