Evasive Nasdaq Drops Hints About Eventual Options Bid
Crying Wolf
We've been hearing rumors about NASDAQ and its designs on the options market for years. These rumors are so frequent, and so incorrect, that it is hard to take any news regarding NASDAQ and the options market seriously anymore.
Over the past few years, the rumor mill has linked NASDAQ with virtually every other exchange in the options world. The most recent gossip had NASDAQ targeting the PHLX and considering a potential counteroffer for the ISE, neither of which came to fruition.
A Small Kernel Of Truth
The veil of uncertainty surrounding NASDAQ's options plans was lifted, if only partially, at the FIA/OIC Equity Options Conference. Adam Nunes, Head of the impending NASDAQ Options Market, was maddeningly vague on specifics regarding the exchange. However, he did say that NASDAQ is planning to launch the exchange in early December. After so many rumors and false starts, it was refreshing to hear an actual time frame announced for the project.
Who Needs Seven Exchanges?
Although the overwhelming theme of the conference was penny pricing, questions about the NASDAQ Options Market surfaced in almost every panel. All of these questions were centered around the same basic refrain - do we really need a seventh options exchange? After all, what can NASDAQ possibly bring to the table that isn't already offered by the other six competitors?
That question has dogged NASDAQ's representatives ever since they first announced their intention to return to the options fray. Unfortunately, their responses (or lack thereof) have raised more questions than they've answered. The fact that NASDAQ is still unable to offer a compelling raison d'etre for their options exchange does not exactly inspire confidence in the endeavor.
Why Not?
The entire NASDAQ options experiment can be summed up in two words: why not? From the scant details available, the project appears to be designed to capitalize on cost and technology synergies. The exchange is hoping to adapt its existing equity infrastructure for the options market.
NASDAQ's competitive advantage, such as it is, is that it can accomplish this change at a relatively low cost. As long as NASDAQ can capture enough market share to justify its small investment, why not venture into the options business?
It remains to be seen whether "why not" is sufficient to drive NASDAQ to success in the notoriously brutal options industry. The exchange is diving into the most competitive sector of the financial market during the most challenging period in its history. If NASDAQ isn't prepared to innovate and fight for every point of market share, then it should end this experiment before it begins. After all, it would be a shame if they had to bail out of the options market for a second time in less than a decade....
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About Mark S. Longo
Mark S. Longo is the founder of The Options Insider Inc. - a firm dedicated to providing free options information, education, news and analysis for options users. Whether it's on TheOptionsInsider.com, a leading online options destination; through Options Insider Radio, the world's only radio network for options users; or through a growing number of newsletters and live events, Mr. Longo continues to provide new ways to spread the word about options.Mr. Longo's analysis of the options market has appeared in a wide variety of domestic and international publications, including The Wall Street Journal, Financial Times, Reuters, Futures Magazine, and more. As one of the few industry commentators with practical options experience, he has developed a substantial following among industry veterans and newcomers looking for insight into this complex market.Mr. Longo began his career as an options trader on the floor of the Chicago Board Options Exchange.
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