`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`-----------------------------------x
`TRADING TECHNOLOGIES, INC.,
` Plaintiff,
` Case No.
` -against- 04-CV-5312
`eSPEED, INC.,
` Defendant.
`-----------------------------------x
` April 7, 2005
` 9:49 a.m.
`
` Videotaped deposition of ROBERT G.
`McCAUSLAND, taken by Defendant, pursuant to
`subpoena, at the offices of Winston & Strawn LLP,
`200 Park Avenue, New York, New York, before Jack
`Finz, a Certified Shorthand Reporter and Notary
`Public within and for the State of New York.
`
`TRADING TECH EXHIBIT 2287
`IBG ET AL. v. TRADING TECH
`CBM2015-00182
`
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`A P P E A R A N C E S:
` McDONNELL BOEHNEN HULBERT & BERGHOFF LLP
` Attorneys for Plaintiff
` 300 South Wacker Drive
` Chicago, Illinois 60606-6709
` BY: MATTHEW J. SAMPSON, ESQ.
`
` WINSTON & STRAWN LLP
` Attorneys for Defendant
` 35 West Wacker Drive
` Chicago, Illinois 60601-9703
` BY: RAYMOND C. PERKINS, ESQ.
` PEJMAN SHARIFI, ESQ.
`
` FRIED FRANK LLP
` Attorneys for the Witness
` One New York Plaza
` New York, New York 10004
` BY: DAVID ZILBERBERG, ESQ.
`
`ALSO PRESENT:
` STEVEN BORSAND
` PATRICK CATANIA
` ROBERT CALVERT, Videographer
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` THE VIDEOGRAPHER: We are now on the
`record.
` This is the video operator speaking,
`Robert Calvert, of LegaLink Action Video, offices
`located at 420 Lexington Avenue, New York, New
`York. Today's date is April 7, 2005. The time
`on the video monitor is 9:49 a.m.
` We are here at the offices of Winston
`& Strawn, located at 200 Park Avenue, New York,
`New York, to take the videotape deposition of
`Robert McCausland, in the matter of Trading
`Technologies, Incorporated, versus eSpeed,
`Incorporated. The venue of this case is the
`United States District Court for the Northern
`District of Illinois. The index number is
`04-CV-5312.
` Will counsel please voice identify
`yourselves and state whom you represent.
` MR. PERKINS: Good morning. Ray
`Perkins, representing the defendant, eSpeed.
` MR. ZILBERBERG: David Zilberberg,
`representing the witness, Robert McCausland.
` MR. SAMPSON: Matt Sampson from
`McDonnell Boehnen Hulbert & Berghoff,
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`representing the plaintiff, Trading
`Technologies. With me today is Steven Borsand
`from Trading Technologies, and Patrick Catania,
`an independent consultant.
` THE VIDEOGRAPHER: Will the court
`reporter please swear in the witness.
` R O B E R T G. M c C A U S L A N D,
`having been first duly sworn by the Notary Public
`(Jack Finz), was examined and testified as
`follows:
` THE VIDEOGRAPHER: Please begin.
` EXAMINATION BY MR. PERKINS:
` Q. Sir, could you please state your name
`for the record?
` A. Robert McCausland.
` Q. And where do you live?
` A. I live in Mendham, New Jersey.
` Q. What's your street address?
` A. 21 Pembroke Drive.
` Q. You have been deposed before; is that
`correct?
` A. Yes, I have.
` Q. About how many times?
` A. At least three.
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` Q. How many times have you been deposed
`regarding the Intex system?
` A. Well, once where it was the relevant
`system in question, yes.
` Q. And which case was that?
` A. That was -- I guess at that point it
`was eSpeed versus the three commodity exchanges,
`Board of Trade, the Chicago Merc and the New York
`Merc.
` Q. Do you still have a copy of that
`deposition?
` A. If I do, I don't know where it is.
` Q. If at any time you do not understand
`my questions, just let me know and I will try to
`repeat or rephrase the question. Do you agree to
`do that?
` A. Yes. Thank you.
` (Defendant's Exhibit 110
`for identification, subpoena.)
` Q. Let me show you what I have marked as
`a copy of Defendant's Exhibit 110, which is the
`subpoena that my office served on you, sir. Have
`you seen this document before?
` A. Yes, I have.
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` Q. And in this subpoena, as the
`attachment, there is a request for documents.
`Did you read that, sir?
` A. Yes, I did.
` Q. And did you look for documents in
`response to the subpoena?
` A. I did.
` Q. And did you have any documents in
`response to the subpoena?
