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INSIDEADVANTAGE

Is Pro Rata an Accident Waiting to Happen?

Special Report by Ginger Szala INSIDEADVANTAGE SPRING 2015

IS PRO RATA AN ACCIDENT THE TRADING FLOORS ARE NOT WAITING TO HAPPEN? CLOSING, ONLY THE FUTURES PITS! UPCOMING EVENTS p. 6 p. 12 p. 14 WONDERING HOW… To efficiently add small-cap exposure to your portfolio?

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CONTENTS

6 Is Pro Rata an Accident Waiting to Happen? by Ginger Szala 12 The Trading Floors Are Not Closing, Only the Futures Pits! by Mike McLaughlin, President, Institutional Sales, Advantage Futures 14 Upcoming Events Where should you be?

About Advantage Futures

Advantage Futures ranks as one of the Advantage Futures is a full clearing Trading up to Advantage Futures means highest volume clearing firms in the member of the CME Group (including quick connections, superior service industry, with 2014 volume exceeding CME, CBOT, NYMEX, COMEX and KCBOT), and competitive pricing. At Advantage, 352 million contracts processed and NFX (Nasdaq Futures Exchange), NYSE clients focus on trading while their client 3.25 billion contracts processed over the Liffe, NYSE Liffe US, ICE Clear US, ICE representatives make sure that every past twelve years. Emphasizing superior Europe, LCH, The Clearing Corp., Options other detail is managed to complete technology, customizable back office Clearing Corp., CBOE Futures Exchange satisfaction. operations and highly personalized client and DME as well as a foreign approved support, Advantage Futures remains a full participant of the Montreal Exchange and To learn more about Advantage Futures, service clearing firm for its diverse and non-clearing member of EUREX. please visit our web site at growing client base. Skilled, dedicated www.AdvantageFutures.com or contact personnel provide comprehensive, one of our client representatives at technology-driven clearing and execution 312.800.7000. services to enable successful and efficient trading.

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Visit cmegroup.com/tradenatgas for more information. Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract¿s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profi t on every trade. All references to options refer to options on futures. CME Group is a trademark of CME Group Inc. The Globe Logo, CME, CME Direct and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX and ClearPort are trademarks of New York Mercantile Exchange, Inc. All other trademarks are the property of their respective owners. The information within this brochure has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this brochure are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. All matters pertaining to rules and specifi cations herein are made subject to and are superseded by offi cial CME, CBOT and NYMEX rules. Current rules should be consulted in all cases concerning contract specifi cations. All matters pertaining to rules and specifi cations herein are made subject to and are superseded by offi cial CME, CBOT, COMEX and NYMEX rules. Current rules should be consulted in all cases concerning contract specifi cations. Copyright © 2015 CME Group. All rights reserved. WE DELIVER MORE. OPTIONS.

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The New Year surprise happened fast: the Swiss National Bank announced on January 15 that the Swiss Franc would no longer be capped by the Euro and it jumped 41% in minutes. This black swan event happened just before a U.S. holiday when traders were already winding down for a three-day weekend. Those left trading included a combination of retail players, banks and some prop firms. And the market went into a frenzy.

