Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

Exchanges in Today’s Market

December 2015

2

Stock PricingPrices of stocks go up and down constantlyMovements theoretically based on the perception of

future earnings and dividends an investor may receive

Movements may be caused by temporary supply/demand imbalances (or perception of…)

Decisions for the majority of transactions are made by a computer algorithm

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

3

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

Wells Fargo yesterday:

4

Where can stocks be bought and sold?Public securities primarily trade on regulated exchangesAccess to the exchange is restricted to members onlyHow do exchanges compete and earn profits?What is the advantage of executing trades on an exchange?Broker/dealers are regulated businesses which offer access to trading, securities safekeeping, accounting, investment advice or research, and other servicesBrokers typically charge a commission for executing trades

How does this compare with investing in other asset classes - Bonds? Currencies? Oil? Gold?

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

5

Central Exchange:The Buttonwood Tree

How is a central exchange beneficial?

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

6

Multiple Exchanges:Smart Order Routing(“aggregators”)

Can brokers earn revenue by favoring one exchange in their order routing? Or largercustomers over smaller ones?

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein

7

Markets and InformationWhat is the advantage to trade information transparency?Does transparency lead to more price changes? Larger

price changes? Fairer pricing overall?

Seminar: Timely Topics for Today’s Business World

Mr. Bernstein