Matt Hougan, Session Leader

Live ETF Trading

Workshop:
Achieving Best
Executions
When Trading
ETFs

President of ETF Analytics,

Global Head of Editorial
IndexUniverse

Ugo Egbunike, Session Leader

ETF Analyst, IndexUniverse

Cory Laing, Panelist

Managing Director, Goldman Sachs

Will McGough, CFA, Panelist

Vice President, Portfolio Management,

Stadion Money Management

Thomas Smykowski, Panelist

Head of Global Portfolio & ETF Execution,

ConvergEx Group

Matt Hougan

Session Leaders

President of ETF Analytics,

Global Head of Editorial
IndexUniverse

Ugo Egbunike
ETF Analyst
IndexUniverse

Cory Laing

Managing Director
Goldman Sachs

Panelists

Will McGough, CFA

Vice President
Portfolio Management
Stadion Money Management

Thomas Smykowski

Head of Global Portfolio &

ETF Execution
ConvergEx Group

Part 1:
The Basics In 5 Minutes

Bid/Ask Spread

Sell at Bid, Buy at Ask

Bid/Ask Spread

Sell at Bid, Buy at Ask

Bid/Ask Spread

Impact

Bid/Ask Spread

Market Order: Buy 1000 Shares

Market Order: Buy 1000 Shares

The Beauty of iNAV

iNAV = Indicative (or Intraday) Net Asset Value
IOPV = Indication of Portfolio Value
IV = Indicative Value (especially for ETNs)

Yardstick for the current Bid/Ask

SPY vs. iNAV

$151.50

$151.00

$150.50

$150.00

$149.50

$149.00
30/01/2013 9:30

04/02/2013 16:00
Last Price

iNAV

The Crushing Horribleness of iNAV

iNAVs flaws in:
International Funds
Bond Funds
Commodity Funds
and any other asynchronous things
Sometimes international markets over lap:

But not always:

Market Hours Overlap: GXC

$70.50
$70.00

GXC Price

$69.50
$69.00
$68.50
$68.00
$67.50
$67.00
1/18/12 8:00 AM

GXC iNAV
1/30/12 4:27 PM

Premiums/Discounts: EGPT
Egyptian Stock Exchange
closes January 27, 2011
Protests begin
January 25, 2011.
Mubarak resigns
February 11, 2011.

Exchange reopens
March 23, 2011.

Elephants & Knotholes

Trade

Bulls & China Shops

Trade

Whats In An ETF Bid/Ask Spread?

Ask Price

Market Maker P&L

Creation Costs
Forex Hedging Costs
Taxes

Underlying NAV

Spread

ETF
Spread

Brokerage Fees

Underlying Bid/Ask

Brokerage Fees
Taxes
Forex Hedging Costs
Redemption Fees
Bid Price

Market Maker P&L

Price Discovery: Best vs. Available

2-Sided Quotes are fine, but WHEN do you want to
trade?
Immediately?
Layout the position over the next few hours?
Days? Weeks?
How is my strategy affecting my price?

Every Basis Point

Matters

Will McGough, CFA

Vice President
Portfolio Management
Stadion Money Management

Stadions Execution Beliefs

Best Execution is Strategy not Price
Multiple Strategies per Vehicle and Outlook
Integration of PM and Trading
Pre/During/Post Trade Monitoring

Adapt Trading Practices to Ensure Same Avg. Net Price

Leverage Technology for Downstream Automation
Step-In
Challenges (non-discretionary)

Know Your Counterparty

Strengths and Weaknesses
Risk is Risk
Disclosure Documentation and Reporting

The Keys to Trading ETFs

Understand the fair value of the product you intend to trade.
Utilize the full arsenal of trade types when available.
Develop a relationship with your execution platform or
liquidity provider.
Do not undervalue the true cost of not paying attention to the
execution of your ETF positions. Executing efficiently in the
ETF markets is critical for the performance of your portfolios
and can be easily achieved with a small amount of work.
Source: Visual Guide to ETFs, David J. Abner. (173)

Generating Short Term Alpha

114

1.4

112

1.2

110

108

0.8

106

0.6

104

0.4

102

0.2

100

Strategy EOD

Strategy w/ Best Ex

ST Alpha

GS ETF Desk
Capabilities

Cory Laing

Managing Director
Goldman Sachs

Advisor Trends Impacting Trading

Larger size
Tougher tickers and more challenging parts of the
asset class spectrum
More custodians and sub-advisory platforms
Order fragmentation

