Optiver: The structure of the stock options market needs an update

CHICAGO–(BUSINESS WIRE)–Optiver, a leading market maker in US stock options, today released a new thought leadership series advocating an update to the US stock options market structure. In conjunction with the publication of these documents, the company has issued the following statement:

Optiver has followed the SEC’s recent comments on the Payment for Order Flow (PFOF) and stock market review with great interest, as we believe transparency and fair competition are the foundation for a healthy market. We applaud the SEC for raising concerns about market structure issues, which often unfairly reward wholesalers who route retail flow with an affiliate market-making arm.

As a leading global market maker, we are working to make markets fairer, more transparent and efficient for all market participants, both retail and institutional.

However, the stock market is only part of the problem. The biggest concern in the US stock options market is the underlying market structure, which favors wholesalers with an affiliated market making arm. A review of the public 606 order routing form disclosures of the eight broker-dealers most active in the stock options market showed that just four companies collectively route an estimated 80% of the retail market. These offices also account for 84% of the 40,000 specialist appointments at 11 exchanges. Optiver recognizes the potential benefits that wholesalers with affiliated MMs can offer retail investors; MMs have the expertise in option pricing, while wholesalers provide the infrastructure to execute orders on behalf of retail brokers. However, this relationship can only yield the maximum benefit if there is real competition for these orders at the exchange level.

Our focus areas within the stock options market structure are:

• Price improvement mechanisms that often do not result in best execution,

• An asymmetric fee schedule that helps fund PFOF, and

• Specialized appointments that encourage the internalization of stock option transactions.

In its ongoing review of technology’s impact on market structure, we urge the SEC to expand its investigation to consider the impact of these and other practices not only on U.S. stock markets, but also on the stock options market. to take.

For more information on proposed improvements to the US stock options market, please visit: Optivers Insights page.

About Optiver

Optiver is a leading global electronic market maker with nearly 1,300 employees working from offices in Amsterdam, Chicago, Sydney, Shanghai, Hong Kong, Taipei and London. Through pricing, execution and risk management, the company provides liquidity to self-capitalized and own-risk financial markets, trading a wide variety of products: listed derivatives, cash stocks, ETFs, bonds and foreign currencies. Its independence allows it to objectively improve the markets by pioneering its own trading strategies and technology systems.