From Todd Wilemon:

“We’re on fire!”

No, not literally, but the options business here at NYSE Euronext is going gangbusters. Can I use a few more clichés before I get to the meat of the story?

With two months left in 2009, it is amazing what has taken place. Under the leadership of the Ed Boyle, Senior Vice President of US Options, and with the support of the entire organization, we have been setting goals and ruthlessly executing our plan to become the places to trade options both electronically and via open outcry. In the US, there are only four physical option trading floors and we operate two of them.

What a year 2009 is turning out to be for us in the options world.

After buying the Amex, we gave ‘em a brand new home, new technology, the fastest trading engines in the business and put together an amazing support staff made up of the very best of the Amex staff and our awesome NYSE Arca folks. This was for an exchange that had not updated their technology since the ‘90s. Oh yes, it was that bad… avert your eyes and just keep walking. The good news is that NYSE Amex technology now has the same “look and feel” of NYSE Arca, with its very own pro rata, customer-centric market structure.

At the end of last year, volume on the Amex had declined to a 5.7 percent share of total option volume among the seven exchanges. In seven short months since we opened the new NYSE Amex Options exchange at 11 Wall Street, we have increased NYSE Amex market share by 54%. Yes, you read that correctly, we have increased our market share by more than 50%. This was a mighty team effort of exchange staff in New York, Chicago, San Francisco and all of our customers. The trading firms along with their their desk and back office staff, the brokers, traders, clerks and exchange floor staff have caused a resurrection in the Amex. And let’s not forget NYSE Arca, where we implemented several new order types and increased throughput and capacity, and nobody here even has three hands! To all involved, take the weekend off and celebrate…you deserve it. (But make sure you come back Monday because we are not finished!)

Technology has been a key driver of our success. When we resurrected the Amex, it was through technology. A brand-spanking-new floor with the latest technology for our floor brokerage community to interface in an electronic environment, with an audit trail to ensure compliance with our exchange rules that assure transparency and fair orderly markets. For electronic business we left 100% of the legacy Amex technology behind and ported over production to a new, tested and proven technical infrastructure.

The success of the “new” NYSE Amex is a major contributor but not the only driver of our growth in options. We have been busy on other fronts as well. We have expanded our suite of order types on both exchanges including the PNP order types. PNP or Post No Preference ensures that orders that you want to stay on our exchange do not route out to another exchange. You can check out each of the PNP order types as well as our other innovations by looking at some of my previous blogs or by visiting our order types page here (for NYSE Arca) and here (for NYSE Amex).

Here at NYSE Euronext, we want to empower the trader to have as much control and say in how his order interacts with the marketplace.

We have new Complex Matching functionality on both exchanges to handle multi-leg option orders. On NYSE Arca, we also support options with stock orders. With the new matching engines we unveiled the PNP+Complex order type, which is designed to give price improvement over the leg markets. Not only is this order type innovative, it is dynamic in that it always keeps your order at an aggressive price in the market. Check out my PNP+Complex posts and the Amex Complex post for more information! Also, stay tuned because in Q1 2010 (just around the corner) we have more exciting news regarding our complex order functionality and pricing.

On another front, the Penny Pilot program is expanding. The penny pilot program has been a huge boon to investors and traders alike. It decreases the spread between the bid and ask thus saving investors money when they trade options. It is nice to keep more of your money in your own pocket. The Penny Pilot program promotes tighter markets while increasing transparency of screen markets. No longer do investors have to hope for price improvement in some dark opaque process. Pennies allow market makers and traders post their true markets on the screen.

Did you see the list for the expansion of issues traded in pennies? If not or want to peruse it again, please go here.

And if that is not enough, we also made some of our stakeholders stockholders in NYSE Amex. We partnered with seven firms in the new NYSE Amex Options exchange. As Ed Boyle said, “Having important partners in like this allows us to feel that we are building the structure in the right direction.” It is no exaggeration to say that for NYSE Euronext the best is not enough, we are pushing on all fronts to continuously improve

One last thing — so you are the first to know (between you me and the fence post) 2010 promises to be just as exciting for NYSE Euronext Options participants. 2009 is just the beginning. Keep checking back for more, we have a lot to tell you about in the coming months!

I have expounded enough about NYSE Arca and NYSE Amex, the “wonder twins” of options trading, so what do you think of us? Seriously, have you traded on our exchanges? We want you trading here.

Trade ‘em up!

TW

P.S. In my next blog I’ll fill you in on our progress getting the Universal Trading Platform (UTP) into production. This is a fundamental piece of NYSE Euronext’s ability to “Power the Exchanging World,” and it is pretty amazing stuff.

