EFTA00805569.pdf

DRAFT — MERCANTILE GLOBAL HOLDINGS Work in Progress Investor Presentation Alp Mercantile Global Holdings, Inc. February 2019 MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION EFTA00805569  Confirm Disclosure — any revisions? Disclosures This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as "this presentation." This presentation is for informational and discussion purposes only. Information contained in this presentation is provided in summary form and is confidential and proprietary to Mercantile Global Holdings, Inc. ("MGH") and its affiliates. This presentation may not be disclosed to any party without a written disclosure agreement, and any sharing of this confidential information to unauthorized parties may have a material adverse effect on MGH and its affiliates. • Nothing in this presentation constitutes, or is intended to be construed as, an offer to issue, allot, sell, or otherwise transfer, or an invitation, advertisement, solicitation, recommendation, advice, or inducement to invest in or make a commitment to invest in, any securities, options, other financial instruments or other assets, whatsoever. • This presentation contains forward looking statements including statements regarding our intent, belief or expectations. Forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Words such as "may," "will? "potential" "should;' "expect" "anticipate "target;' "project," "estimate;' "intend," "continue," or "believe," or the negatives thereof or similar expressions or terminology are intended to identify forward-looking statements. Statements in this presentation are made as of the date hereof unless otherwise stated herein. • MGH and its affiliates may or may not pursue the strategy as specifically outlined in this presentation and may change strategy depending on changing market conditions, opportunities, resources, regulations or other factors. Neither MGH nor any of its affiliates undertake any obligation to furnish additional information or to update, revise or correct any of the information contained herein. By accepting this presentation, each recipient on their own accord, and on behalf of their respective business entities, agrees to the foregoing. MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 2 EFTA00805570 Speaker Introductions • • Team / Speakers to be discussed Our team has over 60 years of exchange, banking, and other related experience and has deep knowledge in the sector from running and operating large predecessor institutions Bo Collins Rick Beaman Nick Varelakis Chairman & CEO of CEO of SJMX President & COO of SJMBT and MGH and SJMBT CFO of MGH • Former President of the New York Mercantile • Recent CEO of NASDAQ Futures Exchange • Previous COO and Interim CFO of Noble Bank Exchange (NFX) International, an IFE dedicated to facilitating growth of the digital asset market • Led NYMEX through transition to electronic • Grew NFX volumes from start-up to the 2n° trading and increased market cap from largest exchange in Natural Gas Options; • Head of large operational and business $600M to $2.7B within 3 years named the 'Fastest Growing exchange in 2017 development teams at JP Morgan across various asset classes • Created ClearPort, the first successful OTC • Successfully launched TradeSpark Exchange Clearing platform with Cantor Fitzgerald, which was an early • Director at LCH.Clearnet, Head of Global competitor to ICE Operations for SwapClear, a CFTC registered • In partnership with NASDAQ, launched DCO International Derivatives Clearing Group in • Served 10 years in the U.S. Navy, and last 2008, which was sold to LCH.Clearnet Group served on the Personal Staff for Admiral William J. Flanagan, Jr. (four star), • Serial entrepreneur and well regarded Commander in Chief of the U.S. Atlantic Fleet FinTech executive MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 3 EFTA00805571 Compelling Investment Highlights To Be Refined • Current management team has over 60 years of exchange, banking and related experience, and key members of management have worked together or known each other for years • CEO Bo Collins was previously the President of New York Mercantile Exchange from 2001-2004; launched the International 1.) Seasoned and Cohesive Derivatives Clearing Group in partnership with NASDAQ in 2008 (later sold to LCH Clearnet Group) Management Team • Rick Beaman was formerly the CEO of the Nasdaq Futures Exchange and Vice President of NASDAQ; has been involved in the exchange, clearing, product development and brokering of energy markets for over 20 years • Nicholas Varelakis was formerly the interim CFO and Chief Operations Officer for Noble Bank International; before Noble Bank, Nicholas was an Executive Director and ran the North American Business Architecture and Transformation Group Clear focus on providing a comprehensive suite of integrated products geared toward institutional traders as a leading market differentiator in the exchange space 2.) Integrated Institutional- High importance placed on quality products & services, including low latency connectivity, post-trade settlement Focused Exchange and services, variety of custody solutions, and risk analytics and management Regulated Bank Entity Operates regulated bank entity, offering full services in-house and fiat custody while partnering with third-party crypto custodial solutions Existing relationship with COG grants access to over 40+ global exchanges, including the CME, CBOT, NYSE, NYMEX, LSE, LME, Euronext, Tokyo Stock Exchange and others 3.) Network of Over All existing