Alpha, Omega and Everything In Between

The New Equity Marketplaces

The New World

Randee Pavalow
November 12, 2007

Market structure debate - now

Best execution vs. trade through Separation of price and quantity discovery - dark pools

Canadian Environment

Regulatory environment Data availability Technology

Key Motivations Behind Alpha

Making the Canadian Capital Markets more Competitive Hybrid Model Decreasing the Cost of Execution Increase Liquidity in the Market Increasing the Speed of Execution

Why Alpha Why Now?

Key Milestones
Customization of Technology Application
Adapt the application to meet Canadian rules Introduce the standard for FIX connectivity for Canada Adapt the Trade Through Management facility for Canada. Customize the application low latency API for the Canadian market Internal Testing extensive internal testing before the application is release to the market.

Communication to Marketplace
Provide information on Alphas functionality and technology Introduce the Alpha Trading System connectivity points (FIX 4.2) Provide subscription agreement and other documentation External Testing
Subscribers DMA Clients ISVs Data Vendors

Industry(s) Testing

Regulatory Approvals

Alpha Will be Transparent

Exchange-Hosted Dark Liquidity at TSX

RS Degroote Panel November 12, 2007

Disclaimer
TSX Inc. 2007. All rights reserved. This presentation, and all of the information contained in this presentation, is TSX's proprietary and confidential information. Do not disclose, copy, distribute, sell or modify this document or any of its contents without TSX's prior written consent. Neither TSX Inc. nor any of its affiliated companies guarantees the completeness of the information contained in this presentation and we are not responsible for your use of, or reliance on, the information.

What does ATX do?

ATX combines the benefits of internalization and dark liquidity in an exchange-hosted blind crossing facility featuring a single matching engine that performs two functions:

1. Internalize Flow: Consolidate liquidity from different desks at the firm in ATX to maximize crossing opportunities 2. ATX Community Match: To increase chances of a fill, ATX scans undeclared liquidity of other firms once internalization opportunities have been exhausted ATX is a blind book: no ex-ante information leakage to other firms, or to other desks within your firm

Intents Cover a Wide Breadth of Opportunities

ATX uses Intents, a new pegged order type that is fully hidden, to represent your undeclared interests For UMIR and compliance purposes, Intents are treated as orders

Order Information: Buy up to/sell down to at ATX calculated match price, including price improvement

Qualifying the Posted Quote: Prevents ATX matches from being priced on a quote that is not representative of market conditions, or one that does not meet the dealers needs. Priority Allocation Group: For allocation when internalizing. Auto assigned to intent based on USER ID.

Intents match against order flow to produce trades Intents can also match against one another when the dealer is configured for inter-firm community matching

ATX Operational Overview

Intents flow into Central Intent Book; designated orders pass through CIB en route to the Exchange Inbound intents and orders scan booked intents, seeking full or partial match Matches are printed as trades and unfilled portions of orders sent to the exchange

Price Improvement Mechanism

Match price assigned by ATX based on best intermarket quote Order to intent matches are priced to give one-tick price improvement to the order Intent to intent matches are priced at the midpoint

Connecting to ATX

ATX Economics
Significant value proposition to dealers through: Fee structure: save on active flow Benefits of internalization: keep the spread Lower transaction costs: More single-ticket fills and no market footprint ATX does not distinguish between active and passive order flow as they are not yet visible orders; pricing incentives to enter intents into the CIB All orders matching in ATX (market and better-priced limit orders) would be billed as active orders on the continuous market ATX fees based on activity undertaken (internal/community matching) and instrument used (order/intent) No subscription or setup fees Intents get the spread spread less a tick when trading against orders, half the spread when trading against intents

Benefits of ATX
Internalization ensures that, at a firm-wide level, more of the spread is captured Blind book minimizes market impact costs
Access to hidden liquidity within the firm and within the ATX community Improved chances of obtaining a fill Provides additional depth at the top of book price Implicit: No need to walk down the book to fill large orders Explicit: Opportunity for more single-ticket fills, minimizing transaction costs Fixed: Alternative to high-touch management of large orders

Reduced Costs

Increased Productivity: ATX allows for greater trade desk automation, enabling reduction in fixed costs

BlockBook RS-DeGroote conference Geoff Eby, President

Perimeter Markets Inc.

November 12, 2007

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Perimeter Markets Inc.

