US equity options exchanges submitted their first reports to Securities and Exchange Commission (SEC) on the penny pricing pilot with mixed views on whether the programme is a success or undermining the customer base.
Some exchanges are concerned about how pennies are harming the institutional side of the business, a sector that the options industry has worked hard to attract. Deep liquidity pools in options contracts that were once traded in nickels have seen a massive drop in depth at the top of the order book.
Chicago Board Options Exchange (CBOE) said the size of the quotes is 80% smaller in pennies, therefore making it harder for hedge funds and large money managers to execute large orders. Ed Provost, CBOE executive vice president, business development, told FO Week his feelings were mixed.
"The industry predicted narrower...