From Todd Wilemon:

Have you heard about Tracking Orders?

If you have been involved trading equities, you are probably familiar with this order type. A Tracking Order is a limit order that is not displayed and only activates to trade when certain specific conditions are met (we’ll talk about that in just a bit). Tracking Orders allow you to always trade on the NBBO or National Best Bid or Offer while also giving you the ability to choose the size of orders you will interact with and at a price range of your choosing.

Tracking Orders got their name because they track the NBBO. They will always trade at the NBBO price. Since they are also limit orders, you can set a maximum price or limit you would pay on a buy tracking order and set a minimum price or limit at which you would sell on a sell tracking order. Example: If the current National Best Bid (NBB) is 1.29 and a buy Tracking Order is then entered with a 1.35 limit, the tracking order will match the NBB of 1.29 and will follow the NBB as it moves up or down, up to the 1.35 Tracking Order limit.

Now, to discuss those conditions I mentioned in the first paragraph: Tracking Orders are eligible for execution only after all other interest has been exhausted at the NBBO price; they will execute only against contra orders that are about to route to an away exchange and only against a routable order that has a size equal to or less than the size of the tracking order. Example: if a Tracking Order is entered for 15 contracts and the routable quantity of a contra order is greater than 15, the contra order routes and will not interact with the Tracking Order. So although the order is not displayed or ranked in the book, the Tracking Order gives you control over price range and size you are willing to trade against.

I hope I have whetted your appetite to start using Tracking Orders. To quote Amy Farnstrom, Managing Director, Options, NYSE Euronext, “This is just another tool to keep in your options toolbox.” Options traders understand how options give you options.

With the advent of Distributive Linkage, if an incoming order exhausts the displayed size on our exchange but other exchanges are also at the limit of that order, we will route an ISO (Intermarket Sweep Order) to sweep those away markets. However, if an order is about to route but has a quantity that is less or equal to the size of the tracking order and is within the limit of the Tracking Order it will trade with the Tracking Order and not route out. It gives the user of the Tracking Order a last shot to fill incoming orders on our exchanges at the NBBO.

Tracking Orders have no standing with regard to open outcry trading since they are not displayed nor are they represented in the disseminated bid or offer size. They only have standing or eligibility to trade if contra interest in the NYSE Arca or Amex System would otherwise be routed to another market center at the NBBO. Quick example: NBBO market is 2.05 at 2.15. NYSE Arca is displaying a market of 2.00 at 2.15. A tracking order is in the system to buy 10 with a “top” limit price of 2.10 (currently tracking the NBBO price of 2.05). An order is received to sell 6 contracts at 2.05; this order will be matched against the Tracking Order and will trade at a price of 2.05 since that was the NBBO bid at the time. You are going to like this order type.

Another example with the same initial markets: NBBO is 2.05 at 2.15. NYSE Arca is 2 bid. We have the buy side tracking order with a limit price of 2.10 for 10 contracts. Another Tracking Order is received, 2.05 limit for 20 contracts. An order is entered into the system to sell 15 contracts at 2.05. This order is matched against the 2.05 bid tracking order because the 15 contracts are more than the amount of the first tracking order. The balance of the tracking order that was executed will not post to book or route out but will be canceled.

If a Tracking Order is executed but not exhausted, the remaining portion of the order will be cancelled. It will never route out to another exchange or market participant. Tracking Orders can not be contingent orders or market orders. Tracking Orders are identified by using OrdType (Tag 40) =2 and ExecInst (Tag18) =d.

If you have further question, your relationship manager is ready and willing to help.

Trade ‘em up!

TW

From Todd Wilemon: Have you heard about Tracking Orders?

If you have been trading equities, you are probably familiar with this order type. A Tracking Order is a limit order that is not displayed and activates to trade only when certain specific conditions are met (we’ll talk about that in just a bit). Tracking Orders allow you to always trade on the NBBO or National Best Bid or Offer while also giving you the ability to choose the size of orders you will interact with and at a price range of your choosing.

Tracking Orders got their name because they track the NBBO. They will always trade at the NBBO price. Since they are also limit orders, you can set a maximum price or limit you would pay on a buy Tracking Order and set a minimum price or limit at which you would sell on a sell Tracking Order. Example: If the current National Best Bid (NBB) is 1.29 and a buy Tracking Order is then entered with a 1.35 limit, the Tracking Order will match the NBB of 1.29 and will follow the NBB as it moves up or down, up to the 1.35 Tracking Order limit.

