Jan Strecker - Investor Relations Gregor Pottmeyer - Chief Financial Officer Eric Mueller - GMC Member

Kyle Voigt - KBW Arnaud Giblat - Exane Anil Sharma - Morgan Stanley Martin Price - Credit Suisse Jason Kalamboussis - Societe Generale Peter Lenardos - RBC

Welcome, ladies and gentlemen, and thank you for joining us today to go through our second quarter 2016 results. With me are Gregor Pottmeyer, our CFO and Eric Mueller, GMC Member.

Gregor will take you through the presentation. After the presentation, we will be happy to address your questions.

The presentation materials for this call have been sent out via email earlier today and can also be downloaded from the investor relations section of our website. As usual, this conference call will be recorded and is available for replay.

Let me now hand over to you, Gregor.

Welcome, ladies and gentlemen. I would like to use this opportunity today to give you an overview of the development in the second quarter.

During the quarter, we closed the sale of International Securities Exchange to NASDAQ. As a result, ISE was classified as discontinued operation and eliminated entirely from the income statement and the current and preceding quarter.

This also included the booking of around EUR565 million after-tax. Second quarter results excluding ISE that was driven by strong net revenue performance in index derivatives and commodities at Eurex as well as index business at MD+X.

In total, net revenue increased by 10% to EUR601 million. At the same time, the adjusted operating costs increased only slightly, despite a higher cost base, due to consolidation effect.

This was a result of targeted cost containment measures, we have implemented in the last couple of months. As a consequence the EBIT and EPS grew over proportional at a rate of 19%.

With this, we are well on track to achieve our double digit earnings growth target for 2016. The sale of ISE led to a considerable cash inflow of around EUR1 billion.

The proceeds that will partly be used to redeem the outstanding $219 private placement that was issued in 2008. So far, no decisions have been made with regard to the use of the remaining proceeds.

The redemption of the private placements will result in additional, financial expenses of around EUR26 million in the third quarter 2016. On the fourth quarter onwards, the redemption will reside in a reduction of the financial expenses of around EUR4 million per quarter until the regular expiry of the private placements in mid-2018.

In total, the redemption resides in a reduction of financial expenses of around EUR9 million. We have also made good progress in the merger process with the London Stock Exchange Group.

On July 4th, LSE shareholder approved the transaction in an extraordinary general meeting and this week we cost the necessary threshold in the tender offer for our shareholders. We would like to thank everyone that participated for our support.

Shareholders who have not participated so far will have a final chance of doing so during the additional acceptance period that is expected to commence on July 30 and last until August 12. We expect there will be a significant increase of the acceptance level during this period.

For instance further index funds tendering their shares. Let me now take you through the results, starting with the group financials for the first six months of 2016 on page 2.

Net revenue has increased almost double-digit to EUR1.2 billion. Adjusted operating costs are up around 4% entirely due to consolidation effect.

As a result, the EBIT increased by 14% and the earnings per share 12% to EUR2.35. This brings me to the result of the second quarter on page 3.

Net revenue in the second quarter increased by 10% to EUR601 million, as part of net revenue the net interest income increased with EUR21 million. This is because we included the Eurex NII from cash collaterals in May last year.

But although the Clearstream NII increased due to higher rates on cash held in US dollar and higher negative rates on some currencies. Operating costs adjusted for exceptional items increased by 1% to EUR226 million.

This increase is entirely due to the consolidation of APX in May and 360T in the fourth quarter last year. Exceptional items totaled EUR41 million which was mainly driven by the LSE merger process with structuring and the litigation in the U.S.

The adjusted EBIT increased by 19% to EUR326 million. As to our guidance, the tax rate increased from 26% to 27%.

Apart from the higher contribution from German based businesses like EEX and 360T, this relates to an increase of city tax at the headquarters. Adjusted for exceptional items, second quarter EPS grew 19% as well to EUR1.17.

