Credit Suisse First Boston
Dear Mr. Katz:
Credit Suisse First Boston strongly supports the proposed Boston Options Exchange (BOX) and would urge the Securities and Exchange Commission to quickly approve its published rules. CSFB Next Fund, Inc., is a member of the BOX.
We believe that the BOX will provide an efficient platform for trading listed options that will greatly benefit investors. In contrast to conventional floor-based exchanges, where orders are exposed only to a limited number of market makers physically present on the exchange at the time of order entry, the BOX exposes orders to a potentially unlimited community of competing market makers, using a fair and transparent electronic auction process. The BOX does not seek to limit the number of market makers who can compete on the exchange, nor does it have a multi-tier system where certain market makers enjoy particular privileges over others. We believe that these two factors will encourage far greater competition and thus result in deeper and tighter markets for all investors.
Certain market participants have sought to represent the BOX as an 'internalization' exchange. We believe that this characterization is incorrect and that the BOX should in fact provide a much fairer, more transparent, and more competitive marketplace for order-flow providers to compete to trade their own customers' orders. All of the existing exchanges have rules which guarantee order-flow providers the ability to interact with some percentage of their own orders, once they have been displayed to the crowd of market-makers physically present on the exchange floor at the time of order entry. We believe that the BOX's 'PIP' order process represents a much more thorough price-discovery process, which will result in materially better price improvement for option investors. Further, the electronic nature of this auction process allows it to be controlled and monitored carefully to ensure that every single order has been handled correctly and fairly.
We believe that the BOX represents an important step in the development of the U.S. options marketplace and will provide a modern market structure that will allow the U.S. options industry to continue to remain competitive globally and grow as it has in the past. We would encourage the Securities and Exchange Commission to approve its rules as currently published.