annual On the year 2015 and prospects for Deutsche Börse Group Our clear vision is to turn Deutsche Börse into the global market infrastructure provider of choice, being top-ranked in all its activities. This Annual is the “accelerated” version of our corporate report. Key information, and to the point: the Annual com- prises an overview of Deutsche Börse Group, and of our “Accelerate” growth strategy. We are looking at the present state of the Group – but of course we will also take a look ahead to what we have planned for the near future, as well as potential innovations over a longer period. We have thus structured the report into three sections: Status, Ambition, and Innovation. We accept responsibility in all of these areas. Not only are we determined to be the number one for our customers and investors – we also take the needs and interests of all rel- evant stakeholders into account. Dialogue and transparency are key aspects in this context. This is why we not only expanded our stakeholder survey in 2015, but also further developed our reporting, bringing it in line with the stan- dards set by the Global Reporting Initiative (GRI): our Annual and our financial report 2015 have both been prepared in accordance with the GRI G4 framework for the first time. We are looking back at a successful year. Yet we have no intention of resting on our laurels. We must grow much faster in the future. We have called our strategy – designed to achieve faster growth – “Accelerate”. The purpose of this strategy is to propel Deutsche Börse Group into the global number one or number two position – in all of its business areas. And we are making good progress. Last year, we acquired the remaining stake in index provider STOXX, and also took over the foreign-exchange trading platform 360T, an enter- prise that is a blueprint for entrepreneurial courage, client proximity and innovation. You can read more about 360T and its founder Carlo Kölzer on page 22. Talking about client proximity: we want our clients to be our focus, throughout the Group and for the long term. Under the leadership of our new Global Head of Sales, Robert Jolliffe, we have established a team of Group Relationship Managers. You will find an interview with Robert on page 32. Client relationships are one part of the equation – client- focused solutions are the other: they must go hand in hand. This is why we have centralised our product development, coordinated by Ashwin Kumar, our new Global Head of Prod- uct Development. He talks about his plans on page 18. We continue to focus on Asia, and especially China – one of the world’s most important growth regions. We founded the China Europe International Exchange (CEINEX) at the end of October 2015, a European- Chinese cooperation that is truly unique worldwide, with which we are preparing for the future. To ensure that “Accelerate” is a success, we realigned Exec- utive Board portfolios at the beginning of 2016. The goal of all these steps is to act faster, and in a more focused and client-oriented manner. I hope you will enjoy reading our Annual. Yours sincerely, Carsten Kengeter Chief Executive Officer S tat u S in n ovati o n Deutsche Börse Group – Interview with Ashwin Kumar an overview Our Executive Board Security in trading as a European virtue 18 21 22 A portrait of 360T Venture Network The Deutsche Börse Sustainable investment A new architecture of trust Important key figures 28 The new Regulatory Reporting Hub RE S P o n S ibiLit Y 38 Will trade: London for Singapore 6 9 10 31 35 54 a m biti o n “Accelerate” 14 Strategic perspectives: 26 Regulatory strategy Interview with Rob Jolliffe 32 49 Our prospects 40 42 44 Working at Deutsche Börse Group 360-degree assessment Risk management: questions for Marcus Thompson Compliance: questions for James Freis 46 51 Corporate governance A–Z 53 Our Supervisory Board 18 14 22 49 6 Deutsche börse Group – annual S tat u S an overview S tat u S – D Eu t S c hE b ö RS E G R o uP An overview 1 PRE-iPo anD LiStinG Start-up companies often enter into a decisive phase when their business requires liquid funds in order to boost their market profile and to expedite growth. It is specifically for companies in this phase that Deutsche Börse launched its Venture Network. A com- pany’s presence on the stock exchange starts with the exchange listing. The Frankfurt Stock Exchange allows companies of all kinds and sizes to raise equity or debt capital – SMEs or large enterprises, domestic or inter- national. Investors may participate in the growth of the real economy – promoting it at the same time by providing capital. Our brands: Deutsche Börse, Börse Frankfurt 1 PRE-iPo anD LiStinG 2 tRaDinG 3 cLEaRinG 4 SEttLEmEnt 5 cuStoDY 6 coLLatERaL anD LiquiDitY manaGEmEnt 7 maRkEt Data 8 inDicES 9 tEchnoLoGY 7 2 tRaDinG Deutsche Börse Group operates regulated markets for equities, bonds and numerous other products using its Xetra® electronic trading system. The Group also facili- tates trading of derivatives – i.e. contracts derived from other assets or reference values (including equities, indices, German and European government bonds, for- eign exchange or commodities), which are traded on the various Eurex trading platforms based on the T7® market architecture. This also encompasses electricity and gas trading at the European Energy Exchange. Foreign exchange trading takes place via the 360T® platform. Our brands: Xetra®, Eurex®, European Energy Exchange, 360T®, Börse Frankfurt, Tradegate 3 cLEaRinG Clearing denotes the offsetting of transactions to reduce risk positions. In addition, Deutsche Börse Group’s clear- ing houses – Eurex Clearing AG and European Commodity Clearing AG – act as central counterparties: as buyer to each seller, and as seller to each buyer to minimise counterparty risk. More over, centralised clearing for off-exchange (over- the-counter, OTC) trades is gaining importance, due to financial markets regulation but also reflecting the security features. Deutsche Börse Group offers an efficient clearing platform for all types of trading activities. Our brands: Eurex Clearing, European Commodity Clearing SEttLEmEnt Following trading and clearing, settlement involves the accurate booking of individual items, with the exchange of securities against money. The booking of securities transactions to individual client securities accounts is also ascertained during this process. Clearstream, Deutsche Börse Group’s provider of post-trading securities services, is responsible for efficient global securities settlement. Our brand: Clearstream 4 cuStoDY Once assets have been settled correctly, they are held in safe custody. Clearstream administers assets through- out the period for which they are held, offering services such as the handling of corporate actions and dividend payments – across all product types. Moreover, these services allow market participants to efficiently comply with their regulatory obligations. Our brand: Clearstream 5 8 Deutsche börse Group – annual S tat u S an overview coLLatERaL anD LiquiDitY manaGEmEnt Through Clearstream’s Global Liquidity Hub, Deutsche Börse Group offers financial institutions optimal liquidity and collateral management. Due to its links to depository banks, trading platforms, central counterparties and other national central securities depositories, the open architecture provides real-time access to a rich pool of liquidity. Our brands: Clearstream, Eurex Repo® 6 maRkEt Data Private and institutional investors make decisions based on market data, creating new information in turn. Deutsche Börse’s most prominent data products include (real-time) price data generated from its various trading systems, as well as historical market data, plus analytical indicators from trading at its cash and derivatives exchanges. Our brand: Deutsche Börse 7 inDicES Through STOXX Ltd., Deutsche Börse Group dissemi- nates indices tracking markets around the world. The STOXX index families are differentiated by country, region, product type, investment theme or strategy; customised indices facilitate tailor-made market analysis in real time. Among the Group’s benchmark products are the EURO STOXX 50® and the German blue-chip DAX® index, which tracks the performance of the 30 largest German companies. Our brands: STOXX®, DAX® 8 tEchnoLoGY Resilient, state-of-the-art IT systems provide the foun- dation for virtually all capital markets services. Deutsche Börse Group develops IT systems for trading, clearing, settlement and custody services, while ensuring the operational reliability of the data centres. Deutsche Börse’s IT processes are certified in accordance with ISO standards. Our brands: Deutsche Börse, T7®, C7®, N7®, F7® 9 Deutsche börse Group – annual S tat u S our Executive board 9 Define and execute Deutsche Börse Group’s growth strategy across the value chain, creating a group that is truly one, and enabling a culture of entrepreneurship, innovation and superior customer service caRStEn kEnGEtER, Chief Executive Officer haukE StaRS, responsible for Cash Market, Pre-IPO & Growth Financing Establish new opportu- nities in our European cash market business, with an active role in growth financing and by establishing a leading pre-IPO marketplace A new structure – to build the global market infrastructure provider of choice ouR a mb ition Contribute to the growth strategy of the Group through sophisticated financial, risk and compliance controls with a focus on creating value for our shareholders GREGoR PottmEYER, Chief Financial Officer Drive the essentials of well- functioning markets with our technology, data and new asset class portfolio – safety, integrity, efficiency and innovation anDREaS PREuSS, Deputy Chief Executive Officer, responsible for IT & Operations, Data & New Asset Classes Design the right solutions across all asset classes – equity, index, fixed-income, FX, commodities, funds – to create growth oppor- tunities tailored to customers JEffREY tESSLER, responsible for Clients, Products & Core Markets 10 Deutsche börse Group – annual S tat u S Security in trading as a European virtue S tat u S – W h Y S E c u Rit Y in t R a D in G i S a Eu R o PE a n v iR t u E “Security is embedded into the DNA of our markets” 11 t R a D i n G Exchange trading is the best proxy for a ‘per fect’ market, mainly because exchanges match supply and demand – directly and free of distortion. Deutsche Börse Group operates regulated markets for equities, bonds, and numerous other products using its Xetra® electronic trading system. The Group also facilitates trading of derivatives – contracts derived from other assets or refer- ence values (including equities, indices, Euro- pean and US bonds, foreign exchange or commodities), which are traded on the various Eurex trading platforms based on the T7® market architecture. This also encompasses carbon dioxide (CO2) emissions trading at the European Energy Exchange. Based on free decisions to buy or sell, fair and transparent prices – which, for example in the case of equities, reflect the future potential of compa- nies – are determined across all regulated trading segments. Trading is a business area of Deutsche Börse Group. p. 7 milliseconds – no carrier pigeons, and no more telephone calls either. Even open outcry on the trading floor would be far too slow; it takes glass- fibre lines to submit orders: “Speed has always been a principle of free trade.” it’S about PLauSibiLitY Whilst trading participants are quick to agree upon the importance of speed, as far as security is concerned, European markets have embarked upon a different route than those in the US, for example: “We have embedded mandatory security features into the DNA of our markets”, explains Budimir. The starting point is plausibility checks, even prior to clients placing their orders into the system. “This is a targeted measure to prevent so-called ‘fat finger’ errors”, says Budimir. “For instance, where a trader would normally buy 1,000 shares at a price of 10 euros, but places an order for 10 shares of the same company at a price of 1,000 euros, the system will detect that something must be wrong.” The mechanism All areas of our lives are getting faster. By switching to electronic trading systems, Deutsche Börse took a key step towards automated trading – almost two decades ago. “Some critical observers of securities trading are call- ing for an artificial slowdown of markets – now that is precisely the opposite of what state-of-the-art technol- ogy intends”, says Miroslav Budimir, Head of Segment Management, who is responsible for Deutsche Börse Group’s cash market structure. “It is unlikely that such demands will actually materialise.” In fact, mechanisms designed to artificially slow down markets already exist – but they are only used in extreme situations: “These mechanisms exclusively serve to maintain fair, trans- parent and liquid trading”, Budimir adds. fRom caRRiER P iGEonS to GL aSS -fibRE cabLES In trading, time has always been money. Up until the 19th century, carrier pigeons were launched from ships sailing from Europe as soon as the