Greater reliance on risk and sell-side capital

Advisors trade at risk at a far greater rate than other institutions

Externalization of trading function

Prohibitive step-out fees
Historic under-resourcing on advisor trading desks

Role of High Touch Broker Dealers

Trading is the most likely bottleneck to continued
growth if strategy doesnt evolve
Not updating your process often results in:
Performance Slippage

Adjusting your investment process/security selection

often results in:
Broken Business Model

Role of High Touch Broker Dealers

Trading is the most likely bottleneck to continued
growth if strategy doesnt evolve. So:
Either Change what you do:
Modify investments
Modify vehicles
Swaps, notes, underlying portfolios, etc.

Or Change how you do it

Trading

Role of High Touch Broker Dealers

There is no magic best practice once size is
achieved. Do the work, use the sell-side for more
than just price and know your alternatives
Do the work, use the sell-side for more than just
price and know your alternatives
Trading performance is determined far more by
execution strategy than by sourcing prices

Role of High Touch Broker Dealers

Dealers have massive infrastructures set-up to
provide execution advice:
Pre-trade analytics
Run scenarios on trading alternatives when transacting
Granular breakdown of cost components:

Fixed costs
Variable costs
Risk factors and associated costs
Behavioral costs

Transaction Cost Analysis (TCA) to help understand

trading Alpha and behavioral patterns

Role of High Touch Broker Dealers

It is to your benefit to have dealer relationships
who understands your entire business
Know how to:
Minimize order fragmentation
Achieve client equitability issues
Achieve & document best execution responsibilities

How to control information leakage:

Formal leakage
Detectable trading patterns that have the same effect

Cash Management
How to keep you properly invested through a rebalance

Execution Quality Analysis

Same-day closing price
Mid-quote 5-mins post
execution
2

Execution price

Price T+1 to T+5

ST-alpha capture
Execution shortfall

1
2

For example, mid-quote at order arrival

Execution price

Short-term (ST)
alpha

Pre-trade strike price

After trade
impact has
subsided

Volume-weighted average if multiple executions

Post-trade price

Mid-quote 5 minutes after last execution?

Same day close?

T+1 to T+5 average?

What is my trading cost?

What is my short-term alpha?
What is my cost relative to my
short-term alpha?

Disclaimer

This message has been prepared by personnel in the Securities Division of one or more affiliates of The Goldman Sachs Group, Inc. ("Goldman
Sachs") and is not the product of Global Investment Research. It is not a research report and is not intended as such.

Non-Reliance and Risk Disclosure: This material is for the general information of our clients and is a solicitation of derivatives business generally,
only for the purposes of, and to the extent it would otherwise be subject to, 1.71 and 23.605 of the U.S. Commodity Exchange Act. This material
should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation
would be illegal. We are not soliciting any specific action based on this material. It is for the general information of our clients. It does not
constitute a recommendation or take into account the particular investment objectives, financial conditions, or needs of individual clients. Before
acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. The
price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize
losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital
may occur. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or
legal advisers regarding any potential investment. The material is based on information that we consider reliable, but we do not represent that it is
accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing
on this material only and only represent the views of the author and not those of Goldman Sachs, unless otherwise expressly noted.

Conflict of Interest Disclosure: We are a full-service, integrated investment banking, investment management, and brokerage firm. The
professionals who prepared this material are paid in part based on the profitability of The Goldman Sachs Group, Inc., which includes earnings
from the firm's trading, capital markets, investment banking and other business. They, along with other salespeople, traders, and other
professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the
opinions expressed herein or the opinions expressed in research reports issued by our Research Departments, and our market making, investing
and lending businesses may make investment decisions that are inconsistent with the views expressed herein. In addition, the professionals who
prepared this material may also produce material for, and from time to time, may advise or otherwise be part of our trading desks that trade as
principal in the securities mentioned in this material. This material is therefore not independent from our interests, which may conflict with your
interests. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may
from time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives (including options) thereof in,
and act as market maker or specialist in, and serve as a director of, companies mentioned in this material. In addition, we may have served as
manager or co manager of a public offering of securities by any such company within the past three years.

