International Securities Exchange
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| International Securities Exchange | |
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| Founded | May 26, 2000 |
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| Headquarters | New York |
| Key People | David Krell, Chairman; Gary Katz, President/CEO; Other select ISE Staff |
| ISEexchange | |
| http://www.linkedin.com/company/ise | |
| ISEOptions | |
| Corporate Website | www.ise.com |
| Releases | Company News |
The International Securities Exchange (ISE) operates a U.S. options exchange and offers options trading on over 2,000 underlying equity, ETF, index, and FX products. As the first all-electronic options exchange in the U.S., ISE created efficient markets through its market structure and technology. Regulated by the Securities and Exchange Commission (SEC) and a member-owner of The Options Clearing Corporation (OCC), ISE provides investors with a transparent marketplace for price and liquidity discovery on centrally cleared options products. Through minority investments, ISE participates in the securities lending and equities markets. ISE also licenses its proprietary Longitude technology for trading in event-driven derivatives markets.
ISE is a wholly owned subsidiary of Eurex. Eurex itself is jointly operated by Deutsche Börse AG (Ticker: DB1) and SIX Swiss Exchange AG.
On July 2, 2012, ISE announced that they planned to launch a second US options trading platform. This new exchange would incorporate the ability to trade multi-legged strategy orders, according to a Financial Times article. [1] The filing for the new exchange, temporarily dubbed "Topaz," was published for comment in the Federal Register on March 7, 2013.[2] ISE announced on April 11, 2013 that the new options exchange will be called ISE Gemini, and will launch in Q2 2013, pending SEC approval. ISE Gemini will stand "side-by-side" with ISE's existing options exchange.[3]
On July 27, 2012, ISE announced the introduction of a new order type, the "Add Liquidity Only Order" (ALO).An ALO specifies that the order can only be executed if it adds liquidity to the order book as a maker. If the order cannot be added to the book then it will be canceled. The new order type aims to give greater control to customers managing various fee structures across multiple options exchanges. [4]
ISE received the "Most Innovative Exchange Technology - Options" award at the Wall Street Letter 2013 Institutional Trading Awards for enhancements to its PrecISE Trade and Optimise, the introduction of Implied Order Functionality, and improvements in risk management. [5]
Contents |
History
The ISE took root in 1997 when then-chairman of E*Trade, William A. Porter and his colleague, Marty Averbuch, approached David Krell and Gary Katz about the concept for an all-electronic options market. The four founded what today is known as the International Securities Exchange.
Just 10 years after Porter, Averbuch, Krell and Katz conceptualized the market, ISE traded its two-billionth options contract (March 9, 2007).
A month later, in April 2007, Eurex and ISE announced that they had signed a definitive agreement under which Eurex would acquire ISE by way of a merger. Late in July of that year, stockholders approved the merger, which was completed on Dec. 20, 2007. Eurex acquired ISE for approximately $2.8 billion in cash, or $67.50 per share. Eurex’s two parent companies, Deutsche Börse AG and SIX Swiss Exchange, provided the necessary financing in line with the economic interests of 85 percent and 15 percent respectively that both companies had in Eurex.
The combined entity is now the leading transatlantic derivatives marketplace, with offerings in index, equity and long-term interest rate derivatives in USD and EUR.
On Jan. 30, 2008, ISE announced a joint technology initiative with Eurex. Plans were in the works to develop an options trading system for ISE, which would provide members with greater platform flexibility and an improved trading experience. The multi-year project would draw on the expertise of ISE and Deutsche Boerse AG’s technology teams and ISE would continue to run on the OMX CLICK technology platform until the new platform was rolled out.
