OneChicago seeks BookDepth traction

Chicago-based equity stock futures exchange OneChicago is preparing a marketing push to boost usage of the depth-of-book data it now distributes over CFN (CBOE Financial Network) from its co-parent Chicago Board Options Exchange.

The service, called BookDepth, provides prices and sizes available for the best five bids and offers above and below the market price. Previously, only the top-of-book price was available. The additional data is “much more indicative of the market", said Robert Walsh, operations director at OneChicago.

The additional data can be used by traders to fill orders outside the main market size if required. "If you trade only five or 10 lots per day, it’s not of much value," Walsh said. "But if you have large orders or volume to move at one point—say, 1,000 contracts—and the size is 100, you’re going to move the market… But if the next tick up is 500, you could put a limit order up, knowing that there is interest at or near that price."

Users can also run an analysis of the process to produce implied stock prices. By comparing these prices with actual equity prices, traders can judge whether they would receive better returns from a stock or from its future.

Although BookDepth was launched about six months ago in response to client demand, so far it has just one subscriber, an undisclosed broker-dealer that also has a data distribution business, Walsh said.

But he added there is natural interest right now in this data because of the growth in volumes and open interest at OneChicago. Therefore, the exchange will devise a new marketing strategy and re-announce the service to vendors—the primary target clients—in around a month’s time, he says. However, officials say potential users — which also include dealers — will not see a major push on the product until the fourth quarter of this year or the first quarter of 2006.

Walsh said companies that take the depth-of-book data will have to make on-site software changes to allow their systems to not only receive the feed—which would previously update just a single price—but maintain an in-memory database of the other bids and offers. "That’s more complicated," Walsh said. "Simply kicking out the old quotes with new ones is simpler than keeping them in place as well."