Disclaimer

Not a Fiduciary: To the extent this material is provided to an employee benefit plan or account subject to the Employee Retirement Income Security
Act of 1974 or Section 4975 of the Internal Revenue Code, this material is provided solely on the basis that it will not constitute investment advice
and will not form a primary basis for any persons or plans investment decisions, and nothing in this material will result in Goldman Sachs becoming
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evaluating investment decisions in that its investment decisions will be based on its own independent assessment of the opportunities and risks
presented by a potential investment, market factors and other investment considerations.
Not a Municipal Advisor: Except in circumstances where Goldman Sachs expressly agrees otherwise, Goldman Sachs is not acting as a municipal
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Legal Entities Disseminating this Material: This material is disseminated in Australia by Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897); in
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Reproduction and Re-Distribution: No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii)
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Disclaimer

written consent. Notwithstanding anything herein to the contrary, and except as required to enable compliance with applicable securities law, you
(and each of your employees, representatives and other agents) may disclose to any and all persons the U.S. federal income and state tax treatment
and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to
such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind.

Information Not for Further Dissemination: To the extent this communication contains Goldman Sachs pricing information, such pricing information
is proprietary and/or confidential and is provided solely for the internal use of the intended recipient(s). You are notified that any unauthorized use,
dissemination, distribution or copying of this communication or its contents, including pricing information, in whole or in part, is strictly prohibited.
Further, unless prohibited by local law, any use, review or acceptance of this information is subject to and manifests your agreement with Goldman
Sachs to use such information only in accordance with the terms set forth above. Goldman Sachs has caused its proprietary information to be
delivered to you in reliance upon such agreement.

Not a Valuation: Values herein are not customer valuations and should not be used in lieu of a customer valuation statement or account statement.
These values may not reflect the value of the positions carried on the books and records of Goldman Sachs or its affiliates and should not be relied
upon for the maintenance of your books and records or for any tax, accounting, legal or other purposes. The information provided herein does not
supersede any customer statements, confirmations or other similar notifications.

Indicative Terms/Pricing Levels: This material may contain indicative terms only, including but not limited to pricing levels. There is no
representation that any transaction can or could have been effected at such terms or prices. Proposed terms and conditions are for discussion
purposes only. Finalized terms and conditions are subject to further discussion and negotiation.

Special Risk Disclosure related to Exchange-Traded Funds ("ETFs") and Exchange-Traded Notes ("ETNs"): To the extent this communication contains
information pertaining to ETFs or ETNs, consider the investment objectives, risks, and charges and expenses of the ETFs and ETNs carefully before
investing. Each U.S. Registered ETF and ETN has filed a registration statement (including a prospectus) with the SEC which contains this and other
information about the ETF or ETN as applicable. Before you invest in an ETF or ETN, you should obtain and read carefully the prospectus in the
registration statement and other documents the issuer has filed with the SEC for more complete information about the product. You may get these
documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you may obtain a copy of the prospectus for each of the
ETFs and ETNs mentioned in these materials by (i) contacting your Goldman Sachs sales representative, or (ii) sending a request by calling toll-free 1866-471-2526, or (iii) sending a request by email to Prospectus-ny@ny.email.gs.com, by fax to (212) 902-9316, or by mail to Goldman Sachs, 200
West Street, NY, NY 10282, Attn: Prospectus Department.

Disclaimer

ETFs are redeemable only in Creation Unit size aggregations and may not be individually redeemed; are redeemable only through Authorized
Participants; and are redeemable on an "in-kind" basis. The public trading price of a redeemable lot of the ETFs may be different from its net asset
value. These ETFs can trade at a discount or premium to the net asset value. There is always a fundamental risk of declining stock prices, which can
cause losses to your investment.
Some leveraged and inverse ETFs and ETNs "reset" daily, meaning that they are designed to achieve their stated objectives on a daily basis. They will
therefore realize each day a loss or a gain which is a multiple (for leveraged ETFs and ETNs) or the inverse (for inverse ETFs and ETNs) of the
performance on that day of their underlying index or benchmark. For this reason, if they are held for a period longer than one day, their performance
over such longer periods of time can differ significantly from the stated multiple of the performance (or the inverse of the performance) of their
underlying index or benchmark during the same period of time. This effect can be magnified in volatile markets. Prior to entering into a transaction in
leveraged or inverse ETFs, you should be aware of the general risks associated with such transactions. You should not enter into leveraged or inverse
ETFs transactions unless you understand the nature and extent of your risk exposure. You should also be satisfied that the leveraged or inverse ETFs
transaction is appropriate for you in light of your circumstances and financial condition.
ETFs and ETNs that are linked to commodity futures do not offer direct exposure to the commoditys spot price, and may perform differently than the
spot price for the commodity itself. Performance differential can be magnified if a specific condition persists in the market for a commodity that
creates a disparity between near-term future prices and long-term future prices and may lead to unexpected performance results. Other factors,
such as roll yield, transaction costs, management fees, and taxes may cause deviation in performance between the spot price of a commodity and
commodity futures. You should not assume that an ETF or ETN that is linked to commodity futures will provide an effective hedge because of a
negative correlation with equities or other asset classes. You should always be aware of the general risks associated with investing in the
commodities market and the futures market before investing in an ETF or ETN that is linked to commodity futures.