INSIDEADVANTAGE SPRING 2015 7 The losses were still being calculated into the next week and Consider if we had an unexpected rate move similar to the beyond. To date, several retail forex firms – from London to recent event in Canada. On a typical day, the offered-side New Zealand - went bust. Alpari was an early victim. FXCM in front month Eurodollar futures could be tens or even was on life support until it received a $300 million rescue 100,000 contracts or more. An unexpected move repricing from Leucadia National Corp., owner of Jefferies, which itself the market by 25 basis points could lead to significant was being dumped to the highest bidder. Deutsche Bank, dislocations if traders inadvertently buy or sell multiples of Citicorp, and Barclays each suffered losses in the $150 million the quantity they expect actually desire to trade. The trader zone. Clearing firms took hits -- Interactive Brokers’ CEO Tom bidding for 1000 in the hopes of buying 20 while the market Peterffy admitted the following day they lost $120 million. remains bid will be considerably disrupted if his bid is filled Early hits in the hedge fund community included Everest, and the market is nearly instantly 25 basis points lower. If a which closed 7 of its 8 funds. Its one remaining fund, with bid for 100,000 was instantly filled and the market dropped less than $500 million, represents less than 20% of the assets 25 basis points, that filled trade is collectively a $62,500,000 they had months before, according to Reuters. BlueCrest loser. Liquidity in the immediate aftermath of such an event Capital Management, a multi-billion dollar hedge fund could be disastrously meager as market maker liquidity based in London, reportedly shut the trading book of one providers who were just filled beyond their desires struggle senior currency traders. Retail losses were widespread and to cope with their unwanted long position in a market where hefty. The maximum leverage permitted for retail cash forex bids may be scarce and fleeting. This market disruption is trades in the United States is 50:1. Unfortunately for Europe, something nobody wants and yet pro rata distribution sets the higher leverage permitted there exacerbated losses. the table for this to occur. Within a week of this “What happened January 15 was the Market participants are move came another fortunate the Swiss Franc seismic shock in a smaller sort of perfect storm that highlights the and Canadian market marketplace. Although events did not occur 10 out of 10 economists potential chink in the pro rata armor.” in marketplaces with had predicted no rate a pro rata distribution cut, the Bank of Canada caught many traders off-guard methodology. There remains a question of whether it is on January 21 with a surprise cut in its overnight rate. The prudent to utilize this methodology at all. As long as we resultant rally in front-month Canadian Bankers Acceptance maintain this distribution process it seems only a matter of futures, BAs, was 35 basis points. A one standard deviation time before some form of significant dislocation will occur. move in this product equaled 1.5 basis points at the time. What happened on January 15 was the sort of perfect storm The market therefore experienced a 23 standard deviation that highlights the potential chink in the pro rata armor. move. The Swiss Franc move was nearly identically rare from a statistical modeling standpoint. Each of these events would Upside of pro rata occur only once in billions of years if this data were distributed “normally.” The fact that we have witnessed so many “black As mentioned above, there are generally two forms of trade swan” events in our lifetimes highlights an important issue: matching algorithms used by global exchanges: 1) Pro Rata, SPAN and VAR analysis based upon historical data and and 2) First in/First out (FIFO) also referred to as Time/Price. normal distributions often underestimate REAL risk. Basically, pro rata is distributing trades at a certain price level by size ratio, that is if there are three bids at a specific price, Fortunately, the FX outright futures at CME utilizes FIFO one for 2000 contracts, the second for 200 contracts and the and not Pro Rata for its fill distribution methodology. If the last at 20 contracts, the fills would be in a ratio of 200:20:2 FX market had used pro rata, the carnage from the Swiss respectively. Although this is an oversimplified explanation National Bank event could have been even more disastrous. of algorithms that can get considerably complex, this is the The fixed income markets at CME utilize pro rata. Had the basic idea. unexpected rate cut effectuated by the Bank of Canada taken place in the US by our Federal Reserve Board, the FIFO is exactly what it describes. Bids/offers at a certain dislocation and market chaos created could have been price are ranked by time, not size. Most financial futures and even more extreme. This is because many traders in pro rata options contracts use a version of the pro rata method for markets enter bids and offers far in excess of the quantity trade matching algorithms. The Intercontinental Exchange they actually expect to buy or sell. They may bid for 1000, (ICE) has it divided simply: pro rata for interest rates and hoping to buy a 20 lot when the bid is hit for 100 and the FIFO for energies. Eurex uses a time pro rata for its interest matching algorithm splits up the sale quantity partly based rates. CME Group is nuanced, with many versions of pro rata upon a pro rata methodology. as well as a mix of pro rata and FIFO. FIFO is used largely in the commodity products and stock indices. However, for the

