Consequences of exchange merger

There has been a traditional bit of competition between derivative markets Eurex and Euronext. Mostly for the sake of tradition and maybe a little bit for the European Union (look mother, we’re playing competitors). Loaded with employees, slow to adapt and absolutely unfit to combat lean and mean contenders, the exchanges look more like a government institution. The fate of any monopolist.

After the proposed merger of NYSE Euronext and DB only one option market remains in Europe. That sounds like the fees won’t be lowered anytime soon. Maybe the option market could be centralised in one server park, which would save the small market makers some bucks in connection fees and co-location. Wouldn’t bet on it. My guess on what’s going to change : nothing. Dutch options will stay tradable on Eurex (“competition”) and the gap for a new option market stays wide open (TOM). In line with touchy politics, several systems will be kept operational at the same time.

European Style Stock Options

The weekly options on stocks have failed because of the large chunk of transaction costs for especially retail investors. Nevertheless Eurex introduced them as well. Beginning next week the Germans have another interesting idea (which will be copied by Euronext probably) – European style single stock options on a dozen blue chips. No more early exercise of calls and puts, exercising the options is only possible at maturity. The benefit of European style stock options isn’t yet clear to me. I see a lot of opportunities for messing up around ex-dividend dates, when stuck with combined positions of American and European options.

Play-off primary market makers in Aegon, Akzo and Ahold

The play off for primary market makers (PMM) in Aegon and Akzo has ended. The competition for quoting the tightest spreads was won by Optiver in Aegon (silver medal for Nino, bronze for 323). Doesn’t really come as a surprise, with superior giant Optiver beating the dwarfs Nino and 323. The bigger the surprise in Ahold and Akzo. Optiver actually lost the play off from 323 Trading in both Akzo and Ahold. Two licenses were are stake in Akzo, IMC takes the other one. Optiver loses its PMM license in both stocks.