November 21, Industry Update Exchanges & Order Execution 2011

Niamh Alexander Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Analyst 212-887-3695 Summary-- [email protected] Trading activity slowed in October from 3Q11's record levels, with the exception of KBW Inc (North America) energy derivatives as well as on certain Asian exchanges. November volumes have slowed further in general. With regulators investigating the MF Global collapse and the Justin Bates CFTC's smaller budget increase, U.S. regulation could be further delayed. NYX-DB1 Analyst are nearing the final stage of discussions with European regulators. MiFIDII and MiFIR +44 207 663 3219 drafts were released on October 20th; we expect final rules by 2013 and implementation [email protected] KBW Ltd (Europe) by 2014. We believe regulators in Asia may allow G20 deadlines to slip rather than take the global lead on regulatory change. We reiterate our Outperform ratings on DB1, BGCP, NDAQ, NYX, and SGX. Sam Hilton Analyst +852 3973 8330 [email protected] Key Points-- KBW Asia Ltd ■ October Volume Solid, but Slower and Trading Activity in November Continues to Decline. In October, volatility continued to drive volume, which remained elevated Karl Morris Analyst relative to last year, though slower than hectic 3Q11 levels. We continue to believe a +44 207 663 5296 calm will follow the storm. We expect trading activity to slow further in November [email protected] and December with the start of the holiday season, and volume growth in 2012 could KBW Ltd (Europe) be muted due to tough comps with 2011 and the shrinking of dealer trading desks across assets classes. Nassime Ruch-Kamgar, CFA ■ European Regulation in Focus; MiFIDII and MiFIR Drafts Released. The Analyst European Commission released first round drafts of both MiFIDII and MiFIR on 212-887-7715 [email protected] October 20, 2011. The proposals are far from finished, and many particulars were not KBW Inc (North America) laid out; however, the first draft appeared to ambiguously challenge the vertical trading and clearing model for listed products. Discussions on the FTT in Europe continue, with the UK and Germany heads of the two opposing camps. The proposal Thomas Mills got tepid response from other global leaders at the G20 meeting. Analyst +44 207 663 5295 ■ All Eyes on NYX-DB1 Deal Progress over Next Month. NYX-DB1 submitted [email protected] proposed concessions on which business lines it would alter/divest to the EC on KBW Ltd (Europe) November 17, according to the WSJ. The EC's final decision deadline is now January 23, 2012, from December 22, 2011. The concessions allegedly include opening Eurex' clearinghouse to rivals, but only for new and innovative products, as well as divesting overlapping single-equity derivative businesses in Europe. We do not believe any of these concessions will have a material impact on the combined earnings power of the two companies. ■ US Derivative Rule-Makings Could Be Delayed Further with Smaller Budget Increase and MF Bankruptcy Taking Resources. U.S. Congress approved a $205M budget for the CFTC in 2012, up from its $169M budget in 2011 but 33% lower than the $308M it requested. With MF Global's bankruptcy on October 31, 2011, the CFTC has launched a probe into the FCM's business practices and ~$600M potentially in missing client funds. New CFTC Commissioner, Mark Wetjen, was confirmed by the Senate on October 20, 2011 and replaces Commission Dunn. ■ Please view PDF version for full note.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 1 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Global Exchange and Interdealer Broker Comp Sheet

Market Market Target Dividend EV / NTM KBW Estimates P/E Consensus Symbol Company Name Rating (USD Mil) Price Price Yield EBITDA 2011E 2012E 2013E 2011E 2012E 2011E 2012E

