On Wednesday, the International Securities Exchange (ISE) reported December’s average daily volume (ADV) was 2.4 million contracts, a 6.1% rise vs. 2011’s monthly options volume at 47.8 million contracts.

In December, ISE was the largest U.S. equity options exchange with its 18.6%* market share and for the year, it was No. 2 with an 18.1% market share. ?

ADV for 2012 was 2.5 million contracts, an 18.1% fall over 2011. Total annual volume was ?631.8 million contracts.?

Dividend trades make up 10.0% of industry volume in December 2012 and 6.2% of total industry volume for 2012, as noted by ISE in its release.

ISE 2012 business highlights included the following:?

  • Corporate
    • In July, ISE filed a Securities and Exchange Commission Form 1 application for a second exchange license. It will launch a second options exchange platform this year, pending SEC approval.
    • ISE announced its AlphaClone LLC partnership and its intent to promote the firm’s AlphaClone’s innovative hedge fund position replication index, the AlphaClone Hedge Fund Long/Short Index.?
  • New Technology?
    • In March, ISE completed its trading system upgrade based on the OptimiseTM trading architecture and in May, introduced Implied Order functionality, which enhanced the execution of multi-legged strategy orders by allowing greater interaction of the complex order book with the regular order book.?
    • ISE made several enhancements to the risk management features offered in PrecISE Trade?, ISE’s innovative, front-end execution management system. This included the Kill Switch functionality to PrecISE, enabling this segment (FIX and DTI users) of ISE’s membership community to utilize the Kill Switch to cancel all open orders and prevent new order submissions for more comprehensive risk management.?
  • New Order Types and Trading Functionality
    • In November, ISE became the first exchange to confirm a March 18, 2013 launch date for Mini Options trading.?
    • In August, ISE completed the roll out of Implied Order functionality for all products in its complex order book. Since the launch, Implied Order functionality has accounted for 7.2% of all non-crossing, multi-legged contract volume executed on ISE.
    • ISE launched Add Liquidity Only (ALO) orders, which specify that the order can only be executed if it adds liquidity to the order book as a “maker.” If the order cannot be added to the book, it will be cancelled, or may be re-priced to rest on the book at the discretion of the firm entering the order.
    • In May, ISE introduced Order Management Functionality, enabling PrecISE users to route orders to other PrecISE users for execution.?
  • New Products?
    • ISE created and launched five new proprietary indexes in 2012, three of which already serve as the underlying for exchange-traded products. This includes Horizon Kinetics ISE Global Wealth, Horizon Kinetics ISE Asia ex Japan Wealth, ISE Diamond/Gemstone, ISE Mining Service, and ISE Junior Silver.?
    • Virtus Investment Partners, Inc. launched the Virtus Wealth Masters Fund (Tickers: VWMAX, VWMCX, VWMIX), which tracks the Horizon Kinetics ISE Wealth Index. The Horizon Kinetics ISE Wealth Index includes companies whose senior managements have demonstrated track records of skill and specific industry knowledge that have translated into long-term shareholder value creation.?
    • PureFunds and Factor Advisors introduced three exchange-traded products based on ISE indexes: PureFunds? ISE Diamond/Gemstone ETF (NYSEArca: GEMS); PureFunds? ISE Mining Service ETF (NYSEArca: MSXX); and PureFunds? ISE Junior Silver ETF (NYSEArca: SILJ). With the addition of these three new ETFs, there are now 19 ETFs that track ISE’s proprietary indexes.?
    • Finally, ISE expanded its market data product suite to include the new Premium Hosted DatabaseTM (PHDTM), a fully managed historical tick database that offers full OPRA data including all quotes and trades from all exchanges, U.S. equities level one data, pre-computed implied volatilities and Greeks, full corporate action histories, and ISE Open/Close trade data, totaling over 200 terabytes of data.?
  • Industry Leadership
    • In November, ISE and several other U.S. options exchanges eliminated support for dividend trade strategies. For years, ISE has spoken about the risks posed by dividend trade strategies and have provided transparency to the market by publishing information and statistics about these trades.?