Exchange Standardization August 10, 2005

Bill Herder Director, Order Routing Technology Rolfe & Nolan Systems, Inc.

Agenda Exchange Messaging Why Standardize What to Standardize What Standard

Exchange Messaging

Exchange Messaging Exchanges use messaging for a variety of data transfer requirements –Execution Transactions –Clearing and Settlement delivery –Margin requirements –Market Data distribution Most message formats are proprietary in protocol

Exchange Messaging The advent of globalization in the Exchange Traded Derivative industry has led to many different messages structures Most exchanges still utilize message formats that have evolved over time to become more efficient yet still not standard

Exchange Messaging The result is a headache for all market participants –Vendors have to adapt to multiple formats driving up costs –No cross asset ability for customers –Slow time to market for new products –Lack of continuity in contract specifications

Why Standardize The Financial Industry is continuing to grow in both depth and breadth –The walls between the different asset classes are starting to fall The other asset classes have already set standards More trading in ETD’s as part of large portfolios Electronic Trading in ETD’s has led to people trading on multiple exchanges

Why Standardize The Financial Industry is continuing to grow in both depth and breadth –Straight Through Processing is becoming a reality Less manual intervention in data flow More interaction between market intermediaries Errors during trade processing can be extremely costly in terms of time as well as financially

What to Standardize The Standardization should occur at every level of the trade flow –Execution –Market Data –Clearing & Settlement Information

What Standard? FIX –Industry Proven and Accepted Standard –Variations have been adapted to optimize different sectors FIXML (Clearing & Settlement) FastFIX (Execution) –Many vendors have already built and marketed “engines” capable of transforming and adapting to the FIX protocol –Standards Board (FPL) already in place to ensure continued updates and compliance