ISE Gemini announced the introduction of a new “flat” pricing structure for price improvement mechanism (PIM) auctions as of January 2, 2015, subject to regulatory clearance. With this new model, both PIM auction initiators and responders will pay the same fee of $0.05 per contract. Priority Customers on the originating side of a PIM order will continue to be free. The new structure will create additional transparency and a more level playing field in auction pricing. It also has the potential to deliver a higher level of price improvement to the end customer by increasing competition among auction responders at a fee level substantially lower than competing auction mechanisms.
Boris Ilyevsky, Managing Director of ISE Gemini, said, “By becoming the first exchange to introduce flat pricing for price improvement auctions, we hope to foster a more competitive auction process that will benefit retail customer orders. The new structure also strengthens ISE Gemini’s value proposition as the ‘customer-friendly’ maker-taker exchange along with our existing priority for customer orders and low taker fees.”
This fee change comes amidst ongoing debate among options market participants about the appropriate level of fees and rebates in auction mechanisms, including a recent comment letter submitted to the SEC by several market making firms. Concern exists that the current fee and rebate levels inhibit true competition, may limit price improvement, and negatively impact the quality of the displayed quote. This fee change on ISE Gemini will enable the industry to analyze the results of a new approach to auction pricing and whether it has a beneficial impact on price improvement for customer orders.
ISE Gemini launched in August 2013 as ISE Holdings’ second options exchange and offers customers a unique maker-taker pricing model combined with its patented pro-rata and customer priority market structure. For more information about fees on ISE Gemini, please visit www.ise.com/geminifeesummary or contact ISE Business Development at bizdev@ise.com.