US coast was within reach. They brought the latest news long before ship and crew reached the harbour. This meant that those traders who received the news first were able to adapt their trading patterns and pricing policy accordingly. “Whoever was able to skilfully exploit the benefit of being a few hours ahead had an advantage”, says Budimir. Nowadays, it’s not about hours, but about 12 Deutsche börse Group – annual S tat u S Security in trading as a European virtue c L E a Ri n G Clearing is used to net claims and liabilities relating to financial instruments to each other. Deutsche Börse Group’s clearing houses – Eurex Clearing AG and European Commodity Clearing AG – act as central counterparties: as buyer to each seller, and as seller to each buyer. Market participants pledge collateral that allows man- agement of the risk exposure from trading. The clearing function is akin to insuring market par- ticipants against the default of a contractual counterparty. Moreover, centralised clearing for off-exchange (over-the-counter – “OTC”) trades is gaining importance, due to financial markets regulation but also reflecting the security fea- tures. Deutsche Börse Group offers an efficient clearing platform for all types of trading activi- ties; the Group continuously enhances and expands its services offer in this field. Most recently, Deutsche Börse introduced a mecha- nism that allows the execution and settlement of large orders without burdening the market (i.e. without price distortions), and in line with regu- latory requirements. Deutsche Börse thus lives up to its responsibility of facilitating regulated trading with a maximum of service quality and efficiency – making it as attractive as possible. built into Deutsche Börse’s systems is called ‘volatility interruption’ – a very effective protection against a phe- nomenon that made headlines in the US: the so-called ‘flash crash’. Using pre-defined price ranges (‘corridors’), the volatility interruption mechanism is an electronic plausibility check of the next price that is going to occur. If that price is outside one of the corridors, continuous trading will be interrupted for a short period of time; the market will be informed about this situation. Market participants are thus given time to review their orders, and to adjust (or delete) them in order to adapt to the new situation. Continuous trading resumes after a volatility interruption. Static and dynamic price corridors Price Volatility interruption Clearing is a business area of Deutsche Börse Group. p. 7 Static corridor Upper limit Dynamic corridor Upper limit Dynamic corridor Lower limit Static corridor Lower limit + + Time “We use two different corridors for the purpose of vola- tility interruptions: the dynamic price corridor is based on the last price determined; it is designed to capture and prevent abrupt price changes”, Budimir adds. “The static price corridor is wider – and hence more stable – than the dynamic one. We use the static corridor to detect a series of small, successive price changes which, taken together, would constitute a more extensive price movement – a ‘flash crash’, for example.” This means that where a trading pattern would gradually shift the dynamic price corridor – and would thus neutralise its check function – the static corridor would nonetheless trigger a volatility interruption. Budimir adds: “Continuous trading would also be interrupted in this scenario. We have also taken precautions for cases where the price continues to diverge strongly from the preceding price level, even after a volatility interruption. In this case, our third security feature will be triggered: an extended vola- tility interruption, where a qualified employee of Deutsche Börse checks for any news and corresponding order book situation that would justify such an unusual price movement. The employee’s decision when to resume trading is thus based on regulations passed by the man- agement as well as personal expertise and experience.” tRanSPaREncY a S a matt ER of RESP onSibiLitY Budimir stresses the importance of the underlying prin- ciple: after all, even extreme price fluctuations may be justified in specific cases: “Of course, new facts emerging about a company, or other news, may provide a justifi- cation for a price divergence”, Budimir explains. “All we want to avoid is sudden, abrupt spikes – not strong price fluctuations per se. After all, as a market operator, we are not in a position to assess what price is appropriate for a given share traded on our markets. This assessment 1 3 kEY fEatuRES of thE t7® DERivativES tRaDinG PLatfoRm: ■■ optimised processing and enhanced reporting ■■ extended Calendar Spread functionality (calendar spreads support the trading of differences between different options [and futures] contracts on the same underlying instrument, but with different contract months) ■■ markedly faster listing of new products and introduction of new functional features ■■ more flexible timelines for implementing software upgrades kEY fEatuRES of thE XEtRa® RELEaSE 16 tRaDinG PLatfoRm: ■■ fast trading of large-volume orders, without negative market impact (Volume Discovery Order) ■■ MiFID II-compliant solutions ■■ optimum execution of large ETF orders through interaction with the entire order book (Designated Sponsor Quote Request) ■■ protection against unwanted order execution against the participant’s own orders (Self Match Prevention) To directly contact the Eurex Exchange and Xetra teams: technology.roadmap@eurexchange.com xetra@deutsche-boerse.com takes place through interaction between buyers and sellers – by way of their placing orders on our market – and the resulting price discovery process. We support this process by setting the rules for such interaction – rules that apply for all market participants, and which we make transparent. This strengthens the trust of market participants in the price discovery process, and hence, in trading on markets organised by Deutsche Börse. You could say that we define the grammar, not the specific content. Our clients appreciate the robust- ness of our markets, as demonstrated by technical availability and reliability, but also in terms of fast, fair and transparent trading”, Budimir states. Accelerate a m biti o n – S t R at E G i c PE RS PE c ti v E S “Accelerate” is the name of Deutsche Börse’s growth programme, which we launched in July 2015. Accel- erate is the result of a detailed analysis of our strategic focus, as well as our organisational structures and business processes. The purpose of Accelerate is to secure our growth momentum through numerous initia- tives, to boost this momentum over the medium term and to strengthen and ensure the Group’s economic and social value in accordance with our sustainability strategy. fivE StEPS to RE ach th E numbER onE SP ot Accelerate pursues a clearly defined vision: to turn Deutsche Börse into the global market infrastructure provider of choice, being top-ranked in all its activities along the entire value chain. The growth programme will help us to focus more strongly on our clients’ needs, and to enhance the efficiency of our processes. accelerate comprises five elements: 1. to better fulfil client needs, through a more rigorous organisation 2. to improve performance measurement and performance-oriented remuneration 3. to review the medium-term financial planning 4. to exploit opportunities for external growth 5. to review and examine the portfolio of businesses and investments Our key approaches – which are aligned with these five strategy elements – are summarised as follows: StRuctuR aL chan GE Within th E com PanY ShaRPEnS focu S on cL iEntS Going forward, we will apply a joint approach to mar- keting, innovation and operations within Deutsche Börse Group. This organisational change will enable us to better serve new client needs, and to tap sales potential which we have not been able to explore to date. In order to expedite structural change within the company, and to intensify Group-wide cooperation, we have established a Group Management Commit- tee, as a first step. This committee brings together executives from all parts of the Group – its composition will be variable, in line with the Group’s strategic needs. Moreover, our new Managing Directors for Group Sales (Robert Jolliffe) and Group Business & Product Devel- opment (Ashwin Kumar), both based in London, will improve coverage of our top customers, and will en- hance our client- oriented offers. In addition, we have restructured the entire Executive Board (for details, please refer to the CEO’s letter to share holders as well as the combined management report of the financial report 2015. nE W S taff inc EntivES We will gradually introduce new systems for measur - ing staff performance, and for determining remunera- tion. Besides enhancing incentive structures, this will establish a more direct responsibility for profit and loss. The objective is to increase performance orien - tation on all levels – at the same time, we want to raise the Group’s attractiveness for the top talents in our sector. 16 Deutsche börse Group – annual a m b i t i o n Strategic perspectives faStER GRoW th – With cLE aRLY DEfinED taRGEtS uP to 2018 Our competitors use their strong results to expand their business lines – some of them on a massive scale: ICE, the Intercontinental Exchange, has acquired Interactive Data Holdings Corp. for US$5.2 billion, thus boosting its presence in the data business. In other words: the market for financial infrastructures is undergoing massive changes – to stand still in such a situation simply means falling behind. This is why we want to invest into new markets and asset classes at a faster pace than in the past. In fact, during the course of revising our financial planning until 2018, we already identified opportunities for organic growth. We set clearly defined targets for profit growth – also with a view to safeguarding the scalability of our business model by making sure our technical systems are prepared to support the expansion of our product and service offers – at minimal cost. The targets of our revised financial planning are as follows: ■■ We strive for net revenue growth of between 5 and 10 per cent per annum until 2018, based on the Group’s current business portfolio and assuming a continued recovery of the world economy as well as medium-term interest rate rises. ■■ Earnings before interest and tax (EBIT) and consoli- dated net profit for the period attributable to the shareholders of the parent company are targeted to grow by between 10 and 15 per cent per annum. ■■ This implies a target range of between €2.8 billion and €3.2 billion in 2018 net revenue (up from the previous target range of €2.3 billion to €2.7 billion), and EBIT of between €1.55 billion and €1.75 billion for 2018. To achieve these growth targets, three fundamental cost management principles will apply: ■■ Our business model must be scalable – not just as a “snapshot”, but on a sustained basis. Hence, single- digit net revenue growth requires stable operating costs; costs will be permitted to rise by around 5 per cent if revenues grow by a double-digit percentage. ■■ We will continuously enhance our operational effi- ciency, with a focus on our clients’ needs. We will offset inflationary effects and salary increases through internal cost savings. ■■ We will create additional scope for further investments by removing hierarchies, consolidating functions in competence centres, and through further improve- ments in procurement and purchasing. SuccESSfuL tak EovERS an D coo PER ationS ShoW th E WaY to th E futuRE We will also continue to pursue external growth options – not only in order to strengthen existing growth areas, but also to explore new asset classes and services. What is essential in this context is to remain disciplined, to 17 act with an eye to the future and to grow only where we can create sustainable value. The acquisitions of STOXX and 360T are cases in point. In July 2015, we acquired the remaining 50 per cent stake in index provider STOXX that we did not already own from SIX Swiss Exchange, thereby achieving full control. This will significantly increase our strategic flexibility, allowing us to benefit from the fast-growing index business to an even larger extent. With the acquisition of 360T, a fintech, we have gained exposure to foreign exchange – an asset class that is quite new to us – and hence, access to new clients. Based in Frankfurt/Main, 360T is a global foreign-exchange trading platform with a broad cus- tomer base that includes corporates, buy-side clients as well as banks. Since its foundation in 2000, 360T has been posting double-digit annual growth rates. Our acquisition of 360T will provide the company with a further boost to its organic growth momentum; moreover, the combination provides the option of real- ising revenue synergies in a high double-digit million euro amount over the medium term. We will be lever- aging our international distribution network and our expertise for this purpose. In