Amex launches electronic trades
By Jeremy Grant in Chicago
Published: May 24 2004 5:00 | Last Updated: May 24 2004 5:00
The American Stock Exchange will tomorrow launch a new electronic trading system for its options products in an effort to attract more business and reduce reliance on its "open outcry" trading pits.
The development is another sign that electronic trading is making rapid inroads into the US options industry, mirroring developments in futures and the equities markets.
Last week marked the first quarter of trading on Box, an all-electronic options exchange launched in February by the Boston and Montreal stock exchanges and funded by a group of Wall Street investment banks.
Competition has intensified this year among the five established US options exchanges as electronic trading has reduced trading fees and as institutional investors - especially hedge funds - have increased their use of options.
Trading volume in equity options, the most traded type of option, rose by 48 per cent in April compared with the same month a year ago, according to the US Options Industry Council.
Michael Bickford, senior vice-president of options at the Amex, said the exchange would list 300 equity options - or options on individual stocks - on the new system within six months.
He said trading on the system, known as Ante, would account for about 80 per cent of total options trading on the Amex by the end of the year. The volume of trades done in trading pits - currently about 70 per cent of all trading - would "go down substantially".
The Amex is one of three options exchanges that has been forced to cut fees, adopt more efficient trading systems and abandon membership structures to allow participation in anticipated industry consolidation.
Such moves have been mostly prompted by the entry into the market three years ago of the International Securities Exchange, the first all-electronic US options exchange.
On Friday, the Pacific Exchange said the Securities and Exchange Commission, which regulates the US options industry, had approved a demutualisation plan that would turn the exchange into a for-profit corporation. Philip DeFeo, Pacific Exchange chairman, said: "We will make decisions and implement change faster. We gain the ability to attract outside capital and strategic partners."
Box has stirred unease among the five established exchanges because it allows traders to expose orders to a three-second auction in which a customer's order can achieve a better price than prices available for the same options product at any of the other five exchanges. |
