| Trading Equity FLEX options
|
| While Equity FLEX option orders are exposed to competitive price discovery just as conventional options, there are some differences in trading due to their customized features. For example, Equity FLEX option quotes are generated only in response to a Request For Quote (RFQ) and as a result, they are not continuously quoted.
|
| A modified version of the American Stock Exchange's specialist/registered options trader system, along with special procedures for the RFQ market, has been developed to ensure that each customer order is exposed to a competitive auction process for price discovery.
|
| Creating an Equity FLEX option series
|
| The Equity FLEX option trading process begins with the submission of an RFQ by a participating exchange member (Submitting Member). The RFQ signifies the Submitting Member's interest in creating a new Equity FLEX option series and must include the specific terms for the new series. A minimum size of 250 contracts or $1 million underlying value is required to create a new Equity FLEX option series.
|
| Each RFQ must include a Request Response Time (RRT), from 2 to 20 minutes. During this period Exchange members may submit bids and offers on behalf of customers and may modify quotes.
|
| At the end of the RRT, the best bid and offer (BBO) is reported to the Submitting Member who may accept all or part of the BBO, reject the entire BBO or seek to improve the BBO. The Submitting Member may also request a BBO Improvement Interval during which time new quotes may be submitted to meet or improve the original BBO.
|
| If the Submitting Member accepts the best bid or offer, but there is excess size available at the BBO, Exchange members may trade the balance available; if the Submitting Member rejects the BBO, members may accept the best bid or offer up to the size represented. If it is determined that no further interest exists in the bids and offers submitted, the market for that RFQ is closed and the quotes are no longer valid. Any member interested in trading the same Equity FLEX series must submit a new RFQ.
|
| RFQs, quotes and trades are disseminated as Administrative Text Messages through Options Price Reporting Authority (OPRA).
|
 |
| Trading an existing Equity FLEX option series
|
| Trading in an existing Equity FLEX option series takes place using the same Request for Quote (RFQ) procedures that were developed for initial transactions.
|
| A minimum of 100 contracts is required for opening and closing transactions. However, less than 100 contracts is permitted in Equity FLEX closing transaction when the remaining value of an account in the series is less than 100 contracts and the trade is for the account's remaining contracts.
|
| In trading existing Equity FLEX option series, RFQs can only specify the strike price for that series, not a percentage format. Size is specified in number of contracts, provided that size minimums are met and closing transaction restrictions as delineated above are observed.
|
| Trade Clearing
|
| Trades are matched intraday to reduce possible errors before transmission to OCC for clearance and settlement. OCC also provides daily valuation prices for all Equity FLEX series.
|
