The Chicago Board Options Exchange, Incorporated (CBOE) has proposed to reduce the order handling and exposure periods contained in its rules from three seconds to one second. Current CBOE Rules 6.45A and 6.45B mandate that an order entry firm is prohibited from executing an order where the firm represents itself as an agent with a facilitation or solicited order (Crossing Orders) using the Hybrid Trading System unless it first complies with a three second exposure requirement. During this three second exposure period for Crossing Orders, other CBOE members may enter orders to trade against the exposed order. CBOE’s proposal would reduce this exposure period to one second.
CBOE believes that it is in the best interests of market participants to minimize the exposure period, as both the order being exposed and the participants responding thereto are subject to market risk during the exposure interval. Furthermore, CBOE maintains that the reduction in exposure time to one second will nevertheless allow for sufficient time to ensure effective interaction with orders.