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BOX Newsletter 5, March 10, 2004
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BOX Completes First Month of Trading, Customer Orders Being Improved by Over $ 2 per Contract

BOX has completed its first four weeks of trading and now lists 125 options classes (for full list of classes listed together with those to be added in the coming weeks, click here). There are 28 market makers presently competing on BOX and BOX expects to have completed phase one of its roll out of its first 250 classes by early April, 2004. For a list of the firms already approved as BOX trading Participants, click here.

Price Improvement in the PIP
  
Directed Orders

During the first week of March, BOX executed roughly 315 PIP orders per trading session, representing slightly more than 4% of overall BOX trading volume and a little less than 25% of all BOX public customer traded volume.

The average per contract price improvement to customers from BOX PIPs was $ 2.08. The average PIP size was 7 contracts.

For a view of how the PIP works, 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)

Price Improvement outside the PIP

Public customer executions on the normal BOX book (eg "non PIP") also received significant improvement when compared to NBBO. 50% of these executions traded at least five cents better than the best price prevailing at the other five options exchanges. On a trade weighted average basis, the non PIP customer executions on BOX obtained an improvment of $ 3.25 per contract. This is a reflexion of the high quality of BOX markets due to its competitive market maker structure with price and time priority.

Trading Volumes
BOX trading volumes are averaging between 2 and 3% of the total OCC cleared volume in the classes that BOX has listed. To view BOX daily trading volumes, click here.

BOX is hiring in New York
BOX is looking for a New York based Senior Sales Executive. This person will be a key player in directing the marketing strategy, identifying and closing new option participants, managing relationships and providing expertise on trading and technology. If you are interested in this position or would like a detailed job description visit the Employment section of our Website at www.bostonoptions.com

 

  

During the first five days of March, BOX averaged 320 Directed Orders per trading session. 80% of these orders received an execution at least one penny better than the prevailing NBBO.

Directed Orders is a facility provided by BOX to permit broker dealers which do not have the proprietary trading capacity to offer price improvement to their customers to route their executable orders to a BOX Participant (often, but not necessarily, a BOX Market Maker) who may provide price improvement by taking the contra side of a PIP initial order. The receiving BOX Participant has 3 seconds to either initiate a PIP or forward the order on to the BOX book for normal trading.

For more information on contacting BOX Participants willing to receive order flow via the Directed Order for improvement, click here.

BOX Market Quality

As part of Intermarket Linkage, each of the six options exchanges may send "PA orders" to any of the other exchanges on behalf of a public customer order where the sending exchange seeks to obtain a price on behalf of a client that it itself is not able to match.

For the first week of March, 2004, BOX executed nearly eight times as many PA contracts as it sent to the other five exchanges, an indication of the quality of BOX's markets and BOX's ability to match and often better the other exchanges.

 

 

 

Boston Options Exchange Highlights & Advantages

 

 

 

Fully Automated - Fully electronic equity options exchange.

 

  

 

 

Low Entry Costs - No seats to buy or rent.

 

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.

 

  

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.

 

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.

 

  

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.

 

Simple Cost Structure - traders only pay when they trade, there are no annual fees. No trade execution fees for public customer orders.


   Transparent - Order book broadcasting five best price limits allows traders to see market depth.
Open Architecture – Each trader may connect whatever trading system he wishes.
  

Equal Treatment of Orders - BOX does not discriminate order priority on the basis of the type of account. 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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