The San Francisco-based Arca, which is owned by New York Stock Exchange-parent Intercontinental Exchange, and the Chicago-based BOX Options Exchange trading floor will implement a number of safety precautions to protect traders from the virus as they begin more normal operations.
Their reopening will be a welcome sign for both exchange operators and traders as screen-based trading has made the execution of more complex strategies, which bring bigger volumes, more difficult.
“Nobody wants to stay closed,” Anthony Saliba, CEO of the Chicago-based Matrix Execution Group, an executing broker-dealer that specializes in options and equities, told FOX Business.
Institutional volume in the options market has “dropped off significantly because you can't do these larger, lumpier trades without having data leakage,” he added. “If you put in a 10,000-lot order to sell electronically, everybody and his brother sees it.”
Institutional customers often use complex hedging strategies that involve multiple strike prices, making it easier to fill the orders through open outcry than on-screen. A strike price is the price at which a put or call option can be exercised.
Volume from commercial players made up just 6 percent of the options market in the first quarter, according to an analysis from the securities market intelligence firm Trade Alert, down from 11 percent in the third quarter of 2008 – the last time volatility reached such elevated levels.
Cboe Global Markets CEO Edward Tilly admitted on the exchange’s first-quarter earnings call on Friday that there was “frustration” among the biggest players.
“We, I think, managed to satisfy the demand for the majority of our customer flow really well,” he said. “But that said, the most complex trades, those that are the most risky, we have not been able to fully satisfy.”
Despite the sharp drop in institutional participation, trading volumes have surged across all exchanges amid the uncertainty caused by the COVID-19 pandemic.
Cboe Global Markets, the largest options exchange operator in the U.S., said average daily options trading volume surged 51 percent in the three months through March to a quarterly record. Huge volume growth was also seen at Intercontinental Exchange and CME Group.
When BOX's trading floor opens on Monday, traders will administer self-temperature checks, wear face masks and be separated by plexiglass dividers. The BOX declined to comment.
Traders entering the NYSE Arca options trading floor in San Francisco must undergo temperature checks and wear masks, in addition to avoiding physical contact with others.
The trading floor at the New York Stock Exchange will remain closed, and reopening plans will be provided later.
A CME Group spokesperson told FOX Business the exchange’s Chicago trading floor “reopening will be evaluated based on medical advice.”
Cboe plans to be ready to open its trading floor as soon as June 1, but said the date will ultimately be determined by the health and safety needs of its trading floor community, which includes company staff as well as market participants.