Options update for May 23...Just when you thought things couldn't get worse
On Friday the TSE announced the appointment of Steve Rive as VP in charge of derivatives. Well and good, you say, they finally brought in someone who is conversant with trading to re-energise our markets. Well--no. By his own admission Mr. Rive has never traded and by his words and actions, he has demonstrated that he knows nothing of the dynamics in trading. Well, then, he must be a marketing guru, someone who can sell ice to the Innuit. Well--no. He is a systems person whose sole mandate is to implement the change to a fully-automated trading system, right 'out of the box', with little or no customisation from the Swedish model. Skoal! I always wanted to be just like Sweden! A renowned centre of derivatives trading. Who in their right mind would even consider adopting a system like the Amex or the CBOE, the two most successful options exchanges in the known universe? All we really need is some decent marketing and an electronic book, but noooo, we're rushing headlong into becoming a back-water bulletin board system. Remember, even the best-case scenario for full automation cuts out the heart of a fair market by removing the auction process--no incoming order can ever receive a better fill than the posted market. That right there puts a stake through the heart of TXO, and will eventually cause a slow, ugly death for equity options as well. No price discovery, no central disclosure, unfettered agency/principal crossing, and you have something worse than the equity market here--you have a dealer market just like NASDAQ, a market so odious the SEC has recently felt compelled to take steps to clean it up.
Also on Friday, in an ironic counterpoint, the TFE released figures comparing year/year y/t/d numbers for TFE products: TXF volume doubled 1997/1996; TXO volume was up 65%; TXF open interest tripled; and TXO open interest quintupled! I can tell you anecdotally that equity option volumes and open interest also went up sharply. As I said before, all we need is some aggressive marketing/promotion and the addition of appropriate technology. It's truly a shame to have such misguided and mis-informed people in charge at this point in time. They truly don't know the damage the are about to inflict on our markets, and what's worse, they won't listen to anybody who brings it up. Remember, this is all my opinion (though shared by many!).
Wish I could be more up-beat, but I can't.
Porter |
