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Strategies & Market Trends : Canadian Options -- Ignore unavailable to you. Want to Upgrade?

To: Vectra who wrote (694)	10/21/1997 5:53:00 PM
From: Dave.S	Read Replies (1) \| Respond to of 1598

Vectra: You are correct that my last statement about option automation leading to more stops being triggered was false. I got the logic of my argument mixed up. I switched from discussing illiquid stocks to options. Thanks for catching it! You are also correct in saying that the option market in Canada has little impact on the equity markets except at expiry times. The "manipulation" which occurs at expiry usually has short term influence. Don't get me wrong - the option market needs to be automated in Toronto. The tedious paper flow system currently in place is a burden and leads to occasional "break downs" such as what happened in the TXO pit after the last referendum in Quebec. It's just the new rule set which is being implemented without much input from the traders is what has Porter and others upset. You sound knowledgable in this area. What do you feel can be done to improve the options business in Canada? Dave

To: Vectra who wrote (694)	10/21/1997 9:22:00 PM
From: Porter Davis	Read Replies (3) \| Respond to of 1598

Say what, Vectra? > No more will you see a group of traders manipulating the > market to trigger these orders, since they will not be seeing them. > Instead the auction market will determine if they are triggered. I am specialist in, and run the book for, three of the most active option classes in Toronto. On average, I see an on-stop order about once every six months. If you have specific information regarding what you term 'market manipulation' I would be happy to investigate it for you, or provide you with the phone number for Market Surveillance at the TSE. Absent any specific information, I would appreciate that you not use derogatory langauge like 'manipulation'. We are the most srutinised people you can imagine...if you have a case, let's hear it. Further, your use of the word 'auction' in describing the proposed electronic trading system could not be further from reality. The exchange is proposing an 'order-driven' system in its most basic form. There will be no auction or price discovery in the new system. An incoming market order to buy twenty contracts can buy ten at the posted offer, say $1.00, and then the system will automatically search through the book for the remaining ten, and if the next offer is $10.00, so be it, that is where the second ten will trade, without the possibility of anyone intervening to prevent it. This is right and fair? Imagine the effect on any on-stop orders that will have. Vectra, I notice you have chosen not to provide an e-mail address. There are many good reasons for desiring privacy, but perhaps you could provide us on this thread with some background on your experience/connection/contribution to options trading in Toronto? Perhaps that might lend some credibility to any comments or criticisms you might have on our market. Happy trading. Porter