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PHILADELPHIA STOCK EXCHANGE. THE SOCIETY FOR INFORMATION MANAGEMENT (SIM) December 3, 2002 Confidential. THE SOCIETY FOR INFORMATION MANAGEMENT (SIM). CONTENTS PHLX PROFILE FINANCIAL AUTOMATION PROFILE SYSTEM ARCHITECTURAL OVERVIEW Equity Options FCO Market Regulation (TDAS)

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PHILADELPHIA STOCK EXCHANGE

THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

December 3, 2002Confidential


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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

CONTENTS

  • PHLX PROFILE

  • FINANCIAL AUTOMATION PROFILE

  • SYSTEM ARCHITECTURAL OVERVIEW

    • Equity

    • Options

    • FCO

    • Market Regulation (TDAS)

    • Back Office

    • Network Communications

  • PHLX TECHNOLOGY PROGRESS

  • FUTURE ENHANCEMENTS

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

PHLX PROFILE

  • First Exchange - Established in 1790

  • Most Diversified Exchange in the World

    • Equity Common Market

    • Exchange Traded Funds

    • Equity Options

    • Index Options

    • Foreign Currency Options

    • Clearing Services

  • 13 Hour Trading Day

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

FINANCIAL AUTOMATION PROFILE

  • Data Processing Division of the Philadelphia Stock Exchange (PHLX)

  • Services Four (4) Businesses: Equity, Equity Options, Foreign Currency Options and Clearing Services

  • Over 180 Full Time Technology Professionals

  • Senior Staff Consists of an Executive Vice President and Chief Information Officer, One (1) Senior Vice President, Two (2) First Vice Presidents and Five (5) Vice Presidents

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

ORGANIZATION AND STRUCTURE

  • Major Departments and Functions:

    • Trading Systems Development

    • Business and Administrative Systems Development

    • Operations and Information Services

    • Communications

    • Technical Services

    • Technical Consulting

    • Quality Assurance and Quality Control

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TECHNOLOGY OVERVIEWSYSTEM ARCHITECTURAL OVERVIEW


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PHILADELPHIA STOCK EXCHANGE

Public Investor

Brokerage Firms

PHLX Trading SystemsOrder Delivery

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ITS

Market Regulation System

Back Office System

ElectronicBook

PHLX Trading SystemsOrder Delivery & Execution

PHLX TRADING SYSTEMS

Public Investor

National Market System

Brokerage Firms

OCC

NSCC

Specialist

Floor BrokersMarket Makers

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

SYSTEM ARCHITECTURE OVERVIEW

  • Stratus and SUN Client Server Based Systems Servicing the Three (3) Trading Floors, Windows NT Subsystem for Flex Options

  • IBM ES9000 Mainframe Servicing the Exchange Business Systems Applications and the Clearing Corporation

  • SUN Client / Server Based System Supporting the Trading Data Access System (TDAS)

  • PC Based Enterprise Wide Local Area Network Supporting E-Mail and Staff Administrative Functions

  • A PC Based Web Server Supporting the PHLX Internet Home Page

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Paper Based Trading Systems

X.Station Full Service Electronic Book

 Paperless Trade Execution

 Specialist Electronic Order Book

 Real-Time Order / Quote Alerts

 Automated UROUT’s

 Cancel Processing

 Risk Management (Options)

 Position Keeping and P&L

 Real-Time Positions and P&L

THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

PHLX TRADING TECHNOLOGY PROGRESS

1997 Through 2002

Where We Were Where We Are Now

Paper Based Trading Systems

X.Station Full Service Electronic Book

 Paperless Trade Execution

 Specialist Electronic Order Book

 Real-Time Order / Quote Alerts

Automated Features

Manual Processes

 Automated UROUT’s

 Cancel Processing

 Risk Management (Options)

 Position Keeping and P&L

 Real-Time Positions and P&L

 Ticket Matching

 Broker Comparison System

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 Floor Broker Order Entry System

 Broker Order Processing

 Automated NBBO Step-Up

 Manual Executions for BBO

 TDAS On-Line Surveillance System

 Regulatory Oversight via Print Reports

 Network Management Center

 Network and LAN Monitoring

Specialized Quote Feed

No Remote AutoQuote Access

THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

PHLX TRADING TECHNOLOGY PROGRESS - (Cont’d)

1997 Through 2002

Where We Were Where We Are Now

Manual Processes

Automated Features

 Floor Broker Order Entry System

 Broker Order Processing

 Automated NBBO Step-Up

 Manual Executions for BBO

 TDAS On-Line Surveillance System

 Regulatory Oversight via Print Reports

 Network Management Center

 Network and LAN Monitoring

Specialized Quote Feed

No Remote AutoQuote Access

Centralized Wireless Network System

Uncontrolled Wireless Environment

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

PERFORMANCE CAPACITY SUMMARY

Percent

Equity19972002Increase

Peak Messages Inbound (mps) 150 750 500%

Peak Messages Outbound (mps) 35 88 251%

Number of Orders 11,763 14,910 127%

Number of Trades 12,502 13,499 108%

Average Daily Volume (Millions) 5.5 8.9 162%

Historic Peak Volume (Millions) 7.0 24.6 351%

Number of Customers 33 56 170%

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

PERFORMANCE CAPACITY SUMMARY

Percent

Options19972002Increase

Peak Messages Inbound (mps) 400 10,500 2,625%

Peak Messages Outbound (mps) 60 2,500 4,167%

Number of Orders 6,152 30,000 488%

Number of Trades 15,643 35,000 224%

Average Daily Contracts 80,000 345,188 431%

Historic Peak Contracts 193,000 1,005,000 521%

Number of Customers36 124 344%

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

MAJOR CHALLENGES 1997 - 2002

  • Significant Increase in PHLX Options Volume (DELL)

  • Multiple Listing

  • Year 2000

  • Regulatory SEC Mandates

  • Decimal Pricing

  • Industry Market Data Rates (Capacity)

  • Competing Specialist System (Equity)

  • SEC COATS

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

NEXT MAJOR INITIATIVES

  • Electronic Trading – Changing Business Models

  • Linkage System

  • T+1

  • Remote Competing Specialists System Expansion

  • Disaster Recovery

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

QUESTIONS AND ANSWERS

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