I am now turning to the quarterly results of individual segments, starting with Eurex on page. The Eurex development in the second quarter was again mainly driven by the strong commodities performance at Eurex, inclusion of FX net revenue from 360T in the fourth quarter last year and high double-digit growth of the index derivatives business.

In total, net revenues in the Eurex segment stood at EUR261 million and adjusted EBIT amounted to EUR149 million. In the cash market, we saw a decline of the order book turnover by 15%.

As a consequence, net revenue in the Xetra segment declined to EUR41 million and EBIT on an adjusted basis stood at EUR20 million. At Clearstream, the total assets under custody decreased by 3% year-over-year to EUR13 trillion.

This was driven by a decline in the domestic German CSD business while the international ICSD business in Luxemburg and the IFS, Investment Fund Service business were slightly growing. Outstanding in the collateral management business, GSF continues to be negatively affected from Central Bank Monetary Policies which receives the need for our secured transactions.

The cash balances at Clearstream adjusted for plot account increased by 7% to EUR12 billion. In total, net revenue in the Clearstream segment amounted to EUR193 million and the adjusted FX stood at EUR96 million.

Net revenue in the market data and services segment increased by 10% year-over-year, this was due to substantial growth in the index and data businesses. In the index business, the 22% increase of derivatives raising activity on Eurex offset the decline of asset under management in EPS due to lower index levels.

In the data business, we saw positive effect from improvement in the licensing model and from the reversal of accruals. Total net revenue in the MD+S amounted to EUR106 million and the adjusted EBIT stood at EUR59 million.

This brings me to page 8 of the presentation. The benchmark, the results for the first six months is again our full year guidance.

The 2015 pro-forma basis for the 2016 growth range is we are guiding for are including the full year effect of the APX and 360T acquisitions and exclude the ISE Infobolsa, and MNI divestitures. With organic net revenue increase of 5%, we are at the lower end of our full year guidance of 5% to 10% net revenue growth.

At the same time, operating costs on an organic basis declined by 2% due to targeted cost containment measures. This resulted in an over proportionate organic EBIT growth of 12% which is in our full year guidance of 10 to 15%.

Therefore, we are confirming our full year guidance and double-digit earnings growth. As we go through the remainder of the year, lower than anticipated net revenue growth could be offset by the targeted cost containment measure.

This concludes our presentation, we are now looking forward to your questions.

Hi, thanks for taking my question. I guess first one is just related to the LSE merger.

Just wondering if you could give us an update on where you are in terms of your submission for a formal review of the merger to the European Commission competition authority and how that progress or process is progressing?

Yeah, hi thanks for the question. So first we are obviously pleased that we have reached now the milestone for 60% threshold.

This triggers now the additional acceptance period of two weeks. Secondly, we are focusing on our merger controlling, filling with DG competition of the European Commission and we are aiming to file as possible and here in principle, we expect that it will go in with Phase 2 approach and we still continued to work towards closing of the transaction in Q1 2017.

Okay. And then just one follow-up, if I could, to stay on topic.

Just some politicians and regulators have been very outspoken in the press around the headquarters of the holding company being in London and how this may not be acceptable after the UK's decision to leave the EU. I believe changing this would constitute a material change in the merger terms.

So, could you give us any idea of any other solutions to these concerns that are kind of in the press? Or do you in fact believe that there is no change necessary?

Thanks.

Yes, Kyle thanks again for that question. Obviously you know that we have a referendum committee to talk about exactly that and the referendum committee has started its work and the referendum committee will make recommendations to the Board of both companies.

And we want to ensure that the combined group will meet all regulatory requirement, first, to secure closing of the transaction and, second, to achieve its commercial objectives, but we won’t report on the discussions which takes place in the meeting of the referendum committee in the upcoming months.

Okay. I'll get back in the queue.

Thank you.

Hi, good afternoon. A question on Eurex, please.

