How to Obtain Price Improvement

In order for a customer order to be "PIPed", his agent/broker must be able to present the customer order to BOX at a price equal to or better than NBBO with the full quantity guaranteed execution by the agent/broker himself. In other words, the agent/dealer must present BOX with a "facilitation trade" via the PIP mechanism prior to BOX initiating a PIP auction. If no other BOX Participant is willing to offer the same or an improved price during the one second PIP auction, the customer order will trade against the contra order provided by the agent/broker at the initiation of the PIP.

However, not all options investors are clients of brokers who are able to provide this service since it requires proprietary trading ability. Accordingly, BOX has put into place structures which will enable all investors to access the PIP.

Broker dealers who wish to offer access to the PIP to their clients, but are unable, themselves, to take the counterparty side of the trade necessary to initiate a PIP, may use the BOX "Directed Order" functionality. This system allows any BOX Participant to instruct BOX to route his orders to any eligible BOX Market Maker (Executing Participants or "EP"'s) for possible submission to the PIP.

This very simple procedure means that the PIP is accessible to all options investors. When a broker dealer decides to route an order to another BOX Participant willing, in some cases, to offer price improvement, BOX ensures that the customer order's interests are always respected since:

• The receiving BOX Participant has three seconds to either initiate a PIP or decline.
• If he declines (or times out), any quote the receiving BOX Market Maker has in the market on that instrument is "shelved" and will be used to guarantee the customer order executed for that quote.

Furthermore, all of the usual BOX protections such as NBBO filtering continue to be available to the customer.

For details on using the Directed Order functionality or the PIP mechanism, email here..

To view daily PIP volumes and the average improvement for each PIP by trading session, click here.

There is a patent pending regarding the PIP.