2013 Goldman Sachs. All rights reserved.

ConvergEx ETF
Execution

Thomas Smykowski

Head of Global Portfolio &

ETF Execution
ConvergEx Group

Algorithmic Strategies

Trade Size
Liquidity Analysis
Historical Spread and Volatility
Average Volume Profile

Block Execution
Estimating Fair Value

Underlying Securities
Creations/Redemption Fees
Brokerage Cost (Commissions and Taxes)
Slippage Risk (Hedging Costs)
ETF Inventory
Alternative Hedging Vehicles

Primary Market Versus Secondary Market

Examples:
Side
BUY
SELL

Ticker
SDOG
FVD

Side
Ticker
BUY/SELL VWO
BUY/SELL EEM

Fund
ALPS Sector Dividend Dogs ETF
First Trust Value Line Dividend Index Fund

ETY Type
US Equity
US Equity

Shares
Approx. Value
1,700,000 $ 48,035,200
2,700,000 $ 49,237,200

Fund
Vanguard FTSE Emerging Mark ets ETF
iShares MSCI Emerging Mark ets Index Fund

ETY Type
International Equity
International Equity

Shares
Approx. Value
1,100,000 $ 48,240,500
1,100,000 $ 47,762,000

ETF Rebalances
Pre-Trade Analysis
(Opportunity Cost versus Market Impact)

Correlation and Exposure

Trade Horizon
Side
BUY
BUY
BUY
BUY
BUY
SELL
SELL
SELL
SELL
SELL
SELL
SELL
SELL

BUY
SELL

Ticker
PWV
FDN
FXH
EWG
MOO
VTI
IYE
IYF
BIL
STPZ
PLW
HYG
EWJ

Fund
PowerShares Dynamic Large Cap Value Portfolio
First Trust Dow Jones Internet Index Fund
First Trust Health Care AlphaDEX Fund
iShares MSCI Germany Index Fund
Mark et Vectors Agribusiness ETF
Vanguard Total Stock Mark et ETF
iShares Dow Jones US Energy Sector Index Fund
iShares Dow Jones US Financial Sector Index Fund
SPDR Barclays 1-3 Month T-Bill
PIMCO 1-5 Year U.S. TIPS Index Exchange-Traded Fund
PowerShares 1-30 Laddered Treasury Portfolio
iShares iBoxx $ High Yield Corporate Bond Fund
iShares MSCI Japan Index Fund

ETY Type
US Equity
US Equity
US Equity
International Equity
International Equity
US Equity
US Equity
US Equity
Fixed Income
Fixed Income
Fixed Income
Fixed Income
International Equity

Shares
430478
237478
279630
402901
181159
77369
135624
92282
130989
110640
187207
64586
798005

Approx. Value
$
10,000,004
$
9,999,985
$
9,999,988
$
10,000,003
$
9,999,977
$
5,999,966
$
6,000,006
$
5,999,991
$
6,000,017
$
6,000,007
$
5,999,984
$
6,000,039
$
8,000,000

Shares
Approx. Value
1,531,646 $
49,999,957
1,596,702 $
50,000,011

Disclaimers

ConvergEx Group is a global technology firm. Its companies focus on providing software products and technology-enabled services in the
following areas: global execution, commission management, independent research, transition management, trade order management,
portfolio margining and prime services. These businesses do not engage in market making, investment banking or at risk proprietary
trading. When executing trades, one or more ConvergEx Group companies may operate in an agency, riskless principal and/or net trading
capacity in search of liquidity for customers.

