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QQQQ News -- =DJ Nasdaq OMX PHLX Ramps Up Pricing Play As BATS Options Debuts.

Thursday, February 25, 2010 5:08 PM

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News for 'QQQQ' - (=DJ Nasdaq OMX PHLX Ramps Up Pricing Play As BATS Options Debuts)


By Jacob Bunge
Of DOW JONES NEWSWIRES

Nasdaq OMX Group Inc. (NDAQ) moved to expand a program to pay market makers at its PHLX options platform on the eve of a new competitor's debut.
The exchange operator added 23 new options symbols to the list of names trading under a so-called maker-taker pricing system, after test-driving the new pricing in key names over the last two months.
The move comes as upstart competitor BATS Global Markets prepares to launch an electronic options platform that will carry a similar pricing scheme, and highlights the intense competition in the growing field of options exchanges.
Nasdaq OMX PHLX--formerly the Philadelphia Stock Exchange--is trying out maker-taker pricing, in which market makers are paid rebates to provide liquidity to the market and customers are charged to interact with that liquidity.
The experiment began in January with options tied to the S&P 500 SPDR Trust exchange-traded fund, among the most actively traded contracts. It has since expanded to include options on Citigroup (C), iShares Russell 2000 (IWM) and Powershares (QQQQ) ETFs.
The move is a shift in strategy for Nasdaq OMX PHLX, where most options are traded under a pro-rata pricing regime that charges market makers and pays for customer order flow.
It appears to be paying off, with PHLX's share of SPY trade rising from 6% in December 2009 to 21% this month, according to figures from the Options Clearing Corp.
Beginning March 1, options on stocks such as Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS), Amazon.com Inc. (AMZN) and the United States Oil Fund LP (USO) will trade under the maker-taker model at Nasdaq OMX PHLX.
Nasdaq OMX officials were unavailable for comment.
BATS Options, set to launch Friday with contracts on 18 underlying stocks and exchange-traded funds, is being closely watched by competitors after the company took 10.2% of the U.S. stock market since its launch in 2006, thanks to a combination of fast technology and competitive prices.
A new electronic exchange backed by the Chicago Board Options Exchange is also set to launch later this year.
"This is an important year for the exchanges to gain additional market share in equity options," said Paul Zubulake, a consultant with Aite Group. "Aggressive pricing by the established exchanges is normally used to prevent new entrants from gaining any traction."

-By Jacob Bunge, Dow Jones Newswires; [phone]; [e-mail]

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(END) Dow Jones Newswires
February 25, 2010 17:06 ET (22:06 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.- - 05 06 PM EST 02-25-10

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