1. The buy-side perspective Dr. Arjuna Sittampalam, research associate at the EDHEC Risk and Asset Management Research Centre; founder and CEO, Sage & Hermes

2. Preamble Uncertainty

3. Major trends Convergence Electronic advances Regulation

4. Convergence Geographical Asset classes Electronic impact Mergers & alliances

5. Regulation Regulation National Market Systems (Reg NMS) Markets in Financial Instruments Directive (Mifid)

6. MiFID - Intentions Competition Innovation Price reduction Market integrity

7. MiFID – Best execution obligation 3 principles: Obligation of means Documentation of execution policy Demonstrate that the execution policy allows achievement of the best result consistently Source: Jean Réné Giraud (Director of Edhec Risk & Asset Management Research Centre), Investment Management Review summer 2006 (www.imrmagazine.com)

8. MiFID - Problems What is best execution? Not just price or fees Consensus lacking Quality assessment? False confidence Obligation of means Obligation of result Regulator chose both = Investment protection illusory

9. MiFID - Outcomes Fragmentation Liquidity Electronic tools Dark pools

10. Worrying example Cheryl Cargie (Ariel Investment – Chicago) NYSE mid-cap stock 1m shares Several dark pools 100,000 Source: Wall Street Journal, May 2008 Big block trades difficult Average dealing size 10 years ago – 1,400 Average dealing size 2008 - 280

11. Dark pools Characteristics – "opacity " – market impact Massive growth (42 dark pools in US 7 times the number 5 years ago) Venue proliferation Exchanges joining Linkages Electronic tools

12. Dark pools - problems Best execution? Impact on public liquidity Large versus small investors Spreads Order size Consolidation Future of spreads Re-mutualisation

13. Dark pools – potential problems Self-dealing Conflicts of interest Assurances Sell-side track record Biggest traders – biggest clients Information leakage

14. Electronic warfare New tools – Algos – DMA My preference Recent Edhec survey - 2 main types of algo Need for education Dark pools Pattern-spotting Prevention Cost of technology - ROCE Soviet Union versus USA

15. Trade reporting Screen prices unreliable IMA, FSA (UK) Consolidated Tape (US) Regulation Market-driven solution

16. Summary of problems Transparency Conflicts of interest Investor protection Higher transaction costs Cost of technology Regulators trigger-happy Pro-active approach?

17. Analysis Conjectures Anecdotes Statistics? Scientific analysis? Industry studies?

18. Industry impact – asset management Past Low entry barriers Dynamic industry Changes in rank Present Increased costs Compliance Technology Dealing Future?