JSC Operations Managers Conference

Goldman Sachs view of CLSExperience and Expectation

Frank Smith

London 21st April 2005

2

Experience

Volumes We have seen, and are continuing to see, increased volumes being settled through CLS. We now have just over 80% of our eligible interbank FX deals going in. This represents about 77% of all our interbank FX deals being settled.

Value Very similar reductions in overall settlement risk. Average Daily Net Cashflows to/from CLS, after In-Out Swaps, = less than $800 million.

Performance Given the time criticality of settlements in CLS the performance overall is excellent. When there are problems, communication is first class. Both settlement and IT queries are responded to efficiently and in a timely manner.

Source: Text

3

Expectation

Inclusion of New Products

FX Products

1. Non Deliverable Forwards – matching of inception and maturity trades and settlement of the difference.

2. FX Options – matching at inception and settlement of the premiums.

Interest Rate Swaps

1. Single Currency – matching and settlement as required through the life of the deal.

2. Cross Currency – matching, settlement of the currencies at inception, and maturity, and as required through the life of the deal.

Credit Default Swaps

1. Matching of cashflows as far forward as possible.

2. Generation of cashflow ladders potentailly.

3. Settlement of the quarterly cashflows (and the few that are settled on anniversary).

4

Expectation?

Non-Eligible Currencies1. Matching2. Calculation and provision of bi-lateral net settlement amounts, together with formatted

payments for the net amounts.

Additional Settlement Sessions1. An evening session (CET) so that USD/CAD spot trades can benefit from the settlement risk

elimination2. Maybe 2 sessions, midday and early afternoon (CET), so that same day spot and the near

legs of overnight swaps can be included

5

Expectation!!

Reduce the Costs involved1. Get reduced transaction costs from our nostro providers.2. Reduce costs of daylight overdrafts.3. CLS to reduce the base costs.4. CLS to reduce its liquidity charges by reducing the amount of liquidity providers that it

needs.

Continue to expand the scope for multilateral payment netting, and correspondent risk reduction, right across the financial markets; not just for traded products.