- Jul
- 30
- 2007
- 3:51 PM
Options penny pilot to expand
- By: Amy Farnstrom
- File Under: Options
Hello my options friends! Excellent news: the SEC has just indicated that they will approve the penny pilot expansion. We expect the SEC to approve a plan that adds 22 more issues on 28 Sept., 2007, bringing the total number of issues in the pilot up to 35. Those 35 issues represent about 35% of total options volume for the industry. By the end of March 2008 we'll have 63 products trading in the pilot. This is great news for all options traders, who can take advantage of the tighter spreads.
For our part, we are ready to go! Our capacity looks great, our quote mitigation plan has proven extremely effective in reducing our quote traffic to OPRA, and we are ready and able to process the additional incoming quotes and orders that breaking the nickel entails, giving our clients extremely fast access to tight markets. We have seen significant increases in market share in the penny pilot issues. These are exciting times!
The past couple of months have also seen several new participants join NYSE Arca, and there are more on the way. This increase in participation from Market Makers and Order Sending Firms is also big news for our clients, bringing more liquidity and competition to our markets.
In the next quarter we have some big technology enhancements in the pipeline coming to market. I will keep you posted in the coming months!
Comments
This topic seem to be a significant change with opportunities. However, it would help if you elaborated further on: What the Penny Pilot Expansion is? And how is it advantageous for an investor?
by Richard on August 10, 2007 10:50 AM
The penny pilot was created to study the benefits and impact of penny increment pricing in the options market. The results of the initial pilot names (13 issues, which started trading under the pilot in January of this year) have been very promising.
All of the options exchanges were charged with creating quote-mitigation mechanisms to prevent overwhelming vendors and OPRA with quote traffic. NYSE Arca feels that our quote mitigation has been quite successful, and our internal capacity has been proven capable of managing the increase quote and order traffic from the penny pilot issues.
In anticipation of the next iteration of the rollout, we are adding an additional matching engine and rebalancing issues across all four matching engines, so that we can continue to provide the superior speed of order handling our clients have come to expect. The expansion of the penny pilot will bring an additional 22 issues into the pilot, at which time approximately 35% of total options volume will be trading in the pilot.
What this means for investors is tighter markets (.01 increments rather than .05 for premiums under $3.00 and .05 rather than .10 for premiums above $3.00). Along with our post/take pricing model, these smaller increments encourage market makers to quote tighter markets than they were able to in legacy issues.
NYSE Arca believes that penny increments allow true pricing to finally come to the options markets, creating tighter spreads and thereby benefiting our customers.
by Amy on August 23, 2007 11:44 AM
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