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`TRADING TECH EXHIBIT 2053
`IBG ET AL. v. TRADING TECH
`CBM2015-00182
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`eS0021231
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`~URORA
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`CHICAGO BOARD OF TRADE
`
`AURORAm: THE MOST TECHNOLOGICALLY ADVANCED TRADING SYSTEM AVAILABLE TODAY
`
`Constantly investigating how new tech(cid:173)
`nological developments can enrich its proven
`auction market system, the Chicago Board
`of Trade is committed iri its efforts to always
`meet the demands of the marketplace.
`
`Because of its commitment to all global par(cid:173)
`ticipants, the CBCYI' is proud to present the
`most technologically advanced electronic
`trading system on the market and the only
`one that incorporates the proven efficiency
`of an auction-AURORA'~!"
`
`ticipants to trade in a competitive electronic
`trading pit from virtually anywhere in the
`world. Here are just a few of the benefits
`AURORA™ offers:
`
`Excellent market liquidity available
`through CBar trader participation.
`
`Sustained and improved member
`f"lrm/client relationships.·
`
`Significant cost and time savings.
`
`AURORA™ is an electronic auction market
`system that gives global market participants
`immediate access to the world's most
`actively traded futures contracts when the
`physical auction market is closed.
`
`The power of AURORA"'" lies in its ability to
`capture the proven efficiency of the auction
`market system, while allowing market par-
`
`Complete view of the trading activity
`enables traders to see who is in the market
`and at what price and quantity.
`
`Unp~lleled market integrity through
`an electronic audit trail that works in con(cid:173)
`junction with the clearing process and set(cid:173)
`tlement procedures of the Board of Trade
`Clearing Corporation.
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`AURORA™ ENHANCES MEMBERS'
`OPPORTUNITIES
`
`Local traders are important to the viability
`of futures markets. Their role is invaluable
`in maintaining liquidity in CBOT product
`markets-providing narrow bid/ask spreads
`and consistent trading activity so market
`participants can execute their trades quickly
`and efficiently.
`
`This will not change with the addition of the
`AURORA'™ system. In fact, th.is relationsh.ip
`will be enhanced because:
`
`AURORAT1d will increase local trader
`opportunities because of expanded trading
`hours.
`
`Traders will adapt to the computer-based
`system easily because trading on AURORAT1d
`is user-friendly. It is easy to understand and
`easy to use.
`
`· Training time will be reduced because of
`the similarities to the physical trading pit
`mechanics. ·
`
`AURORAm PROVIDES EXCE~LENT
`MEMBER FIRM INCENTIVES
`
`Member firms also will benefit from using
`AURORN"'by:
`
`Ret.a.m.rng amd ell.llb.amcmg crurrent
`brokerage f"rrmfclient relationships. With
`AURORA';"' the brokerage finn sales force
`continues to act as an important link between
`customers and the exchange. Finns will
`retain the necessary credit controls over
`customer accounts.
`
`Enhancing servicing capabilities for
`clients. International customers will appre(cid:173)
`ciate the increased trading opportunities.
`Firms will be able to provide their clients
`with 24-hour risk-management coverage in
`the most actively traded interest rate
`futures contracts in the world.
`
`fucreasing efficiency of trading opera(cid:173)
`tions. AURORN" has been designed as a
`component of a fully integrated electronic
`trading support system for the futures
`industry. In addition, three leading tech(cid:173)
`nological f"mns-Apple Compute~; Thxas
`Instruments, and Thndem-have been
`involved in the development of this system.
`
`EOS™: AN INTEGRAL PART OF AURORA™
`
`EOS"' is the Chicago Board of Trade's state(cid:173)
`of-the-art order entry/order delivery system,
`designed to receive and confirm orders with
`improved efficiency and greater savings in
`cost and time.
`
`The pathway to both the physical trading pit
`at the CBOT and AURORA';"' EOS"' is the
`vehicle by which customers' orders will
`reach CBOT broker-members. As a compo(cid:173)
`nent of the CBOT fully integrated electronic
`trading system, EOS'"" ean be tised to transfer
`orders from one type of trading session to
`anothe:r:
`
`E08;M designed in conjunction with Bridge
`Market Data, Inc., will benefit the brokerage
`firm by speeding delivery of the customer's
`order to the pit and returning the confirma·
`tion to the customer.
