1. How will MiFID impact exchanges and how will it change the way they do business? Burçak Inel, Head of Regulatory Affairs, Federation of European Securities Exchanges London, 8 May 2006 inel@fese.org www.fese.org MiFID CONFERENCE 2006 - London Stock Exchange “The financial services landscape is changing – are you ready?”

2. Outline of Presentation Introduction to FESE What are the major structural changes introduced by the MiFID regime?  A new framework for Regulated Markets  Greater competition among execution venues  Open Points at Level 2 and Level 3 Conclusion: What are the opportunities and challenges for Europe’s markets?

3. Introduction to FESE Whom do we represent? 24 Full Members, representing nearly 40 Securities Exchanges from all the countries of the EU, Iceland, Norway and Switzerland as well as 6 Corresponding Members from other non-EU countries. What do we do? Interest representation Forum for dialogue and cooperation Statistics and data Sponsorship of research and conferences How are we organised? Secretariat in Brussels, Belgium Member groups MiFID Task Force: Representatives from all FESE members Meeting on an ad hoc basis Chair: Ludovic Aigrot (Euronext)

4. Major structural changes: A new framework for Regulated Markets  Definitions of Market Operator & Regulated Market: accommodating various market models  Operators’ requirements:  Management and controlling interests  Organisational requirements => Mainly best practice

5. A new framework for Regulated Markets – cont’d  Requirements regarding admission of financial instruments to trading & mechanisms to verify compliance with issuers’ transparency obligations  Requirements regarding pre- and post-trade transparency of RM  Requirements regarding membership in RMs  Monitoring of compliance by members with RM rules and identification of breaches of the rules, disorderly trading or market abuse => Some requirements that were in market rules are now set at EU level (consequences for flexibility/innovation)

6. Competition Among Venues RMs MTFs  MTF=RM for shares traded on RMs  National regime for MTFs trading other instruments  Two-way competition Systematic Internalisers  For some jurisdictions, this represents a major change  Differences with RMs/MTFs Achieving a level playing field

7. Key Aspects of the New Regime Internalisation Best execution Transparency/reporting rules => RMs can play a key role in assisting firms to comply with their obligations

8. Open Issues at Level 2 and Level 3 SI definition Best execution Post-trade transparency

9. Conclusion Opportunities:  Competition  Integration of markets  Cross-border investments Challenges:  Fragmentation of liquidity  Fragmentation of price data  Level playing field among venues