Education, education, education, that was the theme of this year’s Annual FIA and OIC New York Equity Options Conference. In a market where customers are increasingly skeptical as to the benefits of interacting with the market, how can we as an industry encourage growth and attract a wider base of options clients? The answer- EDUCATION!
The two day conference kicked off on Tuesday, September 13th starting with an opening discussion and reception at the New York Stock Exchange. However, by day two education came to the forefront with the first panel “The Outlook for the U.S. Equity Options Markets,” centered on this topic. The panel was comprised of senior management from each of the U.S. options exchanges including, Steve Crutchfield, CEO of NYSE Amex Options, and Paul Finnegan, Co-CEO of NYSE Arca Options. Although the panel discussed education extensively and the large success OIC has had with its Investor Education Days, other industry issues were also presented. Many panelists noted that the complexity of exchange fee schedules was soliciting negative reactions from clients, and that some exchanges were forced into frequent fee adjustments as a reactionary move to aggressive price alterations by rival exchanges. NYSE Amex Options however, was keen to stress the simplicity of their fee schedule for customers -customer executions are free.
When the conversation moved to growth initiatives, all participants cited education as a priority. However, both NYSE representatives took this concept further. Steve Crutchfield argued that with recent Tabb Reports revealing a lack of understanding in the asset management community as to how options can benefit their businesses, certain education initiatives should be targeted towards familiarizing them of the huge potential options have to offer. Crutchfield also noted with a reported 10% of U.S. equity options volume originating in Europe, growth possibilities in that space should be explored. Paul Finnegan spoke of educating high- frequency shops, and argued that the industry needed to diversify out of the current situation, whereby there is an overly concentrated business mix in the top 100 options. It is hoped that if more trades occur in the top 200-1000 options, customers will utilize single equity options more. Finally both Arca and Amex CEOs mentioned a key growth initiative for the next few months is their Complex Order Book system with multi leg functionality, which recently has seen strong volume increases.
Throughout the rest of the day and subsequent panels, many more industry issues were discussed. “Game Changers” contemplated recent customer demand for access to multi region and multi asset products; with Goldman’s Todd Hohman ultimately concluding, that while sometimes the cheapest hedge is cross asset, cross region, there are always niches to act locally leaving space in the industry for both approaches.
The “Hidden Costs of Market Reform” panel turned to the timely discussion of limit up, limit down proposals, with all participants emphasizing the need for a greater understanding of what the ramifications of such a proposal would be across different market centers. “Hot Topics” theorized as to what a rumored new exchange could bring to the U.S. options market place and “Ask Your Regulators” offered the audience the opportunity to do just that. Ultimately though, the common word uttered in every panel remained education. With the theme of education permeating all sectors of the options industry, from customers all the way up to regulatory bodies seeking continual education and training on key products, education certainly will be at the forefront of everyone’s minds for the coming year.