`
`For example, an outside customer calls his
`account executive with an order and that
`order is electronically transmitted directly to
`an AURORAT>I broker. The electronic trans(cid:173)
`mission of the order speeds the process and
`reduces the chance of error.
`
`After the order has been executed, the trade
`confinnation is transmitted electromcall.y to
`the brokerage firm's account executive as
`well as its back office for processing and to
`the Board of Trade Clearing Corporation for
`clearing.
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`A REPLICATION OF PROVEN
`MARKET EFFICIENCY
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`AURORAnt is an electronic trading system
`that allows traders to view and participate
`in a competitive market. Its trade execution
`speed is measured in nanoseconds, with a
`reaction time closely approximating that
`associated with the auction market itself.
`Trade execution is standard for all time
`zones.
`
`Information necessary for traders is
`presented on the screen in the form of
`objects, colors, and text. The re-creation of
`the competitive pit provides an incentive for
`locals to trade, maintaining the liquidity that
`is critical to auction market trading.
`
`The system also provides market trans(cid:173)
`parency. Pa.nicipants can see who is in the
`market and who is executing trades with
`whom-an important component of a com(cid:173)
`petitive market.
`
`Simply stated, the electronic auction market
`provides the essential information that is
`now available on the floor. AURORATM also
`provides the following additional features:
`
`AURORATM identifies the total quantity of
`the bids and offers by- contract month.
`
`AURORA'"" k.eeps a running tabulation of
`the traders' own positions.
`
`AURORN"' provides easy access for
`tradip.g in·different contract months.
`
`AURORATM provides calendar-spread
`quote displays.
`
`AURORATM gives members the flexibility
`to set up their own screen to view whatever
`trading arenas, price displays, and other con(cid:173)
`tracts they want to see.
`
`AURORA m provides trade information
`directly to the Clearing Corporation.
`
`AURORATM reduces the risk for all market
`participants because there are no
`unmatched trades.
`
`"WHEN WE TOOK OUR STORY TO THE BIG SCR
`
`MULTIPLE TRADING ARENAS The largest area
`of the screen is composed of the trading
`arena. There is one trading arena per con(cid:173)
`tract month. In this screen, the front month
`is being viewed. If the back months are be(cid:173)
`ing viewed, up to four contract months can
`be displayed.
`
`MEMI!l!EllliCONS The red circles represent
`members who are offering to sell and the
`blue squares represent members who are
`bidding to buy: The red icon is referred to as
`a member-offering icon and the blue icon is
`refe~ to as a member-bidding icon. Icons
`list the member's acronym and the quantity
`available. The bids and offers on the screen
`are at the market or the icons would not
`appear on the screen.
`
`Note: Member icons appear in random loca(cid:173)
`tions in all trading arenas. For example, a
`trader's icon may appear in the center of
`broker l's trading arena and in the left cor(cid:173)
`ner of broker 2's trading arena. Also, the
`trader's icon will appear in a different loca(cid:173)
`tion every time it appears. on broker l's
`screen.
`
`·
`
`PRICE DISPLAYS At the bottom of the screen
`are the price displays of other contract
`months not listed in the trading arenas.
`There. is room on the screen to list up to 10
`contract month price displays, allowing par(cid:173)
`ticipants to view current bids and offers and
`quantities for each. Participants also can
`join the current bid and offer.
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`N, WE LEFT IN ALL THE GOOD PARTS"
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`PRIORITY BOX The green box in the upper
`right-hand corner of a trading arena is the
`priority box. The bid (and/or offer) of the
`member who makes the market is placed in
`the priority box. A member whose bid
`(and/or offer) is in the priority box is entitled
`to be iilled before any other member who is
`bidding (and/or offering) at the same price.
`
`CURRENT CO
`the contrac
`pie, March.
`shows the<
`current off<
`ask price is
`trading are:
`at 10 and tJ
`
`..
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`:URRERT CONTRACJ PRICE DISPLAY The contract's symbol and
`he contract month's code are displayed here. In this exam(cid:173)
`lie, March bonds are trading (USH). The price display also
`hows the current bid price in the blue-shaded area and the
`urrent offer price in the.red-shaded area. Below the bid and
`sk price is the total quantity being bid and offered in the
`rading arena. Currently, traders want to buy 785 contracts
`.t 10 and traders want to sell1,380 contracts at 11.
