Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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May 31, 2003

Specialists May Get a Break

By Staff Reports

Amex options specialists and those at other options exchanges - upset that they continue to pay for order flow even as market makers take some of their orders - may be getting some relief.

The American Stock Exchange Board has approved a rule that would increase the percentage a specialist receives, from 20 percent to 30 percent, in pits with a market maker crowd of seven people, according to Kim Atwater, a spokeswoman for the Amex. The rule is pending SEC approval. The deal, negotiated by specialists at the Amex, is a good one, according to a spokesman for the Options Market Maker Association at Amex.

The Amex has never officially endorsed the common practice of payment for order flow. Nevertheless, the Amex has strict guidelines on how much a specialist can keep from order flow. Usually, the prohibition is no more than 60 percentage whenever a market maker wants to be part of a transaction.

Specialists have complained about these practices for many years. They have contended that the participation of market makers squeezes their profits and puts them at a disadvantage.