1. The first order driven pan-European MTF Faster, Cheaper, Smarter

2. The first order driven pan-European MTF
Overview
In response to client demand Chi-X is addressing competitive issues in both the trade execution and post trade space to provide a more efficient and cost effective wholesale solution that will compete with the European Exchanges.
The Chi-X market model offers an order driven central limit order book with micro second performance and an embedded pan-European market structure. The operating model: 10x faster and 1/10th of the cost
The Chi-X market model is anonymous both pre and post trade with a guaranteed non exclusive central counterparty framework.
The first order driven pan-European MTF

3. The first order driven pan-European MTF
Overview
Chi-X is now live with the following key milestones having been achieved:
30th June 2006: License application approved by FSA
30th March 2007: Commencement of trading with a centrally cleared counterparty service on the Dutch & German markets
29th June 2007:Launch first FTSE 100 stocks with full CCP Service
28th September 2007:Launch first CAC 40 stocks with full CCP service
Chi-X will continue to increase the number of traded securities leading up to and beyond MiFID go live on 1st November 2007, based on a process driven approach
Chi-X provides a MiFID compliant alternative for clients ‘best execution’ policy and can already demonstrate important price improvements relative to the primary markets
The first order driven pan-European MTF

4. Chi-X Value Proposition
MiFID
Technology
Financial
Regulatory
Best
Execution/
Functionality
The
Core
System
Connectivity
Market Data
Trading
Tariffs
Clearing and
Settlement
Chi-X Value Proposition
The first order driven pan-European MTF

5. The first order driven pan-European MTF
Regulatory Framework
"New legislation will transform the landscape for the trading of securities and introduce much needed competition and efficiency” Charlie McCreevy Commissioner in charge of Internal Markets and Services.
Legislation has permitted the creation of new pan-European MTF’s (multi-lateral trading facilities) authorised and regulated in their “Home State”. Once authorised, a firm will use the MiFID passport to provide order matching services to customers in other EU member states. Currently under ISD, a service is regulated by the member state in which the service takes place.
Instinet Chi-X is an FSA authorised securities firm, operating as an Alternative Trading System (ATS) pre MiFID. Post MiFID Chi-X will automatically become an authorised MTF.
The first order driven pan-European MTF

6. The first order driven pan-European MTF
Regulatory Hurdles
FSA needed to rule on outstanding policy issues – January 2006
HM Treasury approval for SDRT – February 2006
ISO - Swift needed to issue us with a MIC – CHIX – March 2006
Crest needed to establish a TSO designation: Flag ‘N’ – May 2006
LSE needed to admit Instinet Chi-X to the list of approved ATSs allowing LSE members to deal with us – May 2006
License application approved by FSA – June 2006 
The first order driven pan-European MTF

7. The first order driven pan-European MTF
Best Execution
Article 21 of MiFID, ‘Best Execution’ is undoubtedly the most heavily debated directive
Requiring minimum standards of pre trade transparency for shares traded on regulated markets as well as post trade transparency obligations.
Intermediaries will have to justify and regularly review their execution policy to ensure clients are receiving best execution, based on liquidity, price and speed to market. If alternative trading venues regularly match or improve these criteria there will not only be a commercial but legislative requirement for them to check different sources of liquidity before executing an order. .
The first order driven pan-European MTF

8. Stock Exchange Dead Ends
Seller on 5.34
BEST
PRICE
AHEAD
BEST
PRICE
AHEAD
STOCK EXCHANGE
5.35
5.34
The first order driven pan-European MTF

9. Trading Functionality
Chi-X is a pan-European Central Limited Order Book
Chi-X takes into account functionality of the local market with additional functional enhancements
Non-matched orders may be added to the Chi-X Central Limit Order Book, a database of available limit orders, where they wait to be matched in price-time priority
All Chi-X orders are anonymous on the order book
The first order driven pan-European MTF

10. Trading Functionality
Market monitoring based on dynamic price range checking and percentage of volume checks
A Clearly Erroneous Trades policy protects participants
All Chi-X orders are valid for the day by default with unexecuted open orders cancelled at the end of the trading day
Continuous Trading Hours: until CET
A combination of ISIN, Currency and MIC can be used to uniquely identify an instrument as well as SEDOL, Instinet symbol, vendor codes (e.g. Reuters and Bloomberg) and exchange codes
The first order driven pan-European MTF

