`
` UNITED STATES DISTRICT COURT
` NORTHERN DISTRICT OF ILLINOIS
` EASTERN DIVISION
`
`Trading Technologies
`International, Inc
` Civil Action No 04 C 5312
` Plaintiff,
` Judge: James B. Moran
`v.
` Magistrate: Sidney I.
`eSpeed, Inc., eSpeed Schenkier
`Internatinal Ltd.,
`Ecco LLC, and EccoWare Ltd.
` Defendants.
`__________________________/
`
` DEPOSITION UPON ORAL EXAMINATION
` of DAVID FELTES
` on Wednesday, 24 January, 2007
` Taken at:
` Taylor Wessing,
` Caremlite House,
` 50 Victoria Embankment,
` Blackfriars, London
` England, UK
` Before Susan A. McIntyre, CSR, RPR, CRR, MBIVR
` ELLEN GRAUER COURT REPORTING CO. LLC
` 126 East 56th Street, Fifth Floor
` New York, New York
` 212-750-6434
` Ref: 83136
`
`TRADING TECH EXHIBIT 2275
`IBG ET AL. v. TRADING TECH
`CBM2015-00182
`
`Page 1 of 20
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` A P P E A R A N C E S:
` FOR THE PLAINTIFF:
` MATTHEW J. SAMPSON, ESQ
` McDONNELL BOEHNEN HULBERT & BERGHOFF LLP
` 300 South Wacker Drive
` Chicago, IL 60606-6709
` Tel: (312) 913 0001
` Fax: (312) 913 0002
` STEVEN F. BORSAND
` TRADING TECHNOLOGIES
` 222 South Riverside Plaza, Suite 1100
` Chicago, IL 60606
` Tel: (312) 476 1018
` Fax: (312) 476 1182
`
` FOR THE DEFENDANT:
` JAMES M. HILMERT, ESQ and RAYMOND PERKINS, ESQ
` WINSTON & STRAWN
` 35 West Wacker Drive
` Chicago, IL 60601-9703
` Tel: (312)558-6214
` FaxL (312)558-5700
`
` FOR CQG, INC.
` MARK W. FISCHER, ESQ
` FAEGRE & BENSON LLP
` 1900 Fifteenth Street
` Boulder, CO 80302-5414
` Tel: (303) 447 7000
` Fax: (303) 447 7800
`
` IN ATTENDANCE:
` PAT KIRK, VIDEOGRAPHER
` ANGLO-AMERICAN COURT REPORTERS
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` ------------------ I N D E X -------------------
`WITNESS EXAMINATION BY PAGE
`DAVID FELTES MR SAMPSON 5
` MR HILMERT 59
` MR FISCHER 165
` MR SAMPSON 186
` ------------------ EXHIBITS -------------------
` EXHIBIT FOR I.D.
` Feltes Exhibit No. 1 17
` Feltes Exhibit No. 2 57
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` A. Yes.
` Q. Could you start by giving us a brief
`rundown of your educational background; I think after
`secondary school.
` A. I went to Washington University in
`St Louis. From graduating in '93 I have a Bachelors in
`Political Science with Economics minor and I have taken
`some IT courses at De Paul.
` Q. The IT courses at De Paul followed your
`education at Washington University?
` A. Yes.
` Q. How many classes did you take at De Paul?
` A. Two.
` Q. Are you currently taking any continuing
`education classes?
` A. No.
` Q. Where do you reside?
` A. I reside in London, in Blackheath.
` Q. Could you give us the address for the
`record?
` A. 26 Weymss, W-E-Y-M-S-S, Road, SE3.
` Q. Are you a US citizen?
` A. I am a US citizen and I'm also a UK
`citizen. I have dual nationality.
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` Q. After your graduation from Washington
`University, can you tell me a little bit about your
`work history?
` A. Sure. I worked on the family farm for a
`while in West Chicago, Illinois, and then in July of
`1994 began working for MJM Trading, which was
`associated with Marquette Partners. I clerked on the
`floor and then did system trading and programming
`upstairs concurrently.
` In 1995 I began working half my time and
`half my salary was paid for by Marquette Partners in
`working with their traders and their IT staff,
`basically doing trader support as well as trading
`off-the-floor systems for them.
` In 1996 I went full time with Marquette in
`Marquette Electronic Brokerage, which was a brokerage
`unit that they had formed. At that point I did IT as
`well as brokering and clearing in back office. As well
`as continuing doing trader support for Marquette, the
`main company.
` In 1998 I began doing IT full-time for
`Marquette. In September of '98 I came to Europe, to
`their Frankfurt offices, their Paris offices and their
`London offices for about eight weeks.
