Greg Wojciechowski - President & CEO Neville Caines – BSX Operations Manager Bermuda Stock Exchange X Asamblea General ACSDA ACSDA 10 th General Assembly.

Greg Wojciechowski - President & CEO

Neville Caines – BSX Operations Manager

Bermuda Stock Exchange

X Asamblea General ACSDAX Asamblea General ACSDAACSDA 10ACSDA 10thth General Assembly General Assembly

Introduction to the BSX &BSDIntroduction to the BSX &BSD

Bermuda Shorts

» Only 1Only 11/2 1/2 hours hours from NYfrom NY

» 7 hours to 7 hours to LGWLGW

» 2 ½ hours to 2 ½ hours to MiamiMiami

Bermuda Snapshot

» Bermuda is a British Overseas Dependent Territory;Bermuda is a British Overseas Dependent Territory;» Stable democratically elected and fiscally Stable democratically elected and fiscally

responsible government;responsible government;» Bermuda’s law is based on English Common Law Bermuda’s law is based on English Common Law

with final court of appeal being the UK’s Privy with final court of appeal being the UK’s Privy Council;Council;

» Bermuda maintains very high credit rating with Bermuda maintains very high credit rating with global rating agencies one of the lowest of global rating agencies one of the lowest of government indebtedness among rated sovereigns;government indebtedness among rated sovereigns;

» GDP Per Capita is forecast to be nearly $90,000 in GDP Per Capita is forecast to be nearly $90,000 in 2008.2008.

Bermuda Business Snapshot

» More than 50% of Fortune 500 companies are More than 50% of Fortune 500 companies are registered and do business in Bermudaregistered and do business in Bermuda

» Bermuda is the leader in Captive Insurance Bermuda is the leader in Captive Insurance MarketMarket

» Bermuda is one of the largest Property Bermuda is one of the largest Property catastrophe reinsurance markets with over catastrophe reinsurance markets with over 1400 companies domiciled1400 companies domiciled

» Leading global fund administration centres with Leading global fund administration centres with 70 licensed administrators70 licensed administrators

» Vibrant Trust and Private Banking sectorsVibrant Trust and Private Banking sectors

BSX Snapshot

» BSX founded in 1971BSX founded in 1971» Over 550 listingsOver 550 listings» 16 Trading Members and Listing 16 Trading Members and Listing

SponsorsSponsors» Daily trading Daily trading » Rolling T + 3 SettlementRolling T + 3 Settlement» Market Cap over $ 350 BillionMarket Cap over $ 350 Billion

The BSX’s Mission

»To develop an efficient , electronic To develop an efficient , electronic domestic marketdomestic market

»To develop the listing of Investment To develop the listing of Investment Funds and other International Funds and other International SecuritiesSecurities

»To build the infrastructure to make To build the infrastructure to make Bermuda the world’s first truly Bermuda the world’s first truly offshore, international capital offshore, international capital marketmarket

Sound Legal Framework

» Bermuda Stock Exchange Private Act - Bermuda Stock Exchange Private Act - 1992, 1996, 1997, 20021992, 1996, 1997, 2002

» Financial Institution under Schedule 3 of Financial Institution under Schedule 3 of BMA Act 1969BMA Act 1969

» Power to Make Regulations - subject to Power to Make Regulations - subject to prior consent of BMAprior consent of BMA

International Recognitions

» Full Member of World Federation of ExchangesFull Member of World Federation of Exchanges» ““DOSM” status from US-SEC DOSM” status from US-SEC » ““Registered Organisation” - LSERegistered Organisation” - LSE» Designated Investment Exchange - UK Financial Designated Investment Exchange - UK Financial

Services AuthorityServices Authority» Approved Stock Exchange – Australian tax Approved Stock Exchange – Australian tax

authoritiesauthorities» Recognised Investment Exchange – The BMARecognised Investment Exchange – The BMA» Affiliate Member – IOSCOAffiliate Member – IOSCO» Recognised Stock Exchange – UK’s HM Revenue Recognised Stock Exchange – UK’s HM Revenue

& Customs& Customs

Over 550 BSX Listings

Mutual Funds

BermudaCompanies

Debt

InternationalCompanies

Trading & Settlement

» Fully electronicFully electronic• BEST - Trading BEST - Trading

System, CLOB basedSystem, CLOB based• BSD - Fully BSD - Fully

integrated integrated settlement and settlement and Depository systemDepository system

BSD

The BSX Clearing, Settlement and The BSX Clearing, Settlement and Depository ServiceDepository Service

Bermuda Securities DepositoryBermuda Securities Depository

www.bsx.com

Neville Caines

The BSD Advantage

BEST Trading

BSD

What is BSD?

» BSD is a wholly owned subsidiary of the BSX

» This company was implemented and operates a fully electronic clearing, settlement and depository service to be known as the Bermuda Securities Depository (BSD)

» The service was introduced during the first half of 2001

» It operates basically the same way as other central depositories although it was adapted to the Bermuda environment.

