The joint venture of online retailbroker Binck and trading firm Optiver has changed plans. The new chief Willem Meijer isn’t afraid to admit the whole plan initially was intended to channel Binck’s retail flow into the books of Optiver with TOM, which stands for The Optiver Machine. The reason for this sudden turn-around isn’t quite clear. Could be the financial watchdog and the rest of the market gave them an off-the-record red stop sign. The ethical standards of Optiver isn’t something many people rely on.
The new plans
Anyway, it’s time for something completely different now. Something difficult, as the new CEO has got a hard time explaining the new plan. It sounds like a hybrid version of the old plan mixed with plans for a new exchange. The final product is so complicated it can’t be explained yet, nor any details could be given. It should be very simple:
- A) Binck is creating an in-house matching system, with Optiver matching all Binck’s retail flow
- B) Binck is creating a completely new trading platform, with Optiver as the first committed liquidity provider
These options don’t mix. Building a new stocktrading exchange is a piece of cake compared with a new option trading platform. The questions marks on clearing, matching, margin and open interest must give a serious headache. Nevertheless, the chief Willem Meijer is an optimist. Trading in options on his new trading platform will start this year, and with some luck even before the summer. That’s definitely not going to happen.
Creating another stock trading exchange can be done. When Binck’s retail flow is routed to the exchange with the best offer, it will be a tremendous challenge to compete with the combined bid-ask spread on Chi-X, Euronext, Bats and Xetra. Again mister Meijer doesn’t seem to get the point. It’s not Binck’s decision where to route the orders, it’s the best price on the market which is king. It’s not like opening a shop with guaranteed customers.
Small option market makers
For the purpose of maintaining a competitive and healthy market with many participants, the small market makers can’t be missed. The small market makers Calimero, Munnik and Klinkenberg announced their concerns with a new option trading platform. Connection expenses, hardware investments and software upgrades are absolutely necessary to join trading on TOM. Their concerns are very reasonable and justified ; the developments are seriously threatening their very existence.