The Boston Options Exchange wants to be its own master. BOX plans to part ways with Nasdaq and apply for its own exchange license.
“We are going, by a Form 1, to get our own SRO,” said Alan Grigoletto, vice president of business development and marketing at the BOX. Speaking at an options industry conference in Las Vegas yesterday, he said the plans to file to be a registered securities exchange are “ahead of schedule.”
R. Scott Morris, BOX’s CEO, told Traders Magazine that BOX must control its own destiny. “Nasdaq is our competitor,” he said at the Options Industry Council conference. “Being regulated by a competitor is not a good long-term solution. It’s best for us to solve that problem by being our own exchange.”
Nasdaq last October announced plans to buy the Boston Stock Exchange in a deal valued at $61 million. BOX uses the BSE’s regulatory license to operate as an exchange. When Nasdaq announced the deal, the exchange (now called Nasdaq OMX Group) said it would sell the BSE’s 22 percent stake in BOX to the Montreal Exchange, which already owned 31 percent of BOX. (Montreal completed its merger with the Toronto Stock Exchange yesterday.) The arrangement last October was that BOX would continue to employ the BSE license for its options market and that Nasdaq would provide regulatory services to BOX.
Now that plan has been scrapped. Nasdaq’s acquisition of the BSE is still awaiting approval by the U.S. Securities and Exchange Commission. However, Morris said BOX’s goal is to have its own SRO license in the first or second quarter of 2009. BOX is beginning the process of changing its corporate structure to become an exchange.
An SRO license would also give BOX new opportunities. Morris said that “having the option to get into equities in the future is part of the advantage” of being a SRO. But he note that BOX has no current plans to move into the equities space.
BOX’s decision to cut loose of Nasdaq will leave Nasdaq OMX with a third options medallion. Nasdaq is in the process of completing its acquisition of the Philadelphia Stock Exchange, which has a quote-driven options market.
Adam Nunes, head of Nasdaq Options Market, said Nasdaq OMX doesn’t have any firm plans for what it might do with the options license that will be freed up. “If we’re going to use the third SRO, we’d need customer demand to help us define what it should be,” he said. “Essentially, what the third SRO means [for us] is flexibility.”
