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DIFX Market Model Presentation

for AMEDA20th April, 2006

by

Nasser Al Shaali, COO – DIFX

&

Muffadal Kagalwala, Head - DIFX CSD & Registry

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Topics covered in this presentation:

Introduction to DIFC and DIFX

DIFX Membership

DIFX Trading

DIFX Clearing and Risk Management

DIFX Central Securities Depository

DIFX Registry

DIFX Systems

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Introduction to the DIFC and DIFX

Dubai International Financial Exchange (DIFX) is a company incorporated under Dubai International Financial Centre (DIFC), a financial free zone situated in the heart of Dubai.

Financial activities in DIFC are governed to the international standards by an independent regulator, the Dubai Financial Services Authority (DFSA)

DIFX is the main gateway of opportunities in the GCC as well as Middle East & Africa. It bridges the gap between Western Europe and far east.

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DIFC believesa new financial time zone is fast developing

London Singapore

Global Perspective of the DIFC

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The DIFX complements regional and international stock exchanges The Exchange is attracting Issuers and Members from across the globe on a level playing field

DIFX : Diverse and Complementary

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Products at DIFX

IPOs

Secondary Listings and Offerings

Bonds

Islamic Products

Funds, Indices & Structured Products

Warrants

Futures & Options

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Products at DIFX

In the pipeline: 3-5 further IPOs by end of Q2 2006

1 March 2006 KHI – Ordinary Shares

06 February 2006 Mashreqbank – EMTN

26 January 2006 Dubai Ports, Customs and Free Zone Corporation (PCFC) – Sukuks

17 January 2006 National Bank of Dubai – EMTN

27 December 2005 4 Deutsche Bank CROCI Islamic US Index

14 October 2005 Investcom (Global Depository Securities)

26 September 2005 5 Deutsche Bank Index Tracking Certificates

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Membership at DIFX

DIFX membership offers 3 types of Membership to its participants:

Non Clearing Member :(NCM) i.e. Trading Only Individual Clearing Member :(ICM) i.e. Trading & Own Clearing General Clearing Member :(GCM) i.e. 3rd Party Clearing Only

DIFX CSD offers a Custodian role to international and regional banks.

DIFX CSD also allows HNWI and corporate investors to open direct accounts.

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Members at DIFX

Today, DIFX has a presence of World class & International recognized participants on its market as well as strong regional participation.

Trading Members:

General Clearing Members:

Custodian Members:

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DIFX Trading

The DIFX Trading platform is a “Hybrid” trading system. The DIFX Trading system is based on the latest version of AEMS,

NSC trading platform. DIFX trading is an anonymous and order-driven market which also

allows for Market Makers to make markets in the products listed. DIFX offers GL Win Terminals to members for access DIFX GL also has an internet application which has the same features. DIFX offers a technical connectivity (API) for users & dealing room

equipment providers who wish to develop their own interface. Access to the API is available from Dubai or Paris.

The timing of the trading sessions are from 11.45 am to 04.45 pm The exchange operates from Monday to Friday.

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DIFX Clearing

DIFX offers the Central Counter Party (CCP) for its Clearing Members Trade novation facility – DIFX becomes buyer to every seller and

seller to every buyers. Eliminates the bilateral counter party risks. CCP allows the multilateral netting and reduction of settlement

volumes. One delivery obligation per security per date per member. One cash obligations per currency per date per member. DIFX has outsourced all its banking activities to a Clearing Bank and

the Clearing Bank coordinates with Member’s Settlement Banks for the funds transfers.

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DIFX Risk Management

DIFX takes on certain risks in its capacity of Central Counter Party (CCP) for all the On Exchange trades. The risks are:-

Counter Party Risks Replacement costs Risks

These risks are addressed by DIFX Risk Management Policies Defining Membership criteria with certain capital adequacy

requirements Margins from DIFX Members Adequate Clearing Fund

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Margins at DIFX – Initial Margin & MTM

Initial Margin DIFX uses the VAR methodology, based on each night Closing Price. Initial Margins are therefore expressed as a percentage of the closing

price.

Variation Margin – Mark to Market Margins (MTM) DIFX does not give the notional credits to members – credit variation

margin cannot be used to offset margin obligations

Margins are accepted in Cash, Securities, CD and Bank Guarantee

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DIFX Central Securities Depository (CSD)

DIFX owns & operates a Central Securities Depository (CSD).

Also, The DIFX owns a bare trustee company called ‘DIFX Guardian Limited’ DIFX Guardian is hold the legal title or beneficial title (where applicable) for the DIFX CSD.

The CSD holds DIFX listed securities in a 100% electronically dematerialized form.

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DIFX CSD Services

Custody of securities

Settlement Services for DIFX Clearing Members

Securities transfer between accounts (Push Transfers)

Securities transfer with DVP / RVP and DFP /RFP

DIFX facilitates transfer of securities between CSD accounts and Registry accounts

The CSD handles all corporate action processing & IPO processing.

