Deutsche Bank screenshow template - The OTC · PDF fileDeutsche Bank Securities Inc. (DBSI)...

dbClearDeutsche Bank

Introducing dbClear

Deutsche BankCorporate & Investment Bank

Introducing dbClear


Introducing dbClear

Contents

1

29/03/2011 2010 DB Blue template

Section SlidesIntroduction 2 - 5Overview of Central Clearing 6 - 12Deutsche Bank’s Offering 13 - 24Mitigating the Cost of Compliance with Regulation 26 - 28Client Clearing product offering 29 - 62 OTC Rates Derivatives 29 - 34 OTC Credit Derivatives 35 - 42 Global Foreign Exchange 43 - 49 Listed Derivatives 50 - 62

Risk Waterfalls 63 - 87Key Risk Management 88 - 97dbClear TradeFinder 98 - 116dbCross-Product Margin 117 - 119Technology and Market Initiatives 120 - 121Transition Management and Client Service 122 - 124Communication and Contacts 125 - 126Appendices 127 - 155 Appendix A - Product eligibility: Clearing and Intermediation 127 - 132 Appendix B - CCP eligible collateral and Collateral process timeline 133 - 136 Appendix C - End-to-end clearing workflow 137 - 150 Appendix D - Listed Derivatives: Key Exchange memberships, Electronic execution 151 - 155


Introducing dbClear


Introduction


Introducing dbClear

Deutsche Bank <NYSE: DB> is a leading global investment bank with a strong and profitable private clients franchise. A leader inGermany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 77,053 employees in 72 countries, Deutsche Bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.

Within Deutsche Bank, the Global Markets Division is responsible for the origination, sale, structuring and trading of fixed income, equity, commodity, foreign exchange, derivative and money market products.

Global Markets has established itself as a global leader in these products by combining its unique distribution franchise with its pricing, structuring and execution expertise.

Global Markets is dedicated to delivering exceptional capital raising, risk management and investment solutions that meet the precise needs of its clients.

The Global Markets Division employs approximately 6,000 professionals in 39 trading rooms around the world.

Deutsche Bank is one of the only institutions in the world able to address the diverse asset gathering and liability management needs of corporations, governments, institutional investors, hedge funds and financial institutions on a truly global basis.

Deutsche Bank Securities Inc., member NYSE, FINRA and SIPC, is the investment banking and securities arm of Deutsche Bank AG in the United States.

About Deutsche Bank

3



Introducing dbClear 4

Deutsche Bank AG (DBAG) is a banking institution incorporated under the laws of Germany. It is a publicly traded company that islisted on both New York (NYSE) and Frankfurt (FWB) stock exchanges. DBAG is regulated by Germany’s Federal Financial Supervisory Authority (BAFIN), and operates under the Basel 2 regime advanced approach. As of 30th September 2010, DBAG has shareholder equity of €38.5 billion, total assets of €1.958 billion, a Tier 1 capital ratio of 11.5%.

Deutsche Bank Securities Inc. (DBSI) is a wholly owned indirect subsidiary of Deutsche Bank AG. As a broker dealer, DBSI is subject to the SEC net capital rules rather than the Basel capital regime (Tier 1 capital rules do not apply). DBSI is required to file regulatory reports with the SEC which provide financial information on DBSI. As of 30th September 2010, DBSI had shareholder equity of $11.429 billion, total capital of $18.153 billion and net capital of $6.838 billion. DBAG is DBSI’s parent entity.

Please refer to the below tables for DBAG and DBSI credit ratings.

Deutsche Bank’s Credit Ratings and Capital Structure

DBAG Ratings as of January 2011

Short-term rating Long-term rating

Moody's Investors Service

P-1 Aa3

Standard & Poor’s A-1 A+

Fitch Ratings F1+ AA-

DBSI Ratings as of January 2011

Short-term rating Long-term rating

Standard & Poor's A-1 A+

Fitch Ratings F1+ AA-


Introducing dbClear

Deutsche Bank’s Clearing Legal Entities

5


US OTC Rates and Credit Derivatives Clearing

ICE Trust CME LCH US IDCG* Futures Commission Merchant

(FCM) model - Projected July 2011 Client faces Deutsche Bank

Securities Inc. (DBSI)

Futures Commission Merchant (FCM) model Client faces Deutsche Bank


Futures Commission Merchant (FCM) model - Projected July 2011 Client faces Deutsche Bank


Futures Commission Merchant (FCM) model Client faces Deutsche Bank


Non-US OTC Rates and Credit Derivatives Clearing

ICE Clear LCHSwaps Clearing Merchant (SCM) modelClient faces Deutsche Bank AG (DBAG)

Swaps Clearing Merchant (SCM) modelClient faces Deutsche Bank AG (DBAG)

Listed Derivatives Clearing FX ClearingEuropean Clients would typically document with DBAG London Branch

Limited. The Legal structure for FX Clearing is yet to be defined.

* Please note that Deutsche Bank is currently in the process of testing with IDCG (since May 2010) as no client has yet requested to put live trades through this CCP for Rates clearing.


Introducing dbClear


Overview of Central Clearing


Introducing dbClear

Operational efficiency Portfolio credit risk only to Clearing House Reduction of systemic risk

Benefits

Avoids requirement to replace hedges that were facing a defaulted bank

Insulates collateral in the Clearing House

Bilateral model: Client executes Over The Counter Derivative with Dealer and faces Dealer as counterparty

ClientCoupons

Variation Margin

Trade Counterparty

Dealer

Agent Model of Client Clearing: Client faces Clearing House as counterparty on their cleared transaction

Principal Model of Client Clearing: Client faces Clearing Member as counterparty on their cleared transaction

Clearing House

Initial Margin Initial Margin

DealerClient

Initial Margin

Coupons Coupons Coupons

Variation Margin Variation Margin Variation Margin

Trade Counterparty Trade Counterparty Trade Counterparty

Clearing Member

Clearing House


DealerClient

Initial Margin

Coupons Coupons Coupons

Variation Margin Variation Margin Variation Margin

Trade Counterparty

Clearing Member

Trade Counterparty

The mechanics of Central Clearing

7


Introducing dbClear

Market implications US and Europe

8


F&O

USDodd-Frank Act

FCM model

EuropeEMIR, MiFID

Matched-Principle (non-FCM) model

CME ICE Trust

LCH (FCM)

ISDA (/Rahmenvertrag)

ICE Clear

LCH (SCM) CMEIDCG Eurex

CLS

Tran

spar

ency

on

exec

utio

nRi

sk /

Clea

ring

Major Swap Participants (MSPs):

Bilateral OTC Broker-Dealer 1


Assets and Liabilities Manager 1

Bank n

Swap Execution Facility (SEF)






Financial Corporation n


Major Swap Participants (MSPs):




Bank n

Organised Trading Facility (OTF)






Financial Corporation n


Post - trade reportingAll swaps (cleared and non-cleared) must be real-time and regulatory reported prior to clearing


Introducing dbClear

Swap Execution FacilitiesHow might the market work?

F&O Block style Commission basis for execution services, Principal

basis, as counterparty to client trade in limited RFQ environment

Voice market access provided by DB execution sales desk (reactive' trades)

DMA style Electronic market access provided and sponsored by DB ('proactive' trades)

Commissions, smart order routing, algo enhanced execution services, bundled with clearing, prime?

F&O style Execution Voice market access provided by DB execution sales desk( 'proactive' trades) Voice execution desk commissions

TradeWeb style Client has direct access to trading venue and self executes for own account ('reactive' trades)

As risk principal, as counterparty to client trade in limited RFQ environment

‘Proactive’ ‘Reactive’ Continuous streamed markets into a central

limit order book for 'on the run' type liquid contracts, e.g. index CDS, benchmark IRS

Respond to client price enquiries for non standard, but non complex, structures and sizes, RFQ style

Trading style divided into two major categories ...1

How will Clients Execute ? How will DB get Paid ?2 3

How will Clients select an Execution Partner ?4

Quality of Electronic Executionquality of smart order router,

execution algorithms Quality of Pricing Quality of Voice Execution

Services & Market Coverage

Research LedAs per Equities model, DB paid

under a Commission Sharing Agreement

9


Introducing dbClear

Regulatory impactStandardisation of OTC Derivatives

10


Few

OTC Derivatives Listed DerivativesMany (bespoke) products / varieties Few products - highly standardised

Many

Client Dealer

ISDA

Client DealerISDA

Client Dealer

ISDA

Client

CB 1

CCP1 CCP2 CCP3

CB 2 CB 3

Standardisation of OTC products

(becoming Futures like)

Post-trade reporting (EOD)

Real-time trade reporting and SDR requirements (cleared and non-cleared swaps)

EB 1 EB 2 EB 3


Introducing dbClear

Regulatory impact (contd.)Many end states

Exc

hang

e

Process

Cle

arin

g Br

oker

RatesCredit

FXEquities

Commodities

Rates

Process Process Process Process

CreditFX

EquitiesCommodities

Rates

Standardised Complex

Central Intermediation Bilateral

Voice A

PI

CFTCF&O SEC

ISDACSA Anx. PBA MNA/GMRA

SM

A Vo

ice

EFP

11


Introducing dbClear

The reconstructed OTC and ETD model

Clearing and Asset Servicing(Credit)

(Process)

Liquidity and Execution(Price)

SEFETF

OTCExchange

Dark Pool

BrokerAPI

DMA

ICELCH

CME IDCG

FCM

SMA

BANKPB

Custody

Client

Price

Process

Credit

ClientDeutsche Bank

SEFETF

OTCExchange

Dark Pool

BrokerAPI

DMA

ICELCH

CME IDCG

FCM

SMA

BANKPB

Custody

12


Introducing dbClear


Deutsche Bank’s OfferingdbClear


Introducing dbClear

The Financial Reform AgendaDeutsche Bank’s commitment

AFME Board M. Faissola Global Rates Board M. Faissola Credit Board A. Diplas Equities Board K. Derhalli FX Board (chair) Z. Amrolia FXPB/ Clearing J.Vitale Prime Brokerage Comte. A. Byrne Securitisation (ESF) M. Ruggieri Lev. Fin Board H. Johnsson ECM Board J. Farry

GFMA (AFME/SIFMA/ASIFMA) Committees

Other key CIB

Other Major Banking

ISDA Board M. Faissola (vice-chair)Industry Gov Comte. Faissola, Diplas, Eilbeck Rates SteerCo. J. Eilbeck (chair) Credit SteerCo. A. Diplas (co-chair) Equity SteerCo. P. Maley Commods SteerCo T. Martin AsiaPac SteerCo. A. Mohapatra Ops SteerCo. S. McClymont Regulatory Comte. D. Trinder (chair)

ISDA Committees

FIA Board D. Bradford FOA Board BoE FX JSC Z. Amrolia Fed FXC J. Vitale

ICMA Board C. Grassie BBA Board C. Grassie EBF Board

– Derivs WG. S. Wolff City of London C. Grassie BdB Board J. Ackermann IIF Board J. Ackermann (chair) Fin. Serv. Forum J. Ackermann CEBS Panel H. Banziger (chair)

US CFTC Richard Shilts (Market Oversight Director) A. Diplas

Ananda Radhakrishnan (DCIO Director) A. Diplas SEC Robert Cook (Trading & Markets Director) Fields / Riffaud Fed Stacy Coleman (VP - OTC Derivs) A. Diplas

Europe FSA Alexander Justham (Director of Markets) D. Trinder BoE Paul Chilcott (Payments & Infrastructure) D. Trinder HM Treasury Hannah Gurga (Securities and Markets) D. Trinder BdF Peter Görß (Stock Markets & Securities) K. Deutsch BaFin Gunter Birnbaum (Securities Director) A. Procter ECB D.a Russo (DDG Payments & Mkt Infra) A. Diplas ESMA To Be Announced Commission Patrick Pearson D. Trinder Euro P’ment Werner Langen (EMIL Rapporteur) A. Tietmeyer

Sharon Bowles (ECON Chair) D. TrinderKay Swinburne (ECON) A. Tietmeyer

Regulatory / Legislative

SIFMA Board J. Mayer Equity SteerCo J. Fields Prime Brokerage Comte. M. Riffaud Capital Markets Comte. S. Bhandari MBS & Securitiztn ExCo T. Dixon Rulemaking Oversight M. Riffaud Financial Reform WG F. KellyASIFMA Board D. Lynne (chair)

Key vendor board seats

Tradeweb S. Wolff Markit S. Wolff LCH Clearnet L. Shaw DTCC DTCC/DerivServ S. McClymont CLS P. Connor BATS J. Marques ELX G. Rafferty Deutsche Börse H. Lamberti EuroCCP M. Bradbury Euroclear M. Slumbers SWIFT W. Gaertner

14


Introducing dbClear

Clearing Governance at Deutsche Bank

15


CIB Platforms GroupAlan CloeteGovernance

FX

Jason Vitale

Credit

Hester Serafini

Rates

Joe Cassidy

Listed Derivatives

Drew Bradford

Commodities

Joe Cassidy

GTB

Werner Steinmueller

E Platforms

Rhom RamDaniel Marovitz

Equity Derivatives

Anthony ByrneClearing

Specialists

Distribution

Onboarding and Transition

dbClear

Operations

Client Service


Introducing dbClear

Deutsche Bank's approach to clearing

16

Prime Brokerage

Listed Derivatives

OTC Clearing and

Intermediation

16


Introducing dbClear

Deutsche Bank Client solutionsRange of solutions to maximise benefit to the client

17

Clearing

Prime Brokerage

Portfolio Compression

Service incubation team

Margin financing / Collateral flexibility

Pre- and post-trade portfolio analysis tools

Cross Asset / Product margining

Margin segregation

dbRiskClear and dbReset

Listed Products


Introducing dbClear

Deutsche Bank works with a number of key fund administrators as part of it’s overall commitment to providing a Global Listed Derivatives clearing infrastructure.