Equity Marketplaces Fixed Income Marketplaces

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Perimeters BlockBook
Canadian equity marketplace Specializing in block transactions Enhancing liquidity without the market impact Trade all TSX-listed stocks without revealing side, size, or price BlockBook front-end or electronic connection to access the marketplace
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BlockBook Block Trading

TSX listed securities, pegging functionality allows the set it and forget comfort that your order will stay in market context Firm, relevant orders, 95% of trades occur within the TSX bid/ask spread Minimum order size: 10,000 shares. Average order size: 61,000 shares (YTD Q3 07) Average trade size: 34,000 shares (YTD Q3 07) TSX average trade size*: 683 shares (Aug 07)
* source: TSX website. 19

Broker-neutral & Anonymous

Perimeter Markets Inc. is a wholly owned subsidiary of Perimeter Financial Corp. BlockBook nor its parent companies take an active role in proprietary or agency trading of equity securities We cannot take advantage of client pre-or post trade information Trade all TSX-listed stocks without revealing side, size, or price Accessed by dealers and institutions, a level playing field Automated and confidential order input, display and transaction Unique signaling capabilities to facilitate meaningful negotiation without the market impact
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BlockBook Access
Available to Canadian and international buy-side, sellside and hedge fund clients Direct via your firms proprietary FIX connection 3rd party front-end system:
ITG Triton Goldman Sachs Execution & Clearing L.P. REDIPlus

3rd party service provider:

Goldman Sachs Execution & Clearing L.P. REDIPlus Credit Suisse
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BlockBook
A new way to move large blocks of Canadian equities without information leakage. www.pfin.ca geoff.eby@pfin.ca
416.703.7800
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Leo Chamberland Chairman, President and CEO egX Group

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Chi-X Canada
Revolutionizing Canadian Equity Trading

An Electronic Trading Pioneer for More than 35 Years

Instinet Corporate Overview
Global Agency Brokerage

Founded in 1969 Trades in more than 50 markets in 30 countries worldwide Offers a full suite of execution and commission management services as well as research Wholly-owned subsidiary of Nomura Holdings, Inc.

Trading Innovation

First to launch electronic crossing capability for institutions (the first ECN) Direct-market access, smart routing and algorithmic trading pioneer Two proprietary advanced execution management systems (EMSs) Currently operates ATS platforms in the U.S., Europe and Asia Formerly operated the INET ECN before selling to Nasdaq in 2005

Alternative Trading Systems Expertise

Building on its strong history and deep roots in global electronic trading, Instinet has the experience and capability to deliver valuable solutions to global investors

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A New Instinet Venture

Chi-X Market Overview

Market Data Third- Party Market Data - Direct

Market Data Vendor Subscriber SmartRouter

Order Entry

Subscriber SmartRouter
Order Entry

CDS
Market Operation Type of Securities Traded TSX-listed equities

Market Type Alternative Trading System (ATS)

Market Data Disseminated electronically through third-party data vendors such as Datalinx, Reuters & Thomson. Pre-trade full depth of book (price/volume)

Order Entry Industry-standard FIX protocol order entry via third-party and proprietary execution management systems. Advanced order types

A continuous auction market based on strict price and time priority.

Customer orders are

protected from tradethrough and improper short sales

Low latency, high volume message

processing

Post-trade time & sales data Orders are fully anonymous

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A Different Market, A Different Model

Chi-X Market Differentiators

Market Model

Benefits to Canadian Investors

Trading Efficiency Greater price discovery, reduced information leakage Fair-access a level playing field Greater liquidity Reduced friction in the trading process Market Growth and Evolution Empower the market to adopt key trends driving global markets Enable new trading and investment strategies and business models Attract new market entrants and international investors

Fully anonymous Strict price and time priority Advanced order types Free market data

Technology 4th generation proprietary platform designed from inception to support global trading Flexible and extensible to quickly respond to client and market demands Robust and scalable capable of handling trading volumes in the billions of shares Low latency, high capacity message processing

Operational Expertise

Seasoned operator of ATSs in markets around the globe Exceptional service levels driven by experience and investments made in support tools developed over time

Cost Savings Savings from low fixed and marginal cost base are passed on to investors Less market impact Lower transaction cost

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Evolving Global Markets

Volumes in the U.S. Equities Markets Have Nearly Tripled Since 1997
12,000 1,600

1,400 10,000 1,200 A vg. Shares (m), A vg. Trades(k) 8,000 A vg. Shares / Trade 1,000

6,000

800

600 4,000 400 2,000 200

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Total Shares (m)

Total Trades (k)

Shares / Trade

Instinet anticipates the Canadian equities marketplace following a similar evolution to that of other markets that have embraced fast, efficient and anonymous electronic trading alternatives.

Chart provided by TABB Group Source: NYSE, Nasdaq, World Federation of Exchanges

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The Dawn of the Institutional Marketplace in Canada

Darren Sumarah Liquidnet Canada Inc.

