September 18, 2020
Simplex Trading, LLC supports the approval of this filing to allow electronic compression trading at Cboe. Simplex operates as a market maker in listed options markets and was among the firms who signed a letter in May 2020 requesting Cboe continue to allow electronic execution of compression trades.
Historically, Simplex has often been constrained in its ability to provide liquidity to options markets as a result of risk weighted asset (RWA) limits placed on our trading by our clearing banks. Cboe's compression process has helped Simplex to mitigate our exposure and allowed us to continue to provide liquidity more consistently. The electronic compression forum provided a more efficient avenue to execute these trades than the floor based forum.
While the Cboe trading floor was closed, the compression forum was available on a daily basis, instead of the weekly and month end schedule that had previously been used. Some clearing banks monitor RWA usage on an intra-month basis, which made the weekly and month end compression forums inadequate for managing exposure. During the floor closure period, Simplex participated in compression trading with other market makers on a number of these additional days. Allowing daily electronic compression is the best way to ensure that market makers are able to continue providing consistent liquidity.
Thank You,
Erik Swanson
CEO, Simplex Trading, LLC