Backing Away
- Thread starter the_dude
- Start date
NEW YORK -(Dow Jones)- In a show of one-upmanship among option exchanges, the Chicago Board Options Exchange will increase to 500 contracts the size of Nasdaq 100 Tracking Stock, or QQQ, option orders that its automatic execution network will fill electronically.
The move is effectively immediately, and comes after the American Stock Exchange, and then the Pacific Exchange, announced late Wednesday that they would bump up to 250 contracts the QQQ options handled by their own auto- execution networks.
Until this week, small orders of up to 100 contracts in the QQQ options can be routed to these exchanges' auto-execution systems, where they are filled quickly and electronically.
Since their introduction, such auto-execution systems have proven popular among retail investors looking to have their smaller orders filled quickly and without being routed through exchange trading floors.
The move to broaden the scope of their auto-execution networks shows how floor-based option exchanges continue to expand their electronic trading platforms, following the trading-volume growth at the electronic International Securities Exchange.
It also shows how competitive the five option exchanges continue to be in their battle for market share.
Displaying 'Quotes with Size'
Separately, the CBOE also said it has begun to display "quotes with size" - displaying on trading screens not just prices of option orders but the quantity of these orders as well.
The orders are said to be displayed in decrements; in other words, as one order is being filled, a trader can see the portion or size of the order remaining unexecuted.
The Chicago exchange said it is in the process of rolling out this "quotes with size" feature among the options it lists. It is said to be available for QQQ options starting Thursday.
The move is effectively immediately, and comes after the American Stock Exchange, and then the Pacific Exchange, announced late Wednesday that they would bump up to 250 contracts the QQQ options handled by their own auto- execution networks.
Until this week, small orders of up to 100 contracts in the QQQ options can be routed to these exchanges' auto-execution systems, where they are filled quickly and electronically.
Since their introduction, such auto-execution systems have proven popular among retail investors looking to have their smaller orders filled quickly and without being routed through exchange trading floors.
The move to broaden the scope of their auto-execution networks shows how floor-based option exchanges continue to expand their electronic trading platforms, following the trading-volume growth at the electronic International Securities Exchange.
It also shows how competitive the five option exchanges continue to be in their battle for market share.
Displaying 'Quotes with Size'
Separately, the CBOE also said it has begun to display "quotes with size" - displaying on trading screens not just prices of option orders but the quantity of these orders as well.
The orders are said to be displayed in decrements; in other words, as one order is being filled, a trader can see the portion or size of the order remaining unexecuted.
The Chicago exchange said it is in the process of rolling out this "quotes with size" feature among the options it lists. It is said to be available for QQQ options starting Thursday.
The main problem with the option exchanges is that in many cases they don't allow you trade directly against their customer order book. The ISE allows auto executions in all cases (except for crossed markets), the PSE is pretty good as well. They will allow direct access to their customer order book as long as the market is not locked/crossed. In some cases the PSE will allow auto executions when the market is locked (its up to the market maker). The CBOE allows auto executions against their client order book if the DPM has the ABP (Automated Book Priority)enabled. This is the case for about 2/3's of the stocks. They have been rolling out to this feature over the last year or so. The main problem is that the PHLX and AMEX do not allow any auto executions against their customer order books. In most cases the market makers will simply step in front of you. From what I undestand the PHLX will be allowing access to their customer order book sometime this year. And, the AMEX, is well the AMEX.................. (one can only hope that in this market slow down, another option exchange merges with the AMEX)
Hopefully we will have access to all customer order books sometime in the future. It shouldn't matter if the market is locked/crossed as we should have the same ability to trade against customer orders as market makers. In such cases (locked/crossed), we should only be allowed to trade the quantity that is on the book.
I recommend to anyone who has had problems with the Exchanges to send their complaints to the SEC. I have some contacts there if you would like to write them a letter. The BOX will put pressure on the other markets just like the ISE did (an all electronic market) but the ISE about a year ago turned off their auto executions when the market became crossed. They initially said that they would never do this. So, the BOX will help, if they are totally open (and stay open), but will it make the market completely fair?? probably not in the short term, but one has to believe that eventually it will be similar to the equity market (nasdaq).
Just my two cents...............
Hopefully we will have access to all customer order books sometime in the future. It shouldn't matter if the market is locked/crossed as we should have the same ability to trade against customer orders as market makers. In such cases (locked/crossed), we should only be allowed to trade the quantity that is on the book.
I recommend to anyone who has had problems with the Exchanges to send their complaints to the SEC. I have some contacts there if you would like to write them a letter. The BOX will put pressure on the other markets just like the ISE did (an all electronic market) but the ISE about a year ago turned off their auto executions when the market became crossed. They initially said that they would never do this. So, the BOX will help, if they are totally open (and stay open), but will it make the market completely fair?? probably not in the short term, but one has to believe that eventually it will be similar to the equity market (nasdaq).
Just my two cents...............
This maybe a little off-topic but whenever I've come across a crossed market in a stock and tried to hit it, I never get the fill. Am I to assume that there is something preventing me from getting filled in this situation other than being to slow to react?
p.s.-- woops, just realized this is under the options thread. Hope someone can answer anyway.
p.s.-- woops, just realized this is under the options thread. Hope someone can answer anyway.
metooxx,
have you actually taken the time to write the SEC?
