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Global Execution Services Electronic Trading Guide Asia Pacific

Global Execution Services

Global Execution Services is BofA Merrill Lynch’s electronic trading and related services platform. Offering a full suite of leading multi-asset trading solutions, it is enhanced by the Firm’s vast global resources, access to superior liquidity, world-class technology and leading scale positions in capital markets. The range of offerings includes multi-asset class direct market access and our powerful algorithmic trading platform backed by 8 groups within Execution Services.

Execution Services

Trader Instinct

Global Equities Trading and Consulting Platform

TM Trader Instinct


TM

Table of Contents

Asia Pacific Algorithmic Strategy Overview

SMA (Smart market access)

VWAP (Volume-weighted average price)

TWAP (Time-weighted average price)

IS (Implementation Shortfall)

POV (Percentage of volume)

QMOC (Quantitative market on close)

AMBUSH®

INSTINCT®

BlockseekerTM

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11

Trader Instinct


TM

Crossing Advanced Algorithms Standard Algorithms SWAP Futures

Instinct X AMBUSH® INSTINCT® BlockseekerTM VWAP TWAP POV IS SMA (Peg, Iceberg) QMOC DMA/Algo DMA

Australia

Hong Kong

India ★

Indonesia

Japan

Korea

Malaysia

Singapore

Taiwan

Thailand

Asia Pacific Algorithmic Strategy Overview Strategy Summary by Market

Strategy Parameters

Start/End Time Urgency Min % Vol Max % Vol Auction Get Done Price Others

AMBUSH® Allow post

INSTINCT® Urgency (1-5) Force Completion (Configuration only)

BlockseekerTM Minimum Cross Quantity, Instinct X only, Cross Limit Price, Mode

VWAP

TWAP

POV Target % Volume , Speed Price, Speed Target %

IS Scaling (Momentum, Neutral, Reversion), Force Completion (Configuration only)

SMA (Peg, Iceberg) Allow Post, Display size, Trade session Peg to, Peg offset, DiscrOffset

QMOC Start time MOC only

OMS/EMS Parameter ★ Click through

1

Equities | Options | Futures | FX | GCM | Execution Consulting | Clearing | Portfolios | ETFs Trader Instinct™ Global Equities Trading and Consulting Platform

Style Description Try using when When to be careful Remember

Advanced Algorithms

AMBUSH® Liquidity seeking strategy Increasing Urgency from Low to Medium to Get Done. Adapts to every quote & print to maximize liquidity

Take liquidity without a footprint (with Allow Post unchecked) Take liquidity with less impact than a DMA order

Use a price limit if the stock is illiquid. Execution affects wait time sensitivity

Aggressively takes liquidity Posts when “Allow Post” is selected Uses dark and lit venues

INSTINCT®

Realizes alpha with 5 settings to tune urgency Quantitative model varies participation intelligently with order size, queue time, real-time volatility, real-time volume prediction, and target vs. actual fill rates

Implementation Shortfall benchmark A go-to algorithm for any order in any environment

Stocks with low trade frequency (few trades per day) Higher urgencies result in faster trading rates and higher potential market impact May finish quickly if circumstances allow Force completion configurable upon request

BlockseekerTM

HK & JP: Posts in Instinct X only, BofAML’s dark pool. Can peg to MID, BID, ASK, NEAR or FAR AU: Posts in Instinct X, Centre Point and Chi-X mid peg. Can peg to MID, BID, ASK, NEAR or FAR. All crossings in accordance with ASIC Meaningful Price Improvement rules.

Seeking natural crossing and liquidity while minimizing information leakage

Use a limit price as protection from volatility Posts at mid unless specified otherwise Does not participate in open/close auctions

Standard Algorithms

VWAP Executes an order over a specified time interval to achieve a volume-weighted average execution price

Alpha neutral trades Where impact is a concern

Will aim to complete if no constraints, so use max % or a price limit for orders with large % of ADV

If momentum is against you, a more optimal strategy such as IS may be advisable

TWAP

Executes an order in equally-sized slices over a specified time interval to achieve a time-weighted average execution price

Maintaining a neutral Delta on multiple names Even market participation into the close

Periods with less volume than usual Can be visible in illiquid markets Will aim to complete if no constraints, so use max % or a price limit for orders with large % of ADV

To unwind a stock vs. a futures position especially in non-auction expiries

POV Tracks market volume to ensure a specified target participation rate

Tracks volume more closely than IS Can be aggressive in keeping up with volume Can be visible in illiquid markets

Remember this strategy is primarily volume reactive, not price sensitive Be careful with names with large spreads

