Bank of America is forecasting dramatic growth in automated equity options trading in the year ahead.
A Bank of America commissioned survey of head traders at 30 buy-side institutions found a relatively high market penetration for automated options trading. Sixty-one percent of respondents indicated that they traded some portion of their options holdings electronically, compared with just 39% who rely solely on the telephone. Respondents who execute electronically tend to be repeat users, trading more than 70% of their total order flow in an automated fashion.
While equity options account for a minority of total electronic trades, the convergence of heavier trade volume, better order entry tools and increased education are likely contributors to this expected growth, says the west coast bank.
Dean Curnutt, head of institutional equity derivative sales for Bank of America, comments: "There are nascent technologies being developed that could do for options trading what algorithms did for equities. The survey suggests that options desks are beginning to embrace these new technologies."
He says the bank is experiencing some of this growth first hand, as seat positions for its own InstaQuote options trading platform recently passed the 6000 mark.
According to the survey, the two most desired features of any electronic trading platform are the ability to execute multi-leg orders (practiced by 61% of those surveyed) and the inclusion of a smart-order routing capability. Participants ranked convenience, price improvement, and productivity as the three most valuable features of smart-order routing technology.