11. Order Types / Conditions Allowed
Tick Size & Order Types
Order Types / Conditions Allowed
Chi-X
LSE
Limit 
Market
Iceberg
Execute or
Eliminate
Fill or Kill
Hidden No
Mid Peg
Primary Peg
Chi-X facilitates potential price improvements by allowing participants to work within the spread of the equivalent listed exchange.
The first order driven pan-European MTF

12. The first order driven pan-European MTF
Price Improvement
The first order driven pan-European MTF

13. Basis Points Savings On Chi-X For Centrally Cleared Stocks
Month
% of Trade between the spread
Improvement (BPS)
April 2007
58%
1.60
May 2007
54%
1.50
June 2007
69%
2.67
July 2007
60%
2.17
Aug 2007
44%
2.04
Sep 2007
45%
1.84
Average
55%
1.97
The first order driven pan-European MTF

14. Liquidity: Early Results From Chi-X
Launching Chi-X is a process, not an event
Chi-X currently trades UK, German and Dutch index constituents with full EMCF clearing. French equities are scheduled to go live by the end September 2007 and Belgium, Swiss and Scandinavian securities by the end Q4*
Trading highlights
Philips Kon % of combined Chi-X/ Euronext volume
ING % of combined Chi-X/ Euronext volume
Royal Dutch Shell A 27.34% of combined Chi-X/ Euronext volume
Fortis Ord % of combined Chi-X/ Euronext volume
*Note:These markets represent 79% of trading activity
on a pan-European basis by turnover
The first order driven pan-European MTF

15. Daily Trading Trend Analysis
The first order driven pan-European MTF

16. Chi-X Value Proposition
Technology
MiFID
Financial
Regulatory
Best
Execution/
Functionality
The
Core
System
Connectivity
Market Data
Trading
Tariffs
Clearing and
Settlement
Chi-X Value Proposition
The first order driven pan-European MTF

17. The first order driven pan-European MTF
The Core System
A low cost, leading edge, open access technology model
Re-engineered 4th generation trading system with high speed connectivity into the core system
Standardised connectivity – FIX 4.2
High throughput, low latency facilitating the trading of high volumes
Platform independent, with IP based connections eradicating the need for any Chi-X specific hardware being deployed on client sites
The Chi-X core matching engine is a proprietary system that resides on the Linux operating system
The core matching engine runs out of the primary data centre, with real-time fail-over functionality at the secondary data centre
The first order driven pan-European MTF

18. Speed: Roundtrip Latency By Venue June 2007
Trading Venue
Average Latency
(milliseconds)
Chi-X 2
LSE SETS 20
Deutsche Börse Xetra 37
Euronext 75
OMX
137
Borsa Italiana
174
SWX
284
VIRT-X
291
Source: Instinet Europe Exchange Linkages gateway internal system performance measurement statistics for average DMA order messaging during April These Instinet internal figures are for round trip latency message acknowledgement based on sending an average number of messages to the exchange system and obtaining a response back to Instinet's system over the course of a normal trading day. Please note: These figures are provided for illustrative purposes only and are not intended to represent an independent performance measure of latency.
The first order driven pan-European MTF

19. Trading System Capacity
Chi-X is built on scaleable low cost hardware enabling increases in current capacity quickly and easily at low cost
Trading Venue
Core cash equity system order flow capacity
(messages per second)
Instinet Chi-X*
30,000
London Stock Exchange**
3,500
virt-x*** 65
Source:
*Independent Test with transact tools proved capacity in excess of messages per second.
** London Stock Exchange
*** virt-x
The first order driven pan-European MTF

20. Connectivity / Market Data
Standardised FIX4.2 protocol. No other specific applications or architecture required.
Connection to network via Radianz or similar. We recommend minimum bandwith of 64K for market access and 256K for market data.
Chi-X is vendor neutral with regards to Smart Routing technology. A test market is available to obtain conformity. A list of 3rd party vendors who already provide a Chi-X compliant solution is also available on the web site.
Real Time data feeds can be accessed directly via a CHIXMD feed, from the Chi-X web site bookviewer, or via third party data vendors in standardised format.
There are no connection fees and market data is provided free of charge.
The first order driven pan-European MTF

