A little more than a year after buying Greenmoor Financial Group with an eye towards getting into the options trading business, direct market access provider Lightspeed Financial is rolling out an options trading platform.
Lightspeed, a brokerage whose focus has traditionally centered on equities, says its latest offering – Lightspeed 8.0 – will enable traders to build and trade complex options strategies like debit and credit spreads, straddles, strangles and butterflies. Advanced Trading previously reported that buy-side trading firms have been expanding their use of options, turning to complex strategies that can be executed through DMA platforms like Lightspeed's, and algorithms.
The move also comes with U.S. equity trading volumes in the doldrums, a climate that's made it more difficult for pure equity traders to make money. Lightspeed Chief Executive Stephen Ehrlich says this is among the reasons why sophisticated day traders and the buy side have been looking to expand their use of options.
"It's for two reasons. One is there's opportunities to trade options and make money in the options market. The equities markets are flat and it's a little bit difficult to make money," he explains.
"The second is to hedge the risk. We're seeing a lot of traders legging into it to minimize their risk. So it's two-front, to make money and to hedge their risk."
In buying Greenmoor last summer, Lightspeed took control of the Green Trader platform, which provides traders and small-to-mid-sized institutions access to the options markets. At the time of the acquisition, Greenmoor had been executing roughly 3.5 million contracts a month. Ehrlich says that over the last 15 months, Lightspeed has been working to combine its capabilities with what it gained from the Greenmoor deal.
The firm launched the beta version of its new platform about six weeks ago, he adds. Its features include customizable options chains, complex order entry (COE), and the ability to trade equities, options and futures from a single screen.
"A bunch of what we did there is based upon historical knowledge from Greenmoor as well as client demand," Ehrlich says. "We have multi-legged order entry, we have our own pre-defined strategies or you can create your own."
In June, Tabb Group analyst Andy Nybo said in a report that the competition for order flow has been fierce throughout the broker community, with most looking to lure the buy side with a range of services. But Ehrlich says Lightspeed is well positioned to compete in this space.
"There are few brokers that built their businesses around the options market," he contends. "We're doing about one percent of the options market every single day right now, and I think that's a claim not many options competitors can say."