Table of Contents -for “Breaking the Barriers” – A Technological Study of the Obstacles to Pan-European Best Execution in Equities (Jan 2003)

Introduction

1 Technological Definitions

1.1 Hardware and Telecommunications

1.1.1 Physical Connectivity to Multiple Execution Venues

1.1.2 Physical Connectivity to Clients

1.2 Software: Applications and Modules

1.2.1 Logical Connectivity to Multiple Execution Venues

1.2.2 Net Price Consolidation

1.2.2.1 Generic Net Price Consolidation

1.2.2.2 Client/Order-Specific Net Price Consolidation

1.2.3 Order Routing

1.2.3.1 Basic Order Routing

1.2.3.2 Generic Smart Order Routing

1.2.3.3 Client-Specific Order Smart Order Routing

1.2.3.4 Execution Strategies

1.2.4 User Order Management Software

2 Price Consolidation

2.1 The US Experience

2.1.1 The US National Market System

2.1.2 The Value of the NMS

2.1.2.1 Investor Protection

2.1.2.2 Best Execution Monitoring

2.1.2.3 Enforcement

2.1.3 The Future of Consolidation in the US

2.2 Pan-European Consolidation

2.2.1 Hardware Issues

2.2.2 Software Issues

2.2.2.1 Differences in Exchange Interfaces

2.2.2.2 Sequencing

2.2.3 Currency Conversion

2.2.4 The Need for Net Price Consolidation in Europe.

2.3 Conclusions

3 Real-Time Net Price Calculation

3.1 Allowing for Costs

3.1.1 Direct Costs

3.1.2 Indirect Costs

3.1.3 Soft Commissions

3.2 Market Depth

3.3 Conclusions

4 Order Routing

4.1 The US Experience

4.2 Pan-European Order Routing

4.3 Conclusions

5 Making the Technology Affordable

5.1 Possible Configurations and Cost/Benefit Considerations

5.1.1 Private Data Centre

5.1.2 Solutions Using Intermediaries

5.1.3 Third Party ASP (Minimal Cost Solution)

5.2 Conclusions

6 Price Benchmarking

6.1 The Objections to Pan-European Benchmarking

6.2 Distinguishing Retail and Institutional Trading

6.3 Conclusions

7 Cross-Border Clearing and Settlement

7.1 The Need for Integration/Consolidation

7.2 Four Models of Integration/Consolidation

7.2.1 Single Monopoly Clearing and Settlement House

7.2.2 ICSD with Hub and Spoke Architecture

7.2.3 Multiple CSDs with Bilateral Linkages

7.2.4 Communications Hub with CSD Spokes

7.3 Costs

7.4 Straight Through Processing

7.5 Different Settlement Cycles and Other Local Anomalies

7.6 The Role of Regulation in Mandating Linkages

7.7 Conclusions

8 Exchange Interfaces

8.1 The Need for Standardisation

8.2 XML Standards

8.3 Addressing XML Issues

8.4 The Market Data Definition Language

8.5 Mandating Minimum Standards

8.6 Conclusions

9 Main Conclusions and Recommendations

9.1 Main Conclusions

9.2 Main Recommendations

9.3 Impact of Suggested Outline Regulatory Package

Bibliography

Appendix A: Abbreviations

Appendix B: XML Protocols (Documents and Schemas)

Keywords for Report:

Best execution, cross-border trading, European equities, price benchmark, European superbenchmark, European market integration, exchange interfaces, clearing and settlement integration, order routing, XML standards, ISO 15022, MDDL, ICSD, CSD.