Single, Collective Trading Crowd Quote
Many of today's floor-based options exchanges have rules that establish that the trading crowd for a particular option is responsible under the Quote Rule for the exchange's disseminated quote. These rules are a response to technology limitations that do not permit each market maker in the crowd to quote independently. When must the quote be firm when the trading crowd is the responsible broker-dealer?
Response:
Unless an exception applies, the Quote Rule requires a responsible broker-dealer to execute an order at its quote when that order is presented. When an exchange's rules establish the trading crowd as the responsible broker-dealer with respect to the exchange's disseminated quote, an order is considered presented when any one member of the trading crowd is presented with the order. Thus, for example, if orders sent to the exchange are routed to an electronic device managed by the specialist, such orders are presented to the trading crowd when received by the specialist on such device. In addition, orders represented by a floor broker are presented to the trading crowd when the floor broker communicates such orders to the trading crowd.
Individual Market Maker Quotes, with Incoming Orders Routed to Electronic Device Operated by Specialist
As exchange systems change to permit each market maker in a crowd to generate its own quote, each individual market maker will be the responsible broker-dealer with respect to its own quote. If orders continue to be routed to an electronic device managed by the specialist, when are such orders presented to a responsible broker-dealer?
Response:
Unless an exception applies, the Quote Rule requires a responsible broker-dealer to execute an order at its quote when that order is presented. When each market maker is the responsible broker-dealer with respect to its own quote, but orders are routed to an electronic device managed by the specialist, such orders are presented: (1) to the specialist when it is the responsible broker-dealer when received on such device; and (2) to any other responsible broker-dealer in the trading crowd when the specialist announces the order to the crowd. An order represented by a floor broker is presented to a responsible broker-dealer in the trading crowd when the floor broker communicates such order to that responsible broker-dealer.
Individual Market Maker Quotes with Incoming Orders Routed to Market Maker at the Best Price
If an individual market maker generates its own quotations and is, therefore, the responsible broker-dealer with respect to its quote, and exchange systems route incoming orders to the responsible broker-dealer with priority, when is an order presented to a responsible broker-dealer?
Response:
Unless an exception applies, the Quote Rule requires a responsible broker-dealer to execute an order at its quote when that order is presented. When each market maker is the responsible broker-dealer with respect to its own quote, an order is presented to it when received by the market maker from the exchange system.