And Then There Were Six

January 10, 2005

After years of no options on SPY, there will now suddenly be SPDR options trading on six exchanges. SPDRs options already off to a huge start on the AMEX this morning.

The SPDRs options story continues to develop…

The floodgates on the SPDRs options are fully open.

Standard & Poor's has now reached a licensing agreement with six exchanges - including the International Securities Exchange (ISE) - to permit the listing of options based on the popular SPDR (SPY) exchange-traded fund.  The six exchanges are: the American Stock Exchange, the Boston Stock Exchange, the Chicago Board Options Exchange, the International Securities Exchange, the Pacific Exchange and the Philadelphia Exchange.  As of 1 EST, options were trading on all of the exchanges.

"We are very pleased to have reached agreements with all of these exchanges," said Kathleen A. Corbet, President of Standard & Poor's, in a statement. "The great interest in SPDR options is an affirmation of the enormous value that Standard & Poor's indices create in the market worldwide."

The interest is indeed great, with some predicting that SPDR options will become "the most actively traded equity derivative in history."  See story detailing the first launch announcements.

Already, as of 11 am EST, the products are the most actively traded options series on the AMEX, with 51,000 contracts representing a notional value of $612 million.

This story has evolved very rapidly since last week, when the ISE announced plans to list SPDR options without first obtaining a license from S&P.  ISE claimed that no license was needed.  S&P sued, and received a temporary injunction blocking ISE from going forward with the listing. 

ISE's aggressiveness appears to have forced the S&P's hand, however, as today's news shows.  Traders have long awaited SPDR options, and S&P has claimed to be in negotiations with various exchanges for years.  Traders no longer have to wait, as the products are already changing hands on many exchanges.

Despite the licensing agreement, the lawsuit between ISE and S&P will move forward.

"With SPDR options now trading on all 6 exchanges, including ISE, the emergency nature of the litigation has been removed," said S&P spokesman David Guarino.  "But when the temporary restraining order expires later this month, the parties will proceed to argue the merits of the positions in the courtroom.  We are confident that we will prevail."

ISE could not immediately be reached for comment.

The lawsuit will certainly be closely watched by the indexing industry, as these types of licensing agreement represent a great deal of revenue for indexers.

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