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Comparing Algorithmic Trading Advances in Canada and Globally Toronto Hilton May 5 – 6, 2008

Comparing Algorithmic Trading Advances in Canada and Globally

Comparing Algorithmic Trading Advances in Canada and Globally Toronto Hilton May 5 – 6, 2008

Toronto Hilton May 5 – 6, 2008

Comparing Algorithmic Trading Advances in Canada and Globally Toronto Hilton May 5 – 6, 2008

Session Participants

Steve Mariotti

– Chief Technology Officer, Mapleridge Capital Corp.

Alison Crosthwait – Head of Research, ITG Canada

Abraham Kohen

– Director Trading Strategies, FlexTrade Systems Inc.

– Vice President, Portfolio Trading, TD Newcrest

– Director, Credit Suisse

Inc. – Vice President, Portfolio Trading, TD Newcrest – Director, Credit Suisse 2 • Lou Mouaket

2

Lou Mouaket

Eugene Choe

Inc. – Vice President, Portfolio Trading, TD Newcrest – Director, Credit Suisse 2 • Lou Mouaket
Algorithms: The Journey is as Important as the Destination Alison Crosthwait Head of Research, ITG

Algorithms: The Journey is as Important as the Destination

Alison Crosthwait Head of Research, ITG Canada

Algorithms: The Journey is as Important as the Destination Alison Crosthwait Head of Research, ITG Canada

2008 World Submarine Racing Championships

2008 World Submarine Racing Championships 4

4

2008 World Submarine Racing Championships 4
2008 World Submarine Racing Championships 4

What you can’t see is important

Is your Algorithm accessing the following sources of liquidity?

Interlisted Liquidity Alternative Trading Systems DARK (including interlisted DARK liquidity)

5
5
sources of liquidity? Interlisted Liquidity Alternative Trading Systems DARK (including interlisted DARK liquidity) 5

Connectivity: Alternative Trading Systems

Canadian Names

ITG Canada offers connectivity in Canadian equities to:

TSX

PURE

Omega (expected Q3 2008)

Chi-X (expected Q2 2008)

Alpha (expected ready for launch)

MatchNow SM

Blockbook

US light and dark liquidity (for interlisted names)

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6

All Canadian orders to the TSX are routed through our Smart Router (SMRTCAN) which checks the ATS Exchanges and MatchNow for liquidity before posting on the TSX. SMRTCAN ensures access to all Canadian market centres and thus access to liquidity and price improvement opportunities.

MatchNow SM is a product offering of TriAct Canada Marketplace LP (“TriAct”) and indirectly owned by ITG Canada Corp. TriAct is registered as an Investment Dealer and Alternative Trading System in the provinces of Ontario and Alberta, and exempt from registration as a dealer in the Provinces of BC, SK, MN, QC, NS and NFLD & Labrador. Further information regarding TriAct is available on the website www.triactcanada.com.

, QC, NS and NFLD & Labrador. Further information regarding TriAct is available on the website
7
7

Dark Connectivity

7 Dark Connectivity

Why is connectivity important?

Connectivity to dark and interlisted liquidity results in a reduction of slippage versus VWAP.

AN EXAMPLE:

You have a list containing TSX 60 names. The orders are a maximum of 5% of average daily volume. Your benchmark is VWAP and you must complete.

What performance would you expect versus VWAP?

Average bid-ask spread in the TSX60 is 8 bps.

Strong VWAP algorithms are approximately 50% passive and 50% aggressive.

8
8

Thus one would expect to miss VWAP by 4 bps.

40% of the volume of the TSX60 trades in the US. Assuming an average 2 basis point advantage when accessing better priced US liquidity this amounts to a performance bump of 40% x 2 bps = 0.8 bps.

On average you will receive 12% of your fills from DARK. DARK fills generally save you half the spread. Accessing DARK liquidity will lead to a performance bump of 15% * 4 bps = 0.6 bps.

Total performance bump from accessing interlisted and DARK liquidity = 1.4 bps. That is a 35% improvement over our original estimate of 4 bps.

from accessing in terlisted and DARK liquidity = 1.4 bps. That is a 35% improvement over
Multi-asset Algorithmic Trading Canada and US Abraham Kohen Director Trading Strategies, FlexTrade Systems Inc.

Multi-asset Algorithmic Trading Canada and US

Abraham Kohen Director Trading Strategies, FlexTrade Systems Inc.

