The Boston Stock Exchange received approval from the Securities and Exchange Commission to launch The Boston Options Exchange (TheBOX), a new electronic options market that is expected to go live in the second half of January.
The BOX will be competing against four existing options exchanges, including the all-electronic International Securities Exchange (ISE). Its founders -- the Boston Stock Exchange, the Montreal Exchange and Interactive Brokers -- are promising lower-cost transactions, anonymous trading and a market structure that guarantees customers price improvement.
One of its more novel features is a price improvement period (PIP) -- that is conducted via an electronic mini-auction -- that guarantees a customer must receive a minimum of a penny-per-share price-improvement. This will pave the way for option trading in penny increments and could lead to internalization of order flow, sources contend.
In response, one rival, the Chicago Board Options Exchange (CBOE), expressed disappointment and concern over the SEC's approval, which it had made known in its comment letters.
"One penny better than the prevailing quote does not amount to a significant price improvement for customers, but the ability to 'penny jump' by market participants will result in a widespread change in the market structure before all of its implications have been fully studied," states CBOE Chairman and CEO William Brodsky in a press release issued hours after the SEC approval was announced.
For competitive reasons, the CBOE says it will file immediately with the SEC for the ability to trade orders in pennies, while quoting in nickels, as the BOX allows. The CBOE says it expects the SEC approval of the BOX to result in firms internalizing order flow.
MFS Investment Management has deployed the CameronFIX engine, which supports the FIX (Financial Information Exchange) protocol for fixed-income trading. Cameron'sFIX supports all FIX versions 4.0 through 4.4. The latest version --FIX 4.4 -- contains increased support for fixed-income.
MFS plans to integrate the FIX engine with its existing trading systems and communicate with all of its counterparties including alternative- trading systems (ATSs) and brokers, according to the news release.
Thomson Financial signed an agreement with Lava Trading. Under terms of the deal, Lava's direct-market-access trading technology will be available to users of Thomson AutEx, a leading real-time network and database for order routing, indications of interest, advertised trades and allocations.
Thomson AutEx clients will have electronic access to the U.S. equity markets. They will obtain intelligent order routing and direct connectivity to all major pools of liquidity, including Nasdaq, listed exchanges, electronic-communications networks and alternative-trading systems. In addition, they will have the opportunity to use Lava's sophisticated order types straight from their order management systems (OMSs). Traders will also have the ability to initiate an order directly from their OMSs through the Lava interface.
The Philadelphia Stock Exchange (PHLX) signed a two-year agreement with HyperFeed Technologies to use its MEPS (Managed Exchange Platform Services) technologies for processing high-speed market data for automated-trading applications. In addition, it will use the software for calculating National Best Bid Offer (NBBO) quotes generated by the exchange.
PHLX also retained HyperFeed to develop a FEP (Front End Processor) for the integration of PHLX generated data and the calculation of a PHLX-designed NBBO.
PHLX is the second major U.S. options exchange to choose HyperFeed's MEPS technology in the last six months. The Chicago Board Options Exchange(CBOE) tapped HyperFeed in June 2003 to manage the market data that is available through CBOEdirect HYTS, the exchange's new Hybrid Trading System.