Asia, cooperations offer particularly strong potential. We are already successfully cooperating with Korea Exchange (KRX) and the Taiwan Futures Exchange (TAIFEX), jointly offering products based on their respec- tive blue-chip indices. At the end of October 2015, we made a great leap forward in our strategy for Asia. In cooperation with the Shanghai Stock Exchange (SSE) and the China Financial Futures Exchange (CFFEX), we founded the China Europe International Exchange (CEINEX), a trading venue for offshore renminbi prod- ucts. Immediately after the joint-venture agreement, CEINEX entered into a cooperation agreement with China Construction Bank (CCB). We are therefore making progress with the implementation of our Asia strategy, strengthening Deutsche Börse Group. RE viE WinG caP itaL a LLocation, REmaininG tRuE to ouR fun DamE ntaL va LuES We will continue to examine our portfolio of businesses and investments, whilst maintaining our very sound balance sheet structure and attractive dividend policy. To achieve our growth targets, we will not compro- mise on high standards of security and compliance. In an increasingly regulated capital markets environ- ment, we will always comply with applicable rules. Nobody within this company will assume risks which will make us susceptible to attack – a fundamental stance which we will clearly communicate to all our business partners. Likewise, for a market infrastructure provider such as our selves, the reliability of our trading and clearing sys- tems remains crucially important. Our core business segments and our IT will continue to join forces in focusing upon solutions. With Accelerate, we have set ourselves ambitious tar- gets – to meet the high standards of Deutsche Börse Group. Yet there is no change in our intention to secure a stable future, and this is why we regularly review the speed at which we are moving. To prevent falling be - hind our competitors, we must act neither too hastily, nor too slowly. It is the programme’s name that sets the pace: Accelerate. 18 Deutsche börse Group – annual in n o v at i o n interview with a shwin kumar Ashwin Kumar, a former hedge fund manager and banker, joined Deutsche Börse Group in September 2015 to take on the newly created role of Global Head of Business and Product Development. 19 “We have the complete value chain” in n ovati o n – i n t E Rv iE W W it h a S h W in k u m a R , G L o b a L h E a D o f b uS in E S S a n D P R o D u c t DE v E L o Pm E n t, DE u t S c h E bö RS E G R o u P DEutSchE b öRSE G RouP ha S a com PLEtE vaLuE chain. Wh ERE D o Y ou SEE th E b ESt oPPoRtunitiES foR nE W PR oD uctS ? In terms of the product development areas, we are looking to develop synergies between all the different aspects of our businesses and offer products which enhance our synergies. In addition, we are looking to commercialise some of these value chains, so we have and bring to the market complete or holistic solutions where we may have previously offered more individual, segmented solutions. Largely speaking we need to focus on our clients, to focus on what our clients’ needs are and what solutions we can provide to them. Our clients on both the sell-side and the buy-side accounts have several constraints being placed on them by reg- ulation, by a revenue stream that is under pressure, and by costs that are escalating on a daily basis. We can provide a variety of different solutions that can address these constraints and bring efficiencies to the market- place as a whole and in turn to our clients. Which SYS tEmic aPPRoach toWaRDS DE vEL- oPinG nE W PR oDuctS D o Y ou foLLoW ? The client is at the centre of all our activities and that includes product development. Product development at its core is understanding client needs, developing solutions and deploying them in a timely manner. That 2 0 Deutsche börse Group – annual in n o v at i o n interview with a shwin kumar “It’s all about the clients’ needs.” is the way we go about thinking of product development and it is an institution-wide effort. It is an iterative effort of interacting with clients, understanding what their needs are, coming up with products, interacting with clients again and seeing if these meet their needs, what tweaks are required and over a short period of time coming up with the right solution for our clients. E X tERnaL fo RcES L ikE t 2S oR m ifiD ii a RE affEctinG ouR bu SinESS ; hoW much R anGE foR ouR o Wn PR oDuct DES iGn E X iStS? In fact there is more range for our own market or product design, as certain aspects of what we deliver to our clients get standardised because of some of the regu- lations you mentioned. The need for value-added ser- vices that we can provide to our clients to distinguish our offering from others increases. And as such, our ability to tailor ourselves to better suit client needs and to better enhance value exists. couLD Y ou tELL u S about th E a RE aS Y ou aRE E nG aGED in? Which b EnEfit S D o Y ou E XPEct foR ouR cL iEntS? We have several initiatives we are currently working on from a Group product development point of view. One of the initiatives that we have been focused on is the whole blockchain space. We are looking at how we can apply blockchain not only for internal efficiencies but also for external marketplaces to bring efficiency, reduce costs and make things easier for our clients. Another area that we have been focused on is the outsourcing space. We are thinking about how we can insource more of our clients’ back-office activities and needs, in order to relieve some of the cost pressures for them. We have also focused on a variety of different value chains we have within our ecosystem, whether they are ETFs or fixed income or securities lending. We are thinking about how we can better serve our clients and provide products that meet their needs in order to bring efficiency as well as lower their costs. Deutsche börse Group – annual in n o v at i o n Deutsche börse venture network 21 Financing the future in n ovati o n – D Eu t S c hE b ö RS E v E n t u RE n E t Wo Rk Young, innovative companies usually need venture capital to boost their growth momentum following the start-up phase – even before they can contemplate an IPO. Compared to other markets, in Germany there is a gap between supply and demand for this type of financing. Launched in June 2015, the Deutsche Börse Venture Network sets out to close this gap by facilitating later- stage capital-raising as well as IPOs. Via a protected, web-based online platform, it provides access to a net- work of national and international investors. Moreover, start-up entrepreneurs are provided with a choice of targeted training offers to ensure they are ready to meet capital markets requirements. At the end of 2015, the Deutsche Börse Venture Network already had more than 150 members. The 52 registered companies include online shops such as Fashionette, or financial provider Kreditech – but also biotechnology companies such as Proteros or Protagen. The list of 111 participating investors comprises specialist venture capital providers or private equity houses, as well as large investment fund managers and family offices. PR E- iP o G R o W t h People developing innovative business ideas need lots of stamina – and the necessary capital. Start-up companies often enter into a decisive phase when their business requires a good deal of liquid funds in order to boost their market profile and to expedite growth. It is specifically for these companies that Deutsche Börse launched its Venture Network – an ex- clusive online platform where investors and entrepreneurs can establish contacts. Within the scope of tailored events, they have the opportunity to get to know each other person- ally, thereby potentially opening channels for entrepreneurs to raise capital for their business. Specific training courses are also available, where entrepreneurs can acquire the requisite capital markets know-how. Pre-IPO and Listing is a business area of Deutsche Börse Group. p. 6 2 2 Deutsche börse Group – annual in n o v at i o n a portrait of 360 t Carlo Kölzer, CEO of 360T, founded the trading plat- form for foreign exchange (FX) in Frankfurt/Main, Germany, in July 2000. Following the takeover of 360T by Deutsche Börse Group in July 2015, he was appointed Global Head of FX and a mem- ber of the Deutsche Börse Group Management Com- mittee in October of the same year. in n ovati o n – a S k iL L E D “ fin -t E c hiE ” The best invention in two decades 2 3 Even the best ideas need a certain amount of luck. Carlo Kölzer is strolling contentedly through his com- pany’s new office premises in Frankfurt’s city centre. A folded children’s playpen leans against a desk: 360T’s Family Day has just finished. 360T’s working language is English – its hierarchies are flat. There is no recording of hours worked; everyone works towards targets, as Kölzer puts it. The company’s beginnings were more humble: back then, looking outside the windows you would not have seen the Taunus hills and the prestigious West End villas – but a traffic junction in Sachsenhausen, the city quarter south of the river known for its pubs rather than for fintech developers. “The server room also served as the smokers’ lounge,” Kölzer recalls. Saving money was a priority. Meetings with clients were planned in line with flight schedules, with the cheapest flight to London being the key criterion. Kölzer previously worked at a bank; he knew from his experience there that banks had failed to develop any new technology for two decades. His idea was to build a central platform for foreign exchange (FX) trad- ing, which lagged equities trading at the time. Frequent misunderstandings were occurring with clients’ telephone enquiries (was that “fifty” or “fifteen”?). Why did it take quite a long time before 360T was able to win its first major clients? “As long as nobody used our platform, banks and clients just kept waiting for each other, unsure as to who should move first,” Kölzer reports. “Plus: banks were not really interested in our solution – 2 4 deutsche Börse group – annual I n n o v aT I o n a portrait of 360T “The sky is my limit.” it threatened their margins. Then, Dresdner Bank and Lufthansa approached us: this was the breakthrough.” Availability met readiness. “Three guys and a l apTop “ The company’s beginnings were anything but easy- going. “We were three guys and a laptop – literally speaking,” says Kölzer. “And even though we had experience in the banking business, we had none in FX.” Not exactly a recipe for success – and there was another issue, as highlighted by an investor’s question: “Who’s your pro- grammer?” A very valid question indeed. Ultimately, the programmer arrived from Down Under: with tattoos, piercings, and wearing flip-flops. Kölzer recalls a brief moment of shock when he opened the door. Mathew had sold his car, said goodbye to his girlfriend, moved out of his flat, and bought a one- way ticket to Germany, ready to start at 360T. “And he is with the company to the present day: he manages our business in Asia.” The first three staff members are still on board – in fact, many have been with 360T for ten years. Is there too much money chasing too few ideas in the fintech market these days? Kölzer’s answer is reluctant: “Money does not hurt.” But he adds that even a lot of money cannot force good ideas: “Even nine mothers won’t have a baby in just one month.” In any case, he was forced to concentrate on the essentials: a strong motivation to succeed, with the resources available. At the time, Kölzer was unaware of the difficulties and pitfalls in FX trading. “We just hit the ground run- ning. At the beginning, we simply didn’t know that we needed to be regulated, for example. Today I know that many ideas fail when they hit such hurdles. Back then, I was blissfully unaware of just how complex this was going to be.” The mainspring for Carlo Kölzer was “the sky is my limit” – even at the cost that the company might fail to take off. By consciously choosing to take this risk, he exhibited an intuition, motivation and willingness to take risks of true entrepreneurial spirit, a strategy which in this case paid off. 2 5 360t anD fX tRaDinG With daily turnover in excess of US$ 5 trillion, the foreign exchange market is the most important financial market segment internationally. Deutsche Börse Group has bene- fited from a competence centre for global foreign exchange trading since mid-2015: 360T, whose state-of-the-art trading platform facilitates secure and transparent trading in foreign currencies, money-market products as well as currency and interest rate derivatives. With a daily trading volume of US$100 billion, 360T® is the largest FX trading platform worldwide. 