IS

Uses market impact estimates to schedule a trade in order to minimize implementation shortfall Price sensitivity parameter (Momentum or Reversion) speeds up down as price moves in/out of favor

Scaling participation up/down for Momentum or Reversion Control Minimum and Maximum participation rates

Performance may suffer if the stock’s actual movement does not match the Scaling setting Days with company results or news

May finish quickly if volume allows Can configure Urgencies’ Target participation rate Force completion configurable upon request Neutral Scaling has most consistent performance

SMA (Peg, Iceberg)

Simulates iceberg/reserve/display, discretion, pegging, other DMA attributes and order types to simplify trading across all markets Takes liquidity up to limit price then posts residual

Iceberg sweeps up to limit price, then posts/refreshes display quantity Pegging posts /refreshes display quantity at the bid (buys) offer (sells)

Most of residual balance rests in Instinct X for crossing opportunities

QMOC

Targets the Close Price benchmark by starting larger orders earlier Entire order can be sent as an MOC, subject to time constraints

Targeting Close Price benchmark Minimizing impact on Close Price and reversion to next day’s Open Price

Orders >10% ADV may start early Orders sent very near the Close may create impact

Start Earlier (aka Low) starts early with least impact on Close price Start Later (aka High) leaves more quantity for the Close

Asia Pacific Algorithmic Strategy Overview

2

Trader Instinct


TM

SMA Smart Market Access

The Key Dynamics WALK | ICEBERG | PEG

What It Does A series of strategies providing direct market access with capability to trade in the fragmented market landscape

WALK – A smart routing market order used to aggressively exhaust liquidity across lit/dark venues one price level at a time until filled or limit is hit

ICEBERG – Sweep up to the limit price, then post/refresh display quantity

PEG – Passively peg order to near touch across consolidated book

User Controls

Trading Ticket Parameters:

● Mandatory Controls: Stock, Side, Quantity, [Peg To]

● Display Size – Set a custom iceberg peak size to keep order discreet. Large orders without a display will have one defaulted

● Peg To – Price point to peg to (BID/ASK/NEAR/FAR). Mandatory for PEG

Use when:

● You want to aggressively sweep up the liquidity from consolidated market (primary/lit/dark) instead of DMA - WALK

● You want to take liquidity from order book while minimizing the impact - ICEBERG

● You want to passively capture incoming order flow at market price - PEG

Be careful:

● To avoid undue market impact as these strategies provide direct access to the market

● To always consider trading with limit

WALK 1

ICEBERG 2

PEG 3

AGGRESSIVE ORDERS ● Concurrently sweeps all available liquidity within the limit. ● Passively posts the residual quantity and stays until new quotes update or the order gets fully filled/

cancelled/ amended. PASSIVE ORDERS ● Directly posts to the exchange. ● If limit is too passive, WALK either rejects or queues: 1) Japan/Thailand: If limit is more passive than day high/low, rejects. 2) Hong Kong: If limit is more passive than 24 ticks from the same side best, price-queues and re-evaluates

on quote updates. 3) Singapore: If limit is more passive than the forced spread from Last Traded Price, price-queues and re-

evaluates on quote update. The forced spread is: ─ Exchange +/- 20 ticks for stocks traded in SGD. ─ Exchange +/- 30 ticks for ETFs. ─ Exchange +/- 10 ticks for the rest (traded in HKD and JPY).

PROTECTION ● Caches during auction or when market data has an error. ● Provides protection against swift price movement for market orders: 1) Australia: Last Traded Price +/- 5% Limit. 2) Hong Kong: Last Traded Price +/- 10% Limit with max 4 ticks cap. 3) Japan: Last Traded Price +/- 10% for Sell/Buy, +/-15% for Short Sell. 4) Other countries: Traded Price +/- 10% Limit.

WALK is a Smart Order Routing strategy. The two typical scenarios are provided as follows:

ICEBERG sweeps up to limit price, then posts and refreshes display quantity.

● If there is no limit price, ICEBERG uses Fair price* as limit price.

● If max display quantity is not specified by user, ICEBERG optimally decides based on historic average quote size.

*Fair price: Dynamically calculated limit price for Market Order – short-term VWAP plus (for buy) or minus (for sell) an adjustment which depends on stock’s volatility and spread.

PEG passively rests whole order quantity at user specified price (BID/OFFER/NEAR/FAR/MID).

• PEG updates limit price periodically as market price evolves.

• User can use peg threshold to determine how much change on the order book before re-pricing.