Multi-asset Algorithmic Trading Canada and US Abraham Kohen Director Trading Strategies, FlexTrade Systems Inc.

Trends

+ interest in other asset classes – α.

Trade cheapest asset or richest asset

+ volumes, in derivatives, and underlying

A. hedging (delta and gamma, if long vol)

B. portfolio margining

C. options algorithms, (equity algos) e.g.,

1. Volatility trading

2. Dispersion trading

3. Delta adjusted limits

D. Risk Arb via Options;

E. Buy BSC “garbage” puts rather than Short Stock

Exchange consolidation & new exchanges + ECNs

Desire for opaqueness (stealth) by traders

+ ECNs • Desire for opaqueness (stealth) by traders • 10 Execute butterfly & underlying on

10

ECNs • Desire for opaqueness (stealth) by traders • 10 Execute butterfly & underlying on 4

Execute butterfly & underlying on 4 or more exchanges

Algorithm trading unique to each asset class & unique to arbitrages across classes

FX to facilitate cross-border arbitrage; FX as a pro trade

asset class & unique to arbitrages across classes • FX to facilitate cross-border arbitrage; FX as

Canada

Liquidity: Exch/ATSs, Crossing Networks, and Dark Pools

TSX, Pure, Chi-X, Omega, Alpha

Perimeter, Liquidnet

TSX ATX, MATCH Now

Smart Order Routing – Unique to Canadian market microstructure (icebergs, etc.)

Portfolio Optimization

Whose Volume? (VWAP, Vol Participation, etc.)

• Whose Volume? (VWAP, Vol Participation, etc.) • TMX Group (TSX-ME approved) • TSX warrants,

TMX Group (TSX-ME approved)

TSX warrants, debentures & equities – already multi-asset

2009 TSX/ISE -> TMX/ISE ??

What about ME + BOX ??

debentures & equities – already multi-asset • 2009 TSX/ISE -> TMX/ISE ?? • What about ME

11

debentures & equities – already multi-asset • 2009 TSX/ISE -> TMX/ISE ?? • What about ME

Algo Trading Do’s

• Mix It Up:

• Be Un-Predictable

• Hide your intentions. Don’t telegraph ahead.

• Route multi-leg to multi-dest

-> Randomize

• Trader Add Value by choosing parameters or algos reflecting market or trend;

by choosing parameters or algos reflecting market or trend; • Quants add value by Meta-level algo

• Quants add value by Meta-level algo selection

• Use broker-neutral platform to route to “reliable” destinations

• Keep broker/destination statistics; reward good performance

• Use broker-neutral “smart” router

• Use adaptive dynamic algos. (Dynamic Delta)

reward good performance • Use broker-neutral “smart” router • Use adaptive dynamic algos. (Dynamic Delta) 12

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reward good performance • Use broker-neutral “smart” router • Use adaptive dynamic algos. (Dynamic Delta) 12

State of Algo I

Equities

• Brokers have algo suites which they each claim are the best.

• CS: guerilla, sniper; BofA: ambush, razor; GS: sonar

• Hedge Funds write their own proprietary tactics

• Broker-Neutral Vendors (Flextrade) give you tools to write tactics in C/C++ in a Formula Builder, and let you use libraries accessible by rules

• Broker-Neutral Vendors (Flextrade) provide API (C++/Java/.net)

Vendors (Flextrade) provide API (C++/Java/.net) 13 • Broker-Neutral Vendors (Flextrade) offer out-of-box

13

Vendors (Flextrade) provide API (C++/Java/.net) 13 • Broker-Neutral Vendors (Flextrade) offer out-of-box

• Broker-Neutral Vendors (Flextrade) offer out-of-box algos, broker algos, build your own.

Options

• Phase I – Brokers rehash equity algos as options algos

TWAP, pathfinder, sniper, trigger

• Phase II – Brokers announce options algos

• Volatility Pegged Trades

• 20 vol bid at 40 vol offer

• Delta adjusted limits

• Constant delta (0 gamma) over a range

Pegged Trades • 20 vol bid at 40 vol offer • Delta adjusted limits • Constant

State of Algo II

• Options

• Volatility pegged trades w/ Options Pricing Models built-in, using firm’s i-rates and div projections

• Delta-adjusted limits with dynamic delta (gamma, ATM near-expiry)

• Multi-legged trades algorithmically

• Spreads, Butterflies, Condors

• Dispersion Execution

• Short Vol : Auto Delta Hedging w/ User Defined Hedge Instrument

• Long Vol : Gamma Hedge (Buy Lo, Sell Hi)

Instrument • Long Vol : Gamma Hedge (Buy Lo, Sell Hi) • Staged Sweeper – Liquidity

• Staged Sweeper – Liquidity Cleaner, sweeps exchanges multiple times – allows excluding certain exchanges

• Futures

• Synthetic Order Types

• Iceberg

• Contingent Orders

• Multi-legged trades algorithmically.

