By 2000 automated quoting generated prices for options with near-zero actual trading

Evidence

In the 1980s, human beings had been still at the center of the market, and technical systems were their aids. By 2000, the balance had shifted. The Chicago Board Options Exchange traded 104,000 classes of option. Inevitably, trading in some was quiet in 2000, despite record overall trading volumes the average class was trading only 13 contracts per day but the exchange’s Autoquote system, now pervasive, continuously generates prices for all classes of options, no matter how sporadic the actual transactions in those classes, and distributes those prices to the vast array of electronic displays on the trading floor and through worldwide computer networks. — Donald MacKenzie, An Engine, Not a Camera, 896

Categorization

• XREF: Autoquote producing prices for illiquid option classes is a vivid instance of the performativity thesis — the market’s machinery manufactures continuous prices despite sporadic underlying trades. — connects to: A pricing model runs inside the exchange’s automated trading machinery. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 135; Option prices are routinely quoted in implied volatility, a purely theoretical construct — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1130
• SEED: Article angle: ‘orphan prices’ — financial systems that continuously quote prices for instruments almost nobody trades, and what that does to the ideal of price discovery.

Broader Connections

• Option prices are routinely quoted in implied volatility, a purely theoretical construct #corroborates (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1130