2. The End of History and the Last Exchange Are We There Yet? Presentation by Dr. Benn Steil Council on Foreign Relations at the 9 th European Financial Markets Convention 26 May 2005 the Last Manthe Last Exchange

3. The End of History and the Last Man From the Library Journal: ‘Fukuyama argues that there is a positive direction to current history, demonstrated by the collapse of authoritarian regimes of right and left and their replacement (in many but not all cases) by liberal governments. "A true global culture has emerged, centering around technologically driven economic growth and the capitalist social relations necessary to produce and sustain it." In the absence of viable alternatives to liberalism, history, conceived of as the clash of political ideologies, is at an end. We face instead the question of how to forge a rational global order that can accommodate humanity's restless desire for recognition without a return to chaos.’

4. Automated limit order books Multi-asset exchanges DemutualizationDenationalization Regulatory convergence. Signs of the End of History Even SEC plays nice with foreigners.

5. What Do Reg NMS and MiFID Have in Common? Both describe a single market structure and a single method of trading...... in which eligible limit orders must be displayed...... and in which market orders have no discretion: an automated limit order book (“CLOB”)

6. The End of History and The End of History and the Last Exchange The End of History and the Last Man From the Library Journal: ‘Fukuyama argues that there is a positive direction to current history, demonstrated by the collapse of authoritarian regimes of right and left and their replacement (in many but not all cases) by liberal governments. "A true global culture has emerged, centering around technologically driven economic growth and the capitalist social relations necessary to produce and sustain it." In the absence of viable alternatives to liberalism, history, conceived of as the clash of political ideologies, is at an end. We face instead the question of how to forge a rational global order that can accommodate humanity's restless desire for recognition without a return to chaos.’ Plagiarized from the Library Journal: ‘The SEC and the European Commission argue that there is a positive direction to current history, demonstrated by the collapse of the floor auctions and dealer markets of Chicago and London and their replacement (in many but not all cases) by automated limit order books. "A true global trading culture has emerged, centering around technologically driven trading growth and the capitalist social relations necessary to produce and sustain it." In the absence of viable alternatives to automated limit order books, history, conceived of as the clash of market structures, is at an end. We face instead the question of how to forge a rational global order that can accommodate humanity's restless desire for trading without a return to fragmentation.’ the Last Exchange the Last Man

7. The Problem with CLOBs Must “display to play” = pre-trade transparency → encourages order-splicing → reduces validity of trade prices

8. Market Solutions to CLOB Limitations Execution-risk transfer: Size discovery: dealers eg, Liquidnet

9. Source: Efficient Frontiers, Liquidnet, POSIT POSIT vs. Liquidnet Average Daily Share Volume (in millions) 28 10 25 13 23 16 22 20 21 23 21 25 21 30 3Q034Q031Q042Q043Q044Q051Q05 Liquidnet POSIT

10. Better Regulatory Approaches to Best Execution Best-execution concerns should ultimately derive from conflicts of interest between investors and intermediaries Therefore, the best approaches are to... or... eliminate the conflicts... eliminate the intermediaries

11. Demutualized Exchange Buy-Side Trader Portfolio Manager Broker Exchange

12. Buy-Side Trader Portfolio Manager Broker Regulator Demutualized Exchange

13. Buy-Side Trader Portfolio Manager Broker Demutualized Exchange

14. Buy-Side Trader Portfolio Manager Demutualized Exchange Smart OMS

15. Demutualized ExchangePortfolio Manager Smart OMS