Price Discovery in the U.S. Stock Options Market

Five U.S. exchanges compete to provide quotes and attract order flows on common set of stock options: the American Stock Exchange, the Chicago Board of Options Exchange, the International Securities Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange. In this paper, we investigate the price discovery in the U.S. stock options market. Our analysis shows that the newly founded, fully electronic International Securities Exchange has become the leader in providing options quotes that are the most informative, the most binding, and also the most executable