My question is regarding EEX and 360T. I would like some more details on the sequential progress of these business, so the progress you're making quarter-on-quarter comparing to quarter-end of March.

360T revenues are up 3% versus Q1, and haven't progressed that much versus Q4. Could you comment as to why progress seems to be slightly below your target of 15% annual growth?

Notably, I think I've picked up that revenue margins have declined by 2% quarter-on-quarter. So, do you see these revenue margins remaining at these levels, or how should we think about revenue margins evolving over time at 360T?

And at EEX, same, revenues are down 3% versus Q1, whilst electricity volumes are up 17% versus Q1. So, could you perhaps explain what's going on in terms of pricing and how we should think about that going forward?

Thank you.

Okay, thanks Arnaud for the question. So for EEX, our strategy works perfectly here and we have continued success here to get additional market shares out of the broker business, so the off-exchange business.

So, we were able in the power derivatives market to increase our market shares from in Q2 last year that was a 24% increase that amount to 32%, and we got that from, basically from the progress. So, that is a success you’d see here and we expect that we continue to be successful to increase our market share here.

And our base assumption for EEX business, double-digit growth and for the next quarters and years. With regard to 360T, yes, you rightly mentioned Q2 was better than Q1 for 360T.

So it’s still not an easy environment for the FX business but 360T was able to slightly increase the market share, if you compare that with the other exchange platforms, like EBS or Thomson Reuters. So that’s positive on 360T side.

From a strategic point-of-view, we won’t specifically go in the U.S. market and also in the Asian markets where they increased our sales effort and we think with this overall we can achieve double-digit growth also in the 360T area and specifically we are focused on making sure that we get the synergy so the building up of central limit order book facility we are on track to implement that next year.

So here we are also on track with regard to our synergy case.

Okay. Thank you.

If I can just follow up, in order to gain the market share of EEX, have you dropped pricing?

Yes, obviously with regard to the, to get more of this broker business there, we agreed to have some more incentives to get this additional market share. But, overall, this is 31% of net revenue increase I think that’s fairly good performance.

Okay. Thank you.

Hey, guys. Just two questions from me please.

I just wondered within the MD+S and Clearstream business, how sustainable are the fee increases you've put through, because I guess it would appear that you're just increasing prices in preparation for some of the regulations that are contained within MFI2 and obviously targeting securities. So, are you effectively expecting fee pressure to come from those particular pieces of regulation.

And so, actually on an 18-month view, the fee increases are going to fall away. And then secondly, just on capital returns, just trying to think through I mean you mentioned you're going to use some of the proceeds to redeem some debt and that's going to help on the finance charge.

But, is it unlikely or how likely is it that management are going to give us any decisions on capital structure or what you might do with your balance sheet until we have further clarity on the proposed LSE merger. So, basically, should we be thinking that there is not going to be any announcement around what you can or cannot, couldn't do until sort of first half next year?

Yeah, so starting with the second part of your question with regard to the capital returns, yes, and we are now in the process to redeem the U.S. dollar transatlantic million euro debt.

And with this we make sure that we increased our gross debt-to-EBITDA ratio, where on a half-year basis, we were on the level of 1.6, you know our targeted level is 1.5 but the redemption after debt it will be on a 1.4 level, so, below that. So, with regard to the remaining of the 1.1 billion U.S.

dollar, again no decisions are made and also from a process perspective, no decisions are made when and how we will use that. With regard to the first question, MD+S and Clearstream.

Yeah, sure so indeed in the data business at MD+S and Clearstream GSF, you saw a small pick up of the average revenue per business unit which related to fee changes, but this is not relating to regulations or those are regular measures were from time-to-time we’re analyzing our fee schedule, we’re analyzing the declined demand and which product are used more frequently and how we might be serving clients better by repackaging them. So those are two unrelated measures that has been implemented over the course of the quarter.

Okay. So, just to check, you're basically saying you don't think there is going to be any fee pressure from regulations.

