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2000 – 2011 April, 2011

EVOLUTION OF U.S. FINANCIAL MARKETS. 2000 – 2011 April, 2011. How Do You Navigate Today’s Markets?. Confused about how the U.S. markets work?

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2000 – 2011 April, 2011

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  1. EVOLUTION OF U.S. FINANCIAL MARKETS 2000 – 2011 April, 2011

  2. How Do You Navigate Today’s Markets? • Confused about how the U.S. markets work? • If you did not have a solid grasp of the U.S. market structure in 2000 (prior to Reg. NMS), you will probably have a tough time navigating the various players and their value proposition today • The markets have evolved: • Exchanges’ M&A • Continued market fragmentation • Introduction of new players • Totally lost? See the next page … Evolution of U.S. Financial Markets

  3. Today’s Market Landscape Evolution of U.S. Financial Markets

  4. Trends and Background • Growth of electronic trading / contraction of open outcry: equities, options and futures; spread compression • Growth and sophistication of the buy side • The Internet has matured, so has trading technology • Demutualization and for-profit business models • Evolution of exchange revenue models, market makers, payment for order flow (maker-taker, taker-maker) • Exchange mergers and acquisitions, continued globalization. Evolution of U.S. Financial Markets

  5. Trends and Background (Cont’d) … • Maturity of prime brokerage business model • De-leveraging and impact of global financial crisis post Lehman Bros. • Introduction of new broker-sponsored exchanges, clearing houses • Continued market fragmentation – equities and options • Regulatory evolution: • Commodity Futures Modernization Act (2000) • S.E.C. Reg. NMS, demise of InterMarket Trading System for equities (2005) • Dodd-Frank Act regulations Evolution of U.S. Financial Markets

  6. Trends and Background (Cont’d) … • Inter-relationship of asset classes, markets; portfolio margining • Growth of algorithmic and high-frequency trading • Madoff. Evolution of U.S. Financial Markets

  7. U.S. EquitiesMarkets 2000 2011 Evolution of U.S. Financial Markets

  8. What Happened ? • Implementation of SEC Reg. NMS, demise of the Inter-market Trading System • Exchanges demutualized, went for-profit and public • Exchange consolidation, continued globalization • Evolution of NYSE, NASDAQ duopoly, internalization of order flow, rise of new, more nimble ATS • Growth of algorithmic trading, new order types, high frequency trading and proximity hosting as differentiators. Evolution of U.S. Financial Markets

  9. U.S. OptionsMarkets 2000 2011 Evolution of U.S. Financial Markets

  10. What Happened ? • Growth of electronic trading / consolidation of open outcry trading • Decimalization, penny quoting, spread compression • Payment for order flow, growth of electronic market makers • Continued market fragmentation • Exchange acquisitions • Algorithmic and high frequency trading • New order types • Evolution of new players - 5 markets are now 8! Evolution of U.S. Financial Markets

  11. U.S. FuturesMarkets 2000 2011 Evolution of U.S. Financial Markets

  12. What Happened ? • Growth of electronic trading / consolidation of open outcry trading • Exchanges demutualized, went for-profit and public • Exchange consolidation and globalization • Demise of Enron • Introduction of new players - some came, some went, some stayed • New products that align risk to users needs • Convergence of OTC and ETD products - rise of OTC clearing, futures look-alikes. Evolution of U.S. Financial Markets

  13. U.S. Clearing Houses 2000 2011 Evolution of U.S. Financial Markets

  14. What Happened ? • Exchange consolidation, clearing member consolidation (Bear Stearns, Lehman Bros., Refco) • Exchanges demutualized, went for-profit and public • Member-controlled versus exchange-owned clearing houses • Clearing house “silos” versus non-profit, industry utilities • New products / convergence of OTC and ETD products • Futures look-alikes, cleared OTC products as new revenue streams • Introduction of new clearing houses. Evolution of U.S. Financial Markets

  15. Need to Navigate Today’s Landscape? Evolution of U.S. Financial Markets

  16. Call Us for the Roadmap Tellefsen and Company, L.LC. 1-212 809 3800 JJR@Tellefsen.com Evolution of U.S. Financial Markets

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