Now, to discuss those conditions I mentioned in the first paragraph: Tracking Orders are eligible for execution only after all other interest has been exhausted at the NBBO price; they will execute only against contra orders that are about to route to an away exchange and only against a routable order that has a size equal to or less than the size of the Tracking Order. Example: if a Tracking Order is entered for 15 contracts and the routable quantity of a contra order is greater than 15, the contra order routes and will not interact with the Tracking Order. So although the order is not displayed or ranked in the book, the Tracking Order gives you control over price range and size you are willing to trade against.

I hope I have whetted your appetite to start using Tracking Orders. To quote Amy Farnstrom, Managing Director, Options, NYSE Euronext, “This is just another tool to keep in your options toolbox.” Options traders understand how options give you options.

With the advent of Distributive Linkage, if an incoming order exhausts the displayed size on our exchange but other exchanges are also at the limit of that order, we will route an ISO (Intermarket Sweep Order) to sweep those away markets. However, if an order is about to route but has a quantity that is less than or equal to the size of the Tracking Order and is within the limit of the Tracking Order, it will trade with the Tracking Order and not route out. It gives the user of the Tracking Order a last shot to fill incoming orders on our exchanges at the NBBO.

Tracking Orders have no standing with regard to open outcry trading since they are not displayed, nor are they represented in the disseminated bid or offer size. They have standing or eligibility to trade only if contra interest in the NYSE Arca or Amex System would otherwise be routed to another market center at the NBBO. Quick example: NBBO market is 2.05 at 2.15. NYSE Arca is displaying a market of 2.00 at 2.15. A Tracking Order is in the system to buy 10 with a “top” limit price of 2.10 (currently tracking the NBBO price of 2.05). An order is received to sell 6 contracts at 2.05; this order will be matched against the Tracking Order and will trade at a price of 2.05 since that was the NBBO bid at the time. You are going to like this order type.

Another example with the same initial markets: NBBO is 2.05 at 2.15. NYSE Arca is 2 bid. We have the buy side Tracking Order with a limit price of 2.10 for 10 contracts. Another Tracking Order is received, 2.05 limit for 20 contracts. An order is entered into the system to sell 15 contracts at 2.05. This order is matched against the 2.05 bid Tracking Order because the 15 contracts are more than the amount of the first Tracking Order. The balance of the Tracking Order that was executed will not post to book or route out but will be canceled.

If a Tracking Order is executed but not exhausted, the remaining portion of the order will be cancelled. It will never route out to another exchange or market participant. Tracking Orders cannot be contingent orders or market orders. Tracking Orders are identified by using OrdType (Tag 40) =2 and ExecInst (Tag18) =d.

If you have further questions, your relationship manager is ready and willing to help.

Trade ‘em up!

TW

From Todd Wilemon: Excellent news from the SEC: they just approved the expansion of the penny pilot program for options. Currently the penny pilot program has 63 names being quoted in pennies. The SEC has approved adding 300 of the most actively traded, multiply listed options classes to the program. Woo-hoo!

Maybe I ought to have warned you to be sitting down before you read that last paragraph. What this means for the average investor and market participant is the spread between the bid and offer of an option will be reduced, thus lowering the cost of the option. It will also increase transparency and price discovery in the options markets. Investors and traders win!

An important reminder: all option classes in all names can already trade in pennies if the order is exposed to a price-improvement auction or if an exchange chooses to trade with hidden liquidity, known as dark pennies. By expanding the program, the SEC has allowed traders and market makers to post their true markets for all market participants to see and trade. Transparency of quoted markets is a foundation of a fair and orderly market. The best advertising for traders is their displayed markets. All together now, “Let the sunshine, let the sunshine in…” Sorry, but on such momentous news, I get a little carried away.

The 300 new names will be added in a phased-in approach of 75 names each quarter over four successive quarters starting on Oct. 26, 2009 and continuing on Jan. 25, April 26, and July 26, 2010. The option classes added each quarter will be based on average daily volume in the prior six calendar months immediately preceding their addition to the program.

Don’t worry about figuring out the names to be added; we will do that for you. We will announce the new additions by Regulatory Bulletin and by publishing the information on our Web site, in addition to submitting a filing with the SEC.

The minimum variation for all classes to be included in the pilot, except for the QQQQ, will continue to be $0.01 for all quotations in option series that are quoted at less than $3.00 per contract and $0.05 for all quotations in option series that are quoted at $3.00 or greater. Options on QQQQ will continue to be quoted in $0.01 increments for all series.

