Listed Option Execution & Liquidity

Ten years ago, the execution of a listed option order might have gone something like this: Client: “I’d like to buy 1,000 MSFT January 2003 30 strike calls, delta neutral.” The dealer would then call each of the four exchanges at the time (AMEX, CBOE, PCX, and the PHLX) and ask the market maker on each floor to quote the market. Five minutes later, the dealer would call each exchange back, scribble down each market (most them would make the bid/ask spread about a dime wide), sum up the number of options at each quoted price, and then transact on the exchanges that gave the “best” price until 1,000 options had been purchased for the customer.