Industry Evolution

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     Prior to 1973, options trading in the United States was essentially unregulated, unstructured and conducted only in the over-the-counter market. In the absence of standardized products, exchange regulation and a central clearing facility, options were considered high-risk vehicles and thus remained a small portion of the overall equity market. In 1973, the Chicago Board of Trade created the first options exchange, the Chicago Board Options Exchange (CBOE) and related central clearing facility, The Options Clearing Corporation (OCC). Under the regulatory auspices of the U.S. Securities and Exchange Commission, the options market has undergone unprecedented growth since then, with a total of eight options exchanges emerging during the twenty-seven year period: CBOE, American Stock Exchange (Amex), Pacific Exchange (PCX), Philadelphia Stock Exchange (PHLX), New York Stock Exchange (NYSE), Nasdaq and Midwest Stock Exchange (Chicago Stock Exchange) and operational since May 2000, the ISE. Today, after consolidation, only five exchanges operate options markets. While options volume has grown, the options market has consolidated in recent years. Nasdaq and the Midwest Stock Exchange have ceased trading options and in 1997, the NYSE sold its options business to the CBOE.