As Nasdaq continues its drive to make its mark in the options market with a potential Philadelphia Stock Exchange merger, the NYMEX is also beefing up its stake in electronic options trading. NYMEX completed its purchase of a 19 percent stake in energy derivatives brokerage firm Optionable this week."From a technology point of view we'll work with them and contribute to their development efforts and they'll help us as well," says Ed O'Connor, president of Optionable. "We've always focused on developing products that are based on what our customers want to trade."
Optionable provides natural gas and other energy derivatives trading and brokerage services via voice, floor and electronic trading. Its Opex real time electronic trade matching system aims to improve liquidity and transparency in an otherwise complicated market. O'Connor says that about 10 to 15 percent of the company's trading is currently done electronically and that number continues to climb.
O'Connor adds that options trading is becoming more and more popular as the markets become more liquid and the process becomes more efficient with electronic offerings. The buy side is also playing a bigger part as many former energy traders have landed at hedge funds and are more familiar with the markets and comfortable trading energy options.
"They are more sophisticated in terms of assessing risk and understanding positions," says O'Connor. In addition he says that the ability to straight-through process via NYMEX's ClearPort electronic clearing platform, which Opex has a direct connection to is also important. "The trades go right into the clearing facility, comes back and within seconds you understand where you stand."
NYMEX also was issued a warrant that would to possibly increase its stake in Optionable to 40 percent over the next 18 months.