1. LIQUIDITY AND MARKET STRUCTURES Eric Bushell, Chief Investment Officer Signature Global Asset Management

2. AGENDA 1) Regulatory reform - Volcker Rule - New risk weights for trading assets - Dealer adaptation 2) Changes to exchange trading - High-frequency trading - Smaller orders, higher volume - Overwhelming the system 3) Impact on market participants - Higher costs - Lower liquidity - Higher volatility 4) Signature’s approach - Expect market dislocations - Be a liquidity provider

3. Source: Bloomberg LEVERAGE LIQUIDATION SWAMPED MARKET CAPACITY

4. VOLCKER CLOSES THE CASINO IN DEPOSIT TAKING INSTITUTIONS

5. Source: International Monetary Fund BANK CAPITAL CHARGES WITH NEW RISK WEIGHTS

6. DEALERS’ WAREHOUSE CAPACITY SHRINKS

7. Source : Citi Volatility to increase U.S. CREDIT FUNDS VS. DEALER INVENTORY

8. Source: Morgan Stanley DEALERS ADAPT TO NEW REGULATIONS

9. RISE OF ELECTRONIC TRADING ALGORITHMIC TRADING SPLINTERS ORDERS

10. Source: Bloomberg RISE OF ELECTRONIC TRADING BLOCK TRADES % OF U.S. TRADING

11. Source: Bloomberg TRADING VOLUME BY INVESTOR TYPE

12. Source: Bloomberg EXCHANGE MARKET SHARE OVER TIME

13. CI SPONSORS EXCHANGE COMPETITION IN CANADA

14. Leverage ratio hurts bond liquidity Wall Street to exit commodities trading OTC derivatives overhaul More margin (cost) for users WHO IS NEXT? – COMMODITY AND DERIVATIVE MARKETS

15. INVESTMENT IMPLICATIONS Expect market dislocations Be a liquidity provider Seize scarce liquidity events Be tactical – active Structurally high cash levels

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