CBOE Says C2 All-Electronic Options Exchange Will Start in Late October

CBOE Holdings Inc. said its second U.S. equity derivatives platform, C2 Options Exchange, will start in late October.

C2 will be an all-electronic alternative to Chicago Board Options Exchange, the largest of eight U.S. markets, offering users a different methodology for handling orders. The CBOE had 29.2 percent of total equity derivatives volume in July.

“C2 will appeal to a wide variety of customers and have the potential to expand our customer base,” William Brodsky, chairman and chief executive officer of CBOE, said in a statement. The electronic exchange “is intended to offer substantial opportunities in a highly competitive and rapidly changing options environment,” he added.

The new exchange will execute orders it receives based on a “modified price/time matching algorithm,” CBOE said in the statement. Under a price-time system, an exchange lines up requests to buy and sell securities in its books according to when they were received, then executes orders against them based on that ranking.

The CBOE uses a different matching algorithm for most products designed to attract quotes at the best price for a larger number of contracts. Options exchange are increasingly competing with one another on pricing and over which trading models work best for investors.

The C2 venue will use so-called maker-taker pricing in which providers of liquidity are paid an incentive and firms that trade against those orders pay a fee, CBOE said. The exchange will publish the fees to trade on C2 in early October.

While C2 won’t initially trade CBOE’s exclusive products such as options on the Standard & Poor’s 500 Index, plans to offer them will be announced after C2 begins. The company said 12 brokers are currently connecting to C2.

To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net

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