تصویب معاملات الکترونیک در بورس بین المللی ارز
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14027||2006||19 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Decision Support Systems, Volume 41, Issue 4, May 2006, Pages 728–746
Information technology is transforming financial trading, lowering costs, and increasing market transparency. Yet, new electronic trading ventures often fail to attract sufficient activity levels, and close down. Optimark, Tradepoint, Jiway, and BondConnect did not develop sufficient trading volume to survive. In contrast, the International Securities Exchange (ISE), an all-electronic options trading platform has gained trading volumes in the United States in competition with four incumbent markets, including the Chicago Board Options Exchange (CBOE). Compared with floor exchanges, electronic options markets offer immediate trading, direct user access to the market, and reduced costs. The paper describes the ISE and examines newly available data from brokerage firms to comply with the Securities and Exchange Commission's (SEC) Rule 11Ac1-6. The order routing disclosures show that brokerage firms differ widely in the extent of their use of the ISE. Based on a sample of 188 quarterly disclosures from 20 major brokerage firms, OLS, Tobit, and fixed-effects models of ISE use are estimated to explain individual firms' adoption levels. Significant factors are whether the firm is an online discount broker, the firm's membership role in the ISE, and the network externality effect of the ISE market's growth. Firm-specific factors are shown to account for about 60% of ISE adoption explained by the model, with the remaining 40% accounted for by the network effects of growing market liquidity.
This paper examines the adoption patterns of U.S. securities brokerage firms for electronic equity options trading after the launch of the International Securities Exchange (ISE), an all-electronic trading platform on May 26, 2000. In the first quarter of 2004, the ISE handled 29.2% of all U.S. equity options contracts traded and 33.2% of equity options transactions, with the four incumbent options exchanges accounting for the remainder (source: Options Clearing). Quarterly data for a sample of 20 brokerage firms from 3Q 2001 to 1Q 2004, however, reveal wide variation in the extent of ISE use, from 0% to as high as 61% of a firm's options orders in a quarter. Understanding what influences potential users to adopt a new electronic market has research value and practical implications for developers of new trading platforms. We look at how broker-specific and network-effect variables impact ISE use by brokerage firms. In the United States, the ISE is a competitor of four established floor-based exchanges in Chicago, New York (American Stock Exchange), Philadelphia, and San Francisco (Pacific Exchange). The largest of these, the Chicago Board Options Exchange (CBOE), began operating in 1973, and has a competing market maker structure with a floor trading crowd of 1437 that can provide for price and size improvement, and complex, linked transactions such as spreads and straddles in which several options are purchased and sold simultaneously. The ISE's electronic market offers first in–first out (FIFO) time priority among orders at a particular price, and initially undercut the trading fees charged by the floor options exchanges. Transactions on the ISE are free to the brokerage firm and its customer. ISE market maker members are charged about 20 cents per contract traded, and the turnaround time on many orders to the ISE is less than 1 s. Before the ISE launch, floor option exchanges were charging fees about 50% higher than the ISE, but have since lowered fees to match those charged by the ISE. Floor orders can take anywhere from 15 s to several minutes to execute and report to the client, depending on the order and market conditions at the time. At the time of its launch, the prospects for the ISE were unclear. James Marks, an analyst with Credit Suisse First Boston commented in the October 1, 2000 edition of CIO Magazine: “It's a bit of a chicken-and-egg situation for the ISE. To get order flow, they need liquidity-willing buyers and sellers—but to get liquidity they need order flow. Better, cheaper, faster won't mean much if they don't get the critical mass of order flow they need to keep their market makers and the brokerages happy.” Research into the factors that determine whether an electronic market will succeed is inconclusive. Kambil and Van Heck  describe the few examples of online financial and commercial B2B markets that have succeeded. The authors contend that success results largely from integrating product transactions with information and services, such as logistics and payment support, and providing value, not just lower prices, to all market participants. Hendershott  examines the uneven adoption of electronic financial trading, and uses Electronic Communication Networks (ECNs) for Nasdaq stocks and currency dealing systems as examples of electronic trading successes. Bond markets though remain largely dependent on telephone contact for trading. Barclay et al.  examine competition between Electronic Communication Networks (ECNs) and Nasdaq market makers for trading, and conclude that multimarket trading offers benefits and that ECNs are not a complete substitute for trading with a traditional market maker. Well-designed trading automation is beneficial to investors and traders in markets  and . For example, the introduction of the Nasdaq screen market in 1971 to replace the OTC “pink sheets” led to a reduction of the average bid-ask spread (an important transactions cost in financial markets) in a 174 stock sample to 40.3 cents from 48.7 cents . The introduction of the SEAQ screen-based market system as part of the London Stock Exchange's 1986 Big Bang market reforms improved the quality of the LSE market , and played a part in trading volumes increasing from $280 million a day in 1985, to $4.1 billion a day in 1994. Comparing SEAQ to the floor, London's electronic market proved to be more open and competitive than the floor market, and led to lower transactions costs for investors. In spite of advantages, however, many new electronic trading platforms fail to attract sufficient market activity to survive. Researchers have recently identified further opportunities for exploiting IT, and specifically the Internet, for financial trading. Established order routing practices in many brokerage firms, though, can hinder the adoption of the most efficient trading practices, and thus reduce the incentive to introduce trading system innovations. As Fan et al.  points out “The vertical relationships between the brokers and the market centers adversely affect investors' interest and undermine the competition at the exchange markets. These relationships also reduce the incentive for market centers to innovate to offer more efficient trading services.” An obstacle facing a new market, such as the ISE, is how to attract sufficient order flows when many brokers have existing relationships with floor exchanges . This paper will describe recent developments in U.S. options markets, and then analyze U.S. brokerage firms' regulatory order routing disclosures. Table 1 indicates that during the sample period, the 20 major U.S. brokerage firms adopted the new ISE market at a rate roughly equal to the overall volume growth for the ISE. Rule 6 disclosures were mandated beginning in 3Q 2001. The sample firms' usage, however, has lagged the ISE's market share somewhat (see Table 1).The dependent variable in the analyses is the percentage of a firm's options orders it routes to the ISE in a quarter. The adoption differences across firms will be examined to determine what influences the extent that brokers adopt the ISE market. Rule 11Ac1-6 disclosures were first required in 3Q 2001, when just two of the firms in the sample had adopted the ISE. By 1Q 2004, 19 of 20 firms in the sample had reported routing orders to the ISE (see Tables A1 and A2 in Appendix A). Three model specifications are considered: OLS, Tobit, and a firm fixed-effects model. The Tobit model is estimated since it corrects for limited dependent variable problems since the dependent variable is zero (left-censored) in 58 of 188 observations  and . All of the models estimated are statistically significant, and have fairly consistent coefficient values. The fixed-effects model has the greatest explanatory power, but all three show that both firm-specific factorssingle bondincluding firms' ISE membership categorysingle bondand network effects in the form of the prior period's aggregate ISE share influence ISE use. The paper concludes with implications for electronic market governance and success factors for new trading systems.
