BOX - Boston Options Exchange

Discussion in 'Options' started by def, Feb 20, 2002.

  1. def

    def Sponsor

    You may find this of interest. The idea is true price time priority - no games....


    Contact: Newton Lamson
    Donley Communications



    February 19, 2002 (Boston, MA) — The Boston Stock Exchange, Inc. (BSE), the Bourse Montréal Inc., and Interactive Brokers Group LLC today announced the formation of Boston Options Exchange Group LLC (BOX) to jointly establish an electronic exchange for United States securities options.

    BOX will operate as a fully automated equity options market that will conduct trading in options on individual U.S. equities, equity indicies, exchange-traded funds, and single stock futures. The Boston Stock Exchange will serve as the regulatory services provider, with oversight by the U.S. Securities and Exchange Commission. Bourse Montréal Inc., through its trading platform, will provide technical and operational services for BOX and will license and customize electronic exchange software for derivatives trading. Interactive Brokers will provide options market design and marketing assets and will participate as a financial investor in BOX.

    During its first six months of operation, BOX intends to trade options contracts (calls and puts) on the 100 most actively traded U.S. equity issues with other classes to follow. Participation in BOX, which must be approved by the BSE, will generally be available to any dealer/broker in U.S. equities already subject to oversight by a self-regulating organization under the securities laws of the United States. All equity options traded on BOX will be cleared by the Options Clearing Corporation.

    At present, BOX is developing its trading rules which will be submitted to the SEC for approval. Subject to such approval, the target for the commencement of trading on BOX is the last quarter of 2002.

    Bourse Montréal Inc.

    Renowned as the Canadian Derivatives Exchange®, Bourse Montréal Inc. was founded in 1874. It is Canada's oldest exchange and the first Canadian exchange to list options and to establish a major futures market. Today, the Bourse offers both individual and institutional investors a wide range of derivative products on equity, equity index and interest rates. It also offers clearing services through its subsidiary corporation, the Canadian Derivatives Clearing Corporation (CDCC). Additional information can be found at

    Interactive Brokers Group LLC

    The Interactive Brokers Group is a group of electronic brokerage and market making firms at the forefront of the electronic brokerage industry. Interactive Brokers Group, based in Greenwich, CT, has revolutionized the securities and derivatives markets by providing investors with high-speed, direct access to stock, options and futures products worldwide. Interactive Brokers Group specializes in providing investors with technology that offers efficient, fast access to the world's markets at the lowest possible cost.

    Boston Stock Exchange, Inc.

    Founded in 1834 as the third oldest exchange in the U.S., the Boston Stock Exchange (BSE) has, from its beginnings, played a vital role as a leading regional exchange within the strongest capital market system in the world. Today, the BSE offers exceptional market quality, specialized trading services, innovative technology and outstanding customer service to broker-dealers, investment institutions, and listed public companies. The BSE trades more than 6 billion shares of listed and over-the-counter securities on an annual basis. Additional information can be found at

  2. Make sure that you guys do it right:

    (1) equal parity to broker/dealers, market makers, and customers based on strict price and time parity
    (3) fully automated (i.e., no turning off the system for locked and crossed markets)
    (4) allow customers to autoquote if they want to
    (5) allow customers to be two sided

    If you do this, I am sure that you will have the most liquid options exchange out there.
  3. Def.

    I hope you guys succeed. I think you'd be pleasantly suprised how the retail customer would respond and trade options more if fairness is brought to the options markets. You have formidable odds though because of the existing powers that be..
  4. def

    def Sponsor

    you guys have the correct idea. fairness to all. I don't have all the specifics but my guess is that it will act like most non-US electronic options exchanges.
  5. Yes I second all that Freehouse has to say here! Make it fair. We don't need another electronic exchange... ISE...etc. We need something that will be useful. If you can show us how it will give us an edge over what is currently available then perhaps I will become more interested...
  6. sabena


    Succes Def !

    That's the way to go !
  7. kenstl


    :p god bless you guys!:p

    :D :D :D
  8. just21


    Will Box link to other exchanges or is this a move to spoil the Box launch?

    Options Exchanges Set 10-month Goal For Electronic Linkage
    Raul Gallegos
    The U.S. Options exchanges have agreed to electronically link their systems by Feb. 1, 2003 at the latest, and they plan to begin testing the first phase of the options linkage plan by the end of this year. Nevertheless, some options executives are griping that older technology at the Chicago Board Options Exchange is delaying the process of connecting all exchanges.

    Industry-wide connectivity will create an inter-market trading system similar to the one used by listed stocks, whereby the market with the best price gets to execute the order flow.

    Connectivity between options markets has been discussed for many years, but the SEC first directed all options exchanges to interconnect in the fall of 1999. Last December, the chairmen for all the options exchanges met with Securities and Exchange Commission chairman Harvey Pitt in Washington to discuss a joint agreement. Now, months later, the exchanges have agreed to begin testing in December.

    By Feb. 1, options exchanges will begin routing to each other all orders eligible for automatic execution, according to a letter sent to Pitt on March 15 by the heads of the five options exchanges. Such orders account for only a small percentage of total order flow. On March 1, the second phase will begin, encompassing the balance of all orders. The entire connectivity plan would be completed by April 30 of 2003, confirmed Edward Provost, executive v.p. of business development at the Chicago Board Options Exchange, and the author of the letter. "This is a top priority for the industry but it's a complicated process that involves connecting every exchange to a central processor," said Provost.

    Industry insiders believe the process has been complicated by the technological needs of the CBOE in particular, which must invest heavily in new technology for the plan to work. People familiar with the December meeting say the CBOE was the primary reason other exchanges could not implement the connectivity plan this year. Provost denies such claims and argues that the timing needs of the exchanges didn't vary by more than a few months. However, he concedes, "there is no question that the CBOE systems, by its early design, is not as integrated as the systems in other exchanges." He added that the CBOE will put together a new trading system for the connectivity plan.

    Paul Bennett, senior v.p. of market operations for the International Securities Exchange, believes the time frame for this plan is very aggressive as it is. "We have five different exchanges that must be playing like an orchestra in a few months," said Bennett. "This carries a lot of risks."

  9. The biggest one being...that they will lose alot of revenue.
  10. def

    def Sponsor

    look at IB's comment letters from 2+ years ago calling for the linkage. IB even offered the technology to the exchanges.

    The main problem is that the exchanges operate under specialist systems where a specialist does not necessarily have to honor an order. The game has been changed to one where each exchange or specialist/maker maker is fighting for order flow. Unless those games change, BOX should do fine - not because the brokers want it - but because clients will demand instant execution for sizes visiable on the screens. (the brokers love getting paid for order flow and many don't care if you get the best fill).

    at least that my opinion. At worst, BOX will force the exchanges to level the playing field for all. Thus it's a win/win situation.
    #10     Apr 3, 2002