1. Securities Valuations: A Primer The When, Why, What, How and Who of Evaluated Pricing Barry S. Raskin, Managing Director, SIX Telekurs USA Inc. 2011 FIRMA National Risk Management Training Conference, April 20, 2011

2. | Page | Contents About SIX Telekurs Securities Valuations and Evaluated Pricing −When? −Why? −What? −How? −Who? And I should care because… ? Atlanta, 20 April 20112

3. | Page | SIX Group – a world leader in securities processing, trading and financial data Revenue of over 1.354 bn USD (2010) Approximately 3,800 employees Present in 23 countries around the globe SIX Swiss Exchange STOXX Scoach SIX Exfeed Eurex Swiss Fund Data Securities Trading SIX x-clear: Clearing SIX SIS 1) Settlement 2) Custody 3) Administration SIX SAG Securities Services Stock exchange data Index data Evaluation data Information for securities administration Corporate Actions Financial Information Interbank payments in CHF and EUR Card business POS services LSV (direct debits) / PayNet Payment Transactions Key figures Atlanta, 20 April 20113

4. | Page | About SIX Telekurs Gather & distribute all information for securities administration and valuation −Security master/descriptive data −Corporate actions & events −Payments & Distributions −Pricing −Compliance information −Class actions −ETF & index constituent data −Custom solutions Founded in Zurich in 1930 Stable ownership & corporate structure Direct presence in 23 countries Nearly 1,290 employees worldwide Annual revenue of $437 million (2010) Over 2,200 worldwide customers – 190 in North America Atlanta, 20 April 20114

5. | Page | Commercial, Retail & Investment Banks Technology & Web Asset/Investment Managers, Fund Administration Our clients include some of the world’s best-known firms Atlanta, 20 April 20115

6. | Page| Securities Valuations: When? Nowadays people know the price of everything and the value of nothing - Oscar Wilde If I don’t get a price for this bond, you’ll get nothing! - Irate client Atlanta, 20 April 20116

7. | Page | Securities valuations: When? To provide valuation for an instrument that is, −Listed on an exchange but does not trade regularly (illiquid) −Not traded on exchange (OTC) −Complex or structured To approximate a fair value within an orderly market As an interim value pending periodic reset/adjustment (as with private equity) To provide a range of valuations for a given security that might reflect a benchmark index, economic fundamentals, etc. As a reality check on other price sources - even for traded markets that might vary widely Atlanta, 20 April 20117

8. | Page| Securities Valuations: Why? Liquidity is like oxygen…you only notice its absence, not its presence. Atlanta, 20 April 20118

9. | Page | Cash flow, probability, and time Atlanta, 20 April 20119

10. | Page | Reinvestment risk Atlanta, 20 April 201110

11. | Page | Credit risk and optionality risk Atlanta, 20 April 201111

12. | Page | Applications beyond spot Atlanta, 20 April 201112

13. | Page | Applications to swaps Atlanta, 20 April 201113

14. | Page | Securities valuations: Why? In the absence of liquid pricing, financial institutions need to know the value of holdings, −To provide clients with the best information possible about their holdings −For regulatory compliance However, Many instruments are rarely, if ever traded on organized markets −As of March 2011, only 54% of the nearly 7 million securities in SIX Telekurs’ database are listed on an exchange −Asset classes can include, −Fixed income −Structured securities −OTC derivatives −Private equity Unusual circumstances can interfere with regular valuation practices −Reference data and data on benchmark transactions were and completely unavailable for auction rate securities in the wake of the market collapse in February 2008 Atlanta, 20 April 201114

15. | Page | Securities valuations: Why? Regulatory drivers – FAS 157 and Tier 1, 2, 3 designations Internal audit and risk management requirements Client demand for arms-length, independent, third-party valuations Atlanta, 20 April 201115

16. | Page| Securities Valuations: What? There is no right or wrong price – it depends on the intended usage. Atlanta, 20 April 201116

17. | Page | Securities valuations: What? Evaluated pricing vs. fair value An evaluated price is derived using, −Market observations (inputs) −Quantitative elements Fair value is an accounting concept (FAS 157, IAS 30) that defines fair value on three levels: −Level 1: Unadjusted, quoted price from an active, orderly market −Level 2: No observable quotes in active markets, values calculated using comparable instruments or inputs derived from/corroborated by observable market data −Level 3: No observable quotes or inputs in active markets, values calculated using inputs based on assumptions Evaluated prices can be classified as fair value Level 2 or Level 3 Atlanta, 20 April 201117

18. | Page| Securities Valuations: How? Research is an ongoing process of discovery, and we seek to share our advancements on a continuous basis. Atlanta, 20 April 201118

19. | Page | Securities valuations: How? Maximize market-based observations and inputs Ability to reverse-engineer complex instruments Market and reference data are just as important as the models Verify, verify, verify… Atlanta, 20 April 201119

20. | Page | A common way to provide valuations for complex securities… Securities valuations: How? Atlanta, 20 April 201120

21. | Page | And the SIX Telekurs way… Securities valuations: How? Atlanta, 20 April 201121

22. | Page | Securities valuations: How? Methodology Sourcing primary data wherever that may be found Applying quantitative methods where necessary and being transparent Having a process around mapping techniques when they are used Providing assumptive data when and where practicable Developing a framework and sticking to it Atlanta, 20 April 201122

23. | Page| Securities Valuations: Who? When you have confidence, you can have a lot of fun. And when you have fun, you can do amazing things. - Joe Namath Atlanta, 20 April 201123

24. | Page | Securities valuations: Who? Use a pricing source that is, Independent Consistent in process, using commonly accepted methods where plausible and giving maximum consideration of market inputs when possible Experienced in both theory and practice Transparent with regard to methodology and inputs Flexible Able to anticipate requirements and proactively respond Committed to continual process improvement Responsive to valuations challenges Atlanta, 20 April 201124

25. | Page | And I should care because...? When? −Whenever a security is thinly traded, illiquid or complex – or to validate another pricing source. Why? −Customers and regulators demand current, accurate valuations for a wide variety of reasons – P&L, capital adequacy, risk management and more. What? −An evaluated pricing service that can easily handle plain vanilla securities but is also adaptable and extensible to encompass even highly complex structures How? −Thoughtful consideration of any relevant market-based inputs applied within an appropriate pricing framework Who? −SIX Telekurs, naturally! Atlanta, 20 April 201125

26. Thank you for your time! For more information, Visit www.six-telekurs.comwww.six-telekurs.com Email sales@tkusa.comsales@tkusa.com