The PSE has always been the best of the "floor" exchanges. They are usually good for 20 contracts on autoex. I second metooxx's comment; however, playing somewhat fair is probably what got them in trouble.
If you are broker dealer or off-floor market maker then of course you are going to be screwed by all exchanges since they will only trade with you if it makes sense for them to). If you are trading an option that is locked, cross, or in fast market mode, anybody (including customers) may get screwed, too.
Just a note. Pacific Coast Seats are selling at $31,000 and I heard many of the seats are for lease and there are no takers! This is just one more example of how multiple listing of options, tighter spreads and the ISE have killed the floor business. Imagine you were an independent market maker who owned a seat trading at $500,000 a couple of years ago and you were making a solid six figure income trading. Now there is no order flow, no business ,your exchange membership is worth virtually nothing and you can't make a living. This is what is happening on the option exchange floors. Traders, think of how lucky you are as a direct access trader upstairs with no overhead( or very low overhead). See latest exchange seat prices at (need adobe to view) www.pacificex.com/news/weekly/2002/PCX_wb-02-16.pdf . Gene Weissman Lieber & Weissman Sec., LLC gweissman@stocktrade.net
metooxx How are you? I know what you mean, but you know as a pro if the market maker makes no money and there is only four big Option MM firms left, is this really a market? Maybe a true ECN for options will be the answer. In life you cannot always "take" you have to give some back. If the independent MM can't make a living, it's bad for the option business. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
The point is they killed their own game by enacting a number of rules in the last few years, effectively limiting access to the very traders that were trading huge size. All they need to do is honor their markets and give access, volume will explode. Make a market, trade it and hedge with the underlying. Very simple concept; instead of worrying about how the upstairs traders are picking them off.
Pretty good, I haven't got back to you because we are looking into setting up a B/D in the Bahamas. I don't want to see that type of consolidation either, it will kill the game. An option ECN might help; I thought some guys in NY where working on that? I agree the MM needs to make money, but they need volume to do that. If they turn it back on we will do our little bit and give them another 50K a day if they want to fill it.
how lucky??? ask yourself, why was the seat price so high in the first place?? ANSWER: Beacause they have been screwing the retail customer for YEARS!! During these years, everyone and his uncle was making money. The collusion on the floor was/is unbelievable. In any other business it would be criminal. How do you explain 30 guys sitting around a particular equity option with the EXACT same market on all the option contracts?? (I was a floor trader on the TSE in Canada and it was very competitive - no one had the same markets and it was funny to see the Americans come up (O'Connor and others) and attempt to trade our markets - they couldn't believe/understand our marketplace) Exchanges should NOT be set up like casinos. Market makers will always have some sort of advantage over online traders and if they can't make money then they simply are lousy traders. They see order flow we don't. They execute orders we never see posted. They have short sale exemptions. They don't have restrictions (like the 15 second rule) on their trading. They don't allow customers to constantly jump on their bids/asks etc etc etc All I ask for is to be able to trade ALL their customer orders - even if they cross or lock the market. Let me give you an example of what happens everyday on the floors. Recently a smaller cap stock got cut in half (trading around $7) and I noticed that the $15 puts were very active. Some of the big institutions are so stupid that they give firms the ability to "work" an order to buy/sell a large number of contracts over a day. In this example it appeared that the customer had an order to sell the $15 puts. The NBBO of the put option was quite wide ($7.50 bid - $8.50 ask). I would see the option trade 100 times at $7.50 (the option was worth $8 intrinsically) and I would immediately show a $7.60 bid then a $7.70 bid then a $7.80 bid and then would leave my order in the book. Now, the off floor market making rules are very vague when it comes to how long you can post a market. Each exchange has the words continuous and simultaneous in the rule which forces me to cancel my limit order (I don't want the hassle of a SEC investigation). And as soon as I cancel my limit order to pay $7.80 then another 100 would trade at $7.50. Yes, it is the clients fault to leave such an order to the brokers on the floor but Exchange rules are set up to deter competition. Perhaps this institution actually believes that he is getting a "fair" price because of competitive forces. And don't think that it is easy to get a clarification on the rules either. I have spoken to compliance at the PSE who refused to answer my question in this regard - they would not tell me how long I could appear on the bid/ask and also told me that their auto execution system was "not designed for someone like me" - I would love to send this conversation to the SEC - showing their anti competitive views. and I'm suppose to feel lucky????? give your head a shake!
Mskl, You are getting as bad as I am about this; but I have to agree. Isn't that a fun conversation when they tell you the "autos" were not designed for you. I have had that conversation with all of them, always the same result, stonewalling. They don't want you to know how to be in compliance; they just want to have the ability to selectively enforce a handfull of vague rules against a small group of high volume upstairs traders. Trouble is that there are not enough of us for anyone to care.
"MM 's need to make a profit" there is an assumption here that we need what they are selling... pseudo continuous pseudo firm two sided quotes. If we don't need the product then MM's don't need to make a profit. A provider of a level playing field in equity options needs to make a profit. Options have the potential to be an enormous business... Level the playing field ...Lower transaction costs...reconcentrate speculative option interest ... and the the options will out trade the underlying instruments.