Wall Street Letter VOL. XLV, NO. 36 - December 2013 - Page 15

DECEMBER 2013 FEATURE Dissecting the issues WSL collects top quotes on the big issues for options exchange executives who spoke at last month’s FIA Expo in Chicago A t the FIA’s 29th Annual Futures and Options Expo in Chicago last month, options exchange execs talked fragmentation, the culmination of the penny pilot, and the first big meeting with the mandate but the SEC would like to see this thing, as we all would, become a permanent fixture in the industry and no longer be a pilot… This is a pilot that is seven years old, it almost doesn’t make sense that it’s still a pilot.” – Ed Boyle, senior vp of business development & strategy, BOX Options Exchange On the meeting between exchange leaders and SEC chair Mary Jo White: “[During the Nasdaq] outage, we did not feel like we could get on phone calls together and have a conversation where we could set that timestamp as to what the exact halt time was. I think as a result of the meeting with Chairman White and with these working groups, I think going forward… we can handle those types of situations more prudently than in the past.” – Andrew Lowenthal, vp of business development, Chicago Board Options Exchange “I think, realistically, we’re not going to get it done before the end of the year, we’re looking at another extension of the Penny Pilot as an industry, unfortunately. Is it worth some time thinking about this and trying to get it exactly right? That sounds nice philosophically. I think we want to pull the trigger and move on and find something that works for most participants.” – Crutchfield new SEC chair. “The other thing I think was that, as Gary [Katz] mentioned, communication seemed to be a big point to [Chair White]. Even if you don’t know specifically what is causing an outage at this point in time we would much prefer sooner than later, even if it has to be sooner with caveats. That was one of the things that I took away… even if you don’t know exactly what is causing your problem, tell us something.” – Thomas Gallagher, chairman and CEO, Miami Exchange On harmonizing trading halt rules “We’re going to be making some recommendations here in advance of the 60 day deadline, but the expectation I think, based on a lot of feedback from the marketplace, is there should be a general bias that when OPRA goes down we halt and then we, on a best efforts basis, announce a time when we expect the market would resume trading and attempt to have a coordinated reopen around that time while also avoiding sort of the lowest common denominator problem of always waiting for the last exchange to be ready before we begin trading again.” – Steven Crutchfield (pictured), executive vp and head of US options, NYSE Euronext On amending the Penny Pilot “It’s not motivation to reduce it but to take some of the noise out of it… I’m not going to say it’s a On fragmentation due to new venues “I think that the fragmentation Ed [Boyle] talked about is just another thing that hurts because these market makers need to have their markets on 11 exchanges, and that makes it tougher for new entrants to come and get market makers to participate because they have to decrease their size. So I think [it’s something] I am fearful of, and that a couple years from now that will hurt our marketplace.” – Thomas Wittman, senior vp of Transaction Services, Nasdaq OMX Group “We spent over $185m dollars to bring a new exchange entrant to the space. We’re not like some of the other ones that are recently either a pricing strategy or a business strategy. We spent that kind of capital and I think when you can bring new tech and automated safety features, I think there is room… We developed a tool called th