September 3, 2010
Cutler Group LP (Cutler) is submitting this comment to demonstrate its opposition to the Securities and Exchange Commissions approval made by delegated authority, of SR-ISE-2009-35 and requests that the Commission disapprove ISEs QCC filing.
As a Partnership with over 50 market makers on the PHLX, NYSE/Arca and CBOE, we think that the CBOE, NYSE/Arca and all other parties who have provided comments (with the exception of the ISE itself) have correctly identified the negative impact of this rule change. This rule flies in the face of the existing rules and general guiding principles ensuring that all orders should be exposed to as many sources of liquidity as possible. Without such exposure there is no incentive for market makers to display liquidity, provide liquidity or offer price improvement. The general public is further harmed as pricing transparency disappears under this rule and needless to say there is no order protection and the public will forgo the opportunity to receive the best possible price on any order.
This rule gives the ISE an unfair advantage and a possible monopoly for any QCC trade 500 contracts and over which is a relatively low threshold. This is a case of large institutions being enabled by an exchange to shut out other market participants on relatively small trades. This will result in deteriorating conditions for the primary individual liquidity providers who are increasingly faced with ever increasing opposition by a few giant institutions.
In conclusion, the magnitude of this change and the harm it will cause do not comport to the just and equitable principles of trade. Nor does not increase competition. Nor does it further economically efficiency of trading executions. For these reasons, Cutler respectfully asks that the Commission disapprove the ISEs QCC rule filing.