Securities Business – Managing complexity & gaining Operational Excellence

1. Securities Business – Managing complexity & gaining Operational Excellence Mayank Mishra, Director Financial Services, Aug 30, 2006 Oracle Confidential, DRAFT

2. Sources of Funds Retail Customer $ Corporate Treasury Corporate Centre “Distributors” Retail Distribution “Buy-Side” Retail Brokerage Retail Asset Management Banks - Cash Management Institutional Asset Management Life Insurance P&C Insurance Hedge Funds Venture Capital $ Financial Markets structure - A look at the ecosystem Financial Markets Structure(1,2) $ “Sell-Side” Primary Market Equities Fixed Income Secondary Market Equities Corporate Bonds Government Bonds Treasury Prime Brokerage Syndicated Lending Mergers and Acquisition $ $ Support Services Information Services IT Services Consulting Services Legal Services Banks - Custody $ $ $ $ Oracle Confidential, DRAFT

3. 1 1 4 4 7 7 15 15 3 3 2 2 6 15 15 6 5 5 5 9 9 8 15 15 8 11 10 10 14 14 14 14 10 10 12 13 14 14 14 14 The life of a trade – Viewing the Complexity (Foreign selling asset manager) Local selling broker (SE trading member) (Foreign buying asset manager) Local buying broker (SE trading member) Foreign buying asset manager Foreign selling asset manager (Foreign buying asset manager) Receiving global custodian (Foreign selling asset manager) Delivering global custodian Stock Exchange Clearing House (Local buying broker) Receiving clearing agent (Local selling broker) Delivering clearing agent Custodians (Receiving global custodian) Receiving local custodian (Delivering global custodian) Delivering Local custodian Central bank payment system Oracle Confidential, DRAFT

4. Investment Funds, Asset Managers - Description • Investment Funds are pools of assets made up from numerous individual/ institutional investors where the assets are collectively invested in a variety of instruments around the globe • Asset managers are responsible for investing investment funds assets in securities appropriate for its stated investment objectives. The Asset Managers interact with Broker/Dealers to initiate trades, and with Custodians to manage the settlement of the executed trades Oracle Confidential, DRAFT

5. Broker-Dealer - Description • A broker is: a person who acts as an agent between a buyer and a seller, usually charging a commission • A dealer is:a person acting as a principal in a securities transaction (i.e. who trades from his inventory, for his own account and risk) • Remarks • since most brokerage firms operate both as brokers and as principals, the term ‘broker-dealer’ is commonly used • market makers/specialists are dealers that maintain firm bid and offer prices in given security by standing ready to sell or buy round lots at publicly quoted prices Oracle Confidential, DRAFT

6. Broker-Dealer - Role • Trade Capture - the capturing of all trade information sent to the broker by clients, exchanges etc. This is then sent to the order room. • Order Management - orders enter the broker’s processing system via previously agreed methods of communication. • Matching - through trading operations of either an exchange or an OTC environment, two orders, one buy and one sell, will be matched. Oracle Confidential, DRAFT

7. Custodian - Description • Custodians manage the safekeeping of assets on behalf of their clients. • Custodians handle all administrative issues that arise with regard to assets in their safekeeping; • corporate actions announcements, • dividend payments, • securities lending etc. • A global custodian offers both core custody services and value added services; the latter enables the custodian to differentiate itself from other players in the market. Oracle Confidential, DRAFT

8. Agenda • Introduction • Introduction to market participants • Role of each market participants • Gaining Business Excellence • A look at the trends • Effectiveness in operations • Effectiveness in performance management & corporate governance • Strategy • Organizational Enablement • Role of Architecture Oracle Confidential, DRAFT

9. Source: TowerGroup Restructuring the Operations to generate maximum value Oracle Confidential, DRAFT

10. Operations Area Reduce costs Desired Effect Enhancing Liquidity Effective use of technology How Excellence in Operations • Single view of static data to reduce errors • Straight Through Processing • Managing Credit risk • Handling of large volume Omni bus accounts • Infrastructure consolidation by back office insourcing • Up-skilling technology staff • Managed Services Oracle Confidential, DRAFT

11. Operations Area Business Process Orchestration Reduce costs Fusion Service Bus Desired Effect Enhancing Liquidity Fusion Service Registry Effective use of technology How Excellence in Operations Unified Access Business Intelligence Activity Monitoring SOA Industry Standards Channels In-house applications Packages Grid Computing Oracle Confidential, DRAFT

12. Performance Management & Compliance Area Quality Credit Management Desired Effect Increasing Liquidity Effective use of technology How Excellence in Performance Management • Consistent operational procedures for order management, payments & accounting – transaction execution • Protection against credit defaults • Protection against insider trading & other malpractices • Understanding historical transactions to generate customer specific pricing • Accurate and consistent static data, reconciled with Operational data Oracle Confidential, DRAFT

