|
Prior to 1973, options trading in the United States was essentially unregulated, unstructured and conducted only in the over-the-counter market. In the absence of standardized products, exchange regulation and a central clearing facility, options were considered high-risk vehicles and thus remained a small portion of the overall equity market. In 1973, the Chicago Board of Trade created the first options exchange, the Chicago Board Options Exchange (CBOE) and related central clearing facility, The Options Clearing Corporation (OCC). Under the regulatory auspices of the U.S. Securities and Exchange Commission, the options market has undergone unprecedented growth since then, with a total of seven options exchanges emerging during the twenty-five year period: CBOE, American Stock Exchange (Amex), Pacific Exchange (PCX), Philadelphia Stock Exchange (PHLX), New York Stock Exchange (NYSE), Nasdaq and Midwest Stock Exchange (Chicago Stock Exchange). Today, after consolidation, only the first four exchanges operate options markets.
Total equities options volume traded on U.S. exchanges have risen from 5.7 million contracts in 1974 to 444 million contracts in 1999. (Since each options contract is for 100 shares of underlying security, the 1999 volume represents 44.4 billion shares of stock). Volume in 1999, in fact, more than doubled that of 1996. This growth trend has continued as options are being increasingly utilized by institutions in their risk management programs and by retail customers in their personal investment programs. While options volume has grown, the options market has consolidated in recent years. Nasdaq and the Midwest Stock Exchange have ceased trading options and in 1997, the NYSE sold its options business to the CBOE.
Exchanges around the globe are moving toward some form of automated trading systems. Most notable is the experience of MATIF, the French futures and options market. In 1997, it began utilizing a computer-based system contemporaneously with its traditional floor system. Within a few weeks, virtually all of MATIF's business migrated to its automated system and its floor was subsequently shut down. EUREX Deutschland (formerly DTB), the German Futures and Options Exchange, is an electronic exchange that has successfully captured significant volume from LIFFE, a London floor based exchange. In October of 1997, the Australian Stock Exchange changed its options trading from a floor-based mechanism to a screen-based system of trading.
|