2 6 Deutsche börse Group – annual a m b i t i o n Regulatory strategy Connecting interests a m biti o n – RE G u L at o RY S t R at E GY Lack of transparency, unhedged exposures, inefficient risk management, loopholes in financial markets regu- lation: not so long ago, these and other factors helped destabilise the financial system up to a point when, in 2008, a global crisis broke out – a crisis which has prevailed since then. The first measures implemented by decision-makers in their efforts to deal with this crisis focused on creating sustainable stability by regulating and realigning the international capital markets. Neutral financial markets infrastructure providers, such as Deutsche Börse Group, played a key role in this re - alignment since they connect a heterogeneous group of capital markets participants with regulators. The providers of such infrastructure carry a heavy load of functional, strategic and macroeconomic responsibility. cuRREnt DE vELo PmEnt S The G20’s commitment to strengthening the system triggered, amongst other things, the regulation of OTC derivatives trading enshrined in the European Market Infrastructure Regulation (EMIR) of 2012. Current reg- ulatory efforts aimed at financial instruments trading (MiFID/MiFIR) and central securities depositories (CSD-R), as well as the creation and dissemination of benchmarks, are all designed to remedy the mistakes that resulted in the financial markets crisis. Alexandra Hachmeister is the head of Regulatory Strategy in the Public Affairs section at Deutsche Börse Group. She is a member of the Group Management Committee. 2 7 for a heavily reg ulated provider of infrastructure to the financial markets. Regulation has become a key driver of Deutsche Börse Group’s strategy. The added value this strategy provides lies in the ded- icated and timely analysis of economic and capital market issues as well as of regulatory trends, since it lays the groundwork for strategic dialogue with pol- iticians and regulators on the effects of regulation. Deutsche Börse Group in turn reflects the results of this dialogue in products and services for the benefit of all market participants, for example in their regu - latory reporting platform (see “Our clients have a say” on page 28) or post-trading offers for TAR- GET2-Securities (see on page 35). “A new architecture of trust” REGuL ation anD GR oW th aRE t Wo S iDES of th E S amE coin Smart regulation of European capital markets may prove to be a powerful engine to drive the sector. This is of particular importance from a competitive point of view, especially with regards to the financial centres in Asia and the US. And because of global competition, it is high time Europe turned its attention back to growth, fostering investments and new approaches – the main objective of the European Capital Markets Union. The EU Commission under Jean-Claude Juncker initiated the Capital Markets Union in 2015 to strengthen cross-border capital flows and provide businesses with better funding sources. Deutsche Börse supports this important project to the best of its abilities, for exam- ple through its newly established “Deutsche Börse Venture Network” (see “Financing the future” on page 21). EfficiEnt aPPLication of REG uL atoRY R uLES Transparency, fairness, neutrality, stability and efficiency are Deutsche Börse Group’s core values. They have en abled the Group to act as a reliable partner for policymakers and regulators, in particular over these last years, and help clients fulfil diverse regulatory requirements along their value chain. This is essential 2 8 Deutsche börse Group – annual in n o v at i o n Regulatory Reporting hub in n ovati o n – t hE nE W RE G u L at o RY RE P o R tin G h u b “Our clients have a say” Marco Popp is part of a larger, Group-wide team working on new products for regulatory reporting. “Deutsche Börse Group and its clients will have to look into the details”, says Marco Popp from the Market Data + Services division, who is a member of a cross- divisional project group on Regulatory Reporting and MiFID II. “As a market participant, for example, you cannot simply go and report all the data you have ge ne- rated. This would not be accepted as qualified report- ing, and would lead to so-called ‘findings’ – reporting errors which may in turn lead to serious fines. And that is just the reporting side. Many of our clients face addi- tional issues, such as collecting data in-house, com- piling and processing it for reporting to the competent authority, having aligned the data to match requirements. We can support our clients across this entire processing chain.” Everyone concerned – regulators, trading par- ticipants, as well as Deutsche Börse – has yet to gain concrete experience with the new rules. Hence, the project team is convinced that a dynamic, cooperative model is the only way forward: “There is no such thing as an optimum, all-in, ready-to-go solution,” Popp says, adding: “Or it would be too late – not exactly ideal either.” The latest amendments to the EU Markets in Financial Instruments Directive – known as MiFID II – are the big topic on financial markets these days. The new Directive, aimed at transparency and the detection of market abuse, marks a new high in terms of regulation. Reporting obli- gations – including those for information which to date was considered irrelevant – are complex and demanding; it is fair to say that many questions will only be answered over time. 2 9 mifiD ii – backGRounD anD DEtaiLS The EU Markets in Financial Instruments Directive – or MiFID – is a directive which sets the legal framework for providing investment services related to financial instru- ments, such as interme diation, advisory services, trading, portfolio management, underwriting etc. The Directive is applicable for banks and securities firms, as well as operators of regulated markets. Its over arching goal is to promote the integration, competitiveness and efficiency of financial markets in the EU. MiFID II refers to the cur- rent revision of the Markets in Financial Instruments Directive, with the objective of making financial markets more efficient, more resilient and more trans parent. Besides strengthening investor protection, MiFID II includes new procedural rules for algorithmic trading. mana GED tR anSPaREncY Popp continues: “We started with a dynamic, collabo- rative approach, having restructured product develop- ment from scratch, in an interactive manner. In short, you could summarise our model as ‘inform – discuss – offer’.” Very short indeed, since this involves a complex process flow with many interdependencies. A method that is currently en vogue came in handy for the team: the ‘scrum’ method uses an open approach where pro- cesses can grow alongside the tasks at hand, for as long as possible. After all, it is impossible to define every- thing from the very beginning. Using this method allowed the team to create transparency – both internally and vis-à-vis clients and other stakeholders – and to manage it appropriately. One key objective was defined at the outset: the goal was to establish a dynamic, open platform for compre- hensive regulatory reporting. “This meant approaching clients at a very early stage – with contacts not just from the core project team, but also from the Group’s sales teams. We convinced our colleagues to touch base with their clients with a preliminary ‘door opener’ – a very short piece of information.” Of course, an issue such as MiFID II is an ideal opportunity for cross- divisional client contacts, and clients were indeed interested, right from the start. As project manager Popp puts it: “Maybe Regulatory Reporting is a topic that benefits from a favourable framework right now. But we are indeed proud of the Group-wide team effort we have under- taken in this respect.” WoRkShoPS With a LL S takEho LDERS Passing on information and exchanging views was the focus of the second stage. The project team organ- ised workshops, in Germany as well as throughout the European market, with regulators actively taking part as key stakeholders. “We succeeded in building a sound format for an open exchange of views, with Deutsche Börse Group acting as an honest broker.” It was only then that client discussions in a narrower sense kicked in. “Our joint workshops, together with 3 0 Deutsche börse Group – annual in n o v at i o n Regulatory Reporting hub fuRthER infoRmation For more details, please refer to the “Regulatory environment” section of the combined management report in the 2015 financial report. The central landing page can be accessed via deutsche-boerse.com/regulatory-reporting Or contact Deutsche Börse Group’s team of experts directly, by e-mail to regulatory-reporting@deutsche-boerse.com clients and regulators, are a case in point for the re- sponsible manner in which we dealt with our clients – and with our knowledge.” Thanks to this model ap - proach, the team even succeeded in establishing con- tacts with firms in the UK – an extremely challenging market for non-resident providers of solutions for regu- latory tasks. The pilot phase is running at present. The platform has been launched, with functionality being added step by step. In fact, the first clients are already working on the “live” database: “This is not a prototype version that you would discard after testing – it’s the database to which all functional features will be added over time. There is nothing as valuable as this live feedback.” Deutsche Börse has been discussing planned function- ality in detail with interested parties since mid-2015, allowing for customised offers to be requested. The first pilot clients have been online since February 2016. Was that it – or will there be more? “Interesting question,” says Marco Popp, “on the one hand, we have already achieved quite a lot – but on the other hand, we are still at the beginning. This is because even though MiFID II might well represent the peak of regulatory activity for the time being, it will certainly not be the end.” Popp firmly believes that the new platform is the right tool for clients’ international business, as well as for future regulation. “Step by step, we will be able to append addi- tional regulations to the platform, conducting live tests with our pilot clients, and adjusting the platform to their respective requirements – true to our fundamental prin- ciple of involving all stakeholders into the process.” Deutsche Börse Group thus lives up to its responsibility as a leading market infrastructure provider. a S S E t S E R v i c E S Various additional services are required in connection with the safekeeping (custody) of assets, including the handling of corporate actions, dividend payments and tax services. Likewise, services to investment funds have gained importance over recent years. All these services are available to market participants from Clearstream, Deutsche Börse Group’s post-trading services provider. Custody is a business area of Deutsche Börse Group. p. 7 R E G u L at o R Y R E P o R t i n G International capital markets are shaped by ever more complex regulatory requirements, such as reporting duties or transparency requirements. Responding to this trend, Deutsche Börse Group has joined forces with various customers to develop an innovative Regulatory Reporting Hub, comprising the Group’s comprehensive range of services de- signed to fulfil the various reporting duties imposed by different regulators and in different jurisdictions. The Hub will support market participants in their reporting to the various national authorities, taking the respective requirements (which may differ considerably) and other regulations, such as data protection, into account. For participants, this service will provide higher efficiency and lower risks, since they will be able to obtain all the solu- tions they require from a one-stop shop. Market Data is a business area of Deutsche Börse Group. p. 8 Deutsche börse Group – annual S tat u S Sustainable investment 31 S tat u S – S uS ta in a bL E i n v E S t m En t Responsibility is more than just a business deal SuStainabLE in Dic ES Deutsche Börse Group is strongly committed to neu- trality, objectivity and transparency. We have therefore created several indices that focus the attention of capital market participants on companies with sustainable business practices. In 2015, Deutsche Börse Group expanded its range of sustainability indices to a total of 35. The set of sustainability criteria applied to deter- mine which companies are included, is fully transparent. Based on data provided by Sustainalytics, a sustaina- bility research and analysis specialist, this index model allows investors to fully understand how com- panies are rated in terms of their environmental, social and governance (ESG) performance, and the importance of these factors. SuStainabLE inv EStoR P oRtaL As the central point of contact between different capital market participants, Deutsche Börse Group aims to promote market transparency. In particular, we aim to improve the availability of high-quality ESG information and to enable a better understanding of its relevance. To this end, Deutsche Börse’s online information por- tal for sustainable securities, which can be found at boerse-frankfurt.de/sustainability, provides market participants not only with financial data, but also with key sustainability figures as well as data provided by the Carbon Disclosure Project, an international non-profit initiative with a focus on climate change. In addition, Deutsche Börse Group offers investors and the broader public a comprehensive overview of the sustainability reporting activities of companies listed in Germany’s key indices DAX®, MDAX®, SDAX® and TecDAX®. m a R k E t D ata All capital market participants – private and institutional investors, asset managers, secu- rities trading firms or fund management com- panies – make decisions based on market data, creating new information in turn. Deutsche Börse’s most prominent data products include real-time and historical price data of the Group trading systems Xetra® and Eurex® as well as a number of cooperation partners such as the Irish Stock Exchange. The data is disseminated directly via data feeds and indirectly through data vendors. The product range also com- prises real-time data of the DAX® and STOXX® index families as well as the financial news ser- vices of the subsidiary MNI. Market Data is a business area of Deutsche Börse Group. p. 8 3 2 Deutsche börse Group – annual a m b i t i o n interview with Rob Jolliffe Rob Jolliffe, an experi- enced investment banker and trained historian, took over responsibility for all sales activities of Deutsche Börse Group as Head of Sales in August 2015. 