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BOX - Boston Options Exchange
- Thread starter def
- Start date
The Price Improvement part of the rules are vital. Currently it is not 100% clear if everyone will see the customer side of the order during price improvement periods. Without this ability, the BOX would rank right near the bottom for exchanges in terms of equal access. Imagine for a minute if only the contra side of the PIP was displayed and only market makers for that class are invited in the Price Improvement Process. If this is the case then outside traders would never know when many customers orders are available then they would simply see it trade at the contra price.
I suspect/hope that we will see the customer side of the order in such circumstances and that will create a level playing field. However, as I said it is not clear with statements such as:
"BOX Market Makers on the concerned options class may introduce Improvement Orders to compete with the original order"
It doesn't sound like all participants will be allowed to enter PIO's.
But perhaps you can still enter an order (not considered a PIO)
And Under Market Maker Privileges
"Right to compete during the Price Improvement Period on classes where he holds a market maker appointment"
An example of a PIP would help clarify (currently not available).
Knowing that Timber Hill is involved leads me to believe that it will be a GREAT/FAIR exchange. I'm just waiting for the exact rules to come out to be certain that it will be good for traders such as myself.
and,
Metooxx
I tried to PM you buy your message box was full.
I suspect/hope that we will see the customer side of the order in such circumstances and that will create a level playing field. However, as I said it is not clear with statements such as:
"BOX Market Makers on the concerned options class may introduce Improvement Orders to compete with the original order"
It doesn't sound like all participants will be allowed to enter PIO's.
But perhaps you can still enter an order (not considered a PIO)
And Under Market Maker Privileges
"Right to compete during the Price Improvement Period on classes where he holds a market maker appointment"
An example of a PIP would help clarify (currently not available).
Knowing that Timber Hill is involved leads me to believe that it will be a GREAT/FAIR exchange. I'm just waiting for the exact rules to come out to be certain that it will be good for traders such as myself.
and,
Metooxx
I tried to PM you buy your message box was full.
Originally posted by mskl
The Price Improvement part of the rules are vital. Currently it is not 100% clear if everyone will see the customer side of the order during price improvement periods. Without this ability, the BOX would rank right near the bottom for exchanges in terms of equal access. Imagine for a minute if only the contra side of the PIP was displayed and only market makers for that class are invited in the Price Improvement Process. If this is the case then outside traders would never know when many customers orders are available then they would simply see it trade at the contra price.
I suspect/hope that we will see the customer side of the order in such circumstances and that will create a level playing field. However, as I said it is not clear with statements such as:
"BOX Market Makers on the concerned options class may introduce Improvement Orders to compete with the original order"
It doesn't sound like all participants will be allowed to enter PIO's.
But perhaps you can still enter an order (not considered a PIO)
And Under Market Maker Privileges
"Right to compete during the Price Improvement Period on classes where he holds a market maker appointment"
An example of a PIP would help clarify (currently not available).
Knowing that Timber Hill is involved leads me to believe that it will be a GREAT/FAIR exchange. I'm just waiting for the exact rules to come out to be certain that it will be good for traders such as myself.
and,
Metooxx
I tried to PM you buy your message box was full.
Try again, I will clear it.
Hi,
I have read with interest the stream. It sounds like there is a broad feeling that market makers are making undue profits because of the floor market structure. So I tried making a small guesstimation :
There are roughly 2.5 millions equity option contracts traded per day. The tick is 5cts, the quotity is 100, so the effective tick per contract is 5 $. If we assume that "old style" floor exchanges enable market makers to hold on to two ticks on average because of all the "bad practice" and all the sweet rules they enjoy, that will amount to 10$ x 2.5 millions = 25 millions $ / day. No wonder these guys were getting rich.
Now, the ISE has presumably divided the average edge MM make per contract to maybe one tick. That still leaves quite a bit of money on the table. Do you guys believe that BOX can help along the way and bring it down to its minimum of 0.5 tick (or can it go below ? I could not figure why ?).
Carrying the number game a little further, how many market makers can this type of revenue sustain ? My guess is that you need at least 1 Million $/year per trader to make it worthwhile being in the business of market making. That still leaves room for around 1000 hot bodies that will make markets. That is still a crowd, but only two guys per equity listed (ball park).
How many market makers are there in activity today ?
thks
I have read with interest the stream. It sounds like there is a broad feeling that market makers are making undue profits because of the floor market structure. So I tried making a small guesstimation :
There are roughly 2.5 millions equity option contracts traded per day. The tick is 5cts, the quotity is 100, so the effective tick per contract is 5 $. If we assume that "old style" floor exchanges enable market makers to hold on to two ticks on average because of all the "bad practice" and all the sweet rules they enjoy, that will amount to 10$ x 2.5 millions = 25 millions $ / day. No wonder these guys were getting rich.
Now, the ISE has presumably divided the average edge MM make per contract to maybe one tick. That still leaves quite a bit of money on the table. Do you guys believe that BOX can help along the way and bring it down to its minimum of 0.5 tick (or can it go below ? I could not figure why ?).
Carrying the number game a little further, how many market makers can this type of revenue sustain ? My guess is that you need at least 1 Million $/year per trader to make it worthwhile being in the business of market making. That still leaves room for around 1000 hot bodies that will make markets. That is still a crowd, but only two guys per equity listed (ball park).
How many market makers are there in activity today ?
thks
Originally posted by junglebee
Hi,
I have read with interest the stream. It sounds like there is a broad feeling that market makers are making undue profits because of the floor market structure. So I tried making a small guesstimation :
There are roughly 2.5 millions equity option contracts traded per day. The tick is 5cts, the quotity is 100, so the effective tick per contract is 5 $. If we assume that "old style" floor exchanges enable market makers to hold on to two ticks on average because of all the "bad practice" and all the sweet rules they enjoy, that will amount to 10$ x 2.5 millions = 25 millions $ / day. No wonder these guys were getting rich.
Now, the ISE has presumably divided the average edge MM make per contract to maybe one tick. That still leaves quite a bit of money on the table. Do you guys believe that BOX can help along the way and bring it down to its minimum of 0.5 tick (or can it go below ? I could not figure why ?).
Carrying the number game a little further, how many market makers can this type of revenue sustain ? My guess is that you need at least 1 Million $/year per trader to make it worthwhile being in the business of market making. That still leaves room for around 1000 hot bodies that will make markets. That is still a crowd, but only two guys per equity listed (ball park).
How many market makers are there in activity today ?
thks
Not as many as yesterday ...