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23 March 2006

AIM 50 PROSPERS ON SETSMM

A new study published today by the London Stock Exchange demonstrates that the market for smaller stocks has benefited from the choice of order book trading alongside existing market maker provision introduced by SETSmm. The study shows that trading volumes have increased and the cost of trading has decreased, with the AIM50 securities transferred to SETSmm in December 2005 showing a particularly marked improvement. In addition, the greater choice and transparency of SETSmm has enabled more institutional investment in the small cap, mid cap and AIM markets.

Paul Killik, Senior Partner at Killik and Co, said:

"Most of our clients will never have heard of SETSmm but, by now, most of them will have benefited from the tighter spreads available in midcap, small cap and now AIM securities. The introduction of SETSmm has been an important and valuable development for retail investors as well as other users of the market."

The Exchange estimates that the value traded in the AIM50 by institutional investors has increased by around a quarter since the index constituents moved to SETSmm in December, while the value traded by institutions in the Small Cap index has increased by around two thirds since June 2005, the index's last full month of trading on an exclusively quote-driven system.

Nick Holtby, Head of European Trading, Sales Trading, and Portfolio Trading at UBS Investment Bank, commented:

"SETSmm is an initiative that recognises the importance of market-maker support in mid-cap stocks while enhancing liquidity and execution for our clients. The smooth extension of SETSmm into the small-caps and FTSE AIM 50 illustrates the flexible market structure and supports our objective to enhance service for our clients while providing stronger volumes for us. The extension of SETSmm to the Mid250 has enabled derivatives to be priced more aggressively and traded more actively, thus complementing that process. We expect similar developments to unfold in the Smallcap Index, and UBS will be pro-actively supporting that process."

Alex Snow, Chief Executive Officer of Evolution Securities, one of the four largest market makers on AIM and the Main Market, said:

"SETSmm has enabled better access for institutional investors in trading smaller company shares, which is of great benefit to issuers, and the market as a whole."

Barclays Global Investors commented that:

"SETSmm has had a positive effect on institutional investors trading in smaller company securities: it has increased transparency and increased choice of access."

Key findings of the review published today are:

The introduction of the choice to trade electronically using SETSmm has boosted trading activity. In the AIM50, which moved to SETSmm in December 2005, the impact has been immediate and pronounced, with a 26 per cent increase in the average daily value traded since the index constituents were moved to SETSmm, including two successive record months[1].

Tighter spreads on SETSmm have resulted in a marked reduction in trading costs for investors. A transaction cost analysis, which calculates the difference between the mid price and the price at which each individual trade is executed, shows that SETSmm has reduced the cost of trading small cap securities by between 16 and 30 per cent, depending on the size of the trade, with an even bigger reduction for those small caps securities which have been on SETSmm since July. The AIM 50 saw a reduction in transaction costs of between 16 and 42 per cent.

For further information, please contact:

Catherine Mattison Press Office +44 (0)20 7797 1395 newsroom@londonstockexchange.com

[1] Average value traded on a rolling twelve month basis