Four months into the equity options penny pricing pilot
scheme, a debate is raging over whether the change is enhancing
the marketplace or fragmenting it.
Exchange leaders and market participants worry that penny
pricing is reducing order sizes, eliminating market makers and
discouraging institutional users from executing options trades
Others counter that such concerns are overblown and they
point to the benefits of tighter spreads and more volume in
highly traded listings as good for customers, especially retail
traders. The debate arose during several panels last week at
the Options Industry Conference in San Antonio, Texas.
"There has been more growth in options on the institutional
side than on the retail side and clearly pennies are forcing
that institutional business back to the phone," said Joe
Sellitto, marketing director for listed options at Susquehanna.
"They don't want to do it that way, they want to do it
electronically. And you're going to wind up with dark pools of
liquidity in the options business because people are not
finding liquidity on the screen."
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