STAC Mid-Winter Conference Summary, Part Six

Posted January 26th, 2010 by The Options Insider in Industry

Continuing our coverage of the STAC 84th Annual Mid-Winter Meeting, TheOptions Insider finishes coverage of the Best Execution panel.

To read the first installment of the summary for this panel, please click here.

Further coverage of the meeting includes parts one, two, and three of the Exchange Leaders panel, and Converging Institutional and Retail Needs.

The featured speakers were:

Moderator: Chris Nagy, TD Ameritrade

Panelists:

Chris Larkin, E*TRADE Securities, LLC
John Standerfer, S3 Matching Technologies
Joseph Sellitto, Susquehanna Investment Group
Alan Shapiro, The Transaction Auditing Group
Joanna Fields, SIFMA, Deutsche Bank

Jumping back into the discussion of best execution, we pick up with JoeSellitto stating that price improvement was specifically standardizefor reporting purposes, and as such is defined as a fill at a pricesuperior to the prevailing NBBO at the time the order is received. Price improvement, Sellitto says, is not just a function of theexchange, but also of order routers and where an order is sent for thepurposes of price improvement.

The question of routing led Chris Larkin to opine that as long asspeeds are going down, retail investors arenít interested in othertypes of information. Retail customers have great resources ofeducation at their disposal and prices are relatively inexpensive.

Larkin noted that for his customers, the opening process is the mostcommon area of concern, but that otherwise customers are happy. Heconcluded that self-policing has made best markets possible.

Share your thoughts on best execution in the forum.

Endless Source of Data
The amount of data disseminated in the options marketplace isremarkable. There is more than a terabyte of data produced by theoptions marketplace in two weeks. Given that this is only going toincrease, it begs the question of capacity.

Again, there was the distinction made between the equities and optionsmarketplaces. First, there is the number of exchanges, with therebeing seven options exchanges as of this writing, with two more to comethis year. Secondly, the number of listed options is 20:1 to equities.As options are a derivative of the underlying, the number of strikes,calls, puts, in, at, and out-of the money quotes is immense.

Symbology Changeover
With the imminent options symbology changeover, the question was raisedas to how it will affect best execution. Will a standardized symbologyassist in measuring quality in the marketplace?

Alan Shapiro believes that standardized data will streamline how datais matched, as some firms currently use different symbologyinternally. Chris Nagy believes that it will not impact retail bestexecution, but will positively affect customer experience. Ultimately, thewhole panel agreed that it will benefit the industry.

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