Happy 20th Birthday WWW

The birth of the World Wide Web is considered to have occurred on April 30, 1993 when the European Organization for Nuclear Research which is commonly referred to as CERN in scientific circles released the source code of WorldWideWeb.  The source code was released royalty free which meant anyone could use it free of charge.  The result was what we now know as the Internet.

Also in 1993 total listed option volume across all exchanges come in at just over 232 million contracts, the last two years total volume in the option industry topped 4 billion contracts.  That’s some incredible growth over 20 years – both for use of the Internet and option trading volumes.  The argument can be made that there is a direct relationship between the two.

Twenty years ago if you wanted to do an option trade the trade would follow a pretty common path.

Step 1 – you call your broker

Step 2 – your broker calls their order desk at their headquarters

Step 3 – the order is called down or wired to the floor of the CBOE

Step 4 – a runner takes your order to the appropriate spot on the floor of the CBOE

Step 5 – a floor broker presents (yells) the order to the market makers in their area

Step 6 – the market makers respond with a price where they would be willing to take the other side of your trade

Step 7 – the market makers and floor broker fill out the details of the trade on a trading ticket and give part of those tickets to the exchange.

Step 8 – a runner walks your execution details on another part of the ticket back to the phone clerk

Step 9 – the phone clerk calls or wires the execution details back to their trading desk

Step 10 – the trading desk contacts your broker with details of the executed trade

Step 11 – your broker calls you

The end.

In 1993 over 232 million contracts were executed in this manner.  Fast forward to 2013.  You want to do an option trade, you open your brokers software on your laptop or tablet or smart phone or (if you are old school) personal computer.  After a few keystrokes or cursor movements you send an order to your broker which is routed to an exchange where you should receive the best execution and the details of you execution are returned to you pretty quickly.  In fact the details come back to you faster than it took for you to read this sentence.  That is how over 4 billion contracts will be executed in 2013.  The now 20 year old WWW is what made that happen so fast and was a big contributor to the rapid volume growth in the option industry over the last 20 years.