Exchanges - Americas CME CME Group MP $15,981 $240.71 $290 #N/A 7.1x $17.42 $18.38 $20.77 13.8x 13.1x $17.64 $19.29 ICE IntercontinentalExchange MP $8,304 $114.30 $140 NA 9.3x $7.07 $7.81 $8.90 16.2x 14.6x $7.00 $7.72 NYX NYSE OP $7,053 $26.92 $38 4.5% 3.2x $2.52 $2.61 $3.21 10.7x 10.3x $2.58 $2.86 NDAQ OMX Group OP $4,435 $25.03 $30 NA 6.7x $2.52 $2.91 $3.24 9.9x 8.6x $2.51 $2.82 CBOE CBOE Holdings MP $3,466 $25.82 $28 1.9% 10.7x $1.63 $1.85 $2.08 15.8x 14.0x $1.59 $1.76 BVMF3-BSP BM&FBOVESPA NC $12,111 10.13 NA 3.4% NA NA NA 0.67 0.71 X-TSE TMX Group NC $3,285 44.66 NA NA NA NA NA 3.69 3.90 BOLSA-MEX Bolsa Mexicana NC $1,013 23.00 NA NA NA NA NA 1.15 1.26 Median 13.8x 13.1x Exchanges - EMEA 63DU-ETR Deutsche Boerse OP $10,812 41.69 68 5.0% 6.6x 4.78 5.66 6.54 8.7x 7.4x 4.48 4.90 LSE-LON London UP $3,574 793.50 666 3.4% 4.1x 66.90 71.10 NE 11.9x 11.2x 83.80 84.10 BME-MCE Bolsas Y Mercados Espanoles MP $2,372 20.38 21 6.4% 6.2x 1.73 1.73 NE 11.8x 11.8x 1.83 1.80 EXAE-ATH Hellenic Exchanges Holdings MP $256 2.70 6.31 9.3% 2.4x 0.44 0.48 NE 6.1x 5.6x 0.34 0.28 JSE-ZA Johannesburg Stock Exchange NC $746 7,050 NA 3.0% NA NA NA 5.49 6.68 GPW-WAR Warsaw Stock Exchange NC $545 39.68 NA 8.1% NA NA NA 3.22 3.10 Median 10.2x 9.3x Exchanges - Asia-Pacific 388-HKG Hong Kong SE & Clearing MP $17,458 120.00 132 3.7% 20.8x 4.67 4.68 4.96 25.6x 24.2x 4.86 5.20 S68-SES Singapore Stock Exchange OP $5,275 6.10 8.50 4.4% 13.9x 0.28 0.30 0.32 21.2x 19.6x 0.28 0.30 ASX-ASX Australian Stock Exchange MP $5,329 29.56 32 6.2% 8.8x 2.02 2.16 2.25 14.1x 13.4x 2.02 2.14 1818-KLS MP $1,130 6.37 7.30 3.7% 13.0x 0.21 0.26 0.27 24.5x 23.6x 0.28 0.29 8697-JAS Osaka Securities Exchange NC $1,426 406,500 NA 2.2% NA NA NA 23,596 25,254 PSE-PHS Philippine Stock Exchange NC $320 226 NA 2.7% NA NA NA 6.12 7.10 NZX-NZE New Zealand Stock Exchange NC $214 2.25 NA 9.8% NA NA NA 0.13 0.15 Median 22.8x 21.6x Inter-Dealer Brokers IAP-LON ICAP MP $3,614 331.90 370 6.2% 6.2x 39.30 35.90 37.60 8.4x 9.2x 39.30 38.40 TLPR-LON Tullet Prebon MP $1,074 302.00 356 5.2% 3.8x 44.50 46.80 NE 6.8x 6.5x 44.70 45.90 BGCP BGC Partners OP $1,602 $6.02 $8 11.3% 3.7x $0.79 $0.84 $0.92 7.6x 7.2x $0.77 $0.83 GFIG GFI Group MP $500 $4.12 $5 4.9% 2.6x $0.32 $0.43 $0.49 12.9x 9.6x $0.34 $0.45 CFT-SWX Tradition NC $468 64.10 NA 7.8% NA NA NA Median 8.0x 8.2x Non-Public/Other Exchanges Americas EMEA Asia Oslo Borse Bourse de Casablanca Dubai Mercantile Exchange Tokyo Stock Exchange Bolsa de Comercio de Santiago (Listed) Irish Stock Exchange Kuwait Stock Exchange Bolsa De Valores de Colombia (Listed) MICEX Russian Stock Exchange Stock Exchange of Mauritius Thailand Stock Exchange Bolsa de Valores de Lima (Listed) Bourse de Luxembourg Stock Exchange of Tehran Bolsa de Comercio de Buenos Aires SIX Swiss Exchange The Wiener Borse Oman Exchange Nigerian Stock Exchange National Stock Exchange of India Ljubljana Stock Exchange Abu Dhabi Securities Exchange Saudi Stock Exchange Stock Exchange of Thailand Instanbul Stock Exchange Borse Dubai Priced as of November 18, 2011 Note: All values in local currency. For IAP, LSE, ASX, SGX, OSE the 2011E EPS is an actual EPS. UP = Underperform, MP = Market Perform, OP = Outperform, NC = Not Covered, NE = No Estimate Source: Bloomberg, FactSet, KBW Research

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 2 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Global Volume on Exchanges

Listed Derivatives Trading Activity - October Slows From September Global Share of 2010 Listed Derivative Contract Volume In October, derivatives volume slowed from 3Q11 with the exception of energy derivatives and other Other Latin America trading activity in parts of Asia. Volume in November continues to slow. U.S. futures volume in October 1% 7% was 15% lower than 3Q11, while European futures volume fell 13%. U.S. options volume in October was down 8% from a record 3Q11 while the average VIX in October increased from the average level through 3Q11. Volume in Asia decreased 9% overall in October compared to 3Q11, however, it increased on the Hong Kong Exchange as well as Bursa Malaysia. We expect volume to decelerate further in 4Q11 with the beginning of the Holiday season almost upon us. Europe 20% Asia-Pacific 40% YoY, derivatives volume in October 2011 showed solid growth: up ~14% on Asia‐Pacific exchanges, ~9% on European exchanges and ~10% higher on U.S. exchanges. OTC derivatives volume on ICAP's electronic platforms in October 2011 was 2% higher than last year, and North America 8% lower than 3Q11. 32%

