Market Information of TSE

1. Market Information of TSE November 13, 2007 Daisuke Tanaka Tokyo Stock Exchange, Inc.

2. Topics • Current scheme of market information dissemination • Expected changes in 2009

3. Trading System MAINS (MArket Information System) TSE-provided trading terminal Current Scheme Overview “ITA” (Book) Feed FLEX Trading Participants Information Vendors etc.

4. FLEX • No restriction for subscription (both for vendors and trading participants) • Disseminated via MAINS (MArket Information System) • 5 best bid/ask, Open/High/Low/Last, Trading value/volume, VWAP etc. • Both cash and derivatives market

5. FLEX (cont’d) • 10Mbps and 1.5Mbps connections • 10Mbps guarantees to send all the occurred events • 1.5Mbps may become a “snapshot” when message rate is heavy • No “Level1/2” classification • Some discounts on License Fee (fixed fee) for those who distribute only best bid/ask information • Some discounts for trading participants • Fixed part of the fees (License Fee etc.) are 44% discounted • Same fees for variable part (terminal fees etc.)

6. History of MAINS enhancements

7. “ITA” (Book) Feed • Disseminated via trading system • Only trading participants can subscribe • Trading participants can use the data in their own system • Can be used only at the dealing rooms of the trading participants. No distribution is allowed. • “Snapshot” of every 2 seconds

8. “ITA” (Book) Feed (Cont’d) • More detailed information is available • 8 best bid/ask (cf. FLEX: 5 best bid/ask) • Accumulated volumes over 8 best quotes • Number of orders at each price point • Conditional close orders • More accurate reflection of “Itayose” (single price auctions) status (see next slide)

9. ITA Feed FLEX Sell Buy Sell Buy 100 30 50 20 10 40 10 50 30 10 Over 120 119 118 117 116 115 114 113 112 111 110 109 108 107 106 Under 10 10 20 50 10 30 50 100 120 50 80 90 80 150 m/o 20 10 40 130 118 117 116 115 114 113 112 111 110 109 140 50 100 120 50 Better quotes are accumulated at the “hypothetical” best bid/ask quotes Comparison at “Itayose” status m/o 30 10

10. TSE-provided trading terminal • Only for trading participants • Disseminated via trading system • Only “query and display” basis (i.e. trading participants cannot use the data in their own system. They just look the information on the screen.) • Possible to look at the whole book (8 bid/ask quotes at one time)

11. Expected Changes in 2009

12. System upgrade in 2009 • Trading system for cash market will be upgraded in 2009 • The new trading system is designed to handle much more orders with low latency • Accordingly, market information dissemination scheme will change as well to handle such high message transaction

13. FLEX CompleteBook (tentative name) • New lineup of the real time data feed • Full depth information is available (New) ITA Feed Abolished (some limited functions remain) TSE-provided trading terminal New lineup Overview <Current> <in 2009> FLEX 10Mbps FLEX 100Mbps(*1) (*1) Actual bandwidths will be decided later. FLEX 1.5Mbps FLEX 1.5Mbps

14. Book disclosure policy change • Full depth book information will be open to everyone • Historically, book information was considered as a “privilege” of trading participants. • Recently, the idea that all the investors should have equal access to market information becomes widespread. • The policy change was approved by Market Structure Advisory Committee which consists of trading participants. • FLEX CompleteBook (tentative name) will be launched in 2009

15. FLEX CompleteBook • Only cash market data • Contents • Last trade price • Full depth of bid/ask prices and quantities • Quantities of closing buy/sell orders at the every price point • Trading volume/value

16. Streamlining data path • Currently, many trading participants receives both FLEX and ITA Feed • ITA Feed cannot be distributed • ITA Feed contains more detailed information • ITA Feed provides only 2 second snap shot • New FLEX family will fill the gap between current ITA and FLEX • FLEX 100M&1.5M will be enhanced to provide 8 best bid/ask quotes etc. (Cash market only) • FLEX CompleteBook provides full depth information • Accordingly, ITA feed will be abolished (However, trading system still has minimal function to provide market data) • Query-based with minimum 2 sec interval • Limited issues at one time

17. Comparison of contents

18. Difference of FLEX 100M/1.5M and FLEX CompleteBook

19. FLEX 100m/1.5M message format • Q1 tag represents the best quotes while Q8 represents the 8th best quotes • Each Qn tag contains both bid/ask prices and quantities • All Qn tags are set in one message not only changed quotes but also unchanged ones • Each message represents a “screenshot” of the book at that time  Easy to create display program • Easy for error recovery as each message contains the latest book information • Messages tend to be long • Impractical to provide full depth information • Required just incremental modifications from the current format Q6 Q7 Q1 Q2 Q3 Q4 Q5 Q8

20. FLEX CompleteBook message format ... • QS: Ask quote, QB: Bid quote • Each QS/QB contains price, quantity and the number of orders • Only changed quotes are set in one message • Suitable for providing full depth information since each message sends just “components” of the book • Messages tend to be short • Potential problems for error recovery since the information is sent only when it is changed • More work for creating display program (e.g. need to compare with the current book and determine the priority of the new quotes among the book) QS QB QB

21. Conclusion • Drastic changes are expected in 2009 • Full book will be open to anyone • Market data amount will be explosively increased due to capacity enhancement of the trading system • TSE addresses to these changes by offering two product lines • FLEX 100M/1.5M: Friendly to current users • FLEX CompleteBook: Address to new demand (more detailed book info, algorithmic trading, etc.)

22. Thank you!