The Proven Retail Exchange Operator
Bill Cody Director, US Equity Sales Bats Global Markets
November 16, 2017 Global Exchange Operator
Options • #1 U.S. options market • Trading home to SPX and VIX options
Futures • CFE is an all-electronic, open access market model • Trading home to VIX futures
European Equities • #1 Pan-European equities market • Cboe Europe operates two lit books and two dark books
Equities • #2 U.S. equities market • 234 listed ETFs from 41 unique issuers
FX • Well-established ECN for institutional trading • Spot, Forwards and SEF marketplaces
2 Cboe is a top global exchange leader
Global Cash Equities Exchanges by Monthly Notional Value Traded
1,200,000 1,156,364 1,109,902 ($ in millions) 1,048,554
1,000,000
800,000 776,806
673,322
600,000
447,944
400,000
200,000 164,177 150,941 150,272
88,568 80,996
0 NYSE Nasdaq Cboe Shenzhen Shanghai Tokyo Hong Kong LSE Korea Euronext Toronto
Source: World Federation of Exchanges, Cboe Global Markets. Notional value traded July 2017. 3 Strong Track Record of Growth
JUNE 2005 OCT 2008 OCT 2010 JAN 2012 FEB 2014 APRIL 2016 FEB 2017
Bats BZX Exchange Bats BYX Exchange, Bats acquires Bats launches in launches its first Bats acquires Direct CBOE acquires BatsTrading, Inc. is the company’s ETF.com — a media Europe with an primary listings, 9 Edge, becomes #1 Bats Global Markets founded in Kansas second equities outlet focused on equities market – ETFs from BlackRock, global stock and becomes Cboe City, Missouri exchange, goes live Exchange Traded Bats Europe Inc.’s iShares ETFs exchange operator Global Markets in the U.S. Funds business
Bats receives SEC Bats Europe lists its approval for its Bats acquires Chi-X Bats Europe first ETFs from Bats completes its Bats Global first U.S. equities Bats’ first equity Europe creating Bats becomes a iShares and Lyxor, acquisition of Markets becomes Chi-X Europe — the and launches exchange — Bats options exchange largest pan-European Recognized Hotspot, a foreign a U.S. public Exchange (also goes live in the U.S. equities platform by Investment Europe’s largest exchange (FX) company listed on known as the Bats notional value traded. Exchange (RIE) trade reporting trading platform Bats BZX Exchange BZX Exchange) service, BXTR
AUG 2008 FEB 2010 DEC 2011 MAY 2013 NOV 2013 MAR 2016 APRIL 2016
4 Cboe is the leading exchange in Europe and the U.S.
#1 exchange group in Europe #1 exchange group in U.S. intraday*
22.0%
20.6% 18.6% LSE
15.1% Euronext NYS 19.6% E 10.3% Deutsche Boerse Nasdaq 17.5% 8.9% Turquoise
Other 2.8% 7.3% SIX Swiss
17.0% Other
Source: Cboe Global Markets, July 2017 *Excluding auction volume. 5 ETF Market Volume
SM SM 22.7%
22.7%
15.1%
Source: Cboe Global Markets (ETFMarketplace.com), 5-Day Average 10/27/17. Includes Volume Traded in the Auctions. 6 Cboe Four U.S. Equity Exchanges
We operate markets that provide customer choice, various fees and liquidity profiles. EDGA BYX EDGX BZX
Key Differentiators Hidden Price Routing, Retail Price Improvement Retail, Attribution Low Cost Improvement Listing Exchange Statistics 33% of orders more than 7% average 30+ 40 unique are of inbound mils of price strategies retail/wholesale; executed orders improvement 9% attributed receive PI
1 Recent Market Share 1.73% 5.17% 6.33% 6.08%
“Taker-Maker” Traditional Traditional Pricing Model Low fee with low fee “Maker-Taker” “Maker-Taker” and rebates model model Pricing for 0 to 3 12 to 18 (20) to (35) (20) to (36) Adding Liquidity Pricing for 3 to 5 (10) to (16) 30 30 Removing Liquidity
Exchange Code J Y K Z
1Cboe Global Markets, June 2017 7 Cboe Is The Top Retail Destination
Retail Broker Limit Order Routing to the EDGX Exchange Q2 2016 Rule 606 Reports – EDGX Rank Among Exchanges
Broker Cboe is #1 NYSE-Listed NASDAQ-Listed Limit Orders on Cboe #1 #1 31% Retail Broker & ® #1 #1 Wholesaler ~1% #2 #2 Other 27% 8% SM #1 #1 Bulge Bracket Agency
20% 14% Proprietary Automated Market Making
Source: Cboe SEC Rule 606 Public Disclosures for EDGX Exchange 8 Liquidity Profile by Exchange
EDGA, BYX, BZX EDGX
Retail-Wholesale Agency Retail-Wholesale Agency 8% 16% Automated Market 11% 10% Retail 1% Maker 14% Retail-Direct 1% Automated Retail-Direct Market Maker 14% 16% Proprietary Retail 26% 1% Bulge Bracket 27% Proprietary Other 20% 1% Bulge Bracket 35%
Source: Percentages represent add and remove volume based on Cboe data for Q2 2017. Cboe categorizes its members into segments on a best efforts basis according to its view of each Member's business model. For definitions of each segment, please click here. 9 Track Record of Leading Retail Initiatives
Cboe has an extensive history of working closely with retail broker dealers in support of their customers. Cboe continues to be an industry leader in developing and promoting initiatives alongside retail Members to offer an ever-improving trading experience.
