Options Traders Are Under Pressure from Electronic Trading, and Big Players Moving In
Bigger isn't always better. If you take a quick look at the rapid growth of electronic options trading, you might think jobs would be picking up. Total options contracts increased 32.82 percent as of the end of November 2010 from the year prior, according to the Options Industry Council (OIC).
But ask an options trader, and he'll quickly tell you jobs are still disappearing. Even the recent addition of short-term options listings hasn't necessarily resulted in an uptick in trading positions. This year, the NYSE Amex became the first exchange to trade a weekly expiring short-term options series. Its second set of weekly short-term options listings accounted for about 1 million contracts in their first week of trading activity.
In June, the CBOE added weekly options on four ETFs: Standard and Poor's Depositary Receipts (SPY), Nasdaq-100 Index Tracking Stock (QQQQ), DIAMONDS Trust, Series 1 (DIA), and iShares Russell 2000 Index Fund (IWM). The CBOE is currently looking for regulatory approval on options expiring in as little as a day. This sort of action requires big players with big money to facilitate such a short-term trade.
Actual short-term options listings do go back to 2005, but the tech takeover has brought bigger interest. As the big guys beef up and can afford the tech, more of the little players have been driven off the trade. It goes without saying that tech facilitates trades with less headcount.
Blame another part of the job loss on the NYSE Amex Options E-Specialist program and its growth. The NYSE Amex selected some big guns - Barclays, Citadel, Citigroup, Goldman Sachs, Integral Derivatives, Morgan Stanley, Susquehanna Securities, Timber Hill, UBS, and Wolverine Trading - to act as its E-Specialists moving a large chunk of the volume. They're pushing more volume with fewer folks required.