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POWERING THE EXCHANGING WORLD

POWERING THE EXCHANGING WORLD. Provided by James Maguire, Training Manager NYSE Euronext. October 5, 2009 New York, New York. NYSE: History. The Buttonwood Agreement 1792. A matter of trust 24 stockbrokers agreed to trade with each other. Continuous Market 1871.

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POWERING THE EXCHANGING WORLD

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  1. POWERING THE EXCHANGING WORLD

  2. Provided by James Maguire, Training Manager NYSE Euronext October 5, 2009New York, New York

  3. NYSE:History

  4. The Buttonwood Agreement 1792 • A matter of trust • 24 stockbrokers agreed to trade with each other

  5. Continuous Market 1871 • Large open trading floor • Simultaneous trading in all securities • Trading posts • Origin of the specialist

  6. New Building 1903 • Architectural innovations • Trading posts and telephones • Annunciator boards • Pneumatic tubes

  7. New Technologies 1960-1970s • Designated Order Turnaround (DOT) • Intermarket Trading System (ITS)

  8. New Technologies 1980-1990s • Trading Floor Upgrade • SuperDOT • Wireless technology

  9. Hybrid Market 2005 • More choice for customers • Price improvement for auction market orders • Speed and certainty for electronic orders

  10. Business of the NYSE • History of the NYSE • Buttonwood Agreement – 1792 • New York Stock and Exchange Board – 1817 • Addition of Trading Posts – 1872 • 1929 Crash gives birth to regulation • 1934 Securities Act • SIAC established – 1972 • Electronic Display Book – 1983 • Circuit Breakers – 1988 • Trading in Decimals – 2000 • Direct+ – 2000 • NYSE OpenBook – 2002 • NYSE and Arca merge – 2006 • NYSE and Euronext merge – 2007 • NYSE and AMEX merge – 2008

  11. Asia Middle East The Largest Exchanges in Europe and the US, Uniting the World’s Two Largest Pools of Capital NYSE Euronext offers tailored solutions to complement your global financing needs and accommodates multiple asset classes and issuers of any scale. Strategic Relationships • Abu Dhabi Securities Market • Strategic Alliance • Qatar Exchange • 20% Equity Stake • Tel Aviv Stock Exchange • Strategic Alliance Americas: NYSE Group Europe: NYSE Euronext The World’s Largest Equity Market. The Largest Exchange in Europe; the only international integrated exchange in the world. • Tokyo Stock Exchange • Strategic Alliance • National Stock Exchange (India) • 5% Equity Stake • Multi Commodities Exchange (India) • 5% Equity Stake • Bursa Malaysia • Strategic Alliance • Dalian Commodities Exchange • Strategic Alliance • Philippines Stock Exchange • Strategic Alliance NYSE Liffe • Derivatives NYSE Euronext • Cash Equities • DRs • Fixed Income • ETFs • Certifications • Warrants NYSE Alternext • Cash Equities • DRs NYSE • Cash Equities • DRs • Fixed Income • ETFs NYSE Amex • Cash Equities • DRs • Equity Options • ETFs NYSE Arca • Cash Equities • DRs • ETFs NYSE Arca Europe • Cash Equities • DRs NYSE Liffe US • Derivatives Latin America • BM&FBovespa • Equity Stake Listing Venue Trading Platform

  12. NYSETrading DMMsBrokers-Commission-Independent

  13. NYSE Market Model Evolution Evolution of Specialists to Designated Market Makers (DMMs) Greater incentive to add liquidity, via quoting at the NBBO Greater flexibility to commit capital More opportunities to leverage sophisticated technology Increased participation through new rebate model Introduction of Supplemental Liquidity Providers (SLPs) Complementary to DMMs Seek to deepen liquidity and enhance price discovery Economically incented to quote on NYSE Innovative Solutions to Further Attract Block Liquidity Launch of NYBX with BIDS Holdings Launch of NYSE MatchPoint for portfolio crossing Roll-out of the Universal Trading Platform Provides seamless high-performance trading across asset classes, global geographies, and time zones Reduces latency from 62 milliseconds to sub-10 milliseconds The Changing Global Equity Markets The NYSE Continues to Adapt its Market Model to Address These Changes

  14. Role of a DMM: Manage the auction process and ensure a fair & orderly market Quote at the National Best Bid or Offer (NBBO) a specified percentage of the time Facilitate price discovery during market openings & closings Provide capital to ensure liquidity during temporary imbalances Serve as an information resource for company management The NYSE Liquidity Advantage: The only market where market makers have an obligation to quote at NBBO a specified percentage of the time The only market where market makers have accountability with performance reviewed by the Exchange The only market combining the newest in technology with the human element of the Trading Floor Liquidity Advantage: Designated Market Maker (DMM) DMM Participation Rate in % of NYSE Trades

  15. Floor Brokers • Commission Brokers • “House Brokers” • Execute orders on behalf of firm’s customers or his/her firm’s own account • Independent ($2) Brokers • Provide basic services, typically order execution and clearing • directly conduct business for public • execute special orders for customers • assist House Brokers on a busy day

  16. Trading Floor and the Systems that Support Trading

  17. Trading Floor Main Room Original Trading room opened on April 23, 1903 Posts 5 – 11 (NYSE equities) Garage Added as a second Trading room in 1922 Posts 1 & 2 (NYSE Amex equities) Posts 3 & 4 (NYSE equities) Blue Room and EBR NYSE Arca Options NYSE Amex Options Tech Support Executive Ramp

  18. Display Book DMM’s order management and execution workstation Receives and displays orders/interest Executes and reports transactions and publishes results to the Consolidated Tape Auto-ex trades 1 million shares Auto-quote Manual trades Connects with other NYSE Systems for: Comparison, surveillance, and reporting information to customers Interfaces with other market data system and National Market System

  19. Display Book

  20. Broker Booth Support System (BBSS) Broker’s order management system Displays unexecuted and closed orders individual order activity e-Quote details Provides messaging capability between the upstairs trading desk and the e-Broker Routes orders via SuperDOT to the e-Broker or Post (Display Book) Routes reports to an upstairs trading desk

  21. BBSS

  22. e-Broker Receive and view orders Send interest to Display Book (Dot and e-Quotes) Send e-Quote to external algorithm (Broker Algo) Retrieve market information, including Trades, Quotes, OpenBook, Broker Volume, and VWAP data Broadcast interest in a particular stock to other Brokers (BlockTalk) Send market looks (current quote/ crowd interest) to the Trading Assistant and the Trading Desk via email Enter execution reports Send reports instantly to the booth and customer

  23. Floor Broker Tools • Broker Algorithms • Order sent from handheld to external Algo engine • Pragma & Deep Value • Broker specifies specific trading strategy and time parameters • Algo generates e-Quotes to Display Book • Block Talk • Allows Floor Brokers to alert each other of their interest • Broker subscribes and broadcasts through the handheld • Provides order confidentiality

  24. e-Broker

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