boa-merrill-conference

8/7/2019 boa-merrill-conference

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London Stock Exchange Group plc

Xavier RoletChief Executive

September 2010


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AgendaCompeting in an Age of Austerity

Overview of business and strategy

Cash equities markets overview and actions to strengthen our market

position

Information Services importance of LSE data and development of other

services

Development expanding Post Trade and Derivatives businesses

Regulatory uncertainty


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Diversified revenues

FY 2010 Q1

Admission fees

5%

Derivatives trading3%

Fixed Income trading

5%

Clearing

6%

Custody & other

7%

Real time data

14%

Technology

8%

Other revenues

1% Annual fees

6%

Other information

12%

Settlement

3%

Net interest incomethrough CCP business

4%

Other Capital

Markets

6%

Cash equities

trading Italy

5%

Cash equities

trading UK

15%

Technolog

Services

8%

Post Trade

20%

InformationServices

26%

CapitalMarkets

45%

Technology

Services

4%

Information

Services

27%

Post Trade20%

Capital Markets

49%

FY 2011 Q1


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Strategy and priorities

Strategic focus and priorities:

1) Drive efficiencies Getting in shape

Lowering costs, re-focusing the business on major clients, transforming thetechnology, strengthening the management team

2) Build scale, increase scope, extend reach - Leveraging our assets

organic growth across range of assets equities, derivatives, fixed income,information products and post trade services

3) Developing other opportunities

JVs, partnerships, other links to grow the Groups scale and scope

Objective : to be a leading global exchange group within 5 years


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The Future of the Sector European consolidation

Total fee pool3 : $630 million

Number of major equity trading venues2: 4

Total notional fee pool using MTF tarriff4: 75 million

Number of major equity trading venues: 28

Order Book Trading (USD)1: $6,756 bnOrder Book Trading (USD)1: $23,902 bn

1 Figures for Jan- Sep 09, Source: WFE, FESE

2 Four venues have a market share over 2.5% oftrading in 2009: NASDAQ 27.1%, NYSE 37.3%,DirectEdge 13.9%, BATS 12.9%

3 Per annum calculated using data from theGoldman Sachs Global Investment Research(November 2009)

4 Per annum calculated using an MTF tariff andThomson Reuters data


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0%

5%

10%

15%

20%

25%

30%

35%

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

%sha

reoftotalFTSE1

00valuetraded

0.0bn

1.5bn

3.0bn

4.5bn

6.0bn

7.5bn

9.0bn

10.5bn

FTSE100value

traded

Average daily LSE FTSE 100 value traded(right axis)

Specialist technical traders' share of trading(left axis)

Specialist technical traders' share of FTSE 100Introduction of MiFID


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Capital markets secondary

ETFs

4%

FTSE 100 Auction

15%

FTSE 250, FTSE

SmallCap,AIM & Other

13%

IOB

9%

FTSE 100 Continuous

59%

LSE order book trading profile (value traded)

Actions taken

Share of trading stable

*Trading figures exclude Turquoise

SETS Pricing changes Sep 2009 and May 2010, removal of maker/taker, qualifying aggressive fee 0.29bps andqualifying passive free

Post trade fees reduced Feb 2010 LCH / Euroclear netting fee reduced for large users

MillenniumIT acquired Oct 2009 TradElect trading platform to be replaced Nov 2010

Retail incentives introduced Aug 2010 low cost real-time data and no trading fees for 6 months

LSE order-book value traded and share of trading

4.6

5.0

4.5

3.7

4.9 5

.1

4.9

4.9

7.0

5.1

4.3

4.0 4

.1

70.2%

66.3% 65.8%67.0%

65.3% 64.8% 64.3%

61.4%

63.7% 63.3% 62.9%64.2%

62.1%

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10

Average

DailyValuetradedb

n

0%

10%

20%

30%

40%

50%

60%

70%

80%

Shareoftrading

LSE daily value traded

LSE share of trading - SETS

Sep-10 updated to 24th September


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Turquoise - Pan-European opportunity

Important opportunity to partner with largest

banking clients

Acquired February 2010

Now partnered with 12 banks;

LSEG retains 51 per cent

Pan-European offering, recently extended to US

securities

Significant development opportunity as a dark

venue; value up c.100% during last quarter

Scope to benefit from sharing LSEG infrastructure:

Access to London Stock Exchange membership

base; another 180 clients could connect at no

extra cost

Server co-location facility covers Turquoise as well

as London Stock Exchange

#1 European MTF dark pool

European MTF dark pools 2010

48%Turquoise

44%

CHI-X

9%BATS

0%

10%

20%

30%

40%

50%

60%

MAR APR MAY JUN JUL AUG SEP to

24Sep

Valuetraded

Source: Thomson Reuters / BATS


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Technology

MillenniumIT (MIT)

Trading platform migration work in progress:

Turquoise go-live 4th October 2010

SETS go-live 1st November 2010

Planned migrations 2011:

