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Misplaced Confidence At The CBOE

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CBOE Holdings Inc. technology staff knew of software issues in the hours before the largest U.S. options exchange suffered a three-hour outage, according to people briefed on discussions among CBOE officials.

Staffers at the company, which operates the Chicago Board Options Exchange, were confident they could fix the issues, CBOE executives have told colleagues and others outside the company. One area of focus by CBOE Thursday and Friday has been whether the exchange should have moved to a backup system to be safe, the people briefed on the discussions said….

The CBOE suffered a drop in its market share in some contracts Friday. One trader likened the volume drop to the company being sent to the "penalty box."

Which is totally unfair, since the whole thing isn't even the exchange's fault: It's your fault for wanting better trading systems.

U.S. stock options are one of the world's most competitive financial markets, with 11 platforms vying for business, and CBOE's efforts to match improvements introduced by rival exchanges are being examined as a potential cause of Thursday's problems, according to the people briefed on the matter.

And while things may be back up and running on South LaSalle Street, they're not exactly running well.

Another error cropped up late Friday when CBOE notified customers that "numerous" trades from Thursday had unexpectedly appeared in CBOE's system after the market's close. Exchange officials were working with staff from the OCC, the clearinghouse that processes all U.S. options trading, to remove the trades, according to a notice from CBOE….

Even after the CBOE said it was fully up and running Thursday, trading-firm executives said they had problems getting trade reports back, making it unclear where they stood on some positions.

CBOE Staff Knew of Problems in Advance [WSJ]