SPX b/o spread size- a real question about "THEY"

[resinate]

The rules seem to indicate this is a violation. Am I missing a loophole?

the rule is below, plus remember spx gets 4x times the norm.

CBOE rulebook, From the obligations of MMs.... "To price options contracts fairly by, among other things, bidding and/or offering so as to create differences of no more than $0.25 between the bid and offer for each option contract for which the bid is less than $2, no more than $0.40 where the bid is at least $2 but does not exceed $5, no more than $0.50 where the bid is more than $5 but does not exceed $10, no more than $0.80 where the bid is more than $10 but does not exceed $20, and no more than $1 where the bid is more than $20, provided that the appropriate Market Performance Committee may establish differences other than the above for one or more options series. The bid/ask differentials stated above shall not apply to in-the-money series where the underlying securities market is wider than the differentials set forth above. For these series, the bid/ask differential may be as wide as the quotation on the primary market of the underlying security "...

 

[ktm]

Quote from resinate:

The rules seem to indicate this is a violation. Am I missing a loophole?

the rule is below, plus remember spx gets 4x times the norm.

CBOE rulebook, From the obligations of MMs.... "To price options contracts fairly by, among other things, bidding and/or offering so as to create differences of no more than $0.25 between the bid and offer for each option contract for which the bid is less than $2, no more than $0.40 where the bid is at least $2 but does not exceed $5, no more than $0.50 where the bid is more than $5 but does not exceed $10, no more than $0.80 where the bid is more than $10 but does not exceed $20, and no more than $1 where the bid is more than $20, provided that the appropriate Market Performance Committee may establish differences other than the above for one or more options series. The bid/ask differentials stated above shall not apply to in-the-money series where the underlying securities market is wider than the differentials set forth above. For these series, the bid/ask differential may be as wide as the quotation on the primary market of the underlying security "...

CBOE? I could be wrong but....

I didn't think the CBOE had anything to do with ES/SPX. The CME handles ES/SPX (futures contracts) as it is legally considered a commodity, not a security. The statement above talks about the "securities", which should be equities, narrow based indexes and a few other things. Since SPX is a future, the options on them are also commodities. There are "index options", which are not the same as "futures options". I believe the CBOE would have jurisdiction over the index opts, but not the futures options.

Again, I could be off base here. Vega might be able to help us.

 

[riskarb]

Quote from resinate:

I do have one concrete question amid this discussion with and about THEY.

The primary MM's auto-quoted b/o spread has gone from 1.00 to 1.20 in 5-10 $ spx options over the last week or so. Like I said above, until very recently and other than x week, it was pretty consistently 100$.

Was there a rule change expanding the maximum allowable spread by 20c OR is it a change in the person or behavior of the primary MM?

The a/q software widens the spread with each handle on the volty-line. As has been stated repeatedly, it's to do with the increased volty.

riskarb

 

[riskarb]

Quote from resinate:

The rules seem to indicate this is a violation. Am I missing a loophole?

the rule is below, plus remember spx gets 4x times the norm.

CBOE rulebook, From the obligations of MMs.... "To price options contracts fairly by, among other things, bidding and/or offering so as to create differences of no more than $0.25 between the bid and offer for each option contract for which the bid is less than $2, no more than $0.40 where the bid is at least $2 but does not exceed $5, no more than $0.50 where the bid is more than $5 but does not exceed $10, no more than $0.80 where the bid is more than $10 but does not exceed $20, and no more than $1 where the bid is more than $20, provided that the appropriate Market Performance Committee may establish differences other than the above for one or more options series. The bid/ask differentials stated above shall not apply to in-the-money series where the underlying securities market is wider than the differentials set forth above. For these series, the bid/ask differential may be as wide as the quotation on the primary market of the underlying security "...

I don't believe it applies to equity index.

riskarb

 

[riskarb]

Quote from ktm:

CBOE? I could be wrong but....

I didn't think the CBOE had anything to do with ES/SPX. The CME handles ES/SPX (futures contracts) as it is legally considered a commodity, not a security. The statement above talks about the "securities", which should be equities, narrow based indexes and a few other things. Since SPX is a future, the options on them are also commodities. There are "index options", which are not the same as "futures options". I believe the CBOE would have jurisdiction over the index opts, but not the futures options.

Again, I could be off base here. Vega might be able to help us.

There is the SPX equity index option at the CBOE, SP and ES futs options at the Merc.

riskarb

 

[bebe]

I have a dream - that time will come when we can trade options on the SPX/OEX with reasonable spreads, electronically.
Attached is a screenshot (I made it 2 minutes ago) about the AEX Index (the main Index on the Amsterdam Exchange). I consider Amsterdam THE best options exchange in the world. Reasonably tight spreads, all electronic, very liquid, MM's lining up to fill your orders - you get what you see and immediately - no funny games. When was the last time you saw spreads like 33.00 - 33.40 ?
or 24.20 - 24.50 (I know: maybe in your dreams).
Sweet dreams!

 

[riskarb]

Quote from bebe:

I have a dream - that time will come when we can trade options on the SPX/OEX with reasonable spreads, electronically.
Attached is a screenshot (I made it 2 minutes ago) about the AEX Index (the main Index on the Amsterdam Exchange). I consider Amsterdam THE best options exchange in the world. Reasonably tight spreads, all electronic, very liquid, MM's lining up to fill your orders - you get what you see and immediately - no funny games. When was the last time you saw spreads like 33.00 - 33.40 ?
or 24.20 - 24.50 (I know: maybe in your dreams).
Sweet dreams!

OMG... amazing

riskarb

 

[murray t turtle]

Quote from bebe:

I have a dream - that time will come when we can trade options on the SPX/OEX with reasonable spreads, electronically.
Attached is a screenshot (I made it 2 minutes ago) about the AEX Index (the main Index on the Amsterdam Exchange). I consider Amsterdam THE best options exchange in the world. Reasonably tight spreads, all electronic, very liquid, MM's lining up to fill your orders - you get what you see and immediately - no funny games. When was the last time you saw spreads like 33.00 - 33.40 ?
or 24.20 - 24.50 (I know: maybe in your dreams).
Sweet dreams!

=====
Interesting; where is the AEX volume , volume box was blank???

Apparently true in most any market;
more volume usually equals better liquidity.

 

[bebe]

You have to sign up and get access to all market data.
Also, I'd recommend you read the material on how their system works. MM's are required to maintain tight spreads - and they do have a lot of MM's! Maybe they are motivated enough to stay in the business?! No monopoly games there (unlike our CBOE inn spx, etc). Guess which system is more friendly to the trading public?

 

[resinate]

Hey all,

The reason I dug this thread up was yesterday the width were 2.4 on options less than 10$. According to the rules I posted, plus special 4x standard width for spx, it seems the max allowable spread width for options priced between 5-10 $ should be 200.

From my post last night: "for example at 2:16 Et., the march 1100 put was quoted by the auto quote MM at 5.4 x7.8." All day long yesterday like this.

How, why? and what a f'n edge are my thoughts.