On March 25, 2009, ISE published a proposal which detailed a risk-based regulatory framework built on clearly legislated regulatory objectives, designed to proactively maintain an orderly and efficient marketplace for all participants. This approach promotes comprehensive, consistent and ongoing oversight for all types of trading venues while addressing the global nature of the markets and promoting the innovative and competitive edge of the U.S. financial industry.[6]
On Feb. 3, 2010, ISE announced that it had made a strategic investment in Hanweck Associates, a premier financial-services provider specializing in high-performance risk management and trading solutions for institutional investors. ISE’s minority investment is expected to help Hanweck Associates support further product development, expand its sales and technical support teams, and meet the increasing market demand for real-time options analytics as the options industry continues to grow. [7]
In March of 2010, ISE published a white paper explaining how dividend trades and short interest trades temporarily inflate and distort trading volume and market share. With volatility low in 2009, dividend trades represented a significant portion of the growth in industry volume. If dividend trades were excluded from industry data, average daily volume in equity options would have decreased 0.1 percent in 2009 over 2008, compared to 2.9 percent growth when dividend trades are included.[8]
In March of 2013, the SEC published ISE's filing to launch a second US options trading platform which would launch in Q3 2013.
2010 Options Industry Conference
ISE was the sponsor of the 28th annual Options Industry Conference, a responsibility which has historically rotated among the Options Industry Council’s member exchanges. The 2010 conference was held in Phoenix, Arizona from April 29 to May 1. The event featured expanded panel discussions, the largest exhibit hall in conference history and keynote speaker Malcolm Gladwell, the author and one of Time Magazine’s 100 Most Influential People.
Legal Issues
In July of 2010, an Illinois court ruled in favor of Chicago Board Options Exchange or CBOE in a nearly four-year dispute with the ISE.[9] ISE, which vowed to appeal[10], had sought to list contracts exclusively licensed by CBOE, such as the S&P 500 and the Dow Jones Industrial Average.
In November 2006, the ISE sought a judgment in New York that would let it offer its own contracts on the S&P 500 Index and Dow Jones Industrial Average without securing licenses from the index developers. ISE argued that the value of the indexes lie in the public domain. The exchange also argued that multiple listings would lower investor costs.
CBOE responded to ISE's November 2006 action with its own lawsuit in Illinois state court, joined by McGraw-Hill Cos. and Dow Jones & Co., the respective owners of the S&P 500 and the DJIA.
In 2012, the Chicago Board Options Exchange (CBOE) sued the ISE for at least $525 million, accusing its rival of infringing three patents related to an automated options trading system. In a complaint filed in the U.S. District Court in Chicago, the CBOE said the patents were issued in 2008, 2011 and 2012, and cover systems to monitor quote risk and automatically adjust quotes when risk exposure gets too high.[11]
Strategic Investments
ISE has complemented its core options business by expanding into other asset classes through strategic investments.[12]
These companies include:
- Ballista Securities
- Direct Edge
- Hanweck Associates
- Quadriserv
- Weather Risk Solutions
Philanthropic Efforts
In honor of its 10th anniversary, ISE partnered with Ronald McDonald House New York to launch its first Corporate Social Responsibility Program, “Ten in Twenty-Ten.” Ronald McDonald House New York provides temporary housing and support services for pediatric cancer patients and their families, while they undergo active treatment. Under this initiative, ISE organized ten different events to benefit the families staying at Ronald McDonald House New York. ISE’s Corporate Social Responsibility initiative will extend into 2011 and beyond. .[13]
Key People
- Chairman, David Krell
- President/CEO, Gary Katz
Board Directors: The ISE, LLC board has 16 members, seven of whom are non-industry public directors.[14] The chief executive officer of the exchange also is on the board, as is one former employee director.
Industry Directors:
- Timothy Brennan, Ronin Capital
- Mark Dehnert, partner, Goldman Sachs
- Sean Flynn, Timber Hill
- Michael T. Juneman, head of U.S. Options Exchange, Citadel Derivatives Group LLC
- Joseph Sellitto, Chief Executive Officer, Global Execution Brokers
- J. Slade Winchester, head of U.S. and international business development, technology and operations, Citigroup Derivatives Markets, Inc.
Non-Industry Directors:
- Michael Kuhn, chief information officer, Deutsche Borse AG
- Michael P. Monaco, senior managing director, Conway Del Genio Gries & Co., LLC.
- Andreas Preuss, chief executive officer, Eurex
- Joseph B. Stefanelli, retired
- Jurg Spillmann member of the Executive Board, Eurex
- Kenneth A. Vecchione, chief financial officer, Apollo Global Management
- Christianna Wood, Chairperson and member of the Board of Directors, The International Corporate Governance Network
Management Director:
Former Employee Director:
- David Krell, chairman [15]
Membership
ISE has approximately 190 broker-dealer members, in three categories: Primary Market Makers (PMM), Competitive Market Makers (CMM) and Electronic Access Members (EAM).
