To handle its continuously increasing options quote traffic and trading volume, the Pacific Exchange recently upgraded its Stratus Computer-supplied servers. Over the past six months, the options and equities market has performed a staged rollout of new Stratus hardware, replacing Stratus' Contiuum 1245 mini-computers with Continuum 1228s.
Carolyn Botell, vice president of San Francisco development for the Pacific Exchange, says that the exchange began installing the 1228s this March, and completed the rollout just last month. Stratus hardware, she says, now drives all of the exchange's "mission-critical" trading systems--including automated dealing applications and systems that support the firm's open outcry pits.
Noting that the exchange currently has one options floor in San Francisco and one equity floor apiece in San Francisco and Los Angeles, Botell says that the Pacific's decision to upgrade its Stratus technology was primarily fueled by dramatic changes in its options business. Among those changes was a significant upswing in the Pacific's options trading volume.
Recently, Botell says, the exchange recorded an all-time high by trading 500,000 options contracts in a day--nearly doubling the average number of contracts it traded on a daily basis one year ago. What's more, Botell adds that over the last year, the number of options trades the Pacific has executed electronically has "at least doubled."
Just as significantly, during 1999, the exchange has seen a large jump in its options quote traffic. Botell says that early in the year the rise in quote traffic was "extreme volatility" in high-tech stocks. But in the "second half" of 1999, she says, the heavy increase in options quote traffic can be mostly attributed to the new practice of multiple listings among the four major U.S. options exchanges.
In the past, the Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia Stock Exchange and the Pacific all practiced single listing--a policy which gave each exchange exclusive trading rights for certain popular options. But earlier this summer, the exchanges began cross-listing each other's products, breaking their decades-long single listing tradition.
Some industry observers say the cross-listings phenomenon can be directly traced to impending launch of the International Securities Exchange--an all-electronic options market that will attempt to undercut the big U.S. options players by offering lower transaction costs. The ISE is scheduled to go live on March 24, 2000.
While it is difficult to measure the exact impact the ISE has had on options traffic, there is no question that quote traffic in the options industry continues to grow. And that fact was one of motivating forces for the Pacific's Stratus upgrade. "Our use of Stratus hardware is relegated to those areas of our business where we have to have virtually no downtime," says Botell. "We don't have a stated maximum quote traffic capacity... but we would anticipate being able to handle anything the industry could throw at us."
Besides supporting its options trading business, Stratus hardware also powers the Pacific's equity trading systems. Specifically, Botell says that Stratus' Continuum 1228s are the backbone behind the systems the Pacific's equity specialists use to manage their limit order books and handle customer order flow.
However, unlike its options unit, the Pacific's stock trading business has fallen on hard times. In fact, in an attempt to turnaround huge monthly losses the exchange's equity floors are currently recording, the members of the Pacific last week approved a plan to convert those floors into a for-profit subsidiary dubbed PCX Equities Inc. The SEC still must approve that plan.