`
`OFF LOCAL:
`HOST:
`
`I messages
`
`> transaction request
`sent to host
`> trade request
`accepted: buy 25 from
`KMT
`
`OUT: JWZ
`
`USH+100
`
`93-09 USH BJ.G
`93-09. USH GB
`93-09. USH KMT
`
`TRADE COUNTER The trade counter, located
`in the upper right-hand corner of the screen,
`counts how many contracts the member has
`traded and how many contracts have been
`cleared. This feature allows members who
`want to trade a larger lot than any one icon
`is offeri.r1g to quickly hit many icons while
`the system tallies the quantity of contracts.
`
`MESSAGE PANE The message pane gives the
`user a message after each entry, for exam(cid:173)
`ple, a trade corumnation. Thls screen is
`scrollable, allowirig the trader to review per(cid:173)
`sonal messages.
`
`PIT TRADE SUMMARY BOX This box portrays
`the most recent trades that have been made
`in the pit. For trades with brokers, the pit
`summary box Will show the clearing firm of
`the broker's customer. The. pit trade sum(cid:173)
`mary box is not scrollable.
`
`IN/OUT MARKET BOX The in/out market box
`lists acronyms of those members entering
`and leaving the pit. If a member's acronym
`is listed in the "in" box, this doesn't mean
`the member's icon Will appear in the trading
`arena. This only happens when the member
`is on the bid or offered side of the market.
`
`PlERSO!MAil. TAADIE SUMM8U!1f BOX: The personal
`trade summary box surrun.ariies all trades
`that the member has made. Tills box is
`scrollable. This means the trader Can scroll
`the contents of the personal trade summary
`box to see previous trades that were made.
`
`Oifl!E!Rl flllllT lfl>llUC!E WJISPIJ.Jitf$ The lower right(cid:173)
`hand side of the trading screen contains
`three price displays for contracts outside the
`Treasury bond pit. Members can choose the
`contract and contract month they wish to
`view. The displays give bid and offer prices
`and total quantities available.
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`TRADING ON AURORAm: THE MECHANICS
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`There is a lot of infonnation available on the
`AURORA™ trading screen. This is because all
`of the components that make up physical
`trading are represented electronically on the
`screen. Furthermore, a small mechanical
`device's movement on a desk, otherwise
`known as the mouse, allows traders to move
`to different areas of the trading screen, just
`as if they were walking around the trading
`floor.
`
`So, in essence, the trader will not lose the
`hands-on approach to trading that is avail(cid:173)
`able in the auction market setting. One
`added benefit is that traders can view activ(cid:173)
`ity in other areas of the tradhtg pit, not just
`the contract month in which they are
`positioned.
`
`In summary, AURORAn. means "flexibility:'
`
`Let's run through an example of how a
`trader would use AURORA':"
`
`II Here is CBar member Jim Dobbs (member
`
`acronym JD). Jim Dobbs turns on his
`member terminal, which connects him to
`AURORN01
`. via telecommunications link.
`AURORATM allows member Jim Dobbs to
`view and participate in the auction market
`trading activity of the CBOf's Treasury bond
`futures market. Jim Dobbs decides to enter
`the Treasury bond pit.
`
`Jim Dobbs is now viewing the trading activ(cid:173)
`ity in the CBar Treasury bond electronic
`trading pit. Currently on his screen are the
`trading arenas for March (USH), September
`(USU), and December (USZ) U.S. T-bond
`futures. In each trading arena are icons rep(cid:173)
`resenting the traders. The current price dis(cid:173)
`plays indicate the current bid price in the
`blue-shaded area and the current offer price
`in the red-shaded area. The total quantities
`
`II
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`Page 8 of 12
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`available on each side are within the paren(cid:173)
`theses. This means·that the total of the bid(cid:173)
`ding icons equals the quantity being shown
`in the price display blue-shaded area, and
`the total of offering icons equals the quan(cid:173)
`tity listed in the offer price display box. Cur(cid:173)
`rently, the market for March U.S. bonds
`(USH) is 10 bid for 235 contracts and offered
`at 11 for 235 contracts.
`
`It is important to note that only member
`icons will appear on the AURORA™ trading
`screen. In addition, the only member icons
`that appear on the screen are those for
`members who are bidding on the bid side of
`the market and those for members who are
`offering on the offer side of the market. A
`member may be logged into the pit, but
`unless that member is in the market, his
`icon will not appear in the trading arena_
`
`IJ By looking at the arena, Jim can see that
`
`member JP is bidding 200 contracts, member
`TEN is bidding 100, and member TJC is
`offering 200 contracts.