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` And then it was decided that I would become
`general manager in IT for Marquette London in the
`consolidated offices in February of '99. So from
`February of '99 until 2000 I was the general manager.
` Late 2000 I became the managing director in
`charge of IT for London as well as the management of
`London as well as some other global responsibilities.
`I remained in that role, going back and forth to
`Chicago as well as Asia, doing business development,
`ISVs and macro development for Marquette.
` In April 2006 I was named CEO of Marquette
`Partners, and that's my current role today.
` Q. Can you just tell me briefly over the
`period of your work experience what kind of experience,
`if any, you have had with trading?
` A. I was a pit clerk for a top bond trader in
`the US Treasury Bonds. And then off the floor we would
`do system trading, which is essentially designing
`systems that would then -- on trade station software --
`coming up with the idea, writing the code and then,
`when that system would activate we would get on the
`phone and either phone to the floor or a broker. So
`basically phone trading. There were other
`discretionary trading that was done on behalf of my
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`bosses, with them making the decision but I would be
`the one who would actually fill those orders.
` In my time with Marquette Electronic
`Brokerage I would take clients' phone calls and trade
`on either the Eurex front end or any software that we
`had, and I have been -- I'm responsible in my risk
`management duties to exit trades when either an
`individual system goes down or if an office goes down.
` Q. OK. You mentioned a little bit of software
`development, trading software. What other kinds of
`experience have you had in software development?
` A. I have taken a Basic programming course, a
`basic Basic --
` Q. The language Basic?
` A. Yes. I have -- I know easy language from
`trade station and I would not consider myself a
`programmer but have limited exposure.
` Q. Tell me a little bit about Marquette
`Partners. What is the business of Marquette Partners?
` A. Marquette Partners is a proprietary trading
`firm based in Chicago with now a London office. We do
`not trade client money. We are primarily electronic
`traders although our business model has been arbitrage
`between Bund and the LIFFE floor and the Eurex machine.
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`We are members of 12 to 13 exchanges worldwide. We
`have multiple entities. There's a Hong Kong entity, an
`energy entity, etcetera. Essentially we have, I think,
`probably about 60 people now. So we have fluctuated in
`size over the years. But it is a limited partnership
`based in Chicago.
` Q. Do the traders employed by Marquette -- are
`they on the floor of an exchange or do they trade
`primarily electronically?
` A. They trade electronic. We're a proprietary
`trading firm, not necessarily an arcade. All the
`traders are sole -- are employees of the firm, so
`there's no independent contractors or whatever.
` Q. Out of the 60-some current employees, how
`many of those are traders?
` A. In and around 30 to 35.
` Q. And all of them trade through electronic
`interfaces; is that accurate?
` A. That is correct.
` Q. Can you tell me in your various roles at
`Marquette what responsibilities you have had in terms
`of trading software selection?
` A. I think when I became general manager here
`in London in '99 I spent a lot of time getting to know
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`the London community, which I think was a little
`further advanced with electronic trading, with the
`LIFFE floor going electronic, and got to know a lot of
`the independent software vendors at the time and was
`responsible for bridging the gap between the traders --
`what the traders wanted and what was available in a
`burgeoning marketplace with new technology. So
`essentially I was the liaison between the various ISVs
`and the exchanges and my management and my traders.
` Q. You have used the acronym ISV, could you
`just express what that is?
` A. Independent software vendor. Basically
`front-end trading systems for access to futures and
`equity electronically-traded markets.
` Q. So have your responsibilities at Marquette
`included reviewing software products for traders?
` A. Yes. I give seminars internally regarding
`the various ISVs that we have used and I have formed
`relationships with various ISV vendors to basically
`find out what the cutting edge software is so we can
`implement it for our traders.
` Q. Is it also part of your responsibility to
`make selections of which software vendors are going to
`be utilized by Marquette Partners?
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` A. Yes.
` Q. Tell me a little bit about -- you mention
`that you review new softwares, new technologies that
`are coming out for the traders. Can you explain for us
`a little bit what involvement, if any, traders or end
`users have in relation to the functionality of the
`software that they use?
` MR HILMERT: Object to the form.
` A. Can you restate the question?
`BY MR SAMPSON:
` Q. I'm just curious whether traders, end users
`of the software products, have any role in the
`functionality that's involved in the product?
` A. Yes, frequently. And using the word
`"liaison" I would bring in the ISV rep and have them
`work with the various traders and have them sit down,
`watch them trade, and they would give suggestions and
`then we would -- I would be responsible for helping
`follow up on those suggestions to get those ideas
`either in further releases or to tell traders that what
`they wanted is not possible in the current situation.