customers of CQG today will have access to SJMX upon launch and after onboarding process; CQG will also 150,000+ Global Prop offer free customer access to CQG's Desktop, Mobile, and FX products Traders CQG to allow MAX to co-locate in their data centers, allowing for industry-low latency (less than 3 milliseconds a 100 micro-seconds by end of 2019) Trading technology is programmed to facilitate trades in digital currencies and is already integrated with CQG's existing institutional trading infrastructure, which has been operating globally for —40 years 4.) Enterprise-Grade • Matching engine can process over 1.5mm transactions per second and has the capacity to support 1,600 listed products for Trading Technology trading • Software will be developed so that it can be integrated into existing institutional infrastructure and trading platforms and will be available as a computer and smartphone application • Traditional and cryptocurrency trading exchanges have proven to be highly cash generative and a high margin business, 5.) High Free Cash Flow offering flexibility for capital deployment and working capital security Business Model • Strong run-rate profitability may provide investors with multiple exit opportunities at higher valuations in the future • Larger publicly-traded global exchange businesses have historically been highly acquisitive to fuel growth 6.) Growth Opportunities to Build Operating Scale • Numerous acquisition opportunities exist for SJMX to acquire and build operating scale, with a potential to leverage SJMX's platform for a roll-up strategy MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 4 EFTA00805572 Table of Contents DRAFT 1. Company Overview [XI 2. Integrated Exchange & Banking Platform [XI 3. Deep Network and Relationships In-Place [XI 4. Technology Systems [XI 5. Financial Overview [XI 6. Key Milestones & Growth Opportunities [XI 7. Appendices [XI MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 5 EFTA00805573  MERCANTILE GLOBAL HOLDINGS Company Overview MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 6 EFTA00805574 Company Overview DRAFT Mercantile Global Holdings, Inc. ("MGH") is developing an institutional-grade electronic trading platform and integrated banking platform for digital assets MERCANTILE Li GLOBAL HOLDINGS San Juan Mercantile Exchange, Inc. ("SJMX") San Juan Mercantile Bank & Trust International Corp. ("SJMBT") (Based in Chicago) (Based in Puerto Rico) Institutional-Grade Exchange Technology Fully Regulated Bank Entity Connected to LIT market, dark pool, and OTC trading • Regulated by the Puerto Rico Office of the Commissioner of Financial Enterprise-grade matching engine with FIX APIs Institutions Capacity for 1.5 million transactions per second with 3 milliseconds of • Correspondent banking partners will be in-place for launch latency • Fully integrated FinTech layer for connectivity to exchange • Real time settlement and cash / margin efficiency and availability Professional Trading Infrastructure • Connectivity with leading software vendor currently servicing global Custodial Services financial markets Working to integrate with leading digital asset custodians • Immediate on-ramp for traders Client directed with ability to diversify holdings across multiple custodians Mercantile Global Holdings L Jrp Exchange Bank Trust Accounts (Del. Corp) Completed Trade Data (PR Corp) Custody Settlement Order Routing Other Exchanges 41- Technology I Correspondent Institutional Digital Clients Banks Federal Custody Services Reserve Broker MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 7 EFTA00805575  Cohesive Management Team with Deep History • SJMX to confirm # of Employees _ mi l Key members of MGH's management team have worked together and known each other for years Executive Management Team & History Organizational Chart Key Industry Prior Working Executives Experience Firms Together S Bo Collins Chairman & CEO of NIGH Bo Collins New York Chairman & 31+ years Mercantile 120+ years. CEO of MGH Exchange Bob Cavnar and SJBT President & COO of MGH • Rick Beaman CEO of SJMX 23+ years NASDAQ Joined recently from NASDAQ Rick Beaman Nick Varelakis Interim John Wyman Rene Carson Chief Carrie Gill • Chief CEO of CFO & Lego! & Head of Tech Nick Varelakis SJMX COO of Govern HR Officer President & Noble Bank Bank team SJMBT Officer COO of SJMBT 19+ years JP Morgan together for and CRO of SwapClear 7+ years (3l Team (9) Team (1/ Team (3l Team PI Team MGH Members Members Member Members Member With Bo Bob Cavnar since 1997, Infrastructure In-Place with (24) Team Members President & 44+ years enegX LLC El Paso COO of MGH Corporation Ready for Operational Ramp-Up (22+ years) Rene Canon Legal team Actively Seeking to Build Out Platform and Hiring 0 Head of Global Sidley 15+ years together for Legal & Austin Additional Key Employees - 8+ years Compliance MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 8 EFTA00805576 Full Product Suite for All Institutional Trader Needs Confirm — S.INIXport? I • Settlement services? Comprehensive suite of products & services all offered in-house to build customer flexibility and ease of use Overview of Products & Services 2020E Revenue by Product ($mm) Central Limit Order Book: $4.6 • Match engine designed to process more than 1.5 million transactions per 4% second with an expected latency of 3 milliseconds $29.8 Fix APIs or access through CQG front-end 23% $44.2 OTC Execution Desk: 34% • Facilitate large buy or sell orders through OTC facilitation desks • Execute orders through proprietary execution algorithms or with