Swiss investment bank UBS is launching a DMA platform for options trading that can also be accessed from 14 third-party OMS and EMS providers.
UBS has been developing its options DMA capabilities through its desktop trading system, Pinpoint, for years and has been working on supplying third-party providers with access to its options offering for the last nine months, said John DiBacco, head of U.S. equity derivatives trading at UBS.
“We’re at a point now where we can offer a high-quality capability to the market,” he said, referring to the platform, which serves both retail and institutional clients. “Additionally, the market is pretty well poised for a transformation in options execution. We currently have seven exchanges, and we have increasing volumes. In the last few months, [UBS has] seen quite a few days in which the total options contract volume exceeded 20 million.”
Client demand for electronic trading capabilities is at an all-time high, and it is estimated that by 2009, 95 percent of small orders will be traded electronically, DiBacco noted. Based on the number of all contracts traded year to date, UBS says it trades more than 10 percent of all U.S. options volume.
Penny trading in options will also have an impact, said Will Sterling, head of UBS’s institutional electronic trading. “There are tighter spreads, and, in a lot of cases, increased liquidity in the market. So there’s increased demand from clients on one side and also tighter spreads,” he said.
Although the biggest traders of options have been hedge funds, the timing of the release happens to coincide with increased interest from almost every client segment, Sterling said.
Vijay Kedia, president and CEO of FlexTrade, an EMS provider participating in the launch, said more sellside firms are now offering full DMA access to the options exchanges. “This highlights the growing importance of DMA to all the options exchanges,” he said. “It gives users more control and really enhances their capabilities.”