BNP Paribas Asset Services

JPM Investor Services

CITCO Financial Services

IFS Dublin

BONY Treasury Services

GLOBEOP Financial

State Street

Northern Trust Fund Services

Providing some of the following range of services:

Listed DerivativesClient distribution and Fund Administrators

18

Trade & Position Management / Reporting

• Defined trade delivery using a specific custom

• Customised position information

• Portfolio analysis facilitating cross-product margining

Static Data Information Portal

• Including position expiration data

• VAR analysis where required

• Corporate actions data where appropriate

Management Reporting & Information

• Dynamic & Customised Reporting

• Focus on flexible information formats

• Interfacing directly into internal systems

Margin Payments & Transfers

• Link into DB Payments infrastructure if required (described later in this

presentation)

• Automated margin transfers and payments into internal

infrastructure

750 Global

Customers

127Use a Fund

Administrator

Exchange2010 Ranking (Cleared Volumes)

2010 Market Share (Cleared Volumes)

Eurex, Frankfurt 2 3.87%

Euronext Liffe, London 4 5.10%

CME, Chicago Not provided by Exchange 2.14%

CBOT, Chicago Not provided by Exchange 1.71%

SFE, Sydney 4 10.96%

SGX, Singapore 13 2.89%

TSE, Tokyo Not provided by Exchange 2.77%

TFX, Tokyo Not provided by Exchange 3.53%

OSE, Osaka Not provided by Exchange 1.50%

HKEx, Hong Kong 9 3.13%

MDEX, Malaysia Not provided by Exchange 16.54%


Introducing dbClear

Key Considerations Agreed trade between client and dealer should be a legally binding bilateral trade until cleared (potentially only for minutes but that state should exist) If trades are not accepted for clearing then fallback to being bilateral If a trade is not affirmed then it cannot process through to clearing but is still legally binding between client and dealer based on execution Trades submitted on individual (gross) basis, netting/compression process to be completed separately from clearing submission Strategic goal of affirmation = confirmation within middleware

Not complete for illustrative purposes only

Operational excellence

19


Introducing dbClear

Bank of the Year 2010Derivatives House of the Year 2010-IFR Review of the Year 2010, January 2011

Derivatives House of the YearBank Risk Manager of the Year-Risk Awards, January 2011

No. 1 in Derivatives- Risk Interdealer, September 2010

No. 1 in Global Fixed IncomeDB is “meaningfully ahead” of the next placed banks-Greenwich Associates, March 2011

Best Global Risk Management HouseBest Risk Management House in North AmericaBest Global Investment BankBest Global Credit Derivatives House-Euromoney, Awards for Excellence, July 2010#1 FX provider with 21% market share for 5 consecutive years#1 FX Prime Broker

Most Innovative Team of the Year (FX)Most Innovative in FXMost Innovative in Retail Structured Products- The Banker, The Banker Awards, September 2010

No. 1 Top Rated Global Prime BrokerNo. 1 Global Overall Prime BrokerNo. 1 Multi-Strategy Provider- Global Custodian, Prime Brokerage Survey, June 2010

Overall, Top Investment Bank-Life & Pensions , L&P Rankings , August 2009

Derivatives House of the Year Bank Risk Manager of the YearDerivatives Research House of the YearHedge Fund Derivatives House of the Year Inflation Derivatives House of the YearRisk Magazine, January 2011

Headlines for dbClear

“Deutsche handles seamless OTC interest rate swap”http://www.ft.com/cms/s/0/fc89d3f0-3d87-11df-bdbb-00144feabdc0,s01=1.html

“Deutsche Bank Electronically Executes and Clears First OTC Interest Rate Derivative Transaction Via Autobahn”http://www.advancedtrading.com/infrastructure/showArticle.jhtml;jsessionid=IHEZMQSA2ZWRJQE1GHRSKH4ATMY32JVN?articleID=224201007&_requestid=26779

“Deutsche Bank Clears First Interest Rate Swap on Behalf of Citadel”http://www.cnbc.com/id/39724462/Deutsche_Bank_Clears_First_Interest_Rate_Swap_on_Behalf_of_Citadel_LLC_on_CME_Group_s_IRS_Platform

“First Fully-Electronic Interest Rate Swap Trade Executed and Cleared in U.S.”http://www.tradeweb.com/news/press_releases/2010/20101118

“Deutsche Bank Sets New Industry Benchmark with ISAE 3000 Certification for Rates Client Clearing”http://www.db.com/medien/en/content/press_releases_2010_3228.htm

"CDS traded and cleared under anticipated Dodd-Frank rules"http://www.ft.com/cms/s/0/cfdf6ea6-355b-11e0-aa6c-00144feabdc0.html#axzz1G1f7JcHP

“First Fully-Electronic CDS Trades Executed and Cleared in U.S.”http://www/tradeweb.com/news/press_releases/2010/20110210

Deutsche Bank is the Ideal Partner

Award winning services

20

http://images.google.com/imgres?imgurl=http://www.ifre.com/Pictures/Web/n/g/p/award-small-blank.gif&imgrefurl=http://www.ifre.com/hybrid.asp?typeCode=52&pubCode=1&usg=__Lj41mKsX_pGNV8_o-KesL3193oU=&h=195&w=106&sz=7&hl=en&start=2&um=1&tbnid=9GJuwO3dSks8NM:&tbnh=104&tbnw=57&prev=/images?q=ifr+awards+2009&hl=en&um=1

http://images.google.com/imgres?imgurl=http://www.greenwich.com/WMA/images/title_logo.gif&imgrefurl=http://www.greenwich.com/WMA/about_greenwich/our_mission/1,1604,,00.html?rtOrigin=G&vgnvisitor=gKqYl56Ing==&usg=__3Q0FONlGfL2Iap_Q_Ryevihed7A=&h=65&w=288&sz=3&hl=en&start=1&um=1&tbnid=aAtEDhXOpQidwM:&tbnh=26&tbnw=115&prev=/images?q=greenwich+associates+logo&hl=en&um=1

http://www.advancedtrading.com/infrastructure/showArticle.jhtml;jsessionid=IHEZMQSA2ZWRJQE1GHRSKH4ATMY32JVN?articleID=224201007&_requestid=26779


Introducing dbClear

Trading information provided to Prime Brokerage is kept separate from Deutsche Bank trading desks through information barriers in place within Deutsche Bank systems

Deutsche Bank’s trading desk does not have access to client clearing positions Clearing Front Office and Middle Office are dedicated teams that are not part of our trading desk's respective

teams ISAE 3000 (International Standard on Assurance Engagements) is a new industry standard that supersedes

the SAS 70 (Statement on Auditing Standards) ISAE 3000 audits the design of internal controls and assesses the completeness, accuracy and transparency

of controls based on Management’s assessment criteria Deutsche Bank engaged PWC (PriceWaterhouseCoopers) to audit the LCH client clearing workflow, to assess our current

process and where applicable suggest improvements

November 2010 Deutsche Bank receives ISAE 3000 accreditation on its LCH Swapclear Client Clearing process Deutsche Bank becomes first to gain ISAE 3000 accreditation for the LCH Swapclear client clearing process

Passes audit without limitations or disclaimers

Audit scope incorporates the complete life cycle of a client cleared trade Assessment of 9 management assessment criteria

The ISAE 3000 opinion confirms Deutsche Bank has designed and implemented effective internal controls to ensure the transparency and accuracy of the LCH Swapclear client clearing process Demonstrates Deutsche Bank is operating within a market leading control framework which is highly responsive to

regulatory changes

Information barriers and ISAE 3000 accreditation

21


Introducing dbClear

dbClear Client Service“Follow the Sun” Global Support model

Dedicated Single Point of Contact Teams in every major centre at Deutsche Bank

Relationship manager and back up contact allocated to each client

Client confidentiality is strongly enforced Client Service Teams are in separate locations from trading and sales teams

Client Service Team operates under separate reporting lines from front office personnel to avoid conflicts of interest

Confidentiality is policed and enforced by senior management at Deutsche Bank

Industry recognition – 09/10 ZYen survey 1st Global Derivatives for Client Management overall

1st Cross Product Services for Client Onboarding

22


Introducing dbClear

dbClear Onboarding

RFI Legal Negotiations

Technical Transition

SupportMigration

ClientService

New AccountOpening

23


Introducing dbClear

dbClear TradeFinder

24


Introducing dbClear

The dbClear principles of Client Clearing

Information barriers

List

ed

Credit

FX

Equities

Commodities

Rates

Business Cycle Support (RM/SRM)

Full CCP access

Targeted Offering

Operational Intelligence (Market Initiatives Group)

Regulatory Edge

Cost certainty and mitigation

Operating and Business Model Enabling

Rep

ortin

g an

d R

isk

Onb

oard

ing

& T

rans

ition

Clie

nt S

ervi

ce

Clie

nt

Additive Platform Advisory and Services

Ope

ratio

nal E

xcel

lenc

e25


Introducing dbClear


Mitigating the cost of compliance with Regulation


Introducing dbClear

Cost of compliance with Regulation

27


Business Impact

Initial MarginVariation Margin (Cash)

CCP ChargesAsset Transformation Charges

New Fund Costs

Operational CostsOperational Risks

IT CostsRegulatory Reporting Costs

Infrastructure Costs

Lobby RestructureDevelop Capital

Efficiencies


Introducing dbClear

Cost of Client Clearing for End Users

Commercial terms agreed on bespoke basis between Client and Clearing Broker. Central Clearing of End User transactions will generate costs that must be passed through to End User or subsidized by Clearing Broker

Clearing House Initial Margin requirements are non-zero and conservative

Methodologies are generally VaR based and Initial Margin calculated at portfolio level

Interest rate paid on cash posted may be less than Fed Funds/OIS

Custodial charges may apply to securities posted

Client Clearing Transaction and Facility Fees

Transaction fees are the most common charges and originate from both Clearing House and Clearing Broker

Clearing Broker fee typically waived by Clearing Broker if trade execution occurs in-house

Fees generally applied upfront once transaction has been registered at Clearing House, and billed on monthly basis

Fees may be fixed per transaction or based on product, market, notional, tenor and/or risk level

Volume discounts may apply for both Clearing House and Clearing Broker fees

Clearing Broker may set minimum monthly fee level and/or warehouse fee for providing the Client Clearing facility

Onboarding logistics to connect to Clearing Brokers and Clearing Houses

Process Reengineering: Resource allocation to ensure client systems, custodians, administrators and vendors are fully integrated and prepared for Client Clearing flows

Legal and Compliance: Resource allocation to negotiate Legal agreements with each Clearing Broker and Clearing House, as well as ensure proper compliance with legislative and regulatory directives

28


Introducing dbClear


OTC Rates DerivativesClient Clearing offering


Introducing dbClear

Summary of Clearing House Status

CME OTC Rates platform is live as of October 2010, and CDS platform launched in December 2009 Based in the United States and Regulated as a Derivatives Clearing Organization by the CFTC Trades and collateral are segregated from house account of Clearing Broker and are portable Product and market scope for first phase limited to vanilla USD swaps.

IDCG IDCG Client Clearing service is live as of December 2008 Based in the United States and Regulated as a Derivatives Clearing Organization by the CFTC Recently announced development of OTC Account Class offering, a hybrid agent clearing model

More stringent membership criteria to be introduced to support new OTC Asset Class. Market scope limited to USD

Limited flexibility on reset/payment frequencies and other trade terms

LCH SwapClear (SCM)

SwapClear Client Clearing service is live as of December 2009 Participation from all major Dealers with well established connectivity Tried and tested Default Management process <Lehman Brothers default> Individual Segregated Account for each client; trades and collateral fully segregated and portable Product, currency and tenor eligibility is broadest among the Clearing Houses

30

LCH FCM LCH is launching FCM model to provide US-based collateral protection. Currently engaging buy and sell side participants to seek input into proposed model Regulated as a Derivatives Clearing Organization by the CFTC

Summary of Clearing House statusOTC Rates Derivatives


Introducing dbClear

Rates Clearing Houses: Key Differences in StructureOTC Rates Derivatives

31


Clearing House Membership Criteria to Become a Clearing BrokerCME IRS LCH.Clearnet (SwapClear) IDCG

Guaranty Fund Contribution

Min USD 50m. Then weighted 85% on margin, 15% on gross notional.

£125m required in total from all SwapClear CBs. Each CB’s contribution share

proportional to its Initial Margin (avg. over past 3 months), and subject to min £2m.

(However Default Fund available is £591m as of Mar-10, as it combines other

products.)

Min USD 2.5mRisk based according to stress tests

designed to respond tomarket conditions and profile

Capitalization$1bn adjusted net capital2

plus sufficient excess to cover CB’s pro-rata share of largest IRS CB’s default.

Net Capital of USD 5bnAs set by the Risk Committee from time to time. Currently $300m;; with CB’s trading limit at 1/3 of capitalisation.

Ability & Commitment to Participate in Default Management Process

Required to bid on portfolios auctioned(and have expertise to hedge, liquidate and

facilitate process).

Required to bid on portfolios auctioned.New CBs must demonstrate ability to

participate before commencing clearing.Outstanding IRS portfolio of $1tr notional.

No requirement for all CBs to bid on auctioned portfolios.

Risk Management / Operational Capabilities

Must stress test exposures, monitor risk and screen clients’ credit & suitability.

Must demonstrate ability to act as a CB.

Regular partial and front-to-back fire drills test both SwapClear and the CBs’ ability to

implement the process.Adequate back-office.

Must demonstrate ability to act as a CB. Also competent back-office

personnel required (or outsourced)

Approvals Required Include…

Must be registered with the CFTC as a FCM

Local regulator authorizations for bank CBs.

FCM registration, if conducting client clearing

1


Introducing dbClear

Default protection and Margin segregationOTC Rates Derivatives

32


Protective FeaturesCME IRS LCH.Clearnet (SwapClear) IDCG

Initial Margin (IM) Methodology

Principal Component Analysis based on 10yr historic data & stresses

VaR (7day, 99.7%, 5y)Daily back-testing

VaR (1day, 99.7%, 6m)IM relief uses a SPAN compliant process

Variation Margin (VM)Valuation based on closing curve published by CME (based on 3pm EST snapshot)

In respective currency, using LCH’s yield curve

Valuation based on IDCG discount Curve, updated constantly through the day.

Margin Collection Frequency

Once daily; reserve the right to call more frequently in extreme cases.

Collected Intra-day, multiple times (currently 4x)

Twice daily, and more frequently if necessary

Margin Segregation

CFTC governed segregated funds treatment for client margin in new “OTC Derivative Sequestered Account Class”

CB must charge full margin from each client, and post full margin to the CME.

Gross Method: Client accounts fully segregated from each other at the LCHNet Omnibus Method: Lower IM required due to netting (across clients in the same omnibus account), but all clients in the account must use same back-up CB.Additional IM (if any): can be stored at the LCH, to augment the Gross method only.

CFTC governed Segregated Funds treatment (i.e. any client margin retained at the CB must be kept in segregated client accounts per CFTC Rule 1.25.)

CB must charge full margin from eachclient, but posts net (with offset benefits across its clients) to the clearing house.

Loss mutualisation (i.e. impact of default of other clients of the same CB)

Yes, if CB defaults due to a client of the CB defaulting, then (after utilizing all IM and Guaranty Fund contributions of the defaulted CB) CME may access the margin of all remaining clients (on a pro-rata basis) of the defaulted CB.

None, except within the Net Omnibus account (if Net Omnibus Margin Method is used)

Yes, if CB defaults and a client defaults, then clearing house may access the margin of all remaining clients (on a pro-rata basis) of the defaulted CB.


Introducing dbClear

Client Clearing overviewOTC Rates Derivatives

33

Bilateral: Client executes array of Over The Counter Rates Derivatives with many Dealers

Intermediation: Prime Broker steps in to Client trades and faces Dealers

OTC Counterparty Evolution: From Bilateral to Intermediation to Client Clearing

“Prime Broker”

Fixed

LiborPrime BrokerClient Dealer A

Fixed

Libor

Short Option

Long OptionPrime BrokerClient Dealer B

Short Option

Long Option

Fixed

Libor

Dealer AClient

Short Option

Long Option

Dealer BClient

Client Clearing: Clearing Broker registers Eligible Client trades at the Clearing House

Fixed

LiborClearing House

Clearing Broker

Fixed

Libor


Fixed

LiborDealer AClient

Initial Margin

Credit Protection


Introducing dbClear

Client Clearing overviewOTC Rates Derivatives

34

Gap Risk Issue: Greater Counterparty Risk From Ineligible Trades

Clearing House

Δ = -100kIRS

Clearing House IM = 1m

Swaptions Δ = +80k

FRAs Δ = +30k

Δ = -100kIRS

Clearing House

Δ = -100kCleared

Bilateral Δ = +110k

Δ = -100kCleared

Credit Protection on IRS Δ = -100k

Client


Client


Detail

Summary

Net Gap Risk Clearing HouseNet Gap Risk Δ = +110k

Δ = -100kCleared


Client


Client Portfolio only has 10k of gap risk, but bilateral gap risk has increased to 110k due to limited Clearing House product eligibility

Eligible transactions registered at the Clearing House, ineligible transactions remain bilateral

Transactions between Client and Clearing Broker result from direct execution and/or Intermediation

Assume Initial Margin Requirement = [ Delta x 10 ]

Client Net Portfolio Δ = +10k

Clearing Broker

Clearing Broker

Clearing Broker


Introducing dbClear


OTC Credit DerivativesClient Clearing offering


Introducing dbClear

Summary of Clearing House statusOTC Credit Derivatives

36


CME Dealer clearing “live” on 12/15/09

Client clearing “live” on 12/15/09

CME has indicated the intention to develop European offering

ICE Clear Dealer clearing since July 2009

Client clearing target go live Summer 2011

Eurex Dealer clearing live since July 2009, little volume

Eurex is still interested in developing Client clearing but has abandoned dealer to dealer clearing

ICE Trust Dealer clearing since March 2009, 95+% of new eligible trades cleared

Client clearing “live” on 12/14/09, but in process of converting to FCM model, which is expected to go live July 2011

LCH Clearnet Dealer clearing live since March 2010 with four French dealers

Working on expanding dealer participation

Intention to build client clearing platform as well


Introducing dbClear

ICE vs. CME: Differences in Structure*OTC Credit Derivatives

37


* Subject to Change – Offerings would need to be changed to comply with rule-making under Dodd-Frank Act.

