DTCC Deriv/SERV ACSDA Leadership Forum Michael Velleca, Vice President, Deriv/Serv October 8, 2007

2 2 DTCC Confidential Market Drivers DTCC has been working with the industry since mid 2002 to reduce operating risk in OTC derivatives - targeting activities on a priority basis In 2007, market growth continues unabated; top priorities are product coverage and extension of services DTCC has been working with the industry since mid 2002 to reduce operating risk in OTC derivatives - targeting activities on a priority basis In 2007, market growth continues unabated; top priorities are product coverage and extension of services Progress Dramatic growth in customers Current: 980+ Broker dealers: 30 Buy-side clients: 950+ Dramatic growth in customers Current: 980+ Broker dealers: 30 Buy-side clients: 950+

3 3 DTCC Confidential Benefits of Deriv/SERV Reduced Operational Risk; Fast and accurate Confirmations Quicker feedback on differences Reduce outstanding backlog of paper documents Easier dialogue with your counterparty Common Solution to Multiple Asset Classes Low integration and training costs Reduced Operational Risk; Fast and accurate Confirmations Quicker feedback on differences Reduce outstanding backlog of paper documents Easier dialogue with your counterparty Common Solution to Multiple Asset Classes Low integration and training costs

4 4 DTCC Confidential Connecting To Deriv/SERV Automated Manual  Spreadsheet Template Upload – manual upload of a CSV file via web interface  Via T1 line – Computer-to- Computer connection with MQ Series real-time messaging.  Affirmation – Affirm a trade alleged by the counterparty via web interface. Does not require input by the client.  Data Entry Screen – manual data entry via web interface.

5 5 DTCC Confidential CDS Trade Matching Service introduced in Nov ’03 that provides confirmation and legal ISDA execution for Credit Default Swaps (CDS) leveraging existing DTCC infrastructure DTCC Deriv/SERV offers confirmation matching services on Credit Derivative Products Cover all trade lifecycle events Service introduced in Nov ’03 that provides confirmation and legal ISDA execution for Credit Default Swaps (CDS) leveraging existing DTCC infrastructure DTCC Deriv/SERV offers confirmation matching services on Credit Derivative Products Cover all trade lifecycle events Credit Derivatives

6 6 DTCC Confidential Federal Reserve involvement with CDS The Federal Reserve and other global regulators become concerned in 2005 that risk resulting from unexecuted paper confirmations in the CDS market was too large.The Federal Reserve and other global regulators become concerned in 2005 that risk resulting from unexecuted paper confirmations in the CDS market was too large. The Broker dealers executing the biggest volumes were called to see the FED September 2005.The Broker dealers executing the biggest volumes were called to see the FED September FED Targets involving DTCC 31st January ‘06 – all clients trading >5 trades per week confirm on electronic platform31st January ‘06 – all clients trading >5 trades per week confirm on electronic platform 31st March ’06 – all clients trading >5 trades per month confirm on electronic platform31st March ’06 – all clients trading >5 trades per month confirm on electronic platform 31 st October ’06 – brokers dealers to submit 98% of eligible DTCC trade on or before t +1, confirm 96% DTCC trades by t st October ’06 – brokers dealers to submit 98% of eligible DTCC trade on or before t +1, confirm 96% DTCC trades by t + 5. The Federal Reserve and other global regulators become concerned in 2005 that risk resulting from unexecuted paper confirmations in the CDS market was too large.The Federal Reserve and other global regulators become concerned in 2005 that risk resulting from unexecuted paper confirmations in the CDS market was too large. The Broker dealers executing the biggest volumes were called to see the FED September 2005.The Broker dealers executing the biggest volumes were called to see the FED September FED Targets involving DTCC 31st January ‘06 – all clients trading >5 trades per week confirm on electronic platform31st January ‘06 – all clients trading >5 trades per week confirm on electronic platform 31st March ’06 – all clients trading >5 trades per month confirm on electronic platform31st March ’06 – all clients trading >5 trades per month confirm on electronic platform 31 st October ’06 – brokers dealers to submit 98% of eligible DTCC trade on or before t +1, confirm 96% DTCC trades by t st October ’06 – brokers dealers to submit 98% of eligible DTCC trade on or before t +1, confirm 96% DTCC trades by t + 5.

