1. New Challenges for Market Infrastructures International Securities Services Association Urs Stähli

2. Agenda 1. A glimpse into the future – our landscape changes! 2. Conclusions, predictions, implications 3. Focus Europe

3. Trading Settle- ment Clearing Trading Settle- ment Clearing Trading Settle- ment Cle aring Trading Settle- ment Clearing EquityBondsFundsDeriv. Today Product-specific streams by function and market Source: Key note address Boston Consulting Group / ISSA Symposium 2006 Tomorrow? 1. A Glimpse into the Future

4. Trading Settle- ment Clearing Trading Settle- ment Clearing Trading Settle- ment Cle aring Trading Settle- ment Clearing EquityBondsFundsDeriv. Today Product-specific streams by function and market EquityBondsFundsDeriv. Transaction Processing Trading, Clearing, Settlement, Custody Risk Management Data Management Tomorrow Integrated processing and risk management, across products Source: Key note address Boston Consulting Group / ISSA Symposium 2006 Our Landscape Changes!

5. 2. Conclusions, Predictions, Implications Reduced exposure to - market risk - counterparty risk - operational risk - Introduce CCP - Improve valuation models - Improve margin management - Increase process automation - Widen asset class coverage Market demandOptions to respond Source: Key note address Boston Consulting Group / ISSA Symposium 2006 For post-trade infrastructures, this could mean…

6. More effective use of capital - Cross-product margin management - Netting Market demand Options to respond Source: Key note address Boston Consulting Group / ISSA Symposium 2006

7. More effective use of capital - Cross-product margin management - Netting Market demand Options to respond More price transparency - Contract standardization - Prove "Value for Money" Source: Key note address Boston Consulting Group / ISSA Symposium 2006

8. More effective use of capital - Cross-product margin management - Netting Market demand Options to respond More price transparency Intermediary consolidation - Contract standardization - Prove "Value for Money" - Process standardization - Automation, STP - Platform expansion (scope) Source: Key note address Boston Consulting Group / ISSA Symposium 2006

9. Obstacles to Better Post Trade Integration Legacy systems Cost of upgrading technology Paper and manual processes Reconciliation challenges Multiple processing platforms Inefficient interfaces Source: Key note address Boston Consulting Group / ISSA Symposium 2006 Legal, regulatory issues

10. Some Predictions and Implications  Further consolidation - within markets and cross-border  Politicians and regulators become more alert to monopoly abuse, particularly where infrastructures are de-mutualized  Infrastructure governance assumes even higher importance  Consolidation creates concentration of market power  More areas of conflict between owners – users – public sector Source: Key note address Ruben Lee / ISSA Symposium 2006

11. 3. Focus Europe  More consolidation is required: ECSDA has 36 members; the EU Commission wants one integrated market!  ECSDA, Euroclear Group, European Securities Forum are the key drivers of market practice harmonization  The end vision for the CSD business in Europe is not clear  Industry now committed to "Code of Conduct", rather than being subjected to EU Directive

12.  "Fair & Clear" dispute still ongoing  TARGET 2 for Securities adds a new aspect  Possible mergers NYSE / Euronext and NASDAQ / LSE: >> Implications for the clearing and settlement level?  Horizontal or vertical? - While the giants are talking, the small players set the trend for a third way: diagonal!

13. Horizontal? Vertical? Diagonal!

14. International Securities Services Association ISSA c/o UBS AG FNND OZTH P.O. Box CH-8098 Zurich, Switzerland Phone :+41-44-235 74 21 Fax:+41-44-236 14 74 issa@issanet.org www.issanet.org