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December 1, 2010

Amex Outgrows Its Floor

By Peter Chapman

NYSE Amex Options, which earlier this year instituted an electronic specialist program, has seen a near doubling in the number of contracts traded electronically.

Steve Crutchfield

The old-line floor-based exchange is now trading three-quarters of its volume electronically. That compares to two-thirds a year ago.

In October, for example, Amex traded nearly 1.6 million contracts per day electronically, on average, up from 900,000 contracts in October 2009.

While the growth is not entirely attributable to Amex's 10 e-specialists, a substantial chunk is. "Our volume has been up overall, and most of that growth has been on the electronic side," Amex chief executive Steve Crutchfield said. "A major contributing factor is the launch of the e-specialist program."

In February, five firms became e-specialists, including Barclays Capital, Goldman Sachs, UBS, Citadel and Citigroup. The five are also part of a group of seven firms negotiating to take a 50 percent stake in Amex Options. In July, five more firms joined the program: Morgan Stanley, Timber Hill, Integral Derivatives, Wolverine Trading and Susquehanna Securities.

More are on the way. Crutchfield said the exchange is in talks with a number of other firms looking to become e-specialists.

The year just passed actually wasn't atypical. Electronic trading has gradually overtaken floor trading at Amex Options since NYSE Euronext bought the American Stock Exchange in October 2008. At that time, two-thirds of all volume was still being traded on the floor.

There are five open-outcry specialists at Amex Options, but their ranks have dwindled. At least seven floor-based specialists, including Goldman and LaBranche Structured Products, have closed shop in the past year or so. The names they traded have been passed to the remaining five, and now just about every one of the options traded at Amex is handled by both a specialist and an e-specialist.

The five remaining traditional specialists are Barclays, Integral Derivatives, Taylor Executions, Susquehanna and Trinity Derivatives. Floor-based specialists are permitted to trade both on the floor and electronically. E-specialists can only trade electronically.

Floor-based volume continues to grow, Crutchfield said, albeit at a slower pace than the electronic variety.


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