PRISM

Primary

Market Quotes

Child Orders

Venue A

Venue B

Parent Order

Fill Info

3

VWAP Volume Weighted Average Price

The Key Dynamics Volume Profile Generation | Slice Management

What It Does VWAP executes an order over a specified time interval by scheduling slices according to historical/predicted volume, aiming to achieve Volume Weighted Average Price

Benchmark: Interval VWAP

User Controls


● Mandatory Controls: Stock, Side and Quantity

● Start time: Time at which order begins (Default: The time of submission/open)

● End time: Time at which order expires (Default: The end of day)

● Auction participation: Participation in open and/or close auctions by default

● Max % of volume: Ensures that any slices submitted will not breach the max % of volume (Default: No restriction)

● GetDone Price: User-specified price that will trigger order to switch to GetDone when stock reaches the threshold

Examples of Customizations:

● Speed Up: Customizing levels at which the participation rate can increase or decrease to. Triggers include: ─ Price threshold ─ Percentage of price move (bps) in a

particular direction ─ # of ticks in a particular direction

● Look Ahead: Slicing the behind schedule quantity of ideal curve to INSTINCT X before crossing the spread

● VWAP volume profile adjustment: Skewing volume profile so that front-loading or back-loading can be done

● Contact your sales rep for more customizations available

Use when:

● Your benchmark is interval VWAP ● You trade alpha neutral stocks where

market impact is of concern ● You aim to complete your order

Volume Profile Generation 1

Slice Management 2

IDEAL CURVE ● Ideal execution curve assuming VWAP follows historically realized volume profile. ● Generated based on the historical volume curve and order size.

MIN CURVE ● Minimum quantity VWAP must achieve. ● Shifted down from Ideal curve by 10%/5%/2%. ● Min curve converges to Ideal curve gradually in the last 20 minutes.

MAX CURVE ● Maximum quantity VWAP can achieve. ● Shifted up from Ideal curve by 10%/5%/2%. ● Max curve takes into account queue time for adjustment. ● Max curve converges to Ideal curve gradually in the last 20 minutes.

DYNAMIC PARTICIPATION RATE ● Participation rate is dynamically calculated by dividing ideal quantity in the next 20 minutes by market volume

expected in the next 20 minutes. ● Ideal quantity in the next 20 minutes is calculated based on Ideal curve. ● Market volume expected to be realized in the next 20 minutes is estimated based on historical average daily

volume (ADV), volume profile and real time market volume. PASSIVE QUEUE vs. SPREAD CROSSING If current accumulated filled quantity is; ● Behind Min curve, VWAP will cross spread to catch up to ideal quantity. ● Between Ideal and Max, VWAP passively takes the queue. ● Between Min and Ideal, VWAP decides whether to passively queue or to cross the spread by using “Risk and

Reward Model” which utilizes order book imbalance. DARK CROSSING ● With Dark Crossing enabled, VWAP posts the behind-schedule quantity at midpoint to INSTINCT X.

Example Order Detail

- Stock: 7203 JP - Side: Buy - Quantity: 1M Shares - Start Time: 12:30PM - End Time: 15:00PM

-

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Ideal Curve

Min Curve

Max Curve

Ideal/Min/Max Volume Profile

Dynamic Participation Rate

● VWAP estimates market volume during 13:00-13:20PM to be 1.5M shares and ideal curve tells to complete 0.30M shares.

● As a result VWAP acts as a 20% POV during the period.

● 20% may change dynamically according to real-time data.

ASK QTY PRICE BID QTY POST QTY TOTAL QTY 4,000 100

99 10,000 2,500 12,500 98 20,000 5,000 25,000 97 50,000 12,500 62,500 96 10,000 2,500 12,500 95 3,000 750 3,750

4

Trader Instinct


TM

TWAP Time Weighted Average Price

The Key Dynamics Volume Profile Generation | Slice Duration Calculation | Slice Management

What It Does TWAP executes an order over a specified time interval by scheduling trade slices evenly throughout the interval, aiming to achieve Time Weighted Average Price


User Controls


● Mandatory controls: Stock, Side and Quantity

● Start Time: Time at which order begins (Default: The time of submission/open)

● End Time: Time at which order expires (Default: The end of day)

● Max % of volume: Ensures that any slices submitted will not breach the max % of volume (Default: No restriction)

● Auction Participation: Participation in open/close auctions by default (No participation during close in Japan)

● Limit price: User-specified price to set the price limit

● GetDone price: User-specified price that will trigger order to switch to GetDone when stock reaches the threshold


● TWAP strategy seeks dark liquidity by default. Orders with the GetDone parameter may complete before End time at prices better than GetDone price


Use when:

● You want to spread out your execution evenly over time while maintaining a neutral Delta on multiple names, but do not want to track stock-specific volume patterns

● You want to participate in the close ● You want to trade IPO stocks on IPO day

and following days

Volume Profile Generation 1

Slice Duration Calculation 2

Slice Management 3

TWAP splits order quantity into equally sized slices to provide evenly balanced market participation.

