OUTSOURCED TRADING SOLUTIONS FOR FINANCIAL INSTITUTIONS June 23

OUTSOURCED TRADING SOLUTIONS FOR FINANCIAL INSTITUTIONS June 23 rd 2011

Agenda Brief introduction The Online Trading Industry Case study: Ava FX Business opportunities Q&A Romania’s gateway to online trading

Brief introduction Established in 2006 Fastest growing broker in Europe Trading volumes over $50 B monthly Operates in 150 countries 7 offices worldwide Regulated in the EU by the Central Bank of Ireland Winner of multiple awards Romania’s gateway to online trading

The Online Trading Industry How it started Mid-late 1990’s: Saxo Bank (EU) and FXCM (US) bring the spot FX market to the retail investors. Main Drivers: Broadband internet access in homes and workplaces Internet access everywhere (Wi-Fi, mobile etc. ) Increasing confidence of customers making financial transactions online Economic growth Romania’s gateway to online trading

The Online Trading Industry Main drivers 500 Internet access - Europe 400 Source: IDC, Gartner, Morgan Stanley Annual Unit Shipments (MM) 450 300 250 200 150 100 50 0 200 5 200 Desktop PCs 200 6 7 Laptop PCs Smartphones 201 200 201 8 9 0 1 201 2 (E) Romania’s gateway to online trading

The Online Trading Industry Main drivers 20 Internet usage 18 16 Source: Microsoft Hours/Week 14 12 10 8 6 4 2 0 2004 2005 2006 Internet 2007 TV 2008 2009 2010 2011 Romania’s gateway to online trading

The Online Trading Industry Value proposition Open 24 h, as opposed as stock markets – trading in free time Fairness of the market – huge liquidity, no market movers or inside info Ability to generate gains in any market condition High amount of leverage Romania’s gateway to online trading

The Online Trading Industry Evolution Increased regulatory scrutiny Institutional customers become more comfortable with online firms Online trading industry 2006: 5% of revenues from institutional customers 2010: Over 10% of revenues from institutional customers (+100%) Romania’s gateway to online trading

The Online Trading Industry Growth 4. 5 Daily volume 4 Source: IBS, Sept. 2010 3. 5 4. 0 3. 3 $ Trillions 3 2. 5 2 1. 5 1 0. 5 0 2007 FX Spot 2010 Romania’s gateway to online trading

The Online Trading Industry Growth 4. 5 Daily volume +48% ~ 3. 5 $ Trillions 3 1. 5 1. 0 +20% ~ 2. 5 2 Source: IBS, Sept. 2010 4 1. 5 1 0. 5 0 2007 FX Spot 2010 Romania’s gateway to online trading

The Online Trading Industry Relevance 90%+ of trading volumes consists of spot FX Rapid growth of CFDs and FX options BIS surveys pick up volumes through liquidity providers BIS includes several online trading firms and non-bank dealers for the first time in 2010 Romania’s gateway to online trading

The Online Trading Industry CFDs: Contract For Difference A contract for difference (or CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time. No physical exchange of asset, only difference in price More liquidity – No need for matching order No expiry – Rollover of positions on different underlying Ability to short-sell assets regardless of regulations High leverage available Romania’s gateway to online trading

The Online Trading Industry Geography – A truly global market Healthy distribution worldwide for both trading volumes and customer base Key trends US caught up with the EU. Trend expected to reverse due regulatory limitations Expected reduction in volumes and customers migration to non-US firms Growth of CFDs will shrink US pie CFDs not allowed in the US “Rest-of-the-World” will grow in importance Due to availability of market drivers Romania’s gateway to online trading

The Online Trading Industry Geography – A truly global market 2000 10% 2010 2015 (E) 20% 25% 25% 20% 25% 30% 45% 30% Source: Leap. Rate US Europe Japan Other Romania’s gateway to online trading

