EdgeTrade Algorithmic SuitePowered by FAN Technology

Strategy U.S./Europe Function Objective Sample Scenario

FAN U.S.Europe

• Sweep and probe dark pools and public markets for liquidity.• Simultaneously rest and intelligently circulate shares through-

out dark pools (and back to ATSs and public markets).

• Liquidity sourcing andbest execution

Consider: BBO = 32.80 – 32.81… perceived liquidity is available “but where?” Buy 50,000 ABC @ 32.84 top. Never display greaterthan 1,000 shares out loud. I want to be opportunistic. Aggressively participating in all public and dark venues simultaneously,while adapting to shifting liquidity. My goal is to reduce opportunity cost at the expense of some potential price impact.

Covert U.S.Europe

• Sweep and probe ATSs. Rest (post) intelligently in dark-pools.

• Dark liquidity sourcingand best execution

Consider: BBO = 22.10 – 22.30 and liquidity is sparse. “Sell 100,000 DEFG @ 22.00. Be passive never interacting with public venues.Float with the inside quote, sourcing actionable liquidity in all dark pools only.

SUMO U.S.Europe

• Time urgent.• Uses real-time and historical liquidity measures to

determine speed in completing an order.

• Complete trade quickly• Minimize impact risk

Consider: BBO = 20.25 – 20.26 Perceived liquidity is available “but where?” A MKT (aggressive LMT) order may still incur price im-pact. This is a time urgent order to Buy 50,000 XYZ @ MKT. I want to get completed immediately for the entire quantity at 20.26if possible. Otherwise, meticulously work the order into the marketplace and back off when necessary in order to keep marketimpact contained.

Oasis U.S.Europe

• Sweep and probe dark pools and public markets using anadaptive liquidity sourcing and anti-gaming logic thatleverages both historical information and intraday feed-back to execute orders in small- and mid-cap equities whileminimizing impact.

• Optimally source inlow ADV names such assmall/mid-cap securities

Consider: BBO=12.50 – 12.60 and the stock is a small- or mid-cap. Liquidity is insufficient and trading costs are inevitable if theimplementation process is not optimal. Avoid impacting the supply/demand characteristics of the BBO by only accessing themost probable dark pools and do not display my intentions in the public quote. Closely monitor the spread for caustic behaviorsuch as gaming, take appropriate action and reenter the market when conditions normalize. If liquidity improves alter the tac-tics to participate with traded volume. Monitor trend and take action if liquidity we are absorbing appears to be impactingprice. I am aware that my order may not complete in its entirety.

Smart Order Execution Algorithms (Liquidity Sourcing)

Strategy U.S./Europe Function Objective Sample Scenario

SmartVTrack

U.S.Europe

• Aggressive volume tracking algorithm driven by FAN.• When in-line with participation parameters, strategy

intelligently seeks to match public market volume byparticipating in displayed and non-displayed markets.

• Powered by FAN technology.

• Intelligently trade upto target volumepercentage

Consider: BBO = 50.25 – 50.27 where liquidity is of moderate concern. Buy 100,000 DEF @ 50.75 top and be 20% of the volume.You can passively trade slightly ahead of the traded volume but not greater than 22%. Conversely don’t fall behind less than18% of the displayed volume. While trading in line simultaneously, I want to turn the Dark Switch on which will work theentire balance of my order in all dark pools (Covert) and not count these executions toward my percent of volume calculation.

ArrivalPrice

U.S.Europe

• Calculates optimal trade horizon to balance market impactwith price risk based on specified urgency level.

• Performance is measured as follows: if stock has notopened, the previous close is used.

• If stock is open, the cross side of the market is used(ask for buy, bid for sell). Powered by FAN technology

• Minimize slippage (fromthe arrival price) basedon specified urgencylevel

Consider: BBO = 32.85 – 32.87. “I want to trade this order with minimal dispersion from my arrival price (32.87) while striving tomaintain trading costs in balance. Buy 50,000 ABC @ MKT. If the price begins trending against my benchmark then increase thetrading rate. Conversely if the price begins trading at more favorable prices then tune down the trading rate and be more passive.

VWAP U.S.Europe

• Participate proportionally with expected volume profile.• Powered by FAN technology

• Match VWAP overspecified time period

Consider: BBO = 22.48 – 22.50. The market hasn’t opened and the indication is much lower related to a news announcement in ahighly correlated name. Buy 200,000 XYZ @ MKT. I believe the stock price will recover later on in the trading horizon. Therefore Iwant to instill this bias by using the Tilt parameters and front-loading my share distribution relative to the volume curve.

TWAP U.S.Europe

• Spreads executions evenly over designated time period.Powered by FAN technology

• Track TWAP overspecified time period

Consider: BBO = 22.48 – 22.50. Buy 200,000 XYZ @ MKT. Volatility in this equity is unusually high today. I believe the most optimalimplementation strategy is to participate in a linear manner throughout the day. I want to use the Take and I Would Parameters,so that if the stock price increases to 22.73, I can convert the order to FAN to Take it all at that price point. Similarly, if the pricedecreases to 22.05, I can convert the order to FAN to buy it all at my I Would price.

