So Far, So Good – Updates from Cboe’s Options Trading Floor

Matt Raebel

Matt Raebel

Editor

Cboe Global Markets has been reopened for more than two weeks now. How have things been going? According to Cboe, it’s been a smooth ride.

“After a tremendous lift involving nearly all departments across our company,” a Cboe spokesperson said in an email, “we accomplished what could only be described as an extremely successful reopening of the Cboe Options Exchange trading floor.” 

Cboe closed its trading floor on March 16 to protect its staff and floor traders, brokers, and market makers from contracting COVID-19, temporarily transitioning from a “hybrid” trading model (consisting of both open outcry and electronic trading) to an all-electronic model. The exchange reopened its options trading floor on June 15, but that didn’t mean things were back to normal.

For starters, before even setting foot inside the building, Cboe now requires everyone to submit to health screenings, temperature checks, and stringent safety protocols, which include wearing face coverings at all times.

Working on an options trading floor isn’t usually considered a dangerous job, but under the current circumstances, the risk of contracting COVID-19 through physical contact is a hazard to everyone who isn’t in self-quarantine. 

Among Cboe’s safety protocols, those working in the building are to avoid shaking hands or engaging in other “unnecessary physical contact” with others, including fist bumps or chest bumps…in fact, any kind of celebratory bump is strongly discouraged.

The layout of the options trading floor has also been carefully redesigned to optimize trading while ensuring the safety of all market participants and other staff with social distancing requirements. Consequently, capacity is at a lower level than usual.

Turnout on the first day of the floor’s reopening was “outstanding,” according to the Cboe spokesperson. “Although not at the capacity of a typical day prior to the closure, all the designated market maker and broker spots were occupied, and nearly all TPHs (Trading Permit Holders) who had committed to returning on Day 1 were present.”

The new rules and layout initially met with some skepticism from the trading floor community, but the exchange says that feedback from those working on the floor has been “overwhelmingly positive.” 

The redesigned floor has some unexpected silver lining to it for a couple of reasons; because there are fewer people working the floor and more space available in the new floor layout, brokers have more access to equipment like laptops than they did before.

Open outcry is also reportedly going just as well, the Cboe spokesperson said, even with the new social distancing requirements. “We’ve heard the ability to hear is better than expected, and multiple TPHs remarked that the new floor layout with enhanced safety provisions was ‘surprisingly good,’ and ‘working much better than expected.’ Brokers have also told us they are getting busier and have access to a good number of market makers.”

That’s all well and good, but what about market performance? According to the spokesperson, the exchange had “the highest market share of any venue in the multi-listed options space.” On Day 1, “approximately two million combined contracts were traded in SPX and VIX options – of which about 717,000 contracts were executed via open outcry,” she said.

According to electronic trading statistics provided by Cboe, 48.9% of SPX options and 55.7% of VIX options traded electronically before the pandemic, in February 2020. After the floor reopened on June 15, 59.7% of SPX options and 53.0% of VIX options were traded electronically. In the same time frame, 73.4% total options traded in February 2020 were traded electronically; after the reopen, 84.5%  total options were traded electronically. While there was a dip in the percentage of open outcry trades, it’s worth remembering that these trades were done with half the traders, brokers, market makers, and various Cboe staff than usual.

Market participants note that it is common to trade more via open outcry in times of greater volatility, especially to execute more complex trades. In early March 2020, just before the floor closure, the Cboe Volatility Index (VIX) spiked to over 34 points, almost twice the level it had been at the beginning of February.

As of July 6, 2020, the spokesperson said things have continued to go well on the trading floor and there were no reported cases of COVID-19 on the floor. Of course, at the Cboe, as elsewhere, it will probably be a while before anyone can say things are “back to normal.”

Suzanne Cosgrove contributed to this article.

Sources

Standards of Conduct related to the Reopening of the Cboe  Options Trading Floor and COVID-19
Cboe Global Markets
https://jlne.ws/2BYsk2r

Cboe Global Markets Supplemental Electronic Trading Statistics for Cboe Options Exchange (C1) – 2020
Cboe Global Markets
https://jlne.ws/38whjBy

Cboe Global Markets Reopens Chicago Trading Floor
Cboe Global Markets (press release)
https://jlne.ws/2NPhX3R

Cboe VIX Data
Cboe Global Markets
http://www.cboe.com/vix

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