CBOE Asks SEC for Permission to List Options That Expire Within Single Day
CBOE Holdings Inc., operator of the largest U.S. options market, asked regulators for permission to become the nation’s first to list contracts that expire in as little as one day.
The daily options would be linked to as many as 200 stocks, exchange-traded funds, exchange-traded notes and indexes, according to a filing with the Securities and Exchange Commission dated Aug. 24. The contracts may have terms of one, two, three or four days, the owner of the Chicago Board Options Exchange said.
CBOE is introducing products to maintain its market-share lead against rival exchanges, which total seven after Bats Global Markets introduced a platform this year. CBOE introduced weekly options in 2005, including contracts on the Standard & Poor’s 500 Index, on which the exchange has the exclusive right to list equity options.
“It makes sense that the exchanges would want to give dailies a try,” said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market analytics. “For ultra short-term event trading, these would be useful.”
Daily options will “provide market participants with a tool to hedge overnight and weekend risk, as well as the risk of special events such as earnings announcements and economic reports, and pay a fraction of the premium of a standard or weekly option,” CBOE said in the filing, which was posted on the firm’s website.
Carol Kennedy, a spokeswoman for the owner of the Chicago Board Options Exchange, wouldn’t comment further.
CBOE shares rose 0.6 percent to $21.94 at 4 p.m. New York time. The stock is down 24 percent from its initial public offering at $29 in June. The last major U.S. securities exchange owned by its members raised $339 million in the IPO by selling shares at the top end of its price range.
The company said yesterday it will list weekly options on the Chicago Board Options Exchange Volatility Index, or VIX, the benchmark for U.S. options prices and a gauge of expected stock- price swings. CBOE has the exclusive right to list derivatives linked to the S&P 500 and VIX.
CBOE handled 27.2 percent of U.S. options trades last month, down from 32.5 a year ago, according to data from the Chicago-based Options Clearing Corp., which clears and settles all trading of exchange-listed contracts.
Nasdaq OMX Group Inc. took 23.4 percent last month at its PHLX exchange in Philadelphia, while the New York-based International Securities Exchange won 18.3 percent. Excluding index options, CBOE took second place with a 21.8 percent share last month, down from 28.2 a year earlier. PHLX was first with 25.2 percent.
U.S. options volume is on pace for a seventh straight annual record, OCC data show. Volume this year reached 2.36 billion contracts as of the end of August, up 5 percent from the same period last year, OCC said in a statement last week.
Options began trading in the U.S. on an exchange when the CBOE started on April 26, 1973. There were 1.1 million contracts traded that year. Volume first exceeded 100 million contracts in 1981. Trading reached 1 billion in 2004 and 2 billion in 2006.