8 INSIDEADVANTAGE SPRING 2015 interest rates, pro rata is the main matching algorithm for the electronic products. As Bryan Durkin, CME Group’s Chief “There are other situations when Commercial Officer, outlined in a letter to the Commodity order matching algo in use and Futures Trading Commission (CFTC) in 2013 responding to the regulator’s Concept Release on Risks Controls and System trades execution in general can Safeguard for Automated Systems1: become as important as the • “Our Pro-Rata allocation matches fills based on the resting order’s proportional size of the cumulative bid or strategies/trade ideas themselves.” offer. This is especially valuable in markets with low price volatility where a FIFO allocation could result in a large want 200 contracts filled at a certain price, they bid for 2000, limit order at the top of the book to maintain a priority and once they get the fill, they cancel the rest. position for longer periods of time, effectively blocking later entrants from receiving any fill volume. The Pro- In the Federal Reserve of Chicago 2014 paper, Rata allocation enables all traders to join the queue at a “Recommendations for Equitable Allocation of Trades in High 3 particular price level and have an opportunity to compete Frequency Trading Environments ,” author John McPartland for a fill, independent of their order’s relative time priority. states: “If there is a criticism of the Pro Rata trade allocation Further, since time is not factored into the allocation, like- logic, it is that many market participants are constantly sized orders at the best bid or offer are at equal risk of bidding or offering unrealistically large quantities, often far being allocated a fill from an aggressor order. greater than they could likely absorb.” • In certain markets, we employ a split FIFO/Pro-Rata Illustrating his assertion is a London-based quant trader who allocation. The FIFO component motivates traders to noted in her blog, Math Trading, how FIFO allowed faster narrow the bid/ask spread and rewards traders who are firms to get the bids/offers first as they were in line earlier, among the first to enter orders at the top of the queue. and if the market was unbalanced, she might get her order The Pro-Rata component leads to greater participation filled at that price. She states that “there are other situations and depth because orders other than those near the when order matching algo in use and trades execution in top of the time priority queue still have an opportunity general can become as important as the strategies/trade to be allocated a portion of the fill. The combination of ideas themselves,” such as pro rata used in Eurodollar futures. the two match algorithms therefore helps to foster tight She states: “If you really want a fill of X lots, you could just bid/ask spreads and broad participation in the market. It send an order that is somewhat bigger than X – with the is important for the Commission to note, however, that extra amount being dictated by how aggressive you want/ there are a variety of factors that a marketplace must need to be – and once filled try to cancel the remaining lots. consider when instituting a particular type of matching (DISCLAIMER: of course by doing this you are actively risking algorithm in a market, some of which include, but are not of being filled in all the lots, so just don’t take my word on limited to, market type, bid/ask spread, minimum tick this being a good practice and do it at your own risk.)” sizes, liquidity, and price volatility.” Normally ‘padding the book’ doesn’t blatantly harm the Downside of pro rata market, like spoofing or quote stuffing, but it should cause concern for risk managers, brokers, and exchanges in cases In itself, pro rata is not dangerous, and in fact, it was of extreme moves. Of course, it is the responsibility of developed to be fairer to smaller traders, as Durkin explains the trader’s firm and clearing broker to set pre-trade risk above. However, a study by Karel Janecek and Martin Kabrhel parameters. In their 2012 paper How do proprietary trading (Matching Algorithms of International Exchanges2) found: firms control the risks of high speed trading?4 authors Carol “that the Time Pro-Rata algorithm substantially complicates Clark and Rajeev Ranjan of the Chicago Federal Reserve bank decision making, and, more importantly, induces individually found : rational trader’s behavior that is inconsistent with the general market efficiency.” Although this paper focused on splitting “Each proprietary trading firm interviewed has pre trade of orders, a practice many exchanges have banned since it risk controls on the trading platform that are applied at one was written, a newer practice is when traders, trying to get a or more of the following levels: strategy, account and/or number of contracts filled, will “pad the book,” that is, if they 3 Recommendations for Equitable Allocations of Trades in 1 CME Group Letter Response to CFTC Concept Release High Frequency Trading Environments, Federal Reserve Bank of on Risks Controls and System Safeguards for Automated Trading Chicago, John McPartland, July 10, 2014 Environments, Dec. 11, 2013 4 How Do Proprietary Trading Firms Control the Risks of High 2 Matching Algorithms of International Exchanges, Karel Speed Trading? Federal Reserve Bank of Chicago, Carol Clark and Janecek and Martin Kabrhel, Dec. 1, 2007 Rajeev Ranjan, March, 2012

