evolution of us markets - 2000-2011 0405
TRANSCRIPT
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20002011
April, 2011
EVOLUTION OF
U.S. FINANCIAL MARKETS
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Evolution of U.S. Financial Markets2
How Do You Navigate
Todays 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
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Todays Market Landscape
Evolution of U.S. Financial Markets3
http://www.itg.com/http://www.bidstrading.com/http://www.liquidnet.com/index.htmhttp://www.convergex.com/http://www.knight.com/investorRelations/AR/2009AR/index.asphttp://www.directedge.com/Home.aspxhttp://www.idcg.com/index.htmlhttp://www.nypclear.com/http://progressive.powerstream.net/008/00102/edu/interactive/cme-clearport/intro/index.htmlhttp://www.theocc.com/default.jsphttp://www.dtcc.com/http://cfe.cboe.com/http://www.cbsx.com/http://www.kcbt.com/index.asphttp://www.c2exchange.com/http://www.nasdaqtrader.com/http://www.ise.com/webform/homeDefault.aspx?categoryID=287http://www.cboe.com/http://www.cmegroup.com/http://www.nyse.com/ -
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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, continuedglobalization.
Evolution of U.S. Financial Markets4
Trends and Background
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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 Markets5
Trends and Background (Contd)
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Inter-relationship of asset classes, markets; portfolio
margining
Growth of algorithmic and high-frequency trading
Madoff.
Evolution of U.S. Financial Markets6
Trends and Background (Contd)
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U.S. EquitiesMarkets
2000 2011
Evolution of U.S. Financial Markets7
NYSE
Nasdaq
BSE
PHLX
CHX
NSX
PSX
Arca
Brut
Redi
Instinet
Island
Attain
Nextrade
Strike
Bloomberg
Tradebook
ITG Posit
Latice
Trading
Inter-market Trading System [ITS]
EXCHANGES REGIONALS ECNs ATS
NYSE
Euronext
Nasdaq
OMX
CHX
NSX
SIGMA X
Instinet -
Newport
GETCO - GES
CSFB -
Crossfinder
EXCHANGES ATS / DARK POOLS
Direct Edge
Convergex
Knight Link
UBS - PIN
CitiMatch
BlockCross
Fidelity -CrossStream
BIDS
Level
Pipeline
Liquidnet
BATS
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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 asdifferentiators.
Evolution of U.S. Financial Markets8
What Happened ?
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U.S. OptionsMarkets
2000 2011
Evolution of U.S. Financial Markets9
AMEX
EXCHANGES
CBOE
ISE
PHLX
PSE
Options Linkage
NYSE- AMEX
EXCHANGES
CBOE
ISE
NASDAQ OMX
- PHLX
NYSE
ARCA Options
BATS
Options
BOX
C2
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Growth of electronic trading / consolidation of open
outcry trading
Decimalization, penny quoting, spread compression
Payment for order flow, growth of electronic marketmakers
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 Markets10
What Happened ?
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U.S. FuturesMarkets
2000 2011
Evolution of U.S. Financial Markets11
CME
EXCHANGES
CBOT
NYMEX
NYBOT
MGEX
KCBOT
BTEX
NASDAQ
LIFFE
OneChicago
CME GroupCMECBOTNYMEX
EXCHANGES
ICENYBOTICE OTC
WCE
KCBOT
MGEX
NYSE LIFFEUS
OneChicago
CBOE FuturesExchange
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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 Markets12
What Happened ?
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U.S. Clearing Houses
2000 2011
Evolution of U.S. Financial Markets13
EQUITIES OPTIONS FUTURES FIXED INCOME
NSCC
Options
Clearing
Corp
New York
Clearing Corp DTCC
NYMEXClearing
CME Clearing
BOTCC
KCBTCC
EQUITIES OPTIONS FUTURES FIXED INCOME
DTCC OCCDTCC /
FICC
OCC
CME
Clearing
ICE Clear
US
KCBTCC
New York
PortfolioClearing
International
DerivativesClearing Group
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Exchange consolidation, clearing member consolidation
(Bear Stearns, Lehman Bros., Refco)
Exchanges demutualized, went for-profit and public
Member-controlled versus exchange-owned clearinghouses
Clearing house silos versus non-profit, industry utilities
New products / convergence of OTC and ETD products
Futures look-alikes, cleared OTC products as newrevenue streams
Introduction of new clearing houses.
Evolution of U.S. Financial Markets14
What Happened ?
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Need to Navigate Todays Landscape?
Evolution of U.S. Financial Markets15
http://www.itg.com/http://www.bidstrading.com/http://www.liquidnet.com/index.htmhttp://www.convergex.com/http://www.knight.com/investorRelations/AR/2009AR/index.asphttp://www.directedge.com/Home.aspxhttp://www.idcg.com/index.htmlhttp://www.nypclear.com/http://progressive.powerstream.net/008/00102/edu/interactive/cme-clearport/intro/index.htmlhttp://www.theocc.com/default.jsphttp://www.dtcc.com/http://cfe.cboe.com/http://www.cbsx.com/http://www.kcbt.com/index.asphttp://www.c2exchange.com/http://www.nasdaqtrader.com/http://www.ise.com/webform/homeDefault.aspx?categoryID=287http://www.cboe.com/http://www.cmegroup.com/http://www.nyse.com/ -
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Tellefsen and Company, L.LC.1-212 809 3800
Evolution of U.S. Financial Markets16
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