Read an article in the WSJ about how Box Options wants to open trading pits for options. Currently, they are SEC regulated and an entirely electronic options exchange. They want to open a pit for strategic and competitive reasons.
Many in the industry are in much consternation.
It pays to understand that the SEC regulates far differently than the CFTC. Markets in the SEC are highly fragmented. There are dark pools and private trades and all kinds of things that go on. Box is just another exchange.
If they want to open a pit, let them open a pit. It’s not a big deal. If they think humans can do a better job trading options than machines, let them try. CBOE is complaining, but CBOE and anyone else complaining just want to limit competition.
Options are a different animal than straight futures or stocks. Some spreads are complicated and humans can execute them as fast as machines or faster sometimes. Many options markets look like they are executed on a screen when in fact they are simply “call around” markets where the real trade is done over the phone and then buttons are pushed to formalize it.
Stupid to argue which is more efficient. What’s important is that markets are flat with equal access to everyone. There should be little or no gatekeeping (that means brokers). Competition should be on the bid/ask spread, not speed or where you stand in a pit.
I fail to see what everyone is fearful of with an exchange deciding to do business via a trading pit. Interesting that they are setting it up in Chicago and not another city. That shows the network effects are still in Chicago.
If Box gets customers because of it, others will have to change and follow suit. If they don’t, they took a risk and lost. The rest of it all is hyperbole.