Key Difference ICE Trust ICE Clear CME

Model Structure

Agency ModelCM guarantees performance of, and acts as agent for ClientClient has a trade facing ICE Trust via its agent

PB Intermediation ModelClient has a legally binding trade facing DB and DB has a legally binding trade facing ICE Clear as a principal (DCM)

Agency ModelCM guarantees performance of, and acts as agent for ClientClient has a trade facing the CME via its agent

Membership Requirements

Min. Adjusted Net Capital of $1 bn. $5Bn of Tier 1 capitalA rating 1. Non-bank – Min. Adjusted Net Capital of

$500 mm2. Bank – Tier1 Capital of $5 bn

Client Margin Segregation

Partial mutualization:Client losses may only be mutualized across the Net Account which is the client margin calculated across all client positions.Any margin in excess of this amount cannot be used to mutualize losses.

Partial mutualization:Client losses may only be mutualized across the Net Account which is the client margin calculated across all client positions.Any margin in excess of this amount cannot be used to mutualize losses.

Full mutualization:Client losses may be mutualized across the full amount of client initial margin.

Margin Methodology

Stress based approach Factors considered are Spread Dynamics, Liquidity Charges, Concentration Charges, Basis Risk, Jump to Default and IR Risk.

Same as ICE Trust Stress based approachFactors considered are Systematic Risk, Curve Risk, Spread Convergence/Divergence Risk, Sector, Idiosyncratic and Liquidity Risk.

Documentation Documentation for ICE Trust FCM Model has not been finalized.

• ISDA Master / CSA• ICE Clear Standard Terms Annex to ISDA & Schedule• ICE Clear DCM Standard Terms Annex & Addendum/Side Agreement

• Futures & Options Agreement• Addendum to F&O Agreement & Schedule• Give-up Agreement

DB Legal Entity Deutsche Bank Securities Inc. (DBSI) as FCM

Deutsche Bank AG (DBAG) as DCM Deutsche Bank Securities Inc. (DBSI) as FCM


Introducing dbClear

ICE vs. CME: Differences in Operational Process*OTC Credit Derivatives

38


* Subject to Change – Offerings would need to be changed to comply with rule-making under Dodd-Frank Act.

Key Difference ICE Trust ICE Clear CME

Confirmation Trade is confirmed on ICE PlatformTrades are submitted to DTCC as Gold-like records for reporting and Credit Event processing purposes

Trade is confirmed on ICE PlatformAll trades are confirmed in the DTCC Confirmation Warehouse

Trade is confirmed on CME PlatformTrades are submitted to DTCC as copper records

Settlements Daily CDS Settlements• Upfront Fee settles T + 1• Daily coupon settlements with VM• Monthly Fee Billings settle separately from Margin

Standard CDS Settlements• Upfront Fee settles T + 3• Standard quarterly coupon• Monthly Fee Billings settle separately from Margin

Daily CDS Settlements• Upfront Fee settles T + 1• Daily coupon settlements with VM• Monthly Fee Billings settle separately from Margin

Affirmation ICE LinkVCONMarkitWire

ICE LinkVCONMarkitWire

ClearportVCONMarkitWire

Compression Optional Netting/ Compression

Clients will have the ability to have all or no trades compressed at the end of the day

Custom Netting/ Compression

Clients will have the ability to select specific trades to compress or have all trades compress at scheduled time interval

Automatic Netting

All trades are automatically netted at the end of the day

Collateral All Collateral (IM and VM) in segregated accountNetted margin call - Coupon accrual/payment included in VM

Only IM is segregatedNon-netted margin call - Coupon accrual/ payment handled outside of margin

All Collateral (IM and VM) in segregated accountNetted margin call – Coupon accrual/payment included in VM

Reporting Clients can access reports directly on ICE Link Platform• Clearing Activities Report• Cleared Positions Report• Gross Margin Report

Clients can access reports directly on ICE Link Platform• Clearing Activities Report• Cleared Positions Report• Gross Margin Report

Clients cannot access report on the CME Platform• Clients receive reports directly from CM and not from the CME platform• Reports display Total Netted Position and Daily Trade Activities


Introducing dbClear

Protective FeaturesICE CME

Margin Segregation CFTC governed segregated funds treatment for client margin in new “OTC Derivative” 4d Account Class Only IM is segregated, IM is held in an omnibus

account across all clients of the Clearing Member (CM)

CFTC governed segregated funds treatment for client margin in new “OTC Derivative” 4d Account Class Both IM and VM are segregated

Loss mutualisation (i.e. impact of default of other clients of the same CM)

Client margin is fully protected in the event of a CM default due to a house position Client margin is fully protected in the event of another Client’s default, that does not cause the CM to default Client margin is only at risk if another Client at the Client’s CM defaults AND causes the CM to default In that event, only the portion of the Client’s initial

margin that is Net Margin is at risk, the remainder of the Client’s margin (called Custodial margin) is protected. Net Margin is equal to the margin computed across all positions of CM’s clients, with credits for offsetting trades.

Client margin is fully protected in the event of a CM default due to a house position Client margin is fully protected in the event of another Client’s default, that does not cause the CM to default Client margin is only at risk if another Client at the Client’s

CM defaults AND causes the CM to default In that event, unlike in the ICE model, all of the Client’s

initial margin is potentially at risk

Default protection and Margin segregationOTC Credit Derivatives

39


Introducing dbClear

Prime Brokerage exampleOTC Credit Derivatives

40

Step 1: Client executes with many dealers

Client

Step 2: Client gives up trade to a Prime Broker (PB)

1.00%

Client Sells Prot on CDX IG

Client Buys Prot on CDX HY

5.00%

Client

Dealer A

Dealer B

Operational efficiency Portfolio credit risk to one high quality Dealer Net margining on positions Ability to margin cross products

Benefits

1.00%

Client Sells Prot on CDX IGPrime BrokerClient Dealer

A1.00%

PB Sells Prot on CDX IG


5.00%

Prime BrokerClient Dealer

B

PB Buys Prot on CDX HY

5.00%


Introducing dbClear

Client Clearing exampleOTC Credit Derivatives

41


Client

Step 2: Client gives up trade to a central clearing broker (CB)

1.00%


5.00%


Client

Dealer A

Dealer B

Operational efficiency Reduction of systemic risk Avoids requirement to replace trades that

were facing a defaulted bank Insulates collateral in the Clearing House Enables client positions and collateral

portability in case of a clearing broker default

Benefits

Client 1.00%


5.00%


Client

CB

CB

CCP 1.00%

CCP Sells Prot on CDX IG

5.00%

CCP Buys Prot on CDX HY

CCP

Dealer A

Dealer B

1.00%

CB Sells Prot on CDX IG

5.00%

CB Buys Prot on CDX HY


Introducing dbClear

CDS Client Clearing mechanicsICE / CME (Credit): how it works

42

Step 1: Client executes with Dealer A

Client

Step 2: Client gives up trade to Clearing Broker for Clearing on ICE / CME

1.00%

Client Sells Prot on CDX IGDealer

A

Client 1.00%


CB ICE / CME 1.00%

ICE / CME Sells Prot on CDX IG

Dealer A1.00%

CB Sells Prot on CDX IG

Initial MarginInitial Margin

Client has credit risk to Clearing House but Clearing Broker has full risk to Client

Client IM is held in a segregated Client account at ICE/ CME. This is separate from Clearing Broker X’s House account.

Initial Margin


Introducing dbClear


Global Foreign ExchangeClient Clearing and Prime Brokerage offering


Introducing dbClear

In development / Not live

LCH Deutsche Bank participating member of “ForexClear” project

European FX Options with hedging via swaps, forwards, and spot

Membership requirements: TBD

SGX Deutsche Bank participating founding member

Currently clears spot, swaps and forwards in 8 currency pairs with more products and currencies to be added in the future

Phase One: Asian FX Forwards (KRW, CNY, TWD, MYR, INR, IDR, PHP) up to 1 yr

Phase Two: Expanded currency and tenors


CME Clearport Deutsche Bank participating on the Founding Member board

Product coverage planned: FX Spot, Forwards, Swaps, NDFs & Options

Phase One: Spot, Fwds, Swaps to 5 yrs; current CLS currencies initial scope

Phase Two: FX Options, expand currency pairs


Summary of Clearing House statusForeign Exchange

**Additional CCPs in Development**

44


Introducing dbClear

IntroductionFX Clearing and Prime Brokerage

45

Global Leader in Foreign Exchange

FX clearing experience dates back to 1993

Ranked globally as #1 FX provider with 21% market share for 5 consecutive years by EuroMoney

Ranked as #1 FX Prime Broker by EuroMoney and FX Week

Consistent market making, 24 hours a day, executing an average of over 1 million trades globally each day and clearing over 200 thousand tickets

Access to broadest set of FX products and currency pairs

FX Clearing Coverage through 4 global centers from Sydney’s open to New York’s close


Introducing dbClear

Proposed market structureFX Clearing and Prime Brokerage

46

ClientFX

Liquidity Trade Execution

dbC

lear

FX

•Trade Matching• Allocations

•Limit Monitoring• Client Service

•Single Credit Line• Single Collateral

Relationship• Single Reconciliation

• Consolidated Reporting• Single Cash Account

•Bank to CCP Settlements•Global Trade Repository•Trade Flow Manager•Trade Aggregation

CCP CCPCCP

http://www.cls-group.com/


Introducing dbClear

FX execution: Bilateral tradingFX Clearing and Prime Brokerage

47

Client executes and clears with many dealers

Initial Margin

Currency 2

Currency 1

Initial Margin

Currency 2

Currency 1

Dealer AClient

Dealer BClient

Trading occurs with multiple counterparties

Reconciliation done with each individual dealer

Gross open positions across dealers

Multiple collateral placements

Multiple points of failure possible


Introducing dbClear

FX execution: Prime Brokerage structureFX Clearing and Prime Brokerage

48

CCP CP


Client

Step 2: Client gives up trade to a prime broker

Initial Margin

Client

Prime Broker

Currency 2

Currency 1

Currency 2

Currency 1

Currency 2

Currency 1

Currency 2

Currency 1

Initial Margin

Prime BrokerCurrency 2

Currency 1

Currency 2

Currency 1


Reconciliation with the prime broker

Netted open positions and

collateral requirements

Reduced points of failure

Client

Client

Dealer A

Dealer B

Dealer A

Dealer B


Introducing dbClear

FX Intermediation: Central Clearing exampleFX Clearing and Prime Brokerage

49


Client

Step 2: Client gives up trade to clearing member for clearing through CCP

Currency 2

Currency 1

Currency 2

Currency 1

CCPClearing Member

Initial Margin

DealerClient

Initial Margin

Currency 2

Currency 1

Currency 2

Currency 1

Currency 2

Currency 1


Reconciliation with the CCP

Collateral posted to clearing member only

Portfolio credit risk to central counterparty

Single point of contactClient

Dealer A

Dealer B


Introducing dbClear


Listed DerivativesClient Clearing


Introducing dbClear

Deutsche Bank Listed DerivativesProduct overview

51

Deutsche Bank’s Global Markets Listed Derivatives business provides exchange traded derivatives execution, clearing and related services for its customers. The group provides access to over 70 Global Listed Derivatives exchanges, consistently ranking Deutsche Bank in the top Global Clearers, and is structured around the following core competencies:

Global Clearing Services

Ecommerce Trading & Clearing Connectivity

Risk, Liquidity and Collateral

Global Prime Brokerage

Voice Execution, Trade Ideas &

Research

Single Global Clearing Infrastructure

Key processing centres in London, Frankfurt, Sydney,

New York and London

Consolidated structure around OTC (CDS, Rates

& FX) and Exchange Listed Clearing

Continued investment in technology and

infrastructure, ensuring scalable clearing services

autobahn completes the DB electronic execution

offering

Single screen access to more than 25 Global Listed

Exchanges

Enhanced trade order functionality including key exchange order types and

trade algorithms

DB’s Fast FIX facility offers the lowest possible latency

metrics

DB proprietary and risk management systems

Real-time customisable risk infrastructure

monitoring customer and market risk management

Flexible and real-time reconciliation services providing customised

reporting and resolution

Efficient Liquidity management services

Integrated Prime Services offering incorporating Equity Finance, Listed

Derivatives, FX and Fixed Income Prime Brokerage

Market leading web-based reporting infrastructure,

Global Prime gives customers real-time access to trade and position information

Margin consolidation and financing, improving pricing opportunities

Global cross asset-class coverage teams

Generating trade flows and trade ideas for customers

Managed flow facilities benefit customers trading

on risk

Access to liquidity, Options coverage and block / basis trading facilities


Introducing dbClear

Deutsche Bank Listed DerivativesGlobal Clearing Services

52

dbClear provides clients comprehensive clearing services through a consolidated global processing environment and exchange membership structure offering a wide range of benefits including our value added services such as dbClear reporting for file/statement delivery, dbClear matching and dbClear allocations

The dbClear Listed Derivatives suite includes dynamic access to data and reports, secure FTP, FIX and email deliveries plus complete flexibility to customize reports. Our allocations and matching solutions are market leading products that enable our clients to follow the complete life cycle of a trade in real time, cutting operation risk to the absolute minimum

With our Local branches throughout Asia we can provided superior custody and clearing services into exchanges such as KRX, TAIFEX and NSE in countries with restricted currencies.

Our international Futures & Options clearing has client facing staff in Sydney, Singapore, Tokyo, London, Frankfurt and New York. Our consolidated global processing environment and exchange membership structure offers the following: Automated trade management

Timely and accurate electronic reporting

Dedicated client service staff

Consolidated margining

Position maintenance including first notice days, last trading days and delivery monitoring

Innovative technology solutions

Extensive exchange memberships


Introducing dbClear

Deutsche Bank Listed DerivativesRe-defining Futures & Options and moving to the real-time model

53

dbClear Listed Derivatives provides customers with an innovative solution, re-defining the Futures & Options clearing process.

Clients have access to a consolidated view of Execution and Clearing Broker trade status information in real time. Trades arematched, allocated and exceptions identified intraday instead of next day reducing Operational Risk


Introducing dbClear

Deutsche Bank has a number of facilities enabled to accept orders electronically, including:

FIX DMA and Care Orders through AutobahnFO and DB Proprietary FIX engines

FIX DMA flow from Customer Order Management / Trading system

FIX Care Order flow from Customer Order Management / Trading system

Care Order flow from Bloomberg EMSX

Care Order flow from vendor Portfolio Management systems, including:

– Trading Screen

– Charles River

– Portware

– Bloomberg EMSX

The process for FIX order management, both DMA and Care Orders, is documented to a great level of detail to ensure that the process is completely automated with the appropriate controls and automated acknowledgements.

