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Bourse de Luxembourg

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Bourse de Luxembourg

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    1. Bourse de Luxembourg / Euronext Comment la Bourse de Luxembourg se prépare-t-elle ŕ son rôle futur dans la nouvelle structure de marché?

    2. Banque Degroof Luxembourg, 6 February 2007 2 Consolidation and the impact on the competitive environment Michel Maquil +352 47 79 36-272

    3. Banque Degroof Luxembourg, 6 February 2007 3 Who is driving exchange consolidation?

    4. Banque Degroof Luxembourg, 6 February 2007 4 Who is driving exchange consolidation? “The fundamental issue is whether the mergers and acquisitions model is the right one for exchanges”. Georges Ugeux, FT January 2007

    5. Banque Degroof Luxembourg, 6 February 2007 5 Merging exchanges: is this the right model for the capital markets worldwide? Merging two institutions means clearly making one out of two Dramatic impact on employment Unifying market infrastructures Sharing membership Unifying regulatory framework Bringing regulators together (lead regulator) Etc. Unpopular, painful and lengthy processes

    6. Banque Degroof Luxembourg, 6 February 2007 6 Merging exchanges: is this the right model for the capital markets worldwide? Experience so far: Euronext successful but ultimate goal not yet reached (unified CSD-platform) OMX successful but lengthy process (Scandinavia) Deutsche Börse - Euronext merger mainly failed because of difficulties to find compromises Etc.

    7. Banque Degroof Luxembourg, 6 February 2007 7 Is there an alternative? Exchanges as for profit organisations fight to survive and adapt to the new environments e.g. the example of the Luxembourg Stock Exchange

    8. Banque Degroof Luxembourg, 6 February 2007 8 Is there an alternative? Most synergies praised by supporters of mergers can be achieved through outsourcing / insourcing of basic infrastructures. Euronext, Deutsche Börse and OMX are pursuing such strategies.

    9. Banque Degroof Luxembourg, 6 February 2007 9 Conclusion Europe is still a complex entity Exchanges remain national icons with (too) many stakeholders Stakeholders in exchanges have (too) diverging interests Exchanges as for profit organisations diversify their activities to survive

    10. Banque Degroof Luxembourg, 6 February 2007 10 How the Stock Exchange is organized and where it is going Dominique Valschaerts +352 47 79 36-581 dva@bourse.lu

    11. Banque Degroof Luxembourg, 6 February 2007 11 Agenda History of the Luxembourg Stock Exchange A major listing centre for international securities Trading activity Data dissemination Impact of EU directives on capital markets

    12. Banque Degroof Luxembourg, 6 February 2007 12 History of the Luxembourg Stock Exchange

    13. Banque Degroof Luxembourg, 6 February 2007 13 The Luxembourg Stock Exchange Some Historical background 1928 : INCORPORATION OF THE LUXEMBOURG STOCK EXCHANGE 1929 : FIRST TRADING SESSION ON THE LUXEMBOURG STOCK MARKET 1953 : FIRST LISTING OF A SUPRANATIONAL ISSUE – 100 MILLION US DOLLARS, WORLD BANK,1951-81 1963 : FIRST LISTING OF A EUROBOND -AUTOSTRADE, 15MILLION US $,1963-78 1988 : LUXEMBOURG LAW ON INVESTMENT FUNDS 1996 : LAUNCH OF THE ELECTRONIC TRADING SYSTEM : SAM 2000 : COOPERATION AGREEMENT WITH EURONEXT 2005 : CREATION OF EURO MTF MARKET 2006 : MEMORANDUM OF UNDERSTANDING WITH EURONEXT N.V. PP

    14. Banque Degroof Luxembourg, 6 February 2007 14 Current members of the Luxembourg Stock Exchange

    15. Banque Degroof Luxembourg, 6 February 2007 15 A major listing centre for international securities

    16. Banque Degroof Luxembourg, 6 February 2007 16 4,200 issuers (100 countries, and 13 supranationals) on the Luxembourg Stock Exchange