“Representing over 85% of the overall volume in U.S. options, this expansion of the penny pilot offers many benefits to the investing public, including increased transparency, improved price discovery and reduced spreads,” said Paul Finnegan, Senior Director, NYSE Euronext U.S. Options. Penny pricing allows flexibility to investors and traders to compete and determine the natural spread for each security independently.

Ed Boyle, VP of US Options, NYSE Euronext has warned before, “If we destroy transparency in the options market, we could see the industry shrink and it could ultimately disappear.” By enlarging the penny pilot program, the SEC has made a huge step forward in the growth and transparency of options markets.

We also have in place a procedure to replace any pilot option class that is delisted with the next most actively traded, multiply listed class that is not already in the pilot. We will do this semi-annually, on the second trading day following Jan. 1, 2010 and July 1, 2010.

One last thing: only options on securities and indexes priced under $200 at the close of trading on the expiration Friday prior to being added to the pilot are eligible..

Transparency, a level playing field (no favorites here) and price discovery make the NYSE Arca and NYSE Amex the places to trade options!

Trade ‘em up!

TW

From Todd Wilemon: Excellent news from the SEC: they just approved the expansion of the penny pilot program for options. Currently the penny pilot program has 63 names being quoted in pennies. The SEC has approved adding 300 of the most actively traded, multiply listed options classes to the program. Woo-hoo!

Maybe I ought to have warned you to be sitting down before you read that last paragraph. What this means for the average investor and market participant is the spread between the bid and offer of an option will be reduced, thus lowering the cost of the option. It will also increase transparency and price discovery in the options markets. Investors and traders win!

An important reminder: all option classes in all names can already trade in pennies if the order is exposed to a price-improvement auction or if an exchange chooses to trade with hidden liquidity, known as dark pennies. By expanding the program, the SEC has allowed traders and market makers to post their true markets for all market participants to see and trade. Transparency of quoted markets is a foundation of a fair and orderly market. The best advertising for traders is their displayed markets. All together now, “Let the sunshine, let the sunshine in…” Sorry, but on such momentous news, I get a little carried away.

The 300 new names will be added in a phased-in approach of 75 names each quarter over four successive quarters starting on Oct. 26, 2009 and continuing on Jan. 25, April 26, and July 26, 2010. The option classes added each quarter will be based on average daily volume in the prior six calendar months immediately preceding their addition to the program.

Don’t worry about figuring out the names to be added; we will do that for you. We will announce the new additions by Regulatory Bulletin and by publishing the information on our Web site, in addition to submitting a filing with the SEC.

The minimum variation for all classes to be included in the pilot, except for the QQQQ, will continue to be $0.01 for all quotations in option series that are quoted at less than $3.00 per contract and $0.05 for all quotations in option series that are quoted at $3.00 or greater. Options on QQQQ will continue to be quoted in $0.01 increments for all series.

“Representing over 85% of the overall volume in U.S. options, this expansion of the penny pilot offers many benefits to the investing public, including increased transparency, improved price discovery and reduced spreads,” said Paul Finnegan, Senior Director, NYSE Euronext U.S. Options. Penny pricing allows flexibility to investors and traders to compete and determine the natural spread for each security independently.

Ed Boyle, VP of US Options, NYSE Euronext has warned before, “If we destroy transparency in the options market, we could see the industry shrink and it could ultimately disappear.” By enlarging the penny pilot program, the SEC has made a huge step forward in the growth and transparency of options markets.

We also have in place a procedure to replace any pilot option class that is delisted with the next most actively traded, multiply listed class that is not already in the pilot. We will do this semi-annually, on the second trading day following Jan. 1, 2010 and July 1, 2010.

One last thing: only options on securities and indexes priced under $200 at the close of trading on the expiration Friday prior to being added to the pilot are eligible..

Transparency, a level playing field (no favorites here) and price discovery make the NYSE Arca and NYSE Amex the places to trade options!

Trade ‘em up!

TW

From Todd Wilemon: NYSE Amex Options is happy to announce the new Complex Order Book going live tomorrow, September 9, 2009. The options trading platform that you love because of the speed, transparency and throughput will now be able to handle your multi-leg complex option trades.

I know you have been enjoying the lightning-fast order handling for single-leg option orders and now you can enjoy all the benefits for your multi-leg complex option trades.

Clients will be able to enter “option only” multi-leg strategy trades of up to five option legs. Coming in Q1 of 2010, clients will be able to enter multi-leg options with an equity leg as well.

