Market Overview TEACHER’S WORKSHOP

1. June 2014 Market OverviewTEACHER’S WORKSHOP

2. Topics • Equity Trading • Market Data • Market Structure 2

3. The Role of Exchanges: Price Discovery • Exchanges establish best prices and disseminate quotes/trades • Price discovery optimally functions through the interaction of diverse order flow (brokers, institutions, retail) from multiple participants MARKET DATA LISTING TRADING • Clients : Data providers, brokers • Quote and trade data • Transparency Clients: Issuers Providing the capital companies need to compete, grow, create jobs • Clients: Brokers, retail, institutional investors • Price Discovery • Liquidity/Price Support • Market Quality • Central Matching

4. SignificantChanges in Trading • Developments: • Market fragmentation • Smart order routing • Algos/smaller trades • HFT • Dark pools/orders • Sub-penny trading • New pricing structures • Small-cap trading • Message traffic • Order types • Change Drivers: • Technology • Regulation • Competition • For-profit exchanges • Consolidation

5. Equity Trends Since 2009 Equity Volume Mix by Client Segment • Since 2009: • Volume down 33% • HFT down from 61% to 49% • VIX down 56% • HH stock ownership down to 52% • Off-exchange trading up to 37% • $391B net fund outflows • 5 years of positive stock returns • Source: TABB Group, Standard & Poor’s, NYSE. • * Adjusted for EDGA/EDGX launch July 2010. 5

6. Order Routing Process and Fragmentation • Retail and Institutional Investors route to Brokers • Brokers try to internalize orders flow on dark pools • Brokers may send orders to Exchanges 1 2 3 • Sell-Side Brokers: 200 Internalization Desks & 42 Private Broker Platforms (40% of Volume) • Buy-Side Institutions & Retail Investors • 11 Exchanges • Arca • NYSE • MKT Barclays LX Citadel Getco DB SuperX CSFB SIGMA X • EDGA • BATS • BYX • EDGX CITI MATCH Knight Link BIDS ITG Posit MS Pool UBS PIN Knight Match • PSX • BX • Nasdaq CONVERGEX LeveL IEX Liquidnet H2O Instinet CBX Instinet Liquidnet • NSX Other Dark Pools • Exchanges disseminate quotes and trades. Dark pools do not quote, but rely on Exchange prices. 4

7. Rise in Off-Exchange Dark Trading • Off-exchange dark trading has increased from 18% in early 2009 to 39% today, and is even larger in less activity securities • 70%+ of off-exchange activity matches exchange prices, not price improvement or blocks

8. SIP: Consolidating Fragmented Markets • Participants send quotes and trades to a central Security Information Processor (SIP) that consolidates data streams of 11 exchanges, 42 ATSs and other off-exchange venues. • Consolidating the feeds requires includes SIP aggregation process vs. direct fees. • Rule 603(a): Prohibits SRO or BD from transmitting data to user sooner than transmission to SIP. 42 ATSs plus internalizers TRFs No pre-trade display Limited post-trade information 11 Exchanges Top of book prices only sent to SIP Proprietary feed (top and depth of book) Rule 603(a) SIP Consolidated Tape • Continued focus on reducing SIP latency (under 500 microseconds) Vendors, brokers, Internet, TV

9. SEC’s 13 Directives – Change is Coming • Regulation SCI – SEC completing rule. Stricter technology rules to improve market stability. • SIP enhancements – Exchanges completing backup capabilities in June. • Anti-disruptive trading rule – SEC to develop recommendations on trading rules during short periods of market vulnerability. • HFT oversight – SEC/FINRA adding rules that apply dealer status for unregistered active prop traders and require FINRA membership for dealers trading off-exchange. • Trading algorithm and risk management and oversight – SEC to prepare recommendations to improve risk management of trading algorithms. • Time stamp in consolidated feeds – Exchanges exploring to better compare speeds of proprietary and SIP speeds. • Exchange feed disclosure – Exchanges to disclose data feed use. • Off-Exchange disclosure – Expand off-exchange volume disclosure to non-ATS areas • ATS operations information – SEC recommends greater public disclosure • Order routing disclosure – SEC recommends additional disclosure to institutions. • Comprehensive order type review – Exchange review. • Tick pilot program – SEC completing pilot framework for wider ticks in smaller companies. • Market Structure Advisory Committee – Diverse group to conduct holistic review.

10. NYSE Positions • Goal: Reduce complexity, reduce fragmentation, reduce broker conflicts, restore investor confidence • Eliminate maker-taker pricing • Protect displayed liquidity by requiring price improvement or blocks • Tick size pilot in small-cap stocks • Improve disclosure for all venues and order routing • Fewer order types and fewer venues • Explore options for delivery of market data • Change must be applied equally to all venues • Support pilots and data-driven approach • Segments may deserve different market structures

11. NYSE’s Unique Liquidity Provider Programs Four distinct liquidity provider programs: • Designated Market Makers (DMMs) • Supplemental Liquidity Providers (SLPs) • Floor Brokers (FBs) • Retail Liquidity Providers (RLPs)Objectives of liquidity provider programs: • Improve market quality (narrowest spreads, most time & size at NBBO) • Encourage continuous liquidity • Focus on performance across ALL securities, including less liquids • Diverse and competitive quote providers • Strengthen broker partnerships and stickiness