Panel Discussion – Equity Options Jenga
Changing market structure is like a Jenga game?.pulling out chunks of the structure can leave other parts in a precarious position. This panel discussed various regulatory changes that are having an impact on market quality.
Chair:
Joseph Sellitto, Chief Executive Officer, Global Execution Brokers, Affiliate of Susquehanna International Group
Speakers:
Dennis Davitt, Managing Principal & Chief Investment Officer, Harvest Advisors
Ed Haravon, Partner & Chief Operating Officer, Spot Trading
Patrick Hickey, Head of Market Structure, Optiver
Todd Lard, Vice President, Trading Operations, Charles Schwab
Jonathan Werts, Managing Director, Bank of America Merrill Lynch
- There are currently 12 US option exchanges. Fragmentation is a worry
- The rules requiring “best execution” across exchanges only takes into consideration price, not costs
- Institutional option volume is growing steadily, retail option volume is growing for the first time in 5 years
- OCC costs are increasing as are margin costs
- The industry needs to do their best to get cross margining rules improved
- The panel believes that open outcry will still stay in selected products (SPX, Eurodollar, for example) will continue
- The rules regarding options on futures are vague (see cross margining)
- The number of market-makers is decreasing as locals have more or less vanished and the banks are closing their prop desks
- In a zero interest rate world clearing is becoming less and less profitable
?Interesting Quotes“Rias are an untapped market for options -even within our own firm..They manage billions of dollars in assets with little to no understanding of the risk mitigation benefits of options..We can probably do a better job internally of introducing that audience to the benefits of using options” – Todd Lard, Vice President, Trading Operations, Charles Schwab“Is it time to consider risk controls and total cost of execution into the best ex determination..right now an exchange has a severe issue and then they go right back to their same market share the next day..shouldn’t we be able to consider that in our best execution rooting decision?” – Joe Sellitto, Chief Executive Officer, Global Execution Brokers, Affiliate of Susquehanna International Group