ISE Education
ISE provides education in the form of seminars and webinars for individual investors, options user groups, fund managers, trading desks, corporate treasurers and hedge fund managers. ISE also participates in a number of annual educational investor conferences.
As a member of The Options Industry Council (OIC), a non-profit joint venture by the eight U.S. options exchanges and the Options Clearing Corporation, ISE participates in the creation and delivery of programs designed to reach investors and brokers alike.
ISE regularly hosts live webinars, allowing participants to learn from education instructors on a variety of topics, including Index Options, ETFs and FX Options. ISE also has a podcast series that lets options traders of all skill levels download educational material directly to their MP3 devices. The ISE site also provides users the chance to sign up for FX Options and Equity Index Options Weekly Outlooks, as well as read articles by ISE’s leading educators. ISE Education [1].
ISE Options
ISE currently lists more than 2000 equity, index, ETF, FX and quarterly options. ISE introduced index options in October 2003 and later in 2004 launched ISE Proprietary Sector Indexes, industry indexes that track the performance of publicly-traded companies in various industries. ISE also lists options on broad-based indexes in addition to options on a variety of licensed benchmarks.
On July 9, 2008, the ISE announced that it had introduced a new ISE Order Routing System (IORS2) for its options exchange. The new, internally developed routing system connected ISE members using API or FIX connections to ISE's options exchange interface.[16]
In July 2010, ISE introduced Do Not Route (DNR) orders for both priority and professional customers. This allows ISE’s customers to indicate that they want to cancel their options orders rather than have them routed to another exchange if the National Best Bid or Offer (NBBO) is not posted at ISE. The exchange said this order type gives customers more choice as transaction fees vary across U.S. options exchanges. These orders will be executed at the National Best Bid or Offer (NBBO) in whole or in part on ISE’s order book only. If ISE is not posting the NBBO, ISE members have the opportunity to match or improve the NBBO through a stepup auction to trade with the DNR order. Any balance of a DNR order that cannot be executed or placed on ISE’s limit order book will be automatically canceled.[17]
ISE Indexes
The ISE Index group creates innovative indexes and partners with issuers to launch unique ETFs and structured products. In 2007, ISE announced a partnership with First Trust to launch ETFs based on ISE proprietary indexes, further establishing ISE indexes as sector benchmarks. In 2010, Direxion listed the first Leveraged ETFs based on ISE indexes, giving investors enhanced means of executing their trading ideas. There are now 10 ETFs based on ISE proprietary indexes with over $1 billion in assets under management:
- First Trust ISE Natural Gas Index Fund – FCG
- Direxion Daily Natural Gas Related Bull 2X Shares – FCGL
- Direxion Daily Natural Gas Related Bear 2X Shares – FCGS
- First Trust ISE BICK Index Fund – BICK
- First Trust ISE Global Wind Index Fund – FAN
- First Trust ISE Global Engineering & Construction Index Fund – FLM
- First Trust ISE ChIndia Index Fund – FNI
- First Trust ISE Water Index Fund – FIW
- First Trust ISE Global Platinum Index Fund – PLTM
- First Trust ISE Global Copper Index Fund – CU
ISE Proprietary Indexes
- ISE Earth Wind & Fire – EWF
- ISE Bick – BIQ
- ISE Semiconductors – BYT
- ISE Global Engineering and Construction – CVL
- ISE Electronic Trading –DMA
- ISE-Revere Natural Gas – FUM
- ISE-Revere US China Supplier – GUO
- ISE Global Wind Energy – GWE
