Trading Options in the 90's

JSOP · Nov 26, 2018

ajacobson said:
The evolution in electronic markets begins in the '90s. CBOE, AMEX, and PCoast are the big markets. OEX has pretty much died and has been replaced by the SPX. CBOE works a deal to merge with the PCoast which never ends up getting done. Big celebration party and then the deal is off the next AM. Lot's of small market makers still around and they are looking to sell their names or consolidate. NYSE options and the CBOE consolidate and the NYSE option floor closes and becomes the Greenroom at CBOE.
ISE and payment aren't a factor until after 2000 so volumes are still modest and commissions are still expensive.
No hidden liquidity on the exchanges until later in the 2000s.
A couple of handfuls of liquid names, but more based on multiple listing competition.
Trade thru rules exist, but no linkage yet.
Overall volumes are modest and costs are still pretty high to execute for most of the '90s so volumes are around a couple million a day.
Exchanges still are charging fees on everything including the automated systems.
The big sea change in trading begins when the ISE lights up in 2000. Payment runs as high as $.80 a contract. Everything goes multiple list with the exception the monopoly products and the major ETFs. ETFs still have exchange fees, but that goes away in the 2000s and payment becomes common for ETFs.
In the 2000s after ISE opens we get the linkage of exchanges. Payments take many forms and the maker/taker model evolves as well. New MM firms come to life because they can acquire trading names cheaply. Citadel is a clear example of the new breed of electronic MM. COB comes in the 2000s as well as "so-called" Smart Routes". Technology costs get so high the small MM firms either consolidate, sell out or die.
Many of the original ISE members don't survive in their original form, but the early 2000s were a heyday period of trading. MMs often had quotes posted below fair value just to print the volume. Also in the 2000s, you get MIAX and NASDAQ into the business and the beginning of the thought process for the formation of exchange groups. Today three MMs are probably half the liquidity provided and as much as 15 - 20% of the customer volume.

If still have CBOE/PCoast merger shirt - the Ying/Yang shirts - don't use them to wash the car - they still trade pretty rich. I'll dig one up and post pictures
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So where did exchanges like BATS, EDGX, GEMINI and MERCURY come from? What's become of PCoast now? Looking forward to seeing the merger shirt.

ajacobson · Nov 26, 2018

As I recall - much later than the 90s.

RRY16 · Nov 26, 2018

JSOP said:
So where did exchanges like BATS, EDGX, GEMINI and MERCURY come from? What's become of PCoast now? Looking forward to seeing the merger shirt.
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PCoast merged with Archipelago. Waited toolong to merge and was left in the dust. At one point they listed MSFT, CPQ, SUNW, MU, AOL, AMD, once they started dual listing on exchanges it was just a matter of time.

peilthetraveler · Nov 28, 2018

We need to get Bob Bright in here. I met him once in 2005 and he said he made $16 million his first year trading options in the 70s "when $16 million was actually worth something" (his words).

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Trading Options in the 90's

JSOP

ajacobson

RRY16

peilthetraveler