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Wednesday, February 11, 2009

Options Trader Alert #2009 - 6
NASDAQ OMX PHLX Announces Plans to Re-platform the PHLX XL System Pending SEC Approval

Markets Impacted:

  • NASDAQ OMX PHLX

Contact Information:

What you need to know:

  • NASDAQ OMX PHLX is planning to re-platform the PHLX XL system with INET technology in April 2009, pending approval by the SEC. The new system will be referred to as XL II.
  • The new system will include enhancements to the opening process, routing with various strategies and improved order and quote handling.
  • Necessary changes are outlined in Options Technical Update #2009-1.

What will be changing?

In April 2009, NASDAQ OMX PHLXSM (PHLXSM) plans to launch XL II, a new version of the PHLX XL system which will be re-platformed using INET technology, pending approval by the Securities and Exchange Commission (SEC). XL II will maintain current XL functionality and will include enhancements to the opening process, routing with various strategies and improved order and quote handling.

PHLX plans to begin the migration from the current system to the XL II system in early April and complete the rollout by the end of June 2009.

PHLX has worked to minimize the changes firms must make to operate on the new system. The changes are outlined in Options Technical Update #2009-1.

How will the opening process change?

The opening process is changing to take into account bids and offers on other exchanges and to provide an improved auction mechanism to PHLX participants.

How will routing change?

Routing will be improved in the new system by allowing firms entering orders to specify if an order should not be routed (DNR), should be routed once upon receipt (FIND) or routed any time it is locked or crossed (SRCH).

How will order and quote handling change?

Order and quote handling will be improved to allow for PHLX participants to provide improved price continuity on executions subsequent to the PHLX Best Bid and Offer (BBO).

Will new data feeds be offered?

Yes, NASDAQ OMX plans to offer several feeds. The first is proposed to be a new direct, low-latency market data feed called Top-Of-PHLX-Options. The feed will include the same Best Bid and Offer (BBO) and last sale information currently sent to the Options Price Reporting Authority (OPRA). Sent directly to subscribers, this Top-Of-PHLX-Options feed will give firms a competitive advantage by offering minimal latencies.

Where will the new system be located?

The XL II system will be located within NASDAQ’s New York Area and Mid-Atlantic data centers. Firms that already have connectivity to these locations to access other NASDAQ markets can use their same circuit connectivity to access PHLX XL II. Up to and during the transition to the new system, firms can maintain connectivity for remote access to the current PHLX data center at 1900 Market Street in Philadelphia, PA. Once the roll out of the new system is complete, firms must connect exclusively to the New York Area and Mid-Atlantic data centers for remote access. PHLX will continue to maintain connectivity to XL II at 1900 Market Street for trading that occurs on the floor and will provide facilities at that location to support floor operations.

Will the legacy system continue to run in a parallel period after the new system goes live?

The legacy PHLX system will remain active concurrently with the re-platformed system for some period of time until all symbols are rolled out. During that time, some symbols will trade on the new platform while others will continue to trade on the existing platform until they are converted. Firms preparing for the new system should be sure not to eliminate their old processes until the re-platforming is completely rolled out.

Where can I get more information?

To learn more about the PHLX re-platforming effort, contact NASDAQ OMX Market Sales at +1 800 846 0477.


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