- ISE Water – HHO
- ISE Homeland Security – HSX
- ISE Long Gold – HVY
- ISE CHIndia – ICK
- ISE Global Coppe] – ISC
- ISE U.S. Regional Banks – JLO
- ISE Oil and Gas Services – OOG
- ISE Global Platinum – ORE
- ISE Integrated Oil & Gas – PMP
- ISE Bio-Pharmaceuticals – RND
- ISE Homebuilders – RUF
- ISE SINdex – SIN
- ISE-CCM Nanotechnology– TNY
- ISE-Revere Wal-Mart Supplier Index – WMX
- ISE Global Uranium – YC
Other Major Indexes
- RBS EUREX Bund Futures Total Return Index – BUB
- RBS EUREX Bund Futures Excess Return Index – BUE
- Nasdaq Q-50 – NXTQ
- Nasdaq 100 – NDX
- Mini Nasdaq 100 – MNX
- Russell 1000 – RUI
- Russell 2000 – RUT
- Mini Russell 2000 – RMN
- Morgan Stanley Technology – MSH
- Morgan Stanley Retail – MVR
- ISE 250 – IXZ
- S&P SmallCap 600 – SML
- S&P MidCap 400 – MID
- KBW Bank Index – BKX
- KBW Mortgage Finance Index – MFX
- Mini FTSE 100 – UKX
ISE FX Options
In April of 2007, ISE listed ISE FX options with dollar-based underlying values[18], allowing investors to trade their views of the strength or weakness of the US dollar relative to the euro (symbol: EUI), British pound (symbol: BPX), Canadian dollar (symbol: CDD) Japanese yen (symbol: YUK), Australian dollar (symbol: AUX) Swiss franc (symbol: SFC), Mexican peso (symbol: PZO), Swedish krona (SKA) New Zealand dollar (symbol: NZD) and Brazilian real (symbol: BRB). Though strategies for ISE FX options are nearly identical to equity options strategies, ISE FX options are cash settled, thus eliminating the requirement to hold the actual foreign currency.
On Oct. 28, 2008, ISE and NYSE Euronext announced an agreement to license the right to list ISE FX Options products on the NYSE Arca Options platform, allowing NYSE Arca Options to trade options on all currency pairs traded at ISE. [19]
In July of 2009, ISE launched FX Options TV, a weekly online program focusing on macro-economic events and long-term analysis of the global currency markets. Each segment also features Trading Central's independent view on the psychological and technical factors driving the industry and provides short-term forecasts, strategies and unique FX Options picks. The program is produced by NYFP and hosted by currency expert Remy Blaire.
In September of 2009, ISE announced the availability of dual currency conventions for four currency pairs in its portfolio of ISE FX Options. The ISE Spot EURUSD (Symbol: EUU), ISE Spot GBPUSD (Symbol: GBP), ISE Spot AUDUSD (Symbol: AUM) and ISE Spot NZDUSD (Symbol: NDO) began trading on September 22, 2009.[20]
In December of 2009, ISE announced it will introduce enhancements to its FX Options product suite in early 2010. ISE expanded its product offering to include options on the Brazilian real (USDBRL), bringing the total number of currency pairs, including dual conventions, to fourteen.
ISE Stock Exchange/Partnership with DirectEdge
ISE, along with a group of strategic partners, launched the fully electronic ISE Stock Exchange on Sept. 8, 2006. The exchange offers two primary capabilities integrated on a single platform: 1) MidPoint Match, an exchange-based anonymous (non-displayed) platform for trading equities at the exact midpoint price of the National Best Bid and Offer (NBBO), which was launched in 2006. 2) Displayed Market, as its name implies, is a fully electronic displayed market of best bid and offer trading for common stock s and ETFs listed on the NYSE, Nasdaq and Amex.
Displayed market orders first receive exposure to the non-displayed MidPoint Match order book and may be automatically executed with price improvement.
The ISE Stock Exchange is Regulation NMS-compliant. It is able to receive orders routed to the ISE Stock Exchange from other equity markets. Orders placed on the ISE Stock Exchange have complete trade-through protection.
