Great article. Writing has been on the wall for awhile, but sad nonetheless that open outcry is going away.
Quick question, for ES futures, SPX options and other major option series that are operating on a hybrid model (electronic + open outcry?) How do the exchanges reconcile these?
For instance, do open outcry trades have to follow NBBO; and what is the latency of an open outcry trade/bid/ask being broadcasted in quote feeds? Do people mostly still do open outcry to execute extremely large block orders? Finally, would the cease of open outcry affect membership pricing of CME?
You are trying to fit the futures markets into the US equities model. Open outcry and Globex are two separate markets. Open outcry quotes don't show up on Globex. Traders in the pits have handheld devices that allow them view quotes and place orders on Globex.
My understanding is that open outcry is still useful for options trading because it lets you do complex multi-legged trades "atomically." A broker can get together with a local (or several, if it's a big order), and sort out a single price for a trade that will involve multiple instruments.
Thanks appreciate it! So sounds like then Globex and Open outcry are separate markets then although they are closely correlate as they trade the same asset but aren't obligated to reroute orders.
As for options, AFAIK, CBOE and ICE already keep multi-legged books in electronic trading. For example, you can request for a multi-leg order via Interactive Brokers and it'll return a bid/ask spread that's the sum of all your ratio's/legs. When you execute, I think IB's SmartRouter does the magic to figure out which exchange to submit your order to (whether to submit it all to a multi-leg book or as single orders; but IB is on the hook to guarantee the complete execution of your order).
On liquid options, hitting mid on your multi-leg has a decent chance of being executed. However options in general are not as liquid as equity, so happy that guys at CBOE/CME can still do open outcry.
Quick question, for ES futures, SPX options and other major option series that are operating on a hybrid model (electronic + open outcry?) How do the exchanges reconcile these?
For instance, do open outcry trades have to follow NBBO; and what is the latency of an open outcry trade/bid/ask being broadcasted in quote feeds? Do people mostly still do open outcry to execute extremely large block orders? Finally, would the cease of open outcry affect membership pricing of CME?