Thirty Years of Explosive Growth

U.S. Mutual Fund Industry Total Net Assets
$10.4T

1990: Net Assets Reach $1 Trillion

$7.0T

$3.5T $1.4T

$51B

$241B

$715B

1976

1981

1986

1991

1996

2001

2006

Source: 2007 ICI Fact Book

The Impact of Technology

Retail Side
The internet changed the landscape of retail brokerage better information cheaper and faster execution TSX Executions close manual floor trading Until 2000 the internet had little impact on institutional brokerage

Institutional Side
Information dissemination re institutional brokerage phone calls Information unbalance Exchange trading model is retail, not institutional focused

How Liquidnet Works

Portfolio Manager
1,000,000 Shares 1,000,000 Shares

Portfolio Manager

Trading Desk
200,000 Shares 200,000 Shares

Trading Desk

Broker
(Sales Trader)

Broker
(Sales trader)

100,000 Shares

100,000 Shares

Position Trader
50,000 Shares 50,000 Shares

Position Trader

Execution Trader
25,000 Shares

Execution Trader

TSX Book Order Execution

How Liquidnet Works

Portfolio Manager
1,000,000 Shares 1,000,000 Shares

Portfolio Manager

Trading Desk

Trading Desk

Broker
(Sales Trader)

Broker
(Sales trader)

Position Trader

Position Trader

Execution Trader

Execution Trader

TSX Book Order Execution

Average Execution Size Declines

Where the Liquidity Lies

Price

Displayed Displayed orders on Exchange Limit Books and on ECNs Dealer quotes Non-displayed at market venue Floor brokers Reserve orders on Exchange Limit Books Crossing networks Non-displayed at broker-dealers Client orders worked by brokers Dealer capital

Most liquidity is non-displayed

Po Po o orr ex ex e ec u cu ttiio on n

i on on ut i cu t ec ex e ex od od Go Go

Non-displayed at investors Orders at buy-side desks Latent liquidity

Source: George Sofianos Accessing displayed & non-displayed liquidity The next market structure

How Institutions Trade

Until 2006, Upstairs Brokers Provided The Only Access to Block Liquidity: 1. Asset Manager contacts a Dealer with its interest; 2. the Dealer calls other asset Managers until he finds Contra Interest
Canada US Europe/Asia

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

AM

AM

AM

AM

AM

AM

AM

AM

AM

AM

AM

AM

AM

Issues: Dealers do not share with each other Block Liquidity is fragmented As Foreign investors approach 50% od Canadian Institutional holdings, liquidity is increasingly offshore, and difficult for traditional dealers to source

Institutional Investors had outgrown the current market structure

How Institutions Trade

Liquidnet directly links a growing Global community of Canadian investors together.

Canada

US

Europe/Asia

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

Dlr

AM
N

AM

AM

AM

AM

AM

AM

AM

AM

AM
N

AM

AM

AM
400+ Managers & Growing

Liquidnet links 70% of the worlds equity holdings

Using Liquidnet, Asset Managers directly and discreetly interact ONLY with those other Asset Mangers who are Naturally prepared to trade

Q307 Stats
Average Daily Volume: 733,000 Average Daily Natural Liquidity: 171,795,746 Average Trade Size: 90,000 shares Average Trade size on the TSX: 845 Members trading Canadian equities: 177

Execution Costs Under Scrutiny

Will Plan Sponsors demand more transparency for execution costs?

Source: 2006 Liquidnet / Greenwich Associates Survey

One Login, One World.

24 Global Markets Now Live. Greece went live: November, 2007 South Africa went live: October, 2007

Thank You

MATCH Now
Wendy Rudd CEO, TriAct Canada Marketplace LP 14 November 2007

SM

This presentation has been prepared for informational purposes only, and does not constitute a solicitation to buy or sell securities. TriAct Canada Marketplace LP (TCM), member IDA / CIPF, is registered as an Investment Dealer in the Provinces of Ontario & Alberta. TCM does not warrant the completeness or accuracy of the information provided herein. October 2007

MARKET STRUCTURE AND THE VALUE SPECTRUM

High Pure Transparent Continuous TSX Auction ICX Transparent Alpha Call Auction Omega Small Confidential Continuous TriAct Auction MATCH Now Confidential TSX-ATX Call Auction BlockBook Confidential Liquidnet Negotiation
Dealer Capital Upstairs Mkt

Urgency
Low

Medium

Large

Order Size Relative to Liquidity

Fragmentation: duplication of services among securities markets and/or lack of Fragmentation: duplication of services among securities markets and/or lack of interconnection interconnection 43

MATCH Now AT A GLANCE

Liquidity Providing Orders
sit passively & confidentially in the MATCH Now book no minimum order size

Marketflow Orders
route to MATCH Now only if a potential match exists unfilled size immediately routed on to exchange not booked in MATCH Now

