The BOX Files to Participate in Penny Pricing Pilot

Ivy Schmerken, Wall Street & Technology

The Boston Options Exchange (BOX) has filed with the Securities and Exchange Commission (SEC) to participate in the penny pilot program for option trading, which will begin on Jan. 26, 2007. In addition, BOX has also filed a quote mitigation plan to help manage market data traffic, according to the announcement."The tightening of spreads from penny pricing will provide significant value to BOX customers," stated Scott Morris, BOX CEO, in the release.

The BOX is also working off a new trading system, SOLA, which has been designed to "effectively manage the increasing messaging from a decimal world and provide superior response times," further stated Morris in the release.

In the quote mitigation filing, BOX includes using variable rates of "bundling" delays in order to reduce traffic, said the release.

"The quote mitigation plan makes it possible to significantly reduce market data traffic with a relatively small impact on the quality of the information available to options market users," added Morris in the release. Morris maintained the proposal is "the optimal trade-off between costs and benefits, and is fully compliant with firm quote obligations," according to the release.

The penny pilot program includes 13 classes. Options under $3 will be traded in penny increments and those trading at or over $3 will be in nickels. All series of the QQQQs will be traded in pennies. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio