Is it just IB or is it a regulation that does not allow you to be on the bid and offer of an option contract? I tried to place a bid when I was on the offer already (or vica versa can't remember as it was awhile ago) and I got a "no,no you can't do that" from the IB platform. What is the reason for this limitation?
Do you have a reference to the exact language about this? I'm just curious if this is an exchange thing, or regulatory thing...
"cannot have open orders on both sides of a US option contract" is the warning. I just can't think of the reasoning behind this. All it does is hinder market efficiency by giving MMs a monopoly and decreasing competition.
It's a regulatory issue. You are not a market maker. Before you cry about this understand the advantage you have by not being able to make two sided markets. You have customer priority which the market maker does not.
Thank you for the answer that makes total sense with the customer priority. I am not by any means "crying about it" just trying to learn and understand.
That makes sense... but why is it allowed in equity markets but not options? IOW, why the regulation for options only?
I have never heard any rules regarding this for a customer. it might be an IB thing to prevent a non-market maker from trying to essentially make markets by submitting a whole bunch of orders. there would be bandwith issues with having a whole bunch of customers doing this. i would think you should be able to have scaled bids and offers. just curious, how wide was the market that you'd even want to be on both sides. as a market maker, i'm rarely on both sides of NBBO since markets are so tight.