Source: FIA Derivatives Exchange 2010 / 3Q11 / Oct-11 / ADV (000s) 2010 2009 3Q11 3Q10 Oct-10 Oct-11 Oct-10 CME 12,167 19% 14,702 27% 11,444 12,421 9% Cash Equities - Americas Increase Most in October, Asia-Pac Lags ICE U.S. 426 16% 477 12% 400 390 -3% CBOE 4,445 -1% 5,419 46% 4,331 5,008 16% Below we show cash equity volume by value‐traded as most European and Asian NYX U.S. options 3,670 39% 4,866 53% 3,942 4,678 19% exchanges earn a fee based on value‐traded rather than shares traded. DB1NDAQ (ISE) U.S. options 3,9162,974 39%-22% 4,9043,453 36%39% 4,4242,937 4,1273,433 -7% 17% TotalDB1 (ISE) North America 28,679 2,974 -22% 13% 3,453 39% 2,937 3,433 17% Last month, value‐traded in the Americas was 14% higher than October 2010 as Total North America 28,679 13% volatility remained elevated.elevated Cash equity value‐traded in EMEA was down 4% from last ICE Europe 862 32% 1,071 28% 899 1,198 33% year. Asia‐Pac lagged behind the other regions in value traded, declining 41% YoY in DB1 (Eurex) 7,365 11% 8,529 40% 6,259 7,332 17% October, following a 23% YoY decline in September. This is due to difficult comps, as Hellenic 34 8% 47 38% 34 55 62% the Sept‐Dec period in 2010 in Asia‐Pac saw significant fund flow stemming from QE2. BME 273 -25% 212 -10% 227 155 -32% LSE (EDX and IDEM) 172 3% 348 42% 261 270 3% NYX (LIFFE CONNECT) 3,422 11% 79 -3% 3,066 2,907 -5% Total Europe 17,534 15% Total Cash Equity Value Traded by Exchange ASX market 88 15% 127 51% 76 109 43% 2010 YoY Growth ASX24 market (SFE) 337 33% 466 31% 308 315 2% Oct-11 / HKEx 468 18% 653 55% 615 697 13% bln of USD 2010 / 2009 3Q11 / 3Q10 Oct-10 SGX 246 13% 322 33% 259 304 17% Bursa 25 0% 34 36% 25 39 56% Total Americas $32,902 -1% 28% 14% Total Asia-Pacific 35,179 43% Total EMEA $11,276 4% 26% -4% Global Total 88,473 26% Total Asia-Pacific $18,912 5% 3% -41% ICAPSource: Electronic Company Volume reports, ($B KBW Research 746 25% 882 25% 794 807 2% Source: World Federation of Exchanges. Data through October 31, 2011.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 3 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 The Global Exchange Landscape

Americas EMEA Asia-Pacific

Oslo Borse

RTS SE LSE ICAP MICEX

TMX Warsaw SE Tokyo SE Tullett TOCOM Chi‐X GFI Deutsche Borse KRX Osaka SE NDAQ SIX BGC Shanghai SE CBOE CME BATS Tradition BME Shenzhen SE NYX Instanbul SE Taiwan FE Hellenic SE Kuwait SE Tel‐Aviv SE Taiwan SE ICE Saudi SE HKEx Qatar SE Borse Dubai DME NSE NYX DB1 Bombay SE Thailand FE Bolsa Mexicana Thailand SE Philippine SE Bursa Malaysia Indonesia SE

Bolsa Colombia Nigerian SE SGX

Bolsa Lima BM&F Bolsa Santiago ASX Johannesburg SE NZ SE Bolsa Buenos Aires

Note: Size of bubble represents market cap excl. non-public exchanges. Non-public exchanges indicated by white bubbles. SE = Stock Exchange, FE = Futures Exchange Source: World Federation of Exchanges, Reuters, KBW Research

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 4 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Global Exchange M&A Shifts to Domestic from Cross-Border

Announced Exchange Mergers and Targeted Closing Dates

Deutsche Boerse (DB1) ‐ NYSE Euronext (NYX) ‐ According to a Nov. 18th WSJ article, NYX and DB1 submitted proposed concessions to the European competition commission (EC) for review on the evening of Nov. 17th. This pushes the EC's final decision deadline on the deal to January 23, 2012 from December 22, 2011. The reported concessions don't appear to sacrifice much revenue or earnings power for either business and importantly, appear to support the sustained vertical integration model. The EC is focused on competition in the derivatives businesses, Eurex and LIFFE. So far the German regulator BaFin has officially approved the proposed merger, but the deal also still needs approval from the U.S. Department of Justice (DOJ), and the full college of 27 European Commissioners. BATS ‐ Chi‐X Europe ‐ On October 20, 2011, the UK Competition Commission provisionally cleared the $305 million acquisition of Chi‐X Europe by BATS finding that the merger would not significantly reduce competition as the limited number of large financial institutions that compose the customer base of both could easily move business in the event of higher pricing or poorer service quality. The Commission is now considering responses to its provisional findings before issuing its final verdict due December 2, 2011 (though it has the option to extend the deadline by eight weeks). We expect the deal to go ahead and close soon. TMX Group ‐ Maple Group ‐ On October 30, 2011, TMX Group's Board approved the $3.8B bid from Maple Group. Maple extended the deadline for its offer to January 31, 2012 while it awaits a decision from Canadian regulators, who are concerned that the combined group would dominate Canadian cash equity trading, and control cash equity clearing and fixed‐income. Tokyo Stock Exchange (TSE) ‐ Osaka Securities Exchange (OSE) ‐ Following earlier reports of pressure from regulators to get the deal done, Nikkei reported on November 18th that TSE and OSE reached an agreement. Consistent with previous articles, TSE will reportedly tender for up to 66.6% of OSE’s shares, which would allow OSE to remain listed while being folded into a to‐be‐ created holding company with TSE. TSE’s value has be set at around 1.7x that of OSE, implying a $4B combined entity. The two exchanges will reportedly merge operations in autumn 2012 or spring 2013 (Dow Jones). Previous indications were that there may not be significant non‐tech synergies, as early reports suggested that the combined entity would maintain operations in both Tokyo and Osaka. Each exchange’s Board will meet on November 22, 2011, after which we expect an announcement with further details. MICEX ‐ RTS Stock Exchange (Russia) ‐ The merger of Russia's two largest exchanges, which will create a combined company worth $5B, is expected to be completed by early 2012, part of a goal to make Russia an international financial center by 2020. The goal of combining the two exchanges' securities depositories has slowed the process thus far.

