Battle for U.S. options market share heats up

Thu Apr 1, 2010 6:13pm EDT

* Nasdaq OMX gains ground in battle for market share

* CBOE stays No. 1 in total market share last month

* ISE's overall market share fell to 19.4 pct in March

* ISE:Inclusion of dividend trades distorts US volumes

CHICAGO, April 1 (Reuters) - The two dominant U.S. option exchanges on Thursday reported a decline in overall options market share last month as rival venues grabbed a bigger slice of volume in the fast-growing options business.

Eight option venues are now battling for order flow following the February launch of BATS Options.

Nasdaq OMX Group (NDAQ.O), which runs the Nasdaq PHLX and NOM option platforms, accounted for a combined 25.57 percent in option trading, giving them the No. 2 spot behind the Chicago Board Options Exchange, according to the Options Clearing Corp.

NYSE Euronext's NYX.N two venues, AMEX and NYSE Arca options, together captured 23.40 percent of market share, overshadowing the long-running No. 2 player International Security Exchange.

Dropping to the No. 4 spot was ISE, owned by Deutsche Boerse AG's (DB1Gn.DE) derivatives exchange Eurex.

ISE said its total market share fell to 19.4 percent in March from 22.8 percent in February and 28 percent in March 2009.

Daily average trading at ISE fell 32.6 percent to 3 million contracts last month from 4.4 million a year earlier.

CBOE was still the top market among exchange operators. CBOE accounted for 30 percent of the options market last month, down from 30.7 percent in February and 31.5 percent in March 2009, the market said separately in a volume report.

Trading at CBOE, ISE's bigger rival, fell 8 percent in March compared to a year earlier, at an average of 4.5 million contracts a day.

For the first quarter of 2010, CBOE average daily volume rose 2 percent from the same period a year ago.

Trading at all U.S. options markets last month rose 1.44 percent to 351 million contracts from 346 million in March 2009, the Options Industry Council said in a report.

ISE, which has long been a vocal critic of ex-dividend trades, said its market share data continue to be negatively affected by this specialized trading strategy which temporarily inflate and distort trading volume.

Excluding dividend trading, ISE said its March market share in equity options would have been 22.3 percent, more than the 20.6 percent it reported.

The exchange said last month in a paper on the practice posted on its website that inclusion of dividend trades inflated the reported market share of some options exchanges.

For details, see [nN01253514].

(Reporting by Doris Frankel; Editing by Kenneth Barry)

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