1. Models for cooperation / integration of FEAS member countries 7 th International SASE Conference Mustafa Baltacı Secretary General, FEAS

2. Agenda  Regional cooperation among exchanges  The past and future of the exchange industry  The case of small and medium sized exchanges  Why cross-border trading and connectivity matters  Models for capital markets linkages  Examples on inter-market linkages  Is FEAS standing any chance for regional connectivity ? 2

3. Regional cooperation among exchanges- Federations/Associations/Forums Benefits to the exchanges:  Increased visibility  Contribution to the promotion of the region  Opportunity to learn from others’ experiences  Tackling common problems together  Following industry trends and developments closely  Common projects  Lobbying 3

4. Regional cooperation among exchanges- Federations/Associations/Forums 4  Federation of Euro-Asian Stock Exchanges (FEAS)  Federation of European Securities Exchanges (FESE)  South Asian Federation of Exchanges (SAFE)  African Securities Exchanges Association (ASEA)  Organization of Islamic Cooperation (OIC) Member States’ Stock Exchanges Forum  Association of Southeast Asian Nations (ASEAN) Exchanges

5. Regional cooperation among exchanges- FEAS  Federation of Euro-Asian Stock Exchanges (FEAS)  established with its head quarters in Istanbul on 16 May 1995 with 12 founding members  it has grown to 34 members and 16 affiliate members in 28 countries  Membership in the Federation is open to exchanges in Europe and Asia as affiliate membership is available for post trade institutions and dealer associations  The mission of FEAS is to help create fair, efficient and transparent market environments among FEAS members and in their operating regions  Minimize barriers to trade through the adoption of best practices for listing, trading and settlement  Support promoting linkages among members for cross-border trading 5

6. The past and future of the exchange industry  Regulation and deregulation:  1986 - “Big Bang” deregulation of UK Government  Late 1990s – Japan followed the UK reform model and the US passed Regulation (Reg) ATS  Early 2000s – Reg NMS in the US and MiFID/MiFID II in Europe  Deregulation opened the floor to fragmentation - competition from alternative trading platforms  Demutualization and IPOs of exchanges  Advances and investments in technology – importance of speed and access to more markets (DMA, colocation, etc.)  Debate on HFT and algorithmic trading  Domination of the markets by large exchanges – the need to cooperate for small and medium sized exchanges  Listing, no longer a primary function 6

7. The case of small and medium sized exchanges  Mostly in emerging and developing economies  Limited number of public companies  Hesitation of private companies to go public  Low liquidity  Exchange consolidation trend in the world  Fierce competition abroad and fragmentation  Need to cooperate with others to survive 7

8. Why cross-border trading and connectivity matters…  A single access-point to different markets for investors  Extended opportunities for diversification  Ease of cross-border transactions  Improved investor base and liquidity for exchanges  Increased liquidity for listed companies  Wider range of products to offer their customers for brokers  Platform management simplification, easier support, wider applicability of developments for technology firms 8

9. Models for capital markets linkages 9  Integrationist: NYSE Euronext, NASDAQ OMX Nordic, CEESEG  Collaborative: ASEAN, MILA  Acquisitive: CME, ICE Futures Source: Sungard

10. Examples on inter-market linkages - I ASEAN link by Sungard ASEAN Exchanges: A collaboration of the seven stock exchanges of ASEAN Other ASEAN Exchanges: The Philippine Stock Exchange (PSE), Indonesia Stock Exchange (IDX), Hochiminh Stock Exchange (HOSE), Hanoi Stock Exchange (HNX) 10 To be added in October 2012 +  Connected on Sept. 18, 2012 

11. MILA (Mercado Integrado Latino Americano): One equity market linking three stock markets  Went live on May 31, 2011 11 Collaboration of stock markets from:  Colombia  Chile  Peru Examples on inter-market linkages - II

12. 12  North-to-south order routing agreement between CME Group and the Mexican Derivatives Exchange (MexDer)  The commercial agreement for South to North order routing between CME Group and BM&FBOVESPA Examples on inter-market linkages - III  M oU to cooperate on inter-market linkage/connectivity between İMKB and Egyptian Exchange (EGX)  Letter of intent between NYSE Euronext and Tokyo Stock Exchange to identify options to give customers of each exchange accessibility to the other’s markets through a network linkage

13. Is FEAS standing any chance for regional connectivity? -YES!  Great potential of emerging markets of FEAS  Improved visibility and accessibility through a network linking FEAS exchanges  Advanced technology and safe environment  Operational efficiency and cost effectiveness  Increased liquidity 13 Linkage/connectivity models to be analyzed for the best solution for FEAS exchanges  volunteering exchanges  investment in technology  commitment  support from regulators

14.  Based on a survey among FEAS members, members denoted that;  Their investors have interest for investing in other member states’ capital markets.  A market access to other member states’ capital markets would attract their investors.  They have intentions to establish capital market linkages and/or correspondent relationships with the other member states’ capital market institutions.  Increasing the trading volume, regulations and legal framework are the important factors.  Expectation about cost feasibility and demand potential of discussed linkage is generally positive. Cost feasibility is deemed more hopeful than demand potential by the member states.  Some members stated that there are some barriers to establish a link/relationship with the correspondent institutions operating in member states 14 Is FEAS standing any chance for regional connectivity? - FEAS Survey on market linkages

15. Is FEAS standing any chance for regional connectivity? - Sungard Trading Link Solution for FEAS 15

16. Thank you… Sarajevo, October 19, 2012