other 2020E counter-parties Revenue: f $128mm Integrated bank platform intended to enhance security and efficiency of transactions Dark Pool: Handles large OTC or Institutional orders by efficiently connecting customers to superior liquidity, promote best execution, and decrease market impact $22.8 18% i $26.7 21% Ability to stream quotes into the OTC Book / Dark Pool • CL0B • OTC Dark Pool • Settlement Fees • Custody Revenue Ability to place large orders across both dark and lit markets [Exchange Support Products] Projected Exchange ADTV ($mm) and Fee Structure SJMXport: $530.5 FeeStructure • Settle OTC trades bi-laterally with registered participants through $91.4 CLOB Execution Fee 0.025% proprietary systems $80.3 • Standardized on-boarding procedures, developed to comply with OTC Execution Fee 0.100% customary KYC / AML practices Dark Pool Execution Fee 0.075% • Access a flexible suite of settlement services to provide secure and efficient transactions S114.9 $358.8 Settlement Fee 0.025% $19.8 517.4 577.7 Custody 0.400% 2019E 2020E MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION • CLOB • OTC Dark Pool 9 EFTA00805577 Fully Integrated Operational Infrastructure • Confirm Next Custodian and power checks MGH's fully integrated platform provide customers additional liquidity, integrated onboarding, and expedited transfers between crypto and fiat currencies The operational structure on the left hand side illustrates: NSW A °onto, ) Instant trade • Clients onboarded onto MGH are simultaneously xapo settlement and ability to trade. Once a day onboarded with each rebalance across exchange integrated with the It fl e et" custodians and Fiat ETP / Elysium, allowing for e Banks fast access to liquidity BitGo owe,. Lit Market • Elysium provides buying power checks, trade DIGITAL ASSF1 DACC concur submissions, trade COMPANY confirmations, limit MGH Elysium ETAINA • management, and reporting • Omani Ledger Fintech Layer Orders Dark Pool RFQs • When onboarded, clients (Next] t Reports have access to two pools of -S liquidity: lit market and dark market. Clients have the Buying power ability to seek liquidity within checks the dark pool while • Trade submission maintaining price matching • Trade confirmation functionality with Lit Market • Limits management Eat • Reporting • MGH connects to digital Custodian Banks currency custodians and banks, allowing clients to switch between digital and fiat currencies allowing for instantaneous trading Overnight Investments • Daily rebalancing between custodians and fiat banks MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 10 EFTA00805578  co , MERCANTILE GLOBAL HOLDINGS Integrated Exchange & Bank Platform MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 11 EFTA00805579 MGH's Value Proposition DRAFT MGH is able to offer traders an institutional approach towards digital asset trading The Issue: Retail Infrastructure The Solution: MGH's Institutional- Grade Infrastructure Existing digital asset exchanges are not designed to meet The Exchange will have technical infrastructure modeled after institutional requirements top commodity exchanges • Access via a web browser and often too slow • Access via proprietary trading application • Outsourced infrastructure (i.e., AWS) • High speed private network • Vulnerable to cyberattacks and unreliable during peak times • Owned and controlled infrastructure • Unable to trade on other exchanges • Enterprise grade security infrastructure • High performance and fault tolerant Integrated into global exchange ecosystem Most institutions are not able to trade on their existing Institutions will be able to trade on their existing infrastructure infrastructure platforms platforms • Incompatible with web-based connectivity and protocols • Industry accepted connectivity and protocol standards • Inconsistent connectivity • Reliable connectivity and customary exchange controls • Not able to service existing customers • Fair and efficient markets • Subject to fraud, manipulation, and deceptive trading • Maintain and enhance your existing customer relationships practices • Intuitive workflow integrations Unable to connect with middle and back office workflows More secure infrastructure, no limits on withdrawals and Material limitations on security, withdrawals, and support dedicated support At risk of cyberattacks; funds sit with the exchange • Separation between the Exchange and the Bank along with Tiered account security creates vulnerabilities and unfair 3rd party custody options creates significant security advantages benefits Limitations on dollar and / or digital asset withdrawal • No planned limits on dollar or digital asset withdrawal amounts amounts Delayed and unpredictable trade processing • Dedicated account management and customer service MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 12 EFTA00805580 Integrated Platform Tailored Towards Institutional Traders DRAFT MGH's integrated exchange and banking platform provides instantaneous execution between traders and their counterparties with complete flexibility between fiat and digital asset currencies SAN JUAN 1,JAN CA\ MERCANTILE re MERCANTILE \W EXCHANGE c if BANK & TRUST • Enterprise-grade matching engine • Single user interface to manage fiat and digital asset balances • Connectivity with major ISVs currently servicing the global financial markets • Real-time settlement and availability of asset balances based on intraday exchange activity • Real time limit management based on intraday Bank balances • Connectivity with reputable fiat and digital custodians • Increased stability and security compared to web-based • Customers will be subject to AML and KYC requirements exchanges Electronic Clearing & Fiat & Digital Liquidity Settlement Custody Trading Platform S • Matching engine • Substantial number of • Real-time limit • Fiat assets to be held in processes more than 1.5 traders able to connect management that is based accounts with correspondent million transactions per through existing trading upon holdings at the bank bank partners second with a 3 infrastructure, creating • Ability to view and • Digital assets to be held with millisecond latency and increasing liquidity manage fiat and digital custody partners; wide • State of the art trading • Integration between asset custody in one entity network of custodial application and analytics Exchange and Bank will partners allow for active with strong risk facilitate seamless management of management tools settlement of OTC concentration risk across transactions multiple platforms MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 13 EFTA00805581 Fully Regulated & Robust Compliance Systems DRAFT Active dialogue with regulators and compliance teams in-place allow for seamless and speedy client onboarding and KYC/AML procedures Foundation of a rigorous and Active dialogue and great relationship with trusted regulatory framework Puerto Rican and other regulators Fully regulated with industry best practices , ociF • Organized as an International Financial Entity (IFE) in Puerto Rico; subject to regulatory SJMBT is treated as a regulated bank by FINCEN for purposes of BSA / AML/ OFAC compliance oversight and BSA & OFAC requirements • Strict oversight and audit by the OCFI, using the same FFIEC • Bo Collins and the Commissioner of OCIF, George Joiner, both serve on audit standards that are applied to FDIC-guaranteed banks the BlockChain Advisory Council • Strong compliance culture created and reinforced by MGH's • Both Bo Collins and George Joiner have a positive relationship and active Board of Directors, ensuring compliance amongst leadership, dialogue senior management, and employees On February 12, 2019, MGH submitted their second stage application in their request for a Permit to Operate Rigorous on-boarding using customary KYC/ AML • Expected to take 2-4 weeks and on-site inspection by OCIF procedures [Also ongoing and recent dialogue with FINCEN, CFTC and the SEC, • Robust KYC / AML procedures for client onboarding process informing regulators of entry to market and business plan] • Once customer is onboarded, customer is onboarded among all users and exchanges integrated onto the ETP • KYC / AML procedures consist of a 4 step process: Strong and Experienced Compliance Customer Identification Program Team In-Place • Due Diligence Run by a seasoned Chief Compliance Officer and a compliance department • Risk Rating Assessment staffed with 4-6 experienced professionals 2 dedicated attorneys with outside legal support by DLA Piper • Enhanced Due Diligence Chief Compliance Officer Biography Active transaction monitoring in-place and market • Former U.S. Department of Homeland Security surveillance technology Special Agent with 10+ years of experience Transaction monitoring compares customer activity with • Worked as the BSA / AML / OFAC Compliance broader market activity to assist in assessing client behavior Officer for Banco Popular in New York and in Puerto Rico Provides information to the compliance staff and officers to identify specific transactions that may require additional • Currently is a Certified Anti-Money Laundering review, documentation and reporting Specialist and Certified Internal Controls Auditor Gilberto Figueroa • Received his B.A. at the University of Puerto MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION Rico and from Interamerican University 14 Chief Compliance Officer EFTA00805582 Clear Market Differentiator and Competitive Advantag DRAFT MGH will offer professional trading front-end that is connected through CQG in order to promote faster execution and greater reliability This structure provides efficiency and unique benefits, including building upon customer flexibility for their demands / needs, institutional-grade custody for digital assets, and connectivity to major liquidity pools Professional trading platform and integrated into traditional capital markets infrastructure • Designed to increase security, efficiency and flexibility for professional traders Features an API that uses Financial Interface Exchange ("FIX") protocol relied upon by banks and broker dealers globally • Clients are able to co-late their servers with CQG for even greater speed and security Owns and will operate a proprietary matching engine designed to manage millions of traders per second • Other exchanges lack this technology and struggle to balance functionality and security Structural advantages over incumbent digital asset exchanges by having an integrated bank entity • Fully regulated and operational bank entity will settle transactions and manage fiat currency balances Only exchange that offers a customer-centric custody solution • Allows customers to choose MGH's proprietary custody solution or to hold assets at other custodians instead With the Exchange and the Bank, MGH will be able to provide customers the ability to hold both fiat and digital assets • Provides clients the ability to trade on the exchange based on these balances MERCANTILE GLOBAL HOLDINGS, INC. I CONFIDENTIAL I NOT FOR DISTRIBUTION 15 EFTA00805583 Competitive Landscape • Note — Names to be removed in final version