3 3 “A new sales culture” a m biti o n – i n t E Rv iE W W it h R o b J o L Lif f E , G L o b a L h E a D o f S a L E S , D Eu t S c hE b ö RS E G R o uP What W aS th E fi RSt imPRESSion Y ou G ot of D EutSchE b öRSE G RouP ? a nD W hat haD bEEn thE fi RSt S tEPS ? What I found when I first got here was that the sales force were “siloed” into their business units – and they still are to a large extent. We are trying to encourage the sales people to come out of those silos, have a look around like a meerkat, and go back down into their silos to do their day job where they are specialised sales people. But also to reach out and see what other oppor- tunities are going on within the Group. So one of the things I found was lacking when I first got here was penetration of the clients at a senior level. What I have done is to create a role of “Group relationship managers” and I have hired five people so far and they are going to work with our existing and our future client base on a very high level, actually at the C level. That way we can build relationships from the top level down rather than just coming from the bottom level up, which is the way we have been developing our relationships over the past ten to fifteen years really. 3 4 Deutsche börse Group – annual a m b i t i o n interview with Rob Jolliffe Do Y ou think thE ma RkE t iS RE aLLY a WaRE Do Y ou SEE a DEman D fo R PR oDuctS an D of DEutSchE b öRSE G RouP ’S E X iStinG PR oD - SERvicES that D EutSchE b öRSE G RouP uct anD SER vicES P oRtfoLio? DoES not YE t covER? The question really is: is the market aware of Deutsche Börse Group itself? Because Deutsche Börse Group is a conglomerate and it has various different very well-known product silos. You’ve got, for example, Eurex, you’ve got Clearstream, two brands which are very well known to quite a lot of people, particularly outside of Germany, who do not know that Deutsche Börse is part of those organisations. So the branding of Deutsche Börse Group needs to be stretched wider, because at the moment many clients just say: “Oh yes, Eurex, I know Eurex”. But they do not know that Deutsche Börse is the owner of Eurex. It is the same with Clearstream, they know Clearstream but they do not know that Clearstream is “married” to Deutsche Börse, to Eurex, to 360T etc. I feel that there needs to be a much higher influence of the sales input into the product development at Deutsche Börse, and that’s why I am very keen to work with Ashwin Kumar. Because he understands the products, and the products on the sales side need to be inter- woven together from the starting point until the final delivery point as well. haS th ERE b EEn a P aRticuL aR E XPER iEncE Which haS im PRESSED an D motivat ED Y ou? The most influential person in my life was a history teacher when I was in school, when I was 13 or 14 years old. I loved history as a subject and he taught me how to have perspective and not objectivity; he basically told me to challenge the status quo all the time, to constantly revise the status quo, not accepting the current status as the only status available. And it is the same in the work place, to constantly revise how you are working, if you’ve got best practices, where are new influences and new ideas, new ways of organ- ising. And that is the way I am constantly looking at my business. Because if you don’t, you become stuck in a rut, you don’t expand your horizons and your thinking which makes it very dangerous for an organi- sation and for people within an organisation. hoW D o Y ou SEE D EutSchE b öRSE G RouP ’S futuRE S aLES o RG aniSation? Okay, coming back to the Group relationship manag- ers. They are going to set the tonus as to how one should cover a client. And they are going to set the tone by covering the top 40 to 50 clients in a way which is agnostic, leads from seniority and also works with the product people who cover that particular account. And I think leading by example we can develop a new sales culture at Deutsche Börse. Deutsche börse Group – annual S tat u S a new architecture of trust 3 5 A new architecture of trust S tat u S – h oW ta R G E t 2- S E c u RitiE S iS RE vo Lu ti o niS in G Eu Ro PE a n c uS t o DY taRGEt2-SEcuRitiES TARGET2-Securities (T2S) is a major pan-European project of the ECB to harmonise cross-border securities settle - ments. CSDs and central banks will be implemented on the platform in five waves. Clearstream, representing 40 per cent of T2S’s future settlement volume via its post-trade infrastructure for the German market, will join with the fourth wave in February 2017. Clearstream will be the first European provider to combine global liquidity management with the benefits of a harmonised market via T2S. With the implementation of TARGET2-Securities (T2S), the European settlement and custody system is being radically reformed. The transformation is in full swing, and both national and international central securities depositories (CSDs and ICSDs) – as well as their cus- tomers – need to prepare for the launch of the European Central Bank’s settlement platform. The migration of all participating CSDs, ICSDs and central banks is sched- uled to be completed by 2017. Clearstream, Deutsche Börse Group’s settlement and custody services provider, occupies an important and particular place in the field, as it offers both CSD and ICSD services. It is Deutsche 3 6 Deutsche börse Group – annual S tat u S a new architecture of trust Karla Amend is Head of Section for the TARGET2- Securities team of the Operations Clearstream department at Deutsche Börse Group. Börse Group’s “one-stop shop” for settlement, custody and asset services, as well as highly efficient collateral and liquidity management. Clearstream settles about 40 per cent of European securities trades. Its unique architecture, integrating both depositories, a complete product range across the value chain and (last but not least) the trust it has built over many years are the reasons why many customers decide to entrust Clear- stream with their assets in anticipation of T2S. tRuSt anD comPEtition T2S is an ECB initiative to harmonise and simplify secu- rities settlement in 23 European countries. Once the platform has been implemented across participating c uS t o D Y Following trading and clearing, securities must be settled, meaning that they need to be booked to the correct securities accounts, and then kept in safe custody. Within Deutsche Börse Group, this function is performed by Clear- stream. Clearstream comprises both a domestic and an international Central Securities Deposi- tory (CSD) and provides access to more than 90 currencies and 54 markets. In line with their respective tasks, both CSDs will partici- pate in the uniform European settlement frame- work (TARGET2-Securities, T2S) from 2017 onwards. Deutsche Börse Group will thus be able to offer a comprehensive, global service to its clients. The international CSD will facili- tate T2S settlement using central bank money, not just across European markets, but also for securities issued in Asia, for example. In this way, Deutsche Börse Group allows for the effi- cient, worldwide use of assets held in custody with the Group – e. g. as collateral. Custody is a business area of Deutsche Börse Group. p. 7 countries, settling transactions in T2S-eligible securities in central bank money will merely require a cash account at the responsible national central bank. With T2S, national CSDs will need to cooperate to a much greater extent than before. They have formed the CSD Steering Group (CSG), whose chair is set to alter- nate at regular intervals. Through the CSG, ECB and CSDs work together on customer-friendly solutions. On a European level, an exemplary model of checks and balances was established between the national CSDs, acknowledging both the importance of players with larger settlement volumes as well as smaller institutions. Clearstream finds itself well-positioned for T2S settle- ment, particularly in light of Deutsche Bundesbank’s prominent role amongst European central banks. Now, it is time to adopt this position emphatically – in the interest of a well-functioning financial market and effi- cient European securities settlement. Europe’s largest provider is thus positioning itself as a responsible and experienced broker of common interest. a bu SinESS mo DEL focu SED on L onG -tERm GRoW th Below the level of cooperation, each CSD has its own business model. Clearstream, for example, providing both CSD and ICSD services, will offer a structured post-trade service for European and global markets, focusing on liquidity management as it grows in importance. Clearstream has been setting standards in the market for many years. Early on, it published a pricing model for T2S that included the settlement fee being passed on to its customers without adding any margin. In the beginning, this unusual decision caused unrest amongst providers. However, one of the main objectives of the T2S process is cost reduction, and introducing a pricing model contrary to the T2S core theme would have turned out to be counterproductive in the medium term. 3 7 Timeline migration 2014 2015 2016 2017 2018 t2S timeline timELinE kEY REGuLationS basel iii capital Wave 1 5 cSDs basel iii LcR Wave 2 2 cSDs Wave 3 5 cSDs Wave 4 6 cSDs final Wave 5 cSDs minimum ratios raised gradually until 2019 basel iii leverage ratio basel iii nfSR EmiR mandatory clearing: phased approach for different asset classes aifmD ucitS v bcbS-ioSco margin requirements cSD Regulation Synchronised optimisation time- line for banks Planning /concept / decision Specification implementation Go-live Complementing the waiver of own settlement fees, Clear- stream focused on expanding its custody and asset services as well as liquidity and collateral management. Clearstream provides all of these services within its own process chain: via its Luxembourg- based ICSD and its Global Liquidity Hub that enables participants to fulfil their margin obligations vis-à-vis clearing houses, amongst other things. Within this integrated process chain, Clearstream customers may choose whether to settle their securities in euro central bank money or commercial bank money. Deutsche Börse Group also caters to the growing needs of customers in terms of legal, regulatory and tax-specific topics with efficient offerings and services. Clearstream has adjusted its fee schedule for custody services and enlisted the support of its customers in carrying the costs of adapting the new T2S infrastruc- ture – in combination with benefits of a discount scheme applicable until 2020. Trust that has grown over many years is indispensable for long-term cus- tomer loyalty. And it is the secret of success for market leaders such as Clearstream. L i q u i D i t Y m a n a G E m E n t Financial market regulation has tightened banks’ equity capital requirements. Corporate treasury departments have a constantly growing need for liquidity management tools in order to gain relief on their equity. Through Clearstream’s Global Liquidity Hub, Deutsche Börse Group offers financial institutions optimal global liquidity management. What is unique about this hub is the fact that assets pledged as collateral remain in their respective home market, thanks to Clearstream’s network of international partnerships. Since this approach does not create any systemic risk, it is also welcomed by regulators. As another benefit, Clearstream precisely selects collateral in line with the type, credit quality and rating of the securities concerned, in order to precisely cover the financial risk at hand. This means that collateralisation is as efficient as possible, without unnecessarily requiring liquidity. Collateral and Liquidity Management is a business area of Deutsche