A DTCC Thomson Reuters Company

Stock exchange integration and the need to increase operational efficiency

Thomas Trepanier, Director

3rd ACSDA Leadership Forum

Buenos Aires, Argentina

November 2011

A DTCC Thomson Reuters Company2

Omgeo LLC

Omgeo LLC is a global joint venture of the Depository Trust & Clearing Corporation (DTCC) and Thomson Reuters. It is the

strength and resources of these two, influential organizations that inform and underpin our innovative, market-leading work.

We have partnered with 700 investment manager and more than 1,600 broker dealer clients across 46 countries worldwide,

working with them to create automated solutions that improve the speed and efficiency of their post-trade processes.

Our expertise enables investment managers, broker/dealers and custodian banks to simplify their operations, with advanced

technologies that speed up transaction processing, reduce costs and minimize risk.

Our network of resources and depth of expertise enables us to keep our clients at the forefront of a fast-evolving industry, and our close partnerships with regulators enable us to ensure that

all industry standards are met.

A DTCC Thomson Reuters Company3

Local Market Infrastructure:

Current Observations & Challenges

Promoting STP in post-trade operations:

• As Direct Market Access (DMA) and algorithmic trading become more

popular, trading systems increasingly diversify themselves. • Front offices turn to automated

processes for their operations to manage an increasing number of

transactions.

However, post-trade operations are still often manual and tend to fall behind in terms of automation:

• Streamlining post-trade operations from trade confirmation through

settlement increases accuracy and reduces costs and risks through increased operational efficiency. • This would help participants

decrease settlement risk and improve operational efficiency.

Key challenges:• Trade participants are under increasing pressure to lower risk, whilst simultaneously

achieving both cost and time efficiencies• Need across markets for reliable technology to minimize delays. Processing capacity

is also critical to handle peak volumes. • Market participants are now looking to have the workflow and trade status

communicated to them in real time regardless of the time zone or domicile. • Need for central matching of allocations and confirmations. This would remove

manual intervention and consequently reduce operational risk.

A DTCC Thomson Reuters Company4

Local Market Infrastructure: How Firms Measure Efficiency / Counterparty Perspectives

• 25% of Investment Managers use fails as a key efficiency measure- Exception Mgt/Matching (including fails)- 56%- Transaction Volumes- 16%- Benchmarking-13%- Speeds, Frequencies, & Quality Stats- 7%- Other- 7%

• 29% of Custodians use fails as a key efficiency measure- Exception Mgt/Matching (including fails)- 36%- STP (Manual vs. Electronic Trades)- 24%- Cost of Exceptions- 12%- Transaction Volumes- 10%- Benchmarking- 10%- Other- 7%

• 22% of Broker/Dealers use fails as a key efficiency measure- Exception Mgt/Matching (including fails)- 57%- Transaction Volumes- 13%- STP (Manual vs. Electronic Trades)-11%- Speeds, Frequencies, & Quality Stats- 11%- Other- 8%

A DTCC Thomson Reuters Company5

Local Market Infrastructure:

Counterparty Pain Points

• Investment Manager- Managing External STP & Connectivity- 25%- Managing Fixed Income / Derivatives & Product Complexity- 21%- Managing Technology Upgrades & Infrastructure- 21%- Data Management / Standards / Corporate Actions-18%- Other- 13%

• Custodian- Generating Industry Priority, Critical Mass & Incenting Automation- 31%- Data Management / Standards / Corporate Actions- 23%- Managing Technology Upgrades & Infrastructure- 15%- Client Reporting and Customization, Managing FI / Derivatives & Product- 15%- Complexity- 8%- Internet- 8%

• Broker/Dealer- Generating Industry Priority, Critical Mass & Incenting Automation- 18%- Data Management / Standards / Corporate Actions- 17%- Managing Fixed Income / Derivatives & Product Complexity- 13%- Managing Technology Upgrades & Infrastructure- 11%- Managing External STP & Connectivity- 11%- Streamline Post Trade / Pre Settlement- 9%- Fail & Exception Reporting- 8%- Other- 13%

