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War Over Trade Crossing: Market Makers Butting Heads With Brokers and Exchanges

Traders Magazine, July 2004

Mark Longo

As you read this column, a life-or-death struggle is being waged in the option trading pits across the U.S. At the heart of this conflict is a controversial practice known as trade crossing. Trade crossing occurs in two distinct forms. The first takes place when a brokerage house becomes the counterparty to its customer's order. Alternatively, brokerage houses can also arrange for customers to become order counterparties. In either scenario, the transactions are arranged prior to reaching the exchange and involve little or no market maker participation.

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