Commentary

Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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November 1, 1999

CBOE Plans Attack On ISE and Allies

By Staff Reports

The Chicago Board Options Exchange, under threat from an electronic options exchange planned by several leading Wall Street brokerages, is planning to hit back with its own system.

The CBOE has almost finished the system, which will rival the one planned by the International Securities Exchange (ISE), according to people familiar with the plan.

The ISE is set to be launched by Menlo Park, Calif.-based E*Trade, Jersey City-based dealers Knight Securities and Herzog Heine Geduld, as well as other participants.

The CBOE is the largest U.S. options exchange with the American Stock Exchange ranking second.

At press time, the ISE was waiting for approval by the Securities and Exchange Commission. David Gray, a spokesman for the CBOE, said the exchange had no comment.

Many trading pros say the introduction of heavily computerized equity trading is motivating the CBOE's decision However, the prospect of losing significant order flow to the ISE is a much bigger threat, some pros say.

"Clearly, the CBOE is reacting to the ISE," said Bikrim Singh, an electronic commerce analyst at Lehman Brothers.

Another possible threat is the American Stock Exchange, an affiliate of Nasdaq. The National Association of Securities Dealers has spoken of electronically linking its Nasdaq and AMEX options businesses.

Multiple Listings

The U.S. options exchanges are also feeling the heat as options on individual companies trade on several exchanges for the first time.

In an increasingly competitive environment, Singh said the CBOE could be eyeing the retail market.

"If the individual investor is educated about how to use options as an investment strategy," he said, "there is a strong opportunity for electronic mediums to attract significant order flow from the retail sector."