Market Adoption, Usage, Trends and a US buy-side perspective Scott Atwell, Manager of FIX Trading and Connectivity, American Century Investments Co-Chair, FPL Global Steering Committee

Agenda Introduction FIX Message Flows Quick Case Study – American Century Investments 2005 Global FIX Survey Results Evolution of FIX Functionality and FPL Trends

What exactly is “FIX”??? FIX is NOT: Software Hardware Network Trading system, exchange, or market Programming language Rather FIX is: A series of written, public-domain specifications Seven numbered versions – five in use today Each new version adds capability Governs connectivity and content Messages text-based, but in “tag = value” or FIXML format Tag/Value Example: “172 = 0” means “SettlDeliveryType” of “DVP” FIXML Example: 0 Common vocabulary Example: “AvgPx” means “average price” to all

FIX Protocol Highlights The FIX Protocol is an open protocol specification (not a software implementation) developed via an open process by the industry participants who use FIX for their business The FIX Protocol celebrated its 10 year anniversary in 2004 FIX Protocol versions: 2.7, 3.0, 4.0, 4.1, 4.2, 4.3, and 4.4 Geographic/product expansion (in order): U.S., Europe, Japan, Asia/Pac, Derivatives, Fixed Income, Foreign Exchange There are 250 vendors with FIX-based products and services listed on the FIX website. Open source FIX software also exists

FIX Message Flows

FIX Order Flow Investment ManagerBroker/Dealer Order Confirm IOIs & Advertisements Don’t Know Trade Order Done for the Day Execution Rpt (Partials)

FIX Post-trade Flow Investment ManagerBroker/Dealer AllocationAck (Received) Booking & Allocation (Breakdowns) Affirmation Block-level Accept Settlement Notification to Agents/Custodians Confirmation

Quick Case Study American Century Investments

Quick case study - American Century’s STP Today Order Management System Portfolio Accounting System PMs Traders Accountants Broker/Dealer Separate Acct Custodians FIX ISITC (ISO 7775) via FTP ACI Global Custodian ISO via SWIFT JPM/Chase SWIFT Hub

Quick case study American Century Investments Over $100 billion in assets, 1.5 million shareholders Trade $130 billion in principal and 4 billion shares / year Have been using FIX since April 1996 FIX Stats (2004) 10 million IOIs 5.6 million Execution Reports (99.94% of total global equity trading)  99.97% US, 99.79% non-US 111,000 FIX Block Allocations (86% US and ADRs, 32% non-US) Also for ETFs, Futures and Options, F/X, and Convertible Bonds Electronic settlement processed w/o human intervention 98-99% US (DTC industry avg 88-89%), 93-95% non-US

2005 FIX Global Survey Key Findings

2005 FIX Global Survey Results (November 2005) TowerGroup was retained by FPL to survey the global FIX community. The goal was to determine on a global basis various trends around current and future use of FIX as well as barriers and opportunities to further FIX utilization. Survey Demographics Number of Responses Responses Buy-Side Survey153 Sell-Side Survey168 Exchange Survey49 Vendor Survey210 TOTAL580 All information and materials in this report are the property of FIX Protocol Ltd, and TowerGroup and are confidential and proprietary and subject to copyright and intellectual property protection under US law. All rights reserved, FIX Protocol, Ltd and TowerGroup, No further republication or distribution is allowed without prior written consent. FPL Membe r 48% 78% 68% 57%

2005 FIX Global Survey Results (November 2005) In the next 24 months, buy-side and sell-side firms both indicate plans to focus significant efforts on leveraging FIX across non-equity products Buy-SideSell-Side EquityProducts: FXDerivatives Fixed Income Current Support Current + Future: Equity: 67%, FI: 67%, Deriv: 78%, FX: 69% Current + Future: Equity: 51%, FI: 65%, Deriv: 75%, FX: 67% % of Total Responses

2005 FIX Global Survey Results (November 2005) Buy-side Block/Cash Trading Program Trading DMAAlgorithmic Trading Sell-side Firms status for supporting TRADING METHODS via FIX The biggest priority for buy-side firms over the next 2 years will be on DMA, whereas the sell-side has already made significant investments in DMA and plans to focus more efforts towards algorithmic and program trading Block/Cash Trading Program Trading DMAAlgorithmic Trading Currently SupportSupport w/in 24 MonthsDo Not Plan to Support 75% 93%94% 80% 96% 79% % of Total Responses

2005 FIX Global Survey Results (November 2005) Block/Cash TradingProgram Trading DMA Algorithmic Trading % of Total Responses NAEuropeAPACGlobal Firms BSSSBSSSBSSSBSSS NAEuropeAPAC BSSSBSSSBSSSBSSS NAEuropeAPAC BSSSBSSSBSSSBSSS NAEuropeAPAC BSSSBSSSBSSSBSSS Regionally, North American firms lead both European and APAC firms in leveraging FIX for various methods of trading electronically Currently SupportSupport w/in 24 MonthsDo Not Plan to Support Global Firms Current: Buyside: NA 78%, Eur 70%, APAC 73%, Gl 75% Sellside: NA 67%, Eur 76%, APAC 81%, Gl 91%