• Multi-Asset

• Full integration with Options, Futures and FX from a single screen.

trades algorithmically. • Multi-Asset • Full integration with Options, Futu res and FX from a single
trades algorithmically. • Multi-Asset • Full integration with Options, Futu res and FX from a single

14

Next Generation Algorithms in Canada A Focus on Improving and Changing Existing Strategies to Accommodate

Next Generation Algorithms in Canada

A Focus on Improving and Changing Existing Strategies to Accommodate Multiple Market Places

Lou Mouaket Vice President, Portfolio Trading, TD Newcrest

Existing Strategies to Accommodate Multiple Market Places Lou Mouaket Vice President, Portfolio Trading, TD Newcrest

Continuous Order Books in Canada

Comparing the Continous Markets in Canada TSX Pure Trading Omega CHI-X Alpha Trading Systems Launch
Comparing the Continous Markets in Canada
TSX
Pure Trading
Omega
CHI-X
Alpha Trading Systems
Launch Date
Live
Live
Live
Feb 20/08
Sept. 8/08
Website Address
www.tsx.com
www.puretrading.ca
www.omegaats.com
www.chi-xcanada.com
www.alphatradingsystems.ca
Reuters Info Page
N/A (see website)
PURETRADING
N/A (see website)
CHIXCANADA
N/A
Stocks Traded
ALL TSX, TSXV
ALL TSX
TSX/TSXV Names Interlisted in
US
ALL TSX
ALL TSX, TSXV
Technology Provided
Internally Designed
OM Group
Perimeter Financial, MarLar
Group
Internally Designed (Instinet)
Cinnober
Publicly Traded,
Private Equity
TD, BMO, CIBC, Dejardins, RBC
Ownership
Widely Held
(Including UBS)
Perimeter Financial, MarLar
Group, SwiftTrade
Instinet
BNS, NA, Canaccord, CPPIB
TSX
TSX Datalinx
Trade Information
TSX Datalinx
Reuters/Bloomberg
(<stock symbol> CJ <equity>)
Reuters (page-based)
Reuters (page-based)
All Vendors Individually
All Vendors
Unique Features
Incumbent, market share
substantial and rooted
First fully live competitor to TSX, very
quick messaging times on engine
Second live ATS, fast engine
Mature ATS experience, access
to global network
Also offers order routing facility,
investors represent significant order
flow
Broker Numbers
Published
Published
Not Published (Anonymous)
Not Published (Anonymous)
Published
Make/Take
Tiered Structure
$0.0027/$0.0037 (<30MM shrs/mth)
$0.0032/$0.0032 (>30MM shrs/mth)
Make/Take
Make/Take
Trading Fee Structure
Make/Take
Tiered Structure
$0.0027/$0.0037 (top tier)
$0.0029/$0.0035 (mid tier)
$0.0031/$0.0033 (low tier)
No Tiers
No Tiers
$0.0036/$0.0039
$0.0025/$0.0028
Make/Take
TBA
(Expected to be Inside TSX Top Tier)
Data Fee Structure
Subscription-based (Level 1/2),
Connection-based (TBF)
Subscription-based (Level 1/2),
Connection-based (PBF)
No Charge
No Charge
TBD
Rebate Cheques to Net
Liquidity Providers
NO
YES
YES
YES
YES
Contact
Email
Thomas Kalafaitis
thomas.kalafatis@tsx.com
416-947-4288
Richard Carleton
richard.carleton@cnq.ca
416-572-2000 ext. 2326
Greg King
gking@omegaats.com
Beth Haines
elizabeth.haines@chi-xcanada.co
Tim Thurman
tim.thurman@alphatradingsystems.ca
Phone
416-646-2764
416-304-6375
647-259-0413
Tim Thurman tim.thurman@alphatradingsystems.ca Phone 416-646-2764 416-304-6375 647-259-0413 16

