The Philadelphia Stock Exchange is to begin accepting and executing electronically routed orders from off-floor broker-dealers at the start of trading today.
The PHLX's programme permits broker-dealers to access the specialist limit order book. The exchange expects the programme will increase efficiency in the options market by exposing orders residing in the limit order book to more order flow. This should also result in additional execution opportunities for booked orders.
Broker-dealers, which include market makers at competing exchanges, have previously been unable to access the limit order book unless they engaged a floor broker, and even then those orders were not eligible for automatic executions.
Meyer Frucher, the PHLX's chairman and chief executive officer, comments: "The walls that separate customers, broker-dealers, market makers and specialists are coming down and they are being replaced by high-speed, precision trading systems that are erasing historical distinctions between order types."
Broker-dealers can participate in the PHLX's new programme by routing their orders through Autom, the exchange's order-routing and delivery system, and ultimately through the electronic network now being developed to link all options exchanges.
The Securities and Exchange Commission approved the PHLX's broker-dealer order flow initiative on Thursday as a six-month pilot programme.