BOX Files to Cut Fees in Penny Pilot; AFA Adds Options Trading

Ivy Schmerken, Wall Street & Technology

The Boston Options Exchange said it filed with the Securities and Exchange Commission (SEC) to reduce fees in preparation for the Penny Pilot Program in which options will trade in one-penny increments.

The proposed change will reduce the trading from the standard $0.20 to $0.15 per contract."Our proposed fee schedule change is one more example of bringing the best value to the customer," said Scott Morris, CEO of BOX, in the release.

BOX has proposed to lower fees for those instruments contained in the Penny Pilot Program, which trade in one-penny increments. The exchange expects to implement these reductions in January, according to the release.

The BOX offers penny trading through its price improvement model (PIP).

Since the BOX, an all-electronic equity derivatives market, began trading as an alternative to existing models in February of 2004, it has saved investors in excess of $100 million, according to its Jan. 4 press release.

During the month of December 2006, investors received price improvement versus the prevailing NBBO (national best bid and offer), averaging $3.43 per contract for contracts submitted via orders submitted to the BOX's price improvement auction. On a yearly basis, average price improvement per contract for 2006 hit a record high of $3.09, the exchange said.

"BOX is well positioned for the introduction of penny quoting because of our success in penny trading over the last three years," stated Will Easley, senior adviser at BOX. Easley added in the release that reduction in fees would further encourage trading for those classes in the Penny Pilot Program.

While exchanges are positioning themselves to compete in the Penny Pilot Program, technology vendors are also gearing up to offer options trading functionality. On Tuesday, Advanced Financial Applications (AFA), a provider of integrated order processing technology to the buy and sell sides, said it plans to offer an options trading capability through its IMPACT Pro Platform. Phase One will offer clients options trading functionality, including a window on the market, order ticketing and an order blotter, while Phase II will include analytics, likely to be released late in the first quarter of 2007.

Specifically, AFA's options window will enable traders to view options contracts across six OPRA exchanges. Traders can customize screens and options tickets. They can use the tickets to view bid and ask levels across all available options exchanges. Traders can route orders via DMA to exchanges or access smart order routers available via multiple brokers. In addition, they can sweep orders across multiple exchanges, isolate single orders or groups of orders, and view P&L. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio