Presentation to Bright Trading

1
Presentation to Bright Trading September 17,
2008 Denise Fiacco, Jack Mahoney, Justin Lerner
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Then and Now Listed Shares

• Then and Now Listed Shares

2001
2008
20081
11
5
3
Regional
Broker-dealers
Broker-dealers
CHX
NYSE
Other exchanges
7
NYSE Hybrid
NSE
NYSE Group 53
2
lt40
84
BATS
BSE
6
PHLX
ARCA
13
3
ECNs
Nasdaq Single Book
4
gt25
INET
lt3
Pipeline
Posit
2
Posit
Liquidnet
Liquidnet
SIGMA X
Crossing networks
MatchPoint
1. Jan 08. Single-counted share volume, internal
matches only, all Tape hours. For some venues the
estimates are rough approximations. Shapes not in
proportion to actual market share.
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Market Landscape Fragmentation
Complex US Liquidity Landscape
Reflects TABB group reported volumes for June
2008.
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Simplified ECN Landscape
Reflects TABB group reported volumes for June
2008.
5
Reflects Rosenblatt Securities reported
volumes for July 2008.
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Dark Pool Competition

• The Actual Numbers

Reflects Rosenblatt Securities reported
volumes for July 2008.
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The SIGMA Smart Router
Smart Routing SIGMA
SIGMA X
SIGMA Smart routed orders
Customer ATS
XLPs
Public

• SIGMA creates a game plan for every order it
  receives
• The original parent order is decomposed into
  child orders according to
• NBBO
• Internal ranking table
• Depth of book feed (real time from all major
  pools of liquidity)
• Orders sent to pure electronic exchanges are
  routed with an IOC (Immediate or Cancel)
  time-in-force
• Orders sent to partially electronic exchanges
  (Hybrid NYSE) are routed with a DAY time-in-force
  
• Prior to routing to public markets, SIGMA will
  search for liquidity in SIGMA X
• This is an iterative process
• SIGMA creates a new game plan for the balance of
  the order
• Subsequent game plans depends on whether the
  order receives a fill or an out from a particular
  venue (no fill at all from particular
  destination, they are removed from the game plan
  at that quote, but if quote moves we may go again
  irrespective of whether we were filled at prior
  quote)
• Posting destination(s) fully customizable

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SIGMA Listed vs. OTC Executed Volumes
Listed Breakdown
OTC Breakdown
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GSET Flow Diagram
Algo Orders

• SIGMA X

Dark Pools
Public Markets
SIGMA Smart Routed Orders
Customers ATS
Liquidity Providers
SIGMA X Posted Orders
REDIPlus Orders to SIGMA X REDIPlus
Portfolio Trader Waves to SIGMA X REDIPlus
X-Posted Tickets FIX Orders to SIGMA X
R
R
R
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SIGMA X Executed Flow Composition
Algorithmic
DMA
Customer ATS
Liquidity Providers
SIGMA X Directed
GSCO
SIGMA Routed
Customer Pool 90
Liquidity Providers10
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SIGMA X Execution Breakdown by Market
Capitalization/Sector
Market Capitalization
Sector
Small 11
Mid 33
Large 56
Volumes in various sectors track the market
closely, overweighed in IT, underweighted in
Financials.
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SIGMA X Order Types and Parameters
Order Types Limit, PEGbid, PEGmid, PEGask, Ping
(limit IOC) All peg orders float with the
NBBO on the side specified. For example, a buy
order pegged to the bid floats with the national
best bid All possible spread capture/price
improvement goes to the liquidity provider
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SIGMA X Customer ATS Execution Analysis
Large 56
Limit and PEGmid most common. PEGbid/ask used
much less frequently. 16 of executions are
limit buyers interacting with limit sellers.
PEGmid buyers interacting with limit sellers
comprise 31 of executions, while PEGmid sellers
interacting with limit buyers comprise an
additional 31 of executions. An additional
18 is PEGmid buyers interacting with PEGmid
sellers. 34 of PEGmid executions occur at a
more favorable price (34 (16.8/50)) of PEGmid
buyers execute on the bid, and 34 of PEGmid
sellers execute on the offer). Sample period
is from January 2, 2008 April 4, 2008
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SIGMA X What We Do To Prevent Gaming
Real-time monitoring and alerts (work in
progress) We monitor all orders that are
directed to SIGMA X and are alerted to
large-sized orders, high participation rates,
excessive price moves and abnormal spreads.
Advanced monitoring tools graphical interface
that allows us to view a particular execution
along with all relevant quote/trade data.
Regular monitoring of historical performance
automated tools and reports to monitor the
performance of clients that provide liquidity.
Internal checks and balances on DMA and
algorithmic flow ability to set default SIGMA X
anti-gaming measures (MXQ, opt-out of certain
flows, etc.) at both client and order level.
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SIGMA X What You Can Do To Prevent Gaming
Prevent fishing use an MXQ (minimum
execution quantity) on orders directed to SIGMA X
to avoid small fills. This quantity is the
minimum size you are willing to cross and can be
set as a default per user or on an order-by-order
basis.
Reduce impact be sure to specify a bottom/top
when using a peg order type to avoid excessive
price impact. Keep in mind that dark executions
do hit the tape.
Call us if you have any questions or concerns
about a particular order or execution, call your
representative.
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SIGMA X Executed Volume Trend
Average execution size 600 shares 1B shares
ADV intractable flow 21 of GSET algorithmic
executions occur in SIGMA X SIGMA X latency
less than 1 ms 4,000 unique symbols executed
per day
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2008 Global Electronic Trading Disclaimer
This message is not the product of the Global
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Research. It is not a research report and is not
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