Transcript Millennium`s presentation

An innovative solution to consolidate
African and Middle Eastern markets
Fragmentation
Fragmentation in developed markets
The fragmentation of liquidity occurs when a security is
traded in multiple trading venues.
The ease of access to technology and regulation such as
RegNMS (US) and MiFID (Europe) has increased the pace of
fragmentation by removing barriers that formerly prevented
the creation of new Exchanges.
What technology helps fragment, technology helps puttogether.
Developed markets overcome fragmentation by using
liquidity aggregation technology.
Fragmentation (cont.)
Fragmentation in emerging markets
Fragmentation in emerging markets is the fragmentation of
market capitalization.
Fragmentation occurs due to the existence of small ‘ponds’
of liquidity in the form of a domestic or regional stock
exchange with a few noteworthy listings.
These few noteworthy listings have limited access to capital
due to the limited audience the domestic exchange could
provide.
The Possibilities
What if ?
The small ‘ponds’ of liquidity could be opened out to a wider
audience without the complication of cross border listings?
A large pool of liquidity in terms of market cap could be
created to attract regional and global attention?
The solution is an easily accessible technological solution
and is least intrusive on current regulation and practices?
The solution is a model that solves liquidity fragmentation in
developed markets and is technology that is already
available?
The Solution
The solution is a liquidity aggregation and
access tool.
We call it a Smart Order Router (SOR).
The SOR
What is a Smart Order Router?
A Smart Order Router is a tool that aggregates liquidity by
consolidating market data from multiple execution venues
and provides direct market access based on simple and
complex routing logic.
Functional Overview
• FIX Order Input Gateway
• Proof of Best Execution
• Displayed Liquidity Aggregation and Heat
Mapping of Dark Liquidity
• Configurable Routing Logic based on
latency, liquidity, trade volume and
execution quality
• Execution Management across internal and
external venues
• Intelligent Order Filtering
Technological Overview
• Flexibility and Faster Time to Market
through “BID”
• Performance and Scalability through
partitions
• High Availability due to application-level
fault tolerance
• External Connectivity through
Programmable Gateways
• Efficient use of bandwidth through “Spatial
Subscription”
High Performance
10,000 orders per sec, under 1ms latency
Partition 1
10,000/sec
Partition 2
10,000/sec
SOR Connectivity
Five steps to consolidation
• Step 1 – Participating exchanges create SOR Utility.
• Step 2 – Member Firms of participating exchanges establish
relationships for client sharing, exposure limits and clearing &
settlement.
• Step 3 – Decide on industry standard protocols for common access
point connectivity (FIX/ ITCH/FAST).
• Step 4 – Decide revenue model – fee per route and/or market data
fee and settlement guarantee fee.
• Step 5 – Install technology, establish connectivity and run.
Proposed Workflow
Exchange names used only for purposes of illustration
An Alternate relationship
• Instead of a broker – broker relationship, an
alternate Exchange – Exchange tie up can be
done
• In this scenario, Exchanges would take on
the settlement responsibility, on behalf of it’s
member firms and guarantee settlement
• Each Exchange would then become a
settlement partner of the other Exchanges it
is connected to
• The advantage is that the Exchange is more
of a trusted entity than a broker firm, in a
regional sense
Questions and Answers
Thank You
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