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Yesterday, the CBOE officially announced that they will list in the very near future SPX PM Settle options on the C2 Options Exchange. The SEC has officially approved them to be listed. This is really exciting news for the retail option trader, but maybe even better for 'prop shops'.
Here are some thoughts:
1. This is a game changer in the 'maker-taker' model, as C2 will be the only firm that has a proprietary product.
2. Watch for the retail broker firms to make a major push to move retail paper from SPX to SPXPM. It is much cheaper for them.
3. CBOE made special note that this will not affect VIX calculations directly. Indirectly, of course it will, as paper there will affect SPX.
4. This opens up SPX to the Prop Shops that trade upstairs; I would be shocked if the markets on SPX and ES options tighten up because of the listing of this product.
5. I will be interested to see which product the major houses decide to trade. My guess is that smaller firms will move toward PM settle, but the smart paper, and those looking to do size paper will stay with SPX.
6. This is going to steal any remaining OEX paper and could potentially grab a nice chunk of SPY paper; both really potentially lose a lot of paper if this product rolls out successfully.
It’s debatable whether this is good for the retail trader. I think it could be great for prop shops and small independent traders, and is likely a wash for everyone else. If anyone loses, it’s maybe the ES, but as I stated the real losers here are probably SPY, OEX and maybe DJX.
Traders that have a high net worth should really consider whether they are better served in a full service shop or moving to a prime broker where he or she can collect maker-taker fees, especially if he or she trades a lot of SPX. I am going to be watching this product closely. If its a success, it could competely change options trading in the United States and the world.
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