In the recent S3 newsletter, it posed the question, “Where has all the volume gone?” The story reviewed the current options exchange landscape and the Maker Taker fee structure. How does this affect volume in 2013?
Here’s some interesting points.?
- This year between January and November, options volume grew by 2.7% as compared to the same 2012 period.
- A closer look at the exchanges’ primary fee structure paints an interesting picture. The Maker Taker fee structure had significant growth at nearly 31% with almost 225 MM contracts while Payment for Order Flow lost almost nearly 94MM executed contracts (3.3% volume) during the same time period in 2012.
- Taker Maker (Inverted Maker Taker) underwent a dramatic volume decline with its loss of 30MM-plus contracts–a fall of more than 20% from executed volume.
- A look at the rising volume helps explain the growing number of exchanges and the different strategies they utilize for either different symbols or client types.
- With BOX (Inverted Maker Taker) as the sole exception, each “exchange owning firm” underwent a volume net increase in volume, with BATS (Maker Taker) undergoing the greatest percentage rise at 21% in volume.
- In every case, a company’s Maker Taker exchange including C2 (CBOE), GEM (ISE), ARCA (NYSE) and NOM (NASDAQ) reported increases. Meanwhile, their PFOF exchanges (CBOE, ISE, AMEX and PHLX respectively) saw falling volume. MIAX, new this year and also a PFOF exchange, reported 31MM contracts.
- When looking at pure volume, Nasdaq was the winner for greatest volume through its addition of 40MM contracts. A portion of this can be attributed to the net increase rise by Maker Taker exchanges, while a second factor is the Inverted Maker Taker approach utilized by its BX exchange, a competitor to BOX with this strategy that had previously not been challenged in the Inverted Taker Maker arena.?
- What will 2014 bring? Will exchanges alter their strategies in an attempt to grab greater order flow??
?Stay tuned…