From the November 01, 2009 issue of Futures Magazine • Subscribe!

NYSE Euronext expands penny pilot

On Sept. 23 NYSE Euronext received SEC approval to expand its options penny pilot program for NYSE Arca. The new program adds 300 more options to trade in pennies, for a total of 363, extending the proposed pilot through Dec. 31, 2010. It provides the phase in of 75 issues on a quarterly basis: Oct. 26, 2009, Jan. 25, 2010, April 26, 2010 and July 26, 2010.

ISE will adopt rules to expand the penny pilot that are parallel to what the SEC has approved and submitted a rule filing to the SEC on Oct. 2 to expand its penny pilot to the top 300 most actively traded options classes that are not already included in the pilot. The additional options classes will be phased in to the penny pilot on the same dates as NYSE’s plan.

CBOE will also file revised penny pilot rules similar to those already approved for other exchanges.

Longo says that retail customers who trade less than 50 contracts at a time will benefit from the program’s expansion, but it will have a negative impact for large institutional customers. “While the markets in penny classes are tighter, they are also smaller. With less displayed size on the bid and offer, institutional customers will have a difficult time executing large trades.”

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