Traders could get the chance to buy and sell US stock options after the closing bell, under a plan being developed by a US exchange.
Tony McCormick, chief executive of the BOX Options Exchange, told the Financial Times that development of an after-hours platform is still in ”very early stages”.
“It exists for stocks, why not a subset of the options world? Electronic trading firms already accept some orders after-hours,” said Mr McCormick.
Unlike in equities, where exchanges offer after-hours trading, the options markets are closed out of normal hours. The only options trades that take place after the bell are large bilateral transactions negotiated privately by large institutional traders.
“This could be huge – especially for options on stocks like Apple around earnings, the implications are enormous,” said Mark Longo, a former trader who now runs The Options Insider, an educational website. “This could open the floodgates to more retail participation in the options market.”
Mr Longo says he often hears complaints from retail traders that they are unable to trade options following companies’ quarterly results that are announced after the markets have closed. By the time markets have opened, he says, options traders have missed much of the market reaction.
BOX is exploring a bulletin board allowing limit orders in the 30 to 50 stock options that are “liquid enough in the underlying equity that it would make sense”, according to Mr McCormick.
The launch of an after-hours market would be the latest in a flurry of activity in US options, which saw record trading volume last year, driven by bets on volatility and price moves, while average daily US stock trading dropped 4 per cent.
Nasdaq OMX, which already operates two US options exchanges, this month announced the launch of BX Options. It will offer rebates aimed at retail traders. A new options market, the Miami International Securities Exchange, is set to launch in September.
BOX has traded about 4 per cent of total US options volumes in May. It caters to retail trades via online brokerages such as TD Ameritrade and Fidelity.
The Chicago Board Options Exchange operates the largest single US options venue, with a 26 per cent share so far in May.
Ed Provost, CBOE executive vice-president and chief business development officer, said his group would “evaluate and decide if there was both enough customer demand and enough liquidity after hours to consider”.
He added: “Since individual equity options are a derivatives equities and are dependent on stock prices, post-market trade on an options exchange currently is not very feasible.”
BOX is majority owned by TMX Group, the parent of the Toronto Stock Exchange. TMX announced its intentions to pare down its stake in BOX, after it won approval from US regulators to operate as a standalone exchange in April.
BOX was formerly known as the Boston Options Exchange. It was split off from the Boston Stock Exchange after Nasdaq OMX acquired that group in 2007. The stock exchange has since been renamed BX by Nasdaq.
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