AIMA Dublin The Impact of MiFID on the content, costs and uses of market data

1. AIMA DublinThe Impact of MiFID on the content, costs and uses of market data 24 October 2007

2. “The essential guide to screwing up your business” Jeff Randall • Keep reminding your customers how lucky they are. • Stick to a proven formula. Assume infallibility. • Don’t meet your customers • Believe your own story. Isolate yourself. • Never take any time out to think • Indulge in continuous use of blackberries and mobile phones • Fall in love with administration and bureaucracy • Be afraid of the future. It’s uncomfortable and will show the world how little you know

3. Key issues – exchange traded markets • The proportion of volume traded electronically will continue to grow rapidly • Regulatory change will be a key driver of client investment and opportunity in ‘08 and ‘09 • Efficiency and risk management will drive even greater adoption of STP, • Algorithmic trading has created new trading opportunities, resulting in volume growth that will outstrip headcount growth • Banks and brokers will seek to monetize more aggressively their OTC prices and data • Growth in the volume of market data will mean that it will no longer be possible to broadcast everything IDN growth 3 month trended traffic rates since 1987. 3 month trend (updates per second)

4. September 2006 – Peak at New York Open Reuters receiving 61,000 messages per second

5. September 2007 – Peak at New York open Reuters receiving 132,400 messages per second

6. Exchanges were “institutions”

7. Old Markets Learn New Tricks - Profits

8. MiFID

9. Markets in Financial Instruments Directive Increase market efficiency through increased transparency and competition MiFID Objectives MiFID Objectives A common regulatory framework across Europe Provide protection for the retail investor

10. Markets in Financial Instruments Directive 01 Apr2004 01 Jul2004 01 Oct2004 01 Jan2005 01 Apr2005 01 Jul2005 01 Oct2005 01 Jan2006 01 Apr2006 01 Jul2006 01 Oct2006 01 Jan2007 01 Apr2007 01 Jul2007 01 Oct2007 01 Nov2007 MiFID Level 1 passed by European Parliament Extended Consultation on implementation measures MiFID Level 2 Implementation measuresfinalised and published by the Commission Deadline for Transpositionof MiFID into local law 9 months allowed forimplementation Deadline for MiFID implementation Most MiFID obligations apply to all financial instruments: 7 days to go.

11. Status of Transposition • As at 1st October out of 27 states: • 15 states had notified the European Commission that they have transposed Level 1, • 13 states had notified the European Commission that they have transposed Level 2. The following states had not notified transposition of Level 1 or 2: • Greece having notified of transposition of Level 1 but not Level 2. • Cyprus having notified of only partial transposition of Level 1. • Latvia having notified of only partial transposition of Level 1 & 2.

12. BOAT Deutsche Bourse OMX Stockholm Euronext Paris LSE .L .PA .DE .ST .M Consolidated Viewbased on all venues Reuters Fragmentation and Consolidation • MiFID Transparency obligations will result in fragmentation of equities trade data • Price fragmentation may occur but not initially • Professionals will need consolidated pricing & trade data for each stock • Will “Dark pools of liquidity” increase the importance of post trade data? • Access to complete market data will be more expensive • Reuters will be a publication venue for trades and prices, but not an MTF

13. New Data feeds • BOAT will charge €120 per person per month with free access to 2hour delayed data • Chi-X, Plus Markets & Xontro data will be accessible free of charge • Borsa Italia,Vienna Stock Exchange, Bratislava SE have yet to announce charges

14. Reuters as a publication venue • “.r” RIC for all publication to a Reuters venue • Reuters Trade Publication: • Leverages the technology behind Reuters Trade Notification Service • Compliance with FSA’s Trade Data Monitor functions and MiFID Level 2 transparency obligations • Publication via a FIX enabled API, or via a GUI • Minimal cost for publication

15. Consolidation From 1st November the “.x” RIC will provide on existing Reuters desktops: • Initially in 1,200 of the most liquid European stocks • Will expand to cover all stocks defined by CESR as eligible • Best bid/offer from multiple venues & all trades as they happen • Separate display of all recent trades • Access cost dependant on the cost of contributing feeds. Day one coverage will cover 13 venues including LSE, Euronext, Deutsche Bourse, OMX, Virt-x, Chi-X, Boat & Reuters.

16. Best Execution

17. Best Execution • Applies across all asset classes, although application to dealer markets not as clear as for equities. • Take into account factors other than price (latency, likelihood of execution, settlement costs…..) • Firms to establish an execution policy, • Evidence compliance with that policy, • Validate that policy at least annually. • Beyond Equities • “whether the client legitimately relies on the firm to protect his or her interests in relation to the pricing and other elements of the transaction…” Commission Working Document – ESC-07-2007 • Status of portfolio managers?

18. Best Execution – RDTH • In all asset classes, Reuters also offers Reuters DataScope Tick History (RDTH) for compliance and regulatory requirements • RDTH will allow firms to retrieve all underlying tick by tick data to: • Determine and establish best execution venues. • Maintain compliance on a daily post trade basis • Prove compliance up to 5 years after the trade should regulatory agency probes come into effect • RDTH will allow firms to validate the quality of execution provided by the venues within their policy by: • Comparing the tradable market of the venue chosen versus what could have been achieved across all other venues. • RDTH will also store the .x RIC composite for future comparison The focus of RDTH is to provide firms access to all underlying tick by tick data across all asset classes on a global basis to assist compliance officers with daily comparative market level intelligence by venue to achieve regulatory compliance.

19. Best Execution – RTCA • In Equities Reuters will offer Reuters Transaction Cost Analysis (RTCA) • RTCA will allow firms to evidence compliance with their execution policy by: • reference to benchmarks calculated using the price & trade data from the execution venues identified in that execution policy. • this will be facilitated by choosing the relevant RIC identifiers in RTCA for the price & trade data from those venues. • RTCA will allow firms validate the quality of execution provided by the venues within their policy by • comparison of the execution quality of the venues chosen versus what could have been achieved across all venues. • this will be facilitated by comparison against benchmarks calculated using the composite ".x" RIC. Although the initial focus for RTCA is on Equities coverage of other asset classes would be possible if comparative trade and pricing data were to be made available.

20. Reuters Transaction Cost Analysis • Historical hosted Transaction Cost Analysis Service • Broad range of Benchmarks • Historical Trade and Order Analytics • Scenario Analytics

21. Reuters Transaction Cost Analysis – Summary and Drill Down Reports • Summary Cost analysis • Segmentation Analysis provides • Drill Down to carry out analysis • Trader Performance • Volume Consumption • Fill Analysis • Individual trades and orders