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Transatlantic Exchanges, Brokers Put Their Money on European Options Growth

December 17, 2007
By John Hintze

One European broker questioned whether retail investors will see cost savings from the mergers, since they must trade through exchange-member brokerages that will have to pay additional reporting and clearing fees. He said that institutional customers may want to take advantage of NYSE Arca's rebate for posting liquidity, but costs involving compliance, risk monitoring and adding dedicated telecom lines to become a direct member of the exchanges may be prohibitive. "Firms may still prefer to go through an international clearing broker that offers low-cost, direct access to U.S. markets, without the added costs of being a direct member to U.S. exchanges," he said.

Greenwich, Conn.-based Interactive Brokers (IB) has catered to European retail investors since 1995. Gerald Perez, managing director in London, said IB is bullish on Europeans investing in options, partly because the structured products they're buying carry much wider spreads than listed options. Perez said IB, a pioneer in connecting to exchanges worldwide, has seen steady growth in options trading in Europe, particularly in the last few years.

Perez noted that educating European investors about the options market is key. In addition to IB's educational efforts, a number of firms that focus on such education--many of them from the U.S.--have opened in Europe.

OptionsXpress, operating in Europe for about 18 months, has long emphasized education, providing customers with Web seminars, online content and books on trading options. Perhaps indicative of Europeans' growing interesting in the market, the firm's top executive in Europe had what appeared to be the misfortune of presenting a seminar in February at the London Business School when a rare blizzard hit. As it turned out, 187 participants trudged through seven inches of snow to attend the two and a half hour presentation.