THE DEVELOPMENT OF STOCK EXCHANGES

“THE DEVELOPMENT OF STOCK EXCHANGES” Santiago, Chile - June 26 & 27, 2008 © 2007 NYSE Euronext. All Rights Reserved. Table of contents 1. The Cons...
Author: Lindsay Greene
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“THE DEVELOPMENT OF STOCK EXCHANGES”

Santiago, Chile - June 26 & 27, 2008

© 2007 NYSE Euronext. All Rights Reserved.

Table of contents 1. The Consolidation Process of NYSE Euronext Step 1 – The Euronext Story Step 2 – the NYSE Euronext merger

2. Benefits of listing on NYSE Euronext 3. Focus: the European Platform: 1. Main benefits 2. NYSE Alternext :The SME Market

Conclusion

2

Step 1. The Euronext Story

© 2007 NYSE Euronext. All Rights Reserved.

A transformational opportunity • Creation of Euronext in 2000, from the merger of the three national stock exchanges: Amsterdam, Paris and Brussels • IPO in 2001 • Portuguese exchange and Liffe joined Euronext in 2002 • Key factors: • • • •

Demutualization of exchanges The Euro-zone created in 2000 Harmonization of regulations (the EU Directives) And, first above all: Technology harmonization in order to maximize economy of scale “IT has no borders and makes trading easier, more efficient and less expensive”

4

An incontestable integration track record…

Amsterdam Brussels Liffe Lisbon Paris Futures Paris Options

Amsterdam Brussels Lisbon Paris

2004

Liffe.Connect Amsterdam, Brussels, London, Lisbon, Paris

NSC Amsterdam, Brussels, Lisbon, Paris

Independent Settlement & Custody Euroclear/Crest

CASH TRADING

DERIVATIVES TRADING

2001

…to 2, respecting domestic regulations

Independent Clearing LCH.Clearnet

From 10 trading systems…

S.T.P

5

One holding company: one legal entity in each of the five jurisdictions EURONEXT NV

Euronext Amsterdam

Euronext Brussels

Euronext Lisbon

Euronext Paris

Liffe London

CASH TRADING Single Trading System: NSC

DERIVATIVES TRADING Single Trading System: Liffe.Connect

6

A horizontal model with governance harmonization • Each market undertaking receives a licence to operate markets from its national regulators (e.g. Euronext Paris exchange’s licensed by the French AMF, Euronext Amsterdam by the Dutch AFM…). • The governance of the Holding Company is the same as the governance of each local market undertaking: - In some cases: existence of a dual-body (Supervisory Board and Managing Board e.g. Euronex N.V., Euronext Amsterdam). - Everywhere (except for Liffe): a Managing Board which is identical, and composed of the 5 respective CEOs, chaired in each case by the local CEO (M. Theodore as CEO of Euronext N.V. and Euronext Paris, M. Joost van der does de Willebois as CEO of Euronext Amsterdam…)

7

Euronext regulators AFM NL

CMVM

AMF

P

F

Euronext NV Amsterdam

Brussels

Liffe

Lisbon

Paris

FSA CBFA

GB

B * Euronext N.V. is also regulated by the Dutch Ministry of Finance, as the Holding Company of an Exchange operating a Dutch market

8

Euronext College of Regulators  Each Euronext market has a local regulator  All Euronext regulators are party to one MOU signed in March 2000 (and completed later) which facilitate the process and which inter alia covers:  Co-ordinated supervision of the Euronext group;  Co-ordination with regard to approval of rules and regulations (dedicated working groups, Steering and Chairman committees);  Regulators co-operation enhances harmonization in the context of the E.U. directives implementation.