A year ago, the SEC was NOT aware of what was going on in the marketplace. As a result of letters like mine the SEC morally persuaded the Exchanges to come up with Trade through rules (which still have not been implemented). I got a call from an SEC lawyer, who told me as much.
They are certainly aware of the problems in the options market but the more complaints they get the more likely they are to put it on their priority list.
Currently if you read any new CBOE rule proposals that involve RAES, you will see the SEC always asks the Exchange to allow more direct client to client trading. Although the SEC can't force an Exchange to change their rules, they do have methods that can persuade them.
It may not seem that your letters/emails matter but I would urge anyone that they certainly can't hurt. (Letters are MUCH more effective)
SEC email address: rule-commments@sec.gov
(this email address is meant to be used for comments on rules but I have found that your comments are still taken into account if you are not specifically talking about a rule)
You should direct your letter to:
Annette Nazareth
Director of Division of Market Regulation
450 Fifth Street, N.W
Washington D.C.
20549
and also send copies to the following people at the same address:
Robert Colby (Deputy Director)
Elizabeth King (Associate Director)
Nancy Sanow
have you actually taken the time to write the SEC?
A year ago, the SEC was NOT aware of what was going on in the marketplace. As a result of letters like mine the SEC morally persuaded the Exchanges to come up with Trade through rules (which still have not been implemented). I got a call from an SEC lawyer, who told me as much.
They are certainly aware of the problems in the options market but the more complaints they get the more likely they are to put it on their priority list.
Currently if you read any new CBOE rule proposals that involve RAES, you will see the SEC always asks the Exchange to allow more direct client to client trading. Although the SEC can't force an Exchange to change their rules, they do have methods that can persuade them.
It may not seem that your letters/emails matter but I would urge anyone that they certainly can't hurt. (Letters are MUCH more effective)
SEC email address: rule-commments@sec.gov
(this email address is meant to be used for comments on rules but I have found that your comments are still taken into account if you are not specifically talking about a rule)
You should direct your letter to:
Annette Nazareth
Director of Division of Market Regulation
450 Fifth Street, N.W
Washington D.C.
20549
and also send copies to the following people at the same address:
Robert Colby (Deputy Director)
Elizabeth King (Associate Director)
Nancy Sanow
In our past experience, we have made a number of complaints to the SEC and the SROs; all the complaints were responded to with polite form letters, with no satisfactory resolution or follow-up.
In my opinion, and the option of our council, the SEC "rubber stamps" regulation proposals from the SROs. I think the regulations are intentionally drafted to be selectively enforced and are so convoluted that the SEC does not even understand the actual intent of the proposed rules.
If they really want to see what is going on in the option markets; I would invite them to spend the day with us, and see if they could keep up with the rule violations.
I know they spent a few hours with one of our competitors, a year or so ago, and my understanding is they were surprised by what they saw. However nothing changed.
They entered a settlement in a civil suit for around $75,000,000, nothing changed.
There was the consent decree with DOJ, which forced them to spend millions on additional surveillance, nothing changed.
There is the civil litigation outstanding from Cathedral Trading, over the CBOE's "black list", nothing has changed.
The only recent impact we have seen is when the SEC started to investigate "busted trades" our busts went down substantially.
The current problem is there is no real recourse, if a trade is busted, you can get a floor ruling, almost always goes against you, same lame pat excuses, no matter the evidence, and we have it. Your next level would be arbitration, however they know you are not going to arbitrate a $100 problem; and if you did, the B/D you were using couldn't afford it. File a few of those and find out how fast they ask you to trade somewhere else.
The current process is just a "kangaroo court" and they know it.
In my opinion, and the option of our council, the SEC "rubber stamps" regulation proposals from the SROs. I think the regulations are intentionally drafted to be selectively enforced and are so convoluted that the SEC does not even understand the actual intent of the proposed rules.
If they really want to see what is going on in the option markets; I would invite them to spend the day with us, and see if they could keep up with the rule violations.
I know they spent a few hours with one of our competitors, a year or so ago, and my understanding is they were surprised by what they saw. However nothing changed.
They entered a settlement in a civil suit for around $75,000,000, nothing changed.
There was the consent decree with DOJ, which forced them to spend millions on additional surveillance, nothing changed.
There is the civil litigation outstanding from Cathedral Trading, over the CBOE's "black list", nothing has changed.
The only recent impact we have seen is when the SEC started to investigate "busted trades" our busts went down substantially.
The current problem is there is no real recourse, if a trade is busted, you can get a floor ruling, almost always goes against you, same lame pat excuses, no matter the evidence, and we have it. Your next level would be arbitration, however they know you are not going to arbitrate a $100 problem; and if you did, the B/D you were using couldn't afford it. File a few of those and find out how fast they ask you to trade somewhere else.
The current process is just a "kangaroo court" and they know it.
Yup, I actually got a bust on a 10 lot yesterday. Uncrossed, unlocked market, no news, no fast market. Pathetic.
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?
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?