The Online Trading Industry Revenue and revenue base Estimated total annual revenues of the trading firms to be approximately $6. 5 billion Steady growth of CFD-related trading volume. Currently about 10% of total, 12% by 2012 and 15% by 2015 Steady expansion of products range traded through CFDs Romania’s gateway to online trading

The Online Trading Industry Revenue and revenue base 300 Total Trading at Online Financial Trading Firms 200 Source: Leap. Rate Daily avg vol ($B) 250 100 50 0 2001 2002 2003 2004 2005 CFDs 2006 FX 2007 2008 2009 2010 2011 2012 (E) Romania’s gateway to online trading

The Online Trading Industry Demand drivers #1 Driver: Volatility - Crude oil: Soared to $160/barrel in summer 2008 and dived to a quarter of that price in winter 2009. Trading on crude-oil CFDs skyrockets! - As Gold’s volatility increased, trading volumes increased proportionally Trading volumes on CFDs today: 10% of total Forecasted by mid decade: 15% of total 50%+ increase considering that CFDs are virtually absent from US market Romania’s gateway to online trading

The Online Trading Industry Segmentation by product 2000 2010 1% 2015 (E) 7% 3% 8% 7% 85% 90% 99% FX Gold and Oil Source: Leap. Rate Other CFDs Ava FX 36% FX 64% CFDs Romania’s gateway to online trading

The Online Trading Industry Market trends Increasing involvement of institutional customers 10% of total volumes from nil in 2000, expected to reach 50% in the next decade Increased interest from customers of savings products Through management of online accounts by professional money managers Increased interest in technology by customers Mirror trading platforms, automatic execution, signal providing, technology bridges Romania’s gateway to online trading

The Online Trading Industry Business models Aggregation Trading Liquidity Romania’s gateway to online trading

The Online Trading Industry Business models Aggregation Trading Liquidity • Mainly marketing driven firms • Usually working on revenue sharing deals with market makers • CPA deals • Rev. Share on spreads • White labels • Variety of back-office solutions • In house • Outsourced (full white label) Romania’s gateway to online trading

The Online Trading Industry Business models Aggregation Trading Liquidity • Responsible for: • Data feeds • Execution • Risk management • Variety of revenue models: • Market making • Agent markup • Fee per trade Romania’s gateway to online trading

The Online Trading Industry Business models Aggregation Trading Liquidity • Usually very large firms • Provide • Data feeds • Liquidity • Back-to-back trades • Clearing Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks • Multi-asset • Mono-currency • User-friendly • Open architecture • Market analysis • News • Calendars • Other Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks • APIs* on trading servers • Programmable trading platforms • Off-the-shelf robots • Bridges for signals • Other… *Application Programming Interface Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks • Cheapness • Variety • Increasing quality of providers through certification process • Strictly volume based • Revenues depend on rebates Romania’s gateway to online trading

The Online Trading Industry Technology Trading platforms Auto trading Mirror trading platforms Social networks • Combine principles of traditional asset management with social networking • Stricter certification process • Traditional forms of revenue generation (performance fee etc. ) Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness Security of funds Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness Security of funds • Minimum deposit $100 • Free demo account • Welcome bonuses • All payment methods accepted • Customer support in 12 languages • Easy margin and P/L calculation • Training and webinars Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness Security of funds • 24 h support • Multi-lingual assistance • Trading through dealing room • Technical support • Personalized service • Ava Select • Simplified processes Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness Security of funds • 2 trading platforms • Trading from mobile • EUR/USD/GBP/JPY accounts • Free advanced trading tools and indicators • Mirror trading, auto-trading etc. • “Visual” trading Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness Security of funds • Over 200 instruments • Fixed spreads • High leverage • State-of-the-art execution • No negative-balance margin calls Romania’s gateway to online trading

Case study: Ava FX Ava’s success: key drivers Accessibility Service Trading experience Competitiveness • Mi. FID compliant • Segregated accounts • Solid depository banks • No negative balance margin calls Security of funds Romania’s gateway to online trading