9

Entry Point for Issuers: indifferent Each company chooses his main entry point

Regulated market under Dutch Law

Regulated market under Belgian Law

Regulated market under Portuguese Law

Regulated market under French Law

Each member chooses its main entry point One single Euronext rule book (admission criteria for companies) One single Euronext rule book 23(admission criteria for members)

10

The different Euronext cash markets

Amsterdam

Brussels

Lisbon

Paris

Euronext

Euronext

Euronext

Euronext

Alternext

Alternext

Marché Libre Vrije markt

Regulated markets

Alternext

Mercado Estrudurado

Marché Libre

Non regulated markets

11

Euronext Rule Book

 Contractual basis:  Admission agreement with Brokers  Written confirmation from Issuers to comply with Euronext Rule Book (or Listing agreement)

12

Step 2. The NYSE Euronext merger

© 2007 NYSE Euronext. All Rights Reserved.

The emergence of a World leader • April 2007: combination of NYSE group and Euronext NV, teaming up the largest stock exchange in the world e.g., NYSE in US$ and the first pan- European exchange, Euronext in €; • Creating a truly global market place; • With, once more, advanced Trading Solutions to drive Software & Technology Services Revenue Growth: the Universal trading Platform (“UTP”)

14

With a Universal Trading Platform (target architecture) Legacy Trading Engines

ARCA

NYSE

Liffe Connect

TCS

Universal Trading Platform

NSC

The global platform will be implemented in different data centers or instances, according to: - Regulatory specificities

UTP UTP Cash Cash Cash

UTP UTP Cash Cash Derivatives

- Trading methods - Products - Business initiatives

15

2. Benefits of listing on NYSE Euronext

© 2007 NYSE Euronext. All Rights Reserved.

Global Choice of Listing Venues & Products Flexible Listing Venues Complement Capital Market Objectives

NYSE Euronext

Strategic Relationships

Americas

Europe

The world’s largest equity market

Gateway to the Euro-zone

NYSE  Cash Equities  Fixed Income  ETFs  DRs

NYSE Arca

 Cash Equities  Equity Options  ETFs  DRs

Euronext  Cash Equities  Bonds  ETFs  Certificates  Warrants  DRs

Alternext  Cash Equities  DRs

Asia

 5% equity stake

Liffe

 Derivatives

 5% equity stake

17

Value Proposition For Issuers  Listing Venue Choice • • •

Multiple entry points for issuers of any size and geography in Europe, U.S. and Asia Listing options complement issuer’s strategy over time Fast Path access to European platform for US listed companies (using SEC filings)

 Unique Global Visibility/Marketing • • •

Unparalleled Brand Association Superior service offerings Superior peer alignment

 Broad Investor Pool • •

Global and local investor access to the world’s largest sources of capital Investor outreach programs

 Enhanced Liquidity & Valuation • • • •

Access to $ and € – the world’s two leading currencies Single Order Book Product extensions (GDRs, ETFs, Options, Futures…) Indices – international companies eligible for key indices (Shares & GDRs accepted)

 Sound Regulatory Framework • • •

Simplified Processes and Reporting Filings/Ongoing Obligations in English European listings under EU regulatory regime, no Sarbanes Oxley

18

Vibrant NYSE/Latin American Partnership The NYSE is the Destination for Latin American Companies Outside their Home Market

NYSE

Nasdaq

LSE

Number of Latin American Companies

88

6

2

Number of Latin American listings Since 2004

16

1

1

Number of Latin American IPOs Since 2004

10

1

1

Latin American IPO Proceeds Since 2004

Average Daily Trading Value in Latin American Companies

More than $5 billion

$4.7 billion

Less than $500 million

$800 million

$50 million

Source: Bloomberg; NYSE Research for Q1 2008 *2 UK incorporated, Latin American-based companies (Hochschild Mining, PLC, Antofogasta, PLC) not accounted for in this figure; Grupo Clarin (59,606 shares/day), Banco de Chile (0 shares/day) are the companies that have been included.