Börse Group. p. 8 3 8 Deutsche börse Group – annual R E S P o n S i b iL i t Y People and locations Will trade: London for Singapore f R a n k o D EnD a L L Derivatives Product Development, Product R & D Fixed Income Nationality: German Singapore, since 2015 London, 2011 to 2014 RE S P o n S ibiLit Y – PE o PL E a n D L o c ati o n S What is “normal” is a matter of perspective. That is something Deutsche Börse Group employees Frank Odendall, Valentina Popescu, Heidemarie Seltmann and Vassilis Vergotis know all too well. They have lived and worked in various Group locations, and have be - come culturally adept when it comes to changing their perspective. tween two locations, Luxembourg and Frankfurt, added to the appeal. Vassilis Vergotis fell for the challenge of building a new business segment in Chicago. “It was a very dynamic environment. We had to make quick decisions, find new ways, and needed more spontaneity than I had ever seen in Germany,” he recalls. They are now based in Chicago, Eschborn, Luxembourg and Singapore – having worked for Deutsche Börse in Frankfurt, London or Prague in the past. They are four of many who seize the chance of working in the foreign parts of the Group’s environment. The reasons for taking such steps have been varied. For some, it was simply out of curiosity about living something and somewhere new; others were drawn to an interesting project that made them pack their bags. What made Heidemarie Seltmann move to Luxembourg? “The canteen offering of sliced mangoes,” she jokes. That’s what she always says before sharing her real reason – she was offered a new job in quality management where she could make use of her client service expertise. Working be- Deutsche Börse Group employees hail from 85 countries and work at 38 locations in 30 nations. The Group’s workforce is as diverse as the markets the company is active in. The employees’ cultural background, training and experience in life shapes the values they adhere to – and the expectations they have of others. In Sin- gapore, Frank Odendall is living diversity every day. His colleagues are from Thailand, Malaysia, Great Britain and Germany. “The differences become more pronounced when people with different cultural back- grounds meet, for example Europeans and Asians, but I enjoy it. We learn a lot from each other because we expose each other to new perspectives and new ways of thinking,” he explains. 0220 123456 LH 123456 BN 99 PASSENGER/A MR 02 SIN To Via LH 555 LHR LH 666 3 1 D E C 0 8 0 1 2 3 Via Via 0220 123456 LH 123456 LH555 h E i D E m a R i E SE L t m a n n Core Markets Development, v a L E n t i n a P o P E Sc u IT Infrastructure & Operations, va S S i L iS v E R G o t iS Derivatives Markets Trading, Business Consulting Nationality: German Luxembourg, since 2007 Frankfurt, 2004 to 2007 Service Management Nationality: Romanian Eschborn, since 2015 Prague, 2011 to 2015 Sales Americas Nationality: Greek Chicago, since 2004 Frankfurt, 2000 to 2004 Diverse cooperation raises awareness for both similarities and differences, and furthers flexibility. Frank, for example, has learned to be more patient. In Asia, he says, it takes more time for people to trust each other, be it colleagues or clients. And in Luxembourg, Heide- marie found that German colleagues looking for a solu- tion in meetings always aim for getting to the point quickly, while team members from French-speaking countries like getting into the details and make sure that every aspect is accounted for. She sees that “people are more flexible in an intercultural team when it comes to finding solutions and values, and creating a team culture. It’s a unique chance for growth, not only on a business level, but also personally.” But the learnings – and teachings – of these globetrotters are not limited to intercultural understanding. Valentina Popescu, who worked in the Prague back office for a client before moving to Eschborn, recalls her situation: “My focus was entirely on that particular client, but when I moved to Eschborn, I saw the big picture. I have got to know Deutsche Börse Group much better since I came here.” Apart from gaining a new perspective, globetrotters help build bridges between Deutsche Börse Group’s locations. When they move to a new office, they not only bring with them their work experi- ence, but also knowledge about their previous work- place. They come with a network. When contacts or explanations are required in their new environment, they act as facilitators and “translators”. “My Chicago- based colleagues would like to grow, participate in cross-divisional projects. I know the culture and pro- cesses of many locations, and am happy to share my knowledge to help colleagues achieve their goal,” says Vassilis. 4 0 Deutsche börse Group – annual R E S P o n S i b iL i t Y Deutsche börse Group as employer tRaininG Improving the company’s efficiency and effective- ness starts with its employees: they can choose from a number of individual training options. bEvERaGES Hot and cold drinks in the office and staff restaurants are free for all employees Deutsche Börse Group as employer RE S P o n S ibiLit Y – o f fE R in G RE a L b E nEfit S Job tickEt Getting to work eco-consciously and fast – and into the city for a good movie afterwards. The company supports commuters travelling via public transport with a job ticket. WoRk-LifE baLancE Employee health issues are central to the company’s Job, Life & Family programme. Work-life balance classes such as busi- ness yoga, fitness boxing, qi gong and strong back are offered to meet local demand and requirements – and to sup- port a health-conscious lifestyle, both physically and mentally. Job Rotation Job rotation options for employees and managers factS an D fi GuRES aS at 31 D EcEmbER 2015 5,283 EmPLoYEES work for Deutsche Börse Group. 650 nEW Staff mEmb ERS add to our company culture. EmPLoYEES bY REGion Europe: 90% North America: 6% Asia-Pacific: 4% PaRt-timE WoRk Flexible solutions for working hours and location, tailored to the individ- ual needs and family circumstances of our staff PaREntS’ nEEDS At the locations Frankfurt/Eschborn, Luxembourg and Prague, an emergency parent-child office is available to em- ployees with young children, and an emergency childcare service is offered to employees in Frankfurt. Staff REStauRantS The company’s staff restaurants adhere to principles of sustainability and offer culinary variety to meet the tastes and nutritional requirements of our employ- ees, who also receive a generous meal allowance. 41 mEntoRinG Our mentoring programme gets new colleagues off to a good start at Deutsche Börse Group. Experienced employees assist them in network- ing beyond their own department and offer a comprehensive cross- divisional understanding of the company. caR PaRk Free or subsidised parking for all employees PEoPLE PRinciPLES Our five People Principles describe the expectations for a cooperative and professional working environment at Deutsche Börse Group: respect, team- work, recognition, result orientation and customer focus. aGE S tRuctuRE bY GEnDER Age <30 30–39 40–49 >50 Women Men 384 357 1,086 857 1,098 592 638 271 aGE StRuctuRE bY Location Age <30 30–39 40–49 >50 Germany Luxembourg 239 599 748 532 110 285 483 200 4 2 Deutsche börse Group – annual R E S P o n S i b iL i t Y 360-degree assessment 360-degree assessment L i n E m a n a G E R Direct line manager according to the organisational chart f E E D b a c k R E c iP i E n t t E a m m Em b E R S Direct reports, supporting staff or project team members PE E R S all executives with the same reporting line and level as the feedback recipient in t E Rfa c i n G Pa R t nE R S 5 colleagues from other business areas with whom the feedback recipient interacts 4 3 “We apply the feedback system in a way that bene- fits each individual. For example, it might identify particular and clearly state potential growth areas for an aspiring manager.” S a b i n E R o E c k L - S c h m i D t, h E a D o f hu m a n R E S o u Rc E S “This new kind of feedback, bringing together self-assessment and third-party evaluation, is much more than a diagnostic tool. We will use it to grow a culture of feedback and to sustainably grow Deutsche Börse Group.” J E n S h a c h m E i S t E R , ch i E f o f S ta f f 360-degree assessment RE S P o n S ibiLit Y – a n E va Luati o n f R o m E v E RY L E v E L Feedback raises awareness. Awareness fosters growth. Growth means progress, both on a personal and on a business level. To discover and develop our full poten- tial, we need open and constructive feedback on our be- haviour. Understanding the discrepancies between the way we see ourselves and the way others see us is essential for further growth. fill in a questionnaire on the employee’s social skills, subject matter expertise, customer focus and leader- ship skills, using both rating scales and free-form comments. The more detailed the comments with re- gards to the employee in question, and the more tell- ing the examples, the more meaningful and helpful the feedback. It is against this background that Deutsche Börse Group will establish 360-degree feedback in its organisation for all executive staff, i.e. managers, experts and project managers above a certain level. The third-party feedback is evaluated by an external service provider. Once merged, the assessments stem- ming from the different groups are compared amongst each other and with the self-assessments provided by the employee. In a 360-degree assessment, an employee’s self- evalu- ation is matched against an assessment from four other groups of sources: direct supervisors, peers at the same level and with the same reporting line, team members and other contacts within the company. There are four stages to the process. First, the employees are asked to fill in a self-evaluation questionnaire. After consulting with their supervisor, they also name the colleagues whose feedback they would like to be included in the process. Second, the four groups of sources The third and fourth stage of the 360-degree process are forward-bound, with workshops helping employees translate the results, teaching them about the next steps and showing them how to put the results to use in their daily work (phase 3). The employee and their supervisor will then together define ways of strengthening the growth areas that were identified (phase 4). Throughout the process, everyone involved learns that the feedback received from colleagues provides a valuable platform for self-reflection and discovering your own potential. 4 4 Deutsche börse Group – annual R E S P o n S i b iL i t Y Risk management “We want to manage risks efficiently” British national Marcus Thompson took on the responsibility for risk management at the Group as Chief Risk Officer in October 2013 in the course of his long career with Deutsche Börse Group. He is also a Member of the Executive Board of Clearstream Banking AG. RE S P o n S ibiLit Y – q u E S ti o n S f o R m a R c u S t h o m P S o n , D Eu t S c hE b ö RS E G R o uP ’ S c hiEf Ri S k o f fi c E R What iS th E hi GhESt R iSk foR D EutSchE böRSE G RouP ? We have three different types of risk: first, operational risk; second, financial risk; and third, business risk. Our operational risk makes up about 70 per cent of the total. It is broken down into four categories, two of which are really significant: the first covers availability risk, and in particular, IT availability – what happens if our systems don’t work, with potential customer claims if the markets were closed; the second concerns legal and compliance risks, stemming, for example, from sanction regimes in Europe and the US, which aren’t necessarily harmonised. Financial risk, which is about 20 per cent of the total, consists of market and credit risk. Unlike banks, we have very little market risk, and, although we have a lot of credit exposure, our credit risk is largely mitigated through collateral and through Eurex Clearing AG’s clearing fund. Business risk is the risk that revenues fall or costs increase so that we don’t meet our business targets. Essentially the biggest risk here is the risk of missing something new, something that 4 5 is going to completely change our markets – creative destruction, if you will. And this is why I think that “Accelerate” is so important in changing how we look at ourselves and how we do things. What W ouLD hav E ha PPEnED if G REEcE ha D bEcom E inSoLvEnt ? We have Greek customers both at Clearstream and at Eurex Clearing. For a long time, we have not accepted Greek securities as collateral, and the credit lines that we give to Greek customers were in any event very limited and secured by collateral. So the credit risk was effectively zero. If the Greek state had defaulted, then we would have had no credit loss. There is very little business risk because we don’t earn a lot of revenue from Greek customers. On the operational risk side, we had a task force at Clearstream dealing with the changes in regulation and the capital controls intro- duced by the Greek government. And that was