Co-location and Proximity Hosting solutions are also enabled ensuring the lowest level of latency when accessing exchanges:

CME proximity hosting via UK5 data centre

Euronext LIFFE proximity hosting via UK5 data centre

Eurex proximity hosting via UK5 data centre

NSE and Korea co-location

Listed Derivatives: Electronic executionFIX Connectivity for DMA and Care Orders

54


Introducing dbClear

Fast and flexible access to more than 25 major global electronic exchanges, AutoBahnFO forms a strategic part of Deutsche Bank’s market leading franchise

Complete exchange flexibility including tradable market depth views

Seamless provision of services across regions and asset classes

24-7 Global eSupport teams to implement key solutions

Single sign-on process, linking all Deutsche Bank autobahn products

Compliments Deutsche Bank’s real-time straight through processing capabilities

Supports all major order types covered on exchange

Key algorithmic trading and synthetic orders types include

Volume Weighted Average Price

Time Weighted Average price

Iceberg style orders, both automated and manual

Volume Participation

Arrival Price

Listed Derivatives: Electronic execution AutoBahnFO GUI

55


Introducing dbClear

dbClear Listed Derivatives Matching : Benefits for Clients Manages the entire trade lifecycle from Execution to Settlement

Connects the Client, Clearing Broker and Executing Brokers in real-time via Traiana© Harmony Network

Single Client interface for all execution and clearing relationships

Improves T+0 Transparency for Client and Clearing Brokers in respect to Third Party Broker Executions/Give Ins

Reduces T+1 breaks and Operational Risk due to increased STP and T+0 Exception Management

Support for client allocation and average pricing self servicing via Client Portal

dbClear Listed Derivatives Matching : Client Features Complete Trade Lifecycle event status via Client Portal (Executed, Affirmed, Allocated, Matched, Cleared, Given-Up)

Consolidated multibroker execution reports, trade reconciliations and allocations

Real-time low latency trade notifications and matching

Automated Allocations/Average pricing via GUI, File or FIX message

Multiple average pricing and allocation methods supported

GUI and/or alert based T+0 exception management supported by dedicated Operational team

Efficient client integration using industry standard or proprietary formats

Listed Derivatives: Matching

56


Introducing dbClear

dbClear Listed Derivatives Allocations: Benefits for Clients Top-day management of trade allocations increases STP and reduces T+1 breaks and Operational risk

Automates the Allocation and Give-Out process on an intraday and end of day basis

Enables a more efficient operational model reducing cost and maximising resources.

Flexible solutions tailored to the clients optimal Risk management and Operational model.

Support for FIX, CSV file, GUI and Rules based solutions

dbClear Listed Derivatives Allocations: Client Features GUI based Allocations integrated to Deutsche Bank’s core Order Management, eTrading and Post Trade portals

Allocations can be processed in multiple formats (FIX & CSV file)

Straight allocation, best-fit average pricing and real average price methodologies supported, enabling equal distribution of trades across all accounts

Rules-based allocation methods available

Market standard instrument identifiers (Bloomberg, RIC and Exchange tickers) supported along with client specific identifiers

Client Allocation solutions managed by dedicated IT and Operational Integration teams

GUI and/or alert based T+0 Exception Management supported by dedicated Operational team

Listed Derivatives: Allocations

57


Introducing dbClear

Listed Derivatives workflowsAgency and Principal relationships in F&O

58

Deutsche Bank Securities Inc (US Broker Dealer) - acting as Agent in the US

“Customer agrees that this Agreement shall govern all dealings between Customer and DBSI relating to transactions that DBSI may execute, clear and/or carry on Customer's behalf for the purchase or sale of futures contracts including foreign futures contracts or options thereon”

Deutsche Bank AG - acting as Principle

“In respect of every Transaction made between us subject to the Rules of an Exchange, we shall, unless otherwise agreed in writing in relation to a particular Exchange, act as principal in any Transaction with you, and we shall have made (or arranged to have made through an intermediate broker who may be an Associated Company) on a principal-to-principal basis a matching transaction on themarket”

DBSI Clearing House DealerClient

Variation Margin Variation Margin


Variation Margin

Initial Margin

Future/Option Transaction (on behalf of the Client) Future/Option Transaction

Client Credit Exposure

DB Credit Exposure

DBAG Clearing House DealerClient

Variation Margin Variation Margin


Variation Margin

Initial Margin

Future/Option Transaction (in Clearing Member Name)

Matching Transaction Future/Option Transaction


Introducing dbClear

Listed Derivatives workflowsDetailed flow for clients contracting to DBSI

59

DBSI F&O Clearing Model (acting as Agent) Margin Flows

“Customer agrees that this Agreement shall govern all dealings between Customer and DBSI relating to transactions that DBSI may execute, clear and/or carry on Customer's behalf for the purchase or sale of futures contracts including foreign futures contracts or options thereon”

DBSI CMEClientInitial Margin

Initial Margin

DBAG LDN

Eurex or LCH

Secured

Segregated (US Clearing Houses only)

Initial Margin

Initial Margin

DSI TSE

Initial Margin

Initial Margin

Client Credit Exposure

Secured Account

DB Credit Exposure


Introducing dbClear

Listed Derivatives workflowsDetailed flow for clients contracting to DBAG London

60

DBAG F&O Clearing Model (acting as Principle) Margin Flows

“In respect of every Transaction made between us subject to the Rules of an Exchange, we shall, unless otherwise agreed in writing in relation to a particular Exchange, act as principal in any Transaction with you, and we shall have made (or arranged to have made through an intermediate broker who may be an Associated Company) on a principal-to-principal basis a matching transaction on the market”

DBAG Eurex or LCHClient

Initial Margin

DBSI CME

Initial Margin

Initial Margin

DSI TSEInitial Margin

Initial Margin

Initial Margin

Client Credit Exposures

DB Credit Exposure


Introducing dbClear

Deutsche Bank's solution to Margin protection Listed Derivatives

61

DB AG London - Segregation through DBAG FFT Custody account:

Under German law non-cash collateral is protected in the event of a DB default.

Securities are held in a DB FFT custody account opened in the name of the underlying customer.

Collateral is reflected in client’s Listed Derivatives account.

Clients need to sign a pledge agreement in a addition to a standard Futures and Options agreement.

This is a live solution with customers.

DB AG London - Segregation through Bank of New York Mellon (BNYM):

DBAG London can also provide Listed Derivatives customers with a 3rd Party margin segregation solution through Bank of New York Mellon (BNYM). Only collateral to cover Initial Margin balances only can be held in the segregated BNYM.

A DB account will be opened in the name of each client separately with BNYM.

Additional margin (Variation margin plus any interest, commissions etc), will be settled directly with and held at DB – as per the current standard margining process.

Excess Initial Margin can only be withdrawn from BNYM account on DB’s instruction, except in the event of a DB default.

Standard margin cut-off times are still applicable.

Client needs to sign amended Listed Derivatives Clearing agreement and a 3-way Segregated Account Control Agreement.


Introducing dbClear

BONY Margin segregation workflow Listed Derivatives

62

1. DB settles client omnibus margin call with exchange.2. BNYM send DB Balance Data for each client account it holds.3. Any outstanding margin call is then communicated to client.4. Client confirms Margin settlement details with DB.5. Client settles Initial Margin Requirement with BNYM.6. BNYM confirms Initial Margin Coverage to DB.7. Only DB can request a return of collateral from BNYM to Client (unless DB becomes insolvent).

Clearing House

DBAG LDN

Client

BNYM3.

Mar

gin

Cal

l

4.S

ettle

men

t C

onfir

mat

ion

1. Margin Settlement 2. Balance data

Collateral Returned

Request to return collateralR

eque

st fo

r BN

YM c

olla

tera

l

6. IM Confirmation


Introducing dbClear


Risk WaterfallsOTC Rates and Credit Derivatives, Listed Derivatives


Introducing dbClear

Default protectionOTC Rates Derivatives: LCH

64

125m required in total from all SwapClear CBs. Each CB’s contribution share proportional to its Initial Margin (avg. over past 3 months), and subject to min £2m. (However Default Fund available is £591m as of Mar-10, as it combines other products.)

Portion of LCH’s own capital is £20m

Level stress tested daily to cover at least a default of the single largest CB.

Guaranty Fund size was an estimated total of £591m as of March –2010

LCH can call up to £50m from each remaining CB for mandatory additional contributions

Remaining Capital of LCH totalled EUR 305m as of December –2009

Membership Criteria

Variation Margin

Initial Margin

Defaulter’s Default Fund Contribution

LCH.Clearnet’s capital & reserves to £20mm

Remaining Default Fund

SwapClear Undertaking (£50mm per SwapClear Member)

Replenishment of LCH.Clearnet’s Capital


Introducing dbClear

Default protectionOTC Rates Derivatives: CME

65

Sized to cover 4 largest defaults Funded portion sized to cover 1st and 2nd largest theoretical

losses

Unfunded portion sized to cover 3rd and 4th largest theoretical losses

Stress Testing Stress test covers 99.9% 7-day P/L moves over 5 year back

testing period

7 standard deviation shocks to the PCA factors needed to reach 99.9% 7-day coverage

Limited Recourse The IRS financial safeguards will operate in a limited

recourse model

The portfolios are broken apart in order to margin Futures and IRS separately

a The actual amounts will be based on the four largest net debtor profiles

CME Group

General Assessment Powers for IRS

IRS Non-Defaulting CMs Guaranty Fund

CME Contributed Capital $100M

Defaulting MemberIRS Guaranty Fund

Defaulting MemberIRS Overnight / Initial Margin

a

Fund

edU

nfun

ded


Introducing dbClear

Default waterfall structureOTC Rates Derivatives: CME

66

Risk of Loss Mutualisation If a Clearing Member defaults in the

House account (Lehman), the collateral of non-defaulted clients of the defaulted Clearing Member can NOT be used to cover losses

If a Clearing Member defaults in the Client Omnibus, due to the large default of a client (LTCM), the collateral of non-defaulted clients of the defaulted Clearing Member CAN BE USED to cover losses


Introducing dbClear

Each Clearing Member must maintain at least $2.5 million in Guaranty Fund plus Initial Margin based on portfolio Risk

The order of liquidity default has multiple levels of protection:

1st Protection: The defaulting member’s Initial Margin plus Member’s Guaranty Fund contribution. Liquidity supported by a committed line of credit with current balance of $125 million.

2nd Protection: IDCG’s $50 million Surplus Capital

3rd Protection: Guaranty fund contributions of non-defaulting clearing members’ (pro-rata based on member’s required contribution to Guaranty Fund)

4th Protection: Final backstop is the clearing house’s assessment powers requiring a clearing member capital all to fund any possible residual loss.

Default protectionOTC Rates Derivatives: IDCG

67



Introducing dbClear

Key Principles Hybrid of traditional net and gross margin models

Best of both: (i) only net margin is at risk and (ii) full amount of gross margin is held at clearing house

Client margin is fully protected in the event of a FCM default due to a house position

Client margin is fully protected in the event of another Client’s default, that does not cause the FCM to default

Client margin is only at risk if another Client at the Client’s FCM defaults AND causes the FCM to default

In that event, only the portion of the Client’s initial margin that is Net Margin is at risk, the remainder of the Client’s margin (called Custodial margin) is protected

Default protectionOTC Credit Derivatives: ICE

Risk Waterfall – FCM default due to Client Positions1. Defaulting Client’s ICE Minimum Margin (Net and Custodial Margin) & excess margin*

2. Defaulting FCM’s Excess Margin in the House Account

3. Defaulting FCM’s Excess Guaranty Fund Contribution

4. Defaulting FCM’s Client Omnibus (limited to the Net Client Omnibus requirement)

5. ICE’s Priority Guaranty Fund Contribution

6. Non-Defaulting CPs’ Guaranty Fund Contribution and ICE’s Pro Rata Guaranty Fund Contribution

* In the event that ICE cannot identify the defaulting Client, ICE will proceed to the next step(s) in the waterfall as necessary to cover ICE obligations to non-defaulting members. After a defaulting Client is identified, ICE will work with the defaulting CP to identify if any house and/or client omnibus funds should be recouped from any remaining defaulting Client funds held at ICE

68


Introducing dbClear

Client Margin Protection - ExampleOTC Credit Derivatives: ICE

69

Snapshot (pre-default): FCM-A is clearing for Client-A and Client-B

ICE Minimum Margin Requirement:

Client-A: $1MM

Client-B: $2MM

The Net Margin requirement is $300K

Margin Held at ICENet Margin $ 300K

Gross Margin $ 3MM

FCM-A House Margin $ 500K

FCM-A Guaranty Fund $ 500K

Defaults: Client-B defaults and FCM-A is unable to cover the losses

ICE declares FCM-A in default in their Client Account

Total Losses are $ 4MM

Net Margin to Gross Margin ratio is 10%

Client-A’s funds in Net Margin is $ 100K, Custodial Margin is $ 900K

Risk Waterfall

1. Client-B margin (Net & Custodial) $ 2.0MM

2. FCM-A House Margin $ 500K

3. FCM-A Guaranty Fund $ 500K

4. FCM-A Net Client Omnibus $ 100K

5. ICE Priority Guaranty Fund $ 900K

6. Non-Defaulting FCMs GF / ICE Remaining GF $ 0

7. One Time Assessment $ 0

Net margin is at risk in the event of a Client default

Client-A’s Custodial Margin ($900K) is not available for use in the event of a default

FCM-A House Margin and Guaranty Fund are available to the extent that the margin was not needed to cover losses in its own House account


Introducing dbClear

Key Principles CME has changed their waterfalls to be separate waterfalls for each product (one CDS waterfall, one rates waterfall, one futures

waterfall) rather than the commingled waterfall originally proposed

Client margin is fully protected in the event of a FCM default due to a house position



In that event, unlike in the ICE model, all of the Client’s initial margin is potentially at risk

Default protectionOTC Credit Derivatives: CME

Risk Waterfall – FCM default due to Client Positions1. Defaulting Client’s CME Minimum Margin & excess margin



4. Defaulting FCM’s Client Omnibus (Pro-Rata based on Client’s Contribution to Margin Pool)

5. CME’s Guaranty Fund Contribution

6. Non-Defaulting FCMs’ Guaranty Fund Contribution or Assessment Powers

70


Introducing dbClear

Client Margin Protection – Example 1 OTC Credit Derivatives: CME

71


Scenario:

FCM-X is clearing for Client-A, Client-B and Client-C

Clients A, B and C trade CDS and have posted margins as follows:

Client-A Client-B Client-C Total$3 MM $2 MM $6 MM $11MM

Client A defaults and FCM-X is unable to cover the losses

CME declares FCM-X in default in its Client Account and liquidates its House positions

Losses associated with liquidation of House positions are less than the sum of FCM-X margin and FCM-X Guaranty Fund contribution and there is excess collateral of $3 MM

Total losses due to Client – A default are $5 MM

Loss Allocation: Excess collateral of $3 MM is available to absorb losses

due to liquidation of Client-A’s positions

Client-B and Client-C margins are not impacted by looses due to Client-A positions

Risk Waterfall

Waterfall Margin Remaining loss/excess

1. Client-A $ 3.0 MM -$ 2.0MM

2. Excess Collateral in House Account $ 3.0 MM +$ 1.0MM

3. Client-B Margin $ 2.0MM No impact

4. Client-C Margin $ 6.0MM No impact

CME Clearing

Client-A

House Account

FCM-X

Client-B

Client-C

In default

Aggregated Customer Account


Introducing dbClear

Client Margin Protection – Example 2OTC Credit Derivatives: CME

72


Scenario:



Client-A Client-B Client-C Total

$3 MM $2 MM $6 MM $11MM



Losses associated with liquidation of House positions are less than the sum of FCM-X margin and FCM-X Guaranty Fund contribution and there is excess collateral of $1 MM

