The International Securities Exchange (ISE) and Eurex, the derivatives marketplace owned by Deutsche Borse, will jointly develop a new options trading system for the ISE that will replace the OMX Click trading system currently in operation. This step is the first initiative following the completion of the $2.8 billion merger of ISE and Eurex on Dec. 19, 2007.

The announcement, which barely a month after the completion of the ISE-Eurex merger, shows that technology is a competitive weapon for exchanges and that exchange consolidation deals like Nasdaq-OMX could cause exchanges to rethink their technology suppliers.

The ISE previously said it would stay on the OMX trading platform despite its merger with Eurex, the Swiss-German derivatives market owned by Deutsche Borse, which has its own derivatives technology. Moreover, ISE said it planned to move from the OM Click trading platform to a newer OMX platform called Genium.

However industry consultants didn’t believe that ISE would remain on OMX’s platform because it would be paying software fees to a competitor and relying on OMX to support the ISE’s operations.
Nasdaq also recently acquired acquisition of the Philadelphia Stock Exchange, the third largest U.S. options exchange, which could position Nasdaq to compete with the ISE, the largest U.S. options exchange after the CBOE. The Industry observers speculated that Eurex, a global powerhouse in derivatives, would not wait long to make a change.

In a statement, Gary Katz, ISE’s president and CEO, said, “Technology is an important differentiator in today’s competitive market environment. This internally developed solution will increase the flexibility of our platform and decrease the time-to-market for enhancements, delivering an improved trading experience to our members. Both ISE and Eurex have been at the forefront of technology development in the industry, and this new initiative will solidify our position as an innovative technology leader,” further stated Katz.

ISE and Eurex said the development of a new system would be a multi-year effort that will draw upon the expertise of both ISE and the entire Deutsche Borse Group’s technology teams. While the system is in development, ISE’s options exchange will continue to operate on the OMX Click technology platform and ISE will continue to work with OMX to support as well as enhance the current system. Eurex and ISE are finalizing plans for the joint development effort and expect the new platform to launch in early 2011.

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