INSIDEADVANTAGE SPRING 2015 9 “Many traders and brokers interviewed didn’t see a problem especially with the multiple risk checks. Logic concludes a trading or clearing firm isn’t going to relax risk parameters that could mean its own demise if the trader blows up. But anecdotally, that’s not exactly the truth.”

gateway. However, no firm evenly applies each risk check to the hassle of that kind of the high-speed business. “The real every trading strategy. Most firms apply fewer pre trade risk impediment was the lack of risk controls with front-end checks to some strategies to reduce latency (delays). “ boxes or manual inputs when credit controls were imposed,” he notes. “Any pre-trade check of position limits or margin Despite potential holes, the exchanges appear confident simply slowed down every system we saw to a point where their systems work. Yet, CME Group, though insisting the the HFT lost their edge. Everyone coming to us swore up trading firm/clearing firm that sets the trader’s/client’s risk and down that their programs would never allow excessive limit, also understand it “takes a village.” Durkin’s letter to the trading but being ex-risk guys, we knew that was just not true. CFTC noted: We were and still are unwilling to allow any trading through our pipelines where we do not own the risk controls.” “CME Group supports allowing exchange clearing members to provide direct market access to their customers, provided A clearing firm risk manager saw the problem mainly in the clearing member has appropriately vetted the client Eurodollars, the largest and most liquid futures market that and implemented appropriate risk management controls, is made up of trades typically part of much larger strategies including exchange mandatory pre-trade credit control that encompass layers of related contracts, spread months functionality, and the client has satisfied the system and cash. Having started in the business in the pit and now conformance testing requirements of the exchange… on a desk, he has seen that some internal risk people will We feel that each level of the “electronic trading ‘supply allow a trader to put on larger than allowed size. This is chain’” (trading firms, clearing firms, and exchanges) must “because they know in the situation that they’re in, most share in the effort to preserve market integrity through the of [the traders] aren’t doing this on an outright basis, most implementation of effective risk controls, no matter if that are trying to spread against another Eurodollar or maybe participant has direct market access or is routing to the some equivalent…and they’ll sell what’s correlated. So the exchange via its clearing member firm.” [the risk manager] will allow them to do much more so the machines front end system accepts the order…that way they So is there a problem? get a bigger portion [assigned through the pro rata trading matching algorithm].” Many traders and brokers interviewed didn’t see a problem especially with the multiple risk checks. Logic concludes a What worries him is in a market that has seen little to no trading or clearing firm isn’t going to relax risk parameters volatility in recent years, a spike similar to what happened in that could mean its own demise if the trader blows up. But the Swiss franc could be devastating with larger sized bids/ anecdotally, that’s not exactly the truth. As the Fed 2012 offers being filled without the capital to back them up. found, sometimes things go awry, especially in today’s high-speed markets. Even the CFTC Technology Advisory Why would a clearing firm risk manager allow this? Because Committee noted in its recommendations on pre-trade the client can go elsewhere, and often does. Even the CFTC’s practices5, clearing firms have to trust that their clients/ pre-trade recommendations acknowledged competition trading firms with direct access to the exchange are following for business could force some clearing firms to try to proper risk management set between them and the clearing reduce latency, and one may lose business by acting more firm because the trading firm “will generally not want clearing responsibly than another. firm personnel examining their proprietary code.” Also, some In CME Group’s 50-page response to the CFTC’s conceptual of these risk parameters are set when the client first comes release, which asks if risk controls should be different for on board and checked only periodically afterward. systems and firms that engage in HFT from those that apply Joe Mazurek, president of Straits Financial, and a veteran of to automated trading systems in general, CME was adamant brokerage wars, decided with his business partner to avoid about controls being equal across all groups, adding that: 5 Recommendations on Pre-Trade Practices for Trading “Each market participant should be obligated to have risk Firms, Clearing Firms and Exchanges involved in Direct Market systems necessary and adequate for the type of trading they Access, CFTC Technology Advisory Committee, March 1, 2011

