This week’s Options Industry Conference in Palm Beach Gardens, Florida may be the last one without Trading Technologies representation.
The SaaS provider to the capital markets industry, long a stalwart in futures, options on futures, and non-US options, plans to roll out support for US equity options as soon as this month.
US equity options has become an increasingly attractive market, with strong growth over the past five years and a steady drumbeat of record volumes reported by market operators. Average daily volume was 25.9 million contracts in 2024, up from 17.5 million in 2019.
Traders Magazine caught up with Alun Green, EVP Managing Director, Futures & Options at Trading Technologies, to learn more.
What about the US equity options market is appealing to Trading Technologies?
Trading Technologies is in options on futures, and we have been in equity options outside the US for a long time. But US equity options is new for us.
One point of appeal is the number of our customers already trading futures and other options on our platform, who say they would like us to get into the very liquid US options market. We will start with index options, where we already have a futures contract and a corresponding options contract. There’s a lot of interest in arbitrage trading between those two, both of which have quite a lot of volume on TT.
The second thing is that we are getting more interest from market participants in Asia, who want to trade a wide range of asset classes, including equity options. TT only contracts with institutional firms, but a number of the brokers we work with in Asia have fairly significant professional retail flow.
What are the unique challenges in the US equity options market, and how will TT add value as a platform operator?
Overseas customers who are unfamiliar with the market need to develop different relationships. Not every firm that clears futures can also clear equity options. So partly it comes down to education with those customers as to the differences they need to look at when trading US equity option contracts.
We’re not doing this alone, of course. We’re doing it in collaboration with our sell-side clients so that prospective entrants understand the processing differences between options flow and futures flow. And if a firm’s clearers are not able to offer this, we can introduce them at their request to other clearers who offer products for that.
Why is TT interested in the US equity options market now?
TT has had a desire to get into the US equity options market for a while, but there have been other priorities at the firm related to core platform improvements, acquisition integration, new product development and the launch of other features, so we weren’t able to put the proper development effort behind it. By development effort, I mean not just technical development, but also market development and go-to-market material.
I think now we’re at the point where we’re getting more client demand for options, which has raised its priority. We’d love to have been able to do it five years ago, but today it’s just a more compelling business case.
What synergies exist between TTs current offerings and options?
There are very sophisticated traders on our platform. These traders want to look at futures index contracts and the associated futures options, alongside the options on the actual indices, and be able to trade those on the same platform, with very low latency and with the sophisticated trading tools that TT offers, including Autospreader and our execution algorithms. That is key.
A second aspect pertains largely to Asia customers. A main draw of the TT platform is that you can hop on it anywhere in the world and have access to any exchange or liquidity provider that’s sitting out there. So, sophisticated trading tools can give you an arbitrage with index products, and we’re already using the platform for a lot of venues. Being able to put more asset classes and more venues on the same platform just means fewer screens that traders need to deal with.
What is TT’s in-house options expertise? Will you add staff?
We have people on our engineering and quant teams that have a lot of depth in trading options, and also coding the platform against options. Most of our development team is in Chicago, and quite a few people there grew up trading in markets including options. And some of our support staff used to be options traders. So we have enough in-house talent to launch this.
That said, we’re always looking to bring in new talent. We’re expanding our footprint globally, and wherever we may find good people with the right expertise, we’re interested in bringing them onboard.
What is TT’s longer-term vision for the options business? Where might it stand three or five years from now?
We’re starting with index options, and we’re already looking at phase two, which is single-stock options. That’s in the works for later this year, when we will have at least the most liquid single-stock options on the platform. Broadly speaking, our vision for three to five years out is to have the same kind of traction and penetration on the US equity options market as we do with the other futures and options markets that we support.