TargetClose

U.S.Europe

• Calculates the optimal trade horizon striving to achieve anexecution outcome with minimal price dispersion from theclosing print.

• Target closing price asbenchmark

Consider: I’ve missed the cut-off time for a MOC order. My goal is to execute ahead of the final cross with minimal dispersion fromthe closing print. “Using previous days’ trading behavior intelligently determines the optimal interval and participation rate.

Benchmark & Participation Algorithms

Strategy U.S./Europe Function Objective Sample Scenario

10b-18 U.S.

• Monitors trade quotes in real-time to ensure compliancewith time and price conditions for issuer stock repurchaseswith the use of algorithms (VWAP, TWAP, Arrival Price,Smart Vtrack)

• Execute within thesafe-harbors provisions

Consider: Issuer stock repurchase order to buy 100,000. Certain conditions and parameters should be met related to both timeand quantity of actual executions to remain compliant under the safe harbor rules. Compliance logs are created, including lastsale and quote conditions at time each order is sent or modified.

Other Algorithms

1 Dark Switch – Allows the user to choose to have the algorithms trade outside their default parameters when liquidity is available on non-displayed destinations.2 Take and I Would – Allows the user to override the default benchmarks and enter custom price levels to convert the algorithm into a time-sensitive FAN order.

For additional information:U.S. Tel: +1.646.981.1199

Toll: 888.440.334Europe. Tel: +44.20.7997.2123

algosupport@knight.com

For additional information:U.S. Tel: +1.646.981.1199

Toll: 888.440.334Europe. Tel: +44.20.7997.2123

algosupport@knight.com

EdgeTrade Algorithmic SuitePowered by FAN Technology

Strategy U.S. Europe Limit/Market Max Vol %Start.

(End) Time Style Tilt Aggression IOCI Would(Take)

Dark Switch(Min Dark QTY)

On Open(Close) Crosses 10b-18

FAN � � � � � �

Covert � � � � � �

SUMO � � � � � � � �

Oasis � � � � �

Arrival Price � � � � � � � � � �

VWAP � � � � � � � � � �

TWAP � � � � � � � � � �

Smart VTrack � � � � � � � � �

Target Close � � � �

10b-18 � � � �

Parameter Settings

Aggression Levels (Settings) for FAN (Illustration represents a “BUY” Order)

Aggression Setting Order Type BID Mid-point ASK

Aggressive + MKT (LMT) ▶ .......................................◀

Aggressive PEG-MKT ▶ .......................................◀

Neutral PEG-MID ▶ ......................◀

Passive + NA ▶.◀▶ ......................◀

Passive PEG-PRIME ▶.◀

▶ [IOC only] Represents both Public and Dark venues.

▶ [Post & IOC] Represents both Public and Dark venues.

▶ [Post & IOC] Represents Public venues.

▶ [Post & IOC] Represents Dark venues.

▶ [Post only] Represents both Public and Dark venues.

Tilt Parameter Applicable for VWAP and TWAP

Style Setting Aggression Level

-5.0 � Front-Loaded where -5 will complete most of theorder within the first quarter of TIF

0.0 � Will trade in-line with historical VWAP/TWAPthroughout the entire TIF

5.0 � Back-Loaded where 5 will complete most ofthe order within the last quarter of TIF

Buy & Sell Illustration with Applicationof Market Stop and I Would Instruction

Take and I Would allows the userto pre-specify price thresholds thatinstruct the algorithms to modifyits aggression level to completethe order.

Take �■

Buy Order �●

I Would �■

(Target)

■

� I Would(Target)

●

� Sell Order

■

� Take

$110

$105

$100

$95

$90

Basic VWAP ‘Front-Loaded’ Tilt

�

� �

Each dimension (three arrows) depicts a sepa-rate order, where each is parameterized withan identical (in this example ‘front-loaded dis-tribution’) Tilt and TIF. The goal of this chart isto demonstrate the effect of an identicalTilt/TIF on share distribution relative to thebenchmark (in this case VWAP).

VWAP Benchmark

Time Horizon

Rat

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f Pa

rtic

ipat

ion

©January 2010 Knight Capital, Inc. All rights reserved.Knight Direct LLC and Knight Equity Markets, L.P. are wholly owned subsidiaries of Knight Capital Group, Inc. and are members of FINRA and SIPCTo learn more abouit Knight Capital Group, Inc. (Nasdaq: NITE) go to www.knight.com

Style Parameter Applicable for Sumo and Arrival Price

Style Setting Aggression Level

1.0 � Very Aggressive

0.0 � More Aggressive

-1.0 � Aggressive