Insights to Additional Consolidation

Americas ‐ According to the London Metal Exchange, it has been approached by over ten suitors and has inititiated a process to consider offers. We consider potential bidders to be CME, ICE, LSE and SGX (likely a joint bidder). We'd expect a sale process to be relatively drawn out given ownership structure. We continue to believe CBOE will remain independent in the intermediate term. We estimate a NDAQ‐LSE combination could be solidly accretive on the right terms. However, the LSE's higher multiple makes accretion more difficult and NDAQ's CEO has indicated a deal is unlikely. EMEA ‐ On September 28, LSE confirmed that it was in exclusive negotiations in a bid for LCH.Clearnet, valuing it at €1bn and beating out data service provider Markit. LSE will own 51% of the company, though the deal must still be approved by LCH's 98 shareholders. We believe the merger will increase LSE's scale given the competitive threat of NYX/DB1 and leverage LCH's clearing infrastructure to capture far more post‐trade services revenue. Amongst the inter‐dealer brokers, we expect to see additional attempts by Tullett Prebon to combine with competitors – Tradition and GFIG are the most talked about (Reuters sources) –to broaden product offering/deepen liquidity pool/bolster electronic offering in order to better compete with ICAP. As ever, we believe personality clashes/pricing expectations will be key sticking points. We believe those IDBs that have invested in straight‐through‐processing (STP) and electronic trading will feel no rush to acquire market share that they might otherwise poach post implementation of regulatory reform. Interestingly, the CEO of ICAP said he expected more consolidation in the voice broking market when ICAP's interim results were released last week. Asia‐Pac ‐ Aside from the potential for domestic consolidation – Japan, India –we continue to be skeptical about the near to medium‐term prospects for exchange consolidation in Asia, particularly of the cross‐border variety. Operational partnerships such as the ASEAN Trading Link and the recently announced BRICS exchange alliance (both looking to commence in summer 2012) to us represent the likely near‐term path forward for exchange linkages in Asia, as this avoids the political/nationalist complications that would likely arise from the prospect of selling the economic crown jewels.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 5 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Regulatory Landscape

U.S. Europe Asia

DODD‐FRANK ‐ DERIVATIVES MARKET REFORM MiFID II, MiFIR, EMIR PROPOSALS WORKING TOWARD G‐20 COMMITMENTS

We believe that uncertainty around regulation and the postponement of The MiFID II and MiFIR drafts were released on October 20, 2011. These As there is no common market in Asia/Pacific, rule development remains regulatory deadlines, among other factors, could dampen volume through are the first official proposals and were drafted by only one area of the a country‐by‐country endeavor. Broadly speaking, market sophistication 2012. European Commission. We believe the proposals could significantly lags that of the US/Europe, and regulators thus have the ability to absorb change through the discussion process, which is just starting. The lessons from developments overseas and tailor regulatory responses to Timing of Rule Making timeline for the review of the drafts by the European Council and the local market context. However, the proliferation of announced CCPs The Commissioners are targeting to have all rules completed by the first Parliament will not be specified until later in November when working for OTC financial derivatives in the region has the potential to fragment quarter of 2012 (though have emphasized that they will not prematurely groups of the two branches are established. We do not expect the final liquidity on national lines and increase hedging costs in the region, unless finalize rules without thorough consideration). Once final rules are adoption of MiFID II until 2013, and do not expect new rules to be regulators and governments manage to coordinate their policy initiatives adopted, we expect effective dates to be phased in over nine months. We implemented until 2014. appropriately. In the event of slippage in the U.S./Europe, we believe therefore don't see meaningful new revenue impact for exchanges or regulators in Asia may choose to miss G20 deadlines rather than take the would‐be SEFs until 2013 at the earliest. The EMIR OTC market structure reform process is much further along and global lead on regulatory change. EMIR proposals have evolved to be similar to Dodd‐Frank as one area CFTC budget 33% Lower‐than‐Expected for fiscal 2012 regulators are focused on is minimizing potential for regulatory arbitrage. Australia. The Council of Financial Regulators (comprising the RBA, APRA, On November 14, 2011, Congress agreed to a measure to set the CFTC's ASIC and the Treasury) issued a discussion paper in June considering the fiscal 2012 budget at $205M, less than the $308M requested by the Some of the proposals in the MiFIDII draft include: (i) a requirement that case for requiring AUD‐denominated interest rate derivatives to be Obama administration. This is higher than the CFTC's 2011 budget of all OTC and on‐exchange trades be reported to a data warehouse to centrally cleared, and whether this should take place domestically. The $169M, but with the CFTC's growing responsibilities would constrain CFTC increase transparency, (ii) a requirement that high‐frequency traders CFR solicited feedback on the Council agencies’ views and propositions resources and could further postpone and curtail the CFTC's ability to register and be obligated to provide liquidity which could drive some prior to making any recommendations to the Australian government, and implement and police new regulation. Additionally, the CFTC is conducting smaller players out of the business, (iii) increased efficiency of data has received over 20 submissions to date from market participants and a review of clearing FCMs in the wake of the MF Global bankruptcy, which collection and sharing though the draft doesn't go so far as to propose a other interested stakeholders including banks, securities firms, industry could further delay progress on Dodd‐Frank financial reform. consolidated tape in Europe, and (iv) the requirement to trade OTC associations, clearing houses and multilateral agencies. derivatives on an organized trading facility (OTF, similar to a SEF in the TheThe previousprevious fivefive CFTC CommissionersCommissioners did not agree on many issues,issues, Dodd‐Frank bill), though more trading protocols are allowed than in (cont'd on next page) which slowed rule approval. On October 20, 2011, the Senate current CFTC proposals for SEFs.SEFs unanimously confirmed Democrat Mark Wetjen as a new Commissioner to replace Michael Dunn, and he was sworn into office October 25, 2011. This (cont'd on next page) could ease the current deadlock.

