Options exchanges in "sweet spot" :ISE

By Ros Krasny

NEW YORK (Reuters) - U.S. options markets are riding out the global credit crunch and have landed in a "sweet spot" for growth, Gary Katz, president of the International Securities Exchange, said on Monday.

Current levels of volatility, if sustained, have the potential to keep trading growing at a strong rate, Katz said at the Reuters Exchanges and Trading Summit in New York.

Often termed Wall Street's "fear gauge," the volatility index, or VIX .VIX, measures implied volatility in Chicago Board Options Exchange S&P 500 index options.

A years-long decline in volatility was snapped by the credit and liquidity crisis that erupted in August 2007, starting in the U.S. subprime mortgage market.

Katz said several years of expansion in equity options volume reflected improved technology and new market participants, including ISE, even as volatility eroded.

ISE always assumed that more volatility would generate higher options volume, and "that theory was proven right. Volume exploded" in late 2007, he said.

In late 2006 and early 2007 the index was trading below 10, but by the end of 2007 was back above 20.

U.S. exchange-wide options volume in 2007 was 2.86 billion contracts, up 41.2 percent, according to data from the Options Clearing Corp and Options Industry Council.