CHAPTER 1: EVIDENCE ON INSTITUTIONAL TRADING PRACTICES Moderator - Lin Peng, Zicklin School of Business, Baruch College Assistant Professor Asani Sarkar, Federal Reserve Bank of New York Economist Robert Schwartz, Zicklin School of Business, Baruch College Marvin M. Speiser Professor of Finance and University Distinguished Professor Wayne Wagner, Plexus Group Co-Founder & Chairman Avner Wolf, Zicklin School of Business, Baruch College Executive Director, University International Programs' LIN PENG: It is a great pleasure to moderate this panel today. Wayne Wagner could not be with us today. John Phinney from JP Morgan is here, and John we thank you for filling in. JOHN PHINNEY: I will do my best to convey the essence of the research that we recently completed on the cost dynamics associated with institutional order flow. To a retail investor, the stock exchanges look like a vending machine. An order is placed, the delivery is made and the execution comes back. The broker has completed his or her job, often within seconds. But this is not the case for the institutional trader. As we know, the order size - the 'peg' of ^ At the time of the conference, Avner Wolf was Chairman of the Economics & Finance Department. ^ The presentation was prepared by Wayne Wagner with the help of John Phinney, who made the presentation. At the time of the conference, John Phinney was at JP Morgan. "* The analysis is based on data supplied by investment management clients of the Plexus Group. Ali Jahansouz of Plexus Group conducted most of the internal research. Meei Tsem Jeng of the University of California Financial Engineering Program also provided research.