Tag Archives: cboe


Options Mart CBOE Rumored to Merge with BATS Exchange

Following a decade of new exchange launches, which led to a series of aggressive fee competition to attract order flow and elevated the ‘pay-for-order-flow’ game, the more current trend towards consolidation, fueled by an industry-wide race to zero fees and commissions is sparking rumors that the CBOE and BATS are planning to marry..This on the heels of the still uncompleted deal between Deutsche Boerse and London Stock Exchange (LSE), a transaction that according to one MarketsMuse “has been put on hold pending further impact analysis” of this late summer’s BREXIT vote.”

(Traders Magazine)-CBOE Holdings’ reported talks to acquire Bats Global Markets would be the latest in a long line of exchange tie-ups, with one common denominator: the drive to have more trades execute under the same roof.

“Exchanges are a scale game,” said Brad Bailey, research director at Celent’s securities and investments practice. “Running exchanges in a regulatory, market-structure-complex world is tough. There is tremendous operational leverage available to bigger, more complex exchanges.”

Yesterday, Bloomberg News reported merger talks between CBOE and Bats, citing people familiar with the situation. A deal could be announced within weeks, thought it still may not happen, according to the report.

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CBOE’s eponymous options exchange is the largest of 14 in the U.S., with market share of 26.5% this month, according to OCC data. Chicago-based CBOE has a virtual stranglehold in the index-options business via its dominant CBOE Volatility Index (VIX) product.

Bats, which purchased rival exchange operator Direct Edge in 2014 and itself went public earlier this year, runs the BZX and EDGX options exchanges, which have a combined market share of about 12%. Bats also operates four of the 13 U.S. equity exchanges, with a combined market share of about 20%.

Equity and options exchange operator Nasdaq bought options bourse International Securities Exchange earlier this year. In the equities space, IntercontinentalExchange bought New York Stock Exchange in 2013. In Europe, Deutsche Boerse and London Stock Exchange are planning to merge. And there have been a host of exchange mergers over the past half-decade that have been discussed or proposed but ultimately didn’t happen.

“Think about the size and scale across asset classes of most exchanges,” Bailey told Markets Media. “ICE gobbled up NYSE, DB/LSE are attempting a marriage despite the complexities that Brexit has added to that equation.”

MarketsMuse editors are gearing up to profile ‘What’s Next?’ Anti-Trust Fever Sweeps Regulators as Exchanges Consolidate to Revert To Predatory Pricing Model..” To read the entire story CBOE Rumored to Merge with BATS Exchange from Traders Mag, click here

cboe overhaul

Options Mart’s CBOE To Make Major Overhaul

(MarketsMedia : not to be confused with Madmen Media, owner of MarketsMuse.com)– In order to keep up with the demands of today’s high-volume electronic markets and leverage their fintech muscles, the Chicago Board Options Exchange, the top options mart player plans to migrate its CBOE and C2 options markets as well as its CBOE Futures Exchange to an internally developed matching engine beginning in August, according to CBOE senior management.

The new system, dubbed Vector, will replace the current internally developed CBOE Direct platform, which the exchange launched in November 2001 and runs all three markets.

“Trading volumes on the exchanges have grown and the growing demands of the higher-frequency trader require us to keep up,” said Ed Tilly, CEO of the CBOE. “It’s difficult to keep up a system that was designed with your customers’ needs from 14 to 15 years ago, and meet their needs for today and tomorrow.”

The current trading engine served the CBOE community very well, but the CBOE leadership decided it was time for an overhaul. “We developed Vector starting from a blank piece of paper beginning in 2014,” Tilly said.

The buy-or-build decision was a close call, as at least one unspecified third-party technology provider delivered a very impressive pitch to handle the job. Ultimately, the call to stay in-house was made in deference to the customization of the CBOE product suite, Tilly said.

Besides improved transaction speeds and scalability, the new matching engine will also incorporate new risk management tool for trading firms.

For the entire coverage from MarketsMedia (not to be confused with Madmen Media, owner of MarketsMuse.com, please click here

Open Outcry Options Pit Trading is Dead..Long Live Open Outcry Options Pit Trading

MarketsMuse Strike Price update profiles a “return from the past and into the future” look at what many veteran (and former) option mart floor traders had all but given up for lost thanks to the electronification and bifurcation of institutional options trading.

We’re talking about those legacy, open-outcry trading pits, one -time bastions for burly and sharp-elbowed boys from Brooklyn and college ball-players-turned-options market makers and brokers who had reserved trading pit spots for them congregate and serve as liquidity centers for investors and upstairs traders to route and execute both small retail orders and large/complex institutional options orders. According to an article in today’s edition of the MarketsMedia.com newsletter, the options market is having a “Its Déjà vu all over again” moment.

Those who have been around for more than 15 minutes lament the fact that in recent years, those brick and mortar venues have become mere shells of their former selves and in some cases, ghost towns. The American Stock Exchange, arguably the pioneer in options pit trading, was acquired by the NYSE a few years back and is now literally a vacant lot that real estate developers hope to convert into a luxury rental and retail space. Beantown’s BOX might as well be a bowling alley, as trading via that venue is all electronic. One can hear a pin drop on the floor of the CBOE thanks to the ISE, the options market “Dominator” and a completely virtual exchange that has no physical structure other than corporate office space for their execs, and is otherwise comprised of air-conditioned warehouses patrolled by security dogs to protect rows of rack space for computer servers.

John Houlahan, OMEX Systems
John Houlahan, OMEX Systems

Noted John Houlhan, the COO of OMEX Systems, a long time, broker-favored OEMS platform (recently acquired by fintech firm Raptor Trading) and first designed exclusively for agency-only options and ETF floor brokerages operating on the AMEX and since embraced by a number of “upstairs” executing brokers, prop shops and select hedge funds, “Other than a handful of firms that were rolled up, most legacy floor brokerage firms and market-making firms turned in their trading smocks and floor badges long ago.” Added Houlahan, “The others who are relevant in the course of facilitating large block and/or complex options orders for institutional clients or hedge funds now generally operate from loft spaces in tony areas in Chicagoland, offices in various parts of Manhattan and New Jersey offices adjacent to exchange co-location areas.”

BUT WAIT! Everything you just read in that last paragraph is not entirely true; open outcry options trading floors are as relevant as ever, according to coverage from financial media firm MarketsMedia.com.. Here’s an extract from today’s edition of their newsletter, including a look at select veteran options market brokers who have lived to tell the tale… Continue reading