16

Tim Thurman tim.thurman@alphatradingsystems.ca Phone 416-646-2764 416-304-6375 647-259-0413 16

Dark Liquidity Pools In Canada

Comparing Dark Pools in Canada

TRI-ACT MATCHNOW ATX BLOCKBOOK LIQUIDNET Launch Date July 2007 Q1 2008 (Hardware live July 2007)
TRI-ACT MATCHNOW
ATX
BLOCKBOOK
LIQUIDNET
Launch Date
July 2007
Q1 2008 (Hardware live July 2007)
August 2005
October 2006
Website Address
www.triactcanada.com
www.tsx.com
www.pfin.ca
www.liquidnet.com
Reuters Info Page
TRIACTPAGE
N/A
BLOCKBOOK
LIQUIDNET
System Type
ATS
Facility of TSX
ATS
ATS
Stocks Traded
All TSX
All TSX, TSXV
All TSX
All TSX, TSXV
Ownership
Subsidiary of ITG Canada Corp.
Owned by TSX Group Inc.
Owned by Perimeter Financial - closely held
private company - partners include, CDP,
OTPP, Goldman Sachs, CI Funds
Principal investor is Seth Merrin, minority
holders are TVC, Summit, TH Lee
Trade Information
Distributed by TSX Datalinx (included in
TL1 and TBF), Bloomberg ("TR" market)
Distributed by TSX Datalinx, included in
TL1 and TBF
Distributed by TSX Datalinx, Reuters and
BlockBook website
Distributed by TSX Datalinx and Reuters
-
Passive intents match in a call market
or participate with market-bound flow
Brokers have option of having all order
flow pass through ATX
-
-
Anonymous, continuous, PRICE-time
priority block market
-
Anonymous dark pool only accessible by
buy-side
Features/Description of
-
Intents will be matched continuously
-
Intents will match against eachother at
-
If orders are not matched right away,
-
Not a separate electronic entity, system
Market Model
30 second intervals or trade with inbound
throughout the day (rather than
intervals) with no order queuing and
broker matching function still applicable
(same as TSX)
signals will indicate that there are offsetting
orders that sweep through en route to a
CLOB
orders at nearby price points, some argue
this is more of a "grey book"
resides within buy-side OMS systems and
100% of client orders stay in system until
completed, cancelled or re-routed
Price Improvement
Mechanism
Intents that match eachother will split the
NBBO spread 50/50, liquidity-providing
intents that match against market-bound
orders will receive 80% of the spread
Passive intents that interact with active
intents or order flow will be matched at
the NBBO price plus an exchange-
determined price improvement (price
improvement specifics not yet available)
Prices can be negotiated at any price,sell-
side members are limited by best price/best-
ex obligations, buy-side members are not
Prices can be negotiated at any price, buy-
side members are not limited by best
price/best-ex obligations
Broker Numbers
Published (but Anonymous is available)
Published
Not Published
Not Published (Buy-side Only)
Stock price > $5.00
$0.001/share/side (capped @ $10)
Crosses = $0.01/share (capped @ $10)
Tiered Active/Passive Structure
See:
Trading Fee Structure
$0.01/share
$0.02/share
Stock price < $5.00
$0.005/share/side (capped @ $10)
Crosses = $0.05/share (capped @ $10)
www.tsx.com/en/pdf/notices/July27-
2007_ATXFeeNotice-022.pdf
Access Open To
Sell-side (Buy-side access via broker-
sponsored DMA)
Sell-side (Buy-side access via broker-
sponsored DMA)
Buy-side and Sell-side
Buy-side Only
How To Access System
(Trading & Info)
Available via FIX
N/A (Community matching facility not
yet live)
Available via FIX (REDIPlus, ITG Triton,
Neovest, TradingScreen, Bloomberg EMS)
Available via Liquidnet Desktop Network
Application (OMS Integrated)
Average Daily Volume
(Oct.1/07 - Feb.29/08)
690,678
N/A
57,201
505,529
Average Daily Value
(Oct.1/07 - Feb.29/08)
$
17,300,352
N/A
$
1,516,983.65
$
14,408,783.24
Contact
Email
Phone
Joanne Hill
jhill@triactcanada.com
416-861-1010 ext. 261
Thomas Kalafatis
Robert Young
thomas.kalafatis@tsx.com
ryoung@liquidnet.com
416-947-4288
Chris Jackson
chris.jackson@pfin.ca
416-703-7800 ext. 400
646-674-2128
ryoung@liquidnet.com 416-947-4288 Chris Jackson chris.jackson@pfin.ca 416-703-7800 ext. 400 646-674-2128 17

