The International Securities Exchange (ISE) has filed a proposal with the Securities and Exchange Commission (SEC) to restructure the Competitive Market Maker (CMM) trading rights on its options exchange. The new structure will grant greater flexibility to existing CMMs to select the options classes they would like to quote. It also opens up the opportunity for new liquidity providers to join ISE as CMM members. Implementation of the new structure is subject to SEC approval.
Gary Katz, President and CEO of ISE, stated, “The new structure for CMM trading rights will make it more cost-effective for market makers to provide liquidity on ISE and will afford them greater flexibility and control over their quoting obligations. This new framework creates a more attractive structure for existing CMMs and for potential new liquidity providers, who will now have an expanded opportunity to join ISE’s market making community.”
Currently, ISE operates ten bins, and all options products are assigned to a bin. Existing CMM rights enable a market maker to quote options in a given bin. Under the new proposal, CMM rights will entitle a market maker to enter quotes in options symbols that comprise a certain percentage of volume on the exchange. A CMM’s first trading right entitles that market maker to quote in 20 percent of the volume on the exchange, and each subsequent right provides the ability to quote an additional 10 percent of volume. Therefore, a total of nine CMM rights will be required to act as a market maker in all classes listed on the exchange.
The proposal will not impact the rights and obligations of ISE’s Primary Market Makers (PMMs). A PMM will continue to be assigned to each symbol traded on the exchange to provide continuous, two-sided quotes and carry out other responsibilities to maintain an orderly market.
