FLEX options trading volume soars at CBOE

The Chicago Board Options Exchange (CBOE) has seen a massive growth in its FLEX® (FLexible EXchange) options trading over the past year. In 2009 alone there has been a threefold increase in volume—a development that demonstrates a well positioned service as interest in transparent and cleared markets increases.

Trading OTC-like contracts on exchange

FLEX options were first launched by CBOE in 1993 and are now broadly available on indexes and equities, including exchange traded funds (ETFs). They are the only listed options that allow users to specify contract terms in order to suit portfolio-specific time horizons and performance objectives. Terms that can be specified are underlying index or equity, option type, expiration date, strike price, exercise style and settlement value, giving a high degree of flexibility.

In March this year CBOE added to the flexibility of FLEX options by removing the blackout dates. The contracts can now expire on any day of the month, making the FLEX options even more similar to OTC-traded products while still being traded on an exchange with guaranteed clearing.

The FLEX options trading is performed transparently on CBOE’s electronic trading platform CFLEX and cleared by The Options Clearing Corporation. The Cinnober developed CFLEX was launched in 2007. It is based on the TRADExpress Trading System and customized to specifically support the trading of flexible contracts. One central feature in the system is the auction procedure for competitive price discovery. An auction can be initiated by a market participant at any time during the trading day by issuing a request for quote (RFQ) allowing all market participants to participate in the auction.

“The trading in CFLEX is gaining momentum and I expect this positive development to continue. The strengths of a fully automated process are many: speed, efficiency, convenience and anonymity for the trading participants to name a few. When working with Cinnober we appreciate their agile approach and passion for flexibility – in their technology as well as in the day-to-day work,” says Andy Lowenthal, Vice President at CBOE.

CBOE is the largest U.S. options exchange and the creator of listed options and other groundbreaking products. CBOE offers equity, index and ETF options. To read more, please visit www.cboe.com.