cboe will enable sp500 index options electronic auction mechanism feb 22. Anyone have info on this other than cboe website?
Not sure what other info you'd like to know besides what's in the press release: https://ir.cboe.com/news-and-events...-index-options-products-beginning-february-22 It's pretty self-explanatory. But it's maybe just me. I've been in this industry for so long.
Care to explain? I read the news clip and there are no details in there whatsoever. I don't trade cboe futures but still garnered interest. How will this benefit those who trade 10 contracts or less? What is "negotiated price improvement" ? I do understand how cboe defines that and Aim but it sounds to me like marketing gibberish just to show that they "are with the retail guys" which of course they have never been and never will be. How does this mechanism work in practice on top of their general matching engine?
This is for options, not futures ('...trading S&P 500 Index options (SPX) and S&P 500 Index Weeklys options (SPXW)...') Like you said, it will be for orders equal or less than 10 contracts. ('...for trades up to a maximum size of 10 contracts.') ('AIM auctions are designed to allow participants to broadcast their orders on the Exchange for price improvement opportunities over the current market price, and to trade their orders against specified contra parties or other participants responding to the auction - thereby potentially enhancing execution rates and quality.') In short, it works like that: - I send a BUY market order on a particular strike. - My broker take this order and send it as an AIM. - The Exchange tell the crowd (via their market data feed) that they have received an order for price improvement. - The crowd can decide to send response in order to trade against my order. Each crowd participant specify the price at which they are willing to trade against my order. - The Exchange take the response with the best price and match it against my order (basically, this is why it's called an auction). So, in theory, instead of trading at the offer price, I'm trading at a better price, which is usually off-tick, meaning if the strike trades at nickel, my order will trade at penny price. AIM trades can print off-tick.
Each option exchange has their own set of rules for auctions (for those supporting it). Not sure if CBOE allows AIM on Complex Order. Some exchange does. It doesn't have to be a market order. As long as the order may be improved based on the current market conditions.
Sorry what what what? Who is the "crowd"? I strongly assume you are not speaking of locals on the floor as in the last century. You mean the public market? Who can see those orders precisely? So let me ask you, you consider this an improvement? What would be an improvement would be to have a 100% transparent market. No hidden order types no dark pools allowed. You want to buy spx options or ES futures options then you submit an order, it is placed in the order book (unless market order) for EVERYONE to see and act upon. Then you allow everyone to also make markets and place orders on the bid and offer simultaneously and at different levels in the order book. Then you eliminate minimum tick size. Orders can be submitted with single penny precision. No sub-pennies no other bullshit, single pennies. No membership bullshit and commission discounts, commission is a fixed schedule and everyone is subjected to that schedule equally as function of transacted volume. I guarantee you that in no time you would have cheaper costs of execution, it would add much more liquidity on both sides. Regulators can make all this happen with a single stroke of a pen. But the will is not there because in America regulators and industry are intertwined and collude and there is tons of moral hazard. What cboe is proposing is total and utter bullshit and only designed to obfuscate the mechanics even further.
'The Crowd', I mean market participants in general. It can also means you and me. Auction notifications are usually sent via the exchange's market data feed. So anyone who has access to these feeds can see them and respond to auctions. This is not hidden or a dark thing. Auction mechanisms are not new. BOX Option exchange was the first to propose that in 2004 (called PIP). Auctions are totally transparent and benefit Public Customer orders (again, this is me and I presume you) by allowing trading off-tick at a better price than the original intention of the order initiator. With all due respect, the US Option market is much more complex than what you're thinking.
More complex? Yes because it was made complex for a few to benefit greatly and at the expense of those who buy risk, small or large. So, why place them in an auction if those orders could be directly placed in a centralized order book?