● Flat volume profile for TWAP:

- Stock: 7203.T - Side: Buy - Quantity: 2.4M Shares - Start Time: 10:00Am - End Time: 13:00PM

TWAP Volume Profile vs. Market Volume Profile

- Order Duration: 120mins - Slice Duration: 5mins - # of slices: 24 - # of shares/slice: 100K

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Price Determination ● Passively posts with limit price or other soft limit constraints. ● Becomes aggressive as End Time approaches by 1) Seeking dark liquidity or 2) Crossing the spread. Alternative Venues ● Gets access to alternative venues in Japan, Hong Kong and Australia, aiming to minimize market impact. Volume Cap ● Trades larger orders with user-specified max% of volume to control market impact.

Scenario

SIZE BID OFFER SIZE 2,500 5,790 5,800 22,100

31,600 5,780 5,810 14,000 50,000 5,770 5,820 11,200

SIZE BID OFFER SIZE 31,600 5,780 5,800 19,600 50,000 5,770 5,810 14,000 21,000 5,760 5,820 11,200

1) TWAP passively slices at 5,790. 2) If slice does not get filled and End Time approaches, then TWAP scans the dark venues. 3) If no dark liquidity is available, then crosses the spread to catch up.

● Slice volume depending on slice duration:

Cross the spread

Volume/min = Order Qty

Order Duration (mins)

Volume/slice = volume/min x Slice Duration

5

IS Implementation Shortfall

The Key Dynamics Real Time Volume Prediction | Trade Schedule | Scaling Parameters (Reversion / Momentum)

What It Does IS uses market impact estimates to schedule a trade in order to minimize implementation shortfall and to determine the optimal trading duration. It seeks to complete all orders by the end of the day (subject to impact constraints) in the absence of a limit price or volume constraint

Benchmark: Snap (Arrival Price)

User Controls


● Mandatory controls: Stock, Side, Urgency (Low, Mid, High) and Quantity

● Start Time: Time at which order begins (Default: Now)

● End Time: Time at which order expires (Default: The End of day)

● GetDone price: User-specified price to trigger orders to GetDone when stocks reaches this threshold

● Max/Min Volume Participation: Maximum % of volume to be targeted (default: No restriction)

● Auction Participation: Participation during open and close auctions by default when applicable (No participation during close in Japan)


● IS seeks dark liquidity by default ● Orders with the GetDone parameter may

complete before End time at prices better than the Get Done prices

● Scaling (momentum / reversion) speeds up or slows down as price moves in/out of favor


Use when:

● Your benchmark is arrival price ● You want to control market impact and

time risk

Real Time Volume Prediction 1

Trade Schedule 2

Scaling Parameters (Reversion/Momentum) 3

Real Time Volume Prediction model generates two different predicted market volumes in the current time bin using real time and historical market volume during trading hours.

Based on real-time volume prediction, IS estimates market impact to schedule orders while trying to balance market impact with time risk. Illustration of IS Scheduling

● Target participation rate changes based on stock volatility.

Target Participation Change Dynamics

Periodic Calibration

Predict

Interval Market Volume

Current-to-Close Market Volume

Real Time Realized Market Volume

Prediction Model

Historical Market Volume

Market Open

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Current Time-Bin

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Order Details

- Stock: 7203 JP - Side: Buy - Start Time: 12:30PM - End Time: 14:45PM - Urgency: Mid - Target Volume%: 2%

*IS order targeting 2% on average is front-loaded to 2.6% and finished before market close

The Scaling parameters allow IS to increase the target participation if stock price moves onside (Reversion) or offside (Momentum) of the arrival price when IS order arrives.