17

ryoung@liquidnet.com 416-947-4288 Chris Jackson chris.jackson@pfin.ca 416-703-7800 ext. 400 646-674-2128 17

US Darkpools and Algos

Types of Dark Pools

Type

Example

Independent/Agency Owned

Instinet, Liquidnet, POSIT

Broker/Dealer Internalization

Goldman Sachs’ Sigma X, Credit Suisse’s Cross Finger, UBS’s PIN

Consortium-owned pools where many broker dealers are investing

BIDs and LeveL

Exchange Crossing Networks

NASDAQ Crossing Network

Dark Algos in the US Broker Algorithms Citi Dagger, Scouter Credit Suisse Guerrilla, Sniper Goldman
Dark Algos in the US
Broker
Algorithms
Citi
Dagger, Scouter
Credit Suisse
Guerrilla, Sniper
Goldman Sachs
Sonar
JP Morgan Chase
Aqua, Arid
Morgan Stanley
Night Vision
UBS
UBS Tap
Guerrilla, Sniper Goldman Sachs Sonar JP Morgan Chase Aqua, Arid Morgan Stanley Night Vision UBS UBS

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Guerrilla, Sniper Goldman Sachs Sonar JP Morgan Chase Aqua, Arid Morgan Stanley Night Vision UBS UBS

Supervising Algorithms in Canada

RS has released a notice specific to algos and their supervision under UMIR.

A participant has the same supervisory requirements as an ordered entered using the keyboard of a desk trader.

Checks need to be in place for a trader “fat finger” as well as a computer “fat finger”. Example: an unexpectedly looping algorithm.

Dilemma – disconnect between the programmer of the Algorithm and the trader that uses it.

programmer of the Algorithm and the trader that uses it. • Brokers test drive their algos

Brokers test drive their algos before rolling them out DSA.

of the Algorithm and the trader that uses it. • Brokers test drive their algos before

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of the Algorithm and the trader that uses it. • Brokers test drive their algos before

Algos of the Future in Canada

• Multiple marketplaces • Genetic Algorithms – guesses are used to approximate optimal market conditions.
• Multiple marketplaces
• Genetic Algorithms –
guesses are used to
approximate optimal
market conditions. Based
off of performance, only
parameters that result in
“good” executions are
allowed to live.
• Reinforcement Learning
Models
• News Algorithms
• Algo of Algo model?
executions are allowed to live. • Reinforcement Learning Models • News Algorithms • Algo of Algo

20

executions are allowed to live. • Reinforcement Learning Models • News Algorithms • Algo of Algo
Advanced Execution Services ® (AES) Eugene Choe Director, Credit Suisse

Advanced Execution Services ® (AES)

Eugene Choe Director, Credit Suisse

Advanced Execution Services ® (AES) Eugene Choe Director, Credit Suisse

Canada: How Does Smart Order Routing Work?

Canada: How Does Smart Order Routing Work? Resident Darkbook Orders; Darkbook IOCs It’s It’s one another
Canada: How Does Smart Order Routing Work? Resident Darkbook Orders; Darkbook IOCs It’s It’s one another
Canada: How Does Smart Order Routing Work? Resident Darkbook Orders; Darkbook IOCs It’s It’s one another

Resident Darkbook Orders; Darkbook IOCs

It’s It’s one another thing thing to have to

Smart connectivity… Order Route!

Crossfinder+

AES Crossfinder+ sources non-displayed liquidity on ATSs and Dark Pools.

Pathfinder
Pathfinder

AES Pathfinder sources displayed liquidity on all exchanges and ECNs.

