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 on exchanges.
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...