(cont'd on next page)

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 6 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1 Regulatory Landscape

U.S. Europe Asia

DODD‐FRANK ‐ DERIVATIVES MARKET REFORM (cont'd) MiFID II, MiFIR, EMIR PROPOSALS (cont'd) WORKING TOWARD G‐20 COMMITMENTS (cont'd)

In its last meeting on October 18, 2011, the CFTC finalized rules related to The language around position limits was stronger in the MiFID II draft Hong Kong.In line with the G‐20 recommendations and deadlines on Position Limits and Clearinghouse Core Principles. Spot month position than the consulation paper, though is still less prescriptive than U.S. OTC derivatives, the HKMA and HKEx plan to launch a local trade limits, which we estimate apply to ~5% of futures volume, will go into position limit proposals. The consultation paper proposed a position repository and OTC clearing facility by end‐2012, with initial applicability effect 60 days following the finalization of the rule defining a "swap." Final management regime while the MiFID II draft proposes hard limits to IRSs and NDFs. Regulator SFC issued its consultation paper on the rules on entity and product definitions were expected in 4Q11. However, determined by exchanges, MTFs, and OTFs based on number of contracts proposed regulatory regime for OTC derivatives in Hong Kong in October, this could be pushed to 1Q12 as the CFT C currently has no scheduled bought over a certain time frame vs. a limit on the size of a participants with an end‐November deadline for comments. The consultation meetings on the calendar. Additionally, the effective date for spot month open interest determined by the CFTC in the U.S. We believe European proposes that the regulatory regime receive legislative backing as part of limits could be delayed as exchanges work to update estimates of position limits will ultimately be similar to U.S. limits as regulators on the Securities and Futures Ordinance, and that it be jointly overseen and deliverable supply (spot month limits to be set at 25% of deliverable both sides of the Atlantic are generally trying to align markets. For a regulated by the HKMA and SFC. Initial applicability would be to specified supply). Many of these estimates have not been updated for a number of more in‐depth analysis of position limits and its impact on exchanges see IRSs and NDFs, but will be expanded. The SFC is also considering a years and as markets have generally grown, we believe this will increase our Sept. 6 note Position Limits: Key Issues, Timing & Potential Impact location requirement for clearers of certain products considered the spot month limits. systemically important to the Hong Kong financial market. The SFC Financial Transactions Tax (FTT) Proposed ‐ Not All Enthusiastic explicitly said that given the relatively small size of the local OTC As laid out at its September 8th meeting, in 4Q11, the CFTC hopes to On September 28, 2011, the European Commission released a proposal derivatives market, Hong Kong should not drive global reform initiatives consider: (1) Final rules on entity and product definitions (both joint rules for a financial transactions tax on all exchange‐traded and OTC products in this area. with the SEC), (2) Swap data recordkeeping and reporting, (3) Real‐time (with some exceptions) effective Jan. 1, 2014. If passed it could reporting, (4) Regulations for trading platforms such as Designated negatively impact most companies in our coverage universe, particularly Japan. New rules require key OTC financial derivatives (CDS, IRS) to be Contract Markets (DCMs) and Foreign Boards of Trade (FBOTs), (5) NYX/DB1 and ICE, should overall trading activity decline. However, we do centrally cleared by late 2012. This was one of a number of focus areas External/internal business conduct rules related to risk management, not believe it will pass since it requires unanimous approval by all 27 the FSA proposed improving in January 2010. Other areas include supervision, conflicts of interest, recordkeeping, and chief compliance member states. The UK is strongly opposed (which is significant as the EC strengthening clearing/settlement systems for government bond officers. estimates that ~60% of the expected tax revenue is from the UK), while transactions, improving consolidated regulation and supervision, and Germany and France strongly support the measure. UK Prime Minister hedge fund regulation. The Japan Securities Clearing Corporation IInn 1Q12,1Q12, thethe CFTC hhopesopes to consconsiderider: (1) CapitalCapital andand MMarginargin ((workingworking Cameron will meet with German Chancellor Merkel on November 18, launched its OTC derivatives clearing service in late July; in its first full closely with international regulators), (2) Swap Execution Facilities (SEFs), 2011 to discuss opposing views on the FTT,FTT prior to a December 9th month of operationoperation, JSCC cleared a notional JPY25bn of OTC credit (3) Straight‐Through Processing (STP), (4) Documentation, (5) Client summit to discuss an overhaul of the EU's treaty. Some U.S. politicians default swaps in 23 transactions. clearing rules, customer segregation rules are floating the idea of a similar tax in the U.S. on the momentum of the European proposal, though we view this as very unlikely. See our Sept. 28 Singapore. The Monetary Authority of Singapore (MAS) said that it is Volcker Rule Released note EU Parliament Release Proposal for Financial Transactions Tax for reviewing its policies and will conduct a consultation by the end of 2011 On October 11, the Federal Reserve released the Volcker Rule for public more details. We felt that there was tepid response from other regions on all aspects of the Financial Stability Board’s recommendations, comment, which seeks to ban short term proprietary trading by banks and for an FTT at the G20 summit but the uncertainty about a eurozone targeting implementation by end‐2012 per the G‐20 timetable. For OTC affiliates. Trades related to market making and hedging risk are exempt, alternative could persist. derivatives trading, this will take the form of 4 key thrusts: 1) encourage which leaves room for interpretation. Several banks have already cut prop standardized derivatives contracts; 2) mandate central clearing of all desks ahead of the rule so we believe the impact on trading volume could standardized contracts, with implementation details to come; 3) move be minimal. trading to trading platforms where appropriate; 4) report trades to a trade repository –MAS is assessing the need for a local repository and the appropriate regulatory regime. We note that SGX has been operating an OTC clearing facility for energy and freight derivatives since 2006, and expanded into financial derivatives in late 2010 ahead of any regulator push.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 7 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