Total losses due to Client –A default are $5 MM

Loss Allocation: Excess collateral of $1 MM is available to absorb losses

due to liquidation of Client-A’s positions

Client-B and Client-C margins are mutualised across Client-B and Client-C margins, with Client B and Client-C absorbing $0.25 MM and $0.75 MM of losses respectively

Risk Waterfall


1. Client-A $ 3.0 MM -$ 2.0MM

2. Excess Collateral in House Account $ 1.0 MM -$1.0MM

3. Client-B Margin $ 2.0MM $1.75MM

4. Client-C Margin $ 6.0MM $5.25MM

CME Clearing

Client-A

House Account

FCM-X

Client-B

Client-C

In default



Introducing dbClear


73


Scenario:




$3 MM $2 MM $6 MM $11MM



Losses associated with liquidation of House positions are greater than the sum of FCM-X margin and FCM-X Guaranty Fund contribution and there is no excess collateral


Loss Allocation: Excess collateral is not available to absorb losses due to

liquidation of Client-A’s positions

Losses associated with Client-A positions are mutualisedacross Client-B and Client-C margins, with Client B and Client-C absorbing $0.5 MM and $1.5 MM of losses respectively

Risk Waterfall


1. Client-A $ 3.0 MM -$ 2.0MM

2. Excess Collateral in House Account $ 0.0 MM -$ 2.0 MM

3. Client-B Margin $ 2.0MM $1.5 MM

4. Client-C Margin $ 6.0MM $4.5 MM

CME Clearing

Client-A

House Account

FCM-X

Client-B

Client-C

In default



Introducing dbClear


74


Scenario:




$3 MM $2 MM $6 MM $11MM



Losses associated with liquidation of House positions are greater than the sum of FCM-X margin and FCM-X Guaranty Fund contribution and there is no excess collateral


Loss Allocation: Excess collateral is not available to absorb losses due to

liquidation of Client-A’s positions

Losses associated with Client-A positions are mutualised across Client-B and Client-C margins, with Client B and Client-C absorbing $0.5 MM and $1.5 MM of losses respectively

Risk Waterfall


1. Client-A $ 3.0 MM -$ 2.0MM

2. Excess Collateral in House Account $ 0.0 MM -$ 2.0 MM

3. Client-B Margin $ 2.0MM $1.5 MM

4. Client-C Margin $ 6.0MM $4.5 MM

CME Clearing

Client-A

House Account

FCM-X

Client-B

Client-C

In default



Introducing dbClear

Default Protection Listed Derivatives: TSE

75


Key Principles FCM Client Account separate from FCM House Account

Client Account margined Net across all clients (i.e. DB receive in gross from clients and pay net to the clearing house)

Client margin in the Client Account is fully protected in the event of a FCM default due to a house position



In that event, only the portion of the Client’s initial margin that is Net Margin is at risk, the remainder of the Client’s margin will be moved on to another FCM.

Risk Waterfall – FCM default due to Client Positions1. Defaulting Client’s Minimum Margin & excess margin


3. Defaulting FCM’s Excess Default Fund Contribution


5. TSE’s Default Fund Contribution

6. Non-Defaulting Members’ Default Fund Contribution


Introducing dbClear

Default Protection Listed Derivatives: LCH

76


Key Principles FCM Client Account separate from FCM House Account

Client Account margined Net across all clients (i.e. DB receive in gross from clients and pay net to the clearing house)

Client margin in the Client Account is fully protected in the event of a FCM default due to a house position



In that event, only the portion of the Client’s initial margin that is above Net Margin is at risk, the remainder of the Client’s margin will be moved on to another FCM.

Risk Waterfall – FCM default due to Client Positions1. Defaulting Client’s Minimum Margin & excess margin


3. Defaulting FCM’s Excess Default Fund Contribution


5. LCH’s Default Fund Contribution


7. Voluntary re-contribution to the Default Fund from members


Introducing dbClear

Default Protection Listed Derivatives: Eurex

77


Key Principles FCM Client Account commingled with FCM House Account in one account

Account margined net.

Client margin is not protected in the event of a FCM default due to a house position


Client margin is at risk if another Client at the Client’s FCM defaults AND causes the FCM to default

June 2011: Eurex plan to offer variety of client margin segregation solutions

Risk Waterfall – Member Default1. Defaulting Members Margin

2. Defaulting Members Clearing Fund Contribution

3. Reserve Fund of Eurex Clearing AG

4. Clearing Fund Contribution of other members

5. Liable Equity of Eurex Clearing AG



Introducing dbClear


Risk Waterfalls comparisonCurrent CME FCM and LCH SCM models, proposed CFTC collateral models


Introducing dbClear

Collateral Segregation – “Omnibus Account” FCM model (Based on current CME FCM model)

Market Omnibus AccountClient collateral co-mingled in omnibus account segregated from FCM accounts.

Risk: Client funds at risk of being used in event of default of FCM.

Characteristics:- Shared omnibus structure- No segregation from other counterparties- Segregated / bankruptcy remote from CCP and FCM- Sequestered account held physically at third party custodian (e.g. BONY for Deutsche Bank)

Key Considerations:- Maximal margin compression for OTC Rates or Credit (compared to individually segregated accounts for a

single asset class)

79


Introducing dbClear

1) Membership criteria and Assessment risk / Limited liability (FCM)- CME to potentially reduce from USD 1bn capital to USD 50mn capital

- CME can call members for mandatory additional contributions of a total of 250% of the combined Guaranty Fund.2) Collateral Segregation(CCP)- As per existing current account structure, client funds at risk of being used in event of default of FCM

3) Eligible collateral and haircuts (CCP)- Risks on the collateral pool:

1. haircuts are inside the market should be assessed daily

e.g. defaulting Government bonds: applied haircut is 10%, but the market implies 30%

2. wrong-way risk / speed of burn

e.g. a Fund Manager puts up its own paper as collateral. However, Clearing Members would prefer collateral that is diversified, e.g. unrelated to the Fund Manager.

Key RisksFCM model (Based on current CME FCM model)

FM

Client F

Client E

Client D

Client C

Client B

Client A

Total collateral for Clearing Member acting as FCM: FCM only accepts 50% of FM’s collateral obligations as FM paper risk limited to 50%

N.B.: CCP applies a 50% limit on FM’s paper posted as collateral (overall)risk becomes much broader

accelerated SPEED OF BURN!

Collateral held in Sequestered Account

Excess margin

Default Guaranty fundCME Contributed CapitalSegregated / bankruptcy remote barrier for OTC Rates

Speed of burn

80


Introducing dbClear

Account structureSCM model (Based on current LCH SCM model)

Option 1: Individual Segregated Account (ISA)Client collateral is segregated and margined separately from other clients of SCM.Full protection in the event of the default of SCM and/or clients of SCM

Option 2: Omnibus Net Segregated Accounts – affiliates (OSA)Clients have option to set up an OSA dedicated to multiple funds at the Fund Managers discretion. All clients of OSA must appoint same back-up SCM to ensure portability of collateral in the event of a default of SCM.Risk: Additional margin called by SCM but not lodged at LCH, not protected by LCH Clearnet rules.

Option 3: Omnibus Net Segregated Accounts – non affiliated clientsClient can opt to be have an OSA where accounts are co-mingled with accounts of other clients of the SCM, who controls participation in OSA. Risk: Additional margin called by SCM but not lodged at LCH, not protected by LCH Clearnet rules.

Additional Collateral Account: Additional margin posted by a client can be lodged separately at the LCH. Clearing member will provide a breakdown by assets lodged in this account by client and this will be used by

the LCH to identify client collateral in the event of a SCM default. Collateral held in this account is fully protected in the event of the default of the SCM. Additional margin called by SCM, but not posted in the Additional Collateral Account would not be protected by

LCH rules in the event of the default of the SCM.

More

Risk to client

Less

81


Introducing dbClear

1) Loss Mutualisation (in event of SCM default)- Loss mutualisation does not occur between individual or omnibus net segregated client accounts. However loss

mutualisation can occur between all clients in a single omnibus net segregated account in the event of a SCM default.

2) Clearing House declared insolvent- In the event the LCH default waterfall has been exhausted following the default of clearing member(s) and is

insufficient to meet the obligations of the clearing house, they would then be declared insolvent and at that point client collateral is at risk as the Clearing Member would be classed as an unsecured creditor of the clearing house.

- It should be noted that when Lehman’s defaulted only 35% of Lehman’s initial margin was utilised across all products cleared at the LCH.

Key RisksSCM model

82


Introducing dbClear

CFTC has proposed an Advanced Notice of Proposed Rulemaking (“ANPR”) where it has asked market participants to comment on the following 4 kinds of collateral models for protection of client margins for OTC derivatives

Collateral models proposed by the CFTCSummary

Baseline Waterfall Method Legal Segregation with Commingling (“LSOC”)

Individual Segregation

Client Account Structure

Client collateral held at the CCP* on an omnibus level i.e., client margin is commingled with margins posted by other customers of the FCM

Same as Baseline Same as Baseline All collateral is kept separate for and on behalf of the cleared swap client at the CCP

CCP Recourse and Loss Mutualization

CCP has recourse to collateral posted by non-defaulting clients in the event of FCM default due to default of one of its customer

Same as Baseline Collateral of non-defaulting clients is NOT available to the CCP in the event of FCM default due to default of one of its customers

Same as LSOC

Position in the Risk Waterfall

Collateral of non-defaulting customers available for recourse BEFORE CCP Capital and Guaranty Fund contributions

Collateral of non-defaulting customers available for recourse AFTER CCP Capital and Guaranty Fund contributions

Collateral of non-defaulting clients is not in the Risk Waterfall

Same as LSOC

Operational and compliance costs

Low Low Low High

Initial Margin Low High Highest Highest

83


Introducing dbClear

Collateral models proposed by the CFTC (contd.)Summary or risk waterfalls

Baseline Model - FCM default due to Client Positions

1. Defaulting Client’s minimum margin & excess margin

2. Defaulting FCM’s excess margin in the House Account



5. CCP’s Capital Contribution

6. Non-Defaulting FCM’s funded Guaranty Fund Contribution or Assessment Powers (unfunded )

Waterfall Model - FCM default due to Client Positions


2. Defaulting FCM’s excess Margin in the House Account



5. Non-Defaulting FCM’s funded Guaranty Fund Contribution or Assessment Powers (unfunded) *


LSOC & Individual Segregation Models - FCM default due to Client Positions


2. Defaulting FCM’s excess Margin in the House Account



5. Non-Defaulting FCM’s funded Guaranty Fund Contribution or Assessment Powers (unfunded)

* It is unclear whether the CCP will have recourse to Defaulting FCM client omnibus before or after exhausting the unfunded portion of the Guaranty Fund contribution

84


Introducing dbClear

Collateral models proposed by the CFTC (contd.)Baseline model example


Scenario:


Clients A, B and C trade CDS and have posted margins as follows (for illustration purposes only):

Client-A Client-B Client-C Total$30 MM $20 MM $50 MM $100 MM


CCP declares FCM-X in default in its Client Account and liquidates its House positions

Total losses associated with liquidation of House positions are less than the sum of FCM-X margin and FCM-X Guaranty Fund contribution and there is excess collateral of $1 MM

Total losses due to Client-A default are $22 MM, after Initial Margin of $30 MM is fully exhausted

CCP capital of $4 MM

CCP Guaranty Fund contribution of $20 MM (excluding Guaranty Fund contribution of FCM-X)

Loss Allocation:

Losses associated with liquidation of Client-A are first offset against excess collateral of $1 MM available from liquidation of House positions of FCM-X

Remaining loss of $21 MM is mutualised across Client-B and Client-C margins, with Client B and Client-C absorbing $6 MM and $15 MM of losses respectively

Risk Waterfall


1. Client-A $ 30 MM ($ 22 MM)

2. Excess Collateral in House Account $ 1 MM ($ 21 MM)

3. Client-B Margin $ 20 MM $14 MM

4. Client-C Margin $ 50 MM $35 MM

CCP

Client-A

House Account

FCM-X

Client-B

Client-C

In default


85


Introducing dbClear

Collateral models proposed by the CFTC (contd.)Waterfall model example


Scenario:










Loss Allocation:


Remaining loss of $11 MM is offset against the CCP contributed capital of $4 MM, leaving a loss balance of $7 MM

Balance is offset against CCP Guaranty Fund contribution

Risk Waterfall


1. Client-A $ 40 MM ($ 12 MM)


3. CCP Capital $ 4 MM ($ 7 MM)

4. CCP Guaranty Fund contribution $20 MM $13 MM

5. Client-B Margin $30 MM No impact

6. Client-C Margin $70 MM No impact

CCP

Client-A

House Account

FCM-X

Client-B

Client-C

In default


86


Introducing dbClear

Collateral models proposed by the CFTC (contd.)LSOC / Individual segregation model example


Scenario:










Loss Allocation:


Remaining loss of $6 MM is offset against the CCP contributed capital of $4 MM, leaving a loss balance of $2 MM

Balance is offset against CCP Guaranty Fund contribution

Risk Waterfall


1. Client-A $ 45 MM ($7 MM)


3. CCP Capital $ 4 MM ($2 MM)

4. CCP Guaranty Fund contribution $20 MM $18 MM

CCP

Client-A

House Account

FCM-X

Client-B

Client-C

In default


** CCP cannot use the collateral attributable to the non-defaulting customers of the defaulting FCM and such collateral is not available as a default resource in the Risk Waterfall

87


Introducing dbClear


Key Risk Management


Introducing dbClearDeutsche Bank

Deutsche Bank Legal, Risk & Capital (LRC)A global Organisation

NorthAmerica15.2%

621

16South

America0.4%

50Pacific1.2%

75Asia

11.1%

456UK

15.6%

638Cont.

Europe17.4%

715

GER36.8%

1,508

4,098 employees (FTE) worldwide

Japan1.8%

8Sub-Sahara

Africa0.2%

11MENA0.3%

FTE, January 2011

89



Legal, Risk & Capital Principles

Our Management Board provides overall risk & capital management supervision for our consolidated Groupas a whole. Our Supervisory Board regularly monitors our risk and capital profile

We manage credit, market, liquidity, operational, business, legal and reputational risks as well as our capitalin a coordinated manner at all relevant levels within our organization

The structure of our function is closely aligned with the structure of our Group Divisions

The Legal, Risk & Capital function is independent of our Group Divisions

90



Legal, Risk & Capital (contd.)Tasks at Deutsche Bank

Research

To research and develop better risk

methodologies

Independence

To exercise independent

monitoring of all risks

Limits

To set appropriate limits for risk taking across

the firm

Communication with regulators

To dialogue with regulators, rating

agencies and external equity

analysts to improve external

perception

Standards

To set standards for

risk information

and reporting

Training

To develop and

implement internal &

compliance risk training

Policies

To establish a coherent

framework of relevant policies

Organisation&

Process

People &

Culture

Methodology&

Tools

Systems&

Infrastructure

Task

sBu

ildin

g Bl

ocks

TrustInnovationPerformance Customer Focus Teamwork

Valu

es

91


Introducing dbClear

Legal, Risk & Capital (contd.) Integrated Risk Management

MARKET RISKArises from the uncertainty concerning changes in market prices

and rates.

LIQUIDITY RISKThe risk from a potential inability

of DB to meet all payment obligations when they come due

Additional responsibility: Capital & Funding Management

REPUTATIONAL RISKThe threat that publicity concerning a transaction,

counterpartyor business practice involving a client will negatively impact

the public’s trust in DB

OPERATIONAL RISKThe loss potential in

relation to employees, infrastructure failure, documentation etc.

