The OIC Announces Trading Increases 29%
The Options Industry Council (OIC) announced that 375,934,882 contracts changed hands in October, representing a 28.75 percent increase over October 2007 and 1.4 million contracts more than the previous monthly volume record set in September. Average daily volume for the month was 16,344,995 contracts, also up 28.75 from the same period last year.
On October 20, year-to-date volume reached three billion contracts for the first time in history. It took 203 trading days to reach this milestone. Total options volume reached two billion contracts for the third time ever on July 22, taking only 140 trading days to reach that mark. The Options Clearing Corporation (OCC) reported October year-to-date volume stood at 3,116,322,848 contracts, an increase of 34.63 percent compared to the same period last year. Year-to-date daily volume is averaging 14,699,636 contracts, compared to 11,022,807 contracts at the same point in 2007.
Equity options saw 336,805,246 contracts traded, 25.54 percent higher than October 2007. Year-to-date equity options volume is 2,857,938,960 contracts, up 36.70 percent over the same point last year. Daily equity options volume averaged 14,643,706 contracts per day in October, an increase of 25.54 percent over the same month last year.
October 10 and October 6, respectively, became the third and fifth highest trading volume days ever recorded when more than 25 million contracts changed hands each of those days.
The Securities and Exchange Commission (SEC) approved much anticipated rule changes proposed by the Chicago Board Options Exchange (CBOE) and the New York Stock Exchange (NYSE) allowing broker-dealers to use a risk-based portfolio approach for the margining of customer accounts.
This expansion of customer portfolio margining helps U.S. equities markets take a major leap forward allowing securities firms to participate on a level playing field with the futures and international equities markets as it relates to customer margining. Current margin rules governing U.S. equity markets follow a strategy-based approach requiring broker-dealers to identify approved hedged positions (or strategies) and imposing a set margin requirement for each position. Portfolio margining allows broker-dealers to group products based on a related underlying asset into portfolios with the margin requirement based on the risk of the portfolio as opposed to a set amount.
This risk-based approach is based on OCC's TIMS margin methodology, which determines the maximum loss associated with a portfolio given a percentage move in an underlying asset. A portfolio containing an offsetting position in the derivative and underlying asset reflect less market risk and requires less equity to collateralize the account. This provides additional leverage to customers' capital available for reinvestment. The approach has been the standard for U.S. futures and international securities markets for years.