` A. I had a few documents which were
`relevant to some system design and testing
`procedures, but that was about it. The majority
`of the documents that I once had with Intex, I
`left them in Bermuda when I left.
` Q. When you say you left them in
`Bermuda, specifically where did you leave them in
`Bermuda?
` A. Intex had an office on Church Street.
` Q. So you left them at the Intex offices
`in Bermuda?
` A. Yes.
` Q. When did you leave Intex?
` A. Well, in -- let's see. In 1988
`Security Pacific exercised an option to license
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` MR. SAMPSON: Objection; vague.
` A. Well, you would have to -- when you
`say it moved, it moved away from -- if the quote
`moved to the point where, you know, in this
`particular illustration, where last was not still
`within the quote, then it probably -- it resulted
`in a repainting of it, and the price that would
`be oriented there would be something within the
`quote, somewhere between the best bid and best
`offer. Or it could be one or the other if they
`were just a tick apart.
` Q. This is what I am wondering, Mr.
`McCausland. The price range here that is on the
`right-hand side of Defendant's Exhibit 10, the
`price range goes from 86.26 to 86.13; is that
`correct?
` A. Yes.
` Q. And say that those are the only
`prices that I wanted displayed on the screen, no
`matter what happens with the market and the best
`market. Are you with me so far?
` A. Yes.
` Q. So, I mean, if the best market goes
`up, I don't care how much, or goes down how much,
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`these are the only prices that I wanted displayed
`on the Intex screen. Are you with me?
` A. But that wasn't what happened. But
`go ahead. You are saying this is a supposition?
` Q. Yes, this is what I am trying to find
`out. If these are the only prices, 86.26 or
`86.13, that I wanted shown on the screen when the
`best market moved, was there a way I do that in
`the Intex system?
` MR. SAMPSON: Objection; calls for
`speculation. It is also a hypothetical question,
`based on the witness' last answer.
` A. Well, let's put it this way: Number
`one, it is illogical that you would want to do
`that from a trading point of view, so, therefore,
`I'm quite sure that we didn't provide the ability
`to do that, to freeze it.
` Q. Was there a number two?
` Mr. ZILBERBERG: There doesn't have
`to be number two.
` Q. I'm just wondering. You said number
`one.
` So as far as you recall, there was no
`ability to freeze the price column in the Intex
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`system?
` A. No.
` Q. You said that it would be illogical
`to do that. Why is that?
` A. Well, what you are attempting to do
`here is show -- give as much information, as much
`data as possible. So you want to show, what I'll
`say, roughly equal amounts of potential offers --
`you know, actual offers and actual bids. So if
`you froze it and the market moved away, maybe you
`would end up just either cutting the number of
`bids that you could display or the number of
`offers you could display, by however many ticks
`the market moved off what's here, the last price.
` Q. I am looking here under, you know,
`the text under the trading screen. It refers to
`a scroll feature. It says "A scroll feature can
`move the book up or down in order to add depth to
`the market." Could you explain how that scroll
`feature worked in the Intex system?
` A. You know, specifically, I don't
`recall exactly how it worked. It was obviously
`designed so that you could look further into one
`side or the other. But it wouldn't necessarily
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` Q. Contract ID, what does that
`represent?
` A. Well, it's the maturity month of the
`contract, which identifies the specific contract.
` Q. And limit price, that's the price
`that you are going to buy or sell?
` A. Yes.
` Q. Principal agency, what does that
`represent?
` A. Well, if you are a trader and you are
`trading on a principal basis, for your own
`account or the account of your firm, then that's
`designated as principal. Otherwise, if you are
`acting as an agent for a client, then it would be
`an agency trade.
` Q. Time in force, what does that
`represent?
` A. Well, that's, you know, there are
`various times in force. GTC is good till
`canceled. So an order could stay in the system
`for -- it stays there until it gets executed or
`it gets canceled. It could just as easily have
`been a day order, which means at the end of the
`day it automatically cancels.
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` Q. And memo, what does that represent?
` A. That is just a free-form field to put
`information which would be carried along with the
`transaction.
` Q. Now, the trading screen that is shown
`here, is this what the screen looked like when
`Intex was released live in about 1984?
` MR. SAMPSON: Objection to the form
`of the question.
` A. Pretty much this is what it looked
`like, yes.
` Q. When you say pretty much, what do you
`mean?
` A. Well, you know, I don't remember
`exact details, but this was substantively the
`screen that we had in the system.
` Q. Now, to place an order in the Intex
`system, could you explain to me what a user would
`have to do in order to place an order?