7 7 DTCC Confidential Customer Adoption of Deriv/SERV Global buy-side take-up* All major dealers globally use Deriv/SERV *Includes 2 nd tier dealers

8 8 DTCC Confidential Equity Derivatives OTC Index options Single share options Variance Swaps Total Return Swaps OTC Index options Single share options Variance Swaps Total Return Swaps DTCC Deriv/SERV offers confirmation matching services on the following Equity Derivative Products: Deriv/SERV is also developing a tool that will facilitate negotiation of Master Confirmation Agreements

9 9 DTCC Confidential Developed based upon customer demand for a one- stop shop Vanilla Interest rate swaps and swaption trade variants Covers all trade lifecycle events Developed based upon customer demand for a one- stop shop Vanilla Interest rate swaps and swaption trade variants Covers all trade lifecycle events Interest Rate Derivatives

10 DTCC Confidential Payment Processing: Deriv/SERV solution Provides reconciliation and bilateral netting positions for OTC derivative payments Started with quarterly CDS cash flows Leverages existing trade matching connectivity Points to potential matches Designed to process OTC payments in any currency

11 DTCC Confidential STP challenges for OTC Contracts Trade volumes only go up Expanding customer base of OTC users Expanding product set & complexity Pressure from regulators on the dealers Competition for skilled staff Bilateral administration Trade volumes only go up Expanding customer base of OTC users Expanding product set & complexity Pressure from regulators on the dealers Competition for skilled staff Bilateral administration

12 DTCC Confidential Today: Bilateral Administration Environment Parties must constantly “sync up” during contract life Payments, events, margining, etc. Each party is hostage to its counterparties’ processing You’re only as good as your counterparty – your records may be right, but if your counterparty disagrees or doesn’t know, you have a problem Parties must constantly “sync up” during contract life Payments, events, margining, etc. Each party is hostage to its counterparties’ processing You’re only as good as your counterparty – your records may be right, but if your counterparty disagrees or doesn’t know, you have a problem

13 DTCC Confidential Deriv/SERV Trade Information Warehouse November 2006, DTCC launched its Deriv/SERV Trade Information Warehouse, creating a centralized and secure global post-trade processing infrastructure The Warehouse is made up of two components: A comprehensive trade database containing the “official legal record” for all contracts eligible for automated Deriv/SERV confirmation A central support infrastructure that automates and standardizes post-trade processes (such as payments, notional adjustments and contract term changes) over the life of each contract, which can extend five or more years Currently the warehouse supports credit derivatives Will extend to other OTC derivatives products including rates, equities, FX and commodities in the future November 2006, DTCC launched its Deriv/SERV Trade Information Warehouse, creating a centralized and secure global post-trade processing infrastructure The Warehouse is made up of two components: A comprehensive trade database containing the “official legal record” for all contracts eligible for automated Deriv/SERV confirmation A central support infrastructure that automates and standardizes post-trade processes (such as payments, notional adjustments and contract term changes) over the life of each contract, which can extend five or more years Currently the warehouse supports credit derivatives Will extend to other OTC derivatives products including rates, equities, FX and commodities in the future

14 DTCC Confidential Deriv/SERV Trade Information Warehouse Cont’d December The Depository Trust & Clearing Corporation (DTCC) announced the selection of CLS Bank International (Continuous Linked Settlement (CLS®)) to provide central settlement of payments for over-the-counter (OTC) derivatives contracts housed in DTCC Deriv/SERV’s Trade Information Warehouse. CLS provides global settlement services in 15 currencies, and is an integral part of the foreign exchange market, settling 270,000 instructions equivalent to approximately $2.9 trillion each day. This partnership will provide an automated, seamless processing and settlement environment for the handling of OTC derivatives contracts on a global basis December The Depository Trust & Clearing Corporation (DTCC) announced the selection of CLS Bank International (Continuous Linked Settlement (CLS®)) to provide central settlement of payments for over-the-counter (OTC) derivatives contracts housed in DTCC Deriv/SERV’s Trade Information Warehouse. CLS provides global settlement services in 15 currencies, and is an integral part of the foreign exchange market, settling 270,000 instructions equivalent to approximately $2.9 trillion each day. This partnership will provide an automated, seamless processing and settlement environment for the handling of OTC derivatives contracts on a global basis