International Securities Exchange (ISE), an electronic revolution

Trading in U.S. options was exclusively a floor-based business until then-E*Trade Chairman Bill Porter thought of creating an auction market for options on an electronic platform.

Porter hoped to bring to options the benefits that electronic trading had yielded for stock trading: better transparency, better execution and lower costs, which result in greater liquidity and tighter spreads.

David Krell and Gary Katz, two former executives of the options division at the New York Stock Exchange, created the ISE as an auction market for options on an electronic platform in 2000. The ISE’s debut contributed to the multiple listing of options, which the floor exchanges were forced to finally consider as the SEC and the Justice Department probed the “gentleman’s agreement” among options exchanges not to compete in equity options.

Enjoying a meteoric rise due to its unique electronic model, the ISE became the largest U.S. options exchange for equity in 2003. The Chicago Board Options Exchange has exclusive listing for index-based options contracts it has licensed.

Throughout its development, the ISE introduced new features, such as ISEspreads or the Sentiment Index (ISEE), which monitors call and put options.