Abstract
The US Equity Options market is poised at an interesting point in time. The dominance of the traditional floor based options exchanges has been challenged by an all electronic options exchange, International Securities Exchanges (ISE) launched over three years ago. ISE has been growing steadily in a market which was once the bastion of floor based exchanges viz. Chicago Board of Option Exchange (CBOE), American Stock Exchange (AMEX), Philadelphia Stock Exchange (PHLX) and Pacific Stock Exchange (PCX). The success of ISE has caught the attention of players like Boston Option Exchange (BOX) and Eurex, now eyeing an entry in the equity options market with their electronic outfits.

The traditional floor based exchanges, have responded to the ISE competition by introducing automation and electronic trading in varying degrees. But the maintenance of a high cost floor infrastructure alongside electronic systems makes executions costly and unattractive from an investors’ point of view. Among new entrants planning an entry in the equity options market is BOX, a partnership between Boston Stock Exchange, Bourse de Montréal Inc. and Interactive Brokers Group LLC (IB). BOX plans to enter the market in the fourth quarter of 2003, as soon as its application pending with Securities and Exchange Commission is approved. Eurex, the market leader in European Derivatives market, plans to make a giant entry in the US Futures & Options industry in early 2004, subject to SEC clearance.

The paper tries to paint the canvass of the changing US Equity Options market, showcasing initiatives and developments taken by the various exchanges. The paper ponders over the state of things to come as electronic trading grows in strength and maintaining floors becomes challenging and unwieldy.

Author Sandeep Chandane

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