SPX electronic trading

If you were .60 bid for an option in the SPX, others could trade at that price if your order is held by a broker. You would have no entitlement to any fills. If your customer order was placed in the electronic book, no market maker "should' be able to trade the option at that price until your order is filled. Other orders at the same price in the book that were placed ahead of you would have priority.

The exceptions to this would be a spread trade. A market maker could make a spread trade that touches one side of a book. So he may also buy your option at .60 as long as the other leg of his spread doesn't touch the book.

Under no circumstance can a trade take place below your bid. If you see this, the order may be a late trade. It could also be a a spread that when the broker was coming up with prices that fit the whole spread, he didn't realize there was a bid on your option.

If you complain to your broker about a trade through, they will contact the CBOE to investigate. Most likely you will see the trade through marked as a late trade, or the price will be adjusted so there will be no trade through.

 

Thanks guys

 

I had this email from CBOE two years back : "
Matching Algorithms for CBOE classes

For all non-penny classes, the matching algorithm is as follows:

1. Resting non-professional public customer order(s) is (are) filled.
2. If on CBOE BBO, Preferred Market Maker (PMM) is allocated 40% of remainder, or pro-rata, whichever is greater.
3. If no PMM and if on CBOE BBO, DPM(s) is (are) guaranteed 30%, 40% or 50% depending on how many other are on the quote of remainder, or pro-rata, whichever is greater.
4. Any remaining is allocated pro-rata.
5. SPX is the same except for opening trades which are strictly pro-rata, except for Sell Market orders that trade at the minimum price increment which allocate in time priority"
6. SPXW is purely price time
For all penny-classes, the matching algorithm is as follows:

1. Resting non-professional public customer order(s) is (are) filled.
2. Market Turner is allocated 50% of remainder.
3. If on CBOE BBO, PMM is allocated 40% of remainder, or pro-rata, whichever is greater.
4. If no PMM and if on CBOE BBO, DPM(s) is (are) guaranteed 30%, 40% or 50% depending on how many other are on the quote of remainder, or pro-rata, whichever is greater.
5. Remainder is allocated pro-rata to other participants plus market turner if he still has size.
"

Anyway when they say : "SPX is the same except for opening trades which are strictly pro-rata"

What "opening trades" means here ?

 

As a general rule.... "If your success depends upon the fill, you're fishin' in a dry hole."

 

I believe they mean trades that are entered prior to opening to get the opening print. For example if there is one large order to sell out of the money puts at .05 and there are a lot of customers and market makers trying to buy them, the trades would be broken up pro-rata.

 

Thanks