A DTCC Thomson Reuters Company6

Austria, Belgium, Czech Rep., Denmark, Finland, France, Germany, Greece, Ireland Italy, Luxembourg, Netherlands, Norway, Portugal, Romania, Russia, Spain, Sweden, Switzerland, UK

Australia

Omgeo Cross Border Products Used In 46 Countries Globally

China, Hong Kong, India, Indonesia, Japan, Pakistan, Malaysia, Singapore, South Korea , Taiwan, Thailand

Bermuda, Canada, Mexico, USA

Egypt, South Africa

Brazil

New Zealand

Israel, Turkey, UAE

Chile

A DTCC Thomson Reuters Company7

Post Trade Workflow

Investment

Manager

Omgeo CTM

Settlement Notification

Central

DepositoryCustodian Bank

Break-down

Confirmation

Omgeo ALERT

SSI Database

Block

Confirm Messages

Allocations

Affirm

10. Release for

Settlement

11. Settlement

Notification

9. Trade Notification

via S

WIF

TBroker

3rd Party

via S

WIF

T

and

Flat

Fi

le

Stock

Exchange

2. Notice of order

executed

9/ Trade Notification

11. Settlement

Notification

3. Block

1. Order Input

Block

MQ Interface

A DTCC Thomson Reuters Company8

Local Market Infrastructure:

Links Between Omgeo and Central Depositories

Links Today

• Canada – CDS• EuroCCP• Japan – Jasdec• South Korea – KSD• United States – DTCC

Links in the Future

• Brazil• Chile• Colombia• India• México• Perú• Pakistán• South Africa

A DTCC Thomson Reuters Company9

Local Market Infrastructure:

Beneficios del Central Trade Manager (CTM)

• CTM enables you to take advantage of the following:- Affirmation rate of 90 percent on the same day of the trade (T)

- Affirmation rate of 95 percent on the day after the trade (T+1). Affirmation rates rise above 94 percent by mid-day of T+2

- The ability for an investment manager to match their cross-border trades on T enables them to book their foreign exchange (FX) transactions in a timely manner. Liquidity volumes are more present in the spot FX market compared to the next day or same day market.

•The use of CTM enables the investment manager to recover transactions on T instead of T+2 or T+3.

A DTCC Thomson Reuters Company10

Local Market Infrastructure:

Affirmation Percentage in Central Trade Manager

Interval Total Trades matched  Running Total

Intervals

Total Trade Details Matched Running Total

% Matched Running Total

0 - 3 Hrs 1,627,673 47.60% 0-3 Hrs 1,627,673 47.60%

3 - 6 Hrs 415,676 12.16% 0-6 Hrs 2,043,349 59.76%

6 - 12 Hrs 612,891 17.92% 0-12 Hrs 2,656,240 77.68%

12 - 18 Hrs 373,839 10.93% 0-18 Hrs 3,030,079 88.61%

18-24 Hours (T) 184,668 5.40% 0-24 hours (T) 3,214,747 94.01%

T+1 days 118,680 3.47% T+1 days 3,333,427 97.48%

T+2 days 47,995 1.40% T+2 days 3,381,422 98.89%

T+3 days 29,984 0.88% T+3 days 3,411,406 99.76%

T+4 days 4,433 0.13% T+4 days 3,415,839 99.89%

T+5 days 1,607 0.05% T+5 days 3,417,446 99.94%

T+6 days 686 0.02% T+6 days 3,418,132 99.96%

T+7 days 534 0.02% T+7 days 3,418,666 99.98%

>T+7 days 851 0.02% >T+7 days 3,419,517 100.00%

3,419,517 100.00%   3,419,517 100.00%

A DTCC Thomson Reuters Company11

Omgeo LLC

Thank You

A DTCC Thomson Reuters Company

A DTCC Thomson Reuters Company