$883,000

19

An NYSE Listing Boots Liquidity for Latin American Companies C

$8 000 000 000

Trading of Latin American NYSE listed companies

$7 000 000 000 $6 000 000 000 $5 000 000 000 $4 000 000 000 $3 000 000 000 $2 000 000 000 $1 000 000 000 $0

2002

2003

2004

Average Daily Value NYSE

2005

2006

2007

Q1 2008

Average Daily Value HOME MARKET

Over 67% of the trading in NYSE listed Latin American companies occurs in the U.S. Source: NYSE Research

Source: NYSE Research

20

A NYSE Listing Boosts Global Liquidity for Chilean Companies NYSE listing for Chilean companies is a “win-win” – providing liquidity and a broader shareholder base

C $160 000 000 $140 000 000 $120 000 000 $100 000 000 $80 000 000 $60 000 000 $40 000 000 $20 000 000 $0

2002

2003

2004

Average Daily Value NYSE

Source: NYSE Research

2005

2006

2007

Q1 2008

Average Daily Value HOME MARKET

Source: NYSE Research

21

3.NYSE Euronext: Focus on the European Platform

© 2007 NYSE Euronext. All Rights Reserved.

Euronext Corporate structure

Euronext NV

100%

AMSTERDAM

100%

BRUSSELS

100%

LISBON

100%

PARIS

100%

LONDON (Liffe)

23

A leading Marketplace For Listings • Multiple entry points for issuers of any size and geography in Europe and the U.S. • Access to the €uro-zone • IFRS accounting standards recognized by the SEC • While, acceptance of Canadian GAAP, Japanese GAAP & US GAAP by E.U regulators; • Innovative “Fast Path Listing” gaining traction, with several NYSE-listed companies choosing to cross list on Euronext: – Anheuser-Busch – Philip Morris International – Satyam Computer Services (India) • The Universal Trading Platform project (U.T.P)

24

Euronext’s Competitive Position in Europe TRADING VOLUMES

MARKET CAPITALISATION

(2007)

European cash equity market capitalisation (end 2007)

180 160

3,000

SWX 8%

Spanish Exchanges 11%

2,500

120

2,000

100

1,500

80 60

1,000

40 500

Deutsche Börse 14%

M illion trades

140

Euronext 27%

Value trad ed € bilion

Borsa Italiana 7% OMX 8%

3,500

London Stock Exchange 25%

20

0

0 Euronext

• Largest equity market in Europe

London Deutsche Spanish Borsa Stock Börse Exchanges Italiana Exchange Turnover

OMX

SW X Group

Trades

• Largest trading platform in Europe Source: Federation of European Securities Exchanges (FESE) Figures include domestic & primary international listings

25

Sector Comparison Euronext vs. LSE • Euronext sector profile very similar to London Stock Exchange • Euronext – larger in Technology, Consumer Goods, Utilities, Industrials London Stock Exchange

Euronext Utilities 10% Technology 3%

5%

Consumer Goods 14%

4%

6%

4%

Basic Materials 12%

1%

Basic Materials Consumer Goods Consumer Services Financials

9%

15%

10%

Oil & Gas 16%

Health Care Industrials

11%

Oil & Gas Technology Telecommunications

7%

Utilities Industrials 12%

24% 4%

Total market cap = €2,982 billion

6% Financials 26%

Total market cap = €2,769 billion

Source: Bloomberg, Euronext & LSE data as December 2007. ICB classification, domestic & primary listings, includes main market, SME market, equity investment instruments.

26

Listing Requirements - Summary Euronext

Alternext Public Offer

Track record

Accounting rules

Minimum free float

Documentation

Compulsory advisor Language

3 years

2 years

IFRS compulsory or US, Canadian or Japanese GAAP 25% or 5% if shares in public > €5m Prospectus approved by the home country regulator (visa)

Private Placement

2 years

IFRS or home country GAAP ( US, Canadian, Japanese…) €2.5m

Prospectus (visa)

Listing Agent (Euronext member)

€5m

Offering circular

Listing Sponsor

English authorized

27

NYSE Alternext: the SME Market

© 2007 NYSE Euronext. All Rights Reserved.

