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Sourcing Option Liquidity

Henry Schwartz, President, Trade Alert, LLC

Panelists:

William Bartlett, CEO, Parallax Volatility Advisors

Jean Cayla, Head of US Execution Trading, Optiver

Michael C. Khouw, President, Optimize Advisors, LLC and Chief Strategist, Tradelegs, LLC

Stephen J. Solaka, Managing Partner, Belmont Capital Group

Market Growth

Source: OCC, Trade Alert (2017 forecast)

PCX

EDGX

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.0B

0.5B

1.0B

1.5B

2.0B

2.5B

3.0B

3.5B

4.0B

4.5B

5.0B

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Gro

wth

Co

ntr

act

Vo

lum

e

ETF & Equity Index 5yr CAGR

Recent Growth

Source: Trade Alert (2017 forecast)

1.4B1.8B

2.0B 2.0B 2.1B 2.0B 2.0B 2.2B 2.1B 1.9B 2.1B

260m

290m

243m 285m338m

323m 387m422m

416m437m

494m

0.6B

1.1B1.0B

1.2B

1.7B

1.4B1.4B

1.5B 1.5B 1.6B1.6B

0.0B

0.5B

1.0B

1.5B

2.0B

2.5B

3.0B

3.5B

4.0B

4.5B

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017est

ETF

INDEX

EQUITY

Underlying Growth

0

100

200

300

400

500

600

700

January-09 January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17

ETF

0

20

40

60

80

100

January-09 January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17

INDEX

0

1000

2000

3000

4000

5000

January-09 January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17

STOCK

Source: Trade Alert, 28 Feb 2017

308 634

84 66

2881 3697

Contract Growth

Source: Trade Alert, 28 Feb 2017

3273

4396

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

January-09 January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17

Un

der

lyin

g Li

stin

gs

Co

ntr

acts

Lis

ted

EQUITY

INDEX

ETF

LISTINGS

Institutional Users

Source: SEC, Trade Alert

240

720

0

100

200

300

400

500

600

700

800

90013F Filers Reporting Options

Participants

Source: SEC, Trade Alert Q42016

Product Concentration

Source: Trade Alert, 28 Feb 2017

SPY, 16%

.SPX, 7%

.VIX, 4%

AAPL, 3%

IWM, 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Average Daily Volume %

SPY

.SPX

.VIXAAPLIWMBAC

QQQ

VXX

XLF

FB

EEMAMD

NVDA GDX

GLD TSLA

TWTRAMZN

MSFT UVXYTLT

FCX RAD USO FXI

Top25

Premium Concentration

Source: Trade Alert, 28 Feb 2017

.SPX, 45%

SPY, 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

.SP

X

SPY

AA

PL

AM

ZN

.RU

T

IWM FB

.ND

X

TSLA

.VIX

NV

DA

QQ

Q

PC

LN

GOO…

BA

C

GO

OG

VX

X

NFL

X

BA

BA

GLD G

S

UV

XY

AM

D

MSF

T

GIL

D C

AG

N

JPM

EEM

SVX

Y

GD

X

XLF X

TLT

CM

G

BM

Y

DIS

XO

P

DIA

TWTR

WFC

BII

B

NU

GT

MU

QCO…

Average Daily $ Premium

.SPX, $1903.1M

SPY, $321.7M

AAPL, $129.9M

AMZN, $108.4M

.RUT, $88.5M

IWM, $67.9MFB, $66.9M

.NDX, $65.7M

TSLA, $65.3M.VIX, $59.0M

QQQ, $37.1M

PCLN, $29.1M

GOOGL, $28.2M

BAC, $27.2M

GOOG, $25.4M

BABA, $18.0M GLD, $17.6M GS, $15.7M

Premium Leaders Top 80%

Source: Trade Alert

0%

10%

20%

30%

40%

50%

60%

January-10 January-11 January-12 January-13 January-14 January-15 January-16 January-17

% T

ota

l Mar

ket

Vo

lum

e

Nonstandard Expirations

%WKLY

%QTRLY

%MONTHEND

60 per. Mov. Avg. (%WKLY)

Source: Trade Alert

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan

-09

Apr-…

Jul-

09

Oct

-09

Jan

-10

Apr-…

Jul-

10

Oct

-10

Jan

-11

Apr-…

Jul-

11

Oct

-11

Jan

-12

Apr-…

Jul-

12

Oct

-12

Jan

-13

Apr-…

Jul-

13

Oct

-13

Jan

-14

Apr-…

Jul-

14

Oct

-14

Jan

-15

Apr-…

Jul-

15

Oct

-15

Jan

-16

Apr-…

Jul-

16

Oct

-16

Jan

-17

Spread Market Share

INDEX PRODUCTS

NONINDEX

Source: Trade Alert

50% 40%

6%

0%

10%

46%

63% 6%

41%

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

AMEX ARCA BOX BXO BZX C2 CBOE EDGX GEM ISE MERC MIAX NOM PEARL PHLX

Complex Order VolumeFebruary 2017

NONSPREAD

SPREAD

Source: Trade Alert

19% 11%

58%

0%

21%

39%

0%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

AMEX ARCA BOX BXO BZX C2 CBOE EDGX GEM ISE MERC MIAX NOM PEARL PHLX

Reported* Price-ImprovementWeek ending 2/24/17

NORMAL

IMPROVED

Source: OCC, Trade Alert

0.0 M

5.0 M

10.0 M

15.0 M

20.0 M

25.0 M

30.0 M

2010 2011 2012 2013 2014 2015 2016 2017

Annual FLEX Option Volume

STOCK

INDEX

ETF

MDLZ, 24%

.SPX, 9%

EEM, 8%

AAPL, 6%DIS, 6%

PFE, 5%

EWZ, 5%

EFA, 4%

.XSP, 3%

FLEX OI Top25

Source: Trade Alert

Source: Trade Alert

Source: Trade Alert

Source: Trade Alert

Source: Trade Alert