IMPORTANT DISCLOSURES RESEARCH ANALYST CERTIFICATION: We, Niamh Alexander, Justin Bates, Sam Hilton, Karl Morris, Nassime Ruch-Kamgar, CFA and Thomas Mills, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject companies and their securities. We also certify that We have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation in this report. Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

COMPANY SPECIFIC DISCLOSURES KBW expects to receive or intends to seek compensation for investment banking services from BGC Partners, Inc. in the next three months. KBW currently makes a market and/or acts as a liquidity provider in BGC Partners, Inc. securities. KBW expects to receive or intends to seek compensation for investment banking services from Nasdaq OMX Group in the next three months. KBW currently makes a market and/or acts as a liquidity provider in Nasdaq OMX Group securities. KBW expects to receive or intends to seek compensation for investment banking services from NYSE Euronext in the next three months. KBW currently makes a market and/or acts as a liquidity provider in NYSE Euronext securities. Keefe, Bruyette & Woods is a member of the New York Stock Exchange. KBW expects to receive or intends to seek compensation for investment banking services from Tullett Prebon PLC in the next three months. KBW currently makes a market and/or acts as a liquidity provider in Tullett Prebon PLC securities. Tullett Prebon PLC currently is, or was during the 12-month period preceding the date of distribution of this report, a client of KBW. For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the most recently published company report or visit our global disclosures page on our website at http://www.kbw.com/research/disclosures.html or see the section below titled "Disclosure Information" for further information on how to obtain these disclosures.

AFFILIATE DISCLOSURES: This report has been prepared by Keefe, Bruyette & Woods Inc. (“KBWI”) and/or its affiliates Keefe, Bruyette & Woods Limited and Keefe, Bruyette & Woods Asia Limited all of which are subsidiaries of KBW, Inc. (collectively “KBW”). Keefe, Bruyette & Woods Inc. is regulated by FINRA, NYSE, and the United States Securities and Exchange Commission, and its headquarters is located at 787 7th Avenue, New York, NY 10019. Keefe, Bruyette & Woods Limited is registered in England and Wales, no. 04605071 and its registered office is 7th Floor, One Broadgate, London EC2M 2QS. KBWL is authorised and regulated by the UK Financial Services Authority ("FSA"), entered on the FSA's register, no. 221627 and is a member of the . Keefe, Bruyette & Woods Asia Limited is a licensed corporation regulated by the Securities and Futures Commission of Hong Kong ("SFC") (CE No.: AUI281). Its headquarters is located at 3101, 31/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong. Disclosures in the Important Disclosures section referencing KBW include one or all affiliated entities unless otherwise specified. Registration of non-US Analysts: Any non-US Research Analyst employed by a non-US affiliate of KBWI contributing to this report is not registered/qualified as research analyst with FINRA and/or the NYSE and may not be an associated person of KBWI and therefore may not be subject to NASD Rule 2711 or NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Disclosure Information: For current company specific disclosures please write to one of the KBW entities: Keefe, Bruyette & Woods Research Department at the following address: 787 7th Avenue, 4th Floor, New York, NY 10019. The Compliance Officer, Keefe, Bruyette and Woods Limited, 7th Floor, One Broadgate, London EC2M 2QS. The Compliance Officer, Keefe, Bruyette and Woods Asia Limited, 3101, 31/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong. Or visit our website at http://www.kbw.com/research/disclosures.html. KBW has arrangements in place to manage conflicts of interest including information barriers between the Research Department and certain other business groups. As a result, KBW does not disclose certain client relationships with, or compensation received from, such companies in its research reports.

BGC Partners, Inc. (BGCP) Target Price: 8.00 Risk Factors: Risks to our established price target include: regulatory driven market structure changes, marked changes in OTC derivatives activity, unforeseen material lawsuits, and interest rate increases further away than expected.

Nasdaq OMX Group (NDAQ) Target Price: 30.00 Risk Factors: Risks to our price target include the following: market conditions and events may not ultimately reflect our assumptions and/or projections. Volatility in the markets carries the potential for shifts in confidence among investors. Investment in securities invariably involves risk and potential for loss of

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 8 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

principal.

NYSE Euronext (NYX) Target Price: 38.00 Risk Factors: Risks to our price target include the following: market conditions and events may not ultimately reflect our assumptions and/or projections. Volatility in the markets carries the potential for shifts in confidence among investors. Investment in securities invariably involves risk and potential for loss of principal.

Singapore Exchange (SGX) (SGX.SP) Target Price: 8.50 Risk Factors: Primary risk stems from turnover levels in the cash market, as this comprises over half of revenue. Weaker-than-expected turnover could be driven by a further deterioration in market sentiment globally or regionally.

Tullett Prebon PLC (TLPR.LN) Target Price: 356 Risk Factors: Brokers and exchanges are heavily geared towards adverse changes in capital market conditions. Furthermore, they generate revenue based on market trading volumes; if there were to be a sustained drop-off in these volumes, then earnings would most likely be adversely affected.

