The International Securities Exchange, the world's largest equity options exchange,
was founded on the principle that technology fosters and infuses new efficiencies
and operational innovations into securities trading. After developing an innovative
market structure that integrated auction market principles into an advanced
screen-based trading system, ISE launched the first fully electronic US options
exchange in May 2000. ISE continually enhances its trading systems to provide
investors with the best marketplace to execute their options orders.
ISE redefined the US options industry by introducing electronic
trading, competition, and lower fees and efficient, equitable
pricing, enabling instantaneous executions in tight, liquid
markets.
Prior to ISE, the US options industry was markedly different.
In the 1980s and 1990s, while other financial markets were embracing
electronic trading, the US options exchanges remained steadfastly
committed to open-outcry trading. The options exchanges also
continued the practice of exclusively listing options on most
blue chip stocks on only one exchange, limiting customer choice,
and forcing brokerages to maintain trading operations on the
floor of each exchange.
Driven by the principle that a fair market structure and technology
enables better quality trading for investors, ISE's founders
started in 1997 planning an exchange that would address the
concerns of potential and current options investors and establish
a new standard in US financial markets.
Bill
Porter, then-chairman of E*Trade, and his colleague, Marty
Averbuch,
began an investigation into the costs and barriers that prevented retail investors
embracing the buying and selling of options. Seeking to facilitate arrangements
similar to those available for stocks in the OTC and third markets, they began
to negotiate directly with the existing options exchanges to lower costs. Due
to the structure under which options exchanges then operated, they were unable
to obtain concessions on costs of execution. Messrs. Porter and Averbuch then
engaged David
Krell and Gary
Katz, former executives of the New York Stock
Exchange's options division,
to examine the feasibility of developing a new US options
exchange. ISE was funded by a consortium of broker-dealers
whose purchase of exchange memberships provided initial
development capital.
ISE, which was launched May 26, 2000, became the first registered
exchange approved by the Securities and Exchange Commission
since 1973, and a member-owner of The Options Clearing Corporation.
ISE changed the fundamental nature of US options trading.
Before ISE traded its first contract, it had affected the US
options industry by fostering inter-exchange competition. When
ISE announced its intentions to list only those options that
represented 90% of industry volumes, it prompted the multiple-listing
of the most liquid options classes which dramatically improved
prices for all investors and broke apart the franchises that
had enabled the floor-based exchanges to exclusively list options
on most blue-chip stocks.
The scalability and efficiency of ISE's business model and
the absence of a trading floor and intermediaries such as floor
brokers enabled the exchange to charge lower execution fees.
ISE's proposed fees prompted an industry-wide scramble to lower
fees. ISE's business model attracted many well-capitalized global
financial institutions to join as members. These firms, that
had previously viewed participation in the options market as
costly and inefficient, have significantly increased the overall
liquidity in the options market.
As the first fully electronic options exchange, ISE also introduced
the efficiencies of electronic trading to the options industry.
ISE developed patented proprietary trading technology, which
resulted in tighter markets and enabled executions in 0.2 seconds.
ISE also strongly advocated for electronic linkage of all options
markets, which enables specialists and market makers at different
exchanges to access each other's markets, thereby enabling customers
to get the best price when they trade, no matter where they
trade.
ISE launched on May 26, 2000. The first transaction was a purchase
of 20 SBC Communications October 45 calls. The ISE introduced
transparency to the options markets by insuring that displayed
markets are accompanied by size. Within three months, ISE had
traded more than one million options contracts. A year later,
ISE had reached the 25 million contracts traded mark, and celebrated
its first anniversary. By the end of 2001, ISE had traded its
50 millionth contract, completed a major trading system upgrade,
and become the third-largest US options exchange.
Building on momentum, ISE experienced further growth in 2002,
achieving its goal of listing equity options representing 90%
of average daily trading volume in the US options industry.
The exchange completed two trading system upgrades that established
the foundation to offer enhanced trading capabilities. In 2003,
the one-size fits all trading rule and ISEspreads went into
effect, which helped provide the momentum for ISE to trade its
250-millionth contract and become the largest US equity options
exchange.
In 2003, ISE implemented the technological and regulatory foundation
to trade index options, which will allow ISE to expand its product
base. ISE also launched the ISE Sentiment Index (ISEE) which
measures opening customer transactions in call and put options,
providing investors with information on the customer buying
and selling activity within the world's largest equity options
exchange. ISE was named Derivatives Exchange of the Year by
Risk Magazine for the second time in three years in January
2004.
On March 9, 2005, ISE became
the first securities exchange to sell its shares in an initial
public offering. ISE's shares are traded on the New York Stock
Exchange under the symbol ISE. |