Aug. 16 (Bloomberg) -- The Miami International Securities Exchange’s planned U.S. options venue will compete for orders by giving priority to market makers that meet certain quoting requirements, according to its application to regulators.
MIAX, as the proposed exchange is called, may become the 11th U.S. venue to trade equity options if the Securities and Exchange Commission approves its application published yesterday. The exchange has been planned for several years and its filing, submitted to the SEC in April, provides the first detailed look into its trading plans and rules. The SEC is seeking comment on the exchange as it considers approval.
The surge in electronic trading since 2000 has spurred more competition among older exchanges and startups seeking to draw trades through different pricing and rules for matching orders. MIAX will compete for volume in the growing options market with established 10 exchanges, including three run by Nasdaq OMX Group Inc. and two each from NYSE Euronext and CBOE Holdings Inc. in Chicago.
“At this point there are 10 exchanges, so they’re going to have to offer something quite unique to stand out,” Stephen Solaka, who oversees about $60 million including options as co- founder of Belmont Capital Group in Los Angeles, said in a phone interview. “You need something highly differentiated and proprietary to succeed as a new options exchange.”
The exchange doesn’t yet have a president and chief executive officer, according to its parent company, Princeton, New Jersey-based Miami International Holdings Inc. Shelly Brown, senior vice president for strategic planning and operations, declined to comment on the exchange’s application. The company expects to begin operating the exchange in October if the SEC approves its plan, MIAX said in a statement today.
The company’s executive chairman is Thomas P. Gallagher, a founding partner at Princeton-based law firm Gallagher, Briody & Butler, which helps companies raise money. Douglas M. Schafer is the chief information officer, Barbara Comly is general counsel and Paul Warner is the chief financial officer. The chief regulatory officer is Edward Deitzel.
The parent company will contribute at least $2 million to the exchange before it begins operating and provide enough capital for it to meet its regulatory and operational requirements, MIAX’s application said. Information about the company’s financing wasn’t immediately available.
The company had about 60 employees in September, more than double the staff in April 2011, Brown said last year.
New Jersey, Louisiana
Directors on the parent company’s board include individuals with connections to New Jersey and Louisiana and executives involved in investment businesses in Kuwait.
William J. O’Brien, chairman and CEO of O’Brien Energy Co. in Shreveport, Louisiana, is on the board, as is Byrum W. Teekell, co-founder and chairman of the Teekell Company, an insurance company in Shreveport. Other board members are Clinton Pagano, former superintendent of the New Jersey State Police, and Robert D. Prunetti, CEO of the Mercer Regional Chamber of Commerce in New Jersey.
Talal Jassim Al-Bahar, chairman of International Financial Advisors, listed on the Kuwait Stock Exchange, and vice chairman and CEO of IFA Hotels & Resorts, is a director. Abdulwahab Ahmad Al-Nakib, chairman and CEO of Univest Group, and Khaled Magdy El-Marsafy, its vice chairman and deputy CEO, according to the Kuwait company’s website, are also on the board.
Dominique Prunetti, a spokeswoman for Miami International Holdings, confirmed that these are among the firm’s directors.
The electronic exchange’s planned start follows a ninth straight year of record equity options activity in the U.S., with almost 4.6 billion contracts changing hands in 2011, according to Chicago-based OCC.
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