You can send up to five option legs. Any strategy you can dream up, as long as it fits within a 3:1, 1:3 ratio! Upon receipt of a Complex Order, NYSE Amex will first check the electronic complex order book for an execution opportunity. If contra-side orders are executable against either individual leg in the consolidated book or a resting complex order, an immediate execution will occur.

NYSE Amex offers riskless execution for options-only complex orders, by matching complex orders within the complex order book or, in the QQQQs, by interacting with the liquid simple markets on the options platform. These complex orders can be priced in pennies. Marketable complex orders will trade immediately, with no auction or delay in processing.

Limit orders are accepted in the QQQQs. For all other issues on NYSE Amex, clients must enter PNP+ Complex orders. PNP+ Complex orders can be Limit or Market. The PNP+ order type for complex orders is a powerful tool. Not only is this order type innovative, it is dynamic in that it always keeps your order at an aggressive price in the market.

PNP+Complex orders are designed to give the sender price improvement over the screen markets. Upon receipt, our matching engine will validate the price of a PNP+Complex order against the leg markets and if the order is marketable against these markets or would post to the book at a price less than one MPV (minimum price variation) away from one of the leg markets, the order will price back one MPV from the derived (net price) BBO (Best Bid or Offer) and post to the complex order book.

The smallest MPV will be used when multiple MPVs are involved so if one leg trades at a .05 MPV and another leg trades with a .10 MPV, the complex order will post at a price that is priced back .05 in price.

Now is that not the niftiest of order types? We at NYSE Amex are all pretty impressed with it! But it gets even better.

If leg markets improve so a resting PNP+ Complex order is marketable, the PNP+ Complex order will be priced back one MPV and repost. If leg markets worsen, the PNP+ Complex order will repost at the more aggressive price, up/down to the net debit or credit price of the order, always remaining one MVP distance from the leg markets.

PNP+ Complex orders will track the screen markets to both better and worse prices, always maintaining a one MPV buffer. A limit order will not track above (buy)/below (sell) it’s limit price, but will back off if the legs move into its resting price. If an incoming marketable order contra side PNP+ Complex order is received, it will immediately trade against the posted order, as long as the execution price is at least 1 MPV away from either side of the complex BBO.

In a nutshell, this means you are ALWAYS guaranteed price improvement over the screen markets, with a dynamic order type that keeps you in the market at an aggressive price! PNP+Complex orders can be sent to NYSE Amex for ALL option symbols.

Orders will not touch the leg markets and therefore the order will be subject to the complex transaction rate of $0.10 per side (order executes against the complex order from another firm). This order type also provides the opportunity for firms to take advantage of the “firm to firm” executions at only $0.05 when they are on both sides of the trade.

Now in order to identify and organize complex instruments and orders, NYSE Arca will disseminate Complex FAST symbols via ArcaBook. FAST Symbols will be created for the order immediately upon receipt from FIX if the instrument does not already exist. An ArcaBook message will be sent that contains the leg definitions of the complex order along with the FAST symbol. Once defined, any further activity in the instrument will be broadcast using the FAST Symbol only. These FAST symbols will be available to ArcaBook users whenever they subscribe, not only at start of day.

A new ArcaBook subscription will be available for the complex order book which will include Top of Book Messages and New Instrument Messages.

You can send in complex orders via FIX or ArcaDirect. Specs are here, here and here.

If you have any further questions do not hesitate to contact your Relationship Manager at relationshipmgt@nyx.com or call the options trade desk at 877-729-7291.

Trade ‘em Up!

TW

From Todd Wilemon: Welcome back! Over the last three days, we have been taking an in depth look at each of the new order types that are coming to NYSE Arca Options on Aug. 24, 2009. If you happened to miss the first three, you can read them here, here and here.

After reading this post and completing your homework, send your finished work to 11 Wall Street and we will send you back your merit badge on PNP order types. The badge is suitable for framing or wearing on a good looking sash or scarf. Just joking, NYSE Euronext does not hand out merit badges and I didn’t really give you any homework. But you should feel really good about yourself if you take the information we’ve given you over the last few days and put some more oomph in your trading arsenal.

This is our last new order type that will be going live Monday. We saved the best for last. Not only is this order type innovative, it is dynamic in that it always keeps your order at an aggressive price in the market.

Coming to the NYSE Arca Options Exchange on Monday, I give you the PNP+ Complex order type. It is so special, it hums its own theme song, “Oh Lord it is hard to be humble, when you’re perfect in every way. I can’t wait to look in the mirror; I get better looking each day. To know me is to love me…”

PNP+ Complex orders guarantee the sender price improvement over the screen markets. Upon receipt, our matching engine will validate the price of a PNP+ Complex order against the leg markets and if the order is marketable against these leg markets or would post to the book at a price less than one MPV (minimum price variation) away from one of the leg markets, the order will price back one MPV from the derived (net price) BBO and post to the complex order book.

