Managing Investment Risk Globally Paul Bennett, NYSE Euronext

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Managing Investment Risk Globally Paul Bennett,
NYSE Euronext

• The Global Sourcing Council
• Risk Management Strategies and Practices in
  Global Sourcing
• June 18, 2008, 60 Pine Street, NY, NY

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Global Risk Management

• Diversification
• How much is enough?
• Evaluation of assets
• Information asymmetries
• Disclosure
• Managing Transaction Costs
• (New) economics of financial exchanges

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Network Economics

• Competition among Networks
• Speed, reliability, cost
• Returns to scale (size lowers cost)
• Global reach
• Desirability of companies, securities, traded
  products
• Market data tools for trading

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Multi-product Trading Instruments

• Cash Equities
• Exchange Traded Funds
• Bonds
• Options
• Futures
• Other

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Multi-product Network Tools, Data, and Services

• Trades, quotes, order books in real time
• Algorithmic trading data support
• Block matching, list trading
• Post-trade reporting (multiple products)
• Clearing and settlement services

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Globalization

• Markets
• Exchanges

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Distribution of Cash Equity Trading Across World
Stock Exchanges
NYSE Euronext Strategic Partners
Note Value of trading, in dollars, full year
2007 Source World Federation of Exchanges
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Corporate Initial Public Equity Offerings by
Country of Issuer Jan-Sept 2007
Other Americas 13B
Brazil 20B
China 36B
India 9B
Other Asia/Pacific 17B
USA 42B
UK 15B
Russia 10B
Rest of Europe Mid-East 54B
Excludes closed-end funds and REITs Source
Dealogic, Exchanges
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Cross US-Border Equity Holdings1997 Q2 2007
Trillions
Source Federal Reserve Flow of Funds
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GlobalizationExchange Consolidation

• NYSE Euronext
• CME CBOT ( NYMEX)
• London Borsa Italiana
• Eurex / Deutsche Börse ISE
• Nasdaq OMX (Nordic) Phil Boston

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GlobalizationExchange Consolidation

• More on NYSE Euronext
• NYSE Arca
• Euronext (Paris Amsterdam Brussels Lisbon)
  LIFFE
• American Stock Exchange
• Other stakes, alliances, product technology
  sharing
• Universal Trading Platform (UTP) project

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NYSE Euronext Listed Cos

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Regulatory Globalization

• IFRS ? GAAP
• MIFID ? NMS
• SOx (US vs UK, Japan)
• Cross border premium
• Regulation quality and constraints
• Convergence ? Coordination ? Competition

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Summary Conclusion

• Automation, Globalization, Mergers
• networks product innovators
• giants niche entrants
• Multi-Product
• instruments
• data tools
• Regulation Accounting
• cooperation
• competition/choice