The Listed-Option Market "Flash Order" is NOT the. Several recent comment letters, including those submitted by LiquidPoint, the Chicago Board Options Exchange, the International Securities Exchange (“ISE”) and the Securities Industry and Financial Markets Association, address many of these issues in detail. LiquidPoint supports much of what is set forth in those letters (although perhaps the ISE’s attempt at humor is somewhat misplaced in this context, even though we understand their rationale for using it). We think it is important to emphasize the following points: The principle, simply stated, requires all orders to be subjected to competition before execution (there are very limited exceptions). There is no guaranteed internalization of order flow. With mandatory exposure, option liquidity providers (registered market makers) know that they will be entitled to have a chance to participate in any trade that happens on their exchange – in keeping with their need to have their quotes traded against.
More on an Order Cancellation Tax | Themis Trading Blog. February, 2010 Last week, we posted a suggestion from T3Live about instituting an order cancellation tax. We think this is an interesting suggestion. But to really understand why there are so many cancellations during the day , you have to dive into our current equity market structure. Ask yourself: Why would the exchanges allow such behavior to go on? It seems like this would only be placing a huge amount of stress on their data centers. The answer is in a little known change to the calculation of tape revenue.
So, as you can see, exchanges now earn revenue for not only trade reporting but for quote reporting.