` Q. Do you know any, currently as you sit here
`today, any specific ISVs that have implemented
`suggestions that came from traders at Marquette?
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` A. Yes. I believe the Trading Technologies
`has implemented in early pre-2000 some of the ideas in
`terms of fast-click trading and slippage. I believe
`that -- that would be one example.
` Q. Are you aware of any others?
` A. There are others. I can't think of any
`specific examples.
` Q. Is it typical for ISVs to be proactive in
`terms of trying to introduce new software solutions?
` MR HILMERT: Objection to form.
` A. Yes.
`BY MR SAMPSON:
` Q. Well, how is software development typically
`driven in your industry?
` MR HILMERT: Objection to form.
` A. I believe that generally, in order to help
`-- to please the customer and get their software into a
`prop shop, an ISV -- and I have connections with
`several ISVs -- they would generally come into the
`office, discuss their new products, what their edges
`were, etcetera, ask for time to spend with the traders,
`and I would generally select a trader who was not too
`busy and that had some ideas and could communicate
`essentially what they were trying to do in the markets
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`showed you, was that in response to input or
`suggestions from you or people at Marquette?
` MR HILMERT: Objection to form.
` A. No.
`BY MR SAMPSON:
` Q. Was it unusual to you to see a software
`company introducing a product that different --
` MR HILMERT: Objection --
` Q. -- than what you were aware of?
` MR HILMERT: Sorry. Objection to form.
`Objection, calls for a lay opinion.
` A. Could you restate the question?
`BY MR SAMPSON:
` Q. I'm just curious if it struck you as
`unusual that TT was showing you a product that was so
`different from what you were aware of.
` MR HILMERT: Same objections.
` A. Yes. It was different. While I had seen
`new versions of multiple ISV softwares and new versions
`of TT software, this seemed to be a new paradigm or a
`change that we hadn't requested but it seemed different
`than previous systems that we had seen.
`BY MR SAMPSON:
` Q. Were you at Marquette motivated to improve
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`the trading screens that you had?
` A. Without a doubt.
` Q. What efforts did you take at Marquette to
`try to improve the trading screens?
` A. Not only having -- not only with me as the
`liaison between the various different reps, our Chicago
`ISV reps as well as our London ISV reps, of having them
`interact with the various traders, interact with the
`management. We also would regularly -- not
`regularly -- we would solicit various different ideas
`for improvements or what we call "edge," which is
`opportunity to create profits in the markets. We also
`polled our traders and asked them for any suggestions
`that they may have in order to help us get better
`access to the markets.
` Q. Is that polling of your traders, is that
`what you referred to here in paragraph 8 of your
`declaration that we just marked as Exhibit 1?
` MR HILMERT: Objection. Hearsay.
` A. Yes.
`BY MR SAMPSON:
` Q. So tell me a little bit about the results
`of the poll.
` A. The traders -- we asked the traders to come
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`up with various ideas that they had in terms of what
`would make the better product, what would be more
`efficient to visually draw a new display or basically
`come up with, you know, your ideal system. And I would
`say they had some marginal suggestions, changes, but
`I did receive from both Chicago and London traders'
`ideas and suggestions on ways to improve the software
`that we used to get better access to the markets.
` Q. Did any of the traders suggest anything
`remotely like MD Trader?
` A. No.
` MR HILMERT: Objection to form. Objection,
`hearsay.
`BY MR SAMPSON:
` Q. You have talked a little bit about this but
`I want to focus on it now. Do the features in
`MD Trader of having a static price access and
`single-click order entry provide any benefits that you
`are aware of?
` MR HILMERT: Objection. Calls for lay
`opinion.
` A. Yes. Our traders are able to quickly put
`bids and offers into the market, know their position,
`visualize correlated markets, have price -- more price
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`assurety [sic] in that they know what they are clicking
`is where -- the region that they are clicking will put,
`with a single click, either a bid or offer in, and
`basically it allowed them to more efficiently trade the
`markets in a quick, scalping manner.
`BY MR SAMPSON:
` Q. What experiences do you have that make you
`aware of those benefits?
` MR HILMERT: Objection. Lay opinion.
` A. In my capacity as risk manager not only do
`I -- am I aware of -- and I was aware of -- trader
`performance, but when I would have to exit out of
`positions for the firm, then I realized how efficient
`it was and that essentially, in my opinion, it helped
`make us, our traders, more money and in risk management
`positions helped save us money.
`BY MR SAMPSON:
` Q. I want to refer to paragraph 5 now of your
`declaration. I have a couple of questions about that.
