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Industry Evolution

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     Total equities options volume traded on U.S. exchanges have risen from 5.7 million contracts in 1974 to 722 million contracts in 2001. (Since each options contract is usually for 100 shares of underlying security, the 2001 volume represents approximately 72.2 billion shares of stock). Volume in 2001, in fact, nearly tripled that of 1997. This growth trend has continued as options are being increasingly utilized by institutions in their risk management programs and by retail customers in their personal investment programs.

     Exchanges around the globe are moving toward some form of automated trading systems. Most notable is the experience of MATIF, the French futures and options market. In 1997, it began utilizing a computer-based system contemporaneously with its traditional floor system. Within a few weeks, virtually all of MATIF's business migrated to its automated system and its floor was subsequently shut down. EUREX Deutschland (formerly DTB), the German Futures and Options Exchange, is an electronic exchange that has successfully captured significant volume from LIFFE, a London floor-based exchange. In October of 1997, the Australian Stock Exchange changed its options trading from a floor-based mechanism to a screen-based system of trading.

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