Reversion Momentum

*IS Low/Initial Target: 10%/Buy order TIME

ARRIVAL PRICE ARRIVAL PRICE

TIME

Style Risk Factor Price Moves In Favor Price Moves Away

Target Speed Up Target Speed Up

Reversion Low 10% 15% - -

Medium 20% 30% - - High 30% 45% - -

Momentum Low - - 10% 15%

Medium - - 20% 30% High - - 30% 45%

Neutral All - - - -

15% TARGET

10% TARGET

PRICE

15% TARGET

10% TARGET

Summary of Scaling Parameters

6

Trader Instinct


TM

POV Percentage of Volume

The Key Dynamics Real Time Volume Tracking | Trading Schedule | Dynamic Adjustment

What It Does POV tracks market volume to ensure user-specified target participation rate


User Controls


● Mandatory controls: Stock, Side, Target participation rate and Quantity

● Start Time: Time at which order begins (Default: Time of submission/open)


● Auction Participation: Participation in open and close auction by default (No participation in close auction in Japan)

● Limit Price: User-specified price to set the price limit

● GetDone Price: User-specified price to trigger orders to GetDone when stock reaches this threshold

● Speed Up Price: The price level that would trigger Speed Up

● Speed Up Target %: Target % of volume when Speed Up is triggered


● Speed Up: Levels that are triggered to increase the participation rate to specified target rate. Triggers include absolute or symbolic price

● Dark Exposure: Percentage of orders exposed to dark pools

● Risk factor: Low/Standard/High (Default: Standard)


Use when:

● You want to spread out an order over a specified time frame while closely tracking real time volume pattern

● You want to trade larger orders with minimal impact

● You want to use additional features such as Speed Up parameters or GetDone price to adjust participation rate

Real Time Volume Tracking 1

Trade Schedule 2

Dynamic Adjustment 3

1) POV passively slices at 5,790. 2) If it falls behind the schedule, then POV scans the dark venues. 3) If no dark liquidity is available, then crosses the spread to catch up.

● POV dynamically tracks the real time market volume with client-specified target percentage of volume. ● The desired quantity is posted on the order book up to the price level. ● No trading schedule is generated.

Example

- Stock: 7203 JP - Side: Buy - Quantity: 150K - Target Volume%: 20%

ASK QTY PRICE BID QTY POST QTY TOTAL QTY 5,810

20,000 5,800 5,790 24,000 6,000 30,000 5,780 25,600 6,400 32,000 5,770 16,000 4,000 20,000 5,760 22,400 5,600 28,000

SPEED CONTROL ● Max % and Min % are determined by Target % and Deviation with default being 5%.

ORDER MANAGEMENT ● Passively slices up to Max%, aiming to fill at better prices. ● If filled quantity falls behind Min% by the end of slice duration, POV becomes aggressive by: 1) Scanning dark venue to cross with dark liquidity. 2) Aggressively crossing the spread to catch up, if no dark liquidity available. ● If ahead of the schedule, POV scales back and passively queues.

Scenario

SIZE BID OFFER SIZE 2,500 5,790 5,800 22,100

31,600 5,780 5,810 14,000 50,000 5,770 5,820 11,200

SIZE BID OFFER SIZE 31,600 5,780 5,800 19,600 50,000 5,770 5,810 14,000 21,000 5,760 5,820 11,200

SPEED UP CUSTOMIZATION ● Speed Up looks ahead of execution and

prepares to speed up by putting more quantity at the passive side of the book.

GRADUAL CATCH-UP ● Gradual catch-up prevents Algo from

aggressively following abnormal price volume spikes in the market.

● Splits large trade into multiple smaller trades and catches up on passive side with gradually increasing POV%.

K FACTOR ● K factor decides passive posting levels

based on stock volatility and the distance from the mid price.

Illustration of Gradual Catch-Up

● Volume surge at 10:07AM triggers Gradual Catch-up. ● Determines to catch up over the next 10 minutes. ● Splits 86,708 shares into 10 slices. ● Each slice trades at each minute until 10:17AM.

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Cross the spread

7

QMOC Quantitative Market-On-Close

The Key Dynamics Optimization | Scheduling | Special Treatment

QMOC utilizes a quantitative optimizer to calculate an optimal split of shares between continuous session and closing auction.

Optimization 1 What It Does QMOC executes an order into the close by scheduling trade slices based on volatility and liquidity characteristics of the stock, aiming to strike a balance between variance to the closing price and market impact

Benchmark: Close Price

User Controls



● Start time: Time at which order begins (QMOC decides by default. If user specifies the start time, QMOC uses whichever is later)

● End time: Time at which order expires (Default: Close auction)

● Auction participation: Participation in close auction only

● Urgency: High/Low/Medium which controls the average trading speed in continuous session (Default: Medium)


● The behavior for last 1 minute for QMOC in Hong Kong can be customized (i.e. Switching between passive queue and liquidity taking or liquidity taking only at every 15 seconds)


Use when:

