Nothing below this point Subtitle Nothing below this point Algorithmic Trading Equity Trading vs. Futures Trading Morgan Stanley Institutional Securities This material has been prepared for information purposes to support the promotion or marketing of the transaction or matters addressed herein. It is not a solicitation of any offer to buy or sell any security, commodity or other financial instrument or to participate in any trading strategy. This is not a research report and was not prepared by the Morgan Stanley research department. It was prepared by Morgan Stanley sales, trading, banking or other non-research personnel. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Past performance is not necessarily a guide to future performance. Please see additional important information and qualifications at the end of this material.

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 2 What is an Algorithm?  A pre-defined step-by-step method to accomplish a task  A computer model that takes an order and structures a sequence of trades that aim to achieve the stated objectives…  Minimize cost compared to a defined benchmark  Maximizing fill rate  Minimizing execution risk

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 3 Trends Behind Algorithm Trading EQUITIESFUTURES Electronification of Markets Regulatory Changes Desire to Reduce Explicit and Implicit Trading Costs Improve Scale & Efficiency Desire for Anonymity Realization that Trading Is a Source of “Incremental Alpha” –

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 4 Impact of Algorithms on Traders “Algorithms are productivity tools” “Algorithms are just ONE of the tools available…”

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 5 Trade Lifecycle Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 6 Execution Evaluation Trade Lifecycle EQUITIESFUTURES Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 7 Execution Evaluation Spectrum of Difficulty Volume Significant Event Time of Day Size of Trade Global Economic Events Volatility Time Price

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 8 Execution Evaluation: Fit the Algorithm to the Strategy Liquidity Urgency Trade Size Single Algorithms Multiple Algorithms Algorithm & DMA Algorithm & Trader Application of Constraints Price Limits Volume Limits Time Limits

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 9 Benchmark Determination Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 10 Benchmark Determination More StructureLess Structure Order(s) Trade Structure Development Schedule BasedFlexibleDynamic  VWAP  TWAP  Volume Participation  Arrival Price  Price React Examples

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 11 Benchmark Determination Trade/Trajectory Planning Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Trade/Trajectory Planning Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 12 Trade/Trajectory Planning  The VWAP strategy creates a trade plan that emulates the historic volume distribution (either all day or interval).  Trajectories are static from the beginning of the trade and do not respond to changes in intraday liquidity.  Volume distributions are determined by country and adjusted for seasonal factors such as expiration days, and month/quarter ends.  The BXS VWAP strategy attempts to minimize shortfall versus VWAP as well as minimize the market impact into achieving that price, thus minimizing the total cost of the trade 3. Volume % Limits 1. Price Limits 2. Duration Limits Parameters Available for VWAP are: VWAP Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 13  The BXS TPOV strategy is designed to participate with either the primary or composite volume at a user specified rate.  Order quantities are determined for individual time sub intervals and scheduled for execution according to continuously updated forecasts of volume 1. Price Limits 2. Duration Limits Parameters Available for TPOV Orders: Target Percent of Volume Trade/Trajectory Planning Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 14  The BXS Arrival Price strategy is designed to minimize execution shortfall to the midpoint of the initial bid/ask.  The trader determines a level of execution “urgency”- get done, high, medium, or low- which corresponds with the expected level of information content (alpha) embedded in the order.  The BXS system determines an initial optimized trading trajectory that controls the pace of execution, balancing market impact with market risk (time) based upon the level of urgency.  Trajectory is based on continuously updated forecasts of volatility, liquidity and spread, and changes dynamically during execution with the changing market conditions.  Order quantities are determined for individual time sub intervals and scheduled for execution. Parameters Available for Arrival Price Orders: 1. Urgency Level 2. Price Limits 3. Duration Limits 4. Volume % Limits Arrival Price: Low Urgency Arrival Price: High Urgency Trade/Trajectory Planning Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 15 Benchmark Determination Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 16 Crossing vs. Liquidity Pool SELL  Arrival Price Medium  Buy 150,000 XYZ  Target 20% of Volume  Sell 135,000 XYZ BUY

