Date:    04/01/2000  10:33 PM

Subject: option linkage

Here is something to consider.  Under current proposals by the four 
Option Exchanges, trade throughs can occur if the Exchange with the 
better price does not respond with a fill within 15 seconds.
     
Currently (with most equities on the CBOE), the CBOE "RAES rejects" any 
order that tries to trade against a client order.  When this rejection 
occurs, the order is sent to a PAR station where the order is handled 
manually.  This process can take a good minute to occur.  As a result, 
trade throughs will constantly occur under these proposals.
     
That is, if a client is bidding $7.50 for an option on the CBOE and 
another client sells the same option at $7.375 on the PSE, the order 
should be routed to the CBOE, where the order would be RAES rejected and 
thus not filled within the 15 second time frame and therefore the client 
would get a $7.375 fill on the PSE and perhaps the CBOE bid of $7.50 will 
not even be filled.
     
I sent a proposal into the exchange that indicates all five exchanges 
should have the same basic technology and rules for the linkage to 
work.  Currently this is not the case.  All orders sent by clients 
should have instant executions.  This is definitely not the case with 
all these rules designed to protect/favor the market makers.  LINKAGE 
WILL BE A FAILURE IF INSTANT EXECUTIONS ARE NOT AVAILABLE!  Please note 
that the AMEX does not have technology to give you fills within the 15 
second time frame.
     
     
Perhaps linkage is not the best idea as brokers should be forced to send 
their client order to the best markets.  Leaving it up to the Exchanges 
can easily create these types of situations where trade throughs can 
easily occur as Exchanges have constantly made up rules to give 
themselves advantages over the clients.
     
     
Mike Ianni