15.10.2001Page 2

European Exchanges, Clearing and Settlement in a Period of Change

Dr. Heinrich Henckel

CEO SWX Swiss Exchange

Milano, 15 October 2001

15.10.2001Page 3

Overview

Introduction

Trends

The needs of market participants

Swiss Value Chain

virt-x

Clearing and Settlement

Outlook

15.10.2001Page 4

IntroductionEuropean markets – fragmented & slowly consolidating

More than 30 spot exchanges and over20 futures exchanges

EU harmonisation – Investment Services Directive – Introduction of the Euro

Trend from national to sectoral investmentsIncrease in crossborder (equity) trading, over 60% of which transacted in London

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Market environment: trends...

Trading beeing conducted electronically

Costs as a key competitive factor among market participants

Consolidation of market players (banks, securities dealers)

New competitors: – ECNs / ATSs – Securities dealers (brokers) are “internalising” order flows

Issuers: statutory domicile and listing drifting apart

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…and challenges for Exchanges

Differentiation along product lines is increasingly difficult

Dependency on a few very liquid securities

Market fees can be compared at a global level

The professional investor community thinks globally, whereasthe infrastructure is still organised locally

Exchanges vying for mermbers and products

Economies of scale - a must, also for exchanges and clearing & settlement organisations

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The Settlement Network TSNThe Settlement Network TSN ClearstreamClearstream

othermarkets(ICSD)

CrestCoCrestCo SISSIS

(CBF)(CBF)MTMT

BIt(IT)

BIt(IT)

EUR(BdF)

EUR(BdF)

EUR(LZBH)

EUR(LZBH)

EUR(BI)

EUR(BI)

GBP(BoE)

GBP(BoE)

EUR(CHAPS/

CBI)

EUR(CHAPS/

CBI)

CHF(SIC)

CHF(SIC)

EUR(euroSIC)

EUR(euroSIC)

TARGET

DTCCDTCC

Euroclear BankEuroclear Bank

(Sicovam)(Sicovam)

(BXS/CIK)(BXS/CIK) (Necigef)(Necigef)

EuroclearEuroclear (CBL)(CBL)

ClearnetClearnetCassaCassa

Othermarkets(ICSD)

SWX(CH)

SWX(CH)

LSE(UK)

LSE(UK)

Euronext(FR, BE, NL)

Euronext(FR, BE, NL)

DB(DE)

DB(DE)

virt-xvirt-x

Eurex Cl.Eurex Cl.

Trading

Clearing

Settlement

Othermarkets(ICSD)

Phase 1: bilateral settlement (without CCP)

LCHLCH

Clearing & SettlementEquities in Europe (Summer 2001)

15.10.2001Page 8

Needs of market participants as tosecurities trading systems

Internationally accessible trading platforms

Central order book

Uniform set of rules (on- and off-order book)

Robust and scalable technology

Integrated, transnational clearing & settlement

Transparency, anonymity

Low costs

LIQUIDITY

15.10.2001Page 9

InvestorsInvestors

Banks & Brokers

Banks & Brokers

SWX Swiss Exchange – Trading Platform

SWXPlatform

SWXPlatform

SIS SEGAINTERSETTLE AG – Clearing and Settlement

SIS/x-clearSECOM

SIS/x-clearSECOM

SIC AG– Payments Systems

SIC/SNBSIC

SIC/SNBSIC

SIC/SECBeuroSIC

SIC/SECBeuroSIC

The Swiss Value ChainReality today

Simultaneous, final, irrevocable delivery versus payment is the Swiss reality

Trading, clearing and settlement fully integrated

Significant reduction inback office costs

Open access, also for remote participants

Competitive transaction costs throughout value chain

High degree of automation: enables Internet access

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SWX/virt-x Platform

SWX/virt-x Platform

SIS/x-clearSECOM

SIS/x-clearSECOM

SIC/SNBSIC

SIC/SNBSIC

SIC/SECBeuroSIC

SIC/SECBeuroSIC

The Swiss Value ChainThe European Dimension

Fully multi-currency Robust, scalable platform On and off order book

trading Full range of instruments

(equities, bonds, derivatives)

Fully-integrated clearing & settlement instructions

virt-x exchange organisation established in UK

Fully multi-currency Robust, scalable platform On and off order book

trading Full range of instruments

(equities, bonds, derivatives)

Fully-integrated clearing & settlement instructions

virt-x exchange organisation established in UK

Fully multi-currency Robust, scalable

platform Full range of

instrument including repos

Automated DVP links to CRESTCo (UK), Euroclear (ICSD), Clearstream Luxembourg (ICSD) and Clearstream Frankfurt (DE)

Fully multi-currency Robust, scalable

platform Full range of

instrument including repos

Automated DVP links to CRESTCo (UK), Euroclear (ICSD), Clearstream Luxembourg (ICSD) and Clearstream Frankfurt (DE)

RTGS system

SNB (CHF) SECB (EUR)

based in DE euroSIC fully

integrated with TARGET (EU) and RTGS+ Systems (DE)

RTGS system

SNB (CHF) SECB (EUR)

based in DE euroSIC fully

integrated with TARGET (EU) and RTGS+ Systems (DE)

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virt-x MembersSeptember 2001 (Total 115)

Swiss (66)

UK (33)

Germany (8)

France (3)

Others (5)

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virt-x TurnoverSince launch

0

1'000

2'000

3'000

4'000

5'000

6'000

7'00025

.06.

01

02.0

7.01

09.0

7.01

16.0

7.01

23.0

7.01

30.0

7.01

06.0

8.01

13.0

8.01

20.0

8.01

27.0

8.01

03.0

9.01

10.0

9.01

17.0

9.01

24.0

9.01

Turnover in mio EUR

15.10.2001Page 13

virt-x Market ShareTurnover of European Indices

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Date

Per

cen

tag

eDow Jones STOXX 50

MSCI Pan European

FTSE Eurotop 300

Dow Jones EuroSTOXX 600

15.10.2001Page 14

GCMsGCMs

GCMs GCMs

Trading

Clearing

Settlement CrestCrestSISSIS EuroclearEuroclear

Central counterpartyRisk management AnonymitySettlement assuranceConcentrator for netting

Exchange matched trades sent for clearing & settlement

Member choice ofsettlement venue

x-clearLCH

virt-x

virt-x Clearing & SettlementPhase 2 Model