Backing Away

I agree with most of what you say but I do think things have changed.


Shortly after the "CBOE black list" lawsuit, the CBOE rolled out ABP for a large number of stocks and orders sent to PAR stations are now handled much better (although still unfair). Before this lawsuit, most of my orders that were sent to PAR stations, were completely ignored (including market orders)

The PHLX will also soon allow auto executions against their client order book. I was also told by the lawyer handling the "CBOE black list" lawsuit that there were rumors that the SEC was conducting an investigation into how option orders were handled on the AMEX.

I would agree that sending letters to the SRO's is a waste of time.


So I think things have changed, changed for the better and will continue to get better as long as we keep complaining and as long as there are alternative fair exchanges (BOX and ISE).
 
Originally posted by freehouse
Anyway, I was thinking that maybe you can "invite' a professor (sort of like the guy from Vanderbilt and I think Ohio who wrote about NASDAQ problems and got the anti-trust law suit started) to observe what you experience and then write about it. Maybe that will create trouble for the options exchanges?
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That's an interesting idea- one would think that a securities lawyer would be interested in the possible financial rewards/high profile aspect of such an investigation.
 
Historically, the option markets have enjoyed an exemption from the firm quote rules due to a lack of “technology” for implementation. The SEC finally approved 34-43591 Firm Quote and Trade-Through Disclosure Rules for Options ( http://www.sec.gov/rules/final/34-43591.htm ) which was effective February 1, 2001.

“The proposed Trade-Through Disclosure Rule would not be meaningful if the market publishing a better quote is not firm for a specified number of contracts at that quote. In particular, members of an exchange cannot develop effective means of access to displayed quotes of another exchange if those quotes are not firm. To that end, the Commission proposes to amend Exchange Act Rule 11Ac1-1 ("Quote Rule") to require options exchanges and options market makers to publish firm quotes. “

Unfortunately, the SEC has been pushing out the compliance date as long as the exchanges were making “satisfactory” progress in implementing the exchange linkage plans. The most recent extension ( http://www.sec.gov/rules/final/34-44852.htm ) was until April 1, 2002. As of this date, the SEC has not published an additional extension for compliance. I have asked the SEC to status this item and I will post their response.

I would suggest that now is exactly the appropriate time to let the SEC know that the quality of executions is rapidly degrading; the exchanges are not meeting their obligation for voluntary enforcement and further delays in implementing Rules 11Ac1-1 and 11Ac1-7 is not in the public interest.
 
Originally posted by mskl
Shortly after the "CBOE black list" lawsuit, the CBOE rolled out ABP for a large number of stocks and orders sent to PAR stations are now handled much better (although still unfair). Before this lawsuit, most of my orders that were sent to PAR stations, were completely ignored (including market orders)
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What is "ABP"?

If your orders were being ignored, you were probably @ Preferred, IB or SLK, the dual PAR station problem.

Originally posted by mskl
I was also told by the lawyer handling the "CBOE black list" lawsuit that there were rumors that the SEC was conducting an investigation into how option orders were handled on the AMEX.
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Are you a party to that suit?
 
ABP - Automated Book Priority


The term the CBOE refers to when you get an automatic execution when trading against a customer order in their ebook.


I found that the CBOE has been very unfriendly when it comes to explaining certain things. Try asking someone why ABP is not on for all stocks and they will start asking you questions: (ie Tom Brady's questions - he is the manager of floor operations at the CBOE)

Who are you?
How do you know about ABP?
Who do you trade through?

As soon as you say, Interactive Brokers - they start flipping out calling you names, "RAES bandit" to which you reply, no I just want to trade your posted markets etc. And from that point on no one at the CBOE has ever responded to any of my questions.

The best way to follow new rules is see them on the SEC website and then view them via in The Federal Registry.


I'm not a party to the lawsuit, however I'm very interested in it. It may be that Cathedral really was breaking rules, however after reading the transcripts of the case I found that it sounds very similar to the problems I have been having. I contacted the lawyer myself about a year ago and offered my assistance.

We have spoken a few times since then (last time about six months ago).

I have no idea what is currently going on. Perhaps I will call him again.
 
Originally posted by mskl
I found that the CBOE has been very unfriendly when it comes to explaining certain things. Try asking someone why ABP is not on for all stocks and they will start asking you questions: (ie Tom Brady's questions - he is the manager of floor operations at the CBOE)

Who are you?
How do you know about ABP?
Who do you trade through?

As soon as you say, Interactive Brokers - they start flipping out calling you names, "RAES bandit" to which you reply, no I just want to trade your posted markets etc. And from that point on no one at the CBOE has ever responded to any of my questions.
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It is more fun to go on the floor and ask those questions.
 
I have been watching this thread with great interest, as I am fascinated by options and I am considering trading them.

However, from what I hear on this thread, I would be very hesitant to try.

For those that "leg" into a spread, aren't you "terrified" that the other side may not be there (because of them backing away) as you get filled on the legs? I read on Thinkorswim that you use stock (underlying) to alliviate (some) of that problem.

Is there a way to get around some of these issues?

I am pretty ignorant about options as you can tell...

nitro
 
If you want to trade equity options then I would recomend the following:


1) Send your orders directly to the option exchanges (if you trade through IB - don't use BEST)

2) Be careful where you send them - not only may you not get filled but be prepared to wait a good two or three minutes to cancel your order. This can happen at the CBOE, PHLX, AMEX and even the PSE.

3) Be prepared for an option exchange to cancel trades. this can happen hours after the trade took place. Market makers don't cancel their good trades, so expect to take a loss.

4) To avoid these kinds of problems - do your homework. know where you can/can't get an auto execution. The rules are different for each Exchange and different for equities at the same exchange. The only way to learn is through experience. So, if you trade, trade small.

5) Expect the auto execution rules to constantly change and as a result you must constantly stay on top of the current rule changes.

6) You will be surprised at some of the rules. So don't break any or the Exchanges will come after you. Currently, you can't enter two sided markets at the same time, there are market making rules (continuous and simulataneous orders are prohibited), you can't enter two trades on the same side of an equity class within a 15 second period, you can't send any computer generated orders etc...............


It isn't a friendly envoronment.


good luck





It may
 
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