Clearance and Settlement Services Provided by NASDAQ Execution Services, LLC

INET provides its subscribers, through its clearing firm, with a choice of settlement options:

I. Trade Compression;
II. Qualified Special Representative (QSR) Clearing;

A. How the program works

With Trade Compression, INET will bundle a subscriber's transactions on a stock-by-stock basis at the end of the day. Trades are aggregated by side of transaction (i.e. Buy or Sell) and are then given a VWAP (Volume Weighted Average Price). This figure is then reported to the National Securities Clearing Corporation (NSCC), a Division of Depository Trust Clearing Corporation (DTCC) for clearing.

B. Benefits

Trade Compression provides several advantages:

• Simplified Transaction Processing - By compressing transactions you are able to minimize the number of transactions submitted for clearing and internal trade processing (i.e. proprietary or retail trade tickets). Simply stated, you significantly lower the number of line items you need to review.
• INET provides all necessary reports to assist subscribers and their clearing brokers in the reconciliation process that are incidental to the execution and clearing process.
• Extended Trading Hours - Trade Compression subscribers enjoy INET's full hours of operation from 7am to 8pm (ET). Subscribers that clear via ACT will only be able to trade on INET until 6:30pm (ET), the time that NASDAQ's ACT system closes.

C. Availability of Service

All self-clearing INET subscribers are invited to participate in the Trade Compression program. All introducing brokers are invited to participate in Trade Compression upon approval of their clearing broker-dealer.

INET’s clearing broker has been approved by many NSCC member firms to act as a Qualified Special Representative ("QSR"). This allows INET’s clearing broker to submit two sided transactions directly to NSCC for clearance.

A. How the program works

Qualified Special Representatives are responsible for submitting contra trade information to NSCC. NSCC receives this information and converts it into the NSCC T + 1 Contract Sheets. Both INET's clearing firm and the subscriber's clearing firm then use these Contract Sheets to compare and reconcile all transactions effected on INET.

When clearing QSR trades, your clearing broker authorizes INET’s clearing broker to bypass NASDAQ’s ACT system and submit ‘locked-in’ transactions directly to the NSCC for clearing. By doing so, however, your clearing broker may not be able to use NASDAQ’s ACT Risk Management System to monitor your firm’s trading activity. Your clearing broker may therefore request “drop copies,” or real-time reports, of the transactions that INET submits to NSCC on your behalf. Alternatively, your clearing broker may request to submit your trades to the ACT Risk Management System. INET will be happy to assist your clearing broker with this request.

B. Benefits

QSR provides several advantages:

• Simplified Transaction Processing – By submitting transactions directly to NSCC for clearing, the potential for trade breaks or discrepancies is greatly reduced.
• Extended Trading Hours – QSR subscribers enjoy INET’s full hours of operation from 7am to 8pm (ET). Subscribers that clear via ACT will only be able to trade on INET until 6:30pm (ET), the time that NASDAQ's ACT system closes.

C. Availability of Service

All INET subscribers are invited to participate in the QSR clearing program. Please have your clearing firm sign and return the required QSR agreements to INET. Once signed, INET will forward the original forms to NSCC and schedule an implementation date for your firm. After the forms are filed with NSCC, testing for QSR will typically take one to two days. Minor system changes may be required on your part, but there are no additional charges for participating in this service.

We hope you will take advantage of this opportunity by contacting your clearing firm today. If you have any questions or concerns, please contact an Equity Transaction Specialist at:

 Email subscriber@nasdaq.com or call 212 231 5180