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CBOE to Offer Benchmark Trades

Traders Magazine, July 2008

Nina Mehta

In another sign the options market is following in the steps of the equities market, the Chicago Board Options Exchange is betting that institutions will embrace benchmark trading as an efficient way to execute large trades. This effort is driven by penny quoting in options, which has shrunk the inside market and is forcing firms to spread orders out over a longer period of time. The CBOE in May inked a deal with broker-dealer 3D Markets to be the exclusive provider of a benchmark crossing product based on 3D's GWAP, or gamma-weighted average price, benchmark. The GWAP benchmark is one of several 3D products. This arrangement allows the CBOE to offer institutions a way to avoid the market-impact concerns of executing throughout the day.

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