` A. All right. As best as I can
`remember, we had special function keys on the
`keyboard which designated what type of order, and
`when I say that I mean are you going to put a buy
`in, a sell, a cancel, a replace. Those are the
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`types of orders that you could enter. And so
`that would get you started with, you know,
`starting to fill in the form at the bottom here.
` Again, you would, by a selection
`process, designate which contract it was that you
`were either bidding or offering in. And then you
`would go on to fill in the other fields.
` Q. Now, every time I placed an order in
`the Intex system, would I have to fill out each
`of the parameters, the order type, buy/sell,
`quantity, contract, limit price? Would I have to
`fill that out each and every time?
` MR. SAMPSON: Objection to the form
`of the question.
` A. Most of the time I believe you had to
`fill them, you know, all these parameters out.
`But, okay, you would start -- obviously, you had
`the function key that said I want to buy, so that
`would get you started there, or bid. But, you
`know, the quantity and the price and those other
`things you would have to fill out, fill in the
`form.
` Q. The function key there was a -- by
`function keys, you mean like F1, F2, F3?
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` A. These probably were the keys we used,
`but I don't remember specifically. I can't
`remember what the keyboard layout looked like.
`But we had, you know, we had keys that, you know,
`represented the various transactions that you
`wanted to do. We had keys that allowed you to
`scroll up and scroll down. And, you know,
`obviously you had the alphabetic and numeric keys
`necessary to fill in quantities and enter data.
` Some of these things would be like a
`toggle, you know. If I got to the principal
`agency, I wouldn't have to type principal in
`there. I had a toggle that said, okay, it is
`agency, principal, and I would keep it in that
`key until it was the form that you wanted.
` Q. Explain the toggle function to me
`again.
` A. Well, for example, I'm looking at
`principal and agency field. When it came time to
`fill that field in, I would have a toggle key.
`You know, I'm focused on that field, I have a
`toggle key, and each time I hit it, it offered me
`one of the options.
` Q. I understand.
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` A. And it would as a result fill that
`option in on the form, in the order form.
` Q. Was the -- strike the question.
` Was the Intex system designed such
`that if I did not want to type in the parameters
`that are on the bottom of the page here, that we
`talked about, but I wanted to default them to,
`you know, a certain thing, like always want to
`buy or have a default quantity, I know what my
`contract is, it's always going to be the same,
`could you do that?
` A. There was no provision for you to set
`up default values.
` Q. So there was no provision for me to
`set up, say, for example, a default quantity, I
`always want to buy or sell at 25?
` A. That's right.
` Q. And there was no way for me to
`default the buy/sell to either buy or sell?
` A. No. You had to initiate that, the
`function key.
` Q. Did Intex have a way to trade through
`the market?
` MR. SAMPSON: Objection to the form
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`of the question.
` A. That would be a function of the
`price.
` Q. Could you explain that to me?
` A. Well, let's take the example here.
`If, let's say, in the June '83, if I want to buy
`500 contracts, I could say buy 500 at 86.21,
`which would mean I would buy the 250 at 86.20 and
`I would buy 300 at 86.21.
` Q. So in the example that you just used
`in the Intex system, the system would, in trading
`through the market, automatically set each of the
`parameters down here to also buy that 86.20 for
`250; is that correct?
` MR. SAMPSON: Objection to the form
`of the question; assumes facts not in evidence
`and mischaracterizes the prior answer.
` A. That all happened in the market
`process.
` Q. What do you mean?
` A. Well, you would have an order come
`in, say buy 500 at, you know, 86.21, and the
`market process would take that buy order and
`match it against the queue of offers, and it is
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`did. I'm sorry. The five bids below the market
`and the five offers above the market.
` A. It would be -- on the Intex system,
`it would be was it within the, you know, say
`seven or eight -- seven price ticks, say. If it
`was in the seven price ticks, it would show it.
`If it was not in the seven price ticks, in the
`normal display it would not show. However, there
`was the scroll feature which allowed you to go
`further in one direction or the other to find
`other orders.
` Q. And I'm, you know, not interested in,
`you know, what -- I want to know if you are sure
`as you sit here today that that's how it worked.
` MR. PERKINS: I am going to object to
`the form of the question. It's argumentative and
`asked and answered.
` A. Could you rephrase the question?
`Does what work?
` Q. Are you sure as you sit here today
`that it is not possible that the Intex system, as
`implemented, would delete prices at which there
`is no quantity in the market?
` A. I'm absolutely positive, because I
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`was long an advocate of saying let's go back and
`redo do this.
` Q. And why did you think that was a
`shortcoming?
