Subject: Option Linkage/Option markets/paying for order flow/anti com
Date:    07/30/2000 1:15 PM
     
     
     
     
The most important issue with linkage surrounds the access of customer orders on
all five option Exchanges.  Currently the PSE and the ISE allow direct access to
customer orders they receive.  This allows ALL market participants the ability 
to trade directly with customer orders ensuring price fairness.  However the 
CBOE, AMEX and PHLX  do not allow "direct" access to customer orders.  On these 
Exchanges, market participants are not allowed access to customer orders 
creating many poor fills or trade throughs.  With the legality of "paymemt for 
order flow", these Option Exchanges (CBOE, AMEX and PHLX) are allowed to "buy" 
order flow then sheild it from outside participants creating an envirnoment that
will constantly steal from the investing public.
     
Does anyone at the SEC wonder why these Option Exchanges want to "buy" order 
flow?
     
     
The CBOE, AMEX and PHLX would have you believe that their members paid "high" 
prices for their seats and thus deserve to SHIELD customer orders from outside 
competition by sending orders that try to trade against "customer orders" to 
slower avenues (such as PAR stations) allowing market makers the ability to look
at the orders manually before executing them.  This allows market makers the 
ability to fill the customer orders in front of you (and they almost always do) 
making it rather fruitless to even try trading against customer orders posted on
the CBOE, AMEX and PHLX.
     
The Option market would become a fairer place to trade if all market 
participants were allowed direct access to all customer orders.  More 
competition would create a more efficient market with less trade throughs. 
     
     
Why is it that the SEC allows such anti-competitve rules?  Stop rubber stamping 
the rules that these self regulated Option Exchanges come up with.
     
In Alan Greenspan's April 13th, 2000 testimnony "The evolution of the equity 
markets", Mr. Greenspan talked about the appropriate role for policy makers in 
todays market.
     
He concludes by saying that "I would like to reiterate my confidence in 
competition as the fundamental guide to the organization of our markets. 
Although fragmentation has some undesirable consequences, it is an inevitable 
part of the competitive process. Fragmentation signals the value investors place
on the services and functions offered by competing trading systems. In the long 
run, activity will migrate to the systems that best meet the needs of investors,
absent impediments to competition. In the short run, policymakers should not 
attempt to anticipate the outcome of the competitive process. Rather, they 
should seek to remove impediments to competition and take judicious steps to 
mitigate the adverse effects of fragmentation through policies such as enhanced 
disclosure."
     
He says policy makers should "remove impediments to competition" and that would 
include eliminating any anti competitve rules currently on each Option Exchange.
 Simply allow direct access to the posted market and the Option markets will
become a better place to trade.
     
     
Mike Ianni