Situation with BSD

» To enter stock into the BSD, investors will To enter stock into the BSD, investors will lodge certificates (unless book form) lodge certificates (unless book form) through the use of transfer forms, to through the use of transfer forms, to transfer legal ownership to BSD nomineetransfer legal ownership to BSD nominee

» Settlement of BEST trades will then take Settlement of BEST trades will then take place by book entry transfer within the place by book entry transfer within the depository systemdepository system

» Investors may withdraw certificates if they Investors may withdraw certificates if they wish but this will be discouragedwish but this will be discouraged

BSD

Clearing

Settlement

Depository

Brokers, custodians/institutions and foreign depositories may be members

Overview

BESTBest trades are passed automatically to BSD through the gateway.

Stock is deducted from the seller’s account and added to the buyer’s account by book entry transfer. Payments are netted at participant level and net amounts are paid to/received from BSD.

Stock is held in dematerialised form at account within member – details are provided to the registrar.

BSD checks trades for validity, e.g. valid account and sufficient stock and funds.

Summary of BenefitsSummary of Benefits

» The implementation of the Bermuda Central Depository The implementation of the Bermuda Central Depository (BSD) provides brokers and custodians in Bermuda (BSD) provides brokers and custodians in Bermuda with:with:

a book entry transfer settlement system which avoids the a book entry transfer settlement system which avoids the need for the movement of paper to settle a tradeneed for the movement of paper to settle a trade

a central guarantee that once a trade has been accepted a central guarantee that once a trade has been accepted then stock and money will passthen stock and money will pass

no bad delivery of stock because all stock is validated for no bad delivery of stock because all stock is validated for good delivery before acceptancegood delivery before acceptance

registration on settlement due date so faster turnround of registration on settlement due date so faster turnround of stockstock

a system that is volume insensitive – enabling significant a system that is volume insensitive – enabling significant volume increases without extra manual processingvolume increases without extra manual processing

a platform for future growth and a platform for future growth and expansion.expansion.

BSD Members

TradingTrading ClearingClearing SettlementSettlement DepositoryDepository

BrokersBrokers YesYes YesYes YesYes YesYes

CustodiansCustodians NoNo YesYes YesYes YesYes

InstitutionsInstitutions NoNo YesYes YesYes Own Own accountsaccounts

Foreign Foreign DepositoriesDepositories NoNo YesYes YesYes Omnibus Omnibus

AccountAccount

Brokers, Custodians, Institutions and Foreign Depositories may become Brokers, Custodians, Institutions and Foreign Depositories may become participants. They have access to facilities as follows:-participants. They have access to facilities as follows:-

Cash Movement

» A payment statement is produced by A payment statement is produced by the BSD for each participant on T, the BSD for each participant on T, showing net funds to pay or receive on showing net funds to pay or receive on T+3T+3

» On T+3 net funds are settled between On T+3 net funds are settled between participants and BSDparticipants and BSDBrokers who are net payers instruct a Brokers who are net payers instruct a

transfer of funds to BSDtransfer of funds to BSDBSD acts as a Central Guarantor for the BSD acts as a Central Guarantor for the

settlement of all tradessettlement of all tradesSettlement Cap Guarantees in place for Settlement Cap Guarantees in place for

all Brokeragesall Brokerages

Clearing

Check Settlement Cap+ bank guarantee+ cash+ sales- purchases

BEST

sold order20 sharesacct. U

A

Buy order20 sharesAcct. Z

C

OwnedAvailable

A B C

U50

V10

W25

X50

Y10

Z25

50 10 25 50 10 2530 10 25 50 10 25

Check and Update inventory

OK?Tradeexecutes

Update inventory

30 10 25 50 10 45

BSD provides guarantee that all trades will settle

Interface with Users

» Brokers and Issuers (and/or a third Brokers and Issuers (and/or a third party registrar) can interface with party registrar) can interface with BSD through:BSD through:our secure websiteour secure websitereceipt of information by e-mail;receipt of information by e-mail;receipt of printed reportsreceipt of printed reports

» Frequency of output dependent on Frequency of output dependent on Issuers connection or pre-agreed Issuers connection or pre-agreed conditionsconditions

System Access

Trader

BEST

Settlement Staff

Same Log In

BSD

DifferentLog In Access

Levels

Secure Website

Closing Summary

» Stock: Stock: BSD checks that stock is available for settlement (in a BSD checks that stock is available for settlement (in a

specified BSD account) and freeze the stock in the specified BSD account) and freeze the stock in the accountaccount

» FundsFundsBSD checks that funds are available for settlement BSD checks that funds are available for settlement

through the use of a settlement capthrough the use of a settlement capClearing members are required to support their net Clearing members are required to support their net

trading balance (settlement cap) by providing a bank trading balance (settlement cap) by providing a bank guarantee or cashguarantee or cash

Bermuda banks or foreign banks with good credit rating Bermuda banks or foreign banks with good credit rating may provide the guaranteemay provide the guarantee

Catastrophe insurance against bank defaultCatastrophe insurance against bank default

BSD offers a central guarantee, but will not be at risk asBSD offers a central guarantee, but will not be at risk as