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BOX Newsletter
6, May 3, 2004 |
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Price
Improvement Remains Above
$2 per Contract; Over $400,000
in Improved Returns to Investors
Since BOX Launch
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The average price improvement to customers during
April from BOX PIPs was $2.04 per contract, maintaining
the level which has been observed since the launch
of BOX. The average PIP size was slightly more than
five contracts, though there were a significant number
of PIP executions above 100 contracts in size. During
the first three months of operation the average price
improvement multiplied by all contracts submitted
to the PIP has yielded nearly $450,000 in cumulative
savings to options investors.
BOX
executed approximately 1,000 PIP orders per trading
session during April, for a daily average of roughly
5,000 contracts receiving price improvement, both
of which are increases of 50% over March data.
BOX
is the only US options exchange offering price improvement.
BOX
has no payment for order flow program; rather, BOX
provides order flow firms with a means to rebate savings
directly to their customers. 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)
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Traffic
Doubles in "Directed Orders" Sent
to BOX for Price Improvement |
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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. Any BOX
Market Maker accepting Directed Orders must
accept them from any and all BOX Participants
who wish to send them and for all options classes
and series. The possibility of price improvement
exists for all marketable orders on BOX.
Where
a Directed Order is not improved, it will simply
be sent to the BOX central limit order book
for execution at the NBBO (or, in a few cases,
routed to another options market which is posting
a better market than BOX).
Directed
Order traffic during April doubled over the
March figures as the rate of improvement (eg
the percentage of Directed Orders which result
in price improvement) remained around 80% with
an average savings to customers of $ 2.04 per
contract to the customer. There are several
large order flow firms commencing to use the
Directed Order routing facility in order to
obtain price improvement for their clients.
For
more information on how to obtain price improvement
on BOX or to contact BOX Participants providing
price improvement, click here.
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BOX
Completes Phase One
of Rollout of Options Classes |
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| BOX
now lists 232 options classes, having rolled
out an average of twenty new classes weekly
(for full list of classes listed, click here)
over its first eleven weeks of trading. At the
end of April, there were an average of nine
market makers on each of the 232 classes,
ranging from five to twenty depending on
the symbol.
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Phase Two of the BOX rollout, which will raise
the average number of BOX market makers per
class to roughly twelve,will continue over the
next two months. The most active options classes
will have over twenty market makers each, providing
unprecedented price competition.
Sixty
broker dealer Participants have already executed
trades on BOX; for a list of the firms approved
as BOX trading Participants, click here.
To view BOX daily trading volumes, click here.
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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.
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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