CBOE Challenges ISE Rule
BY CHRISTINE BIRKNER
Published 11/1/2009??
As Congress called for greater transparency in markets, the International Securities Exchange (ISE) proposed and the Securities and Exchange Commission (SEC) granted approval for a rule allowing orders to be crossed without first being displayed. The Chicago Board Options Exchange (CBOE) challenged the rule, which is currently under a stay and is being reviewed by the SEC.
At the end of August, the Division of Trading and Markets at the SEC granted approval to ISE for a rule change relating to qualified contingent cross orders. The rule would permit an ISE member to cross the options leg of a qualified contingent trade (QCT) on ISE immediately upon entry if the order is for at least 500 contracts, part of a QCT, and executed at a price at or between the national best bid and offer.
Mark Longo of TheOptionsInsider.com says, ?It is a slippery slope once you allow anyone to cross orders without exchange exposure. The exchange execution requirement is one of the defining characteristics of the options market. If you allow certain orders to be executed upstairs, how long before virtually every order can be executed without first being exposed on an exchange??