So, you think these are sustainable.

So across the business in general terms, yes.

Okay. Thanks.

Good afternoon. My question was on the tender offer process.

I was wondering if you envisage having to enter into a domination agreement with investors perhaps choosing not to tender their stock or if you're confident you'll achieve at least sufficient acceptance levels to be able to squeeze out remaining shareholders. Secondly, I was also wondering if you could confirm which portfolio margining technology you plan to use within Eurex and LCH, assuming the merger completes, whether the idea is to use Prisma or LCH Spider, and just wondering if you'd describe why you decide to use one rather than the other.

Thank you.

Yeah, thank you for those questions, its Eric. So starting with your second quarter none of these integration decisions have been made you know probably our technology, well we have Prisma up and running since quite some time, I think the same is now true for the London’s technology which went live more recently and once we get those question as part of integration, those decisions will be discussed but have not so far.

On the tender offer process, the end of the regular period for the tender expired midnight on Tuesday, we are still getting the instructions through the custodian chain and will be able to publish official results on Friday this week. Then on starting Saturday, 30th of July there is the after-tender period which is the final chance for investors to tender their shares for certain.

As we still pointed out, have theoretical possibility for holdco to later decide once the merger is done, whether or not there is the implementation of a domination agreement. But all of these potential measures are uncertain, no decisions on those have been made, no regulatory approvals for those kind of measures have been obtained and the same is true for the squeeze out, which is a theoretical possibility at this stage and as you may know there are certain prerequisites also in terms of tender threshold being met to even be able to start such a process.

That's very helpful. Thank you, Eric.

Yes, hi there. Couple of things.

The first one is on the litigation in the U.S., if you could update us and if, also, you can certify with the amounts that you have taken there. And the second is coming a follow-up question on the 360T.

Can you be more specific in the outlook? That means I can understand that you're doing better than a couple of peers, as you're mentioning.

But at the end of the day you're far away from the plus 15% growth. So, how do you see the rest of the year and what prompted you in the first place to have such a high growth that you think may or may not be delivered this year?

With regard to the litigation in U.S., though they are, there is nothing new what we can report, we are building negotiations with the U.S. data timing.

We are still delivering all the information they need, so nothing new on that side. Let’s take out to 360T, so you saw a slight tick-up in the second quarter with a 7% revenue increase.

So the first quarter was below the high level of Q1 2015 and that’s the main driver for that lower growth was the Swiss franc drop compared to Euro in Q1 2015. So this was a very high level, so it’s now more normalized in Q2 and for the second half year of 2016, as I mentioned, so we have good sales increase, our sales efforts specifically in the U.S.

and in the Asian region and region, hired new people and got more customers on board that gives us confidence that we can achieve higher growth rates even in the second half year of 2016. In this 2017 onwards again, our central limit order book capability and every communication with the clearing capabilities we currently build up.

We think we can make an attractive offer for our customers in 2017 to play more FX business on our exchange platform and with you is the unchanged. So, we are confident to achieve these synergy targets.

Okay. And this bringing more people is not going to affect significantly your EBIT, your expectations of EBITDA margins.

No, if the higher addition is based on the people then we do that to increase our revenues. And there is a clear business case behind any increase in our sales force.

Okay. Thank you very much.

Good afternoon, gentlemen. It's Peter Lenardos from RBC in London.

I just had one question. In your H2 or H1 report, you indicate that you've increased your litigation provisions.

I was just curious, why have you increased them, and what litigation does that relate to? Thank you.

This is the additional fees for our lawyers, so to make sure that we are in line here. So it’s purely legal fees.

Okay. Thank you.

If we don’t have any further questions in the pipeline, we would like to conclude today’s earnings call. This also gives you time now to jump on the SIMI earnings call which I believe starts at 8:30 ET.

So we kept it pretty short today but obviously the team is here to address further questions bilaterally. So thank you for your participation today and have a good day.