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DIFX CSD Accounts Structure

Custodian can hold securities for their clients under their account at the CSD. The custodian account type are Omnibus without details and OWN accounts.

Trading Members will operate accounts at the CSD for Settlement purposes. The account type is normal accounts.

The Clearing Member will operate accounts at the CSD for Settlement, and other purposes. The account types are SSP and normal accounts.

HNWI and Corporate Investors operate accounts at the CSD for Custody purposes. The account type is normal accounts.

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DIFX Settlement

DIFX follows a continuous T + 3 rolling Settlement cycle.

Securities settlement takes place on the DIFX CSD and Cash settlement takes place through the DIFX Clearing Bank

DIFX has nominated Standard Chartered as its Clearing Bank.

All Clearing Members are required to have a Securities Settlement Pool account (SSP) for settlement purposes and a Settlement Bank account for Cash.

Presently, All securities traded are denominated, cleared & settled in US Dollars.

Settlement activity is not performed on US Fed Reserve holidays.

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DIFX Settlement (T+3)

07:00 16:40 13:00 14:30 16:30 17:15

2.Reservation CB liaises with

SB to conduct Cash

settlement

4.Re-compute

securities & cash obligations

8.Reconcile andCompute Cash

Shortfall

7. Receive

confirmationfrom CB

6. Send Cash obligations

to CB

9.Book transfer(Settlement)

Securities through CCP

19:30

10. Announce

Completion of

Settlement (excl. fails)

for T day trades

12. DIFX

Performs EOD for CSD

/Registry

1. DIFX

Performs BOD for

CSD/Registry

3. Identificatio

n of shortfall

14:15 17:30

11. CCP to

create new trades for

carry forward of

the security

fails

5. CCP to inform

affected CMs regarding

recomputed obligations

14:00

Start Time End Time

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DIFX Fails Settlement (T+4)

07:00 09:00 12:40 10:00 10:20 12:30 13:00

2.Reservation for

fails

CB liaises with SB to

conduct Cash

settlement4.

Re-compute securities

obligations

3. Identify security

shortfall for fails &

compute Cash

Settlement for the same

8.Reconcile andCompute Cash

Shortfall

10:30

7. Receive

confirmationfrom CB

6. Send Cash obligations

to CB

9.Book transfer(Settlement)

Securities through CCP

19:30

10. Announce

Completion of

Settlement for

Fails of T+3 day

11. DIFX

Performs EOD for

CSD/Registry

1. DIFX

Performs BOD for

CSD/Registry

5. CCP to inform

affected members regarding

recomputed obligations

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Future programs of DIFX CSD

DIFX envisages in future to have links with other International CSD (ICSD) which will enable DIFX account holders to move securities from one market to another markets.

The DIFX also plans to tie-up with regional CSD’s to allow investors to hold DIFX securities in their existing accounts

DIFX CSD also plans to offer other value added services:- Pledge of securities. Securities Lending & Borrowing of securities (SLB). SMS alerts, WAP / IVR based services. eC connect & eC access facilities. Online risk management profile.

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DIFX Registry

Holds the Shareholder Register of Legal Title for the Issuer.

Company Registrar functions.

Corporate Actions Processing.

IPO processing for the Issuers & Lead Managers.

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DIFX Clearing, CSD and Registry System (eClearSettle)

The DIFX uses its eClearSettle system for Clearing, Settlement, CSD and Registry activities.

The DIFX eClearSettle systems has been developed by Tata Consultancy Services (TCS Ltd) India.

It’s a Highly secured web based application system. It is an end to end integrated systems capable of performing Clearing,

Settlement, CSD, Risks Management & Registry Functions. It is SWIFT compliant for all internationally accepted messages. User friendly reports (PDF) on the pre specified email address. On-line query of all accounts & securities balances held. Participants can participate & instruct in all corporate action –

mandatory & voluntary.

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DIFX Clearing, CSD and Registry System (eClearSettle)

COMMON LIBRARY

Communication Layer

RegistryServices

RegistryServices

CSDServices

CSDServices

Integrated Risk ManagementIntegrated Risk Management

Cross BorderSettlement

Cross BorderSettlement

Repo Repo

Cash Clearing & Settlement

Cash Clearing & Settlement

Derivatives Clearing & Settlement

Derivatives Clearing & Settlement

BusinessPartnerMaster

BusinessPartnerMaster

InstrumentMaster

InstrumentMaster

CalendarCalendarUser

AdministrationUser

Administration

System ParametersSystem

Parameters

FeesAnd

Billing

FeesAnd

Billing

ReportsReports

SWIFTISO 15022

WAP IVR emailWeb

InterfaceFile

Transfer

SecuritiesLending andBorrowing

SecuritiesLending andBorrowing

Payment Services

Payment Services

CorporateActions

CorporateActions

PledgePledge

AccountsAccounts

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Thank You