CHICAGO (HedgeWorld.com)–The trading floor of the Chicago Board Options Exchange may one day be free of the wadded up slips of paper that litter much of its trading pits, but until that day arrives, the exchange continues to be a place of technological innovation.
Investors such as hedge funds and their broker dealers may soon become used to ‘point and click’ access due to recent initiatives by the CBOE and by an active designated primary market maker at the exchange, Wolverine Trading.
The CBOE announced earlier this month that it implemented a new system called LOU, which gives users instantaneous execution of large-sized orders that previously were not eligible for electronic execution. With a fondness for acronyms, the CBOE is highlighting LOU as the crowning jewel of its recently introduced trading systems that are part of a new hybrid trading system, which is picking up where the exchanges’ RAES or Retail Automated Execution System left off.
RAES was originally built with the small retail investor in mind and over the years has increased the size of the trade allowed on the trading system. The new hybrid system offers the best of both worlds, according to the CBOE. It offers easy access and the speed of an electronic system, which in some cases could be lacking on the RAES system where trades are placed in a queue with no guarantee of speedy execution. The hybrid system also offers deep liquidity and superior price discovery of the open auction.
LOU is offering instant access to the trading floor and, according to CBOE, it’s the first on the only options exchange to provide ‘point and click’ access to a centralized trading floor.
This is the second major trading technology change this year with the introduction of Dynamic Quotes with Size in May. This new technology allows investors to see the minimum number of contracts that are available to be traded electronically at a given price. It continually updates itself to give investors an indication of depth of liquidity during the trading day.