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Fast Technology Drives BOX's Quick Growth, Says Vice Chair Easley
May 18, 2009
The Boston Options Exchange may be one of the smaller U.S. options venues, but acting chief Will Easley says its technology platform is second to none.
Last month, the Boston Options Exchange (BOX) saw average daily volumes of more than 719,000 contracts, a 7 percent gain from 672,000 during the same period last year. And BOX reported 37 percent growth in daily volume in 2008, to 706,000 from 517,000. While Easley, who is also vice chairman, attributes the increase in part to overall industry growth, he also credits its Sola trading platform, which was developed by the Montreal Exchange.
Easley noted that the derivatives system's reliability and processing capacity allow his exchange to "accommodate more professional algorithmic traders, which is very good for us." BOX began the migration to Sola in 2006 after the Montreal Exchange--now part of TMX Group, along with the Toronto Stock Exchange--increased its holding in the venue from 21 percent to 53 percent. BOX's other stakeholders are Citadel Derivatives Group, Citigroup, Credit Suisse, Interactive Brokers, JP Morgan Chase & Co., Morgan Stanley and UBS.
Easley, who has been leading the venue since chief executive Scott Morris stepped down about a year ago, sat down with Securities Industry News at the 2009 Options Industry Conference in Weston, Fla. to discuss the exchange's technology projects. Easley joined BOX as project manager in September 2001, prior to its 2004 launch, and has been a consultant for the Montreal Exchange and Euronext in Paris, concentrating on the electronicization of trading environment in Asia, South America, Canada and Europe.
BOX is moving its data center from a Level 3 Communications site in New Jersey. Why are you looking for a new facility?
We have three candidates and it is probably best not to say, as all are still candidates. All are New Jersey based. The logic for it is very obvious: Collocation five, six years ago didn't matter so much. When the processing time of the trading engine was, for example, 100 milliseconds, collocation was not a big deal. When your trading engine and processing times are hundreds of milliseconds, it becomes absurd--then the user has 10 or 12 milliseconds due to geography. There's not much point in trying to get rid of 12 milliseconds if your processing time is 200 milliseconds, but when you're down at 1 or 2, all of a sudden 12 is a big deal.
With Sola, which is so much faster, we've gone from hundreds of milliseconds to 1 or 2 milliseconds. It becomes very logical to help the users strip out the other pieces that slow down the response time. That's the obvious business reason for it--the more your participants are confident of reacting quickly to market conditions, the more likely they are to post aggressive markets.
What are your selection criteria for the new center?
We're one of the small guys, so you always want to make it as easy as possible for people to use you. You don't have as much commercial clout as a bigger exchange, where people have to be there. One part of the logic is you want to go into a location where your competitor is, because all the brokers and market makers are already there. If they're there because they're connecting to the CBOE, ISE or NYSE, it becomes very easy to just have another bridge to connect to BOX.