● Your benchmark is closing price ● You trade large orders and the impact

to closing price need to be minimized ● There is no official closing auction on

exchange such as Hong Kong and India

Optimal Split Ratio*

Stock Characteristics

Order Characteristics

Quantitative

Optimizer

Order Size

Urgency

MOC Volume

Spread

Intraday Volatility

Closing Impact

* Quantitative optimizer finds optimal splitting ratio that maximizes [Performance - λ*std dev(Performance)] |where Performance refers to theoretical QMOC performance, λ is a constant used to control the penalty from standard deviation of the Performance (Default λ=0.25)

Scheduling 2

Total order quantity splits into two portions based on the optimal split ratio: Close Auction Session ● QMOC reserves the portion of shares to be traded in close auction session. Continuous Session ● Start time is determined based on 1) the quantity to be traded in continuous session, 2) average daily volume

and volume profile of stock and 4) participation rate (15%/20%/25% for Low/Medium/High Risk factor). ● The trading schedule in continuous session is similar to reversed IS where trading speed slowly increases.

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Optimal Portion to be traded in Continuous Trading Session

Optimal Portion to be traded in Closing Auction

Order Arrival

Special Treatment 3

HONG KONG ● Closing price is reported as the median of 5 price snapshots taken at every 15 seconds in last 1-minute:

15:59:00, 15:59.15, 15:59:30, 15:59:45, 16:00:00 (HST). ● In the last 1 minute, QMOC in Hong Kong aggressively takes liquidity at the volume peaks (i.e. every 15

seconds) if necessary, and passively queues at other times

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Optimal Portion to be traded in Continuous Trading Session

Aggressive Liquidity Taking

Passive Queue

INDIA ● India closing price is determined by the last 30-minutes Volume Weighted Average Price (No closing auction) ● QMOC works as VWAP in the last 30-minutes

8

Trader Instinct


TM

AMBUSH® Liquidity Seeking Algorithm

The Key Dynamics Allow Post vs. No Post | Passive Leg Posting & Dynamic Evaluation | Urgency-Specific Characteristics

What It Does AMBUSH® intelligently lifts liquidity and reacts quickly to stock movements. It constantly monitors stock volatility and re-evaluates market signals

Benchmark: Arrival Price

User Controls



● Allow Post: With this switched on, AMBUSH® passively posts an intelligent and dynamic quantity on the order book (Default: On)

● Start time: Time at which order begins (Default: Time of submission/open)

● End time: Time at which order expires (Default: The end of Day)

● Urgency: 3 Urgency modes affect the relative participation level: Low, Medium and GetDone (Default: Medium)

● GetDone price: User-specified price that will trigger order to switch to GetDone when Far touch is onside of it


● Allow Post: Allow Post enables to post passively on the book using intelligent posting logic to minimize signaling risk while maximizing queue priority at the limit price. Selecting No Post should be used only in specific cases when posting will negatively impact the execution


Use when:

● You want to take the available liquidity without showing your order to the market

● You are more concerned with order completion than price impact

Allow Post vs. No Post 1

Passive Leg Posting & Dynamic Evaluation 2

*Fair price: Dynamically calculated limit price for Market Order – short-term VWAP plus (for buy) or minus (for sell) an adjustment which depends on stock’s volatility and spread.

Limit Order (Limit Price: 65.20) 1) Slices out 52K at 65.05 and 140K at 65.10 and take 192K – First Sweep of 2 Price Levels 2) Posts dynamically calculated iceberg quantity at 65.05 and 65.10 – Passive Leg Posting 3) Slices out 29K at 65.15 to takes 29K and posts iceberg quantity at 65.15 – Passive Leg Posting 4) Slices out 59K at 65.20 (Limit Price) ands take 59K (280K in total) 5) Posts 20K at 65.20 (Limit Price) – Passive Leg Posting 6) Keeps evaluating its trade position upon any quote changes or every time interval – Dynamic Evaluation 7) Decides whether to wait/cross/amend Market Order 1) Computes 65.10 as an initial Fair price 2) Slices out 52K at 65.05 and 140K at 65.10 and take 192K – First Sweep of 2 Price Levels 3) Posts dynamically calculated iceberg quantity at 65.05 and 65.10 (Current Fair Price) – Passive Leg Posting 4) Keeps evaluating its trade position upon any quote changes or time interval – Dynamic Evaluation 5) Decides whether to wait/cross/amend

Example Order Details

Limit Order Market Order

Allow Post

• Aggressively takes liquidity onside the limit • Posts intelligent, iceberg quantity at the limit • Waits for replenishment at the limit

• Computes the fair price* (In the Money Price) • Aggressively takes liquidity onside the fair price • Posts intelligent, iceberg quantity at the fair price • Waits for replenishment at the fair price while

continuously computing the dynamic fair price

No Post

• Keeps crossing the spread onside the limit (i.e. Never posts any quantity on the book)

