Options Linkage All registered U.S. options markets are linked together on a real-time basis through a network capable of transporting orders and messages to and from each market. The charter of the linkage, according to The Options Clearing Corporation (OCC), is to further increase market efficiency, enhance competition, facilitate the offsetting of investor orders, and contribute to best execution of those orders. Linkage is governed by the Options Linkage Authority (OLA) under the conditions set forth by "the Plan" approved by the U.S. Securities and Exchange Commission (SEC). OLA consists of: American Stock Exchange (AMEX) Boston Options Exchange, Inc. (BOX) Chicago Board Options Exchange (CBOE) International Securities Exchange (ISE) NYSE Arca, formerly Pacific Exchange, Inc. Philadelphia Stock Exchange (PHLX) These participants developed the plan pursuant to an order issued by the SEC on Oct. 19, 1999, directing them to develop an option intermarket linkage plan.[1] The new routing setup, set to begin in summer of 2009, incorporates Regulation NMS-type rules and aims to improve execution quality for large lot orders. It is also expected to reduce costs for market makers and introduce various efficiencies to options trading.
Keep in mind most exchanges offer hidden liquidity. A couple of things can happen before you ship. MM's can adjust their quotes to avoid the ship and MM's with hidden liquidity off the NBBO can elect to adjust to the NBBO.
Do you happen to have a link to the "Reg NMS-type" rules by any chance? I doubt very much that option exchange will route out a large juicy order when they can simply match it locally.
Thanks! That led me to below : https://www.cboe.org/trading/nbbo-step-up "With HAL, Cboe quoters will match the NBBO within the flash period (currently 20ms) or the order will be routed to the exchange showing the best price."
The fun thing with linkage is when it gets gamed. Exchange 1 ships to exchange 2 and exchanges 2's quote change. Three MM firms are about 1/2 the volume most days.
I believe most exchanges support routable and non-routable orders. In the case that a non-routable order being filled violates Reg. NMS, the order is rejected opposed to being routed to another exchange.