MIAX options, the youngest exchange group in the US options industry, announced plans to launch MIAX Pearl in the fourth quarter.
The new exchange, introduced at the Options Industry Conference in Palos Verdes, Calif., is pending regulatory approval. MIAX Pearl will offer a maker-taker pricing model. While much is made of the proliferation of US options markets and possible oversaturation of exchanges, MIAX executives believe they need to create the new market to continue their growth.
Shelly Brown, senior vice president, strategic planning for MIAX, said MIAX was created in 2012 when 75 percent of the options volume flowed through pro-rata exchanges and 25 percent through maker-taker pricing models at exchanges. But over the past four years, that percentage of maker-taker volumes has crept up into the 30- to 35 percent range and the trend may continue.
Brown also pointed out that MIAX has grown its marketshare in the US equity options space significantly with its pro-rata pricing model, which is based on ultra-fast exchange technology. In May, the OCC reported that MIAX had 7.4 percent marketshare in equity options, excluding proprietary contracts, up from 7.2 percent a year earlier.
But Brown explained that behind those marketshare numbers, MIAX’s business model is handling about 25- to 30-percent of the options volume in that part of the pro-rata sector.
“We just believe there is not a lot of room to grow further there,” Brown said.
And as more volume flows not only to maker-taker models, but also to complex orders offered by other exchanges, MIAX believes it is time to move into both of those sectors.
MIAX Pearl will address the maker-taker side of the business. And this summer, MIAX will introduce complex order functionality, also pending SEC approval, to grab more marketshare in that area.
MIAX plans to introduce basic functionality on its complex order book gradually. Once it has gone through its phased rollout, the exchange is also looking at introducing some new functionality that may help it differentiate itself from the crowded field of US options exchanges. Both initiatives are huge for the youngest exchange group in the industry, but critical to its growth.
“If we could, with the new exchange and the complex order book, work our way into the teens in marketshare, I think it would be a success,” Brown said.