Interlisted Traditional ECNs Exchanges BorderCross Price Improvement Range Avg. Price Improvement % of Shares
Interlisted
Traditional
ECNs
Exchanges
BorderCross
Price Improvement Range
Avg. Price Improvement
% of Shares Executed in US
4 mils – 3.5c
95 mils (4bps)
27.15%
Price Improvement Range Avg. Price Improvement % of Shares Executed in US 4 mils – 3.5c

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Price Improvement Range Avg. Price Improvement % of Shares Executed in US 4 mils – 3.5c

Introduction

Electronic Trading as % of Total US Volume 80% 70% 60% 50% Algo 40% DMA
Electronic Trading as % of Total US Volume
80%
70%
60%
50%
Algo
40%
DMA
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007E
Source: Tower Group Estimates
AES Americas daily volume (Feb '02 - Jan '08) 500,000,000 450,000,000 400,000,000 NYSE Hybrid 350,000,000
AES Americas daily volume (Feb '02 - Jan '08)
500,000,000
450,000,000
400,000,000
NYSE Hybrid
350,000,000
rolled out
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
-
Feb-02
May-02
Aug-02
Nov-02
Feb-03
May-03
Aug-03
Nov-03
Feb-04
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
N ov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
May-04 Aug-04 Nov-04 Feb-05 May-05 Aug-05 N ov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07

23

May-04 Aug-04 Nov-04 Feb-05 May-05 Aug-05 N ov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07

Europe: A Post MIFID Model Emerges

Some things look surprisingly like before

Model Emerges Some things look surprisingly like before Median Exchange Spreads (Bips) Median Exchange Latencies

Median Exchange Spreads (Bips)

Median Exchange Latencies (ms)

Ireland

Czech

Greece

Poland

South Africa

Portugal

Sw eden

Norw ay

Denmark

118 87 55 40 36 27 26 26 25 24 18 18 Euro median: 24
118
87
55
40
36
27
26
26
25
24
18
18
Euro median: 24 bips
17
15
12
12
11
US median: 5 bips
10
5 8
US Average 5 US median: 5 ms CHI-X 7 LSE 20 Ireland 49 Germany 54
US Average
5
US median: 5 ms
CHI-X
7
LSE
20
Ireland
49
Germany
54
Euronext
81
Euro median: 90 ms
Sweden
86
Finland
90
VIRTX
95
Norway
105
Austria
111
Copenhagen
116
M ilan
251
SWX
321
1083
Spain
Due to a lack of investment, latencies are
and will continue to be much higher than
the competitive US market
Euro median latencies are 18x higher.

Austria

Finland

Spain

Belgium

UK

Sw itzerland

Netherlands

Italy

France

Germany

US Average

Speed of Change

Established exchanges are not particularly keen to respond to these changes.

Market inefficiencies coupled with large ticksizes dictate that many markets will continue to have large median spreads

Euro median spreads are nearly 5x higher

dictate that many markets will continue to have large median spreads Euro median s preads are

24

dictate that many markets will continue to have large median spreads Euro median s preads are

Europe: The Market is getting CROWDED

Europe: The Market is getting CROWDED E x c h a n g e s Members

Exchanges

Members Only Pools

Live MTFs

Upcoming MTFs

x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders

Traders need connectivity AND SMART ORDER ROUTING!

x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders
x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders

25

x c h a n g e s Members Only Pools Live MTFs Upcoming MTFs Traders

Europe: A Post MIFID Model Emerges

Close to 20% of eligible volume is trading away

Emerges Close to 20% of eligible volume is trading away Approaching 20% off exchange volume 25.00%

Approaching 20%

off exchange volume

25.00%

Pathfinder ~ 10% Crossfinder+ ~ 8.5% 1/9/2008 1/16/2008 1/23/2008 1/30/2008 2/6/2008 2/13/2008
Pathfinder
~ 10%
Crossfinder+
~ 8.5%
1/9/2008
1/16/2008
1/23/2008
1/30/2008
2/6/2008
2/13/2008

20.00%

15.00%

1) Crossing darkly

AND

2) Pathfinding intelligently

10.00%

5.00%

0.00%

1/2/2008

And this is only with 3 venues: Crossfinder, Chi-x light orders and Chi-X dark!

10.00% 5.00% 0.00% 1/2/2008 And this is only with 3 venues: Crossfinder, Chi-x light orders and

26

10.00% 5.00% 0.00% 1/2/2008 And this is only with 3 venues: Crossfinder, Chi-x light orders and

Asia-Pacific: The Changing Landscape of Trading

Asia-Pacific: The Changing Landscape of Trading Crossing off market is a growing phenomenon. New Venues CrossFinder

Crossing off market is a growing phenomenon.

of Trading Crossing off market is a growing phenomenon. New Venues CrossFinder Results And getting BIGGER!

