I can't believe that in 2014: 1 You still can't place a double sided order for options (but "MMs" can). 2 You still have to deal with order cancellation fees (but "MMs" don't have to deal with this BS). 3 You still can't trade options after hours and premarket when the underlying is trading. 4 You still have to pay pretty much the same commission rate as stocks for options even though options are only a fraction of the size that stocks are. Since options are standardized contracts why can't another exchange simply start listing options on their exchange without all these outdated restrictions? I'm surprised we even got penny increments recently.
MMs have lot of advantages but also responsibilities, therefore a cost is imposed on potential competitors, so MMs have incentive to uphold those responsibilities at all times. Just look at HFT, anyone can do it and they all become net takers of liquidity on first signs of trouble. In 2008 it was regulated MMs that stood toe to toe with sellers all the way down, not unregulated liquidity "providers" like HFT. I have no problems with exchange cancellation fees at all, but I despise brokerages imposing their own cancellation fees, internalizing orders etc because it creates opaque markets, which benefit nobody.
Which Brokers are charging fees to cancel your orders? I was rolling my UA Febuary $85s over to the $100s and had to cancel several times because my order at and I did not want to pay a 50% spread. Some Market Makers are strange with options, not willing to take the risk they route them off to the exchange where a Broker like Ameritrade and Etrade will 'internalize' the order. I was trying to sell some contracts from two different brokers at the same time with the same option contracts, Etrade took my contracts and little Mom and Pop let them sit on the Exchange until the stock blow past the value.
Which broker? Any broker without direct pass-through of exchange cancellation fees or with otherwise intransparent, convoluted cancellation policies. MMs dont "pass on orders", however your broker does. The only time your order hits the NBBO is when the OTC MM of the broker-dealer passes on the chance to trade against it, for whatever reason. If not you're getting sub-pennied. http://www.defendtrading.com/mechanicssubpennying.html
If you want to avoid 1 and 2, you can claim to be a professional customer. 3 and 4 I can't help you with. A professional customer looses customer priority, gets treated like a firm BD, pays higher fees, but can make two sided markets and does not get charged cancellation fees by the exchange. Most traders don't claim this unless you have to. You have to if you place over 390 order per day on average. SEE PAGE 3 of this CBOE Circular
Wow, thanks for this information. I've had a professional customer account for some time and did not realize that granted me an exemption from being on both sides of the market.