On April 14, 2010, the SEC proposed to put in place two investor protection measures in options markets that currently exist in stock markets. The proposed rules would prohibit an options exchange from unfairly impeding access to displayed quotations, and would limit the fees that an options exchange can charge investors and others wishing to access a quote on an exchange. Under current practice, investors do not know the total cost of buying an option listed on an exchange since the displayed quotation does not reflect the additional costs to conduct the transaction, including the cost of accessing the exchange’s quotation.

Extending Standards for Indirect Access. In an effort to promote fair and efficient access to quotations, the SEC previously adopted Rule 610(a) under the Exchange Act to prohibit exchanges from imposing unfair discriminatory terms. This anti-discrimination rule is designed to remove barriers that an exchange might erect to keep non-members from accessing a quotation on the exchange.

However, this rule does not apply to quotations in listed options. As such, the proposed changes would extend the application of Rule 610(a) to listed options, to further the objective of fair and efficient access to an option exchange’s quotations.

Limits on Access Fees. In addition to extending the non-discriminatory standard to listed options, the SEC also proposed rules that would set limits on the fees that can be charged for accessing an exchange’s best bid or offer in a listed option. In particular, the proposed access fee limit seeks to:

  • facilitate displayed quotations that are fair and useful
  • create more transparency in the cost of accessing quoted prices in listed options
  • preclude an exchange from taking improper advantage of the requirement to protect displayed quotations by charging high access fees
  • make the proposed access fee limit for options consistent with the maximum access fee limit currently in place for exchange-listed stocks under Rule 610

Under the proposed rules, the SEC would prohibit a national securities exchange from imposing, or permitting to be imposed, any access fees that exceeds $0.30 per contract for the execution of an order.