1. Technology in the Exchange Industry
Anders Fridlund
December 3, 2007

2. OMX Fast Facts Owns and operates the Nordic Exchange
Stockholm,
Helsinki,
Copenhagen,
Iceland,
Tallinn,
Riga,
Vilnius
Delivers technology solutions to marketplaces worldwide
70 marketplaces, in over 50 countries are using technology solutions from OMX to operate their markets
Technology staff approximately 800 persons
In the process of merging with Nasdaq (~ Feb 2008)
>700 listed companies, 150 trading members and 100 information vendors

3. Characteristics of OMX current technology customer base
70 customers in more than 50 countries:
Covering all geographic regions
Targeting established marketplaces but with some attraction to new entrants
Ranging from very small exchanges to some of the largest in terms of size and volume
Including substantially different asset classes (equities, energy, currencies, commodities, etc.) cash and derivatives
Supporting multiple market models (pre-validation, CCP, multilateral credit, etc.)
Addressing different market players (exchanges, regulators, interdealer brokers, multi-lateral trading facilities / internalizers)
Covering entities across the transaction value chain (trading, clearing and settlement)

4. Issues on Developing Electronic Trading Systems
Cost of ownership for technology solutions
Consolidation, partneships and alliances
Convergence of asset classes and instruments
Performance and scalability
Competition and customer orientation

5. Cost of ownership for technology solutions - - - Why are the technical systems so important?
The technical systems account for up to 50-70% of the exchanges cost side
Efficient trading systems enable fast time-to-market for intermediaries’ end-client offerings
Technology can create a wide reach globally connecting investors and and investment opportunities in real-time
Not being able to deliver accurate and timely price discovery mean loss of immediacy, confidence and ultimately future income
Annual IT spending (MEUR)
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000 1 2 3 4 5
Tier
MEUR
(6) (33) (62) (129) (170) 20 40 60 80
100
120
140
160
180
No. Players
Top 6 exchanges (NYSE, Euronext, Deutsche Börse, Nasdaq, NSE, TSE) spend on average 180 MEUR annually on IT
Annual cost for application development and support for these exchanges is on average 60 MEUR
Source: Annual reports, WFE, OMX data, 2005

6. Cost of ownership for technology solutions - Costs vs
Cost of ownership for technology solutions - Costs vs. evolving requirements
Relative technology cost per trade under evolving requirements
Most ”2nd Generation” solutions available today
Significant updates to systems needed
Significant updates to systems needed
Relative cost per trade
”3d Generation” solutions designed for capacity and speed
Time
Cost and fees will continue to be in focus due to increased competition

7. Consolidation, partneships and alliances
“NYSE to merge with Euronext”
“ISE to be acquired by Eurex and Deutsche Börse”
“SGX buys a stake in Bombay Stock Exchange”
“OMX creates the Nordic Exchange”
“London Stock Exchange acquires Borsa Italiana”
“LSE and Tokyo Stock Exchange cooperates around new market”

8. Convergence of asset classes and instruments
Algorithmic trading
Separation of alpha and beta
Integrated trading
Exchange links
Growth in clearing business
Difficulties in adapting equities trading system to derivatives

9. Performance and scalability - Market trends affecting technology solutions
Transaction volumes
Derivatives contracts
6,000
7,000
5,000
6,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000 95 96 97 98 99 00 01 02 03 04 05 06 07 95 96 97 98 99 00 01 02 03 04 05 06 07
Program trading
Average trade size
Transaction volumes = Top 10 exchanges in the world. Total number of trades in equity shares (Millions) Source: WFE statistics
Derivatives contracts = Top 10 exchanges (excluding Korea Exchanges). Total number of contracts traded (Millions). Including Stock options, Single stock futures, Stock index options, Stock index futures, Bond options, Bond futures. Source: WFE Statistics
Program trading = OMX estimates based on Aite Group research
Average trade size = OMX estimates based on WFE statistics. Number of shares per trade. (Number of shares traded / Total number of trades in equity shares)
60%
1,400
1,200
50%
1,000
40%
800
30%
600
20%
400
10%
200 0% 04 05 06 07 08 09 99 00 01 02 03 04 05 06 07

10. Competition and customer orientation
Successful exchanges must become more customer oriented, innovative and responsive
Opportunities
Addressing growth and innovation ouside of core cash equities
Improvement in customer risk managementand cost and capital efficiency, capturing OTC share
Integration / consolidation (cognisant of the stakeholder / regulatory barriers)
Threats
Margin pressure due to consolidating user base, changing order flow and new entrants
Technological failure / cost ratcheting and capital markets growth
Pricing pressure
Regulation
Strategic levers
Core business optimisation
Redefine role vis-á-vis customers
Create alternative trading models
Differentiate services
Improve “commerciality” of customer interface in listings
Expand service offering in information services
Adjacency growth (services, customers)
Leverage clearing to tackle OTC markets
Smarter approach to new product creation
Expansion into non-traditional asset classes
Selective service provision to broker dealers and end customers

11. Summary - Market forces lead to a demand on technology
Marketplace trends:
Technology requirement:
Consequence:
Regulation and harmonization
Consolidation
Speed and performance
Efficiency and cost
Cross assets
Customer orientation
Regionalization
Flexibility
Cost
Performance
Robustness
1st generation
2nd generation
3rd generation