21. Future Product Development
Smart Routing Technology
Trade Feeds and Consolidated Market Data
Off Order Book Trade Reporting Service
MIS Data Analysis
The first order driven pan-European MTF

22. Chi-X Value Proposition
Financial
MiFID
Technology
Regulatory
Best
Execution/
Functionality
The
Core
System
Connectivity
Market Data
Trading
Tariffs
Clearing and
Settlement
Chi-X Value Proposition
The first order driven pan-European MTF

23. The first order driven pan-European MTF
Trading Tariff
Trading fees on Chi-X for execution are:
0.20bps rebate for passive execution
0.30bps charge for aggressive execution
Trade reporting charges are £210 pcm
The first order driven pan-European MTF

24. Trading Costs: Chi-X ‘vs’ Exchanges
Trading Venue
Trading Costs (bps)
Instinet Chi-X
0.05*
London Stock Exchange
0.51*
Deutsche Börse Xetra
0.57*
Euronext Paris
0.50*
* based on a passive/aggressive execution ratio of 50:50.
Source: Instinet Europe internal statistics based on average daily DMA trades, volume and consideration.
The first order driven pan-European MTF

25. (£500 if not a participant)
Trade Reporting Costs
Trade reporting off exchange trades to each trading venue:
Trading Venue
Reporting costs
Monthly fee
per trade report
Instinet Chi-X
£210
(£500 if not a participant) £0
London Stock Exchange
N/A
£2.75*
virt-x
£2,100
min activity charge
£0.10**
* Maximum charge
** High Volume Service
Chi-X will allow systematic internalisers to use trade reporting services to meet their MiFID Article 28 post trade disclosure requirements
The first order driven pan-European MTF

26. Per workstation per annum fee for
Market Data Costs
Chi-X Market Data is non fee liable with no license fees
The following market data costs apply for members of each exchange for domestic data. All charges are in local exchange currency.
Trading Venue License Fee
(per annum) Per workstation per annum fee for
level 2 data
Trading Venue
License Fee
(per annum)
Per workstation per annum fee for
level 2 data
Instinet Chi-X £0
Euronext
€ 36,750
€ 696
Deutsche Börse Xetra
€ 32,400
€ 816
London Stock Exchange
£66,000
£1,260
Source: Exchange websites
The first order driven pan-European MTF

27. The first order driven pan-European MTF
Industry Cost Savings
Estimated annual savings of Euros 140 million generated for market participants if Chi-X received 25% of Total UK, German and Dutch Market Volumes
Annual Industry Savings in Euros
$mm
Industry Utilisation of CHI-X
Market
Vendor
25%
100%
Trading UK
LSE 67
270
Germany
Xetra 45
180
Holland
Euronext 28
112
Total savings
140
562
The first order driven pan-European MTF

28. The first order driven pan-European MTF
Clearing & Settlement
An open non exclusive horizontal market model with initial central counterparty services through Fortis EMCF.
Trading access rights uncoupled from clearing and settlement
Dedicated solution for wholesale cash equity financial markets
Focus on an efficient, maximum STP / minimum touch solution
Use of domestic CSDs
An interoperable solution respecting the interests and trade flows of the wholesale market participants
The first order driven pan-European MTF

29. The first order driven pan-European MTF
Market Model
Structure
MTF
Trading
Trading
Participant
Trading
Participant
Trading
Participant
Trading
Participant
MCF
Clearing
Clearing
Participant
Clearing
Participant
Clearing
Participant
Settlement
Settlement
Agent
Domestic
CSD
Settlement
Participant
Domestic
CSD
Settlement
Participant
Domestic
CSD
Settlement
Participant
Relationships
Trading
Participant
Every Trading Participant requires a Clearing Participant (GCM equivalent) to guarantee trades / credit risk
Clearing
Participant
Every Clearing Participant will need to execute a Clearing Service Agreement
Settlement
Agent
Every Clearing Participant will need to have a Settlement Agent at the domestic CSD
MCF
Multilateral Clearing Facility
The first order driven pan-European MTF

