1. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech American Century Investments FIX Protocol for Cost Effective Global Connectivity Scott Atwell scott_atwell@americancentury.com

2. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Agenda n Introduction n FIX Protocol Ltd Organization n Overview of FIX Message Flows n American Century’s use of FIX n Benefits to Our Business n Summary

3. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Speaker’s Background n Co-chair of the FIX Technical Committee n Member of FIX Global Steering Committee n Member of FIX US Steering Committee n Member of GSTPA STAC technical group n Developed American Century’s FIX engine and interface to Order Mgmt System n AC has been live with FIX since April 1996

4. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech 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. FIX Protocol Ltd’s Mission Statement

5. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Today FIX Today n A standard way to communicate trading information electronically between buy-side institutions, brokers, and markets. n A flexible means of handling many types of information - global in nature. n Platform independent, so it works on many types of computers and communications systems. n The FIX website is the central point of reference for all things FIX: www.fixprotocol.org

6. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Organization FIX Organization n The FIX Protocol is directed by FIX Protocol, Ltd. n The Global Committee oversees all regional committees, authorizes budgets and expenditures, and prioritizes objectives. n The Technical Committee maintains the FIX Technical Specification. n The Regional committees provide business direction. n Working groups provide the business and technical expertise for ongoing development and initiatives.

7. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Global Steering Committee SUPPORTTECHNICALCOMMITTEE USEUROPEJAPAN Regional Steering Committees...... IOIGroup 2Group 3... ECN/ Exchanges FIXMLLists Business Working Groups Technical Working Groups FIX Protocol Limited FIX Protocol Limited

8. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Brokers:DLJ Fidelity Capital Markets Goldman Sachs Merrill Lynch Morgan Stanley Dean Witter PaineWebber Salomon Smith Barney Institutions: Alliance Capital American Century Credit Suisse Asset Management Fidelity Mgmt & Research Putnam State Street Global Advisors The Capital Group US Steering Committee US Steering Committee

9. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Institutions: Alliance Capital AXA Sun Life Dresdner RCM Fidelity International Foreign & Colonial Mgmt. Invesco Mercury Asset Mgmt Prudential Portfolio Mgrs Royal Sun Alliance Brokers: Credit Suisse First Boston Deutsche Bank DLJ Goldman Sachs HSBCInstinet Merrill Lynch International Salomon Smith Barney Warburg Dillon Read European Committee European Committee

10. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Institutions: Brokers: Daiwa BankDaiwa Securities DLIBJ Asset ManagementGoldman Sachs Mitsubishi Trust and Banking Merrill Lynch Mitsui Trust and Banking Morgan Stanley Nippon Life Insurance CompanyNikko Salomon Smith Barney Nomura Asset ManagementNomura Securities Sumitomo Trust and Banking Warburg Dillon Read Japanese Committee Japanese Committee

11. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech American Century Commerzbank Credit Suisse Asset Mgmt DLJ Fidelity Capital Markets Fidelity Investments Goldman Sachs Merrill Lynch Morgan Stanley, DW&D PaineWebber Putnam Investments Salomon Smith Barney State Street Global Advisors Townsend Analytics, Ltd. Warburg Dillon Read Technical Committee Technical Committee

12. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Important Milestones for FIX Important Milestones for FIX Dec 1993 Fidelity-Salomon Pilot Dec 1993 Fidelity-Salomon Pilot Jun 1994 FIX Committee formed Jun 1994 FIX Committee formed Jan 1995 NY FIX General Conference / FIX 2.7 Released Jan 1995 NY FIX General Conference / FIX 2.7 Released Mar 1995 First Technical Committee Meeting Mar 1995 First Technical Committee Meeting Sep 1995 FIX 3.0 Released Sep 1995 FIX 3.0 Released Jun 1996 London FIX General Conference Jun 1996 London FIX General Conference Jan 1997 FIX 4.0 Released Jan 1997 FIX 4.0 Released Apr 1998 FIX 4.1 Released Apr 1998 FIX 4.1 Released Apr 1998 GSTPC Reps meet with US Steering Committee Apr 1998 GSTPC Reps meet with US Steering Committee

13. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Important Milestones Important Milestones Jun 1998 FIX Committee Structure Formalized Oct 1998 Tokyo FIX General Conference Mar 1999 Japanese FIX Committee Formalized Apr 1999 Fix Protocol Ltd. created Jun 1999 Certification effort formalized w/ PwC Dec 1999 First draft of version 4.2 published Mar 2000 4.2 Released Mar 2000 Open/Vendor Forums in NY, London, and Tokyo Mar 2000 Hong Kong FIX General Conference

14. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech “Establish an ongoing testing and certification process to globally increase use and ensure compatibility of the FIX Protocol.” To consist of: n Testing Scripts n Application Notes n Reference Implementation and Testing System n Managed Process Certification Certification

15. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Certification Effort Certification Effort Apr 1999PwC selected to run the RFP process May 1999Certification workshops Jun 1999RFP Completed Jul 1999RFP Distributed Aug 1999RFPs Returned Sep 1999Recommendation for certification Agent Oct-Nov 1999Business Plan Detail created Dec 1999Plan presented to FPL Jan-Jun 2000Refining the business plan and pricing model

16. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Finalize business/pricing model with the certification consortium. Work closely with GSTPA, SWIFT and other standards bodies. Determine formalization of FIXML. Continue to: Evolve FIX to meet industry needs Promote FIX globally Current and Future Initiatives Current and Future Initiatives

17. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Why use Standards? n Standard data formats –Allow systems to scale and process data from many counterparties w/o incremental effort n Standard real-time session-level transport –Allow systems to scale and communicate with many counterparties w/o incremental effort n Combination –Enables automated processing into/out of OMS and Settlement systems--focus on exceptions –Commoditization, vendor solutions available

18. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Order Flow Investment ManagerBroker/Dealer Order Confirm IOIs & Advertisements Don’t Know Trade Execution Rpt (Partials) Order Via Phone Call OR Order Via FIX

19. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Post-Trade Flow Investment ManagerBroker/Dealer AllocationAck (Received) Allocation (Breakdowns) AllocationAck (Accept/Reject) Without Misc Fees Settlement Instructions Settlement Instructions may be standing, exchanged during or after allocation process, or one firm can send instructions for both sides for the other firm to match

20. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Post-Trade Flow Investment ManagerBroker/Dealer AllocationAck (Received) Allocation w/o Fees/Net Money With Misc Fees Settlement Instructions Settlement Instructions may be standing, exchanged during or after allocation process, or one firm can send instructions for both sides for the other firm to match AllocationAck (Accept/Reject) Allocation with Fees/NetMoney AllocationAck (Received)

21. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Session Level Messages n Logon - handshake to authenticate counterparty n Resend Requests - used to request missed messages after detecting a message gap n Heartbeats/Test Requests - keep alive packets used to detect problems during slow message traffic periods

22. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Application Messages n Institution Originated –Quote Requests –Orders, Modifications, Cancels –Allocations –Email –List Orders/Program/Basket Trading –Market Data Request, Security Definition Request, Security Status Request, Trading Session Status Request, etc.

23. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Application Messages n Broker Originated –Indications of Interest, News, Email –Post Trade Advertisements –Quotes –Order Acknowledgments, Change Acknowledgments(cancels, modifications) –Partial Fills, Fills, Done For Days –Market Data, Security Definition, Security Status, Trading Session Status, Mass Quote, etc

24. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech American Century’s STP Today American Century’s STP Today n Use broker web sites and vendor systems to access broker research n Use FIX for all pre-trade, trade, and post- trade communication with brokers in real- time n Use ISITC for batch-driven communication with custodians

25. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech American Century’s STP Today Order Management System Fund Accounting System PMs Traders Accountants Broker/Dealer Custodian FIX ISITC

26. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Our Implementation Our Implementation n FIX System –Developed our own as an interface to our proprietary Order Management System n Connectivity (some have multiple sessions) –Majority (over 25) via the Internet –Less than 6 via private circuits –More than 15 via shared private networks –Over 35 via Bloomberg session (primarily Int’l)

27. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech FIX Activity n Processed 3.5 million IOIs –peak day over 26,000 n Processed 930,000 ExecutionRpts –peak day over 15,000 –97% of total domestic and int’l equity trading »97% of all domestic, 93% of all international trading n Sent 56,000 Allocation messages –peak day over 540 1/1/1999 through 12/31/1999

28. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Current Use of FIX Current Use of FIX n Use FIX with virtually all of our brokers –Over 65 brokers worldwide (53 FIX sessions) –Connections 24 hours/day, 5.5 days/week n FIX Messages Supported –Indications of Interest, Advertisements & News –Orders, Cancel/Replace, Execution Reports and Don’t Know Trade –Allocations and Allocation Acknowledgments –FIX 2.7, 3.0, 4.0, and 4.1 versions

29. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Current Use of FIX Current Use of FIX n Security Types we process via FIX –US Equities –International Equities (all markets) –ADRs –Convertible Bonds –Futures –Foreign Exchange trading

30. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Benefits of Automation 1) Enhance Productivity and Liquidity –Handle more trades with fewer personnel –Process and prioritize information –Manage global “book” around the globe –Better source liquidity 2) Reduce Errors and Risk –Reduce errors overall and detect them earlier –Reduce settlement cycle & likelihood of errors

31. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Productivity & Liquidity: Benefits n Prioritize, filter, and archive IOI’s –75% are discarded –Alert traders as specific opportunities appear –Trading opportunities available to all traders regardless of location (24 hour book) n Significant decrease in clerical tasks n History and statistics for management reporting n Able to scale with recent market volume

32. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Error & Risk Reduction: Benefits n Execution Reports matched to authorized orders –Centrally controlled regardless of trader’s location –Avoid mistakes (wrong symbol, side, qty, etc) –Protect against a “Nick Leeson” incident n Notify if an error occurs –Pop-up error messages to trading desk –Send Don’t Know Trade (DK) to sales trader

33. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Error & Risk Reduction: Allocation & Settlement Error & Risk Reduction: Allocation & Settlement n Allocations were sent via fax to brokers n Allocations now delivered via FIX –Instantaneous delivery/receipt vs. 1-2 min each –Broker can directly feed and match their data –Broker can provide positive or negative acknowledgment for each one –No transaction costs n Working on Int’l Allocations & Settlement Instructions

34. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Head of Desk’s Perspective “FIX has enabled our traders to focus on the business of trading. We don't spend a lot of money on people to answer phones and manually enter trade reports; we spend our money on value-added professional judgments on when to hit bids and take offers. The more our traders get away from data processing tasks, the more professional the position. We almost doubled the number of shares traded in the first two years after installing our FIX engine and we didn't need to add a trader.” “FIX has enabled our traders to focus on the business of trading. We don't spend a lot of money on people to answer phones and manually enter trade reports; we spend our money on value-added professional judgments on when to hit bids and take offers. The more our traders get away from data processing tasks, the more professional the position. We almost doubled the number of shares traded in the first two years after installing our FIX engine and we didn't need to add a trader.”

35. June 5, 2000American Century - Int'l Electronic Trade Settlment Tech Summary n FIX Protocol Ltd organizational overview n Provided examples of FIX message flows n Described American Century’s use and implementation of FIX n Identified benefits to our business n Q&A www.fixprotocol.org www.fixprotocol.org