New Venues

Crossing off market is a growing phenomenon. New Venues CrossFinder Results And getting BIGGER! Japan ~
Crossing off market is a growing phenomenon. New Venues CrossFinder Results And getting BIGGER! Japan ~
CrossFinder Results And getting BIGGER! Japan ~ 9% Hong Kong ~ 5% Singapore ~ 4%
CrossFinder Results
And getting BIGGER!
Japan ~ 9%
Hong Kong ~ 5%
Singapore ~ 4%
Korea ~ 3%
Australia ~ 1%
Coming Soon…
And getting BIGGER! Japan ~ 9% Hong Kong ~ 5% Singapore ~ 4% Korea ~ 3%

27

And getting BIGGER! Japan ~ 9% Hong Kong ~ 5% Singapore ~ 4% Korea ~ 3%

Asia-Pacific: Dark pools starting as broker crossing engines

Asia-Pacific: Dark pools starting as broker crossing engines •Credit Suisse and Instinet link to form Japanese

•Credit Suisse and Instinet link to form Japanese dark pool in May

2007

•Dark pools like Liquidnet and NYFIX moving into Asia

•Crossfinder available in “private mode”

2007 •Dark pools like Liquidnet and NYFIX moving into Asia •Crossfinder available in “private mode” 28
2007 •Dark pools like Liquidnet and NYFIX moving into Asia •Crossfinder available in “private mode” 28

28

2007 •Dark pools like Liquidnet and NYFIX moving into Asia •Crossfinder available in “private mode” 28

Foreign Exchange

Imagine one world, one smart router:

Foreign Exchange Imagine one world, one smart router: Trade cross-listed stocks seamlessly in multiple nations. AES

Trade cross-listed stocks seamlessly in multiple nations. AES trades the FX, delivers you a fill in the local currency.

Trade Any Country, Settle Any Currency.

Smart routing hits Foreign Exchange:

EUR/SEK USD/CHF EUR/JPY EUR/USD USD/HKD EUR/NOK GBP/USD USD/JPY USD/CAD NZD/USD USD/SGD USD/ZAR CHF/JPY
EUR/SEK
USD/CHF
EUR/JPY
EUR/USD
USD/HKD
EUR/NOK
GBP/USD
USD/JPY
USD/CAD
NZD/USD
USD/SGD
USD/ZAR
CHF/JPY
GBP/JPY
USD/MXN
GBP/CHF
USD/SGD USD/ZAR CHF/JPY GBP/JPY USD/MXN GBP/CHF 5 new currency pairs added, bringing total to 21: AUD/USD

5 new currency pairs added, bringing total to 21:

AUD/USD

EUR/CHF

EUR/DKK

EUR/GBP

AUD/JPY

GBP/JPY USD/MXN GBP/CHF 5 new currency pairs added, bringing total to 21: AUD/USD EUR/CHF EUR/DKK EUR/GBP

29

GBP/JPY USD/MXN GBP/CHF 5 new currency pairs added, bringing total to 21: AUD/USD EUR/CHF EUR/DKK EUR/GBP

Futures

17 25 28 Electronic Manual 83 waving goodbye 75 72 CME CBOT NYMEX Source: Tower
17
25
28
Electronic
Manual
83
waving goodbye
75
72
CME
CBOT
NYMEX
Source: Tower Group analysis, CFTC, and Exchange reports

2007 Percentage of Electronic vs. Manual in Futures:

100%

80%

60%

40%

20%

0%

analysis, CFTC, and Exchange reports 2007 Percentage of Electronic vs. Manual in Futures: 100% 80% 60%

30

analysis, CFTC, and Exchange reports 2007 Percentage of Electronic vs. Manual in Futures: 100% 80% 60%

Options

US listed options volume (1973 – 2007)

3000000000 2500000000 2000000000 1500000000 1000000000 500000000 0 1973 1975 1977 1979 1981 1983 1985 1987
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007

6 competing exchanges:

Decimalization pilot launched last January Very similar to equity markets circa 2002
Decimalization
pilot launched
last January
Very similar to
equity markets
circa 2002
2007 6 competing exchanges: Decimalization pilot launched last January Very similar to equity markets circa 2002

31

2007 6 competing exchanges: Decimalization pilot launched last January Very similar to equity markets circa 2002

Questions?

Questions? 32
Questions? 32

32

Toronto Hilton May 5 – 6, 2008
Toronto Hilton May 5 – 6, 2008

Toronto Hilton May 5 – 6, 2008

Toronto Hilton May 5 – 6, 2008