Directed Orders on the New NYSE Amex Options Floor

By: twilemon

File Under: NYSE Amex, Options

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On the new NYSE Amex Options exchange, there are more types of orders than you can shake a tablet pc at. All of the standard order types we know and love will be joined by a variety of order types unique to NYSE Euronext options markets (more about these in a later post!). Along with these unique order types, NYSE Amex will also be adopting the Directed Order. Directed Orders are sent by OSFs (order-sending firms.) These orders are designed to interact with quotes that are entered by market makers.

Order-sending firms and order-flow providers can direct electronic orders to certain market makers or specialists who have an assignment in that options class. These market makers are eligible to receive a Directed Order if they are quoting at the NBBO (National Best Bid or Offer) at the time of the order’s arrival at the matching engine. After all customer interest is satisfied at the trade price (remember customer is king on NYSE Amex; customers trade first and never pay to trade) the Directed Order Market Maker will receive a 40% allocation of the remaining contracts.

Directed Order Market Makers will not receive any guaranteed participation on an inbound order if their bids or offers are not at the NBBO. Directed Order guaranteed participation is expressed as a percentage of the remaining quantity after all customer orders, if any, have been first executed. Market makers who receive Directed Orders must provide continuous two-sided market quotations 90% of the time in issues in which they receive Directed Orders.

Current quoting obligations for Market Makers dictate that they must provide continuous two-sided market quotations 60% of the time for issues they trade throughout the trading day. Directed Orders increase the quoting obligations for continuous two-sided markets to 90% of the time the issue is open on the exchange. Firms that have registered their intent to receive Directed Orders need to understand that the heightened quoting requirements are for all MMIDs (Market Maker Identification) associated with the firm’s ATPID (NYSE Amex Options Trading Permit identification) and all option classes that comprise that firm’s electronic quoting assignment.

Directed Orders help improve customer executions by providing incentives for specialists and market makers to tighten their quote spreads and increase liquidity at the NBBO. It is yet another reason that customers should come to NYSE Amex to trade.

Trade 'em up!
TW