Hello Options People!

It has been an exciting year for us at NYSE Arca Options. From January through November of 2007, we have seen our market share in the penny pilot names increase by nearly 10%, our monthly average volume reaching the 2 million contracts a day range in November–and upwards of 75% of those contracts executed on our blazingly fast electronic options platform!

NYSE Arca Options’ market makers and all of our customers have helped drive market share to 14 .6% for equity options (making us the number three exchange in November 2007) and from 8% (pre-pilot) to 17.6% in Penny Pilot names. We are the fastest growing US equity options exchange with a 60% growth rate in 2007, compared to the industry average of 30%. Our market share in individual penny pilot names continues to accelerate as well, with more than 20% of options volume in the QQQQs coming to NYSE Arca. In anticipation of increased industry volumes and our own growing market share, we’ve increased our throughput this year as well, positioned to handle up to 60,000 orders per second , and our quote capacity is simply enormous–we are well ahead of the curve with 1 million–let’s say that together–1 MILLION quotes per second.

Additionally, here’s a good snapshot of how effective our quote mitigation plan has proven to be: from May to September 2007 we saved 19.5 million quotes, i.e. the equivalent of 15% of NYSE Arca quote traffic, with over 34,000 series mitigated every day.

2007 also saw the addition 10 new Order Flow Providers and 11 new Market Makers to the NYSE Arca Options community. Our post/take pricing model in the penny names has made quoting on NYSE Arca Options a very attractive proposition for market making firms, and the added liquidity and tighter spreads this robust competition from quoters has put us at the NBBO more often than any other exchange, attracting order flow providers to the national best price–right here on NYSE Arca!

So that’s a look back, which is a satisfying thing to do at the end of a year like 2007, but more exciting is what lies ahead. What we can look forward to in 2008 includes another expansion of the penny pilot in March, bringing approximately 60% of all industry volume into the pilot. Here at NYSE Arca we are ready to rock! Our increased throughput and capacity planning in 2007 makes us well placed to continue to offer all the speed and reliability for which we are justly noted in the industry. Our motto is “YES PENNIES! Flat, open and transparent!!!”

Aside from the expansion of the penny pilot, we’ve been busy cooking up a complex order book that will launch late Q1 of 2008, bringing you the ability to execute orders with up to 5 legs, and that includes an equity leg. Because of the liquidity available on our options and our equities platforms, we will not only offer complex to complex order transactions but also legging into our liquidity pools for riskless option/equity transactions along with risk free option only complex trades. This is good stuff–watch this space for more details in the next month or so, when I will take you under the hood and discuss the particulars of how this new functionality is going to work.

We’ve got a lot more up our sleeve for 2008, and it promises to be another stellar year for our quoting and order flow community here at NYSE Arca Options, so keep checking back! If you’re on board, huzzah! If you are thinking of joining the fun, now is the time! A great New Year’s Resolution–NYSE Arca Options!!!!

I don’t know how many of you will look at this as an early Christmas present, but it’s landing in your stocking this morning nonetheless — pre-opening indications start today.

For those of you who hit the eggnog a little too hard last weekend, here’s a refresher on indications, excerpted from the above-linked memo to members:

From 1978 until June 2007, specialists were required under NYSE Rule 15 to send out pre-opening indications under certain conditions that were set out first in the Intermarket Trading System Plan and subsequently in the Regulation NMS Linkage Plan that replaced the ITS Plan in March 2007. In June 2007, the Linkage Plan was terminated and Rule 15 became inoperative. Accordingly, as of July 2007, specialists no longer were required to disseminate pre-opening indications.

Since the elimination of the Linkage Plan, NYSE customers and market participants have requested that the NYSE reinstate the requirement for specialists to disseminate pre-opening notifications. In response, the NYSE has amended NYSE Rule 15 to re-establish procedures for the publication of pre-opening price information. …

As amended, NYSE Rule 15 requires a specialist to publish a pre-opening price indication whenever the specialist, in arranging the opening transaction in a subject security, anticipates that the price of the opening transaction will be at a price which is different from the previous day’s consolidated closing price by more than the “applicable price change” (described below). The pre-opening price indication will include the security and the price range within which the specialist anticipates executing the opening transaction.

The “applicable price change” will be $0.50 where the consolidated closing price of a subject security on the Exchange is under $100 and $1.00 where the consolidated closing price of a subject security on the Exchange is equal to or greater than $100.

The pre-opening indications will be published to Floor broker hand held devices, and to overhead displays on the Floor (“FIDs”), and will be made available to subscribers of NYSE Market Data Alerts.

Ah, the gift of transparency. Beats new socks!

So the late, much-unloved ITS (may it rest in pieces) did have something to recommend itself: these pre-opening indications, which disappeared last summer but are back by popular demand.
I know that Todd and Jamie asked about them in this very space. They must have been very good boys this year, because Santa has not forgotten them.

Speaking of the jolly dude in the red suit, he’s ringing the Closing Bell today at 1 p.m. EST — don’t forget the early close, that ain’t no lump of coal, either!

And those of you who aren’t enlisted already, a reminder that you can subscribe via RSS to this kind of news through the Exchanges blog, or through NYSE System Status Notifications, or NYSE Data Announcements.

Merry Christmas to you and yours, my friends.

Today in NYSE History
24 Dec 1963 — The annual volume record of 1.124 billion shares, set in 1929, was finally surpassed after 34 years.

Today’s quarterly expirations of index futures and options helped produce record trading volume in the first hour of trading at NYSE, exceeding the high set on Sept. 21, the previous quarterly expiration date.

The first half hour today produced volume of 790 million shares, topping the old record of 704 million.

Today’s first hour saw volume of 903 million shares, compared with the previous record of 805 million shares.

Hope it’s all going your way.

Here’s the related press release. And speaking of history…

Today in NYSE History
21 Dec 1863 — A group of brokers met to form the Open Board of Stock Brokers, a rival stock exchange located two doors from the NYSE.

Two doors down, eh? Talk about in your face. NYSE would merge with the Open Board in 1869.

By Jeff Kearns
Dec. 6 (Bloomberg) — Apple Inc. shares may surge 34 percent by the end of next year, boosted by higher iPod sales and better- than-expected demand for Macintosh computers from Asia, a Bear Stearns Cos. analyst said.
Andrew Neff increased his share-price forecast for the Cupertino, California-based computer maker to $249 from $243 and […]