The Emerging Global Exchange Landscape - Who Owns Whom?

LSE Group and TMX Group
S S S S

NYSE Euronext and Deutsche Börse
S S

London Stock Exchange Borsa Italiana

S

Toronto Stock Exchange Exchange

New York Stock Exchange Euronext NYSE Arca NYSE Arca Europe NYSE Alternext NYSE Amex NYSE Liffe (Futures, Options) NYSE Liffe US NYSE Bonds Euronext Bonds NYSE Blue (Environmental Markets) Marché Libre (European Dark Pool) International Stock Exchange (through Eurex) Direct Edge (through ISE)
S S

SMontreal

Tokyo Stock Exchange (JV)
S

S

TSX Venture Exchange
S

Frankfurt Stock Exchange Eurex (with SIX Swiss Exchange) Clearstream

Turquoise (European Dark Pool)
S S

SNatural SBoston

Gas Exchange
S

S

MTS (Fixed Income Trading) CC&G Clearing

Options Exchange

S

S S

Nomura¶s Instinet and BATS Global Markets
Chi-X Global (100% stake)
S

S S S

EDGA ,

Chi-X Canada Chi-X Japan

S S

Chi-East (50% stake) Partner: Singapore Exchange

S S S

BATS Y BATS Z

S S

SEDGX

Chi-X Australia

BATS Options Exchange

SSmartPool

NASDAQ OMX Group
S S

Chi-X Europe (34% stake)

BATS Europe

Nasdaq Stock Market Nasdaq OMX PSX

S S

Nasdaq OMX BX 7 Nordic and Baltic stock exchanges
| February 2011 1

TABB Group

Ranking by Market Capitalization and Operating Margins
as of 1/31/2011

TABB Bloomberg, TABB Group Source:Group

| February 2011

2

Buying power and market capitalization of the existing exchanges and proposed combinations
Buying ower
ajor xchanges by Ratio
B HK x B Bovespa I uronext $6. $4. ap $b $ .7 $ .8 B B $ .6 $ .4 $7. $8.8 $8.

arket ap ± urrent tate
$ 4.7 $ $ 4.9 $ 4. .6

Ratio

arket

arket ap ± uture tate
HK x B $ B Bovespa $ 4. $ .6 $ .6 $ 4.7 .

B Bo ve sp ur a on ex t B

x

HK

I

I

$8.8 $6.

B

asdaq B arket ap B

$4. $ .6 $ .4
| February 2011 3

TABB Group

B

An combined NYSE/Deutsche Boerse creates a strong second revenue generator to the ong ong Exchange
Revenue of Existing Exchanges Split by Business Line (US billions)
$2.9 $2.4 $2.6
35% 18%

$4.7

26%

Revenue of Post Merged Exchanges Split by Business Line (US billions)
$7.6

$.5

$.6

$.8

$.8
35% 61%

$.9
32% 43%
KE x

$1.0
35% 46%
LS E

$1.1
39% 89%
IC E U

19%

87%
S

83%
CM E

12%
on

56%
ex t

26%

X

AS X

TM X

a

Bo er se

Bo ve sp

OM X

H

$2.6 $2.4

SG

NA SD AQ

D

F

BM &

NY S

E

Eu r

$.8
35% 61%
a Bo ve sp

$.9
32% 43%
KE x

$1.1

$1.3
39% 35%
X/ AS X

$1.6
27% 47%
M X

89%
IC E

87%
OM X

83%
CM E

39%
oe rs e

LS E/ T

H

NA SD AQ

SG

F

BM &

Securities
TABB Group

Derivatives

Clearing

Market Data / IT

Other
| February 2011 4

Source: Firms 2009 Annual Reports

N

YS

E

/D

B

How The Chips Could Fall ± Global Powerhouses, Regional Alliances, Product Alignment &Technology
Global Powerhouses
CME BM&F BOVESPA

Regional Alliances
LATIN AMERICA
MILA - Integrados Latinoamericanos, (Integrated Latin American Markets) BM&F BOVESPA
S

NYSE Euronext/Deutsche Börse London Stock Exchange Group/TMX Group

SIX Swiss (Deutsche Börse and SIX Swiss co-own Eurex) Tokyo Stock Exchange (existing JV between LSE and TSE) Singapore Stock Exchange Australian Stock Exchange

Bolsa de Valores de Lima (BVL) de Comercio de Santiago(BCS)

SBolsa S

Bolsa de Valores de Colombia (BVC)

NASDAQ OMX

Common Technology

CHINA
Hong ong Exchanges and Clearing (HKeX) Shanghai Stock Exchange Shenzhen Stock Exchange

Product Alignment
Futures/ Environmental
CME ICE/Climate Exchange

Common Technology
Central and Eastern European Stock Exchange Group (Xetra)
S S

INDIA/THE MIDDLE EAST
India¶s National Stock Exchange (NSE) Bombay Stock Exchange (BSE) Borse Dubai

NYSE Euronext/ Deutsche Börse

Vienna Budapest

S S

Prague Ljubljana

Options
CBOE Korea Options and Futures Exchange LSE /TMX

Warsaw Stock Exchange (NYSE Euronext)

RUSSIA
RTS Tokyo Stock Exchange (TSE)

JAPAN
Osaka Stock Exchange (OSE)

Johannesburg Stock Exchange (Millennium IT)

MICEX
| February 2011 5

TABB Group

Outstanding Notional Values of OTC market vs Exchange Traded Market
The Global Risk Transfer Market - GRTM
Notional Values Outstanding 2010e 100%= $688t 11%
S