    17. Banque Degroof Luxembourg, 6 February 2007 17 Listings on the Luxembourg Stock Exchange as of 31st December 2006

    18. Banque Degroof Luxembourg, 6 February 2007 18 The Luxembourg Stock Exchange holds a leading position for the listing of international bonds 51% of international bonds listed in Europe are listed in Luxembourg

    19. Banque Degroof Luxembourg, 6 February 2007 19

    20. Banque Degroof Luxembourg, 6 February 2007 20 Current markets operated by the Exchange

    21. Banque Degroof Luxembourg, 6 February 2007 21 Key features in common No restrictions to market access Any type of investors Any size A single trading platform SAM (currently) NSC (soon) Market integrity & Investor protection Market Surveillance Department CSSF Multi language regime English French German

    22. Banque Degroof Luxembourg, 6 February 2007 22 Agreement Luxembourg Stock Exchange-Euronext (cash markets only)

    23. Banque Degroof Luxembourg, 6 February 2007 23

    24. Banque Degroof Luxembourg, 6 February 2007 24 Partnership with Euronext Based on the Benelux Alliance agreement of 14 December 1998, then changed ont a Euronext-Luxembourg Stock Exchange agreement in November 2000 6 April 2006: cooperation agreement announced: - centralized market of corporate bonds - use of a single trading platform (NSC) - use of a single listing platform (SAGE) - creation of a joint venture to promote the partnership

    25. Banque Degroof Luxembourg, 6 February 2007 25

    26. Banque Degroof Luxembourg, 6 February 2007 26

    27. Banque Degroof Luxembourg, 6 February 2007 27

    28. Banque Degroof Luxembourg, 6 February 2007 28

    29. Banque Degroof Luxembourg, 6 February 2007 29 Luxembourg has a leading position in the European fund industry CCLux database contains all the Luxembourg-domiciled funds Over 20,000 Luxembourg and foreign type of shares are referenced with CCLux database Up to 14,500 NAVs collected, controlled and disseminated daily Prospectuses and financial reports for 100 % of Luxembourg-domiciled funds

    30. Banque Degroof Luxembourg, 6 February 2007 30

    31. Banque Degroof Luxembourg, 6 February 2007 31 Major issues for 2007 Implementation of the new collection platform of CCLux based on “e-file”, a unique and secured communication tool between professionals and Luxembourg Authorities Facilitates the flows of regulatory data Collection of new data and new formats Improved monitoring tools for fund administrations CCLux gradually opens its scope of collection and dissemination of financial information related to the European funds CCLux intends to extend its range of services and products towards fund administrations in order to answer their needs, particularly in the field of financial data dissemination

    32. Banque Degroof Luxembourg, 6 February 2007 32

    33. Banque Degroof Luxembourg, 6 February 2007 33 Impact of EU Directives on capital markets Hubert Grignon Dumoulin +352 47 79 36-503 hgd@bourse.lu

    34. Banque Degroof Luxembourg, 6 February 2007 34 Financial Services Action Plan of the European Union Launch in 1999 by the European Commission 42 measures in order to realise an integrated capital market in Europe 6 legislative texts directly related to disclosure obligations for issuers and to securities listing Luxembourg has already implemented 4 out of six of these European legislative texts The MiFID Directive should be implemented by end February 2007 and the Transparency Directive is expected to be implemented in the second part of 2007 1.IAS Regulation n° 1606/2002 of 19 July 2002 Scope limited to EU issuers. Consolidated annual financial statement to be prepared under IAS/IFRS from 1 January 2005 for issuers with securities admitted to trading on a regulated market as defined in EU legislation 2.Market Abuse Directive (2003/6/EC) of 23 January 2003 Prohibition of insider dealing and market manipulation Article 6 (1) related to the obligation to disclose all inside information