نتیجه گیری انگلیسی
Understanding the mixed record of success of electronic financial markets is a challenge for I.S. researchers [6,13,18] . Unlike many new computer- ized markets, the ISE has succeeded in attracting a critical mass of volume and liquidity. A requirement of any new market is to attract use broadly or from a narrow set of active participants, and the newly available SEC Rule 6 disclosures provide a way to assess market adoption at the level of individual brokerage firms. The order routing patterns studied showed that online brokers overall and ISE member brokers in particular were rapid early adopters of the ISE. Even in electronic markets, exchange memberships are important, and were shown to influence brokers’ use of the ISE. The analysis shows that ISE members, in particular PMMs, direct substantially more order flow to the exchange than nonmembers. While technology can improve the functioning of a market and reduce costs, membership structures remain an important element in attracting order flow to an exchange. In addition to broker-specific factors, the network effects generated by the ISE’s growth served to draw additional orders from brokers. The liquidity external- ity is evident as individual brokers’ use of the ISE issignificantly related to the lagged ISE market share of options trading in the prior quarter. Once the market began to grow, its adopters raise their usage. Liquidity does attract liquidity. The implications are that a well-designed member- ship structure leads to committed early users that contribute to the positive network effect from market liquidity. We conclude that the ISE benefited from its early efforts to attract members, who in turn con- tributed order flow to the market and attracted additional usage and new adopters. In particular, the activity in late 2001 from early lead users, such as E- Trade and Goldman Sachs, established a liquidity base that encouraged other firms to use the ISE in competition with established open outcry markets. For market developers and exchange officials, the implications of this study of the ISE’s success factors are: (a) early adoption of new markets across brokers is likely to be uneven, but the sustained use of early adopters can generate network externalities that draw in more participation (b) brokers and traders with membership positions in an electronic exchange use its screen-based market more actively, and membership advan- tages are helpful in attracting order flow that might otherwise be directed to the incumbent exchanges (c) segments of brokers, in the ISE’s case online brokers, are likely to adopt electronic trading more rapidly than other segments such as full service brokers (d) electronic market making and access can attract the order flow from securities firms that would not join a floor-based exchange that required a large staff. 2Using SEC Rule 11Ac1-6 disclosures from 20 major brokerage firms, a number of significant influences on firms’ use of a new electronic options market were identified: the firm’s ISE membership catego- ries, if any, whether it is an online broker or not, lagged ISE market share, and firm fixed-effects are important determinants of ISE adoption at the brokerage firm level. The work illustrates the many nontechnological aspects of new trading systems that influence their adoption. It shows how online exchanges’ governance structures can create incen- tives for user firms and order providers to benefit as the liquidity and activity levels of the market increase. Creating business value from electronic markets and exchange is an important area of I.S. and economics research, and the work here shows that governance structures and membership affilia- tions can catalyze usage and liquidity in a new market. Although online markets do not have physical space constraints, ISE PMM and CMM members receive trading privileges in return for buying the membership and adhering to certain obligations to post quotes and trade. Evidence from the ISE suggests these member firms helped build initial liquidity in the critical early stages of the market. Other e-markets however are based on more open structures without costly memberships. Valuable future work on the adoption of new electronic markets will come from further study of membership privileges and obliga- tions, new e-markets examples, and comparison of e- market order types and functionality. The new Boston Options Exchange (BOX) launched its electronic trading platform and became the sixth U.S. options exchange on February 6, 2004. In contrast to the ISE, BOX provides open access to all brokerage firms without expensive memberships, up-front costs, or formal market maker designations. The ISE’s member firms formed a committed user group. BOX’s ability to attract to volume will be a test whether electronic markets can succeed with non- exclusive memberless market structures. Complex orders, such as spreads and straddles, have traditionally been more suited to floor trading, but are now being introduced into electronic markets. The ability to accommodate more sophisticated orders may determine the future growth of the ISE. Further insight into the intermarket competition could comerom more detailed analysis of the b material aspects of the order-routing relationship Q disclosures from the Rule 6 filings. These could show how ownership in trading firms or trading systems, and payment for order flow arrangements influence brokers in choosing among competing securities and options market centers. While it faced significant competitive obstacles, the ISE caught on and can now demonstrate what factors contribute to brokerage firms’ use of a new market and the market’s eventual success