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Directed Orders Initiation Form

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Overview

The Exchange has recently received approval for a rule change permitting Order Flow Providers (OFP's) to direct customer orders electronically to a liquidity provider (LP) of their choosing. Any Specialist, Market Maker, RROT or SROT will be eligible to receive directed orders in any option where they have an assignment.

Process for Directing Orders to a Particular LP

An OFP who wants to direct customer orders electronically to a specific LP must notify the Exchange by sending an email to directedorders@amex.com. The email must contain the following information:

• Start Date - the date when the OFP would like to begin directing orders to a particular LP. Start dates can either be the 1st of the month or the 15th of the month. If the 1st or the 15th fall on a weekend or holiday, then the trading day immediately following shall become the effective start date. Requests received after the 1st of the month will take effect on the 15th and requests received after the 15th will be effective for the next month.
• CM Number - this is the clearing number of the firm entering directed orders
• Entering Mnemonic - the mnemonic used for the entry of the directed orders
• Underlying Symbol - the symbol for the security underlying the option the OFP would like to direct orders in.
• LP Name - this is the firm name of the LP that the OFP would like to direct their orders to.

OFP's may utilize the Directed Orders Initiation Form when submitting the information to the Exchange via email.

Eligibility

Products
Orders for any option listed on the Exchange can be included in the Directed Order Flow Program

OFP's
Any member firm that routes customer orders may give instructions to the Exchange so that all customer orders from that firm in a particular security underlying an option are directed to a particular LP.

LP's
Any Specialist, Market Maker, RROT, or SROT can receive directed orders from one or more OFP's. In order to be eligible to receive directed orders, the LP must have an assignment in the option class and must currently be in compliance with the requirements set forth in Rule 958 ANTE.

Trade Execution/Allocation

A directed customer order to sell (buy) will automatically execute provided the Amex Best Bid (Best Offer) is no worse than the National Best Bid (Best Offer). If at the time of execution the LP who received the directed order is quoting at the best price, after any customer interest at that price is satisfied, the LP will receive the lesser of 40% of the remaining contracts or the full size of their quote. Directed orders will be subject to the same trade through protections given to all customer orders. If at the time the directed order is received a better bid or offer is being shown on another exchange, the order will be routed out through the Options Linkage as needed.

Payment for Order Flow (PFOF)

Currently the Exchange administers a PFOF program in which Specialists and SROT's may instruct the Exchange to collect a marketing fee from LP's who trade with customer orders from certain PFOF accepting OFP's. Subsequently, Specialists and SROT's may instruct the Exchange to pay out the monies collected to certain PFOF accepting OFP's. The Directed Order Flow Program will make it possible for any LP who receives directed customer orders to instruct the Exchange to collect a marketing fee on those directed customer orders. Subsequently, at month end, the monies in a particular LP's PFOF pool may be paid out to certain PFOF accepting OFP's.

Additional Information

Amex Constitution & Rules

Amex Rule 996 - ANTE Directed Order Program