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AMEDA Leadership Forum Alexandria, 29 January 2009

AMEDA Leadership Forum Alexandria, 29 January 2009. State of the Region*. * Plug types in use. Joint Venture partners. Eight leading European CSDs. Link Up Markets. 50 % market share in settlement volumes and 45 % in asset holdings in Europe. - 3 -.

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AMEDA Leadership Forum Alexandria, 29 January 2009

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  1. AMEDA Leadership Forum Alexandria, 29 January 2009

  2. State of the Region* * Plug types in use

  3. Joint Venture partners Eight leading European CSDs Link Up Markets 50 % market share in settlement volumes and 45 % in asset holdings in Europe -3-

  4. Answer to changing environment in Europe 2000 2007 2009 2013 ‘Lisbon Agenda’ / ‘Financial Service Act’: Demand for integration of financial markets in Europe until 2010 to promote cross-border activities. Link Up Markets TARGET2-Cash Improves efficiency TARGET2- Securities Facilitates interoperability Code of Conduct Drives harmonisation Removal of Giovannini Barriers Increases choice MiFID Facilitates integration of European financial markets immediately

  5. Efficiency through interoperability Today • Single point of access to 7 participating markets • Settlement in Central Bank Money leveraging TARGET2-Cash • Best-in-class CSD services for all asset classes • Reuse of efficient local CSD-infrastructures • Absorbing differences in market standards • Extension of market coverage worldwide • Launch in 1st half 2009 Other CSDs Future Link Up Markets Other CSDs DIRECT CROSS-BORDER ACCESS via local CSD infrastructure

  6. Converting and enriching data CSD 2 e.g. Issuer CSD (receiver) CSD 1 e.g. Investor CSD (sender) Link Up Markets infrastructure “CONVERTER” CSD1 IN CSD2 OUT CSD1 IN Converter Format CSD2 OUT MT543 MT543 Data 1 Data 1 CSD Internal Systems CSD Internal Systems Data 2 MT543 MT543 MT543 Data 1 Data 1 Data 2 Data 1 Format Conversion, Transformation & Enrichment Format Conversion, Transformation & Enrichment Data 2 Data 2 Data 2 Data 3 Data 4 Data 3 Data 3 Data 4 • Receiving CSD may use proprietary format • CSD may have CSD-specific usage • CSD defines mapping rules • Receiving CSD free to transform CSD2OUT for further use by internal systems • Sending CSD may use proprietary format • CSD may have CSD-specific usage • CSD defines mapping rules • Sending CSD may need to send additional information for receiving CSD Data 3 Data 3 Data 4 Mapping Rules Mapping Rules • Definition of common format (“converter format”) per message type • Each CSD maps inbound and outbound formats against converter format. • Converter might introduce additional translation logic, e.g. inserting particular attributes specific to the outgoing format • Individual mapping rules not impacted by changes in other markets and addition of new markets -6-

  7. An example Domestic client • Investor CSD: • Settlement on accounts in each Issuer CSD (omnibus or segregated) • Handling of corporate actions, income payments and tax services on individual customer accounts Domesticformat • Client: • Single account relation with Investor CSD • Use existing systems/interfaces • Cross-border DvP settlement • Payment via Target 2 or cash correspondent CSD 1 CSD 2 ? Domesticformat Link UpMarkets CSD 3 CSD 7 • Issuer CSD: • Settlement on Investor CSD accounts • Support to Investor CSD for corporate actions, income payments and tax services • Support to Investor CSD for market specific services Domesticformat CSD 6 CSD 4 CSD 5 Domestic client Domesticformat

  8. Drivers for cost reduction Features Benefits for market participants Direct access to 7 markets via one single, familiar gateway • No changes to the current set-up • Rationalisation of links into 7 different markets • Unbundling of services with significant fee saving potential* • Cross-border settlement fees • Safekeeping fees for non-domestic assets Consolidation of liquidity and custody pools across all participating markets Increased liquidity pool allowing for greater securities financing and collateral management product usage Depository consolidation Greater scale and price advantage with preferred CSD gateway * Pricing at discretion of each CSD

  9. Driving harmonisation • Common format based on ISO message types • Incentive for conversion towards common format • Introduction of message formats in Greece • Introduction of MT56x in Spain • Decoupling of format interdependencies between markets • Implementation of standardized link agreements between Link Up Markets CSDs based on ECSDA template • As little room as necessary for bilateral agreements • Issuer CSDs deliver consistent service scope and quality to Investor CSDs • Existing service gaps to be closed standalone or with support of partners Message harmonisation Link harmonisation Service harmonisation

  10. Business opportunities for CSDs CSD Issuer CSD Attract domesticsecurities from cross-border investors Investor CSD Provide cross-border services to domestic investors

  11. Business opportunities as an Issuer CSD • Become counterparty of foreign Investor CSD • Expansion of customer base • Direct holdings at lower scale • Attract more inflow by providing efficient services • “As close to market as possible” • Upgrade of existing CSD links to full service • Participate in market harmonization efforts • Position yourself as gateway into the region • Own domestic market • Single window into own regional network Issuer CSD 

  12. Business opportunities as an Investor CSD • Transform business model to become specialised custodian for outbound business • Diversify services • Generate new revenue stream • Build cross-border capabilities in-house • Streamline existing cross-border business • Direct access to markets at domestic CSD cost • Simplify setup and maintenance of links • Harmonization as a result rather than a pre-requisite • Access 50% of European market via single technical link Investor CSD 

  13. Implementation plan • 30 Mar 2009 • End of Jun 2009 • Nov 2009 1st Release Window 2nd Release Window 3rd Release Window CSDs • CBF • OeKB • SIS • VP • Helex • Iberclear • VPS • CSE Functionality • Launch of common infrastructure with full functionality • SWIFT connectivity -13-

  14. Outlook Current focus Potential future extensions • 8 markets representing 50% of European securities processing volume • Format conversion for settlement messages • Best-in-class CSD services • Extend market coverage – in Europe and beyond • Shift focus towards asset servicing • Enhance service scope, potentially in co-operation with non-CSD partners • Leverage infrastructure, e.g. interface to Eurosystem applications

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