13. Agenda • Introduction • Introduction to market participants • Role of each market participants • Gaining Business Excellence • A look at the trends • Effectiveness in operations • Effectiveness in performance management & corporate governance • Strategy • Organizational Enablement • Role of Architecture Oracle Confidential, DRAFT

14. Value Proposition Strategic Direction Business Strategy Technology & Business Processes Competitive Analysis Align People, Technology and Processes Business Strategy Bringing together the key components for business strategy development Oracle Confidential, DRAFT

15. Guiding Principles Strategy Pricing & Revenue Functional Model Operating Model Risk Model Technology Regulatory and Legal Framework Oracle Confidential, DRAFT

16. Guiding Principles Adopt international best practices across the organization to strengthen the competitive position Design an open architecture offering ease of access with standardized connectivity Diversify income streams across financially viable business offerings Balance the management of risk within a dynamic industry framework Develop a comprehensive business service model offering value to a universal investor base Create an efficient, responsive organization structure with end-to-end STP capabilities Work closely with the regulators to gain support for change and ultimately, increase market efficiency Oracle Confidential, DRAFT

17. Business • Develop Comprehensive Business Service Model • Description • Develop service models that provide real value to global investors, listing companies, members and regulatory organizations • Examples • Review value added pricing structure - market data services • New services - listed company financial data dissemination • Steps • Map out the service models being offered currently • Survey other markets and exchanges to identify opportunities • Survey market participants to ascertain their business requirements • Derive new business service model from the above • Benefits • Attract and retain quality global and local customers • Diversify revenue streams Oracle Confidential, DRAFT

18. Business • Optimize & Automate Business Workflows • Description • For every business workflow, analyze the workflow to ensure that it is efficient and effective • Examples • Approval of membership applications • Halting the trading for a particular counter • Steps • Document existing workflows • Compare against international best practices • Remove redundancies and inefficiencies • Define new workflows leveraging on automation where possible • Benefits • Increase organizational efficiency • Reduce operational risk • Provide defined service levels Oracle Confidential, DRAFT

19. Technology • Aggregate and Utilise Information Assets • Description • A Enterprise Data Warehouse provides a centralised store of detail data from all relevant source systems, allowing for ad-hoc discovery and drill down analysis by multiple user groups. • An Service Bus to link existing systems to the data warehouse and provide the ability to monitor and distribute information in real time. • Examples • All multinational financial institutions have some form of a data warehouse • Is essential for global risk risk reporting and monitoring • Provides data for CRM that is necessary for tuning the business service model • Benefits • Provides an integrated, big picture view of exchanges information assets • Allows proactive, fact-based decisions to be made • Enables information to be shared across departments as well as outside of the exchange Oracle Confidential, DRAFT

20. TradingOperations “Data Chaos” Surveillance Listing Membership Finance Legal DisciplinaryActions Listing C & R FinancialReports Investor Records Billing Portal Access Market Data External Members “Information” TradingOperations Surveillance Listing Membership Finance Legal Listing Data Member Data Financial Reports Market Data Investor Records Clearing and Registration Data Portal Access “Single Version of the Truth” Technology Oracle Confidential, DRAFT

21. Technology • Open Architecture • Description • An architecture that supports both internal and external access to information with secure access control • Multiple channels are supported to deliver and receive information with customers and partners (e.g. Internet, intranet, mobile phones, call centre) • Examples • SGX provides access to market data via its private network SGX access interface as well as over its internet web site • HKSE provides the ability to route orders to the exchange and notify brokers of executions via its proprietary AMS/3 interface • Benefits • Reduces operational risk by automating data transfer between systems • Provides managed access to systems • Supports new customer services Oracle Confidential, DRAFT

22. Technology • Adopt Technology Standards • Description • Enterprise wide technology standards are necessary to provide technical consistency across the exchange. • Technology standards eliminate inefficiencies that due to use of disparate technologies on an ad hoc basis. • Examples • Use of a common development standards across the organisation simplifies on-going maintenance and skill set requirements - e.g. programming languages, development tools, etc. • Specifying which operating systems should be used for different types of workstations and servers ensures that the appropriate functions will be supported • Benefits • Simplifies decision making about how projects should be implemented • Reduces the risk of incompatibilities between systems and departments technologies Oracle Confidential, DRAFT

23. Summary - Take Aways • Develop service models that provide real value to global investors, listing companies, members & regulatory organizations. • Oracle provides underpinning technology for STP and data warehousing • Oracle applications enable education, CRM & performance management • Industry data standards are the common language between systems and services Oracle Confidential, DRAFT

24. Thanks for your kind attention Mayank.Mishra@oracle.com +65 91472226 Oracle Confidential, DRAFT