NASDAQ OMX Group (NDAQ)

7. Benefits for LSE stakeholders

NASDAQ believes that the combination of LSE with NASDAQ will reinforce London’s pre-eminence as Europe’s premier financial centre and yield benefits to LSE stakeholders.

On the technology side, NASDAQ’s current transaction speeds are amongst the fastest in the industry (delivering sub-millisecond executions within the matching engine) and its infrastructure has the capacity to process approximately ten times the current daily average volume of 2.0 billion shares traded. NASDAQ has a track record of selecting leading technologies and successfully migrating services to new back-end platforms. For example, NASDAQ recently completed the migration of NASDAQ-listed trading services from its legacy platform and the Brut platform to INET, a technology that was developed while Instinet was a subsidiary of Reuters Group plc. The platform integration was effected without requiring users to change connections or protocols, with switches put in place to enable orders and quotes to be moved seamlessly to the end user.

NASDAQ also has a strong track record in streamlining its infrastructure to provide market participants more connectivity options at lower fees to users. In 2005, NASDAQ ceased requiring customers to purchase their network connections exclusively and moved to a “bring your own” pricing model. Overall fees charged by NASDAQ to the industry in the first nine months of 2006 were reduced by 78 per cent. relative to the same period in 2005. The average customer is now able to connect to NASDAQ for charges that are between 41 per cent. and 80 per cent. lower than a year ago. In addition, NASDAQ has reduced average execution fees by 55 per cent. since 2002. NASDAQ would hope to bring that positive experience to the London marketplace, with the view in mind of lowering the cost of trading while maintaining a highly secure, highly reliable network infrastructure.

NASDAQ believes one of its primary responsibilities is to lower the total cost of trading for market users whilst providing superior trading capabilities with a focus on client needs. As a demonstration of this focus, NASDAQ commits not to increase standard broker-dealer tariffs for at least three years. Additionally, NASDAQ will leverage its experience in service improvement, price leadership and product expansion for the benefit of the London market and will always be prepared to compete creatively and aggressively for broker-dealer business.

NASDAQ has successfully broadened its range of issuer services to include Directors and Officers insurance, governance advisory services, investor relations services and corporate communication services. It will look to offer these services in the London market.

The service level for users of data products will be increased as combined products will be made available to customers of both exchanges. NASDAQ already distributes its data to 175 direct market data vendors, over 400,000 professional users and over 1.4 million non-professional users. Subject to regulatory parameters, NASDAQ will be able to offer more visibility and transparency of LSE information to US investors, and more visibility and transparency of NASDAQ information to UK investors. Additionally, the two exchanges can learn from the types of data offered to respective users of each exchange to enhance the transparency of both markets. NASDAQ expects new joint data products will be created (subject to regulatory parameters) to leverage the listing and trading strength of each market.

Over the medium term, a combination will bring substantial benefits to issuers and investors. US investors will gain enhanced access to LSE listed stocks, and UK investors will gain enhanced access to NASDAQ listed stocks. This is expected to lead to an increase in trading activity and liquidity resulting in a reduction in the cost of capital for issuers. Subject to regulatory parameters, investors may also benefit from an increased potential for further portfolio diversification.

The two strong, yet distinct, brands of LSE and NASDAQ will together yield stronger competitive benefits to both the London and the New York financial centres.