Boston moves toward becoming new options exchange
Reuters, 07.30.03, 12:16 PM ET
By Doris Frankel
CHICAGO, July 30 (Reuters) - The Boston Options Exchange said on Wednesday it took another step toward becoming the sixth U.S. options exchange, the latest move in an already crowded field challenged by the growth of electronic trading.
The exchange, known as BOX, said it has submitted to U.S. regulators two filings as part of its ongoing process to become a new, all-electronic equity derivatives market.
BOX said it still expects to go live this year as the sixth U.S. options exchange. If approved, BOX would be the second fully electronic U.S. options exchange and go head-to-head with its rival, the New York-based International Securities Exchange, the first U.S. options market without a physical trading floor.
Launched in 2000, the ISE this year overtook the 30-year-old Chicago Board Options Exchange as the busiest equity options exchange.
BOX spokeswoman Janice Foley said both items were filed last week with the U.S. Securities and Exchange Commission.
The first filing deals with governance issues for BOX and its partner, the Boston Stock Exchange, and the second filing outlines how the exchange will allocate options to market makers, Foley told Reuters.
Both documents are expected to become public on the SEC Web site within the next few weeks and come under a 21-day comment period, she said.
BOX, formed in February by the Boston Stock Exchange, Montreal Stock Exchange and Interactive Brokers Group LLC, plans to list 250 of the most actively traded equity options.
"Following these two filings, we expect in the next few weeks to file an amended rules filing for the creation of BOX," Foley said. "We are hopeful to launch this year, pending SEC approval."
But BOX will be stepping into a highly competitive marketplace for equity options, contracts that give owners the right to buy or sell stocks at predetermined prices within a set time.
Over the past few years, the four traditional options exchanges -- the Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia Stock Exchange and the Pacific Exchange -- have become more automated and have adopted electronic trading systems in one form or another in order to keep order flow.
Those exchanges, which shoulder the cost of operating traditional open-outcry trading floors, are under pressure to consolidate in the face of falling market share.
On top of that, options traders at the exchanges are beset with shrinking profit margins from multiple options listings which have increased competition and the decimalization of options prices which have narrowed the bid and ask spreads.
BOX will differentiate itself by removing cost barriers for market makers, who would not be required to buy seats on the exchange.
Another feature is its brief electronic mini-auction called the price improvement period or PIP, which guarantees that the customer is getting a price better than the national best bid and offer. |
