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

To: Fenwick who wrote (1318)	1/27/1999 2:28:00 PM
From: Vectra	Respond to of 1598

A little clarification! Okay, hopefully I can correct some very glaring errors here. In addition, the message by Hutch regarding the official rule, doesn't look like a rule at all, but something he may have heard over the years, sorry Hutch, although there are a lot of rules and procedures, all are in place to ensure the maximum protection to the public. Providing of course they are aware of how the markets work. Although a lot of people try to state that a board lot for options is 10 or 20 contracts, it is not, it is and has been 1 contract for years. Now before you start berating me, 'cause there is a lot of confusion, here are the facts, the Specialist's have what are called MGF's or Minimum Guaranteed Fills, and this is what confuses everyone. An MGF is not a board lot. A Minimum Guaranteed fill is simply what the Specialist will buy or sell at each posted price. These "MGF's" vary from option to option, some are 10, some are 20. In the case of NNC, I believe the MGF is 20 contracts. Now as far as posting orders are concerned, the Specialists's are only obligated to post orders that are for at least the MGF, no less, however as Dave S. posted, orders for less than the MGF are placed in the "book". Now a little education on what an actual market is. For each series within a option, there is a bid and ask, simliar to an stock quote. So for example, if you were to look at the market on say the January 40 calls for NNC, it would look like this; (bid)$16.30 - $16.80(ask). Trades may take place between the market, however if an order came in to sell 5 contracts at $16.70, the offer would not show, since it is below the MGF, never the less, the order is still considered "live", if the NNC Jan 40's trade above the $16.70 offering price, the Specialist is obligated to purchase the contracts. Market quote changes, do not obligate a Specialist to fill either an offering or a bid, unless the bid or offering is equal to or exceeds outstanding orders. This obligation only comes into effect when quotes are posted for 1 minute or more. In this instance it sounds as though you were expecting a fill because the Specialist did not show your quote, sorry you are only entitled to a fill if the market trades through your order or the quoted bid (which is at least equal to your offering) has been posted for 1 minute or longer. As far as private clients being shut out of the market, nothing can be further from the truth, if your order is for at least the MGF, the Specialist must post your order, no exceptions. V