I have had the same experiences with ISE outlined in the starting post of this thread. This has only entailed low volume and thin traded options though. Issues with extreme volume and liquidity such as the QQQ's do not present a problem. In addition, ISE pulls and posts orders back and forth like a see saw, sometimes in the blink of an eye. It is so annoying when you see an offering there....the underlying is sitting put.....you go in thinking your gonna get hit or sell something.....and than poof....gone like the wind. Its like playing hide and go seek.
But at least they are displaying on both sides actively. Not like the philly that's usually 10-15 cents higher and lower than NBBO and stays that way all day. How do those guys stay in business? ISE must be eating Philly's lunch volume wise.
Well the reason this is happening is that customer orders actually get displayed on ISE. It is more like Naz Lev II than the other option exchanges where there is a spec to control things.
But who sends orders there? I'm sure they get some and I'm sure you're correct. It just baffles me. Talk about a tilted playing field. I don't mind a little risk but to me PHLX is like russian roulette with all chambers loaded.
If an ISE market maker shadows your bid on the CBOE, why not just route your bid to the ISE. Then, if the MM decides to "lean", you will be first in line to get a fill. In fact, since MMs cannot go ahead of the public, the MM may not even post his shadow bid! Anyhow, MMs usually do this in an attempt to draw liquidity to their favored venue. When you put a bid on their venue, you have done that for them, so they feel less need move up their own bids. I do this for individual stock options all the time. I like the other poster's idea, too: when you want to sell, post a bid on CBOE, wait for the shadow, then hit the shadowing MMs bid. These are the kinds of things that more than any other factor make for successful trading.