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CAPITAL MARKETS

Traded options: ISE volume up 45% while NYSE cuts its prices

Electronic options market to open cash equity business in the third quarter.

Executives at the International Securities Exchange (ISE), the all-electronic US equity options market, could be forgiven for being a little nervous as they prepare for the launch of their cash equity market, which is slated to open for business some time in the third quarter. But if the project turns out to be not as successful as hoped, they can at least take heart from the fact that their existing business is booming like never before.

Average daily trading volume for equity and index options contracts for June was up 45% to 2.2 million contracts from 1.5 million traded in the same period in 2005, rounding off a first half of the year in which consistently high volumes have been traded. Average daily trading volumes on a year-to-date basis for equity and index options increased 43% to 2.4 million contracts traded, compared with 1.7 million contracts last year. Meanwhile, total equity and index volume through to June was up 43%, to almost 300 million contracts from the 209 million traded in the same period in 2006.

The value of options

“More and more people, on both the institutional side and the retail side, are coming to understand the value of options as an investment vehicle and as a risk management tool,” says Bruce Goldberg, the ISE’s New York-based chief marketing officer.

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