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BOX Newsletter
2, October 27, 2003
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Trading
Simulation Successful,
Over
2 Million Contracts Traded
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There
are a large number of parties involved in the BOX project,
including:
- BOX
Participant Broker Dealers:
- professional
traders
- clearing
firms
- Market
Makers
- Order
Flow Providers
- BOX
Market entities:
- BOX
R which is the BSE regulatory group for BOX
- BOX
Market Operations Center
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- Options
industry service organizations such as
- Options
Price Reporting Authority
- Options
Clearing Corporation
- Options
Linkage Authority
-
the five other options exchanges participating in Intermarket
Linkage
- Independent
service providers including:
- broadcast
data vendors
- trading
software vendor
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On
Saturday, October 25, 2003, all of the above participated
in a five hour trading simulation which was the first time
that all parties had been connected simultaneously. The simulation
was successful with over two million contracts "traded".
BOX technical staff have been able to confirm that
- the
BOX trading platform is ready for the launch of trading
and
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links to all of the above are operational and reliable
Over
50 different firms participated in the simulation; highlight
statistics are provided in the table at right.
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Trading
Session
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5
hours
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Number
of Firms
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55
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Number
of Traders
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79
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Market Makers
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30
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Total
Messages Processed
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9,875,875
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Market
Maker Quotes
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5,891,764
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Simple
Orders
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24,686
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IML
Related
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3,807
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Total
Trades
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34,470
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Instruments
Traded (of total of 29,000)
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5,900
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Classes
Traded (out of 250)
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174
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Average
Order Messages per Second
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300
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Total
Contracts Traded
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2,082,062
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SEC Approves BOX Allocation Process for Market
Makers, Appointments Allocated for
First Phase of Trading
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The
SEC approved the BSE rule filing governing the allocation of BOX
Market Maker appointments on October 16, 2003. The following afternoon
at BOX's Boston office, the allocation plan was executed and the
market maker appointments for roughly the first five months of
BOX trading were determined via a random drawing. Thirty two broker
dealer firms qualified as BOX Market Makers participated in the
allocation drawing which was supervised and audited by Ernst &
Young; the results for each firm were communicated to them on
October 20, 2003.
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One: First 10 Weeks |
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Phase
Two: Second 10 Weeks |
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Post
Launch |
- BOX
lists roughly 25 classes per week to attain the target
of 250 classes listed for trading (the precise symbols
for each week will be announced shortly before the debut
of trading)
- Market
maker appointments are limited to those selected in the
allocation process during phase one (click
here
for a breakdown of the 250 classes by category)
- Classes
in categories A, B, C and D have twelve market makers
- Classes
in category E have ten market makers
- Category
F classes have five market makers
- At
the end of this phase, BOX expects to have 1,911 market
maker apointments in operation, an average of 7.5 per
class
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- BOX
Market Makers having participated in the initial allocation
process on October 17 who were "wait listed"
for some of their requested appointments will be allowed
to commence trading as market maker
- These
appointments will be rolled out as quickly as practicable
during this phase
- Qualified
firms which did not participate in the initial allocation
process may apply for BOX Market Maker appointments during
this phase as well as commence technical and connectivity
testing
- At
the end of this phase, BOX plans to have over 3,400 market
maker appointments in operation, an average of 14 per
class
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-
BOX's stated objective is an open and competing market
maker structure. New market maker candidates may commence
making markets on BOX after launch, provided they meet
the qualification criteria and have been approved by BOXR
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Status
of BOX's Filings with SEC
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Chicago
FIA Trade Show
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-
procedures
governing the allocation of Market Maker appointments
during the launch phase
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approved
on October 16, implemented October 17, 2003
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BOX
will have a stand at the FIA trade show in Chicago during
the first week of November, 2003, the first time BOX has participated
in such an event. Representatives from BOX will be available
to answer questions about BOX, both regulatory and technical. |
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-
rules
describing the regulatory relationship between the BOX
market and the BSE
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public
comment ended August 22, 2003
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PIP:
the "Real" Story
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- describes
the organization of the BOX business entity
- public
comment period ends November 13, 2003
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For
a view of how the PIP actually works, as opposed to other
explantions you may have come across, click here
to transfer to a demo on the BOX website (select the choice
"PIP Demo" on the menu at the right on the website
page).
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Boston Options Exchange Highlights & Advantages
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Fully Automated - Fully electronic equity options
exchange
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Low Entry Costs - No seats to buy or rent
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Price and Time Priority - orders will be handled
on a strict price/time priority without a specialist controlling
the price. There is no wheel for "allocating" trades that
disincents competition
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Price Improvement Auctions – BOX includes
a unique electronic mini-auction that will attract, subject
to price improvement, orders that would otherwise be printed
elsewhere at the NBBO
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Multiple, Competing Market Makers - BOX places
no limits on the number of market makers who may continuously
quote on a given options class. They compete equally on a
price and time basis
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Anonymous - BOX does not provide information on
broker identification when an order is displayed in the order
book. Furthermore, BOX does not provide counterparty identification
for trade executions. This anonymity encourages competition,
rather than the "herd mentality" which discourages price competition
at some exchanges
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Simple Cost Structure - traders only pay when
they trade, there are no annual fees. No trade execution fees
for public customer orders
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Transparent - Order book broadcasting five best
price limits allows traders to see market depth
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Open
Architecture – Each trader may connect whatever trading
system he wishes
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Equal Treatment of Orders - BOX does not discriminate
order priority on the basis of the type of account, with the
exception of certain PIP executions. All orders on the BOX
book are available to all traders on a first come, first served
basis with no limitation on professional order executions
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