According to ISE, the launch of their equities market, in an atmosphere they characterize as "radically different from that of only a couple of years ago," with new regulatory changes, such as Regulation NMS, will "transform the competitive landscape to a more equitable and efficient trading environment." Thus, the trend toward automation and algorithmic trading, they believe, plays to their strengths.[21]
On Aug. 22, 2008, the ISE announced a partnership with ECN DirectEdge, whereby the ISE Stock Exchange would become a wholly owned subsidiary of DirectEdge and ISE would gain ownership stake in the company. The transaction was completed on Dec. 23, 2008. The strategic partners of both Direct Edge and the ISE Stock Exchange now have a combined 68.5 percent ownership interest in Direct Edge Holdings, with Knight Capital Group, Inc., Citadel Derivatives Group, and Goldman Sachs each remaining as strategic investors with a 19.9 percent ownership interest. ISE currently owns the remaining 31.5 percent stake. After the partnership was announced, Direct Edge continued with its efforts to submit two Form 1 applications to gain exchange status for the purpose of operating EDGA and EDGX as newly-registered national securities exchanges. Until SEC approval of the two exchange licenses was granted on March 12, 2010, Direct Edge utilized the ISE Stock Exchange for quotation display and tradethrough protection in the National Market System. During this period, the ISE Stock Exchange continued to operate as a facility of ISE, LLC. [22]. Direct Edge will launch as a fully licensed exchange in May 2010 . [23]
ISE Market Data
ISE is a leading provider of enhanced market data products for sophisticated investors. Investors have access to ISE Depth of Market Feed, ISE Historical Options Tick Data (ISE HOT Data), the ISE Sentiment Index (ISEE), ISEE Select XML Feed, ISE Open/Close Trade Profile and ISE Spread Book Feed.
ISE Depth of Market Feed is a real-time data feed that provides the aggregated volume of all quotes and orders available at each of the top five price levels for options that trade on ISE. This offering provides transparency beyond the Best Bid Offer (BBO) and helps subscribers improve trading efficiency.
ISE Historical Options Tick Data (ISE HOT Data) includes the full daily tick file of all trades and BBO quotes for equities, index and ETF options that are reported to the Options Price Reporting Authority (OPRA).
The ISE Sentiment Index (ISEE) is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios.
With ISE Select XML Feed, customers can have unlimited access to intra-day updates of all available ISE Sentiment Index (ISEE) values as a bulk delivery in an XML format, which provides the ability to develop analytical models based on ISEE data values.
ISE Open/Close Trade Profile provides aggregated volume and the number of trades by series for opening and closing transactions executed on ISE's options exchange. End-of-day data files are available to subscribers in a .csv format. ISE Spread Book Feed, a real-time feed, provides access to multi-legged option strategies on ISE's order book. ISE also offers a market data widget[24].
References
- ↑ ISE files for second US options exchange. FT Trading Room.
- ↑ SEC Filing for Topaz Exchange. SEC.
- ↑ ISE Introduces ISE Gemini, its New Options Exchange. ISE.
- ↑ ISE Introduces Add Liquidity Only Order Type. ISE.
- ↑ ISE Receives "Most Innovative Exchange Technology - Options" Award at Wall Street Letter 2013 Institutional Trading Awards. press release.
- ↑ International Securities Exchange Proposal for Regulatory Reform for the U.S. Financial Markets. International Securities Exchange.
- ↑ ISE and Hanweck Associates, LLC Announce Strategic Partnership. International Securities Exchange.
- ↑ ISE Whitepaper on Dividend Trade Strategies in the U.S. Options Industry. International Securities Exchange.
- ↑ Court Rules for CBOE in Index-Options Battle. Dow Jones Newswires.
- ↑ Court Rules for CBOE in Index-Options Battle. Dow Jones Newswires.
- ↑ CBOE sues ISE for $525 mln over options trading system. Reuters.
- ↑ Strategic Investments. ISE.
- ↑ Ten in Twenty TEn. ISE.
- ↑ Board of Directors. International Securities Exchange.
- ↑ Press Release. International Securities Exchange.
- ↑ Press Release. International Securities Exchange.
- ↑ Press Release. International Securities Exchange.
- ↑ ISE FX Options. International Securities Exchange.
- ↑ NYSE Arca Options to list ISE FX Options. International Securities Exchange.
- ↑ ISE Introduces Dual Currency Conventions for ISE FX Options®. International Securities Exchange.
- ↑ International Securities Exchange 2006 Annual Report. ISE.
- ↑ ISE-Direct Edge Deal Done. Securities Industry News.
- ↑ Direct Edge Exchange Applications Approved. Direct Edge.
- ↑ Market Data Widget. International Securities Exchange.
