Current Securities and Exchange Commission (SEC) rules allow for the exclusive listing of equity index contracts on one exchange, which effectively gives the CBOE a monopoly position on the three biggest index options classes – the S&P 500, the S&P 100 and the Dow Jones Industrial Average. These count for around 90% of US equity options trading volumes.
However, the ISE is petitioning the SEC to allow for multiple listing of equity options contracts, arguing that investors will benefit from greater competition. In November last year it formally urged the SEC to “remove the last bastion of anti-competitive listing practices in the options market”.
“We are entering the index options market slowly due to circumstance and choice,” said Gary Katz, ISE’s chief operating officer. “While many investors have asked us to list the most actively traded index options, we cannot currently address those demands because we cannot procure licenses to trade these products.”
The CBOE argues that other exchanges should not be allowed to replicate products that it has spent money on developing and creating.
David Krell, the ISE’s chief executive, said the listing of the SML contract is an important event in the history of the options market. “The listing symbolises the ISE's commitment to bringing competition to index options, the last bastion in the options market where investors have not yet experienced the economic benefits of multiple listing,” he said.
The week on Risk.net, August 19-25, 2016Receive this by email