The smallest MPV will be used when multiple MPVs are involved, i.e. if one leg trades with a .05 MPV and another leg trades with a .10 MPV, the complex order will post at a price that is priced back .05 in price.

Take a quick breather with me here…whew, ok! Here is the best part:

If leg markets improve so a resting PNP+ Complex order is marketable, the PNP+ Complex order will price back one MPV and repost.

If the leg markets worsen, the PNP+ Complex order will repost at the more aggressive price, up/down to the net debit or credit price of the order, always remaining one MVP distance from the leg markets.
PNP+ Complex orders will track the screen markets to both better and worse prices, always maintaining a one MPV buffer. If an incoming marketable contra side PNP+Complex order is received, it will immediately trade against the posted order, as long as the execution price is at least 1 MPV away from either side of the complex BBO.

In a nutshell, this means you are ALWAYS guaranteed price improvement over the screen markets, with a dynamic order type that keeps you in the market at an aggressive price!

PNP+Complex orders can be sent to NYSE Arca Options for ALL option symbols, for up to 5 legs, one of which can be an underlying equity or ETF.

The complex order book transaction fees are .10 per side for inter-firm executions and .05 per side for intra-firm executions. (see the complete NYSE Arca Options fee schedule at http://www.nyse.com/pdfs/Options_Fee_Schedule.pdf )

Once again, English majors, you can step out for a cup of coffee while we go over the technical specifications. It’s Friday, get yourself a Danish, too!

PNP+Complex orders will be accepted via FIX and ArcaDirect.

Populating FIX Tag 18 with “M” will designate the order is PNP+Complex.
ArcaDirect (Extended Execution Instructions) will be populated by “M.”
Time in Force can be either IOC or Day.
Both market and limit orders will be accepted.

Let us review.

PNP+ Complex guarantees the sender price improvement over the screen markets, without a Price Improvement Auction. It will never interact with leg markets.

If the PNP+ order is less than 1 MPV from all leg prices, the Complex matching engine will price back and post to the complex order book.

The smallest MPV will be used when multiple MPVs are involved.

PNP+Complex orders will track the screen markets to both better and worse prices, always maintaining a one MPV buffer, up/down to their net debit/credit price if sent as a limit order.

If you have questions regarding this new order type or any other order types please contact your Relationship Manager at relationshipmgt@nyc.com or call the options trade desk at 877-729-7291.

Thank you for joining us over these last four days. It is all of our hopes here at NYSE Arca Options that you use and profit with these four new order types going live Monday Aug. 24.

Trade ‘em Up!

TW

From Todd Wileomon: Welcome back to our second day of delving into new order types coming to NYSE Arca Options Aug. 24, 2009. If you missed the first post in this four part series, you can read it here: http://exchanges.nyse.com/archives/2009/08/blind.php

Helpful hint: This post is best read while listening to Debbie Boone singing,“You Lght Up My Life.”

Yesterday, we spent a few exciting minutes on the PNP Blind order. Today, we are going to spend time on PNP Light Only. The street lingo for these orders is “PNPLO”. Can you already see the progression we are taking? We are going from night to day — or blind to light only.

PNP LO orders are limit orders that do not route. Two key points to remember: this order will never route, and it will only trade against contra interest that is “lit up” or displayed, which gives you greater control over how it will interact on Arca, increasing your likelihood that this order will not inadvertently take liquidity, which increases your potential to make more trades resulting in a posting credit. We pay you. Cool, yes?

The only time a PNP LO order will be charged a liquidity-removing fee is if the order trades upon receipt against displayed interest on Arca. This will be the only time you will not be eligible for a posting credit. Incoming marketable PNPLO orders will trade with any displayed interest on the NYSE Arca consolidated order book and post any remaining balance if possible to the OX book. If after exhausting NYSE Arca volume another exchange is also at the NBBO, the remaining balance will cancel back to the order-sending firm. This way you can be ensured that the order does not lock or cross a market and is not routed away from NYSE Arca Options.

Also, once PNPLO orders are posted to the book they process like standard limit orders. Non-marketable orders will post to the book and stand their ground against updates to away markets’ BBO (Best Bid or Offer) (i.e. will not route or cancel) and follow standard order processing.

