The Philadelphia Stock Exchange received SEC approval in July
to launch trading on its XL platform and has scheduled 10 classes
for conversion in August. Pacific Exchange has begun rolling out
its PCX Plus system, and the American Stock Exchange is devel-
oping its own electronic trading system, ANTE.
No figures are available on the overall ratio of electronic to open
outcry trading, but the trend is clear: an increasing amount of
orders are being matched electronically as each exchange moves
farther along the curve.
The all-electronic ISE has grown steadily since its start in May
2000 and continues to gain market share at the expense of the
other exchanges. It pulled past the CBOE earlier this year and
now ranks as the largest exchange in the world for individual
equity options, with 176.4 million contracts traded in the first
half of 2004.
Even so, ISE still has only a third of the total volume in the U.S.
market. In contrast to the experience of futures exchanges, com-
petition among the U.S. options exchanges has not resulted in a
winner-take-all outcome. As of June, Amex had around 19 per cent
of the market, down from 23 per cent in December 2002, and
Pacific Exchange was holding onto 8 per cent of the market, down
from 11 per cent in December 2002. Their market shares are
declining, but they remain competitive.
Last but not least, there is a new exchange in the marketplace.
The Boston Options Exchange (BOX), a joint venture of the Boston
Stock Exchange, Interactive Brokers and the Montréal Exchange,
began trading in February and has traded 6.8 million contracts in
its first six months. Compared to the other exchanges, it’s still
tiny, with less than 2 per cent of the overall market at the end
of June, but BOX says its market share in individual names has
been as high as 10 per cent.
12 Clearing and settlement of derivatives
The derivatives industry continues to be innovative and to grow. New
products, new exchanges, growing use of OTC products all of this is
creating a massive challenge to the firms and infrastructure that
supports the industry, and the growth is not confined to the United
States and European markets.