Options conference opens amid concerns 
                    New exchange heightens competition

                    By Brenon Daly, CBS MarketWatch
                    Last Update: 4:33 PM ET Jan 27, 1999
                                                                           StockWatch

                    SCOTTSDALE, Ariz. (CBS.MW) -- Rain clouds may hover above the desert
                    resort where many of the options industry bigwigs are gathering this
                    week for an annual conference.

                    The concern: the International Securities
                    Exchange will file this week for regulatory
                    clearance of a new electronic options exchange.

                    "It's down to hours" before the SEC filing, ISE
                    chief executive David Krell said Wednesday in an
                    interview. That would clear the way for the ISE
                    -- the first new exchange in a quarter century --
                    to begin handling options trading in the first
                    quarter of next year.

                    Canny -- or uncanny -- timing

                    And the timing couldn't be more, well, untimely.

                    The filing will hit the desks at the SEC just as
                    the 15th annual Risk Management Conference
                    opens at a Scottsdale, Arizona resort. The
                    conference is put on by the Chicago Board Options
                    Exchange, the world's largest options trading
                    facility. 

                    The CBOE handles about half of all options trades, and reported that it
                    did more than 200 million trades in 1998.

                    The CBOE and other major exchanges -- the Pacific Exchange, the Amex
                    and the Philadelphia Stock Exchange -- are expected to come under
                    pressure as the ISE begins operations. The up-start ISE has pledged to
                    cut the costs of options trades by at least 30 percent. (See earlier
                    story on the ISE.)

                    Increased competition

                    Indeed, when the ISE made it's announcement, seat prices on the major
                    options exchanges declined. The worry is that seats won't be needed if
                    electronic trading takes off. Electronic trading takes place over a vast
                    computer network, replacing the hue and cry of traditional floor
                    traders. (See earlier story.)

                    Krell, who used to work at the CBOE, played down the threat his
                    exchange posed to the traditional option trading floors. He projected
                    the market will double within 3 years, so all exchanges will benefit.

                    "I don't see this will do anything but increase the market," Krell said.
                    "If you lower costs to the end user, you attract more business."

                    Krell drew a parallel with the automation that
                    took place on the New York Stock Exchange.
                    Initially, the floor brokers felt threatened by
                    the computer-base trading, but that diminished
                    as volume swelled from about 100 million
                    contracts to about 600 to 700 million contracts.

                    CBOE officials have countered that they plan to
                    cut the costs by 30 percent just as a normal
                    course of business.

                    Hurt feelings

                    Incidentally, the ISE will have a representative at the CBOE
                    conference. But don't expect any representative from the Pacific
                    Exchange at the CBOE shin-dig. 

                    The CBOE abruptly broke off merger talks with
                    the Pacific Exchange earlier this month, leaving
                    the West Coast exchange fuming. Several Pacific
                    Exchange have complained that they put their
                    development plans on hold as they negotiated
                    with the CBOE, only to be left in the lurch.

                    The ISE was founded by a consortium that
                    includes E-Trade (EGRP), Ameritrade (AMTD),
                    Herzog Heine Geduld (HRZG), Knight/Trimark
                    Group and Scottsdale Securities. Krell said he
                    expected to announce another half a dozen more
                    broker/dealer are joining the consortium within a month.