Like the generic PNP order type, if NYSE Arca is not at the NBBO (National Best Bid or Offer) upon receipt of a PNPLO order, the order cancels back to the firm.

Here is the coolest part of PNPLO order processing: they also cancel back if the order is marketable against any interest that is not disseminated to OPRA (Options Price Reporting Authority). This includes resting PNP Blind orders (while in the blind state) and the hidden portion of reserve orders. This way you will be more likely to trade with interest or orders that will cost you a liquidity-removing fee when that is your intention.

Once again the time has come for our English majors to step out and get a quick cup of coffee as we go through the technical specifications.

PNP LO orders will be accepted via FIX and ArcaDirect.

Populating FIX Tag 18 with “6” will designate the order is a PNP. PNP LO orders will be identified by populating FIX Tag 9417 (Extended PNP) with “L.”

For ArcaDirect, Extended PNP will be populated with “L.” TIF (Time in Force) accepted will be IOC (Immediate or Cancel), Day and GTC (Good till Canceled.)

Let us review the rules for PNP LO orders one more time. PNP LO orders are limit orders that do not route. If NYSE Arca is not at the NBBO upon receipt of PNP LO, the order cancels back to the firm. PNP LO orders also cancel if the order is marketable against any interest that is not disseminated to OPRA, e.g. resting PNP B orders (if the PNP B is in the blind state) and the hidden part of reserve orders. Non-marketable PNP LO orders will post to book and follow standard order processing.

OK enough information, time for our sing along. We will just sing the chorus of “You Light Up My Life.” Don’t worry, no one will hear you, and I won’t tell anyone that you know the words.

If you have questions regarding this new order type or any other order types please contact your Relationship Manager at relationshipmgt@nyc.com or call the options trade desk at 877-729-7291. See you tomorrow.

Trade ‘em Up!

TW

From Todd Wileomon: Welcome back to our second day of delving into new order types coming to NYSE Arca Options Aug. 24, 2009. If you missed the first post in this four part series, you can read it here: http://exchanges.nyse.com/archives/2009/08/blind.php

Helpful hint: This post is best read while listening to Debbie Boone singing,“You Lght Up My Life.”

Yesterday, we spent a few exciting minutes on the PNP Blind order. Today, we are going to spend time on PNP Light Only. The street lingo for these orders is “PNPLO”. Can you already see the progression we are taking? We are going from night to day — or blind to light only.

PNP LO orders are limit orders that do not route. Two key points to remember: this order will never route, and it will only trade against contra interest that is “lit up” or displayed, which gives you greater control over how it will interact on Arca, increasing your likelihood that this order will not inadvertently take liquidity, which increases your potential to make more trades resulting in a posting credit. We pay you. Cool, yes?

The only time a PNP LO order will be charged a liquidity-removing fee is if the order trades upon receipt against displayed interest on Arca. This will be the only time you will not be eligible for a posting credit. Incoming marketable PNPLO orders will trade with any displayed interest on the NYSE Arca consolidated order book and post any remaining balance if possible to the OX book. If after exhausting NYSE Arca volume another exchange is also at the NBBO, the remaining balance will cancel back to the order-sending firm. This way you can be ensured that the order does not lock or cross a market and is not routed away from NYSE Arca Options.

Also, once PNPLO orders are posted to the book they process like standard limit orders. Non-marketable orders will post to the book and stand their ground against updates to away markets’ BBO (Best Bid or Offer) (i.e. will not route or cancel) and follow standard order processing.

Like the generic PNP order type, if NYSE Arca is not at the NBBO (National Best Bid or Offer) upon receipt of a PNPLO order, the order cancels back to the firm.

Here is the coolest part of PNPLO order processing: they also cancel back if the order is marketable against any interest that is not disseminated to OPRA (Options Price Reporting Authority). This includes resting PNP Blind orders (while in the blind state) and the hidden portion of reserve orders. This way you will be more likely to trade with interest or orders that will cost you a liquidity-removing fee when that is your intention.

Once again the time has come for our English majors to step out and get a quick cup of coffee as we go through the technical specifications.

PNP LO orders will be accepted via FIX and ArcaDirect.

Populating FIX Tag 18 with “6” will designate the order is a PNP. PNP LO orders will be identified by populating FIX Tag 9417 (Extended PNP) with “L.”

For ArcaDirect, Extended PNP will be populated with “L.” TIF (Time in Force) accepted will be IOC (Immediate or Cancel), Day and GTC (Good till Canceled.)

