BOX Exchange Gets SEC OK to Trade Jumbo S&P 500 ETF Options

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BOX Options Exchange, the third- smallest of 11 U.S. options venues, will be the first to begin trading larger-size contracts on the most-active U.S. equity derivatives product, according to a company executive.

BOX will list and trade contracts based on 1,000 shares of the SPDR S&P 500 ETF Trust starting May 10, according to Ed Boyle, senior vice president for strategy at the Boston-based exchange. The so-called jumbo options, approved May 3 by the Securities and Exchange Commission, will be 10 times larger than existing contracts on the Standard & Poor’s 500 Index exchange- traded fund, known by the ticker symbol SPY.

The contract is designed to give institutional investors another way to trade the S&P 500 at a time when many asset managers are increasing their use of ETFs as part of their investment strategies. Institutions often use larger-size contracts like S&P 500 options that enable them to buy or sell bigger positions without signaling their intentions and moving the market.

“We see customer demand for the product because it offers flexibility to institutions and traders looking for larger notional size in trades,” Boyle said by phone. “It also provides additional price competition across indexes and ETFs.”

The contracts, which will be a separate product from the regular-size options based on 100 shares of the S&P 500 ETF, also offer an alternative to indexes such as the S&P 500, which trades exclusively on the Chicago Board Options Exchange, Boyle said.    For the full story from Bloomberg LP, click here.