10 INSIDEADVANTAGE SPRING 2015 employ. The risk systems at HFT firms, for example, would Is there a solution? have to have sufficient capacity to handle the order flow generated by the firm. While the capacities of the systems The Fed’s paper by McPartland studies the NYSE/LIFFE Time may vary, the controls themselves may be identical between Pro Rata algorithm and concludes that pro rata algorithms an HFT firm and a firm that utilizes non-HFT systems. “ would be better using a cardinal ranking (rather than an ordinal one) on resting bids and offers “based on the actual That said, CME keeps a closer eye these days on games length of time that bids and offers have been resting in the traders play as illustrated with its new Rule 575 banning order book relative to the time that all of the other orders disruptive trade practices. When asked directly about have been resting in the order book.” Durkin states in CME “padding the book,” the exchange responded, “We monitor letter to the CFTC that it doesn’t use Time-weighted Pro Rata, all of the trading characteristics of our products.” Looking at and it doesn’t appear it plans to change that anytime soon. recent disciplinary infractions where going over individual limits has been fined by the exchange, it seems at least CME To be fair, most exchanges use certain combinations of the Group doesn’t have a lazy eye and is keeping up on iterations two methods. But in markets like Eurodollars, which uses of trader games. the pro rata algorithm, and could see a spike similar to the Swiss Franc with macro economic changes coming into play, Data blast problems could ensue. Still, it seems CME Group has taken precautions, providing software to aid trading firms and Yet another problem caused by “padding the book,” (as well brokers in pre risk management, requiring kill switches and as spoofing, layering, quote stuffing, etc.) is the pure amount Message Volume Controls. of data that must be processed, despite much of it being cancelled. Scott Caudell, CTO of Internet Infrastructure at Further, there’s no doubt most trading firms understand Interactive Data, noted that when an order is placed, at least the risks and have strict procedures, some fairly Draconian. the FIFO matching algorithm has a minimal resting time. As One trading firm in the Clark/Ranjan paper said it considers an expert in the internal workings of the business, he believes “operational risk as its greatest threat” and among other traders should put on only the size that they want. “If you’re restrictions, it holds the head of trading responsible for going to put something out there, you’ve got to be exposed the trade execution and is financially responsible for any for some period of time so you actually think twice about it violation of risk. If there was a breach, the head trader would being out there” he says. “And you can’t keep doing these be 100% financially responsible for the mistake and would ‘cancel replaces’ putting the burden on the rest of us because have to make the firm whole. Of course that was only in the we get all this extra data because of that, which is constantly case of a loss; if the violation proved profitable, the trader growing, and we’re constantly dealing with it, which is could not share in the proceeds. Tough love, no doubt, but a constant expense. The amount is a collective expense may not be standard across the business. across the industry as a whole, [all] because [someone] does 100,000 cancel replaces every minute. No one ever adds that up from a cost perspective but a lot of people directly bear that expense.” ______About the author: One former exchange clearing house manager agreed, Ginger Szala is the former stating that several years ago, the average number of editor-in-chief and publisher Eurodollar futures contracts per trade submitted to CME of Futures Magazine Group. clearing house was 41. Today it’s between 1 and 2, meaning She has reported on and the number of transactions that have to be processed is more written about the global than 35 times than it was 15 years ago. “That means there derivatives and managed are 35 times as many trades that have to go to a quotation funds business for the system, not to mention a 1000 times more quotes that have past 31 years. Today she to go to the quotation systems. Bandwidth and mainframe is a freelance journalist, processing scale is a really big deal,” he said. business writer and media consultant. You can One FCM CEO attributed the extra data to many aspects of follow her on Twitter @ today’s markets, not just “padding the book.” But the amount gingerszalaink or e-mail her of data flowing through the system today led one manager at: [email protected] to say “market surveillance people don’t stand half a chance. There’s too much data. It’s like trying to drink from a fire hose.”