These initiatives include: Functionality and Market Access Unique Retail Pricing Programs Transparency and Reporting Quality of Execution in Liquidity and Price Improvement System Stability and Resiliency First Class Operations and Trading Support Market Structure Advocacy
10 The Retail Package
The Cboe Exchanges are hosted within Equinix NY4/NY5 campus, home to more equity market share and price discovery than any other data center in the U.S. Limit orders on the Cboe Exchanges are closer in proximity to more non-Cboe markets than competing exchanges operating in Mahwah and Carteret.
The Cboe exchanges are latency equalized across data centers; No co-location
Hours of operation: 7 a.m. – 8 p.m. ET
Orders can be submitted as early as 6 a.m. ET. Cboe will queue the orders until the pre-market session opens at 7 a.m. ET
Full Reg NMS protection during the pre/post-market EQUINIX DATA CENTER sessions (unlike many of our competitors) • Cboe router uses depth of book feeds, not the SIP, for pre/post-market for routing decisions • Helps efficiently exhaust liquidity at away destinations while ensuring the best available price
11 Retail Product Offerings
Attestation – Cboe developed a retail program around non-marketable limit orders: Unique pricing model that acknowledges retail orders and allows retail firms to achieve higher rebates than the standard, non-retail tiered rates. Enables Cboe to build additional retail-focused products (e.g., “RTAL” attribution; tagging retail orders on routable flow [see below]) Expand the “retail” category (included the definition of correspondent clearing)
Attribution – Enables liquidity providers to attribute (quote under their own MPID): Benefits retail liquidity providers. Resting retail order flow has value to liquidity takers. By displaying your MPID in data feeds, you provide liquidity takers more transparency, which attracts takers to EDGX Also offer “RTAL” attribution for retail firms that want to quote using a generic identifier
Cboe BYX RPI – A program aimed at providing price improvement for retail Members marketable orders Retail Members control the price improvement they are eligible to interact with ($.001 increments) Orders executing against resting price improving orders receive a $.0025 rebate July MTD price improvement is $.0018/share Orders can be sent book only or routable
12 Retail Product Offerings (ROOC)
A one-stop solution for orders to partake in the listing venues opening and closing auctions while being able to participate on Cboe intraday.
Route to Listing Market (Open, Close and Intra-Day Halts) Choose one exchange to seamlessly manage your flow across all listing market auctions Posts on Cboe intraday Re-routes to listing market after regulatory halts to participate in a stock’s reopening (unhalt auction) Re-route functionality can be defaulted at the session level or enabled on an order by order basis
The requirements include: EDGX or BZX order Routable
13 Routing – Opening
System hours: 6:00 AM ET – 8:00 PM ET 9:28 AM: MOO/LOO Cboe orders are cutoff & LLOO (Routing begins orders are accepted. Market at 7:00 AM) Data 9:25 AM: Quotes are opened /entered for those with no open interest. Nasdaq 9:28 AM: MOO cut off time. 1 2 (Routing begins LOO will be treated as at 3:00 AM) Imbalance Only order Order 9:27 AM – 9:30 AM: Cboe 3 Dissemination of Cboe imbalance info begins. Drops/Copies 7:30 AM; Orders can be EDGX entered/cancelled until Routing Arca security is opened. Exchang (Routing begins 9:29 AM – 9:30 AM: Executions at 6:00 AM) Market Order freeze e Broker period. 4 Dealer 7:30 AM; Orders can be entered/cancelled until NYSE security is opened. (Routing begins 9:28 AM: Opening price at 7:30 AM) info.