` The first sentence includes the statement
`that MD Trader proved to be a superior trading tool.
`What did you mean by that?
` MR HILMERT: Objection. Hearsay.
` A. Because of the visualization, the static
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` Q. Are you personally aware of GL introducing
`a front-end trading screen that had a static price
`access with one-click order entry?
` MR HILMERT: Objection to form.
` A. No.
`BY MR SAMPSON:
` Q. Do you have any personal knowledge of
`eSpeed introducing a product having a static price
`ladder with one-click order entry?
` MR HILMERT: Same objection.
` A. No.
`BY MR SAMPSON:
` Q. Did you ever provide feedback to any other
`ISVs about the static price ladder and single action
`order entry functionality?
` MR HILMERT: Object to the form.
` A. Yes, we had -- in my role as liaison
`several ISVs were in our office working with the
`traders on what functionality they liked and how to
`help improve their systems. And there was feedback
`regarding the desirability of the static visualization,
`one-click trading of MD Trader.
`BY MR SAMPSON:
` Q. Do you remember which ISVs that feedback
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`was provided to?
` A. RTS.
` Q. Anyone else?
` A. Ecco.
` Q. Anyone else?
` A. No.
` Q. Do you recall who at Ecco was provided
`feedback on that product functionality?
` A. My contact there was James Davies.
` Q. What did the other ISVs tell you, if
`anything, about why they were including a static price
`ladder and single-click functionality into their
`screens?
` MR HILMERT: Objection to the form.
`Objection, calls for hearsay.
` A. Could you restate the question?
`BY MR SAMPSON:
` Q. Yes. I'm just curious what, if anything,
`the vendors, the ISVs, told you about why they were
`including static price -- a static price ladder and
`single-click order entry functionality in their
`screens.
` MR HILMERT: Same objection. Matt, which
`ones are you talking about?
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` MR SAMPSON: The competitors that he
`mentioned. The ISVs that he mentioned, Ecco and RTS.
` THE WITNESS: They had said that that's
`what traders had been asking for that they had spoken
`to and they wanted to, you know, be competitive with
`the new TT product.
` MR HILMERT: Object to the answer.
`Hearsay.
`BY MR SAMPSON:
` Q. Referring to your declaration, I want to
`direct you to paragraph 7. Could you review that for
`me and let me know if you feel that is accurate --
`paragraph 7 that is.
` A. I will.
` I think that's representative of my views
`at the time of signing.
` MR HILMERT: Objection, hearsay
`BY MR SAMPSON:
` Q. Is it still accurate today as you sit here?
` A. Yes.
` MR HILMERT: Same objection.
`BY MR SAMPSON:
` Q. Do you remember any particular ISV that
`told you they were coming out with a screen that
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`duplicated the features of MD Trader?
` MR HILMERT: Object to the form.
` A. RTS.
`BY MR SAMPSON:
` Q. Anyone else?
` A. I most clearly remember the RTS.
` Q. OK. Do you recall -- is it your
`recollection that others said it but you just don't
`remember who it was?
` MR HILMERT: Objection to the form.
` A. I remember several specific instances with
`RTS. I remember having multiple conversations with
`other ISVs, including PAT Systems and Ecco, about
`MD Trader and what elements of it that our traders
`liked. And -- but I don't have a specific recollection
`regarding them saying they are going to come out with
`those as well.
`BY MR SAMPSON:
` Q. OK. Fair enough.
` Mr Feltes, do you own any stock in TT?
` A. No.
` Q. Do you have any interest whatsoever in TT?
` A. No.
` Q. Do you care who wins this case?
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` A. I don't really know the specifics of the
`case but -- well, I don't -- in terms of I don't
`understand patent law, whatever, I really would rather
`have competition in the market. So I'm not overly
`happy with restrictions placed on software competition.
` Q. Do you have an ownership interest in
`Marquette?
` A. I'm a limited partner.
` Q. Is there any benefit to Marquette if TT
`prevails in this case?
` A. No. It is probably a negative element.
` Q. What is that?
` A. Lack of competition among ISVs. Potential
`monopolistic or bargaining pricing power. There could
`be changes in the pricing power that would adversely
`affect Marquette.
` MR SAMPSON: I want to ask the court
`reporter to mark this as exhibit 2.
` (Feltes Exhibit No. 2 was marked for identification)
` Mr Feltes, I'm handing you what we have marked
`as Exhibit 2. It is, I will represent to you, a
`print-out from the Ecco website. At the bottom of the
`page it is identified: the Internet address, the
`universal resource locater, and it bears the date of
`
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