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

To: Zardoz who wrote (834)	1/29/1998 5:24:00 PM
From: Porter Davis	Read Replies (3) \| Respond to of 1598

>>to buy 2 contracts for FEB put... All posted quotes have to be good for a board lot, which is a minimum of ten contracts. Your two-lot was in the book and fully protected against trade-throughs, but was not posted. Let me take just a minute to explain how options are traded in Toronto. I hope it can clear up some misconceptions. We utilise what is known as an auto-rotation module (ARM), which calculates and instantaneously posts new quotes every time the average of the underlying equity's bid-ask spread changes. Virtually the only time we change a quote is to post a client (or firm or other pro) order. What this means is we do not move markets away from incoming orders. The markets change automatically. Clients who ask their broker what the market is on a particular series and, say, enter an order to sell on the bid, face the prospect of getting a 'nothing done' because a:) the quote may be up to two minutes 'stale', depending on the vendor; b:) the time lag between when the broker enters the order to the floor, how busy their traders are; and c:) most importantly, what the underlying has done in the interim. The only market that matters is the market at the time an order enters the trading square. Remember, we can't trade what we can't see. We never hear from clients who enter an order to sell at $1.10 and get a $1.20 fill, but we do hear complaints all the time when they try to sell at $1.10 and get nothing done. Invariably they say, "but it was bid". Maybe earlier, but not when their order hit the square. Two further points: the MOST system gaurantees the posted market or better for every order; and if the order is handled manually, the trader with your order asks for a quote on the series without disclosing whether he is a buyer or seller. We are required to give him a two-sided market, and he is gauranteed no worse than the quote currently on the board. Only then does he declare his intention. These guys take their jobs seriously (as do we), and there is no 'club'. Hope this clarifies things a little. Happy trading. Porter