Boston Options Exchange says customers saving cash
Tuesday May 11, 12:58 PM EDT
By Huw Jones
LONDON, May 11 (Reuters) - The Boston Options Exchange's electronic platform is saving users twice the amount originally anticipated -- a feat already triggering copycat systems among rivals, BOX Vice-Chairman Luc Bertrand said on Tuesday.
BOX was launched in February and is the sixth U.S. options market and the second electronic platform after the International Securities Exchange.
BOX has a three-second auction "price improvement period" or PIP, designed to give customers a better price than those found on other U.S. options exchanges. The BOX price is established by comparing prices at other exchanges.
The average price improvement is now working out at just over $2 per contract, more than twice the $1 per contract BOX had expected.
BOX estimated that using the PIP platform has yielded nearly $450,000 in cumulative savings to options investors so far.
"This market model will accelerate the transformation of the U.S. market place," Bertrand told reporters.
Volumes are still only about one percent of the total U.S. options market but Bertrand is hoping this will rise to "double digits" next year.
RIVAL FOLLOWS SUIT
Rival International Securities Exchange, the top U.S. options exchange, has asked the Securities and Exchange Commission for approval to launch a "price improvement mechanism" or PIM -- a system similar to the one BOX uses.
By June, BOX aims to offer trading in 250 different options, rising to 400 by September out of 2,000 listed in the United States.
Bertrand is also President and Chief Executive of the Montreal Exchange which handles derivatives trading in Canada and owns a third of BOX.
Bertrand said Montreal is in the final testing stage of its new UK hub, which is expected to be up and running by the end of May.
Some 12 London-based firms are in the process of becoming "foreign approved participants" on the exchange, a move which Bertrand expects to bring greater liquidity to the Canadian group.
Some 25 to 30 percent of Montreal's open interest in futures is derived from London.
FLOAT?
The International Securities Exchange has said it plans to list itself, but Bertrand said BOX's focus at the moment was to build market share rather than become a public company.
A float of the Montreal Exchange was also not on the cards.
"It's premature," Bertrand said. "It's not a project for us so far, it's not something we are working on."
Bertrand said Montreal already had a cash pile and did not need the extra money a float would raise.
Under an agreement among Canada's exchanges, Montreal has exclusivity in derivatives trading and clearing until 2009.
Since 1999 ME has demutualised, gone fully electronic and launched its BOX joint venture with Boston in a bid to increase its three percent slice of the global derivatives market.
"Canada is behind the curve in financial futures," Bertrand said. (Additional reporting by Doris Frankel in Chicago) |