Overview
S

OTC and exchange-traded derivatives markets are two interdependent components of a single global risk transfer mechanism serving all users, all needs Mainstream and even insider views of OTC derivatives markets remain uninformed Using notional values outstanding showcases size differential ± but distorts the risk differential - of OTCDs relative to other liquid markets When added together, OTCDs represented 89% of notional values outstanding at the end of 2009 Notional turnover is an additional metric that offers new perspective on levels of trade activity and showcases exchange-traded derivatives market as large, if not larger, than OTCDs TABB Group estimates that ETDs will represent 55% of total combined notional turnover for 2010 Both OTCD and ETD components of the GRTM offer wholesale risk transfer; this is where they are competitive The difference is that OTCDs provides bespoke risk transfer products and ETDs offer only highly standardized products The ETD market also includes a subset of products that are useful to smaller institutions and individuals

89%

Total Notional Turnover 2010e 100% = $3,720t

S

45% 55%
S

OTC Derivatives (OTCDs) Exchange-Traded Derivatives (ETDs)
Source: BIS, WFE, TABB Group
TABB Group

| February 2011

6

Notional Turnover Comparison of OTC Market vs Exchange Traded Market
New
S

rket izi

etri

TABB Group estimates that total combined notional turnover in OTCD and ETD markets for 2010 is 3 7 quadrillion; ETD is often the larger of the two on this score
S

Interest rate products dominate both OTCD and ETD markets, together representing 75% of 2009 notional outstanding; short term products (<1 yr) dominate within ETD rates at 95% of notional open interest; OTCD rates are 40% of notional values outstanding OTCD equity exposures represent 49% of total global notional equity exposures

S

S

Notional turnover in ETD equity and interest rate asset classes account for ETD¶s notional turnover size advantage vs OTCDs Unlike OTCDs, however, high levels of turnover in ETD are caused by both structural and strategic activity:
S

Strips: to formulate longer term exposures from short term instruments Rolls: to move from front expiring months to future months

S

S

TABB Group estimates the proportion of structural trading in ETDs is no more than 5% of volume; high turnover strategies account for 40% and are growing quickly
| February 2011 7

TABB Group

Pricing schedules for US Equity Exchanges
Highest Tier Liquidity Take Fees per 100 Shares
$0.40 $0.30 $0.20 $0.10 $0.00

l-0 7

l-0 8

l-0 9

n08

n09

n07

n10

l-1 0

($0.10)

Ju

Ju

Ju

Ja

Ja

Ja

Ja

Ju

($0.20) YSE $0.20 Arca asdaq BATS Edge X Edge A

Highest Tier Liquidity Net Fees per 100 Shares

$0.10

$0.00

l-0 7

l-0 8

l-0 9

n08

n09

n07

n10

l-1 0

Ju

Ju

Ju

Ja

Ja

Ja

Ja

Ju

($0.10) YSE
TABB Group

Arca

asdaq

BATS

Edge X

Edge A
| February 2011 8

Ja

n11

Ja

n11

Market share of Major US Exchanges (not including dark liquidity)
US q ity J ly 2008 ±
40% 35% 30% 25% 20% 15% 10% 5% 0%
10 08 09 10 09 8 -1 0 -0 9 -1 0 -0 9 -0 -0 0 9 -0 -0 JJJJN N J-1 M M M M N
9

e rket Share e ember 2010

ED E
TABB Group

Na daq (Q)

N

E (N)

N

E Arca (P)

BATS (Z)
| February 2011

-1

0

8

9

Market share of liquidity venues are converging
US q ity arket Share (i l des ark I ternalized) nsolidated N SE/N SDAQ isted Eq ities J ly 2008 ± De ember 2010
30.00

20.00

10.00

0.00

ov -0 8

Ju l10

Ju l08

Ju l09

ay -0

Ja

Se

Se

Ja

ay -1

Se

M

M

N

N

M

M

N
Inte nalized
10

Regionals

Nasdaq

NYSE

ca

TS

Di e ctEdge

Da k Pools

TABB TABB Source:Group Group LiquidityMatrixTM, Exchanges

| February 2011

ov -1 0

ov -0 9

9

0

9

9

0

0

n0

a

n1

a

-1 0

-0 8

-0 9

-0

-1

¢

¢

¢

¡£

¢¡

       

Internalized

Dark

Market share of liquidity venues are converging
US Eq ity arket Share (in l des Dark Internalized) onsolidated N SE/NASDAQ isted Eq ities J ly 2008 ± De ember 2010
30.00

20.00

10.00

0.00

ov -0 8

Ju l10

Ju l08

Ju l09

ay -0

Ja

Se

Se

Ja

ay -1

Se

M

M

N

N

M

M

NYSE Combined
TABB TABB Source:Group Group LiquidityMatrixTM, Exchanges

N SD Q

TS

Di e ctEdge
| February 2011 11

N

ov -1 0

ov -0 9

9

0

9

9

0

0

n0

a

n1

a

-1 0

-0 8

-0 9

-0

-1

§

¥¦

¥ ¥

¤ ¤ ¤ ¤

Market share of liquidity venues are converging
US Eq ity arket Share (in l des Internalized) onsolidated N SE/NASDAQ isted Eq ities J ly 2008 ± De ember 2010
30.00

20.00

10.00

0.00

ov -0 8

Ju l10

Ju l08

Ju l09

ay -0

Ja

Se

Se

Ja

ay -1

Se

M

M

N

N

M

M

Nasdaq

NYSE

ca

TS

Di e ctEdge
| February 2011 12

TABB TABB Source:Group Group LiquidityMatrixTM, Exchanges

N

ov -1 0

ov -0 9

9

0

9

9

0

0

n0

a

n1 

©

a

-1 0

-0 8

-0 9

-0

-1 

©

¨ ¨ ¨ ¨

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