The Boston Options Exchange (BOX) announced today that it has surpassed $100 million in savings to investors. The significant value that BOX brings to the market, and ultimately the public investor, is evident in its price improvement period (PIP), BOX’s auction that guarantees customers a price better than the prevailing best price at the six options exchanges.
“BOX revolutionized the options world when it introduced penny trading with its launch of PIP almost three years ago,” said Scott Morris, Chief Executive Officer (CEO) of BOX. “The opportunity to deliver better prices is seen in its more than $3.00 average price improvement per contract versus the prevailing NBBO for contracts submitted to the PIP. This translates to impressive savings benefits to investors – current run rate averaging $250,000 per day, $6 million per month and $100 million since inception.”
The trade that broke the $100 million mark was a 6 lot of Qualcomm (QCOM) which received a 4 cent price improvement – a $330 investment delivered $24 in price improvement – yielding a 7.27% savings. The PIP was conducted on behalf of a public customer via TD AMERITRADE. The market maker providing the improvement was SLK-Hull Derivatives LLC (an affiliate of Goldman, Sachs & Co.).
“The trade that pushed us over the $100 million savings mark is just one of many examples of how PIP rewards competition and aggressive quoting to deliver best execution for customers,” continued Morris. “BOX is well-positioned for the penny environment, and its value will continue to be proven with lower costs, tighter spreads, faster response times and greater benefits to investors.”
The BOX model represents a significant innovation in options trading with a market structure that operates with unprecedented low-costs that eliminate barriers to trading, an electronic auction feature that offers customers price improvement, and a model that functions without a trading floor.
PIP allows BOX options participants to initiate a PIP auction, compete for the customer order and ultimately, offer price improvement to the customer. The PIP must guarantee a minimum of a penny per share price improvement for the entire order. Currently, 21 percent of all contracts executed on BOX are via price improvement.
“BOX remains the leader in penny trading and expects the familiarity of its participant firms with the PIP will lead to a smooth extension of penny trading to penny quoting as part of the pilot which will begin in late January,” said Will Easley, senior advisor of BOX. “PIP's importance to the options industry is confirmed by repeated comments by SEC staff and commissioners of the relevance of price improvement considerations as part of brokers’ ‘best execution’ obligations.”