RATING AND PRICE TARGET HISTORY

Rating and Price Target History for: BGC Partners, Inc. (BGCP) as of 11-18-2011

02/01/10 02/25/10 04/15/10 05/07/10 05/20/10 10/29/10 12/17/10 09/08/11 I:MP:$5 MP:$6 MP:$6.5 MP:$7 OP:$8 MP:$8 MP:$9 OP:$8 12

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Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 9 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

Rating and Price Target History for: Nasdaq OMX Group (NDAQ) as of 11-18-2011

01/08/09 04/06/09 10/16/09 04/15/10 05/03/10 06/01/10 07/28/10 12/17/10 02/03/11 04/07/11 07/28/11 OP:$31 OP:$27 MP:$21 MP:$22 MP:$24 OP:$24 OP:$25 OP:$27 OP:$31 OP:$34 OP:$33 32

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Rating and Price Target History for: NYSE Euronext (NYX) as of 11-18-2011

01/08/09 02/02/09 05/01/09 10/16/09 11/02/09 03/05/10 04/15/10 05/05/10 06/01/10 08/04/10 10/14/10 OP:$38 MP:$25 MP:$27 MP:$30 MP:$28 MP:$30 MP:$32 MP:$34 MP:$31 MP:$32 MP:$31 48

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8 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 2009 2010 2011 2012 02/08/11 04/07/11 06/28/11 08/02/11 MP:$33 MP:$43 OP:$39 OP:$38

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Rating and Price Target History for: (SGX) (SGX.SP) as of 11-18-2011

03/15/10 04/16/10 10/18/10 04/15/11 07/26/11 10/10/11 I:OP:SGD9.5 OP:SGD10 OP:SGD10.5 OP:SGD10 OP:SGD9.4 OP:SGD8.5 12

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Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 10 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

Rating and Price Target History for: Tullett Prebon PLC (TLPR.LN) as of 11-18-2011

12/06/10 08/02/11 08/03/11 11/18/11 I:MP:p400 OP:p400 MP:p400 MP:p356 500

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Rating KEY: OP – Outperform MP – MarketPerform U – Underperform S – Suspended RS – Restricted CNR -Covered -Not Rated Note: The boxes on the Rating and Price Target History Chart above indicate the date of Report/Note, the rating and price target. Each box represents a date on which an analyst made a change to a rating or price target.

Distribution of Ratings/IB Services KBW *IB Serv./Past 12 Mos. Rating Count Percent Count Percent Outperform [BUY] 232 33.72 62 26.72 Market Perform [HOLD] 354 51.45 61 17.23 Underperform [SELL] 60 8.72 7 11.67 Restricted [RES] 0 0.00 0 0.00 Suspended [SP] 42 6.10 9 21.43 Covered -Not Rated [CNR] 2 0.29 1 50.00

*KBW maintains separate research departments; however, the above chart, "Distribution of Ratings/IB Services," reflects combined information related to the distribution of research ratings and the receipt of investment banking fees globally.

Explanation of Ratings: KBW Research Department provides three core ratings: Outperform, Market Perform and Underperform, and three ancillary ratings: Suspended, Restricted, and Covered - Not Rated. For purposes of New York Stock Exchange Rule 472 and FINRA Rule 2711, Outperform is classified as a Buy, Market Perform is classified as a Hold, and Underperform is classified as a Sell. Suspended indicates that KBW’s investment rating and/or target price have been temporarily suspended due to applicable regulations and/or KBW policies. Restricted indicates that KBW is precluded from providing an investment rating or price target due to the firm's role in connection with a merger or other strategic financial transaction. Covered - Not Rated indicates that KBW is not providing an investment rating and/or price target due to the lack of publicly available information and/or its inability to adequately quantify the publicly available information to sufficiently produce such metrics. North American Stocks are rated based on an absolute rate of return (percentage price change plus dividend yield).Outperform represents a total rate of return of 15% or greater. Market Perform represents a total rate of return in a range between -5% and +15%.Underperform represents a total rate of return at or below -5%. European and Asian Stocks are rated based on the share price upside to target price relative to the relevant sector index performance on a 12-month horizon. Outperform rated stocks have a greater than 10 percentage point (“pp”) relative performance versus the sector, Market Perform rated stocks between +10pp to -10pp relative performance versus the sector, and Underperform rated stocks a lower than 10pp relative performance versus the sector. The 12-month price target may be determined by the stock’s fundamentally-driven fair value and/or other factors (e.g., takeover premium or illiquidity discount).

KBW Model Portfolio: "Model Portfolio Buy" - Companies placed on this list are expected to generate a total rate of return (percentage price change plus dividend yield) of 10% or more over the next 3 to 6 months.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 11 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

"Model Portfolio Sell" - Companies placed on this list are expected to generate a total rate of return (percentage price change plus dividend yield) at or below -10% over the next 3 to 6 months. The purpose of the Model Portfolio is to inform institutional investors of KBWI’s short-term (as described above) outlook for a particular industry sector. The Portfolio is not available for purchase or sale, cannot be duplicated as shown, is hypothetical and is for illustrative purposes only. For a more detailed description of the selection criteria and other specifics related to the construction of the Model Portfolio, please refer to the January 5, 2010 Model Portfolio Primer and/or contact your KBWI representative for more information. The Model Portfolio should be viewed as a short-term outlook of a particular industry sector, not as individual security recommendations. The Model Portfolio uses a three-to-six-month time horizon and should not be considered when making longer term investments. KBWI Research publishes research with a 12-month outlook on each issuer of securities contained in the Model Portfolio. Investors who are interested in a particular security should request KBWI Research’s coverage of such securities by contacting your KBWI representative. KBW research contains analyses of fundamentals underlying each issuer. KBWI’s long-term recommendations may differ from recommendations made for the Model Portfolio. These differences are the result of different time horizons -- KBWI research has a 12-month outlook and the Model Portfolio has a three-to-six-month outlook. Although the model portfolio is based upon actual performance of actual investments, KBWI did not recommend that investors purchase this combination -- or hypothetical portfolio -- of investments during the time period depicted here. As this hypothetical portfolio was designed with the benefit of hindsight, the choice of investments contained in it reflects a subjective choice by KBWI. Accordingly, this hypothetical portfolio may reflect a choice of investments that performed better than an actual portfolio, which was recommended during the depicted time frame, would have performed during the same time period. Moreover, unlike an actual performance record, these results do not represent actual trading wherein market conditions or other risk factors may have caused the holder of the portfolio to liquidate or retain all or part of the represented holdings.

