The crazy world of option exchange fees

F

FSU

Just started realizing how crazy the option exchange fee structure is. In the past I mainly traded the SPX and resigned myself to an additional .50 to .65 cents a contract in exchange fees. Recently I started trading equities more and was just hit with a huge end of the month bill for exchange fees ( I am billed the following month for these fees).

I had always simply routed my orders to the CBOE thinking that they don't charge customer exchange fees on most equity options. While this is correct, I got a lesson in linkage. This is where the CBOE will "link" the order to exchange that has the offer or bid that I want. So I end up paying the other exchanges fee, which could be and an additional .85 and another fee to the CBOE for linking the order. Note that this is as a customer. A pro customer, jbo, etc will pay much much more.

I know currently there is a thread about IB's commissions touching on this issue as well.

So now if I leave a standing order in I will generally route to the BATS where I am paid .80 to offer liquidity. You would think that is a good thing, but it seems to affect my fills, as people are less likely to take my liquidity and pay the fee. I will see the option trading at my price on other exchanges.

Just one more thing that must be considered now. Could make it much more worthwhile to use an "all in" pricing structure that some firms such as TOS offer.
 
Yeah I use to think TOS was outrageously overpriced and in terms of margin interest they certainly are but that only applied obviously if you use it. But their all in fee structure in hindsight is not as bad as it looks from a distance. You can cancel orders all you want, trade on any exchange you want, and it's one price.
 
Lol,

I still remember one of my last trades at IB. I think I brought around 4K worth of SPX opt and was charged something like crazy like $300 or $400 or something.

I don't care what their reason is, I aint paying that just to enter a trade. So I decided to jump ship. I mainly trade fops on CME. Everything seems a lot better than dealing with all those option exchanges, not to mention paying IB God knows what in order flow.
 
Some exchanges allow you to tag an order as "do not re-route". I'm not sure what it's called. If at the time you entered the order, you were not crossing a market, it will stay on that exchange. You should ask about it from your broker.
 
1245 said:
Some exchanges allow you to tag an order as "do not re-route". I'm not sure what it's called. If at the time you entered the order, you were not crossing a market, it will stay on that exchange. You should ask about it from your broker.
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Yea, the problem with this is if the offer is on another exchange and you try and buy it with this tag on the "free" exchange, your order will be cancelled so a crossed market wont occur. I find that most of the offers and bids that I want to trade are on the expensive exchanges.
 
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