CREDIT RISKArises from all transactions that give rise to

actual, contingent or potential claims against any counterparty.

We split into:Default risk, Country risk and Settlement risk

Legal, Risk & Capital strives to enhance shareholder value and protect Deutsche Bank's capital, integrity, and reputation byproviding our business partners with innovative solutions.

Deutsche Bank is exposed to a wide range of risks, such as credit losses, volatility due to variation in market prices and rates,operational failures, liquidity shortages and regulatory & legal matters. LRC manages all aspects of these risks from the analysis ofcounterparty credit risk and the stress-testing of market movements to the protection of the Bank's infrastructure and information.

C R E D I T R I S K M A N A G E M E N T

M A R K E T R I S K M A N A G E M E N T

T R E A S U R YO P E R A T I O N A L

R I S K M A N A G E M E N T

L E G A L & C O M P L I A N C E

92



Legal, Risk & Capital (contd.) Risk Management Tools

Expected Loss…

is the loss we can expect on a one year time frame based on historical experience

Economic Capital…

is the capital we need to absorb very severe unexpected losses arising from our exposures

Value-at-risk...

is the potential future loss that, under normal market conditions, will not be exceeded on a 99% confidence interval for one (internal) and ten (regulatory) days

Stress Testing…

determines the effect of potentially extreme circumstances

Regulatory Risk Reporting

93


Introducing dbClear

CRM’s Organisational set upKey Credit processes

― Each borrower must be rated― Basis for correct risk appetite determination― Methodology is stipulated by Credit Rating Policy

― Bank may set portfolio risk appetites for specific business divisions, industries, countries, specific products and individual counterparties to ensure diversification and avoid concentration

― Divisional Risk units are responsible for analysis, structuring, approval and ongoing monitoring of individual exposures or transactions

― Divisional Credit Strategies are reviewed closely with the front office

― Credit decisions generally made by Credit Authority Holders― Authorities assigned based on qualification, experience and training & reviewed periodically by GCPC― Credit approval required for material change to credit facility― Large/Complex transactions referred to underwriting committee― Exposure consolidated under one obligor principle

― Special de-risking units are key part of Bank’s overall risk management process― Risk transfer executed in various forms (outright sales, single/portfolio hedging, securitisations etc.)― De-risking conducted by the respective business units (e.g. LEMG) in accordance with GCPC

approved mandates

― Active monitoring and management is an integral part of Credit Risk Management― Performed by CRM risk units in cooperation with Portfolio Management― Interaction with other functions e.g. LEMG, CPM, TCP etc.

RATING

APPETITE

STRUCTURING/ORIGINATION

APPROVAL/AUTHORITY

DISTRIBUTION

MONITORING

94


Introducing dbClear

As the replacement values of derivatives portfolios fluctuate with movements in market rates and withchanges in the transactions in the portfolios, we also estimate the potential future replacement costs of theportfolios over their lifetimes or, in case of collateralized portfolios, over appropriate unwind periods. Wemeasure the potential future exposure against separate limits.

The potential future exposure measure which we use is generally given by a time profile of simulated positivemarket values of each counterparty’s derivatives portfolio, for which netting and collateralization areconsidered. For limit monitoring we employ the 95th quantile of the resulting distribution of market values,internally referred to as potential future exposure (“PFE”).

For credit risk management purposes, we perform stress tests to assess the impact of changes in generaleconomic conditions or specific parameters on our credit exposures or parts thereof as well as the impact onthe creditworthiness of our portfolio.

Assessing potential future exposure of derivatives

95


Introducing dbClear

Problem Loans: Credit Risk Management regularly assesses whether there is objective evidence that a loanor group of loans is impaired. A loan or group of loans is impaired and impairment losses are incurred if− there is objective evidence of impairment as a result of a loss event that occurred after the initial

recognition of the asset and up to the balance sheet date (a “loss event”),− the loss event had an impact on the estimated future cash flows of the financial asset or the group of

financial assets, and− a reliable estimate of the loss amount can be made.− Credit Risk Management’s loss assessments are subject to regular review in collaboration with Group

Finance

Derivatives – Credit Value Adjustments:− We establish a counterparty credit valuation adjustment for OTC derivative transactions to cover

expected credit losses. The adjustment amount is determined by assessing the potential credit exposureto all counterparties, taking into account any collateral held, the effect of netting under a masteragreement, expected loss given default and the credit risk for each counterparty.

− When the decision to terminate derivative transactions or the related master agreement results in aresidual net obligation owed by the counterparty, we restructure the obligation into a non-derivative claimand manage it through our regular work-out process.

Management of adverse development of credit risk

96



A comprehensive description of Risk Management within Deutsche Bank is given in the SEC Form 20-F, Item 11, which can be found on the Investor

Relations’ homepage:

http://www.deutsche-bank.de/ir/index_e.htm

Deutsche Bank Risk ManagementAdditional information

97

http://ircontent.db.com/ir/annual_sec_e.php






http://www.deutsche-bank.de/ir/en/


Introducing dbClear


dbClear TradeFinderReporting, Margining and Risk analysis


Introducing dbClear

TradeFinder dbClearThe future in cost and risk efficient clearing management

99

TradeFinder is a cutting-edge suite of tools for portfolio, risk and operational managers. Delivered via a well established technology platform it provides wide ranging functionality at all stages of the trade lifecycle.

It offers comprehensive portfolio analysis and history with pre and post trade analytics and modelling capabilities for risk, capital and cash; and full support for all centrally cleared and intermediated trade flows and positions, including LCH, CME, IDCG, ICE.

With multi-product support across Rates, Credit, FX, Listed Derivatives, including multiple variants of swaps and swaptions, and high speed navigation and drill down for multiple portfolio perspectives, it offers users the potential for smarter, faster, improved decision-making.

Data export is versatile, fast and efficient; facilities include FTPS, Excel, flat files and automatic e-mail production and notification.

Main features

Comprehensive portfolio analysis with pre and post trade analytics and modelling Historical, daily and intraday portfolio position tracking Initial and variation margin call explanation for multi-asset portfolios Historical and daily fee and billing reports Portfolio risk and future cash flow analysis CFaR ™ Portfolio risk and clearing management dbRiskClear ™


Introducing dbClear

TradeFinder dbClearNavigation and general functionality

tradefinder.db.com

100


Introducing dbClear

TradeFinder dbClearNavigation and general functionality (contd.)

101

Details for selected portfolio

Date selection field forhistorical browsing

Portfolio Selection in thesummary section.

Navigation bar Show table in popup

window

Excel export

Fast navigation iconsleading to detailed reports

Reports and analytics are accessed via the navigation bar or the fast navigation icon. The summary sectionlists all available portfolios and reports on aggregate portfolio level. A detailed analysis is obtained byselecting a portfolio. All displayed tables can be exported to an Excel sheet or an additional browser popupwindow. For historical browsing of reports the date selection field is used.


Introducing dbClear

Overview

Portfolio Position Tracking

102

Daily, updated reports show trade details, pricing and clearing information across all major Clearing Houses and enable managers to track portfolio performance accurately and efficiently. Key functionality includes:

End-of-day full reporting of position details

Intraday reporting on the status of trades clearing status changes

Portfolio change history tracks trade additions, unwinds and amendments

Multi-product capabilities and product specific reports (Swaps, Swaptions, Interest Rate Futures and Options, Bonds, Bond Futures and Options, FX Options) with expanding product range

Historical portfolio position tracking via archiving functionality


Introducing dbClear

Portfolio Position Tracking (contd.)

103

Press to display selected product specific report only

Sub-producttype filter foreach productspecific table

Date Selection for historical browsing Excel export with all productspecific end-of-day reports andan overall report including alltrade detail columns availableacross product types

Beyond trade details, the Excelsheet shows trade MTMs,coupons, accruals, fees andcash settlements, variation, pai.

Show expanded trade detailview

Product specific excel exportwith trade MTM, coupon,accruals and other cashsettlement related information

End of Day report shows all open positions as of close of business for the selected date. Portfolio positions are displayed in product-specific reports with sub-product type filtering functionality. Excel export provides additional trade details and cash settlement related information (trade MTMs, coupons, accruals, fees, cash settlements, variation, PAI). An expanded trade detail view is available for each product-specific report.


Introducing dbClear

Portfolio Position Tracking (contd.)

104

Trade Additions, Terminations and Amendments

Timestamp of intraday request

Intraday clearing status

Filter

Amended notional amount

The clearing status of each trade in the portfolio and newly added trades to the portfolio can be checked in the intraday report. The portfolio position composition over time is recorded in the change history showingtrade additions, amendments with the corresponding amended notional amount and trade terminations.


Introducing dbClear

Overview

Margin Call and Fee Transparency

105

TradeFinder dbClear provides the client full historical and intraday transparency of the trade clearing process through clearing houses and the ability to analyze and manage cross-product initial and variation margin on individual trade level. Key features are

Daily updated initial margin and variation margin reporting

Trade pricing and mark-to-market change reporting

Variation Margin Explanation and PnL Attribution

Initial Margin Explanation based on trades’ Greeks

Margin Call component reporting: collateral and settlement related cash flows

Daily updated Fee and Billing section

Historical archiving functionality and flexible historical period reporting

Drill-down functionality: clearing houses, currency, product class, interest rate bucket and security level


Introducing dbClear

Margin Call and Fee Transparency (contd.)

106

Excel export ofMargin Call foreach clearinghouse

Fast navigationto MTM variation, pa, initial marginand collateralpage

The margin call explanation provides an insight into the components of variation and intial margin call. Fast navigation leads to MTM variation, initial margin, cash balance and settlement related cash flows. The margin call is sent automatically to the client and can be retrieved on TradeFinder dbClear via Excel export.


Introducing dbClear


107

Click row forbreadown tocurrency, productclass, risk bucketand security level

Click for initial marginexplanation

Initial Margin analysis compares the initial margin charged by each clearing house and portfolio’s delta exposure to each clearing house. The calculation of the initial margin is explained in detail in a popup providing an initial margin breakdown down to currency, product type, risk bucket and trade level.


Introducing dbClear


108

MTM variationattirubtion: couponpayment, newtrades, terminations, amendments, market PnL

MTM change on tradelevel

Daily MTM Variation as part of the daily (variation) margin call is the sum of trade additions, trade terminations, trade amendments, coupon payments and residual PnL due to market movement. The daily total MTM change is attributed to trade level MTM changes and coupon payments.


Introducing dbClear

Overview

Portfolio and Trade Risk Analytics

109

TradeFinder’s risk and cash flow analysis functionality is designed to meet the challenges of an increasingly regulated OTC marketplace where the requirement to take and manage risk in a more capital-efficient manner demands access to the very best models and tools. TradeFinder delivers the wide-ranging functionality to achieve this, including:

Portfolio risk sensitivities change analysis: allows managers to stress test the portfolios using Deutsche Bank’s proven risk methodologies

Daily updated Greeks reports (Gamma, Vega, Delta, etc): allow managers to both manage the risk within their portfolio and identify new trading possibilities

Cash Flow at Risk ™ Analysis: provides access to Deutsche Bank’s market-leading suite of tools for one of the most precious resources our clients have – their cash collateral

Highly flexible risk margining engine including VaR, marginal VaR, Conditional VaR, expected positive/negative exposure (EPE / ENE) calculation

Portfolio risk and clearing management tool dbRiskClear ™

Drill-down functionality: by currency, product type, interest rate bucket and security level


Introducing dbClear

Portfolio and Trade Risk Analytics (contd.)

110

Switch todelta

changereport (1d change, 5d

change)

Click for tradescontributing to thisdelta bucket

Portfolio, currency, producttype selection

Click Excel export of bucketeddelta on trade level

Aggregate Delta and Gamma are reported on portfolio, currency and product type level. By selecting a certain portfolio, currency or a product type the corresponding bucketed delta distribution is shown. 1 day and 5 day delta changes are analysed in the Delta Change Report. By clicking on a tenor bucket the contributing trades are listed in a popup. Bucketed delta per trade is exported via Excel.


Introducing dbClear


111

Select deltachang

analysis

Click for tenor/expirybucket breakdown on trade level

Click Excel export of bucketeddelta on trade level

Portfolio, currency, product type filter

Vega is aggregated on portfolio, currency and product type level. Once a portfolio, currency or product type is selected, the bucketed delta for the selection is shown. For each vega bucket the contributing trades are reported. Bucketed vega per trade can be exported to an Excel sheet.


Introducing dbClear


112

Colour Coding: VaR andcVaR compared to Initial

Margin

VaR and cVaR fordiffernt horizonts and

confidence levels

Colour Coding: VaRand cVaR compared to Initial Margin

Click on cell toupdate currency piecharts

Click pie chart fordetailed VaRanalysis on tradelevel (VaR popup)

Value at Risk engine updates portfolio Value at Risk and conditional Value at Risk for different confidence intervals and horizons on a daily basis. Selecting a confidence level/horizon combination updates the currency breakdown of VaR and cVaR. Clicking on the currency breakdown opens a VaR popup window with a detailed Value at Risk analysis on currency and trade level.


Introducing dbClear


113

Click fortrade/currency NPV change histogram

Drill Down: Functionality

Portfolio Level, Currency Level , Security Level

VaR Excel export

Value at Risk popup reports different Value at Risk figures on portfolio, currency and trade level. For each level the corresponding historical NPV change histogram can be displayed. The VaR report is exported in an Excel sheet.


Introducing dbClear


114

Click foridentification oftrade contribution

Click foridentification oftrade contribution

Future coupon analysis gives insight into future receivable and payable cash-flows. For both single and cumulated cash-flows the corresponding trade list is available in a popup.


Introducing dbClear


115

Cash Flow At Risk Analysis


Introducing dbClear

Report Archive

116

TradeFinder dbClear stores all automatically sent daily reports in its Report Archive.


Introducing dbClear


dbCross-Product Margin


Introducing dbClear

Cross-Product Margining

118


dbCross-Product Margin across Rates and FX under a Master Netting Agreement

Capital efficiency Margin offsets across products and agreements provides capital efficiency

Operational efficiency Single margin call across master agreements

Transparency Rules based Portfolio Initial Margin calculations where clients get full transparency and can replicate the calculations as required

Commitment Margin parameters and offsets are documented in a Master Netting Agreement and subject to a notice period for change

Wide coverage Many FX and fixed income trade types within the portfolio margin calculation


Introducing dbClear

Strategy Product Group Products Covered

dbCr

oss-

Prod

uct M

argi

n

Fixed Income Relative Value / Macro OTC Bilateral, Cleared and Intermediated

Cap, Floor, IR Swap, Swaption

Financing Gov and Gov Inflation Bond

Listed Derivatives IR Futures and Options, Bond Futures and Options

FX OTC Bilateral, Cleared and Intermediated

FX Spot, Forward and Option

Listed Derivatives Currency Futures and Options

Rul

es o

fthe

Roa

d Equity and Credit strategies OTC Bilateral, Cleared and Intermediated

Equity Swaps and Options, CDS

Financing Single Stock, Corporate Bonds

Listed Derivatives Index and Stock Futures and Options

Cross-Product MarginingCapabilities

119



Introducing dbClear


Technology and Market Initiatives


Introducing dbClear

Benefits: Compliance with regulatory

requirements for OTC position reporting

Increased market transparency

Impact: While legislation requirements

are still to be finalised and consequently vendor offerings to meet them the final impact on the end users is still unclear.