Other Research Methods: Please be advised that KBW provides to certain customers on request specialized research products or services that focus on covered stocks from a particular perspective. These products or services include, but are not limited to, compilations, reviews and analysis that may use different research methodologies or focus on the prospects for individual stocks as compared to other covered stocks or over differing time horizons or under assumed market events or conditions.

OTHER DISCLOSURES Indices: The following indices: U.S.: KBW Bank Index (BKX), KBW Insurance Index (KIX), KBW Capital Markets Index (KSX), KBW Regional Banking Index (KRX), KBW Mortgage Finance Index (MFX), KBW Property & Casualty Index (KPX), and KBW Premium Yield Equity REIT Index (KYX); KBW Financial Sector Dividend Yield Index (KDX); Europe: KBW Large-Cap Banks Index (KEBI), KBW Mid/Small Cap Banks Index (KMBI), KBW Large-Cap Insurance Index (KEII), KBW Miscellaneous Financials Index (KMFI), KBW Emerging Europe Financials Index (KEEI); and Global: KBW Global ex-U.S. Financial Sector Index (KGX), are the property of KBWI. KBWI does not guarantee the accuracy and/or completeness of the Indices, makes no express or implied warranties with respect to the Indices and shall have no liability for any damages, claims, losses or expenses caused by errors in the index calculation. KBWI makes no representation regarding the advisability of investing in options on the Index. Past performance is not necessarily indicative of future results. ETFs: The shares ("Shares") of KBW ETFs are not sponsored, endorsed, sold or promoted by KBWI. KBWI makes no representation or warranty, express or implied, to the owners of the Shares or any member of the public regarding the advisability of investing in securities generally or in the Shares particularly or the ability of its Indices to track general stock market performance. The only relationship of KBWI to Invesco PowerShares Capital Management LLC and ProShares is the licensing of certain trademarks and trade names of KBWI and its Indices which are determined, composed and calculated by KBWI without regard to Invesco PowerShares Capital Management LLC and ProShares, the fund, or the Shares. KBWI has no obligation to take the needs of Invesco PowerShares Capital Management LLC and ProShares or the owners of the shares into consideration in determining, composing, or calculating the Indices. KBWI is not responsible for and has not participated in any determination or calculation made with respect to issuance or redemption of the Shares. KBWI has no obligation or liability in connection with the administration, marketing or trading of the Shares. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Investing in a single sector may be subject to more volatility than funds investing in a diverse group of sectors. Brokerage commissions and ETF expenses will reduce returns. In general, ETFs can be expected to move up or down in value with the value of the applicable index. Although ETFs may be bought and sold on the exchange through any brokerage account, ETFs are not individually redeemable from the Fund. Investors may acquire ETFs and tender them for redemption through the Fund in Creation Unit Aggregations only, please see the prospectus for more details. There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks including those regarding short selling and margin maintenance requirements. Past performance is not necessarily indicative of future results. Most ProShares ETFs seek a return that is a multiple (e.g., -200%, -300%) of the return of an index or other benchmark (target) for a single day. Due to the compounding of daily returns, Ultra and Short ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus. An investor should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. This and other information can be found in their prospectuses. For this and more complete information about the Funds, call InvescoPowerShares at 1-800-983-0903 or visit https://invescopowershares.com; or call ProShares Client Services at 1-866-776-5125 or visit http://www.proshares.com/resources/litcenter/ for a prospectus. The prospectus should be read carefully before investing. Shares of the ETFs funds are not guaranteed or insured by the FDIC or by another governmental agency; they are not obligations of the FDIC nor are they deposits or obligations of or guaranteed by KBWI, Invesco PowerShares Capital Management LLC or ProShares. ETFs are distributed by Invesco Distributors, Inc. the distributor of the PowerShares Exchange-Traded Fund Trust II. PowerShares® is a registered trademark of Invesco

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 12 November 21, 2011 Global Exchange Notes - Volume Slowing, Focus on Regulation and NYX-DB1

PowerShares Capital Management LLC; ProShares are distributed by SEI Investments Distribution Co. which is not affiliated with ProFunds Group or its affiliates. General Risk Disclosure: Investments in securities or financial instrument involve numerous risks which may include market risk, counterparty default risk, liquidity risk and exchange rate risk. No security or financial instrument is suitable for all investors and some investors may be prohibited in certain states or other jurisdictions from purchasing securities mentioned in this communication. The securities of some issuers may not be subject to the audit and reporting standards, practices and requirements comparable to those companies located in the investor’s local jurisdiction. Where net dividends to ADR investors are discussed, these are estimated, using withholding tax rate conventions, and deemed accurate, but recipients should always consult their tax advisor for exact dividend computations. 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Neither KBW nor any of its officers or employees accept any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its content. This communication has been prepared as of the date of the report. KBW does not undertake to advise clients of any changes in information, estimates, price targets or ratings, all of which are subject to change without notice. The recipients should assume that KBW will not update any fact, circumstance or opinion contained in this report. COPYRIGHT: This report is produced for the use of KBW customers and may not be reproduced, re-distributed or passed to any other person or published in whole or in part for any purpose without the prior consent of KBW.

Please refer to important disclosures and analyst certification information on pages 8 - 13 of this report. 13