1. 1

2. STOCK EXCHANGE INTEGRATION OR COOPERATION? Andrej Šketa Executive Vice President & COO Ljubljana Stock Exchange March 2007

3. 3 STOCK EXCHANGE INTEGRATION OR COOPERATION? Changing regulation in EU Real focus of exchanges Vertical and horizontal industry structure Opportunities in the region

4. 4 REGULATION CHANGING LANDSCAPE IN EU Competition and fragmentation  Between exchanges  Exchanges, ATS, MTF’s  Members against exchanges Disconnecting listing and trading services Transparency  Full disclosure of market data  Full disclosure of regulated information  Higher standards for transparency of issuers Regulatory barriers

5. 5 REGULATION CHANGING LANDSCAPE IN EUROPE Price discovery  Pre and post transparency  Best execution rule implemented on the side of the member Internalization / concentration Changing nature and role of regulators  Supervision and micro regulation  Providing services to all exchanges and markets  Driver of success or failure for national markets? Explicit and implicit cost of regulation Obstacles for ˝instant˝ integration with markets in the SE Europe  Regulatory standards are not met yet

6. 6 POST MiFID INDUSTRY STRUCTURE Listing Trading Information control Clearing and settlement Registry Marketing EXCHANGE 1 EXCHANGE 2 MEMBER 1MEMBER 2 Listing Trading Information control Clearing and settlement Registry Marketing INVESTORS

7. 7 POST MiFID INDUSTRY STRUCTURE Listing Trading Information control Clearing and settlement Registry Marketing EXCHANGE 1 EXCHANGE 2 MEMBER 1MEMBER 2 Listing Trading Information control Clearing and settlement Registry Marketing INVESTORS

8. 8 DIMINISHING TURNOVER AND LIQUIDITY A ˝death spiral˝ of diminishing liquidity Concentration and reduced free float Takeovers and delistings Country by country opportunities:   Investor protection   Corporate Governance   Reporting and transparency   International marketing Turnover and Stock Exchange profitability Liquidity and quality of the market

9. 9 FOCUS OF THE EXCHANGES 1. 1.Government / regulatory focused 2. 2.Shareholder focused 3. 3.Member focused 4. 4.Self focused 5. 5.Customer (investor + issuer) focused

10. 10 WHAT THEY (COULD) EXPECT FROM THE STOCK EXCHANGE Members  More, better and diverse products  Better liquidity  Competitive pricing of services  Price discovery Issuers  Access to new investors  Improved investor relations  Maintaining relative importance and visibility Investors  More, better and diverse products  Better liquidity  Competitive pricing of services  Membership structure

11. 11 WHAT THEY (COULD) EXPECT FROM THE STOCK EXCHANGE Shareholders of exchange  Value of shares  Long term competitiveness  Efficiency of operations Regulator / Government  Regulatory compliance  Surveillance of markets  Efficient price discovery  Stability of operations  Efficient services

12. 12 POTENTIAL REASONS TO MAINTAIN A LOCAL STOCK EXCHANGE Domestic market is the ˝natural place˝ for most firms, but global ones Flexibility to meet the needs of local firms and investors Low cost trading systems are available now Can you make a business case?

13. 13 INDUSTRY STRUCTURE National market Global market Regional market Instruments EquitiesBondsBlock tradingDerivativesOther instruments Listing Trading Information control Clearing and settlement Registry Vertical Horizontal Marketing Structured products

14. 14 OPPORTUNITIES IN THE REGION FOR THE EXCHANGES Short term opportunities:   Marketing:   Defining the region   List of regional Blue chips   Road shows   New indices   Structured products for cross-exposing the markets Medium term opportunities:   Cross membership (vendor membership)   Clearing and settlement, CCP   Derivatives Long term opportunities:   MiFID environment   M&A + niche players

15. 15 Andrej Šketa Executive Vice President & COO Ljubljana Stock Exchange THANK YOU FOR YOUR ATTENTION. http://www.ljse.si