• May post in dark venues during auctions

• Computes the fair price • Keeps crossing the spread onside the fair price • May post in dark auction

Total Size Bid Ask Size Total

91.6K 91.6K 65.00 65.05 52K 52K

125.6K 34K 64.95 65.10 140K 192K

177.6K 52K 64.90 65.15 29K 221K

272.4K 94.8K 64.85 65.20 59K 280K

304.4K 32K 64.80 65.25 16.8K 296.8K

- Side: Buy - Quantity: 300K - Urgency: Medium (Default) - Allow Post: On (Default)

Urgency-Specific Characteristics 3

* Liquidity sensitivity is a flag to increases the aggressiveness of liquidity taking for AMBUSH®

** The actual number of price levels to be swept depends on limit price (or fair price), urgency and available liquidity

9

Characteristics Urgency

Low Medium GetDone Allow Posting Enabled Yes Yes Yes Dark Enabled (Max %) Yes (50%) Yes (50%) Yes (50%) Liquidity Sensitivity* (Default) Normal Normal Normal

First Sweep Liquidity Sensitivity = Normal Up to 1 level** Up to 2 level Up to 3 level Liquidity Sensitivity = High Limit Price Limit Price Limit Price

Target Volume Percentage

Allow Post Continuous 30% 40% 50% Lit Auction 40% 40% 40%

No Post Continuous 40% 50% 60% Lit Auction N/A N/A N/A

Suitable For Small Cap Middle Cap Large Cap

INSTINCT® IS with Dynamic Signaling

The Key Dynamics Urgency | Tradability | Participation Rate Determination | Dynamic Adjustment

What It Does INSTINCT® is an adaptive and predictive algorithm that trades according to an urgency level set by the client/trader

Benchmark: Arrival Price (Snap)

User Controls


● Mandatory controls: Stock, Side, Urgency and Quantity

● Start Time: Time at which order begins (Default: Time of submission)


● GetDone price: User-specified price that will trigger order to switch to GetDone when stock reaches this threshold

● Max % Volume: Maximum % of volume to target (Default: No restriction)

● Auction Participation: Participation during open and close auctions by default when applicable (No participation during close in Japan)


● INSTINCT® seeks dark liquidity by default ● Orders with the GetDone parameter may

complete before End time at prices better than the GetDone price

● INSTINCT® adjusts participation rate based on Max % restriction


Use when:

● Your benchmark is arrival price ● You want to minimize market impact

while capturing liquidity opportunities

Urgency 1

Tradability 2

Each Urgency level (1 – 5) corresponds to a stock-specific expected alpha.

Dynamic Adjustment 4

Urgency 1 Urgency 2 Urgency 3 Urgency 4 Urgency 5

Low Speed

High Speed

Patient Urgent

Liquidity Taking

High Alpha

Moderate Alpha

Low Alpha

Market Impact is estimated based on spread, order size, volatility and queue length. It is recommended to: ● Trade larger order at faster rate to capture alpha and to reduce time risk ● Trade faster in volatile market to reduce time risk, and post wider to improve performance ● Trade faster for long queue names to exploit liquidity opportunity. At lower Urgencies, prioritize queue position

over trading speed

Participation Rate Determination 3

● Each urgency targets specific market impact as a function of order size and specific level of daily volatility ● Participation rate is determined by matching target market impact with model estimation from stock tradability

Urgency 1 2 3 4 Target Daily Volatility (Ratio

to Daily Volatility) 1/4 1/3 1/2 2/3

Participation Rate by Order Size and Urgency

*This chart is generated with typical JP stock: - 20bps spread - 1.4% daily volatility - 1.1% of ADV

INSTINCT® SIGNAL ● Detects the ultra-short-term price trend based on the recent real-time liquidity history. ● Guides INSTINCT® to speed up or slow down the execution accordingly.

FAIR PRICE MODEL ● Saves INSTINCT® by halting execution on short-term abnormal price movement, and waits for price reversion.

