How to Obtain Price Improvement

In order for a customer order to be "PIPed", his agent/broker must be able to present the order to BOX with the first penny of improvement guaranteed 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 further improvement during the three 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 does require proprietary trading ability. Accordingly, BOX has put into place structures which will let all investors access the PIP.

Agents/Broker Dealers and 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 sytem allows any BOX Participant to instruct BOX to route his orders to any BOX Market Maker or other BOX Participant 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 (generally, though not necessarily, a BOX Market Maker) has three seconds to either initiate a PIP or decline
• if he declines (or times out), any order the receiving BOX Participant has in the market on that instrument is "frozen" and will be used to facilitate the customer order at NBBO

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

BOX Market Makers Certified to Receive Directed Orders and Provide Price Improvement
For a list of firms certified by BOX as qualified Executing Participants of Directed Orders for price improvement, click here.

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

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