some- thing really new for all of us, I think, because the Greek government was introducing new legislation overnight, and we were having to follow it together with the rest of the market the next day. That was very difficult, because the legislation was in Greek, nobody had ever seen it before, and somehow we had to interpret it in the same way as our customers and avoid complaints of having actions taken in the wrong way. The situation would have been even more complicated if Greece had actually defaulted. But all in all, things worked out well because we were well prepared and the whole team came together daily for weeks to coordinate our response as the situation developed. hoW W ouLD Y ou E vaLuatE th E R iSk that thE uk LE avES th E E u? For me personally, this is a very difficult question be- cause, being British, but having lived in Germany for a while, I’m not sure how I would be affected. I see myself as being European, I want to remain European and that may mean taking a new nationality. From a business perspective, the customers based in the UK are, of course, essential participants in the European capital market. A unified European capital market, which in- cludes the UK, is certainly more competitive on a global scale than a fragmented one. If the UK left the EU, this would be a loss for all Europeans. iS th ERE a Diff EREncE b Et WEEn R iSk minimiSation anD R iSk manaGEmE nt ? From a business perspective, there are three risk man - agement principles which we follow: we want to under - stand the risks that we’re taking; we want to manage those risks efficiently, and we want to make sure that the relationship between risk and return is sufficient – that the return compensates for the risk that we take. Doing business, you take risk. But we want to see that the risks are managed actively within our risk appetite – that’s what we mean when we say we manage risk “efficiently”. Of course, in certain essential parts of the market infrastructure, particularly the clearing house, we manage risks within a very tight risk appetite. i n f o R m at i o n tE c h n o Lo G Y Nowadays, exchange organisations are tech- nology companies in their own right: resilient, state- of-the-art IT systems provide the foun- dation for virtually all capital markets services. In this context, uninterrupted systems operation at Deutsche Börse Group’s data centres remains the cornerstone for reliable trading, settlement and custody services. This level of reliability is ensured by IT development and operations pro- cesses certified according to ISO Standards 9001 and 20000. In addition, Deutsche Börse offers tailor-made systems solutions to its cli- ents, such as connectivity to Deutsche Börse’s systems, specialised trading software, or solu- tions for SWIFT connectivity, accounts recon- ciliation and SEPA payments. Technology is a business area of Deutsche Börse Group. p. 8 4 6 Deutsche börse Group – annual R E S P o n S i b iL i t Y c ompliance “Compliance is at the core of our beliefs” James Freis holds both a Juris Doctor and econom- ics degree and gathered broad international regu- latory experience before joining Deutsche Börse Group in April 2014 as Chief Compliance Officer. 47 RE S P o n S ibiLit Y – q u E S ti o n S f o R Ja m E S f REi S , D Eu t S c hE b ö RS E G R o uP ’ S c hi Ef c o m PLi a n c E o f fi c E R W h Y i S c o m PL i a n c E E S S E n t i a L f o R t h E SuR vivaL of DE utSchE bö RSE GRouP – an D What a RE th E cu StomERS’ b EnEfit S ? Compliance is fundamentally about protecting the integrity of the markets and thereby the interests of all market participants. In this context, compliance with regulatory requirements and ethical practices is at the core of our values as a leading operator of markets. The notion and modern expectations for a compliance function have their background in the financial services industry and specifically in the securities markets, in particular related to protecting retail customers and to promoting transparency among market participants. These concepts have now been expanded and deep- ened to apply not just more broadly across financial industry participants, but also to serve as best prac- tices for all corporate entities. What a RE SPEcific com PLiancE cha LLEnGES REL atED to DE utSchE bö RSE GRouP’S bu Si- nESS activiti ES int ERnationa LLY? Deutsche Börse Group is unique due to the fact that it covers the whole value chain. And a fundamental aspect of a compliance programme is that it should be risk-based and tailored to the products and services and jurisdictions unique to the specific entity we are. In short: we cannot copy, we have to make our own compliance programme in virtually every aspect. It is a crossborder business we are involved in, with different legal regimes, regulatory requirements and risks. We must define our own best practices, rather than just seek to fulfil the minimum requirements in individual areas. This is not only a challenge, but also an oppor- tunity for us as a market leader. What a RE th E RE tuR nS of an inv EStmE nt in com PLianc E ? As part of this global movement and considering the ever-evolving global expectations in terms of compli- ance, Deutsche Börse Group seeks to be viewed as a market leader and one whose integrity is beyond reproach. Market participants will be drawn to this, and significant market players cannot afford to be seen as competing on a basis of lower compliance stand- ards. To put it the other way around: a positive repu- tation will be a strong market differentiator, just like higher product quality. One of the lessons of the finan- cial crisis is that financial infrastructure needs to be more reliable and resilient than the individual market participants – and this is also true in terms of compli- ance expectations. Deutsche börse Group – annual ambition o pportunities and expectations 4 9 4 9 We develop values a m biti o n – o PP o R t u nitiE S a nD E X PEc tati o n S Deutsche Börse Group has set itself a clear goal: over the coming years, we want to become the partner of choice for our clients worldwide, achieving a top position in all the business areas we are active in. That is the qualitative goal. Expressed in figures, this means that until 2018, we want to grow revenue by 5 to 10 per cent – every year. Thanks to economies of scale built into our business model, costs will rise to a lesser extent than revenue. This is because our platforms permit higher business volumes at relatively minor additional costs. The bottom line is that we want to boost profits by 10 to 15 per cent every year. A very ambitious target indeed. How are we going to achieve that? By consistently exploiting the opportunities we have identified – and by exploring new areas of business, further diversifying our products and services. Allow us to provide some examples by way of explanation: E XPLoRinG foREi Gn E X chanGE The foreign exchange trading platform 360T® has been part of Deutsche Börse Group since the summer of 2015. 360T is a young, dynamic business with a start-up mentality, which has added an entire asset class – foreign exchange, or FX – to Deutsche Börse’s offering. Being a member of Deutsche Börse Group has provided 360T with access to our global sales network, opening doors which were previously closed to a ‘small’ start-up. With our support, 360T can in turn expand its range of services, evolving into the only foreign exchange pro- vider offering a variety of traded products – from illiquid FX instruments right through to highly liquid futures contracts, plus the entire range of trading mechanisms and post-trading services such as clearing and collateral management. Moreover, the shift from off-exchange trading towards transparent, electronic multi-bank trading platforms benefits 360T. Overall, we expect around €100 million per annum in additional revenue from this business by 2018. E XPanDin G th E fun DS bu SinESS We have expanded our service offering in the funds business with the takeover of Citco’s hedge fund franchise. This means clients can now use Clearstream for settle- ment and custody of their entire funds port folio, from traditional investment funds and index funds to hedge funds. During 2015, we acquired a number of renowned clients who have already transferred their portfolios to Clearstream. We anticipate a significant amount of new L i S t i n G Deutsche Börse Group’s capital market activities start in the pre-IPO market, where the Group brings together “real-economy” businesses with investors. The next step occurs when a com- pany is ready to go public: its presence on the stock exchange starts with the exchange listing. The Frankfurt Stock Exchange allows companies of all kinds and sizes to raise equity or debt capital – SMEs or large enterprises, domestic or international. Investors may participate in the growth of the real economy – promoting it at the same time by providing capital. Pre-IPO and Listing is a business area of Deutsche Börse Group. p. 6 5 0 Deutsche börse Group – annual a m b i t i o n o pportunities and expectations c LiE n t S in c RE a S in G LY a PPRE ci at E t h E t R a n S Pa REn c Y a nD E f fi ciEn c Y o f f E RE D bY a n E X c h a n G E m a Rk E t. business over the years to come, leveraging our services which guarantee maximum security. Over a medium-term horizon, we expect additional revenue per annum to the tune of €50 million. licence fees. STOXX will grow revenue from this busi- ness by around €30 million per annum between now and 2018. GRoWth in thE E nERGY SE ctoR Business with power and gas products is booming. European Energy Exchange (EEX), in which Deutsche Börse Group holds a majority stake via Eurex, suc- cessfully explored new markets in 2015, also winning market share from over-the-counter trading. This trend is set to continue, given that clients increasingly appre- ciate the transparency and efficiency offered by an ex - change market. Our declared long-term goal is to create a single European power market. The energy business is scheduled to contribute additional revenue of around €50 million per annum over the next years. GLobaL inDEX buSinESS STOXX Ltd., which has been a wholly owned subsidiary of Deutsche Börse Group since the summer of 2015, is making excellent progress towards becoming a global index provider. STOXX continues to expand its index portfolio, especially in Asia and the US. Banks and fund management companies use indices as underlying instru- ments for the creation of financial products. Investors have increasingly come to prefer passively managed investments for some time now. This is evident, for example, in the constantly rising flow of funds into index funds – in which STOXX participates in the form of These factors are structural – meaning that they are caused by the continuous development of financial markets – and thus sustainable. We can anticipate these developments, creating the right offers to match the structural changes. incREaSE in kEY intERESt RatES There are also cyclical factors which we cannot influence, and which may have a positive or negative impact on our business. In particular, this includes monetary policy measures by central banks. Key interest rates, which have been low for many years, are burdening parts of our business. If global interest rates were to rise by 1 percentage point on average, this would translate into a revenue increase of approx. €100 million per annum. Whilst the US Federal Reserve raised interest rates (for the first time since 2006) at the end of 2015, we do not yet anticipate a similar move in Europe. We have also launched numerous initiatives designed to generate growth in our various business areas. All told, we anticipate additional revenue of at least €400 million until 2018 from structural opportunities, plus at least €100 million from cyclical opportunities – this is equivalent to the growth target of 5 to 10 per cent per annum. Deutsche börse Group – annual R E S P o n S i b iL i t Y c orporate governance from a to Z 51 Aa L L o c ati o n o f c aP ita L Deutsche Börse Group monitors its port- folio of businesses on an ongoing basis. Above-average growth is a yardstick, provided it creates sustainable value(s): we want to keep on growing through acquisitions or mergers, exploiting prom- ising options which are compatible with our strategy. At the same time, we pro- mote entrepreneurial spirit within the company, and are prepared to spin off businesses. We will, however, terminate any initiatives which lack success over the medium term, and which fail to cre- ate sustainable value. C convERSion into a EuR o - PE a n P u bL i c L imit ED - Li a biLit Y c o m Pa n Y Deutsche Börse AG is a European company with German roots and global reach. Therefore, the company shall be converted into a European public limited-liability company (Societas Europaea, SE). As a consequence, employee representatives from other locations will also join the Supervisory Board, giving the Board a more interna- tional profile – a clear signal that we understand Deutsche Börse to be an international enterprise. Corporate