Alternext – The SME Market Alternext is an exchange-regulated market: • Designed for small and mid sized companies • Simplified listing rules and ongoing obligations • Open for companies from all sectors and countries • Launched mid-2005 • Broad €uro-zone access • Same 4-country trading platform for Euronext and Alternext • Alternext today: Number listed companies………………..

120

Total market capitalisation……………….

€ 5 billion

Average deal size…………………………

€ 9.4m

Deal size range……………………………

€ 2.6m to € 34m

29

Alternext – Key Listing Requirements 2 year company track record (exemption for funds) IFRS or US GAAP • Audited FY accounts, un-audited 6 months report Choice of Market Access: Public offering

Private placement

Access to retail and/or qualified investors

Access to qualified investors only

Minimum free float: € 2.5m

Minimum placing: € 5m

Prospectus cleared by regulator

Offering circular

EU Prospectus Directive

Not cleared by regulator; disclosures under responsibility of the Listing Sponsor & Issuer

• Fast track dual listing through recognised market status • Access via offering circular for companies listed on another market

Use of Listing Sponsor mandatory

30

Alternext – size profile Distribution of companies by market capitalisation

Alternext 35% 30% 25% 20% 15% 10% 5% 0% 0-2

2-5

5 - 10

10 - 25

25 - 50

50 - 100 100 - 250 250 - 500

500+

Alternext’s target company size of €20m - €250m achieved.

€m

No micro-caps… …better liquidity

Distribution of companies by market capitalisation

AIM 25% 20% 15% 10% 5% 0% 0-2

2-5

5 - 10

10 - 25

25 - 50

50 - 100 100 - 250 250 - 500

500+

€m

Source: Euronext, LSE, December 2007

31

Alternext: IPOs and Investor Base Alternext: Truly Pan-European Origin of institutions (as of October 2007)

IPOs: • 80% institutional investor participation, underpinning valuations

Canada 1% Australia U.S. 1% 2% U.K. Switzerland 4%

13%

Sweden 2% Spain 2%

Euronext zone 58%

Luxembourg 5% Germany 9% Denmark 2%

Austria 1%

Investors: • Institutions from 14 countries • Broad continental European institutional take-up • Strong US-UK acceptance

Source: Lionshares

32

Conclusion…

© 2007 NYSE Euronext. All Rights Reserved.

Conclusion The following Key Elements of a consolidation… 1. A Unified Technology Platform •

Next step : a Universal Trading Platform (UTP) for both regions (US/EU) and both cash and derivatives



Combined with the creation of well targeted MTF’s (Smartpool, High Frequency Trading …)

2. Harmonization of Exchanges Listing venues between the consolidated Exchanges (rule book) 3. Sound regulatory framework common to the various jurisdictions (E.U. Directives/ Corporate governance) •

An on going effort aiming at simplifying listing process and on going reporting obligations (ex/ Mutual recognition process) 34

Conclusion … Do allow attraction for Issuers and Investors given: •

Access at once to multi-markets in various countries (e.g.7 markets in 6 countries for NYSE Euronext) in a simplified and less costly way,



Provides Liquidity enhancement,



Creates a broader Investors Pool and,……but not least,



Reduces costs due to the unified technology platform and simplification of listing venues and ongoing obligations

So that…

35

NYSE Euronext ‘s strategy may be defined as follows: Continue Continueto tobuild buildthe themost mostglobal globaland andtechnologically technologically advanced advancedmarketplace marketplacefor forthe thebenefit benefitof ofour ourcustomers customersand and shareholders shareholders

Maintain Maintainaasteadfast steadfastcommitment commitmentto toour ourcustomers customersand and maximize maximizechoice choicefor forissuers issuersand andusers userson onaaglobal globalscale scale

Utilize Utilizebest bestininclass classtechnology technologyand andbusiness businesspractices practicesto to deliver deliversignificant significantoperating operatingleverage leverageand andsuperior superiorfinancial financial results results

36

NYSE Euronext

© 2007 NYSE Euronext. All Rights Reserved.

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