INSIDEADVANTAGE SPRING 2015 11 The Trading Floors Are Not Closing, Only the Futures Pits! by Mike McLaughlin, President, Institutional Sales, Advantage Futures

My initial job on the CME trading floor was to run wire orders, y interview for a position at sent over a telex machine to waiting clerks on the outskirts of MMerrill Lynch on the trading the pits. You needed to be organized, move quickly and get the orders to the correct pit and proper section for execution. floor of the Chicago Mercantile A front month order delivered to a back month clerk was floor suicide. The system struck me as chaotic, a little brutal Exchange took place in a smokers’ at times but wildly efficient. break room. A hurried Merrill Lynch I progressed from running wire orders to working in the filling broker with a raspy voice and S&P 500 options pit, relaying price and trade information to voice brokers on the outskirts of the pit. My filling broker, the a mustache somewhat out of date person actually executing the trades and carrying the risk, had a $1 million out trade during the October 1987 stock for 1986 asked if I was good with market crash. It was the extremely rare positive out trade and numbers and calm under pressure. reminds me to this day of the extraordinary risks brokers and liquidity providers manage on a daily basis. I left the pit and Four years of studying finance and have been a voice broker on the institutional side ever since. it came down to that, could I count For nearly 30 years I have witnessed the CME trading floors performing brilliantly through major market-moving events and was I prone to panic. In the time including the 1987 crash, the S&L crisis, the Orange County it took my interviewer to finish a bankruptcy in 1994, the Russian ruble crisis and resulting Long Term Capital collapse in 1998 and the 2008 financial Marlboro Light, I was hired. crisis. There have been non-events like Y2K and tragic events

12 INSIDEADVANTAGE SPRING 2015 such as the September 11th terrorist attacks. Throughout such as treasury futures have made more of a migration to all of these incidents, the trading floors remained extremely screen based trading with 50% executed on the screen and efficient and liquid venues for risk transfer. 50% still executed on the trading floor. Eurodollar options, however, remain a more difficult beast to tame with 40-plus The CME recently announced it will be closing its historic underlying futures contracts, 26 of which have quarterly futures pits this summer, a move that, while not unexpected, and/or serial options expirations. Eurodollar options came across as sudden. Cynics have long argued that the CME combinations can also be finely tuned with multiple-strikes brass has wanted to close the trading floors since the advent and ratios to peg 3-month LIBOR sets potentially going out of electronic trading. The fact is the futures pits have been 24 quarters. Instant access to Green June 2017 1:3 ratio put transacting less than 1% of CME volume for several years now. spreads does not exist without the open outcry platform. Side–by-side trading, the choice of executing in open outcry futures pits and/or on the electronic platform has existed for In regards to transaction costs, much of the screen-based some time and CME clients have overwhelmingly chosen the liquidity is provided by a few very large market making electronic platform for executing futures contracts. firms who would like nothing more than to see all options trading migrate to the screen. Options pits on the CME So what is the future of the trading floor? Time will tell, but floor, by contrast, remain very well populated with a diverse complex, multi-faceted futures spread transactions and CME group of individual locals, local trading groups and large options markets still benefit from and find value in the open market making firms all aggressively competing for trades. In outcry, auction style of trading. The options markets on the addition, voice brokers disseminate trade information, color, CME floor are some of the most liquid markets in the world. order flow and trading ideas to end users, further enhancing The growth of electronic futures trading and explosion in liquidity. Would transaction costs for price takers increase open interest enhances options markets, allowing ease of if options markets consolidated electronically into a few access to underlying liquidity for open outcry options market price makers’ hands? Would a market always be adequately makers seeking a hedge. The CME reported a record 2.84 supported in the event of a liquidity crisis? Is it worth the risk million options contracts traded per day across all products to find out? in March 2015. Eurodollar options accounted for nearly 1 million contracts per day with 83% of those contracts The CME trading floor is more than just a backdrop for CNBC. executed in the pit. Total open interest in Eurodollar options Price discovery and liquidity transfer remain vibrant in the is approaching 30 million contracts, amazing especially more difficult to electronically replicate options pits. The when one considers the Fed Funds target rate has been at its evolution of the trading floor, from smokers’ break rooms lower bound, 0% to .25%, since December 2008 and it’s been to a dual-platform, multi-faceted price discovery facility is nearly a decade since the Federal Reserve last tightened ongoing. At the end of the day it is our clients, the end users, credit. who will decide the fate of the trading floors. Traders, brokers, market makers and the CME are nothing without our clients. End users demand instant access to liquidity and low transaction costs. Options on single expiration-type futures