` A. Well, because if you are showing --
`you are filling up a page of data that maybe is
`of no value to -- I mean, subsequent
`implementations that I was involved in, when we
`did a book display, which was intended to show
`the depth, we only showed a price where there was
`actually an order, because that's what a trader
`is interested in. He wants to know where the
`orders are. He doesn't want to look at a page
`full of empty prices. And that was one of the
`issues we had here.
` Q. Subsequent implementations of the
`Intex system or other --
` A. Other systems.
` Q. Other trading systems?
` A. We never implemented any changes in
`that aspect of the display on the Intex system.
` Q. Are you familiar with the term Level
`2 screen? Do you know what a Level 2 screen is?
` A. Level 2 screen, in what context is
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`that?
` Q. In the context of electronic
`trading.
` A. No. You will have to explain to me
`what you mean by a Level 2 screen.
` Q. Do you know what a Level 2 NASDAQ
`screen is?
` A. Oh, okay. I've seen the Level 2
`NASDAQ screen.
` Q. Do you know how the Level 2 screen
`works in terms of displaying quantities
`associated with prices?
` A. No, I've never really worked that
`much with the NASDAQ terminals and their screens,
`so, you know, I can't say that I really
`understand how it works.
` Q. Maybe we could refer to the, I think
`it's DX 10, which is the Intex document like
`this. You provided a little bit of testimony
`earlier about highlighting a row in the market
`summary screen to select a contract of interest.
`Is that right?
` A. Yes.
` Q. If you did that, if you highlighted a
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`10 that is shown here, the trading screen that's
`shown on the first page of that exhibit, would
`you agree with me that that trading screen
`accurately represents the graphical user
`interface of the Intex system as it went live in
`1984?
` MR. SAMPSON: I object to the form of
`the question.
` A. The book display that we had was in
`this form.
` Q. And by this form, you are referring
`to what is shown here on the first page of
`Defendant's Exhibit 10?
` A. Yes. Exactly. You know, you had
`multiple prices. You had the quantities shown at
`the price levels, and the other information
`that's here, entering an order.
` Q. And just so I'm clear, you were one
`of the -- you were the one who came up with the
`graphical user interface for the Intex system; is
`that correct?
` MR. SAMPSON: Objection to the form
`of the question. It mischaracterizes his
`testimony.
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` A. Well, I specified what we wanted,
`which was the summary display, and then a book
`display comparable to a specialist's book, what
`he saw, what he had.
` Q. And you were one of the main people
`involved in actually designing the Intex system;
`is that correct?
` A. Yes.
` Q. In fact, you were the main designer
`of the Intex system; is that true?
` A. Probably, that would be accurate.
` Q. And Mr. Gomes was the main software
`developer of the Intex system; is that correct?
` A. Yes, he was.
` MR. PERKINS: Thank you. I have no
`further questions.
` MR. SAMPSON: I just have one last
`followup.
` EXAMINATION BY MR. SAMPSON:
` Q. In your testimony before you say that
`it was a shortcoming to design the display with
`prices that have no quantity associated with
`them, so I'm wondering why would you design the
`display that way?
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` A. Well, let's put it this way: I
`didn't necessarily design the display. That's
`the way it was programmed. And it was -- you
`know, I will put it this way, there were just too
`many other things that were important to work on
`the system than this display.
` Having spent some time, particularly
`with the group in New York, it was the summary
`page that they worked off, and occasionally they
`would go here. But, by and large, they worked
`off the summary page.
` Q. The group in New York, do you mean
`traders or developers?
` A. Traders.
` Q. Traders?
` A. Traders. And I'm thinking -- I'm
`speaking specifically of the -- I can't think of
`the firm we had who was making markets for us.
` Q. And why is it that they used
`primarily the summary page?
` MR. PERKINS: Objection; calls for
`speculation.
` A. That's where most of your information
`is. It shows you the best bid, the best offer,
`
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`and if there was -- only if you were interested
`in doing, say, a larger quantity than what, say,
`was offered or bid, then you go see, well, is
`there more depth to this, I mean, one tick down
`is there another quantity that would interest me,
`and I would be willing to pay down to get it.
`But it's usually, you know, the best market is
`what interested people and that's where they
`traded.
` MR. SAMPSON: Thanks, Mr.
`McCausland. I appreciate your time today.
` MR. PERKINS: Thank you.
` THE VIDEOGRAPHER: This marks the end
`of Tape No. 5 in the videotape deposition of
`Robert McCausland. We are going off the record.
`The time is 3:53.
` (Time noted: 3:53 p.m.)
`
` _______________________
` ROBERT G. McCAUSLAND
`Subscribed and sworn to before me
`this _____ day of _________, 2005.
`
`__________________________________
`
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