Busting an options exchange for disregarding time priority of orders

Discussion in 'Order Execution' started by Option Trader, May 5, 2009.

  1. If I have evidence that one of the options exchanges (e.g. NYSE, BOX, PHLX, etc.) are ignoring the time priority of the orders they receive from customers, what can be done with this information?
  2. d138


    Market makers have priority on most of options exchanges.
  3. My understanding is that retail orders have priority over the MMs and thats one of the reasons why retail traders are not allowed to play both sides of the market at the same time.

    I could very well be wrong about it and if so would like to know.

    I also believe that some brokers allow penny pricing like IB does and some do not. In this case you could be pennied by someone and may not know it.




  4. You are definitely correct that retail traders have priority, hence I cannot understand who got in front of me.

    I know that many brokers who offer GTC orders simply reroute the orders each day, hence there is no overnight time priority by them--but that was not the case here.

    About penny priced options, that was not the case here though.
    I am curious to know which other broker(s) offers penny priced options aside from IB. Thanks.
  5. SForce


    You're 1/3 right.

    Retail gets priority (at least as far as I've ever seen on my orders.)

    There isn't any rule about playing both sides of the market at the same time.

    Options penny pricing has nothing to do with the brokers.
  6. SForce


    I've never had an issue with time priority of orders which makes me wonder what exchange, what options you were trading that you experienced this on.

    The only time I ever have issues is when my broker (Yay smart routing) routes me to something stupid like BOX and I don't get a fill cause everything keeps hitting CBOE and ISE.
  7. Hello Sforce,

    1/3 right?? hey I am doing better than normal....LOL

    Unless the rules have changed very recently and I did not read about it a retail trader can not place a bid and an ask on the same option contract at the same time. (if your broker allows it I would be very interested in knowing what broker). My understanding is that only MMs are able to. the reason is simple. If retail traders where to receive both priority in execution and able to provide two sides to the market the MMs would have a real problem in getting business.(I don't agree that the system is fair to the retail traders. I also think in the long run this rule lowers the total volume on the option exchanges)

    With penny pricing what I mean is that for example IB will allow penny pricing on some options that Tradestation will require a nickel spread. On IB it will show the penny price but on the exchange it will show the nickel price. If the price is matched within IB traders it gets traded at the exact price. Otherwise its at the exchange price.

    Tomorrow give it a try and see if you can post a bid and an ask on the same option contract


  8. O.T.,
    Your first post says that you have evidence that they are ignoring time priority, which would imply you have a multitude of trades where you have actually researched each print. Then your second post says that you are talking about one case. Your first post is very improper and inflammatory if you have a single gripe about one trade. You can contact the exchange and ask for the surveillance department to research the order and they will tell you exactly what happened and why. If you are just going on your broker’s time and sales then you may have seen a late print or a trade went up that has more than one leg so they can trade at your price but you are not entitled to any.