Less than a week after it bid for the options business of the
Philadelphia Stock Exchange
Chicago Board Options Exchange
today saw seat prices fall by more than $100,000.
In mid-May, a CBOE seat sold for $576,000. Today, three seats sold for $440,000, $450,00 and $490,000 -- a major hit in the price and a major concern for CBOE members.
It may just be that the CBOE seat prices have been dragged down with those at the neighboring
Chicago Board of Trade
and caught in the competitive dynamics of electronic trading.
Some believe the pressure on the seat prices is coming partly from the perception that the options market is moving more quickly than expected toward a world of multiple listings, leaving exchanges that dominated the trade in specific issues battling to hold their market share. In that type of environment, spreads will likely tighten, slicing the margins of market makers.
The possibility of such competition looms in the background of the CBOE's recent bid for the Philadelphia exchange. Should that bid fail, industry insiders expect that the Chicago Goliath will move forward with listing the Philly's prized
options, potentially igniting a multiple-listing frenzy. Currently, each options exchange has certain exclusive listings that account for significant portions of their market shares. Right now, the Philadelphia has Dell, the
American Stock Exchange
and CBOE has
and some of the major index options.
Seat prices at the neighboring Chicago Board of Trade are also sagging. According to
, an industry trade publication, a CBOT seat last week went for
, more than $300,000 less than the price it sold for less than a year ago. The pricing pressure was attributed to the onset of electronic bond trading, which is expected to cut into the exchange's business.
While the exchange-seat market is usually the province of exchange insiders and operators, the impending merger of the American Stock Exchange with
and the chase for the Philly listings have made it a consumer issue. Whether any of these developments lead to electronic options trading or a more liquid over-the-counter market, consumers are likely to see tighter spreads as market makers compete for order flow.
The CBOE's offer for the Philadelphia has "focused a lot of people who thought multiple listing was years away," said
head Jon Najarian. "I can't see anything that's going to stop it."
Meantime, Philadelphia members are expecting a formal bid from the American Stock Exchange, and are hoping that it at least matches the CBOE's (because they could take the deal without uprooting themselves and their families from the Philadelphia area).
Seat prices at the Philadelphia Stock Exchange are holding up. The last sale of a seat was in late May, ringing the register for $225,000. The current bid on a seat, however, is $155,000, with an asking price of $225,000.