Trade repositories and transparencyIndustry status / plans

121

2nd June 2009 Fed letter - commitment to universal reporting of all trades not cleared through a CCP - phased deliveries by asset class through 2009/10

Reporting was not mandatory for buy side, but all market participants ‘strongly encouraged’ to comply within 60 days from implementation by the signatories to the letter

Asset class-aligned repositories, already covered by DB for cleared and non-cleared transactions:

DTCC TIW for credit derivatives

TriOptima for rates derivatives

DTCC/MarkitSERV for equity derivatives

The Dodd-Frank Act (DFA) signed into law July 21, 2010 will dramatically change the OTC derivatives environment. Proposed rules from SEC and CFTC outline:

− Reporting and publication of trade data will be required through Derivatives Clearing Organization (DCOs) or registered swap data repositories (SDRs)

− Multiple reporting requirements covering both Cleared or uncleared OTC Derivative transactions (Credit, Rates, Equity, Commodities and FX)

− Contents required:

Transaction and price data

Primary economic terms

Confirmation data

Including the use of Unique Counterparty Identifiers (UCIs), Unique Product Identification (UPI) and Unique Swap Identification (USI)

− Reporting timing requirements vary from Real time, 15 min, 30 min or 24hr

− Responsibility for reporting will be driven by requirement type and market participant type such as:

Swap Dealer (SD), Major Swap Participant (MSP), Unregistered End User

Swap Execution Facility (SEF), Designated Contract Market (DCM)

Derivatives Clearing Organization (DCO),

− Rules do allow participants to leverage Third-Party Service Provider where appropriate

Outside the US, requirements are less clear at this time however proposed EC regulations under MiFID is gaining momentum.

Industry is keen for the CFTC, the SEC, and overseas regulators to adopt consistent reporting requirements to remove inefficiencies, simplify compliance obligations and enhance regulatory agency capabilities

Under the ISDA and AFME frameworks industry is currently finalising RFPs to appoint vendors to develop SDRs to meeting the requirements for Commodities and FX. Additionally Rates are also RFP following a detailed review of the current repository found it unfit for purpose.


Introducing dbClear


Transition Management and Operational Client Service


Introducing dbClear

Transition Management functions

presenter's details · date · page 123

On-boarding Pipeline Coordinate DocumentationThe Transition Management team has the responsibility of managing the onboarding pipeline ensuring a smooth transition of clients wishing to clear with DB

Transition Management coordinates Documentation with Client DB Credit Department DB Legal DB Ops areas

The Transition Management team communicates between areas on all aspects of the transition in order to onboard clients in a timely manner.

Obtain AML and KYC compliance as needed

Provide clear communication to Front Office and Client to manage expectations on turn around of documentation

Facilitate Clearing Agreements between DB and the Client

Facilitating Account Setup Client IntegrationTransition Management will facilitate the account setup with CMV, Legal and Credit

Coordinate Client portfolio testing

Ensure proper and timely client setup within DB systems Trade capture systems Static data Margin terms Monitor limit increases Confirm all trade currencies have initial margin

Education and Advisory Services and coordination of RFI

An internal end-to-end test will be conducted prior to client go-live to ensure systems connectivity is setup correctly

The transition management team together with relevant Ops areas will conduct an operational walkthrough prior to go-live and introduce Clients to necessary internal contacts

123


Introducing dbClear

Operational Client Service functions

presenter's details · date · page 124

Trade Processing Client Service & Product KnowledgePrompt trade affirmation Single point of contact for Clearing Relationship Management

Portfolio back-loading assistance Dedicated Client Service Representatives for OTC and Listed Derivatives

Trade position management (Trade Offsets, Novations, etc.) Assistance with operational process implementation

Reconciliation between Books and Records vs. CCPs Initial Margin vs. CCPs Variation Margin vs. CCPs

Trade flow explanations and diagrams

Proactive trade break resolution Rates and Credit product clearing expertise

24-hour coverage located in London, New York & Singapore

Reporting Risk ManagementAgree on report type and delivery mechanism for client reports Monitor client credit/legal limits

Reports are generated and delivered Real Time Cross Product Canned or Ad-hoc

Review eligible traded products

End-of-day Client trade reconciliations Monitor exception process (including restricted currency processing)

Trade Activity and Position report

124


Introducing dbClear


Communication and Contacts


Introducing dbClear

dbClear Contacts

126


Global product Key contact Details

[email protected]+44 207 547 7465dbClear Chris Hansen

[email protected]+44 207 547 8645Rates/Commodities Joe Cassidy

[email protected]+1 212 250 4845Credit Hester Serafini

[email protected]+44 207 547 6358FX Jason Vitale

[email protected]+44 207 547 1881Listed Derivatives Drew Bradford

[email protected]+44 207 547 1025Equity Derivatives Anthony Byrne


Introducing dbClear


Appendix AProduct eligibility: Clearing and Intermediation


Introducing dbClear

Clearing House eligibilityOTC Rates Derivatives

128


Currencies Max Tenor Currencies Max Tenor Currencies Max TenorUSD, EUR 31 years DKK, HKD, NZD, NOK, PLN, ZAR 10 years USD 30 years

USD: 3M Index AUD, CAD, CHF, JPY, SEK 30 years 1M or 3M IndexEUR: 6M Index EUR, USD, GBP 50 years*EUR not in scope for initial offering. Broad range of Floating Rate Indices supported

Currencies Max Tenor Currencies Max Tenor Currencies Max TenorEUR, USD, GBP, CHF 2 years USD TBD

Currencies Max Tenor Currencies Max Tenor Currencies Max TenorUSD 30 years

1M or 3M Index

Not Supported

Not supported for initial offering Floating Leg spreads are supported Not Supported

Forward starting swaps are supported Forward starting swaps are supported Forward starting swaps are supported

Past effective dates are supported Past effective dates are supported Not Supported

FORWARD EFFECTIVE DATES

AMORTIZING NOTIONAL Not Supported Not SupportedNot Supported

Not Supported

Front or End stub with a minimum stub period of 1 day + Settlement Lag are supported. Swaps with both Front and End stub not supported. Settlement Lag is as follows:USD, EUR, GBP, CAD = 1 dayJPY, CHF, AUD, DKK, HKD, NZD, NZD, SEK, NOK, ZAR = 2 days

Supported with a minimum stub period of 1 week

PAST EFFECTIVE DATES

PR

OD

UC

TSC

HA

RA

CTE

RIS

TIC

S

Not Supported

Not Supported

SWAPTIONS

BASIS SWAPS

ZERO COUPON SWAPS

FLOATING LEG SPREADS

Not Supported

IDCGLCH.Clearnet (SwapClear)

Not Supported Not Supported

Single Currency Basis Swaps are supported

Supported

CME IRS

Not Supported

Not Supported

VANILLA SINGLE CURRENCY IRS

OVERNIGHT INDEX SWAPS

FORWARD RATE AGREEMENTS

Not Supported Not Supported

STUBS

DB expects to clear IRS products that CME, LCH and IDCG are offering for client clearing, as well as additional IRS products that become available for clearing.


Introducing dbClear

Clearing House eligibilityOTC Credit Derivatives

129


ICE Trust US ICE Clear Europe CME

Current offering under the DCM Model CDX IG - Series 8 through 10 with a tenor

of 5,7 or 10 years

CDX IG - Series 11 through 15 with a tenor of 5 or 10 years

CDX HY - Series 8, 12, 13,14 & 15 with a tenor of 5 years

CDX HY - Series 9, 10 & 11 with a tenor of 3 or 5 years

CDX HiVol - Series 8 through 15 with a tenor of 5 years

Scheduled to be launched Q3 2011 FCM Model

Indices listed above as well as the single name constituents of the indices under the FCM Model

Scheduled to be launched in 2011 Buy side clearing services for indices are

targeted for Q1 2011. Single names will be launched at a later date likely in Q2 2011

Itraxx Europe - Series 7 through 14 with a tenor of 5 or 10 years

Itraxx Europe Crossover - Series 9 through14 with a tenor of 5 years

Itraxx Europe HiVol - Series 7 through 14 with a tenor of 5 years

Current offering CDX IG - Series 12 through15 with a tenor

of 5 or 10 years

Scheduled to be launched Q1 2011 Remaining IG indices back to series 10

with tenors of 3,5,7 or 10 years

HY indices back to series 11 with tenors of 3,5,7 or 10 years

Single name constituents of the IG and HY indices to be launched sector by sector

Scheduled to be launched early 2011 CDX HVol with a tenor of 5 years only

DB expects to clear all CDS Index and Single Name contracts that ICE and CME are offering for client clearing, as well as any additional contracts that become available for clearing.


Introducing dbClear

Product and Market coverageOTC Rates Derivatives Prime Brokerage

Rates Prime Broker Product Coverage– Interest Rate Swaps (Fixed/Float)– LIBOR Basis Swaps– Overnight Index Swaps– FRAs– Zero Coupon IRS– Cross Currency Swaps (Fixed/Float and Float/Float)– Caps / Floors– European Swaptions

Rates Prime Broker Currency Coverage– Developed Market Currencies including USD, EUR, GBP, JPY, CAD, CHF, AUD, DKK, NOK, NZD, SEK – Emerging Market Currencies including CNY, CZK, HKD, IDR, ILS, INR, KRW, MXN, MYR, PLN, SGD, THB, TRY, TWD, ZAR

– Restrictions apply based on product, tenor and reference rate combination

Margin Methodology– Portfolio-based and fully transparent

Expanding Platform– Prime Brokerage and Client Clearing offerings seamlessly integrated– Product and market coverage flexible per client preferences– Integration with other asset classes underway

130


Introducing dbClear

Credit Prime Broker Intermediation Product Coverage DM Single Names

Index Products (CDX and Itraxx)

SNAC, STEC contracts

RED preferred ISIN; Daily marks in Markit

Max 10yr maturity

US and European (USD, EUR, GBP)

Credit PB gives access to major executing dealers without negotiating ISDAs, the Transition team will take care of sending out Designation Notices.

Intermediation is offered to key clients as a complement to the broader Prime Finance offering: Fees are charged per Intermediated trade

No DB Intermediation Fees are charged for trades executed with DB’s CDS desk

Fees are billed in arrears on a monthly basis

Credit Prime Broker Additional Product Coverage: Intermediated CDS are cross margined through GPF with physical securities (Bonds and Loans) under a Rules based margin

methodology or a Stress Tested based margining methodology for Credit focused portfolios

Product and Market coverageOTC Credit Derivatives Prime Brokerage

131



Introducing dbClear

FX Prime Broker Intermediation Product Coverage Swaps

Options

Spots

Forwards

NDFs

FX Prime Brokerage Currency Coverage* ARS, AUD, BRL, CAD, CHF, CLP, CNY, COP, CZK, DKK, EUR, GBP, HKD, HUF, IDR, ILS, INR, ISK, JPY, KRW, MXN, MYR,

NOK, NZD, PEN, PHP, PLN, RUB, SAR, SGD, SEK, SKK, THB, TRY, TWD, USD, VEB, ZAR* Restrictions apply based on product, tenor and reference rate combination

Intermediation is offered to key clients as a complement to the broader Prime Finance offering: Fees are charged based on trading style and volumes and can be charged per 1 million USD notional or per ticket

Pricing can be structured to include volume based discounts

No DB Intermediation Fees are charged for trades executed with Deutsche Bank

Fees are billed in arrears on a monthly basis or through trade pippage.

Product and Market coverageFX Prime Brokerage

132



Introducing dbClear


Appendix BCollateral Management:CCP eligible collateral and Collateral process timelines


Introducing dbClear

CCP Eligible collateral summaryOTC Rates Derivatives

134

Cash UST(US Treasuries)

USGA(US Govt Agencies)

MBS(Mortgage Backed Securities)

FSD(Foreign Sovereign Debt)

Other

CME

-GBP, CAD, EUR (5% HC)-US Dollar (No HC)

-UST-Bills (No HC)-UST-Bonds/Notes• 0-5 yrs (2% HC)• 5-10 yrs (3.5% HC)• 10-30 yrs (5% HC)• 0.5% added if security is off the run-UST-Strips (Principal & Coupon) 10% HC applied to market value of security ₁

-Discount notes issued by FFCB, FHLB, FHLMC and FNMA •RE 12 months or less [3% HC on market value (0.5% added if security is off the run)]-Callable and Non-callable FNMA Benchmark Bills, FHLMC Reference Bills , FHLB Bills , FFCB Bills(3% HC)

-FNMA, FHLMC, GNMA (10% HC on market value)

-Govt Securities issued by Canada, France, Germany, Sweden, UK -Discount bills (3% HC)-0-5 yrs (5.50% HC)-5-10 yrs (7.00% HC)-10-30 yrs (8.50% HC)-Greater than 30 yrs(10% HC)

-N/A

IDCG

-CAD, EUR, JPY, GBP,CHF (5% HC)-USD (No HC)Deposits.₁

-UST-Bills• 0-less than 9 months (0.50% HC)• 9-less than 12 months (1.% HC)-UST-Bonds/Notes• 1-less than 5 yrs (2% HC)• 5-less than 10 yrs (3.5% HC)

-Federal Agency Securities• 0-less than 9 months (0.50% HC)• 9-less than 12 months (1.% HC)•1-less than 5 yrs (2% HC)• 5-less than 10 yrs (3.5% HC)

-GNMA, FNMA, FHLMC (“Federal Agency”)•RE 10 yrs or less (10% HC)

-Bills, Notes and Bonds issued by Canada, France, Germany and Great Britain (5% HC)

-Non-Sovereign Debt Securities ₁

LCH₂

-GBP,EUR, USD, CHF, JPY, SEK, DKK, NOK (No HC)

-UST-Bills/UST-Bonds/Notes•2 working days-3 yrs (4.25% HC)•1-3 yrs (5.38% HC)•3-7 yrs (6.88% HC)•7-11 yrs (7.00% HC)•11+ yrs (9.00% HC)

-FNMA, FHLMC, FHLB•2 working days-3 yrs (4.38% HC)•1-3 yrs (5.50% HC)•3-7 yrs (7.50% HC)•7-11 yrs (7.63% HC)•11+ yrs (10.13% HC)

-N/A -Govt Securities issued by Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, UK ₁

-GovtGuaranteedCDs (Certificate of Deposits) -Govt ₁Guaranteed Bonds ₁

₁ Please refer to the clearing house -specific websites for more details and specific haircuts₂LCH haircuts are effective 03/07/2011*Variation Margin must be paid in cash in the currency of the contractDisclaimer - This is a summary for informational purposes only.


Introducing dbClear

CCP Eligible collateral summaryOTC Credit Derivatives

135

Cash UST(US Treasuries)

USGA(US Govt Agencies)

MBS(Mortgage Backed Securities)

FSD(Foreign Sovereign Debt)

Other

CME

-GBP, CAD, EUR (5% HC)-US Dollar (No HC)

-UST-Bills (No HC)-UST-Bonds/Notes• 0-5 yrs (2% HC)• 5-10 yrs (3.5% HC)• 10-30 yrs (5% HC)• 0.5% added if security is off the run-UST-Strips (Principal & Coupon) 10% HC applied to market value of security ₁

-Discount notes issued by FFCB, FHLB, FHLMC and FNMA •RE 12 months or less [3% HC on market value (0.5% added if security is off the run)]-Callable and Non-callable FNMA Benchmark Bills, FHLMC Reference Bills , FHLB Bills , FFCB Bills(3% HC)

-FNMA, FHLMC, GNMA (10% HC on market value)

-Discount bills (3% HC)-0-5 yrs (5.50% HC)-5-10 yrs (7.00% HC)-10-30 yrs (8.50% HC)-Greater than 30 yrs(10% HC)

-N/A

ICE Clear Europe

-EUR (No HC)-GBP (No HC)-USD (No HC)

-UST-Bills• 0-less than 3 yrs (3% HC)-US-Bonds, Treasury Inflation Indexed Notes/Bonds• 0-less than 3 yrs (3% HC)• 3-less than 7 yrs (5% HC)• 7-less than or equal to 11 yrs (13% HC)•Greater than 11 yrs (17% HC)

-N/A -N/A -Govt Securities issued by Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Spain, UK ₁

-US Cash Management Treasury Bills•RE less than 3 yrs (3% HC)-Cross Currencies (6% -8% HC) ₁

ICE Trust US

-CAD (3.97% HC),-CHF (4.63% HC)-EUR (4.11% HC)-GBP (4.63% HC)-JPY (4.26% HC)-USD (No HC)

-UST-Bills/Notes/Bonds• Less than 1 yr (0.09% HC)• 1- 5 yrs (0.40% HC)• 5- 10 yrs (2.38% HC)•Greater than 10 yrs (12.63% HC)

-N/A -N/A -CAD Notes/Bonds-G7 Euro Zone and JP Bills/Notes/Bonds-UK Bonds/Gilts ₁

-N/A

₁ Please refer to the clearing house -specific websites for more details and specific haircuts*Variation Margin must be paid in cash in the currency of the contractDisclaimer - This is a summary for informational purposes only.


