NYSE American Options Halt Prompts Rival Exchanges to Ignore Its Quotes

NYSE American Options suspended trading in all securities processed through two of its transaction systems, TXNs 4 and 6. Competing exchanges were forced to bypass its quotes to prevent the disruption of the broader US options market.

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The platform said its initial attempts to halt trading were unsuccessful and that the suspension remained in progress at the time of its update.

The exchange was cancelling all orders and quotes in the affected symbols, including good-till-cancelled orders, and published a separate list of impacted instruments.

Why Exchanges Can Ignore NYSE Quotes

US options markets are connected by order-protection rules. An exchange generally cannot execute an order at a worse price when another venue displays a better protected quotation.

Under normal conditions, the order may therefore need to be routed towards the exchange offering the best available price.

However, the rule has a “self-help” mechanism. The venues can temporarily disregard another exchange’s quotes in case of malfunction or material delays so that an unavailable or stale quotation doesn’t block trades across the broader market.

Options affected by the NYSE American interruption could consequently continue trading elsewhere.

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Second Technical Incident This Year

It is the venue’s second reported technical problem this year. A March incident affected trading, post-trade processing and market data before NYSE American said that all systems had been restored.

The disruption came four days after NYSE American Options introduced extended trading sessions for options on 24 stocks and five ETFs. The exchange has not indicated that the launch and Friday’s incident are connected.

NYSE American Options is one of 20 US options venues and handles about 10% of listed-options activity. On an average day, more than 70 million equity options contracts trade across the market, giving the venue a typical share of roughly seven million contracts.