30. Stocks Settling In The Domestic CSD
Trading
Participant
Trading
Participant
Post Trade
Participant
Post Trade
Participant
MCF
Netting / Compression
Position management (S-2 to S-1)
Stock Loan
Risk
DVP
Novation
etc ….
CSD
CSD
CSD
The first order driven pan-European MTF

31. EMCF: Clearing Tariffs
Clearing fee.
Charged per line (i.e. per execution).
France: 28 euro cents
Germany: 20 euro cents % order value, cap at 1.2 euro
Holland: 28 euro cents.
UK: 18 euro cents
Settlement fee.
Only payable where a net delivery results.
Local CSD charge FBGC Cost recovery
France: € €1.00 Total= €2.43
Germany: € €1.00 Total= €1.425
Holland: €1.35 €1.00 Total = €2.35
UK: € €1.00 Total= €1.52
NB: FBGC cost recovery includes validation, enrichment, format to meet local CSD message standard,
transmission over relevant network, internal cost recovery for staffing, processing etc.
The first order driven pan-European MTF

32. Chi-X Value Proposition
MiFID
Technology
Financial
Regulatory
Best
Execution/
Functionality
The
Core
System
Connectivity
Market Data
Trading
Tariffs
Clearing and
Settlement
Chi-X Value Proposition
The first order driven pan-European MTF

33. Chi-X Value Proposition
High speed – Over 10 times faster than major European exchange order driven systems
Low cost – 90% cheaper than trading on major European markets
Standardised connectivity – FIX 4.2
No connection fees. Market Data provided free of charge.
Wholesale market CCP solution.
Proven price improvement relative to primary markets
Continued product development responding to client demand
Potential equity participation opportunities for the largest providers of flow
The first order driven pan-European MTF

34. Fast Track: How to get connected to Chi-X
3 Streams:
Legal &Compliance
This process is to ensure that your firm is adequately regulated and authorised to trade on the order book. Chi-X will also carry out a full ‘Know your Client ‘ exercise at this point.
Complete application documents can be found on web site .com (Get Connected/Document Library/Application Forms)
Technical Connectivity
This stage is to ensure your firm can physically connect to Chi-X via FIX 4.2 and conforms with the Chi-X technical specification. A full Chi-X test platform is available.
Clearing & Settlement
You will require your General Clearing Member to be connected to EMCF CCP. For detailed information please contact the Chi-X Director of Clearing & Settlement, who will assist you in this process.
The first order driven pan-European MTF

35. Additional Information
To learn more about the Chi-X value proposition, please contact :
Peter Randall
Director, Head of Business Development
+44 (0)
Jonathan Woodward
UK, Ireland & Nordic Business Development
+44 (0)
Graham Dick
European Business Development
+33 (1)
Hirander Misra
Director - Product Development
+44 (0)
Scott Riley
Director - Operations Website
+44 (0)
The first order driven pan-European MTF

36. The first order driven pan-European MTF
©2007 Instinet, LLC. All rights reserved. INSTINET is a registered mark in the United States. Approved for distribution in Europe by Chi-x Europe Limited which is authorised and regulated by the Financial Services Authority. Instinet, LLC, member NASD/SIPC. Instinet Europe Limited is a subsidiary of Instinet Incorporated.
This information is provided for informational purposes only. It does not take into account the particular investment objectives, financial situation, or needs of any individual or entity. Under no circumstances is it to be used or considered as an offer to purchase or sell any security, or as a solicitation or recommendation of the purchase, sale, or offer to purchase or sell any security. While the information has been obtained from sources deemed reliable, neither Instinet nor its licensors, nor any other party through whom the user obtains any such information: (i) makes any guarantees that it is accurate, complete, timely, or contains correct sequencing of information; (ii) makes any warranties with regard to the results obtained from its use; or (iii) shall have any liability for any claims, losses, or damages arising from or occasioned by any inaccuracy, error, delay, or omission, or from the use of the information or actions taken in reliance on the information. Reproduction or redistribution of this information is prohibited except with written permission from Instinet.
System response times may vary for a number of reasons including market conditions, trading volumes and system performance.
The first order driven pan-European MTF