INSTINCT® SIGNAL FAIR PRICE MODEL

513

514

515

516

517

518

519

520

9:10 9:11 9:12 9:13 9:14 9:15 9:16 9:17 9:18 9:19

Liquidity balanced, Signal is neutral

Liquidity on ask side, indicating price is likely to rise, speed up (down) for buy(sell)

Strong liquidity signal on ask side, continue speeding up(down) for buy(sell)

BidAskTrade

110

115

120

125

130

135

13:00 13:05 13:10 13:15 13:20 13:25 13:30

Fair Price Limit for Buy

Fair Price Limit for Sell

Stop buying above the range

Stop selling below the range

10

Urgency 1

Urgency 2

Urgency 3

Urgency 4

0%

10%

20%

30%

40%

50%

60%

0%-1% 1%-3% 3%-5% 5%-10% 10%-15% 15%-20% 20%-25% 25%-30% 30%-35%

Spee

d (%

of v

olum

e)

Order Size (% of ADV)

Urgency 5

BLOCKSEEKER™ Dark Liquidity Seeking Algorithm

The Key Dynamics Fill Allocation| Order Types Supported | Execution Price by Location within BBO on INSTINCT X

What It Does BLOCKSEEKERTM maximizes block-and-flow level crossing opportunities by capturing both internal and external dark liquidity while reducing market impact and information leakage

User Controls


● Mandatory Controls: Stock, Side, Quantity

● Start time: Time at which order begins ● End time: Time at which order expires ● Auction Participation: Does not

participate in the open and close auctions

● Pegs to mid unless otherwise specified



Use when:

● You seek natural crossing and liquidity while minimizing information leakage

Fill Allocation 1

Order Types Supported 2

Only day orders are supported: Market and Limit order.

Execution Price by Location within BBO on INSTINCT X 3

● Japan and Australia’s higher crossing rate at mid implies more chances for BLOCKSEEKER™ to cross at mid. ● Hong Kong’s lower crossing rate at mid is due to less liquidity on INSTINCT X in Hong Kong.

*Source: BofAML In-House Database. September 2013.

Market Order Limit Order 1) Scanning INSTINCT X as Market order 2) Posting to CP only and sending Tentative to INSTINCT X 3) Converting Market to Limit order with price = ref. Price +/- 5% (TBI*) 4) If market moves away, order is cancelled and kicked out (TBI)

1) Scanning INSTINCT X at limit price. 2) Sending Tentative to INSTINCT X 3) Posting to CP and CHI-X

* To Be Implemented

AUSTRALIA JAPAN/HONG KONG

Order PRISM

CENTREPOINT

CHI-X

95%

5%

Tentative

Firm Up INSTINCT X

Firm Order Order PRISM INSTINCT X

AUSTRALIA 1) SCANNING ● PRISM initially scans entire quantity in INSTINCT X if order is aggressive within bid/ask spread. 2) POSTING ● PRISM sends Tentative slice to INSTINCT X and multi-posts with static weight to CP(95%) and CHI-X(5%). 3) FIRMING UP ● Case 1: If INSTINCT X can fully cross, PRISM sends firm order to INSTINCT X as IOC while cancelling other slices. ● Case 2: If INSTINCT X gets partial fills, PRISM sends firm order to INSTINCT X while amending down other slices

and sending another Tentative to INSTINCT X. ● Case 3: If INSTINCT X gets no fills, PRISM keeps posting on CP and CHI-X as well as Tentative slice on INSTINCT X. 4) FILL CHASING ● If CP gets full fills and CHI-X has open slice, CHI-X slice is cancelled and sent to CP. ● No reallocation if CHI-X gets full fills.

JAPAN/HONG KONG 1) PRISM sends entire quantity to INSTINCT X as there is no other dark venue available. 2) After initial routing, slice stays on INSTINCT X until it gets filled/amended/cancelled.

Scenario 1 (Given 1K@99/1K@101 as Bid/Ask on Primary; 1K@100 on INSTINCT X; 1K@100 on CP)

- Stock: CBA AU - Side: Sell - QTY@LIMIT: 2K@99

- Scan INSTINCT X with 2K@99 - 1 Partial Fill with 1K@100 - Post to CP with 950@99 - Post to CHI-X with 50@99

- 1 Full Fill in CP at 100 - Cancel CHI-X slice - Post to CP with 50@99 - 1 Full Fill in CP at 100

Scenario 2 (Given 1K@99/1K@101 as Bid/Ask on Primary; 1K@100 on INSTINCT X; 1K@100 on CHI-X)

- Stock: CBA AU - Side: Sell - QTY@LIMIT: 2K@99

- Scan INSTINCT X with 2K@99 - 1 Partial Fill with 1K@100 - Post to CP with 950@99 - Post to CHI-X with 50@99

- 1 Full Fill in CHI-X at 100 - Another Sell 2K@101 arrives - Post to CP with 1.9K@101 - Post to CHI-X with 100@101

JAPAN

HONG KONG

AUSTRALIA

4.5% 3.6%

83.9% 3.6%

4.5% NEAR

NEAR - MID

MID

MID - FAR

FAR

22.6% 0.1% 54.7% 0.1% 22.6%

98.2% 0.1% 0.1%

11

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