Interactive Brokers was the first firm to be certified as an Interim Linkage Service Provider. The initial pilot issue is General Electric (GE) with the Chicago Board Options Exchange. The PHLX Specialist is Timber Hill LLC and the guaranteed Auto-X size is 50 contracts for Principal Acting as Agent orders.
Linkage is a Securities and Exchange Commission mandated requirement dedicated to improving the option's industry's efficiency while helping to ensure that all options orders are executed at the best possible price - no matter to which exchange they are routed.
The Philadelphia Stock Exchange began implementation of interim linkage in mid-July. The technical infrastructure for interim linkage is available to broker/dealers (certified service providers) who wish to interface with the PHLX.
Participating broker/dealers must be members of the exchanges where an option class trades in order to be part of the linkage system and have access to AUTOM, the PHLX's automated options market system. Specialists who use interim linkage will be subject to any fees and commissions charged by the broker/dealer and the receiving exchange. However, the use of interim linkage is voluntary; no specialist will be required to participate.
Under the interim linkage plan, brokerage firms will still be able to route orders to their exchange of choice. If the order is due execution at the National Best Bid and Offer (NBBO), and the exchange of choice is not at the NBBO, specialists may elect to fill the order by stepping up to that price. Or they may opt to send the order, through a registered service provider, to another exchange that is displaying the NBBO.
The proposed Interim Linkage plan is intended to be an intermediate measure until full linkage is instituted. The full Options Linkage Plan has been submitted to The Options Clearing Corp. (OCC) by the Options Linkage Association (OLA), a joint authority comprised of the five options exchanges. The OLA, under the auspices of the OCC, is in the process of developing full linkage.