governance from A to Z DD E c L a R ati o nS o f c o n fo Rmit Y Good corporate governance and re - sponsible actions are no coincidence. The German Corporate Governance Code and the German Sustainability Code are key elements of our corpo- rate culture. With our respective Dec- larations of Conformity, we create transparency as to how we comply with the provisions of these codes. We also comply with international guidelines – specifically, the United Nations Global Compact and the standards set by the International Labour Organisation. Our service providers and suppliers are committed to observing a Code of Conduct, and a Group-wide Code of Ethics applies to all members of staff. For more details, please refer to our corporate governance declaration. c o m PLi a n c E “Compliance” means conduct in accord- ance with applicable rules and laws. It is considered a key aspect of good corpo- rate governance. For Deutsche Börse Group as a global financial services pro- vider, the highest compliance standards are a matter of course – within the com- pany and on the markets we operate. This is the only way to safeguard market integrity, and thus preserve the interests of all market participants. Therefore, compliance is a core aspect of our day- to-day operations. For more information on compliance at Deutsche Börse Group, please refer to the James Freis. C interview with EEmPLo Y EE c o m mit m En t We will only be able to achieve our ambitious goals with well-informed and committed staff. Our Group-wide approach, thinking outside the box, and strict client focus require people who are committed to the Group as a whole, and to all of its clients. People who recognise potential for all segments of the value creation chain beyond their own area of responsibility. GG Ro uP -WiD E SuS ta in a biLit Y In its dual role as an organiser of market- places and an exchange-listed company, Deutsche Börse Group adopts a holistic stance in terms of its corporate responsi- bility. We are committed to sustainable conduct across the value creation chain. The goal of our Group-wide sustainability strategy is to strengthen economic and social benefits over the long term. I in vE S to RS Investors from all over the world have pur- chased Deutsche Börse AG shares, with institutional investors accounting for a clear majority of 95 per cent. The shares are a lucrative investment for private investors as well: Since Deutsche Börse went public in 2001, shareholders have benefited from an average annual return of around 14.4 per cent – by compari- son, a direct investment in DAX® would have yielded an annual return of around 3.5 per cent in the same period. We maintain transparent and trustworthy communications with our shareholders. At our annual Investor Day, we provide extensive information on current strate- gic developments and projects. Please www.deutsche-boerse.com/ir–e visit for more details on Deutsche Börse’s investor relations activities. 5 2 Deutsche börse Group – annual R E S P o n S i b iL i t Y c orporate governance from a to Z Oo RG a niS ati o n We have organised innovation, market- ing and sales on a Group-wide level since the beginning of 2016. This con- sistent organisation allows us to better develop products and services in line with our clients’ needs, and to deliver them within a shorter period of time. This has strengthened the Group’s posi- tion as a responsible and reliable partner on the global financial markets – to buy- side and sell-side participants, other infrastructure providers, as well as to politicians and regulatory authorities. REmu nER ati o n o f t hE E X E cu ti v E b oa RD We have introduced a new remuneration system for members of the Executive Board, with effect from 1 January 2016. The new system clearly strengthens the long-term, sustainable remuneration component, through a combination of an assessment basis extending over several years with sustainability elements and the deferral of disbursements. Executive Board members will not have any incen- tives to enter into excessive risks. Fur- thermore, under the new system, the Executive Board will not only participate in the company’s profits. They will also be more exposed to risks than before. As such, the new remuneration system will also serve to align the interests of senior management, shareholders, and other stakeholders. For a detailed explanation of the new remuneration system, please combined management refer to the report within the 2015 financial report. SSuPER v iS o RY b oa RD conversion of the The Supervisory Board is the key super- visory body of a public limited company. It supervises the Executive Board and gives advice on strategic issues. Deutsche Börse’s Supervisory Board currently consists of twelve members. With the planned company into a European public limited- liability company (Societas Europaea, SE), our Supervisory Board will become more international. More detailed infor- mation on the work of our Super visory Board during 2015 is available in the the and the R WT ta RG E t S Deutsche Börse Group will have to stand its ground in international competition – and it will succeed in doing so. Our goal is to propel the company into the global number one or number two position – in all its business areas. Our “Accelerate” growth strategy is dedicated to reaching this goal. For more details, please refer to the report of the Supervisory Board, corporate governance declaration, corporate governance report. ”Strategic perspectives” chapter. Qq ua Lifi c ati o n o f SuPER - v iS o RY b oa RD mEm b ERS The German Corporate Governance Code requires that the members of the Super- visory Board have the knowledge, ability and expert experience required to prop- erly complete their tasks. Over and above an understanding of commercial issues, the members of our Supervisory Board must have profound knowledge of capi- tal markets, regulation, clearing, settle- ment and risk management issues. Detailed information on the qualifica- corpo- tions profile is provided in the rate governance report, which is part of the 2015 financial report. The inde- pendence of Supervisory Board mem- bers is also essential for their ability to lead the company with integrity and de- termination. Relationships with related parties to the company they supervise may give rise to conflicts of interest. As report of the Supervisory stated in the Board, part of the 2015 financial report, all shareholder representatives to the Supervisory Board were independent throughout 2015. S ta k Eh o L D ER En G aG E m En t Deutsche Börse Group maintains a continu- ous dialogue with all its relevant stakehold- ers, whose varied perspective on our fields of activity provide key impulses for the com- pany’s Group-wide orientation. Please visit www.deutsche-boerse.com/sustainability for more details on how we engage with our stakeholders. S Wo mE n in E X E cu ti v E P o Siti o n S In accordance with the Gesetz zur gleich- berechtigten Teilhabe von Frauen und Männern an Führungspositionen (German Act on the Equal Representation of Women and Men in Executive Positions), the Exec- utive Board of Deutsche Börse AG resolved to maintain the existing quota of women, which is 20 per cent in the Executive Board and 33.33 per cent in the Supervisory Board. For the two management levels below the Executive Board, the existing quotas to be maintained are 6 per cent on the first and 10 per cent on the second manage- ment level. These target quotas relate to Deutsche Börse AG (excluding subsidiar- ies) and will be valid until 30 June 2017. For more details, please refer to the “Non-financial performance indicators” section of the combined management report. Deutsche börse Group – annual R E S P o n S i b iL i t Y our Supervisory board 5 3 J o a c him f a b E R , *1950 Chairman Independent Management Consultant, Grünwald Nationality: German E R h a R D S c h iP P o RE i t, *1949 Independent Management Consultant, Hanover Nationality: German c R a i G h E im a R k , *1954 Managing Partner Hawthorne Group LLC, Palo Alto Nationality: US-American Ri c h a R D b E R L i a n D, *1962 Deputy Chairman (since 13 May 2015) Management Consultant – Executive Director Richard Berliand Limited, Ashtead Surrey Chairman of the Management Committee Renshaw Bay LLP, London Nationality: British k a R L - h E i n Z f L ö t h E R , *1952 Independent Management Consultant, Kronberg Nationality: German m o n i c a m ä c h L E R , *1956 Member of different supervisory bodies, Nationality: Swiss G E R h a R D R o G G Em a n n , *1948 Senior Advisor Edmond de Rothschild Private Merchant Banking LLP, London Nationality: German a m Y Y iP , *1951 Managing Partner, RAYS Capital Partners Limited, Hong Kong Executive Director, Vitagreen, Hong Kong Nationality: Chinese (Hong Kong) J o h a n n E S W i t t, *1952 Staff member in the Financial Accounting & Controlling department Deutsche Börse AG, Frankfurt/Main Nationality: German Our Supervisory Board h a n S - PE t E R G a b E , *1963 Staff member in the HR Compensation, Workforce & Talent Management section Deutsche Börse AG, Frankfurt/Main Nationality: German maR i o n f o R n o f f,*1961 Staff member in the HR Europe & US section Deutsche Börse AG, Frankfurt/Main Nationality: German J u t ta S t u h L fau t h , *1961 Lawyer, M.B.A. (Wales) and Head of the unit Policies & Procedures Deutsche Börse AG, Frankfurt/Main Nationality: German iR m t R au D b u S c h ,*1956 Former staff member in the Business Consulting section Clearstream Banking AG, Frankfurt/Main Nationality: German m a R t i n u L R i c i, *1959 Head of the Talent Management unit Deutsche Börse AG, Frankfurt/Main Nationality: German f Ri E D Ri c h m E R Z , *1955 Lawyer and Senior Counsel, Mayer Brown LLP, Dusseldorf Nationality: German t h o m a S n E i S S E , *1948 Independent Capital Market Advisor, Haibach Nationality: German Dav iD k RE L L , *1946 Chairman of the Board of Directors International Securities Exchange, LLC, New York Nationality: US-American Ri c h a R D m . h aY D E n , *1945 Non-Executive Chairman Haymarket Financial LLP, London Chairman of the Senior Advisory Board TowerBrook Capital Partners L.P., London Nationality: US-American and British h E i n Z -J o a c h im n E u b ü R G E R , *1953, † 2015 Independent Management Consultant, London Nationality: German As at 31 December 2015 (unless otherwise stated) 1) The term of office of the former members of the Supervisory Board ended with the end of the Annual General Meeting on 13 May 2015. S E v i t a t n E S E R P E R R E D L o h E R a h S S E v i t a t n E S E R P E R E E Y o L P m E ) 1 D R a o b Y R o S i v R E P u S E h t f o S R E b m E m R E m R o f 5 4 Deutsche börse Group – annual S tat u S key figures 2015 Share price development Closing price on 31 Dec. 2015 €81.39 +37% 1) Key figures 2015 operating costs3) €1,248.8 million +17% 1) Earnings before interest and tax2) EBIT €1,124.0 million +14% 1) cash flows from operating activities €796.6 million +16% 1) Dividend per share2) €2.25 +7% net revenue (total) €2,367.4 million +16% 1) net revenue by segment (€ million) Eurex 1,025.2 +27% 1) Clearstream 746.4 +7% 1) Xetra 184.8 +14% 1) Market Data + Services 411.0 +8% 1) Return on shareholders’ equity3) annual average 22% credit rating Deutsche börse aG4) AA 1) Growth rate compared to 2014 2) Proposal to the Annual General Meeting 2016 3) Adjusted for exceptional items 4) On 20 October 2015, Standard & Poor’s changed the outlook from stable to negative. You will find a detailed overview of all key figures and their composition in the five-year review in the 2015 financial report. Our locations n o Rth a mERic a EuRo PE a Si a chic aG o nE W Yo Rk Wa Shin Gto n, D.c . a mS tERD a m bERLin bRuS SEL S c o Rk E S chbo Rn fR a nk fuRt/ m ain LEiP Z i G Lo nD o n LuX Embo uRG m a D Ri D mi L a n m o S c oW Pa RiS PR aGuE ZuRich bEi Jin G Dubai ho n G ko n G mumbai SinG aPo RE to k Yo au S tR a Lia SY D nE Y a c k n o W L E D G E m En t S Published by Deutsche Börse AG 60485 Frankfurt/Main Germany www.deutsche-boerse.com concept and layout Lesmo GmbH & Co. KG, Dusseldorf Deutsche Börse AG, Frankfurt/Main Photographs Jörg Baumann (title), Thorsten Jansen (portraits), Peter Bialobrzeski, laif (p.14, 15) Lai xinlin/Imaginechina/laif (p.48) Printed by Werbedruck GmbH Horst Schreckhase, Spangenberg Editorial deadline 18 February 2016 In combination with the financial report, this Annual constitutes Deutsche Börse Group’s corporate report 2015. Both are available in German and English. Order number 1000-4606 (German Annual) Order number 1000-4607 (German financial report) Order number 1010-4608 (English Annual) Order number 1010-4609 (English financial report) Registered trademarks C7®, DAX®, Deutsche Börse Venture Network®, Eurex®, Eurex Repo®, EURO STOXX 50®, F7® MDAX®, N7®, SDAX®, T7®, TecDAX® and Xetra® are registered trademarks of Deutsche Börse AG. STOXX® is a registered trademark of STOXX Ltd. 360T® is a registered trademark of 360T Beteiligungs GmbH. TRADEGATE® is a registered trademark of Tradegate AG Wertpapierhandelsbank.