PHILADELPHIA STOCK EXCHANGE

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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 OVERVIEW SYSTEM ARCHITECTURAL
OVERVIEW
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PHILADELPHIA STOCK EXCHANGE
Public Investor
Brokerage Firms
PHLX Trading SystemsOrder Delivery
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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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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 UROUTs
? Cancel Processing
? Risk Management (Options)
? Position Keeping and PL
? Real-Time Positions and PL
? Broker Comparison System
? Ticket Matching
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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

• PHLX TRADING TECHNOLOGY PROGRESS - (Contd)
• 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
• Equity 1997 2002 Increase
• 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
• Options 1997 2002 Increase
• 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 Customers 36 124
  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
• T1
• Remote Competing Specialists System Expansion
• Disaster Recovery

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THE SOCIETY FOR INFORMATION MANAGEMENT (SIM)

• QUESTIONS AND ANSWERS