NEW BUSINESS ASSOCIATION between the JSE Securities Exchange South Africa and London Stock Exchange

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NEW BUSINESS ASSOCIATIONbetween theJSE
Securities Exchange South AfricaandLondon Stock
Exchange
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Discussion items

• Global trends and challenges
• JSE reality, vision and strategic position
• JSE/LSE relationship

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Global Trends and Challenges
The JSE investigated global trends in financial
markets to gain insight into its future
direction. There are a few key characteristics
that are shaping the future

• Technological innovation allows for a greater
  degree of automation, reduction in transaction
  costs and increase in processing efficiency
• Alliances and partnerships facilitate economies
  of scale and provide for a single point of access
  to larger pools of liquidity
• Demutualisation will result in exchanges no
  longer being owned by their members and allows
  them to run as independent organisations
• Deregulation enables a greater degree of
  cross-border trade and investment

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What is the JSE Reality ?
The JSE is aware of the changes it needs to make.
1. The JSE cannot maintain the status quo.
2. The JSE must offer SA companies more than
what is currently offered.
3. The JSE must replace JET.
4. The JSE is looking for a broader business
relationship.
5. The JSE needs to offer a new information
dissemination system.
6. The JSE needs to ensure operational
excellence to compete.
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JSE Vision

• To be recognised for
• providing world-class primary markets,
• secondary markets and services
• facilitated by strategic affiliations
• while providing a gateway
• integrating Southern Africa into
• the global financial markets

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JSE Strategic Options into the Global Market
An affiliation with a global stock exchange with
proven technology would create the opportunity
for the JSE to achieve the following objectives

• Aligning with internationally accepted practices
• Providing gateway for SA listed corporates to
  global markets
• Utilising proven technologies without reinventing
  established practices and technologies
• Positioning the JSE within its geographical area
  to successfully challenge competitive markets
• Enabling the trade in a wider product range
  thereby creating economies of scale
• Creating cost competitive structures, processes
  and infrastructure

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JSE/LSE Deal

• The JSE/LSE deal consists of a number of key
  areas.

Technology
Listings
Membership
Information Dissemination
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JSE/LSE Deal - Technology
The LSE is to provide the JSE with a set of core
technology services delivered through the LSEs
Sequence system

• Trading platform run remotely from UK
• Communication link between JSE technology hub in
  SA and LSE core technology hub in London
• LSE will provide the JSE with a customised,
  complete and fully functional trading and
  information dissemination solution which will
  enable the trade in all counters

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JSE/LSE Deal - Listings
To ensure the JSE is attractive as a gateway to
international capital for large SA companies
Create an international board with listings
requirements acceptable to the LSE and UKLA
Companies on the international board will be dual
primary listed on both the LSE and the JSE
JSE will manage the entire listings relationship
for companies on the international board -
creates an easier route for dual listings with
the LSE, which is a potential growth area for new
listings
Prevents further large companies moving their
primary listings away from the JSE
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JSE/LSE Deal - Membership
A number of core principles of participation by
LSE members trading on the JSE and JSE members
trading on the LSE are being negotiated (remote
participation)

• Members of the JSE authorised as remote SETS
  participants will be entitled to trade on SETS in
  addition to any trading entitlement that they
  have on the JSE by virtue of membership of the
  JSE
• Members of the LSE authorised as remote JSE
  participants will be entitled to trade on the JSE
  in addition to any trading entitlement that they
  have on the LSE by virtue of membership of the
  LSE
• Only JSE and LSE members who comply with criteria
  determined by the LSE and JSE will be accepted as
  remote participants

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What are the implications regarding Membership
and Listings ?
LSE
JSE
Exchanges
Dual Primary Listed
JSE Primary and Other Secondary Listings
Listing
Segment 1 SETS 184 Board
Segment 2 UK International Board
Segment 4 International JSE Board
Segment 5 Local JSE Board 1
Segment 6 Local JSE Board 2
Segment 7 Local JSE Board 3
Segment 3 International UK JSE Board
Segment 8 NSX Board
Segments
Order-driven OA, CA 184 UK Stocks (GBx)
Order-driven OA, CA 40 60 SA Stocks (GBx)
Order-driven OA, CA 40 60 SA Stocks
Order-driven OA, CA Other Liquid SA Stocks
Order-driven OA, IA, CA Illiquid SA Stocks
Quote-driven MM Possible Illiquid Stocks
Order-driven OA, CT, IA . . . CT, CA NSX Stocks
Order-driven OA, CA 184 UK Stocks
Segment Charac-teristics
(ZAc)
(ZAc)
(ZAc)
(ZAc)
(ZAc)
(ZAc)
Local LSE Participants
Int. LSE Participants
Segment Partici-pants
Int. JSE Participants
Local JSE Participants
KEY OA Opening Auction CA Closing Auction
IA - Intraday Auction MM Market Makers Int. -
International
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JSE/LSE Deal - Information Dissemination
The LSE and the JSE will market each others
share price information thereby providing greater
access to such information

• JSE information will be disseminated on the same
  technology platform as the LSE
• JSE will market LSE information in Africa subject
  to LSE contract
• LSE will market JSE information in rest of world
  subject to JSE contract

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Key Issues

• Indices
• Exchange controls
• Regulatory buy-in / support
• Market participation and support

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Strategic Benefits

• The LSE strategic option provides a world-class
  trading platform used by the worlds
  third-largest market place.

• Benefits for the JSE
• Access to global markets
• World class trading solution
• Joint development of new products and dual
  listing and/or trading thereof
• Access to increased pool of liquidity
• Enhanced image and brand of JSE
• Knowledge sharing

• Realisable
• Strategic Benefits
• Natural strategic partner
• European accessibility
• Listings reciprocity
• Improved liquidity
• Cross-membership
• Improved integrity
• Central Counter Party
• Joint marketing
• STRATE/Crest association

Value to JSE

• Benefits for the LSE
• Global business relationship outside of Europe
• Commercial gain
• Improved shareholder return
• Enhanced executive leadership reputation
• Proof of technology and implementation
• Knowledge sharing

Technology
Functionality
LSE Strategic Affiliation
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Questions