In the Directed Order Flow model, options order-flow providing firms will now be able to direct their options business to the PHLX liquidity provider of their choice. Exchange specialists, on-floor market makers and remote market makers who stream their quotes to the Exchange are eligible to participate in this new program.
Directed Order Flow represents the latest functionality of PHLX XL, the Exchange’s new electronic trading platform.
The PHLX XL Directed Order Flow model allows order-flow providing firms of all types to send customer orders to designated specialists, market makers, and remote streaming quote participants. Participants can interact with a directed order when their disseminated price represents the National Best Bid or Offer (NBBO). Under the plan, the specialist or market maker who receives the directed order may interact with 40% or more of the trade, if the firm is making a market in that option, their quote is representative of the NBBO, and their quoted size is equal to or larger than 40% of the incoming order. The remaining 60% of the order will then be allocated based on the Exchange’s PHLX XL trade allocation algorithm.
“ This is a paradigm shift in the options markets,” said Meyer “Sandy” Frucher, chairman and CEO of the PHLX. “Effectively, we’ve introduced a competing specialist system, and a model that will give member firms unparalleled choice in how they direct their business to the PHLX. This evolution of our market will benefit the entire trading community.”
Frucher added: “This latest enhancement to PHLX XL is the culmination of two years effort in Philadelphia to build an options model that is predicated on technological stability, unmatched pricing, and rules that will optimize the business models of order flow and liquidity providers, assuring that their customers receive the best quality of execution. We have demonstrated our superior technology by consistently having the best uptime among floor-based exchanges and the most quoting capacity available in the options industry.”
In February, the PHLX was the first floor-based exchange to deploy its more than 1,650 equity and index options in a streaming quote environment.
The Philadelphia Stock Exchange was founded in 1790. The PHLX trades 2,000 stocks, 1,650 equity options, 22 sectors index options and currency options and futures. For more information about the PHLX and its products, visit www.phlx.com.