    35. Banque Degroof Luxembourg, 6 February 2007 35 Financial Services Action Plan of the European Union 3.Prospectus Directive (2003/71/EC) of 6 November 2003 Initial disclosure at two occasions: - prior an offer to the public of securities - prior an admission to trading of securities on an EU regulated market 4. Directive (2004/39/EC) on financial instruments markets of 21 April 2004 - Definition of regulated market and multilateral trading facility (MTF) - Article 40: conditions for admission to trading of securities on a regulated market (listing) 5. Takeover Bid Directive (2004/25/EC) of 21 April 2004 Article 6: information document prior the opening of the bid 6. Transparency Directive (2004/109/EC) of 15 December 2004 - Periodical disclosure: - annual financial report - half yearly financial report - interim management report for share issuers - Permanent disclosure: - notices to securities holders - price sensitive information - major holdings in the capital of an issuer - Methods of dissemination

    36. Banque Degroof Luxembourg, 6 February 2007 36 Financial Services Action Plan of the European Union

    37. Banque Degroof Luxembourg, 6 February 2007 37 One of the main objectives of the MIFID Directive regarding trading activities: Foster competition between the different execution venues Recognition in European legislation that financial markets are not synonymous to stock exchanges. Other entities can complete on equal footing with exchanges and exercise similar activities Increase competition between the different possible execution venues (exchange, trading platforms with or without matching systems, internalization) Avoid bundled offers that would favor transactions executed on exchange Underlying philosophy Markets forces will provide the appropriate solutions for end users in order to execute their transactions No need to have specific utilities highly regulated such as exchanges in charge of public good and general interest Already a fact for many years. Law behind the reality. Equity ? derivative and debt. Already a fact for many years. Law behind the reality. Equity ? derivative and debt.

    38. Banque Degroof Luxembourg, 6 February 2007 38 Main elements of MIFID in order to achieve these objectives Repeal of Article 14 of the Investment Services Directive (Directive 93/22/EC) Member States have no more an option to impose a concentration rule on exchanges Exchanges are no more called exchanges, rather operators of regulated market (difference between Codified Directive 2001/34/EC with reference to stock exchanges and MIFID in Article 4 (1) 13)) Creation of a new type of Community market: Multilateral trading facility (MTF) defined in Article 4 (1) (15) in the MIFID Recognition in Community legislation of internalisation (see Article 4 (1) 7) in the MIFID Access to CCP, Clearing and settlement system. Articles 34 and 35 in the MIFID

    39. Banque Degroof Luxembourg, 6 February 2007 39 Anticipated consequences of these new elements on the place for achieving transactions Increase of transactions executed off exchange to a limited extent to the detriment of some exchanges depending on the type of financial instruments (difference between equity, debt and derivatives securities, funds, commercial paper) depending on the market model (difference between market driven by the price or by the orders) depending on the Member States (for instance France, Italy, Denmark, …) Increase of competition between exchanges and trading platforms falling under the definition of MTF especially for equity securities Increase of the volume of transactions executed on MTF compared to traditional OTC especially for debt securities Increase competition between exchanges for transactions on equities securities

    40. Banque Degroof Luxembourg, 6 February 2007 40 New elements adopted in order to maintain a fair competition between the different possible execution venues MTFs are regulated because their activities are similar to exchanges non discretionary rules for execution of transactions: Article 14 Exchanges can also operate MTF (Recital 56) Internalisation of certain securities is subject to transparency obligations (Article 27 in the MIFID and Article 6 to 11 of working document ESC/20/2005 - rev 3) Pre transparency for shares transactions executed on a MTF (Article 29 in the MIFID) Missing elements in the MIFID passport for investment firms not extended to exchanges or clearing and settlements activities nothing on third countries investment firms

    41. Banque Degroof Luxembourg, 6 February 2007 41 Possible side effects of this new regime for transactions The price to pay for impleting the new requirements on internalisation seems greater compared to the potential of benefits for banks of the repeal of the concentration rule Migh encourage some of the off-exchange activities to take place outside of the EU because of too demanding requirements Fragmentation of the price formation and difficulties for investors to monitor this price formation Banks not involved in internalisation activities might be encourage to do so Increase of the costs for reporting transactions to regulators (Article 25 in the MIFID) in order to give them tools for market surveillance

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