Copyright© JSE Limited 2008

www.jse.co.za

Russell LoubserChief Executive Officer

Johannesburg Stock Exchange

October 2009

WFE Dark Pool Discussion

1

www.jse.co.za

Agenda

WFE Dark Pool Survey

International Trends – US and Europe

JSE Comments

2

www.jse.co.za

WFE Dark Pool Survey – Summary (Detailed Report is available)

27 Respondents of which:

• 7 currently offer a Dark Pool of Liquidity/Non-Displayed Trading facility;

• 9 have considered establishing such a facility in the future & 11 have not;

• 8 are not interested in establishing such a facility in the future;

3

www.jse.co.za

WFE Dark Pool Survey – Summary (Detailed Report is available)

Main reasons for setting up or intending to set up such a facility:

• Mitigate market impact of large trades

• Provide confidentiality or trading anonymity

• Improve liquidity levels

• Other: Cost efficiency; MiFID; Add Value; Defragment market; etc

Main reasons for not wanting to set up such a facility:

• Concern regarding additional fragmentation

• Do not see the benefits

• Market mechanisms not suited for dark pool offering

4

www.jse.co.za

WFE Dark Pool Survey – Summary (Detailed Report is available)

For the 7:

• Business Growth:

• 4 indicated that volume traded had increased subsequent to the establishment of their non–displayed trading facilities;

• 1 indicated that their number of trades subsequent to the establishment of their non–displayed trading facility had increased;

• 2 did not experience any change in value, volume or trades;

• Billing Models:

• Various fee models are utilised amongst respondents including ad valorem based per trade and per executed order, volume based and a fixed monthly fee;

• Share coverage:

• 6 have all the shares that are available on their Central Order Books also available in their non–displayed books;

5

www.jse.co.za

WFE Dark Pool Survey – Summary (Detailed Report is available)

For the 7:

• Trading Hours:

• 4 utilise the same trading hours as their Central Order Books;

• 3 use different trading hours;

• Size Restrictions:

• 6 have minimum order sizes & 3 have minimum execution sizes.

• Data Dissemination:

• All disseminate post trade data (but only 6 do this real time) and 3 do so free of charge;

• Clearing & Settlement:

• 5 indicated that clearing and settlement occurs with a Central Counterparty;

• 2 indicated that transactions are settled bi–laterally via their local CSD;

6

www.jse.co.za

International Trends – US and Europe

Types of Dark Pools

• Broker-Sponsored

• Exchange/ECN

• Independent/Agency

• Consortium-Sponsored

7

www.jse.co.za

International Trends – US and Europe Volumes

July 2009 – US (Source: Rosenblatt Securities inc., 28 July 2009,“Let there be Light”)

• Exchange dark and dark-pool volumes (markets & venues tracked by Rosenblatt Securities) accounted for 13.86% of all US Equity Trading in June 2009:

• 7.82% from the 16 non-exchange venues with Broker-Sponsored making up the majority of volume and most of these venues have average trade sizes of under 500 shares;

• 6.04% from Exchanges & ECNs;

• 3 flash products venues made up 2.4% of consolidated volume

July 2009 – Europe (Source: Rosenblatt Securities inc., 28 July 2009,“Let there be Light”)

• Most dark pool operators do not disclose their volumes

• Growing number of dark venues being announced

8

www.jse.co.za

International Trends – US and Europe Regulation

Europe

• May 2009 - CESR publishes four proposals for waivers from MiFID’s pre-trade transparency requirements.

• August 2009 – FSA announces that it is examining the impact of high-frequency trading and the use of dark pools on the UK equity market.

• September 2009 – The migration of share trading from regulated platforms to dark pools is to be examined by the European Commission as part of a wider review of MiFID

US

• June 2009 – SEC chief Mary Schapiro says the agency is to step up its scrutiny of dark pools amid concerns about the risks posed to market transparency and integrity by the proliferation of off-exchange trading venues.

• August 2009 – US Senator calls for Market Review.

• September 2009 - SEC issues proposals to ban flash order types.

9

www.jse.co.za

International Trends – US and Europe Regulation

16 September 2009

• SEC & FSA UK Discuss Approaches to Global Regulatory Requirements

21 September 2009

• WFE letter to Financial Stability Forum

10

www.jse.co.za

JSE Comments

“Dark Pools” have existed for a very long time (buy-side & sell-side order books) and will continue to do so.

There will always be a need for trades to be negotiated outside of the market but:

• Level playing fields on regulation should apply

• Reported to a regulatory authority

• Publicly disseminated after trades are concluded

Exchanges are well placed to offer “Dark Pools” but the key is to:

• Avoid fragmentation

• Ensure central order book price discovery is not eroded

• Maintain appropriate levels of transparency

11

www.jse.co.za

12