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PHLX Directed Order Flow Program
Frequently Asked Questions:
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What is a Directed Order?
A Directed Order is any customer order to buy or sell which an
Order Flow Provider has directed to a particular specialist, SQT,
or RSQT. To qualify as a Directed Order, the order must be delivered
to the Exchange via the PHLX XL electronic order entry and execution
system.
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Who can send a Directed
Order?
Any Order Flow Provider who can send orders electronically through
the PHLX XL electronic order entry and execution system can direct
those orders to a specific specialist, SQT or RSQT of their choice
(if that specialist, SQT or RSQT is assigned in that option class).
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How do Order Flow Providers
send a Directed Order?
All that is needed to establish directed order flow, is to send
an email to: xloptions@phlx.com
stating your firm name, the classes you would like to have directed
and to which firm your orders should be directed. Shortly after
receipt of the email, you will receive an email response back
from our Listings Departments notifying you of the status of the
request and if it has been accepted and activated.
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Order Flow Receiving Firms:
Who can receive a Directed Order?
Specialists, SQTs, or RSQTs that have agreed to accept directed
order flow from an order flow provider.
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How do Specialists, SQTs
and RSQTs receive Directed Orders?
Once an Order Flow Provider requests via email to the Exchange
(xloptions@phlx.com) to
direct orders in a particular class to a specific firm and if
accepted by the firm, has been processed by our Listings Department,
all incoming orders in that option class sent electronically by
that Order Flow Provider will be appropriately routed by the PHLX
XL system and to the chosen firm.
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What are the Quoting Requirements
for Specialists, SQTs and RSQTs for receiving Directed Orders?
In order to be eligible to receive Directed Orders and receive
the participation guarantee, Directed Specialists, SQTs and RSQTs
have to fulfill specific quoting requirements as per PHLX rules.
Under the current rules, SQTs and RSQTs are responsible to quote
continuous, two-sided markets in not less than 60% of the series
in each Streaming Quote Option Class they are assigned. Specialists
are required to quote continuous, two-sided markets in 100% of
the series in each Streaming Quote Option Class that such specialist
is assigned.
The continuous quoting obligation for Streaming Quote Traders
("SQTs") and Remote Streaming quote traders (RSQTs)
that receive directed order flow (respectively "DSQTs"
and "DRSQTs"), is to quote continuous, two-sided markets
in not less than 99% of the series in 60% of the options
in which the SQT or RSQT is assigned. Additionally, whenever a
DSQT or DRSQT enters a quotation in an option in which such DSQT
or DRSQT is assigned, such DSQT or DRSQT must maintain continuous
quotations in not less than 99% of the series of the option listed
on the Exchange until the close of the trading day. The specialist
is obligated to quote continuous, two-sided markets in 99% of
the series in each option in which such specialist is assigned.
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What is the Allocation Process
for Directed Orders that are sent to a Specialist, SQT, or RSQT?
Under the program, the Directed Specialist, SQT or RSQT may interact
with 40% or more of the trade, if their disseminated quotation
price is the NBBO at the time of the Directed Order and their
disseminated quotation-size is equal to or larger than 40% of
the incoming order. If the Directed Specialist, SQT or RSQT is
quoting a size of less than 40% of the incoming order, the Directed
Specialist will participate up to its disseminated size. The remainder
of the order in both cases above will be allocated based on an
algorithm that includes a weighted percentage of equal allocation
among PHLX XL participants on parity and on a pro rata basis based
on quotation size to all PHLX XL participants quoting at the NBBO.
Furthermore, to provide additional assurance that customers receive
the NBBO and best execution, incoming marketable orders which
are not filled in their entirety will be routed automatically
over PHLX XL’s auto-link after three seconds to the market
with the best price and size or to multiple market centers if
needed.
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See PHLX Rules 1080(1)
and 1014(g)(viii) for
additional information.
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