Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.