Let us review the rules for PNP LO orders one more time. PNP LO orders are limit orders that do not route. If NYSE Arca is not at the NBBO upon receipt of PNP LO, the order cancels back to the firm. PNP LO orders also cancel if the order is marketable against any interest that is not disseminated to OPRA, e.g. resting PNP B orders (if the PNP B is in the blind state) and the hidden part of reserve orders. Non-marketable PNP LO orders will post to book and follow standard order processing.

OK enough information, time for our sing along. We will just sing the chorus of “You Light Up My Life.” Don’t worry, no one will hear you, and I won’t tell anyone that you know the words.

If you have questions regarding this new order type or any other order types please contact your Relationship Manager at relationshipmgt@nyc.com or call the options trade desk at 877-729-7291. See you tomorrow.

Trade ‘em Up!

TW

From Todd Wilemon: Every day this week, we are going to explain one of the four new order types coming to NYSE Arca Options on Aug. 24, 2009. So be sure to read this blog each day to get an in-depth look into the characteristics and how these order types will function in the market.

Are you tired of generating massive amounts of cancels in your high-frequency trading?

Do you wish there was a way to keep an order on NYSE Arca Options book providing liquidity and receiving the rebate when the order trades rather than having it route to other exchanges that cost money?

Do you want more free lunches?

Good news, I can help you with the first two. If you figure out the free lunch part, please e-mail me!

Commencing on Aug. 24, 2009, NYSE Arca Options will begin accepting PNP Blind orders. PNP Blind stands for “Post No Preference — Blind.” (The lingo for those in the know is PNP B.) This order type has been a big success on the equity side and NYSE Arca Options is delighted to add it to the suite of unique order types we offer to our options participants.

PNP Blind orders are limit orders that do not route. These orders will always stay on the NYSE Arca Options exchange. The PNP Blind execution instruction can apply to any limit price order.

What, you might ask, is so amazing about this order type? Allow me to do a little singing. (Don’t worry, I’m not actually going to sing a song, just sing the praises of PNP B.) Although if we ever get this blog wired for sound, you are in for a treat! But I digress… PNP B orders allow participants to utilize the PNP (do not route) execution functionality while reducing the number of cancels generated. A regular PNP order will cancel back to the user when an incoming order can not be filled in its entirety on NYSE Arca. Here’s the added bonus for PNP B users: If upon receipt, a PNP Blind order locks/crosses an away market: it will first trade any available size at the NBBO (National Best Bid or Offer) on NYSE Arca and then go blind, rather than cancel back to the firm. It will never route out. So once the PNP Blind order exhausts all available volume on NYSE Arca, the order goes blind (i.e. is not displayed to avoid locking the market but remains in the system available for execution) at the lock price and remains blind until the NBBO unlocks. And while blind, if a contra sided order or quote arrives at NYSE Arca, the PNP B will still receive a posting credit. Pretty cool, huh?

If a PNP Blind order is blind due to a locked NBBO and the NBBO subsequently changes so it is no longer locking the PNP B order, it will disseminate to OPRA. Similarly, if an incoming PNP Blind order is not marketable against an away BBO (Best Bid or Offer) upon receipt, if marketable on Arca, it will trade against any resting interest on Arca and the remainder will post to the NYSE Arca consolidated book and disseminate to OPRA. If not marketable, the PNP B order will post and disseminate to OPRA.

Once posted and disseminated, the PNP Blind order will stand its ground, i.e. it will not go blind if locked/crossed by an away BBO; it will disseminate to OPRA and not go blind again under any circumstances.

Now I know some of you have been waiting for the technical aspects of PNP Blind orders. All you English majors can step out for a cup of coffee.

PNP B orders will be accepted via FIX and ArcaDirect. PNP B orders will be identified by populating FIX Tag 9417 (extended PNP) with “B.” For ArcaDirect, Extended PNP will be populated with “B”

Let us review the rules of PNP Blind order one more time. These orders do not route; they only trade on NYSE Arca. They are only limit orders. If a PNP B, upon receipt at Arca, locks/crosses an away market on NBBO, it will first trade all the size (if any) on Arca that is equal to NBBO and then will go blind, rather than cancel back to firm. Non-marketable PNP B orders will post to the book. Once posted, when a quote from another market locks or crosses a PNP B order on Arca, the PNP B order stands its ground and does not go blind.

OK, now you are ready for the quiz. Silly me, there is no quiz!

However, if you have any questions regarding this new order type or any other order types please contact your Relationship Manager at relationshipmgt@nyc.com or call the options trade desk at 877-729-7291. See you tomorrow.

Trade ‘em Up!

TW