If your objective is to trade an options contract in size, the likelihood is pretty high that trade will occur upstairs, in the over-the-counter market. The OTC market is entirely block trades, while maybe 20 percent of the volume on the options exchanges comes from blocks. To better compete, the exchanges are trying to increase their block share with some rules changes and technology.
You can read about this high hurdle the exchanges face in this month’s cover story, written by Peter Chapman. The story outlines the key issues in this tug-of-war between the OTC and the listed options markets. The longtime observer can see some similarities between today’s options exchanges and the block-related problems that plagued the floor-based stock exchanges. When equities first started having an impact on trading in the 1960s, New York Stock Exchange specialists couldn’t cope with the large blocks. Similarly, today’s options market makers tend to scatter when a large trade hits the screen. Also, upstairs traders couldn’t stand it when their trades got broken up on the floor of the New York Stock Exchange. It is not different in the options world.
Besides Traders Magazine’s online and print products, we also produce a one-day conference that you can attend. This year’s Traders Live! will be Sept. 24, in New York at the historic Down Town Association. The idea is to deliver the most informative and provocative one-day event possible, to make it short and sweet and to the point. This year’s conference will take on a new focus: how the credit crisis has impacted trading. The sessions will take a forward-looking perspective and offer a road map of where trading and accessing liquidity are headed. Attendees will have the opportunity to network with others in the trading industry. But they will also have the chance to meet our experienced and knowledgeable staff of reporters: Chapman, Nina Mehta, James Ramage and Gregory Bresiger.
One of the topics that will be addressed at the conference is dark pools. You’ll notice a story in this issue on dark pool reporting written by Mehta. The SEC is investigating whether price discovery is being hindered because of the lack of information from dark pools. Whether the SEC’s study of this issue leads to increased reporting remains to be seen. In the meantime, whether you read us in print or attend our live events, including Web seminars, Traders Magazine’s goal is to bring the institutional trading community the most up-to-date news and thorough analysis of the industry. We’ll do our best to deliver on that promise. Enjoy the issue.
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