ConvergEx Group in the United States comprises ConvergEx Execution Solutions LLC (member NYSE/FINRA/SIPC); LiquidPoint, LLC (member
CBOE/SIPC); G-Trade Services LLC (member FINRA/SIPC); Westminster Research Associates LLC (member FINRA/SIPC); Eze Castle Transaction
Services LLC (member FINRA/SIPC); ConvergEx Prime Services LLC (member FINRA/SIPC); Eze Castle Software LLC, RealTick LLC and ConvergEx
Solutions LLC, of which Cogent Consulting, ConnEx, Jaywalk and LDB are divisions. ConvergEx Group, LLC is a subsidiary of ConvergEx Holdings,
LLC.

In London, ConvergEx Group operates its subsidiary ConvergEx Limited, a U.K. broker-dealer that is registered in England and Wales No
06262150, authorised and regulated by the Financial Services Authority, and operates in Australia under an exemption from the requirement
to hold an Australian financial services licence under the Corporations Act 2001. In Hong Kong, ConvergEx Group operates its subsidiary
ConvergEx Asia Pacific Limited, a Hong Kong broker-dealer regulated by the Securities & Futures Commission.

Any trademarks or service marks used by a ConvergEx Group, LLC company are owned by the company using the mark unless indicated
otherwise.

The material, data and information (collectively ConvergEx Information) contained on or available through ConvergEx Group businesses is
intended for institutional investor use only; is for informational purposes only; is subject to change at any time; is not intended to provide tax,
legal or investment advice; and does not constitute a solicitation or offer to purchase or sell securities. The ConvergEx Information is believed
to be reliable, but none of the ConvergEx Group businesses warrant its completeness or accuracy. Please read your agreement with us
carefully, as it contains important information and disclosures about the product or service covered by it.

2013 ConvergEx Group, LLC. All rights reserved. 1/29/13

Part 3:
Building a Price

Building
ETF Prices

Cory Laing

Managing Director
Goldman Sachs

Breaking Down ETF Prices

ETF prices are determined by 2 main factors:
Behavioral factors Economic factors (Costs and Risk)

Trade packaging
Order fragmentation
Follow-on flow
Information leakage
Competitive bidding
Predictability

Liquidity
Volatility
Tracking error of available hedges
Stamp taxes, creation fees & hard friction costs
Balance sheet and cost of capital
Creation mechanism
Underlying market norms and idiosyncrasies

The question too many

people fail to ask is
Do you actually want to pay
for all of this?

Pre-Trade Portfolio Summary

Trade Date: January: 30, 2013. For illustrative purposes only

For illustrative purposes only

Pre-Trade Portfolio Summary

Trade Date: January: 30, 2013. For illustrative purposes only

For illustrative purposes only

Case Study For a Buy of XHB

Correlated Assets

Hedge
Optimizer

54% RTA1
46%XLY
9bps daily
risk
6bps est.
T-Cost

Source: Goldman Sachs Securities Division, Bloomberg. As of 1/31/13

Case Study For a Buy of XHB

Risk pricing and components:
Liquidity:

4cps

(14.5bps)

Hedge:

1cps

(3bps)

Risk:

2.5cps

(10bps)

Friction:

0cps

(0bps)

Counterparty ?
As of 1/31/13

Pre-Trade Portfolio Summary

Trade Date: January: 30, 2013. For illustrative purposes only

Pre-Trade Portfolio Summary

Trade Date: January: 30, 2013. For illustrative purposes only

Case Study for EPP: Relativity

Premium on EPP at 1:14PM: 0.11%

Source: Goldman Sachs Securities Division, Bloomberg. As of 1/31/13

Case Study for EPP - Risk Exposures

Source: Goldman Sachs Securities Division, Bloomberg. As of 1/31/13

Case Study for Sale of EPP

Risk pricing and components:
Liquidity:

5.5cps

(11.5bps)

Hedge:

-1.5cps (-3bps)

Risk:

5cps

(10bps)

Friction:

0cps

(0bps)***

Counterparty ?
As of 1/31/13

Case Study for Sale of BND

Source: Goldman Sachs Securities Division, Bloomberg. As of 1/31/13

Case Study for Sale of BND

Sample Transaction Costs:

As of 1/31/13

Case Study for Sale of BND

Risk pricing and components:
Pricing relative to NAV
ETF Liquidity:

+3cps

(+4bps)

Bond Liquidity:

-9.5cps (-11.6bps)
OR

Risk:

-3cps

(10bps)

Friction (if redeemed): 1cps (1bps)

Counterparty

As of 1/31/13

IOO vs. EEM

Source: Goldman Sachs Securities Division, Bloomberg. As of 1/31/13

Disclaimer

This message has been prepared by personnel in the Securities Division of one or more affiliates of The Goldman Sachs Group, Inc. ("Goldman
Sachs") and is not the product of Global Investment Research. It is not a research report and is not intended as such.