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material ,000 20,000 30,000 40,000 50,000 60,000 70,000 14:0014:1014:20 14:3014:4014:50 15:0015:1015:2015:3015:4015: ,000 20,000 30,000 40,000 50,000 60,000 70,000 14:0014:1014:2014:3014:4014:5015:0015:10 15:2015:3015:4015:50 Crossing vs. Liquidity Pool SELL  Arrival Price Medium  Buy 150,000 XYZ  “I Would” – Public or Dark  Target 20% of Volume  Sell 135,000 XYZ  “I Would” – Public or Dark BUY

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 18 Benchmark Determination Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 19 Limit Order Program Residual Orders are sent to the Limit Order Program Trades are broken down into market size increments Multiple limit orders are then placed into the market to create a “portfolio” of orders Limit Orders are dynamically managed based upon executions and changes in market conditions Limit order sizes, pricing, duration and spacing between orders change continuously to minimize information leakage and “footprint” Major factors affecting orders are volatility, spread and liquidity From Liquidity Pool XYZ Bid Last Offer SizePXSizePX Orders into Marketplace Executions and Market Data XYZ Bid Last Offer SizePXSizePX XYZ Bid Last Offer SizePXSizePX Limit Order Program 5,000 Shares Sell 5,000 Shares Net Sell T B – T C Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 20 Benchmark Determination Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation

Fidelity Cross Stream LEH LCX CS Cross Finder GS Sigma X UBS PINS Morgan Stanley POOL CITI ACE MS Trajectory Crossing Liquidnet NYFIX Millennium BIDS ITG Now ITG Block Alert Instinet (CBX, etc.) NASDAQ Crossing Network Matchpoint ISE Midpoint Match LeveL Pipeline POSIT TRAC / DATA EDGX / EDGA ONTD BATS BTRD CBOE ISE Stock Exchange NSX / CINN BeX CHX NYSE Arca NASDAQ INET NYSE AMEX PHLX SMART ORDER ROUTING TECHNOLOGY SORT

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 22 Smart Order Routing Technology — SORT SORT is the vehicle through which BXS executes limit orders in the marketplace. SORT creates a consolidated order book from all available liquidity pools. After the Limit Order Program determines the size and price of an individual order, SORT determines which liquidity pool(s) the order should be placed in. SORT will slice orders to access multiple liquidity pools simultaneously. Major factors influencing the choice of destination include current and historical price, liquidity and speed. SORT is utilized for NASDAQ as well as Listed stocks orders. Additional Smart Order Routers include SORTETF for Exchange Traded Funds and OSORT for listed equity options. NYSE AMEX ITS/ CAES BTRD ISLDBRUT ARCA Limit Order Program SORT INCA SUPER MONTAGE PXSizePXSize Offer Last Bid XYZ PXSizePXSize Offer Last Bid XYZ Consolidated Order Book Control Feedback Loop Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 23 Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation Trade Lifecycle EQUITIESFUTURES Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 24 Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA Control Feedback Loop Trade Lifecycle EQUITIESFUTURES Benchmark Determination Execution Sort Limit Order Prog. Crossing vs. Liquidity Pool Trade/Trajectory Planning Execution Evaluation TCA Control Feedback Loop

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 25 Post Trade (Performance by Desk or Trader)

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 26 Development of Algorithms for Futures: The 80/20 Rule 20 % 80 % Expiration Economic News/Events Cash Market Events Extension of the Equity Model Foundation Accelerate the Development of Predictive Models for Futures Using Existing Models

Only Source / Footnotes below this line Subtitle Only Source / Footnotes below this line prototype template ( )\screen library_new_final.ppt 8/21/2015 Only Source / Footnotes below this line This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Please refer to important information and qualifications at the end of this material. 27 Control Behavior  Define your own algorithm  Act like a sales trader What’s Next BLACK BOX Cross Asset Correlation

Nothing below this point Subtitle Nothing below this point Algorithmic Trading Equity Trading vs. Futures Trading Morgan Stanley Institutional Securities This material has been prepared for information purposes to support the promotion or marketing of the transaction or matters addressed herein. It is not a solicitation of any offer to buy or sell any security, commodity or other financial instrument or to participate in any trading strategy. This is not a research report and was not prepared by the Morgan Stanley research department. It was prepared by Morgan Stanley sales, trading, banking or other non-research personnel. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Past performance is not necessarily a guide to future performance. Please see additional important information and qualifications at the end of this material.