CBOE Stock Exchange

From MarketsWiki

CBOE Stock Exchange (CBSX)

Founded	2007
Headquarters	Chicago, IL
Key People	David Harris, president
Products	Equities exchange
Web site	http://www.cbsx.com

Integrating multiple asset classes is becoming the rule, not the exception in the U.S. and elsewhere. Case in point: In early 2007, the CBOE Stock Exchange (CBSX) was created by the Chicago Board Options Exchange and four market-maker partners as a fully electronic market with a strict price-time priority matching algorithm and high-liquidity rebates for dedicated liquidity providers. It is predicated on including at least six Designated Primary Market Makers (DPMs) and multiple, competing Remote Market Makers (RMMs), to assure tight, two-sided liquidity in all stocks. As of July 2008, about 4,200 stocks were listed.

David Harris was named president of CBSX early in 2007.^[1]

1 Market Model
2 History
3 First-Year Volume
4 Trade Engine
5 Contacts and Updates
6 Sources
7 References

Market Model

Reg-NMS Compliant^[2]

---Automated Trading Center with protected quotes
---Automatic sweep functionality to ensure NBBO executions
---Fully electronic order entry and immediate execution

Matching Algorithm

---Strict Price-Time
---Anonymous
---Level playing field

Liquidity Providers

---Assigned Designated Primary Market Makers (DPMs)in each stock
---Remote Market Maker (RMM) program allows liquidity providers to participate remotely
---Economic incentive to liquidity providers to provide the best markets

--Each security traded on CBSX has an assigned Designated Primary Market Maker (DPM) obligated to quote continuous, 2-sided markets. Unlike traditional specialist roles, CBSX DPMs do not act as agents on behalf of orders. In addition, CBSX offers a Remote Market Maker (RMM) program, allowing approved applicants to participate remotely, adding to the liquidity pool. CBSX DPMs include: Equitec Specialists, LLC, LaBranche Structured Products, LLC, Susquehanna Investment Group, Timber Hill/Interactive Brokers Group, VDM Structured Products, LLC, and Wolverine Trading LLC.

Maker-Taker Pricing Structure: Rebate program ^[3]

Market Data Revenue Rebates ^[4]

History

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On March 5, 2007, CBSX was created by CBOE in partnership with four leading liquidity-providing firms: Interactive Brokers Group, LLC ; LaBranche & Co Inc.; Susquehanna International Group, LLP; and VDM Specialists, LLC. All are dominant NYSE specialists. CBSX established a nine-person board, with members of these firms serving as part of the board constituency.

On opening day, CBSX launched an initial roster of 12 stocks, with plans to list 2,800 of the most actively traded New York Stock Exchange, NASDAQ Stock Market, and American Stock Exchange listed securities, exchange traded funds (ETFs), and other listed securities. By summer's end 2007, that goal was achieved, with roughly 2,900 listings on the exchange and climbing. (See CBSX stock listings and rollout schedule)[1]

On January 8, 2008, CBSX and Lime Brokerage, a NY-based firm catering to a diverse, sophisticated customer base, announced that Lime has acquired a minority interest in the CBOE Stock Exchange, LLC.^[5]

First-Year Volume

During its first 12 months, CBSX added more than 3,100 securities to its product offerings. Volume and market share grew consistently during the year, and by the end of December 2007, CBSX total volume topped more than one billion shares traded. Average daily volume built steadily over the first year; and on Friday, February 29, 2008, more than 20 million shares were traded at CBSX.

Trade Engine

CBSX uses the CBOEdirect trade engine, the same platform that underlies electronic trading on CBOE and the CBOE Futures Exchange (CFE).

Contacts and Updates

CBSX lists an entire staff who can answer questions on the Exchange [2], as well as "Trader News e-mails" to update participants on new listings, and information regarding enhancements. [3].