Electronic Exchange Box Options Exchange LLC plan to re-introduce open-outcry trading for options met with derision by competitors..
The first thought that came to this writer’s mind when reading the WSJ headline in today’s front page “Proposal to Launch Options Trading Floor Stirs Outcry” which profiles a contentious effort on the part of Chicago’s Box Options Exchange to introduce an open-outcry trading trading floor inside the Chicago Board of Trade [aka CBOT], was of Yogi Berra-who so eloquently stated, “Its like deja vu all over again!” After all, those of us from a previous era whose “office” was an open-outcry options trading pit, whether in NY, Chicago, Philly or San Fran, can easily recall their office back in the day; it was a stadium-sized venue shared by hundreds of others, many wearing colored smocks and equipped with the barest of necessities: sharp elbows, paper pad and pen to record buys and sells. The ones with the best position in the trading pits, the loudest bark, and most importantly, the best price were typically the ones who won the day.
But, ‘progress’ and technology evolution rendered those heroic, risk-taking options floor market-makers virtually extinct, as trading floors have become as outdated as Donald Trump’s hairdo (not to mention his views with regard to climate change, diversity, healthcare, economics, equal rights, etc. etc.). For all practical purposes, options trading migrated to the ethernet. No more shouting, no audible price improvement made by market-makers in the crowd, no looks of angst on the faces of traders caught on the wrong side of the market and worst of all, none of the pretty women that Thomas Petterfy installed on the various exchange floors to do his bidding on behalf of market-making firm Timber Hill Group, the predecessor to Interactive Brokers LLC.
Ironically, it was Petterfy, along with other iconic tech-centric options trading firms such as O’Connor & Associates and Susquehanna International Group that played a major role in the migration of open-outcry options trading to electronic venues. And even more ironic, Box Options Exchange–created in 2002 to capitalize on the electronification of markets is, to the chagrin of competitors in the industry, now campaigning to re-introduce open out-cry trading. Those opposing the plan claim that yet another options venue will add to the continued fragmentation of markets and Box is asserting that human traders are an integral component to maintaining fair and orderly markets.
For those option quants in their early 20’s and 30’s, the concept of open-outcry trading is akin to driving diesel-powered cars in a world in which Tesla is on the verge of introducing autonomous autos. For those who know better, the clip below is a nostalgic reminder of what once was..
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