Italian equity and fixed income Johannesburg SE & Oslo Bors

Shutdown TradElect FY 2012, savings at least 10m pa

Co-location services Strong demand, further facilities will become available on migration to MIT


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Leveraging our core assets: Information ServicesSignificant potential areas of business development: Index business: Leveraging 50:50 JV FTSE to create significant value

120,000 indices covering 80 countries

FTSE Xinhua China largest Chinese ETF benchmark

Trade processing: Developing Proquote, SEDOL, UnaVista and X-TRM into an expanding tradeprocessing market segment

Trade processing market is inefficient, firms are at risk

Transaction reporting - Approved Reporting Mechanism (ARM)

Proquote OMS support for retail strategy

Real time data: New unbundled post-trade market

data service

Post trade data costs = same as USconsolidated tape

Private investor volume discount

pricing scheme - as low as 20p

per investor per month

LSE professional terminals

Half yearly and quarterly data

0

20,000

40,000

60,000

80,000

100,000

120,000

Mar00

Sep-00

Mar-01

Sep-01

Mar-02

Sep-02

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Aug-10

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Professional terminals (LH scale)

FTSE100 (RH scale)


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Small scale at present, but good base to develop

IDEM trades Italian equity, equity index and electricity futures andoptions

EDX trades International Order Book (mostly Russian) and Scandinavian

futures and options

TMX SOLA technology - EDX migration completed, IDEM go-live 23rd

October 2010

Exploring European and Emerging Markets opportunities

73% of European equity derivatives traded OTC*

USD600bn European equity OTC derivatives outstanding vs USD 250bn US equity*

Leveraging our core assets: Derivatives

*source BIS / ECB study published Sep 2009


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Determining opportunities to extend scope andscale of our assets inorganically into apan-European platform to support Capital

Markets businessMillenniumIT

CC&G

Monte Titoli

Reducing fees

-LCH.Clearnet reduced clearingfees to large users 1st October 2010

-Euroclear reduced post trade costsby removing the gross charge fornetting 1st March 2010

Leveraging our core assets: Post TradePost Trade

Revenues in Europe

Clearing

1.160 m

Clearing

1.301 m

Settlement

&

Custody

2.290m

Settlement

&

Custody

2.176m

2007 2008

LSE analysis,including: EurexClearing, Xetraclearing division,LCH Ltd, CC&G,Helex Ex. posttrading divisions,

NOMX

Average fee rates

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

1,000 10,000 100,000 1,000,000

Trades / day

LCH Oct10

EMCF proposed

x-clear proposed

EuroCCP

Note: EMCF fees identical to EuroCCP up to 500k

trades/day so not visible on this chart as overlayed by


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Basel III

Short selling

Post Trade

MiFID II

Attempts to address over leverage should be welcomed

If fully implemented, reality could be capital requirements up to 10-12%

Must beware reduction in lending 70% of SME funding is bank finance

Reaction to sovereign debt crisis

No evidence that short selling is harmful

Our research indicated it reduces volatility

Driving down cost is key

Harmonisation of CCP standards will support risk management and competition

Central clearing not suitable for all OTC assets

Access to central bank liquidity

Appears to be driven by Londons competitors

We support drive towards better post trade data as a means to improve transparencyDark pools do offer choice, we should be careful not to damage price formation

Regulatory changes / uncertainty


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Summary

Clear strategy delivery progressing

Management team strengthened broader experience and skills

Developing our competencies and capabilities priority now to continueefficiencies and develop post trade and derivatives products

More to be done infrastructure changes over time

Opportunities across the business

Strong cash generation

Expect further progress against strategy in coming year


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Contacts

Paul Froud Tom Woodley

Head of Investor Relations Investor Relations Manager

Tel: +44 (0)207 797 1186 Tel: +44 (0)207 797 1293

email: [email protected]

email: [email protected]

London Stock Exchange Group plc

10 Paternoster Square

London

EC4M 7LS

For information on the Group: www.londonstockexchangegroup.com


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No representation or warranty, expressed or implied, is made or given by or on behalf of London

Stock Exchange Group plc (the Company) or any of its directors or any other person as to the

accuracy, completeness or fairness of the information or opinions contained in this presentationand no responsibility or liability is accepted for any such information or opinions. This

presentation does not constitute an offer of securities by the Company and no investment decision

or transaction in the securities of the Company should be made on the basis of the information or

opinions contained in this presentation.

The content of this presentation includes statements that are, or may deemed to be, "forward-

looking statements". These forward-looking statements can be identified by the use of forward-

looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends",

"may", "will" or "should". By their nature, forward-looking statements involve risks and

uncertainties and readers are cautioned that any such forward-looking statements are not

guarantees of future performance. The Company's actual results and performance may differ

materially from the impression created by the forward-looking statements. The Company

undertakes no obligation to update or revise any forward-looking statements, except as may berequired by applicable law and regulation (including the Listing Rules).

This presentation and its contents are confidential and should not be distributed, published or

reproduced (in whole or in part) or disclosed by recipients to any other person.

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