Continuous, Instantaneous Executions

SMART ORDER ROUTING MARKETFLOW ORDERS EXECUTE INSTANTLY TRANSPARENT CLOB

Between Liquidity & Marketflow NBBO spread split 80:20*

*20% to be capped at $0.01

MATCH Now Liquidity Pool

LIQUIDITY PROVIDERS

LIQUIDITY PROVIDERS

Automated 30-Second Calls Among Liquidity Providers NBBO spread split 50:50

EXECUTE OVER TIME

Shares distributed pro-rata by size

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KEY MATCH Now BENEFITS

broker-neutral; institutional DMA no new desktop application dark book full market potential integrated with existing workflow

reduced information leakage & market impact always best price

automatic price improvement vs. NBBO spread

only MATCH Now (call market) trades in sub-penny prices dealers can internalize firm order flow facilitates optimal algorithm performance
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SO FAR SO GOOD
Avg. Daily Volume (Shares - Millions) 0.400 0.300 0.200 0.100 0.000 July Aug Sept Oct

46

The Canadian market is being ruled into trading new markets for the better
Regulation forces new marketplace system use Dealers: looking at order routing needs Marketplaces: spending millions to comply with routing-out obligations to best markets. OSC: wants public trading policy statements from dealers on how they intend to handle their best price and eventually best execution policies RS: intends to pursue enforcement of these stated policies which will benefit the marketplace as a whole.

Hands Off-Do NOT Touch

The world we live in looks like this -eyeballing trades are in the past.

Network Order Routing

Perimeter Network Routing + Omega will eventually Find and remove liquidity from any other markets that can be defined through customer defined Algorithms

Where will liquidity come from?

Partnering with SwiftTRADE Largest liquidity-adding firm worldwide Trading in worldwide markets A facility 3 times the size of the UBS trading floor would be needed to accommodate all Swift traders Goal to add liquidity to any marketplace electronically accessible Make the markets more liquid Reduce trading costs to absolute minimum

RS-DeGroote Annual Conference on Market Structure and Market Integrity November 12, 2007

One Exchange/Two Marketplaces

Canadian Trading and Quotation System, the first recognized exchange in Ontario in 70 years, operates 2 markets:
CNQ Listed Market (2003): Listed auction market for junior equity securities; first system approved under the new marketplace rules. A competitive alternative: enhanced disclosure model, lower listing and sustaining fees, market makers ensure execution of retail sized orders. Pure Trading (2006): High capacity/low latency marketplace offering continuous auction market services for TSX-listed securities; designed to encourage new entrants to Canadian market through FIX 4.2 gateway, ensures ease of integration to existing local systems through STAMP. Crossing market facility opened October, 2006, continuous auction market launched September 14, 2007. Make or take pricing model to encourage liquidity provision.

V olum e & Value (in m illions) 45 35 25 15 5 Value 50 40 30 20 10 0

CNQ Listed Market Showing Progress

CNQ Listed Market Showing Progress

Listed Companies: 78 Equity-based Issues: 81 Provincial Bonds: 18

Total Listed Issues: 99

Trades

Volume

A u g-03 Sep-03 O ct-03 Nov-03 D ec-03 Jan-04 Feb-04 M ar-04 A pr-04 M ayJu n-04 Ju l-04 A u g-04 Sep-04 O ct-04 Nov-04 D ec-04 Jan-05 Feb-05 M ar-05 A pr-05 M ayJu n-05 Ju l-05 A u g-05 Sep-05 O ct-05 Nov-05 D ec-05 Jan-06 Feb-06 M ar-06 A pr-06 M ayJu n-06 Ju l-06 A u g-06 Sep-06 O ct-06 Nov-06 D ec-06 Jan-07 Feb-07 M ar-07 A pr-07 M ayJu n-07 Ju l-07 A u g-07 Sep-07 O ct-07 0 500 1,500 3,500 1,000 4,500 2,500 Trad es 2,000 3,000 4,000 5,000

Pure Trading Update It works:

Successful in attracting liquidity provision: recent average of just under 1 million orders per day from a good cross section of Canadian and US participants; Order to trade ratio very high: began at over 1000 to 1, still in the range of 300500 to 1; Average trade size very small (125-150 shares), indicative of algo participation. near ubiquitous participation from dealer community. Trade through rate is also very high, confirming that delivery of smart order routing continues to be a challenge for the community. Latencies (under normal operations) exceeding expectations.

New Marketplace Issues

Has the introduction of competing market systems added to the liquidity available to investors: working theory is that new markets have attracted more liquidity providers to the Canadian market, i.e. Not market fragmenting but accretive to liquidity. Is the effect measurable in terms of narrow spreads? Increased depth at price levels inside the previous spread levels? Are electronic trading tools bringing orders (by slicing and dicing) formerly managed upstairs down into the public markets? Are the dark pools competing with the auction marketsor the upstairs market?

Alpha, Omega and Everything In Between

The New Equity Marketplaces

56