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DMMs DESIGNATED MARKET MAKERS IMPROVING LIQUIDITY AND MARKET QUALITY • DMMs are core liquidity providers – DMMs are dedicated market makers that provide liquidity in a given NYSE or NYSE MKT security by assuming risk and displaying quotes in the exchange limit order book. In 2015, DMMs accounted for about 12% of liquidity adding volume in NYSE-listed securities, on average. • DMMs reduce volatility – DMMs provide price stability by satisfying market demand for a security at competitive prices. If investors are selling, DMMs are typically buying, and vice versa. • DMMs improve price discovery at the open and close – NYSE’s opening and closing auctions are the largest single volume events of the trading day. DMMs contribute capital in the auctions to satisfy market demand, and provide human judgment and communication. Volatility is typically the highest during the first hour of trading as participants digest overnight news. DMMs help to establish the right opening price to minimize early-morning volatility. • DMMs reduce trading costs for investors – DMMs enhance market liquidity and reduce quoted spreads. • DMMs have much higher trading obligations than traditional market makers – The table below provides a summary of DMM affirmative obligations under our rules and NYSE-funded liquidity provider incentives to encourage greater quoting and liquidity. For example, unique DMM depth guidelines on the NYSE require them to dynamically add liquidity to the order book when there is not sufficient public liquidity. These depth guidelines are customized by security and change with every trade. COMPARISON OF DMM OBLIGATIONS VS. TRADITIONAL MARKET MAKER The following table summarizes DMM obligations backed by incentives on NYSE and NYSE MKT. Regulatory Requirements DMM Traditional MM Depth guidelines: Dynamically add liquidity to dampen volatility when insufficient public liquidity Yes No Quoting requirements: Quote certain percentage time at best prices (NBBO) Yes No Auction requirements: Facilitate orderly open/closes and contribute capital to satisfy market orders Yes No Conditional transactions: Must re-enter with sufficient volume when removing liquidity Yes No Capital requirement: $125 million plus additional inventory-risk capital for NYSE DMMs Yes $1 million Maintain continuous quote: Must quote within a certain percentage of the best price Yes Yes Individual accountability: Dedicated trader providing human judgment and communication Yes No Quoting rebate: Payment to quote certain percentage time at best prices Yes Some exchanges Quoting size rebate: Payment based on quoted size at best prices Yes No Liquidity provision rebate: Payment based on the amount of liquidity adding volume Yes Some exchanges Price improvement rebate: Payment to encourage posting midpoint orders inside the best price Yes Some exchanges Market data rebate: Payment to improve quoting in less active securities Yes No Flat fee rebate: Payment to improve quoting in less active securities Yes No Exchange-Funded Incentives www.nyse.com NYSE: DESIGNATED MARKET MAKERS (DMMs) 1 NYSE - LEADING THE WAY IN MARKET QUALITY 1 Most Market Share and Liquidity NYSE NYSE 24.4% NASDAQ 12.4% NYSE ARCA NYSE 75.6% NYSE 45.8% NASDAQ 7.4% BZX Most Time at Best Prices 43.1% NYSE ARCA 6.3% 35.5% EDGX EDGX 5.9% BZX BYX 4.2% BYX 33.1% 24.7% EDGA 2.3% EDGA 14.7% Nasdaq BX 1.8% Nasdaq BX 14.5% Nasdaq PSX 0.9% Nasdaq PSX NYSE has the most market share with almost 100% more liquidity than the next largest exchange. Most Block Market Share 2 NYSE NYSE EDGX 1.8% CSX 1.6% NYSE ARCA 1.4% 38.3% Narrowest Quoted Spreads EDGX Nasdaq BZX 0.5% 0.2% BYZ 0.2% EDGA 0.1% Nasdaq BX 0.1% NSX 68 233.9 bps 296.9 bps 422.6 bps BYX 451.7 bps EDGA 649.7 bps Nasdaq PSX 1224.1 bps Nasdaq BX 0.0% NYSE has the largest block market liquidity among exchanges. Most Displayed Shares at Best Prices NYSE NYSE 1135 1279.1 bps NYSE has the narrowest quoted spreads. Most Time and Size at Best Prices 468.2 NASDAQ 437.3 NYSE ARCA EDGX 383.8 EDGX 322.5 NYSE NYSE NYSE ARCA BZX bps 165.9 bps NYSE Arca 1.3% BZX NYSE NYSE NASDAQ Nasdaq PSX 9.5% NYSE is at the best price (NBBO) 65% more often than any other exchange throughout the day. 48.5% NASDAQ BZX 15.8% 12.2% 10.7% 6.1% BYX 131.7 BYX Nasdaq PSX 128.7 EDGA 1.3% 3.4% EDGA 92.2 Nasdaq BX 1.3% Nasdaq BX 58.5 Nasdaq PSX 0.7% NYSE has the most displayed shares at the best price, more than double the next largest exchange. NYSE is at the best price with the greatest size more than three times longer than any other exchange throughout the day. Source: Consolidated tape data in February 2016. 1 For NYSE listed issues only. 2 Trade size of 10,000+ shares. © 2016 Intercontinental Exchange, Inc. All rights reserved. Intercontinental Exchange and ICE are trademarks of Intercontinental Exchange, Inc. or its affiliates. New York Stock Exchange and NYSE are trademarks of NYSE Group, Inc. or its affiliates. For more information regarding registered trademarks see: intercontinentalexchange.com/terms-of-use. www.nyse.com NYSE: DESIGNATED MARKET MAKERS (DMMs) 2