TIMELINE 5 1. 6:00:00 AM ET – System begins accepting orders and receiving market data Dark Pools (Routing begins 2. 7:30:30 AM ET – Start of batch routing to listing market based on time order at 9:30 AM) • ROOC* routing to the Listing market up until Listing Market cutoff • Orders that miss the listing market opening cutoff, are posted on EDGX 3. Send down to primary as On Open MKT/LMT (Example MOO/LOO) • Individual orders result in individual executions (not grouped with other broker dealers for clearing) 4. 9:30:00 AM ET – Post auction, listed market executions are returned to Members, unfilled orders post to EDGX** 5. 9:30:01 AM ET – If routed Aggressive or Super Aggressive (odd lot), route to B/D router + Street *ROOC = Route to Primary **= Orders receive a new timestamp 14 Routing – Regular Hours
System hours: 9:30 AM ET – 4:00 PM ET
Market 1 Data 3
2 Order Cboe Cboe 4 Liquidity Drops/Copies EDGX Routing 4 Cloud 5 Exchang (Combination of Dark Broker Pools, Cboe, Nasdaq, Executions e NYSE) Dealer
1. Non-marketable limit orders are posted on EDGX 2. Orders that route out of exchange • Marketable in-flight • Residual route out 3. Reg NMS routing • Route to Improve – Ability to receive price improvement will take priority over speed of execution • Route to Fill – Speed of execution will take priority over potential price improvement 4. Price Improvement within the dark • Wholesalers, ATS’s 5. Displayed Liquidity
15 Routing – Closing Cross
3 3:55 PM: System hours: 6:00 AM ET – 8:00 PM ET MOC/LOC orders are cut off & Cboe LLOC orders are accepted. Market Data 5 1 3 3:50 PM: Dissemination of Nasdaq imbalance info 1 begins. Order Cboe Cboe 2 Drops/Copies EDGX Routing 3 Exchang Broker 3:59 PM – 4:00 Executions Arca PM: Closing e Dealer Auction Freeze Period. 4 3
3:45 PM: MOC & 3 LOC orders must TIMELINE be in. 1. Start routing orders: 3:55:00 PM ET, NYSE 3:58 PM: No cancels after this • Order after 3:55:00 will be routed, with best efforts, to the listing market point. 2. Route orders to the listing market 3. Post as - Day Orders(Not MOC/LOC) • Market orders will be collared with a LMT 4. Executions (or cancel) on the close will flow back immediately 5. If the Listing Market does not provide an execution or cancellation by 4:45:00 PM ET, then EDGX will provide electronic out due to known NYSE issue • Configurable as Done-For-Day, cancelled, or suppressed
16 Retail Product Offerings (Retail Routing)
Cboe introduced a unique way for Retail Orders to be eligible to receive price improvement on outbound marketable orders. If Members (1) designate their orders as retail and (2) are eligible to route, then the orders may be sent to participating dark liquidity providers allowing them to provide the best execution quality possible. The requirements include: EDGX Order Must have an executed retail attestation on file with Cboe Orders must be eligible to route Features: Orders can be individually marked on an order-by-order basis OR Members can choose to default orders at the port level to ensure all orders are eligible Note: Members have the ability to opt out of retail routing
17 Retail Product Offerings (Retail Routing using ROUT)
Advantages of Retail Routing Access to multiple DLPs looking to provide Price Improvement to retail attested orders Average Price Improvement for marketable orders was $.003891* in July Lower remove rates for interacting with off exchange liquidity Retail attested orders typically experience a shorter order life time as compared to non-retail orders Retail Routing is available with multiple strategies (ROOC, ROUE, ROUD, ROUT, ROUQ, ROUZ)
Cboe Internal Data 18 Cboe Global Markets 400 South LaSalle Street Chicago, IL 60605 www.cboe.com
19 Craig M. Rose Institutional Sales (203) 618-4009