Business opportunities Why banks stayed out Industry dynamics Fast growth, fast change, sophisticated marketing and customer retention techniques Failure to recognize potential Identified as a low-margin segment banks largely underestimated volumes Lack of skill sets and HR Especially online mass-marketing. Relatively low-barriers entrepreneurs and talents prefer setting up their own firm or work for equity upsides in startups High customer churn Banks are usually equipped for long-term investments and relationships with customers Romania’s gateway to online trading

Business opportunities What it takes MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION • Established brand • Ability to cross-sell Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION • Different back-office management • Different payment methods Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION • Different trading platforms • Trading on CFDs Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION • Assistance needed for customer base • Highly labor intensive • Demanding training process Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION • High customer churn • Very different marketing techniques Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION FUNCTIONAL RELATIONAL #1 #3 #2 Romania’s gateway to online trading

Business opportunities Internet trends in Romania Population Internet Users Penetration User Growth ( 2009 Est. ) Latest Data (% Population) (2009 vs. 2000) 33. 40% 828. 80% 65. 30% 238. 90% Romania 22, 215, 421 7, 430, 000 European 489, 601, 562 319, 895, 346 Union Source: www. internetworldstats. com Romania’s gateway to online trading

Business opportunities On days when you use the Internet, how long do you use it on an average day? Source: MCDC Study by IAB-EU & In. Sites Consulting Internet trends in Romania’s gateway to online trading

Business opportunities How many days do you use the internet in an average week? Source: MCDC Study by IAB-EU & In. Sites Consulting Internet trends in Romania’s gateway to online trading

Business opportunities Source: MCDC Study by IAB-EU & In. Sites Consulting Internet trends in Romania Do you have an internet connection at home? Romania’s gateway to online trading

Business opportunities Source: MCDC Study by IAB-EU & In. Sites Consulting Internet trends in Romania Proportion of respondents who perform named activity at least weekly Romania’s gateway to online trading

Business opportunities Banks – Core expertise MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION FUNCTIONAL RELATIONAL #1 #3 #2 Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Omnibus Account CUST. ACCT. BANK AVA FX MASTER ACCOUNT CUST. ACCT. Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Omnibus Account • Branded trading platform • Full control on trading conditions • Full control on back-office and customer relationship Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Partial White Label Romania’s gateway to online trading

Business opportunities The solutions - Partial White Label Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Partial White Label CUST. ACCT. SHARED CRM SYSTEM CUST. ACCT. Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Partial White Label • Fully branded customer experience (website + platform) • Fully outsourced back-office solutions including quick payment methods • Full control on customer relationship Romania’s gateway to online trading

Business opportunities The solutions MARKETING BACKOFFICE TRADING + RISK MGMT CUSTOMER SUPPORT CUSTOMER RETENTION Full White Label • Fully branded customer experience (website + platform + emails) • Advanced customer tracking and data mining • Fully outsourced back-office solutions Romania’s gateway to online trading

Business opportunities Advantages Quick time-to-market Minimal investment State-of-the-art technology Best skills set in the industry (Marketing, anti-fraud etc. ) Romania’s gateway to online trading

Q&A Thank you for your attention Questions are welcome Gabriele Manasse Director – Italy g. manasse@avafx. com Romania’s gateway to online trading

Romania’s gateway to online trading

Romania’s gateway to online trading

“db. FX has been a strongly performing business for Deutsche Bank but has reached a point where in order to reach its full potential it requires significant investment in specific resources which are not consistent with Deutsche Bank’s current strategic initiatives. ” - Deutsche Bank press release Another good reason would be that by June this year db. FX would probably be required to become an RFED due to its foreign bank status which would require major restructuring and additional compliance – which probably wasn’t worth it for Deutsche Bank. - Forex Magnates 21/4/2011 Romania’s gateway to online trading