INSIDEADVANTAGE SPRING 2015 13 Did you know you can watch videos of past Advantage seminars? Visit: www.AdvantageFutures.com/Education/ Seminars-Webinars

UPCOMING EVENTS where should you be? Check with your Advantage Futures client representative for our latest seminars and client events at 312.800.7000 or email [email protected].

ADVANTAGE FUTURES SEMINAR SERIES CLIENT LUNCH AND LEARN 231 South LaSalle Street, Suite 1400 231 South LaSalle Street, Suite 1400 Chicago, IL 60604 Chicago, IL 60604 Tuesday, June 16, 2015 Economic Outlook 11:00 am to 12:30 pm Tuesday, September 29, 2015, 3:00 pm Join Nanotick and OnixS for a complimentary Guest Speaker: lunch. Representatives will be on site to answer any Blu Putnam, Chief Economist, CME Group questions. Monetary Policy and the Bond Market Friday, July 31, 2015 Thursday, October 22, 2015, 3:00 pm 11:00 am to 12:30 pm Guest Speaker: Join Montreal Exchange for a complimentary lunch. A.G. (Tassos) Malliaris, Professor of Economics and Representatives will be on site to answer any Finance, Loyola University questions.

CLIENT EVENT Downers Grove BBQ Wednesday, June 24, 2015, 2:00 pm 1501 W. Warren Avenue Downers Grove, IL 60515 To register for Advantage Futures seminars and client events, please contact Marisol Guereca at [email protected] or 312.800.7150.

14 INSIDEADVANTAGE SPRING 2015 IN THE KNOW Advantage Futures News & Announcements ADVANTAGE FUTURES Client Funds Surpass $625 Million On June 2, 2015 Advantage Futures reached a record high client funds over $625 million, a nearly 40% increase over a year ago. The clearing firm celebrates its twelve year anniversary concurrent with this milestone. Advantage and its 100 employees have processed over 3.25 billion contracts since their founding on June 2, 2003, placing it among the highest volume clearing firms in the futures industry.

“Advantage deeply values each client and our team works hard to earn their trust,” commented Joe Guinan, Advantage Chairman and CEO. “As we pass these significant milestones, we appreciate the wonderful relationships we have formed, for which we are truly grateful, while we renew our dedication to serve our clientele.”

“Clients value our agency, client-focused business model. We don’t trade, so we don’t compete with them,” explained Guinan. “Integrity and transparency are important to us and to our client base.” Stay informed on all of Advantage Futures latest news, visit www.advantagefutures.com/

INSIDEADVANTAGE SPRING 2015 15 Disclosure Statement SPRING 2015 INSIDEADVANTAGE Chicago, IL 60604 Suite 1400 231 South LaSalle Street ADVANTAGE FUTURES ADVANTAGE All rightsreserved. Copyright ©2015 Advantage Futures. indicative of future results. investment. Past performance is not consider whether this is a suitable substantial. Each investor must futures and options can be Advantage. The risk of trading construed as representation by as to the accuracy and is not to be all inclusive and is not guaranteed to be reliable, but it is not necessarily been obtained from sources believed factual information of this report has commodities herein named. The solicitation or an offer to buy construed as an offer to sell or a This information is not to be INSIDEADVANTAGE SPRINGTRADE UP 2015 231 South LaSalle Street, 1400 Chicago, IL60604312.800.7000 Suite LaSalle 231 South

TO CUSTOMIZED SPACE.

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