Introducing dbClear

T+0 (Day 1) T+1 (Day 2)Trade affirmation deadline (SCM/FCM)CCP affirms/ accepts trades

SCM/FCM/ Dealer reports sent out by CCP

CCP sends out banking instruction to SCM/ FCM’s bank

CCP auto CR/DR IM and MTM for Client transactions from SCM/ FCM’s bank

Client Call issued Deadline for client to deliver collateral

LCH 23:00 CET 03:00 CET 04:00 – 05:00 CET 1st call at 9:00 CET 11:00 CET As agreed in client negotiations

ICE Clear 19:00 CET 22:00 CET (T0) 01:00 CET 09:00 CET 11:00 CET As agreed in client negotiations

ICE Trust 00:00 CET 03:00 CET 06:00 CET 14:00 CET 11:00 CET As agreed in client negotiations

CME (Credit) 01:00 CET(T+1) 05:30 CET 14:30 CET 15:30 CET 11:00 CET As agreed in client

negotiations

CME (Rates) 01:00 CET(T+1) 05:30 CET 14:30 CET 15:30 CET 11:00 CET As agreed in client

negotiations

IDCG 23:00 CET 23:30 CET (T0) 23:45 CET (T0) TBD 11:00 CET As agreed in client negotiations

Process repeats daily when positions are live

DB systems are integrated between trading and collateral data with CCP files

Process at DB can be coordinated with the ISDA CSA call notices if required by client

Collateral process timelineOTC Rates and Credit derivatives

136136


Introducing dbClear


Appendix CEnd-to-end clearing workflow


Introducing dbClear

Trade Execution and Clearing process

138


Client and Executing Dealer agree on trade details with client specifying “CME, ICE, LCH or IDCG” clearing trade. The client needs to notify the Executing Dealer what platform they choose to affirm on.

Executing Dealer designates the trade as “CME, ICE, LCH or IDCG” clearing trade and alleges on the affirmation platform as specified by the client.1. VCON (CME/ICE/IDCG)2. Markitwire (CME/ICE/LCH/IDCG)3. Clearport (CME Credit only)4. ICELink (ICE Trust)

Client accepts, allocates trade and designates Clearing Member(s) on affirmation platform and trade feeds to clearing platform.

Clearing Member affirms/rejects trade on clearing platform. Client can monitor status in real-time on affirmation platform.

Clearing House accepts/rejects trade. Client can monitor status in real-time on affirmation platform.

Trade is now cleared with the Clearing House as the counterparty.

1

2

3

4

5

6

1

2

4 5

6

3


Introducing dbClear

If Clearing Broker (CB) or CCP rejects to clear a trade, client has the option to select another CB

If no CB accepts the trade, fallback is a bilateral trade with the Executing Dealer

Partial clearing is allowed

If one of the allocations does not clear, fallback process applies to the un-cleared allocation

Executing Dealer has the option to exercise fallback to a bilateral trade between client and Executing Dealer starting from 2 hours (4 hours for LCH) after the Executing Dealer alleged the trade to be cleared

Trade Fallback process

Client selects

CB

CB accepts

?

CCP accepts

?Fallback

Cleared trade with Clearing Broker

Bilateral trade with Executing Broker

Client

No

No

Yes

Yes

139


Introducing dbClear

CCP timelinesOTC Rates Derivatives

140


2:30am 7pm

LCH Open Point of Trade

Executing Dealer Alleges (30 mins)

Executing Dealer can exercise Fallback option at any time until Cut-Off

Fallback Election Start-Time (CME & IDCG)

Client time to find CB and get trade cleared

Executing Dealer Alleges + 2 hrs

CME Cut-Off

5pm

LCH & IDCG Cut-Off

Fallback Election Start-Time (LCH)


IDCG & CME Open

8am

T+1Fallback Election End-Time (CME)

7pm

Executing Broker (EB) has 30 minutes after point of trade to send electronic notification to the Client

Client must find a Clearing Broker (CB) that will accept the trade and deliver the trade to LCH/CME/IDCG.

If a CB rejects a trade, client may continue resubmitting to other CBs as long as EB has not exercised Fallback

EB can exercise Fallback election at any time between Fallback Election Start-Time and End-Time

Fallback Election Start-Time is EB Allege Time + 2hrs (LCH is + 4hrs)

Trades not cleared on T will result in bilateral trade for LCH and IDCG cleared trades

Trades not cleared on T+1 will result in a bilateral trade for CME cleared trades


Introducing dbClear

Executing Broker (EB) has 30 minutes after point of trade to send electronic notification to the Client

Client must find a Clearing Broker (CB) that will accept the trade

If a CB rejects a trade, the Client may resubmit to other CBs as long as EB has not exercised Fallback

EB can exercise Fallback at any time between Fallback Election Start-Time and End-Time

Fallback Election Start-Time is EB Allege Time + 2hrs

Trades not cleared on T0 will be automatically submitted for clearing on T+1 ,unless EB has exercised Fallback option

At 5pm (local time) on T+1 for ICE / 7pm for CME, EB must exercise its Fallback option

CCP timelinesOTC Credit Derivatives

141

Times are in EST for ICE Trust and CME, and GMT for ICE Clear Europe

8am 7pm

CCP Open Point of Trade

Executing Dealer Alleges (30 mins)

8am

CCP Open

CCP does not accept new trades for clearing

T+1

Executing Dealer can exercise Fallback option at any time

Fallback Election Start-Time

Client time to find CB and get trade cleared


6pm

ICE Cut-Off

CME Cut-Off

7pm

ICE FallbackElection End-Time

5pm

CME Fallback Election End-Time


Introducing dbClear

Credit / Succession events

142


It is important to note that all Credit Event Processes are the same as with bilateral non-cleared trades.

ISDA Determinations Committee determines all Credit and Succession Events. CME also additionally issues an advisory notice that an event has occurred and which specific contracts are affected by it.

Clients will settle Credit Events with their CM as normal with price determined by industry wide auction.

ISDA Determinations Committee will determine the Event Determination Date of the Credit Event. An industry-wide auction will take place approximately 5 business days before Cash Settlement Date. Cash Settlement Date will be approximately 30 calendar days after Event Determination Date.

The buyer of protection will receive the notional of the contract minus the recovery as determined by auction and accrued interest from previous coupon through Event Determination Date.

For CME Succession Events are automatically updated with the new reference entity name, RED code and ISIN.

For ICE Succession Events will automatically be updated on DTCC.


Introducing dbClear

Confirmation and SettlementsICE*

143


Trade will be submitted to DTCC as a Gold Record with three parties on each trade. The three parties are: Client FCM (acting as agent) ICE Trust

ICE will submit all trades to DTCC on behalf of the Client and the FCM.

ICE cleared trades have upfront fees settle T+3 and coupons settle quarterly. This is the same as standard CDS contracts.

Trade settlement process will be the same as with bilateral trades. Client will retain the same dedicated representative that they interact with for non-cleared trades.

*Process for FCM model has not been finalised by ICE. Above is subject to change.

Reconciliation DB reconciles DB internal trade bookings versus ICE affirmed trade details and versus DTCC confirmed trade details on a daily

basis.

Client can download report in excel or PDF format from ICELINK and perform their own reconciliation.

DB will assist client in researching and resolving any breaks.


Introducing dbClear

Confirmation and SettlementsCME

144


When all parties affirm a trade on the affirmation platform, the affirmation acts as a legally binding confirmation of the trade.

Upfront fees settle T+1 and coupon accrual settles daily through variation margin.

Client will retain the same dedicated Collateral Management representative that they interact with for bilateral trades.

Reconciliation

DB reconciles internal trade bookings versus CME affirmed trade details on a daily basis.

Clients can reconcile their position and activity detail on the affirmation platform.



Introducing dbClear

Confirmation and SettlementsLCH

145


When all parties affirm a trade in the affirmation platform, the affirmation acts as a legally binding confirmation of the trade.

LCH cleared trades have upfront fees settle per standard currency default.

Client will retain the same dedicated Settlements representative that they interact with for non-cleared trades.

Reconciliation

DB reconciles internal trade bookings versus LCH affirmed trade details on a daily basis.




Introducing dbClear

Confirmation and SettlementsIDCG

146


When all parties affirm a trade in the affirmation platform, the affirmation acts as a legally binding confirmation of the trade.

IDCG cleared trades have no upfront fees.

Client will retain the same dedicated Collateral Management representative that they interact with for non-cleared trades.

Reconciliation

DB reconciles internal trade bookings versus IDCG affirmed trade details on a daily basis.




Introducing dbClear

CME (Rates) only nets trades with the same effective, maturity date, fixed rate, and next float start period.

IDCG nets all trades with the same maturity.

LCH does not currently offer compression/netting.

Compression / NettingLCH, CME (Rates), IDCG

147


CME (Rates)/IDCG Netting example:

Pay 1mm 3M Libor vs. 5% mat. 8/10/2020

Rec. 2mm 3M Libor vs. 5% mat. 8/10/2020 Pay 2mm 3M Libor vs. 5% mat. 8/10/2020

Pay 3mm 3M Libor vs. 5% mat. 8/10/2020


Introducing dbClear

CME (Credit) automatically nets all trades of the same reference entity, fixed rate, and maturity date on a daily basis.

Client will only see one netted trade on each reference entity, fixed rate, and maturity date at each end of day.

Compression / NettingCME (Credit)

148


Buy 1mm CDX_13

Sell 2mm CDX_13

Buy 3mm CDX_13 Buy 3mm CDX_13

Sell 4mm CDX_13

Buy 5mm CDX_13

CME (Credit) Netting example:


Introducing dbClear

ICE Trust proposal: Automated daily netting of eligible trades to one position or ad hoc netting of existing trades when clientschange from keeping individual trades to full position netting

ICE Clear: Custom netting of trades at an agreed interval of time or on request on an ad hoc basis

ICE netting terminates the trades completely and creates a new trade with the net notional.

Compression / NettingICE*

149


Buy 1mm CDX_13

Sell 2mm CDX_13

Buy 3mm CDX_13

Sell 4mm CDX_13

Buy 5mm CDX_13

Buy 2mm CDX_13

Sell 4mm CDX_13

Buy 5mm CDX_13

Ad – Hoc Netting example: Client chooses to net trades 1, 2, and 3.

Scheduled Netting example: Client scheduled to net all trades.

Buy 1mm CDX_13

Sell 2mm CDX_13

Buy 3mm CDX_13 Buy 3mm CDX_13

Sell 4mm CDX_13

Buy 5mm CDX_13

*Process for FCM model has not been finalised by ICE. Above is subject to change.


Introducing dbClear

Current SCM Model FCM Model

Intermediary as Agency or Principle Principle Agent

Eligible Currencies EUR, USD, GBP, AUD, CAD, CHF, JPY, SEK, DKK, HKD, NZK, NOK, PLN, ZAR

Same

Eligible Products IRS, OIS Same

Multiple Clearing Members Yes Yes

Middleware MarkitServ Same

Trade Netting No No

Post Trade Events Yes Only termination via offsetting trade

Backloading 1. Executing Dealer uploads the eligible trades onto MarkitWire.

2. Client and Clearing Member accept trades.3. Backloading portfolio accepted by CCP

overnight. 4. When both dealers and CCP accept, trades

are rebooked as tri-party trades.

Same process

Fallback Partial Clearing is allowed.

Executing Dealer can exercise fallback 4 hours after trade execution.

TBD

150

Clearing House trade processingLCH: current SCM model vs. future FCM model comparison


Introducing dbClear


Appendix DListed Derivatives: Key Exchange memberships, Electronic execution


Introducing dbClear

Listed Derivatives: Key DB Exchange memberships

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North America EMEA Asia PacificAMEX New York AEX Amsterdam ASX SFE NZFE SydneyBOX Boston ADX Athens HKFEx Hong KongCBOE Chicago BSE Budapest KRX SeoulCBOT Chicago EDX London SEHK Hong KongCME Chicago EEX Frankfurt MDEX Kuala LumpurCSCE New York ENDEX Amsterdam NSE MumbaiCX New York EUXNP Paris OME OsakaICE Atlanta Eurex Frankfurt & Zurich SEM MumbaiISE New York ENXBE Brussels SGXDT SingaporeKCBT Kansas ENXPT Lisbon TFX TokyoMGE Minneapolis HEX Helsinki TGE TokyoMTRL Montreal ICE London TOCOM TokyoNQLX New York IDEM Milan TSE TokyoNYBOT New York IMAREX Oslo TAIFEX TaiwanNYCE New York LIFFE London TFEX ThailandNYFE New York LME London YGE YokohamaNYMEX New York MEFF BarcelonaNYSE New York MIF MilanONE CHICAGO, Chicago NORDPOOL Oslo Africa & Middle EastPBOT Philadelphia OM Stockholm SAFEX, JohannesburgPCX San Francisco OSE Oslo TASE, Tel AvivPHLX Philadelphia PowerNXT Paris DME, DubaiTFE Toronto TURKDEX IstanbulTSE Toronto WBAG ViennaWCE Winnipeg WSE Warsaw


Introducing dbClear

Listed Derivatives: Electronic execution Exchange connectivity

153


Introducing dbClear

Listed Derivatives: Electronic execution Exchange connectivity (contd.)

154


Introducing dbClear

Listed Derivatives: Electronic execution Exchange connectivity (contd.)

155

The list above demonstrates the current development pipeline for connectivity, driven primarily by customer demand, all of which are scheduled for delivery in Q1 2011.


Introducing dbClear

Strictly Private & Confidential

Disclaimer

The information herein is believed to reliable and has been obtained from sources believed to reliable, but we make no representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of such information. In addition we have no obligation to update, modify or amend this communication or to otherwise notify a recipient in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. We therefore strongly suggest that recipients seek their own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency, rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future results.This communication is provided for information purposes only. It is not an offer to sell, or a solicitation of an offer to buy any security, no to enter in to any agreement or contract with Deutsche Bank AG or any affiliates. In addition, any subsequent offering will be at your request and will subject to negotiation between us. It is not intended that ay public offer will be made by us at any time, in respect of any potential transaction discussed herein. Any offering or potential transaction that may be related to subject matter of this communication will be made pursuant to separate and distinct documentation and in such case the information contained herein will be superseded in its entirety by such documentation in final form.In the United Kingdom this communication is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange. This communication has not been approved for distribution to, or the use of, private customers as defined by as defined by appropriate local legislation and regulation. In the United States this document is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, FINRA, NFA and SIPC.This communication and the information contained herein is confidential and may not be reproduced or distributed in the whole or in part without our prior written consent. Copyright © 2011 Deutsche Bank AG

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