Baml revamps options trading platform

Bank of America-Merrill Lynch (Baml) has added “new advanced features” to its global trading and consulting platform, Trader Instinct, which provides buy- and sell-side clients with more efficient order handling and improved fill rates for options trading.

The new enhancements to the Instinct Options component of the platform include an infrastructure upgrade, a range of new algorithms, and direct option market data feeds for more efficient, finely tuned processing. “Our investment in the platform comes as part of our ongoing efforts to evolve our service offering in response to both market conditions and customer demand,” said Meaghan Dugan (pictured), head of electronic options product. “Our latest enhancements will provide our buy and sell-side options investors with more efficient order handling and fill rates.”

The enhancements will benefit those using options to build structured products as the bank’s structured product is part of an overall multi-asset global trading platform which offers a range of customisable trading solutions, said Dugan. “Trader Instinct encompasses all of Bank of America-Merrill Lynch’s overall trading platform, as well as the wide array of products and services that we offer to our global client base, including structured products,” said Dugan. “Instinct Options is our options initiative which takes into account both high touch and low touch/electronic order flows.”

The US options market continues to change in complexity, with clients increasingly looking for smarter and more effective ways to capture liquidity, according to Dugan. The additions to the platform include infrastructure hardware upgrades; advanced market data processing; TWAP (Time Weighted Average Price) algorithm; display quantity randomisation; delta-adjusted performance improvements; and exchange crossing order mechanisms: price improvement, facilitation, solicitation, and customer match.

One of the challenges for options trading is greater market fragmentation which has resulted from the arrival of more exchanges, according to Dugan. “This has caused quote traffic volumes to increase, which has put more demands on the network,” said Dugan.

The options market is “top-heavy” and has more than 900,000 series available for trading based on 4400 Options Clearing Corporation (OCC) underlyings, according to Dugan. Although “45% of the OCC industry volume has been in the top 10 symbols year to date”.