`
`In order for member TJC to hit member
`TEN's bid for 100 contracts, T.JC simply
`points at TEN's icon and clicks and the trade
`is made. When the trade takes place, an
`arrow will appear connecting the two
`member icons as shown. Every Board of
`Trade member who is logged into the
`Treasury bond pit will see the arrow
`indicating the trade.
`
`.
`
`II With the click of the mouse, Jim Dobbs is
`
`able to quickly move to another contract
`trading arena just as if he were walking
`from one pit into another.
`
`The March Treasury note contract (TYH) is
`now in the trading arena. In addition, the
`price displays at the bottom of the pit are
`for other contract months within the
`Treasury note pit.
`
`II
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`Page 9 of 12
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`II TRADING EXPERTISE: STILL A NECESSITY
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`A broker appears in the trading arena just
`like any other Board of Trade member who
`is on the bid or offered side of the market ..
`Highlighted on the screen is broker-member
`TCO, who is bidding 10 for 25 contracts.
`
`After broker TCO fills 25 at 10, a brokerage
`finn delivers an outside customer order to
`its broker-in this case, broker-member TCO
`-via EOS'?" Broker TCO then uses his exper(cid:173)
`tise to fill the order in the auction market.
`
`As you can see, the market is currently 10
`bid for 785 contracts, 1,380 offered at 11.
`Suppose broker TCO has just received a
`market order to buy 2,000 contracts. With
`AURORA','~ broker TCO has the same number
`of choices for filling the order as TCO has in
`the physical trading pit today. TCO can buy
`the 1,380 offers at 11 and bid 11 for the re(cid:173)
`mainder; TCO canjoin the current bid of 10
`for any portion of his order; or TCO can
`selectively take some of the 11 offers and .
`wait. Obviously, broker TCO's trading exper(cid:173)
`tise is still very valuable to customers when
`using AURORA':'
`
`II
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`THE CHICAGO BOARD OF TRADE:
`MEETING THE CHALLENGE
`AROUND THE CLOCK
`
`For more than 142 years, the Chicago Board
`of Trade has had a history of demonstrated
`effectiveness in responding to the economic
`needs of the marketplace.
`
`For example, in fulfilling its goal of provid(cid:173)
`ing a forum for price risk management, the
`CBOI' first expanded its trading day by 3~
`hours to better serve market participants in
`other international time zones.
`
`Even with this move to expand its trading
`day, however, the CBOI' could not make its
`risk-management capabilities available to all
`business managers in all time zones. Global
`market participants were limited by the fact
`that the hours of physical open outcry
`trading did not coincide with their regular
`business hours in many instances.
`
`Electronic trading seemed the sound, logical
`answer, but no one system existed that
`offered the liquidity, cost-effectiveness, and
`integrity of the open outcry auction market.
`
`'Th meet these particular needs in today's
`highly competitive worldwide market, the
`Chicago Board of Trade developed AURORATM
`-the only global electronic trading system
`that replicates the actual physical market(cid:173)
`place. A link to every time zone in the world
`-there is no question that AURORN., will
`meet the growing demands of the
`worldwide marketplace.
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`Chicago Board of Trade
`
`141 WEST JACKSON BOULEVARD
`CHICAGO, ILLINOIS 60604
`
`1455 PENNSYLVANIA AVENUE, N.W., SUITE 1225
`WASHINGTON, D.C. 20004
`
`52-54 GRACECHURCH STREET
`LONDON EC3V OEH, ENGLAND
`
`IMPERIAL TOWER 6-A-12, 1-1-1 UCHISAIWAICHO
`CHIYODA-KU, lOKYO 100, JAPAN
`
`@Boanl of Trade of the City of Chicago 1990. All rights reserved.
`
`3.90.7500
`EM45-4
`The infonnation in this p\lblication is taken from sources believed to be
`reliab1e, but is not guaranteed by the Chicago Board of Trade as to acc.uracy.
`completeness, nor any trading result, and is intended only for purposes of
`infonnation and education. Nothing herein should be considered as a trading
`recommend:ltlon of the Chicago Board of 'lnde. The Rules and Regulations of
`the Exchange should he consulted as the authoritative source on aU current
`contract speciflc:at!on5 and regulations. It might be advisable to c:onsult an
`attorney regarding the legal restrictions in your state applicable to your
`particular business that might precJude Or limit use of futures markets.
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