1. © 2008 NYSE Euronext. All Rights Reserved. Innovation on Warrants & Certificates December 2008 Alicia Suminski Structured Products NYSE Euronext

2. © 2008 NYSE Euronext. All Rights Reserved. Bring clarity to the market: tool to generate product segmentation Product Listing Universal Gateway

3. 3 PLUG : bringing clarity to the market New listing interface PLUG is an automated interface for warrants and certificates issuance management between NYSE Euronext and Issuers systems : –Increase admissions (STP process) by Saving time in control process on issuer side Shorten time to market: issuing to trading in one step –Ensure better quality of the information by Limiting manual work load: less errors Increasing automatic controls Flexibility of data product management

4. 4 Product segmentation Warrants & CertificatesETVsETFs Investment productsLeverage products Yield enhancement Capital protection Performance tracking Strategy Bear indexation Plain vanilla warrants Spread Digital double knock-outs Knock out products Pure indexation

5. © 2008 NYSE Euronext. All Rights Reserved. A new market model

6. 6 Description An open order book bound by the liquidity provider quotes An adapted environment for issuers New functionalities: Bulk quote, bid-only flag, refresh mechanism, automatic purge following disconnection Prices always determined by the liquidity provider quote For the benefit of end investors Price reliability: consistency of bid/ask quotes in the order book Price availability: unjustified market halts will be reduced (replacement of trading thresholds by liquidity provider quotes) Erroneous transaction price occurrences greatly reduced (no trades possibly when the liquidity provider is not present in the order book Better price quality: –New quality indicators built into the trading engine –For certain products: smart refresh mechanism, reducing the occurrence of latency arbitrage and mechanically enabling liquidity providers to offer tighter bid/offer spreads –Book building is still possible, clients can still trade with each other at or inside the liquidity provider quotes –Transaction prices can be improved at the time of execution Pending regulatory approval

7. 7 General case –The issuer provides a continuous bid/offer spread to the market –As soon as the liquidity provider is absent from the book; the product is reserved: investors may still place resting orders in the order book –The liquidity provider receives an AFQ (Ask For Quote) message every time a product is reserved and then at regular intervals if he persists in not re-sending a new quote –Orders sent by the liquidity provider are firm when they hit the order book, orders sent by the liquidity provider can aggress any orders in the book thus leading to immediate executions –Transaction prices are dictated by the liquidity provider orders, no longer by the order that has the earliest timestamp –Investors can trade with each other at or within the liquidity provider bid/ask quote –Bid-only and offer-only situations are identified with a specific flag within the market feed –Bid-only and offer-only situations are stopped automatically as soon as the liquidity provider sends and offer (in bid-only situations) or a bid (in offer-only situations) –The liquidity provider does not have absolute priority in the order book New market model Principles Pending regulatory approval

8. 8 For products benefiting from the smart refresh mechanism : RFE –Orders sent by the liquidity provider are firm when they hit the order book –The balance of unexecuted liquidity provider quotes is indicative Is disseminated in the market with an «indicative quote» flag Cannot be aggressed by an incoming order during the «refresh period» –An RFE message is always sent when an executable order hits the book (whether matching a liquidity provider quote or a client quote), the RFE is devoid of any market sensitive information (price, side, size) –The liquidity provider is required to respond to an RFE message with a bulk quote that includes at the minimum both the bid and ask on that particular instrument (it may include orders on other instruments) –The liquidity provider maintains his priority in the order book if he does not degrade his original quote when responding to an RFE –The responding liquidity provider quote will aggress all orders in the book whether they were at the source of the RFE or not –Transactions will be executed following the classic price/time priority rules; as soon as a new quote is entered by the liquidity provider or at the end of the “refresh” period –If the liquidity provider fails to respond to the RFE with a new quote: the transaction will be executed on the basis of the last indicative liquidity provider quote available in the book New market model Principles Pending regulatory approval

9. 9 Illustration Smart refresh mechanism Order LPOrder RFE message Order 1 Execution confirmation Achat 1.000 XYZ à 0.08 EXECUTION 1.000 XYZ at 0.08 Liquidity providerClientLiquidity provider XYZ order book 3 Order type Bid quantity Bid priceOffer price Offer quantity Order type LP10.0000.070.0810.000LP 1.0000.060.091.500 2 POSSIBLE MATCH 4 EXECUTION Client 5 Order type Bid quantity Bid priceOffer price Offer quantity Order type LP10.0000.070.089.000LP 1.0000.060.091.500 0.07 – 0.08 The LP re-sends 0.07/0.08: the client is immediately executed at 0.08 The LP re-sends 0.08/0.09: the client order is placed in the order book, it has priority The LP re-sends 0.06/0.07: the client is immediately executed (and improved) at 0.07 The LP does not re-send an order: the client is executed at 0.08 at the end of the « refresh period » Pending regulatory approval

10. © 2008 NYSE Euronext. All Rights Reserved. Market quality indicators New indicators

11. 11 Liquidity indicators Development of new tools : transparency for the end investor –A certain number of indicators will be disseminated to the market via our internet website –Execution ratio Presence time Average spread and size –Offering precious information to investors concerning the quality of the service offered by issuers Indicator description –Execution ratio Number of executions/number of RFEs sent –Spread reliability Comparison between the spread pre and post RFE –LP presence % of the day during which the LP was present –Avg bid/offer spread –Average quantity

12. 12 At the product look up level Information on the indicator

13. 13 At the instrument level