2005 FIX Global Survey Results (November 2005) Globally, the belief that electronic trading will positively and dramatically change the process of trading securities is consistently supported by firms across all regions As institutions look towards the back-office to achieve greater trading efficiencies and higher levels of STP, the focus will be on allocations and confirmations, driven primarily by the sell-side 78% of exchanges surveyed support a FIX interface and the majority handle over 25% of their total trading volume via FIX Market data via FIX is perhaps the biggest opportunity and holds the most potential for the extension of FIX across the trading activity chain and truly converging on a single communications standard and STP The combination of FPL’s global membership and a positive belief in FPL’s ability to articulate regulatory changes puts FPL in a position to drive standardization across impending regulatory changes Current or planned supportAllocationsConfirmationsSettlement Inst BuysideOver 80%Over 50%Over 30% SellsideOver 95%Over 75%Over 55%

Evolution of FIX Functionality and FPL

FIX Functionality Matrix fixprotocol.org/functionality

Evolution of FPL’s Committees U.S. (Americas) Technical U.K. (EMEA) Japan FIX Protocol Ltd Asia/Pac Global Derivatives Global Fixed Income Global Education and Marketing Global Foreign Exchange 34% increase in FPL Membership from Oct 2004 to Oct 2005 fixprotocol.org/fplmemberstats

FIX Protocol Limited (FPL) Organization EMEA Region Asia/Pac Region Japan Region Global Technical Global Education & Marketing Americas Region Global Fixed Income Global Steering Committee (GSC) Global Steering Committee comprised of the FPL Committee Chairs Global Technical and Global Education & Marketing comprised of Product/Region Committee Reps Global Foreign Exchange Global Derivatives fixprotocol.org/committees

FPL 2006 Goals Support and enhance FPL’s education and marketing efforts promoting the use and increase the penetration of the FIX Protocol Expand the product and functionality supported by the FIX Protocol Improve the effectiveness of FPL’s working parties Enhance FPL’s operational efficiency Develop an effective strategy for coordination activities with other industry standards bodies, industry associations, and regulatory bodies Establish proper and effective legal protection for the FIX Protocol and FPL Establish non-membership sources of revenue to help fund FPL’s operations as a non-profit, user-led standards organization Mission:To improve the global trading process by defining, managing, and promoting an open protocol for real-time, electronic communication between industry participants, while complementing industry standards fixprotocol.org/fpl2005

FPL 2005 Accomplishments Q Adopted new FPL logo and new FPL Member logos Completed FPL legal restructuring exercise FIX Certification program launched Established “aligned” regional quarterly meeting schedule (Q3/Q4) FIX “Functionality Matrix” produced Events: Stockholm, London, Frankfurt, Cape Town, Boston, Tokyo, etc Q GSC and Directors held onsite meeting to discuss strategy Submitted FPL’s response to Giovannini Report (SWIFT consultation paper) Initiated MiFID Joint Working Group (ISITC Europe, FISD, FPL, RDUG) Foreign Exchange F/X Collaboration SOU between FPL, FpML, and TWIST Elevated FIX Foreign Exchange Working Group to Global Foreign Exchange Committee (GFXC) status Events: Chicago, New York, Paris, London, Toronto, Shanghai, etc

FPL 2005 Accomplishments Q Launched 2005 Global FIX Survey Participant in Giovannini Independent Advisory Group (IAG) Leadership for MiFID JWG Standard Protocols Subject Group FPL’s Algorithmic Trading WG proposal to convey algo-specific parameters within a repeating group (also avail in Japanese) FPL’s Market Data Opt WG concluded and released Phase 1A results Reg-NMS working group Events: Chicago, London, etc Q Elevated South African WG to EMEA Southern African Committee Cape Town event in January 2005 had 100 participants. Another Southern African event will be in March at the Cape Town Convention Center FPL Market Data Optimization Working Group release of Phase 1B results and demo / official kickoff Implement FPL legal structure ensuring non-profit and open protocol Address needs and structure of FPL’s resources (global program office) Articulated FIX’s long-term strategic role and position regarding int’l standards efforts Launched fee-based Job Posting system on FIX website & site sponsors program. This will fund some of the costs for running the website Richard Balarkas Elected as Co-Chair of FPL Global Steering Committee 2006 Budget proposed Events: New York, London, Amsterdam, Milan, Singapore, Mexico City, Chicago, etc

Trends

Electronic trading Direct Market Access (DMA) Reserve quantity and sophisticated order types Algorithmic trading OMS adoption Emphasis on compliance Sell-side commission pressure Unbundling, hard dollars, focus on best execution & TCA FSA CP 154 and CP 176, SEC 28e “safe harbor”, etc. MiFID in Europe Reg-NMS in the US De-mutualization of exchanges: for-profit entities Hedge funds and “trading firms” – stat arb, etc. Electronic foreign exchange trading Focus on post-trade/pre-settlement (Allocations, Confirmations, Affirms, etc)

FIX – the Enabler FIX is the enabling technology for Electronic Trading A specification of what and how to communicate A document, not a piece of software, network, or service Protocol is truly open, specs are freely available to public Industry-driven messaging standard Market participants: Invented FIX to solve specific business needs Suggest changes to FIX and use to run their businesses Responsible for maintaining and promoting the spec FIX organization and process is very pragmatic Focused on meeting “real world’ needs in an efficient, community driven model

Summary Introduction FIX Message Flows Quick Case Study – American Century Investments 2005 FIX Global Survey Results Evolution of FIX Functionality and FPL Trends