Non-Reliance and Risk Disclosure: This material is for the general information of our clients and is a solicitation of derivatives business generally,
only for the purposes of, and to the extent it would otherwise be subject to, 1.71 and 23.605 of the U.S. Commodity Exchange Act. This material
should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation
would be illegal. We are not soliciting any specific action based on this material. It is for the general information of our clients. It does not
constitute a recommendation or take into account the particular investment objectives, financial conditions, or needs of individual clients. Before
acting on this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. The
price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize
losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital
may occur. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or
legal advisers regarding any potential investment. The material is based on information that we consider reliable, but we do not represent that it is
accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing
on this material only and only represent the views of the author and not those of Goldman Sachs, unless otherwise expressly noted.

Conflict of Interest Disclosure: We are a full-service, integrated investment banking, investment management, and brokerage firm. The
professionals who prepared this material are paid in part based on the profitability of The Goldman Sachs Group, Inc., which includes earnings
from the firm's trading, capital markets, investment banking and other business. They, along with other salespeople, traders, and other
professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the
opinions expressed herein or the opinions expressed in research reports issued by our Research Departments, and our market making, investing
and lending businesses may make investment decisions that are inconsistent with the views expressed herein. In addition, the professionals who
prepared this material may also produce material for, and from time to time, may advise or otherwise be part of our trading desks that trade as
principal in the securities mentioned in this material. This material is therefore not independent from our interests, which may conflict with your
interests. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may
from time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives (including options) thereof in,
and act as market maker or specialist in, and serve as a director of, companies mentioned in this material. In addition, we may have served as
manager or co manager of a public offering of securities by any such company within the past three years.

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Pair Trading &

Execution Strategy

Will McGough, CFA

Vice President
Portfolio Management
Stadion Money Management

Pair Trade - Sell 1M EEM to buy 700k IOO

.90 @ .02
Trades .965

.95 @ .07
Trades .02

VWAP Avg Pr .97

.93 @ .94
Trades .93

Pair Trade - Selling 8mm EWJ to 2mm DXJ

about 50% crosses, 13 bps tracking daily, spreads in the stocks are a bit wide,
but adv is only about 2.5%, so very liquid on both sides

DXJ -- Dec 13, 2012

DXJ -- Last 5 Trading Days

Multiple Leg Strategy

Average Price = 55.8357
5,104,034 Shares
No Impact, didnt trade on Secondary
Combination Basket/Futures/2ndary Strategy
Beat VWAP of Day, VWAP during Window and Close

Traded 5% on
risk @ .97,.15

Traded 10% on
risk @ .62

Worked 20%
from 10-11
~55.76avg

Worked 40%
from 11-12
~55.77avg

Worked 20% from

12-130
~56.013avg

Trading Covers All Situations

Small Lots (<10k) Algo Destinations
Small Blocks (10k-50k) Agency Liq Agg, Prop/Bal Sheet Providers
10k TUR, 50k FEMS
Med Blocks (50k-300k) Agency Liq Agg, Prop/Bal Sheet Prov, Banks
250k IJR, 100k AGZ
Big Blocks (300k-1mm) Agency Liq Agg, Prop/Bal Sheet Prov, Banks
500k VTI, 750k XRT, 500k EWZ,
Mega Blocks (1mm++) Negotiated
5mm XLI, 4mm IEFA

Part 4:
Live Trading

Thank You.
Questions?

Matt Hougan, Session Leader

Live ETF Trading

Workshop:
Achieving Best
Executions
When Trading
ETFs

President of ETF Analytics,

Global Head of Editorial
IndexUniverse

Ugo Egbunike, Session Leader

ETF Analyst, IndexUniverse

Cory Laing, Panelist

Managing Director, Goldman Sachs

Will McGough, CFA, Panelist

Vice President, Portfolio Management,

Stadion Money Management

Thomas Smykowski, Panelist

Head of Global Portfolio & ETF Execution,

ConvergEx Group