European Exchanges, Clearing and Settlement in a Period of Change Dr. Heinrich Henckel CEO SWX Swiss Exchange Milano, 15 October 2001

Overview Introduction Trends The needs of market participants Swiss Value Chain virt-x Clearing and Settlement Outlook

Introduction European markets – fragmented & slowly consolidating More than 30 spot exchanges and over 20 futures exchanges EU harmonisation – Investment Services Directive – Introduction of the Euro Trend from national to sectoral investments Increase in crossborder (equity) trading, over 60% of which transacted in London

Market environment: trends... Trading beeing conducted electronically Costs as a key competitive factor among market participants Consolidation of market players (banks, securities dealers) New competitors: – ECNs / ATSs – Securities dealers (brokers) are “internalising” order flows Issuers: statutory domicile and listing drifting apart

…and challenges for Exchanges Differentiation along product lines is increasingly difficult Dependency on a few very liquid securities Market fees can be compared at a global level The professional investor community thinks globally, whereas the infrastructure is still organised locally Exchanges vying for mermbers and products Economies of scale - a must, also for exchanges and clearing & settlement organisations

Clearing & Settlement Equities in Europe (Summer 2001) Trading LSE (UK) virt-x SWX (CH) BIt (IT) Euronext (FR, BE, NL) DB (DE) Phase 1: bilateral settlement (without CCP) Clearing LCH Cassa Clearnet Eurex Cl. Other markets (ICSD) Other markets (ICSD) other markets (ICSD) The Settlement Network TSN Euroclear Bank Clearstream Euroclear (CBL) Settlement CrestCo SIS (Sicovam) DTCC MT (BXS/CIK) (Necigef) (CBF) GBP (BoE) EUR (CHAPS/CBI) CHF (SIC) EUR (euro SIC) EUR (BI) EUR (BdF) EUR (LZBH) TARGET

Needs of market participants as to securities trading systems Internationally accessible trading platforms Central order book Uniform set of rules (on- and off-order book) Robust and scalable technology Integrated, transnational clearing & settlement Transparency, anonymity Low costs LIQUIDITY

The Swiss Value Chain Reality today Investors SWX Swiss Exchange – Trading Platform Simultaneous, final, irrevocable delivery versus payment is the Swiss reality Trading, clearing and settlement fully integrated Significant reduction in back office costs Open access, also for remote participants Competitive transaction costs throughout value chain High degree of automation: enables Internet access SIS SEGAINTERSETTLE AG – Clearing and Settlement SIC AG – Payments Systems Banks & Brokers SIC/SNB SIC SWX Platform SIS/x-clear SECOM SIC/SECB euroSIC

The Swiss Value Chain The European Dimension SIC/SNB SIC SWX/virt-x Platform SIS/x-clear SECOM SIC/SECB euroSIC Fully multi-currency Robust, scalable platform On and off order book trading Full range of instruments (equities, bonds, derivatives) Fully-integrated clearing & settlement instructions virt-x exchange organisation established in UK Fully multi-currency Robust, scalable platform Full range of instrument including repos Automated DVP links to CRESTCo (UK), Euroclear (ICSD), Clearstream Luxembourg (ICSD) and Clearstream Frankfurt (DE) RTGS system SNB (CHF) SECB (EUR) based in DE euroSIC fully integrated with TARGET (EU) and RTGS+ Systems (DE)

virt-x Members September 2001 (Total 115)

virt-x Turnover Since launch

virt-x Market Share Turnover of European Indices

virt-x Clearing & Settlement Phase 2 Model Exchange matched trades sent for clearing & settlement Trading Clearing LCH Central counterparty Risk management Anonymity Settlement assurance Concentrator for netting x-clear GCMs GCMs SIS Crest Euroclear Member choice of settlement venue Settlement