Cboe BZX Options: Price-Time Options Market

Key Takeaways

• Cboe BZX Options uses pure price-time priority and a maker-taker fee model.
• The best price trades first; among equal prices, the earliest order wins.
• Adding liquidity earns a per-contract rebate; removing it pays a fee.
• It complements EDGX Options, which uses customer priority and pro-rata allocation.

What It Is

Cboe BZX Options is a registered options exchange in the Cboe family. It started as a Bats market and was rebranded after Cboe acquired Bats Global Markets in 2017. It trades listed equity and index options electronically.

Its defining trait is allocation by price-time priority. When an order arrives, the best-priced resting interest trades first. If several orders sit at the same best price, the one entered earliest fills first. There is no special carve-out for public customers in the core allocation, which makes BZX Options a "pure" price-time market.

The Intuition

A pure price-time market is the simplest fair rule: post the best price, and if you tie, be there first. It rewards two behaviors at once. Quoting an aggressive price earns priority over worse prices, and quoting quickly earns priority over equal prices entered later.

This model is friendly to fast, technology-driven liquidity providers who continuously update quotes. By rewarding speed and price rather than participant category, BZX Options encourages tight, frequently refreshed quotes. Cboe pairs it with EDGX Options, which uses customer priority and pro-rata allocation, so the two venues attract somewhat different order flow.

How Cboe BZX Options Works

BZX Options ranks resting interest by price first and time second. An incoming order sweeps the book from the best price outward, and at any single price it takes the oldest resting order first.

1. Best price trades first
2. At the same price, earliest order fills first
3. No customer-priority carve-out in the core allocation

The fee model is maker-taker, expressed per contract. A participant who posts resting interest is the maker and earns a rebate when it fills; a participant who removes liquidity is the taker and pays a fee. The schedule sets different rebates and fees by participant type, including Customer, Market Maker, Professional, and Firm, with volume tiers that adjust the rates. Like all U.S. options exchanges, BZX Options must honor the national best bid and offer, so it competes on rebates, speed, and order types rather than on showing a better price.

Worked Example

Suppose a put option shows a best offer of 0.90, where two participants are resting. Market Maker A posted 40 contracts at 0.90 at 10:00:01, and Market Maker B posted 40 contracts at 0.90 at 10:00:02. A buyer arrives wanting 50 contracts.

Under price-time priority, Maker A fills first because A was earliest at that price. A's 40 contracts execute, then 10 of B's contracts fill to complete the buyer's 50. Time decided the split, not displayed size or participant type.

Compare that to a pro-rata venue like EDGX Options, where the 50 contracts would be split between A and B in proportion to their quoted size rather than handed to whoever was first. Same resting quotes, different allocation outcome.

Common Mistakes

1. Expecting customer priority. BZX Options does not give public customers a special place in its core allocation. It is pure price-time, so customers compete on the same price-then-time basis.

2. Confusing it with EDGX Options. Both are Cboe options venues, but BZX Options is price-time while EDGX Options uses customer priority and pro-rata. The allocation rules differ.

3. Underrating speed. At the same price, the earliest order fills first. For active traders, latency genuinely affects the share of fills you receive on a price-time venue.

4. Ignoring per-contract economics. Options fees and rebates are quoted per contract and vary by participant type and volume tier. The headline rate is rarely the whole story.

5. Believing it shows a better quote. BZX Options honors the national best bid and offer like every options exchange. It competes on rebates, speed, and order types, not on a superior price.

Frequently Asked Questions

What is Cboe BZX Options in simple terms? Cboe BZX Options is a U.S. options exchange that fills the best-priced order first and, among equal prices, the one entered earliest. It pays a rebate to add liquidity and charges a fee to remove it.

How does Cboe BZX Options affect investment decisions? For options traders, the price-time model means sharp pricing and speed both matter for getting filled. Brokers and market makers route here when they want a straightforward, fast, price-time market.

What is a real-world example of Cboe BZX Options in action? When two market makers quote the same best price, the one who posted first fills before the second, so a buyer's order is satisfied in time order rather than split by size.

How can investors use Cboe BZX Options effectively? Understand that on a price-time venue, posting an aggressive price and being early both improve your fill odds, while passive resting orders can earn the maker rebate.

How is Cboe BZX Options different from Cboe EDGX Options? BZX Options is pure price-time, with no customer carve-out, so the earliest order at a price fills first. EDGX Options gives public customers priority and then splits the rest pro-rata by quoted size.

Sources

1. Cboe. "BZX Options Exchange Fee Schedule." https://www.cboe.com/us/options/membership/fee_schedule/bzx/
2. Cboe. "Options Exchange Fee Schedule." https://www.cboe.com/us/options/membership/fee_schedule/
3. Cboe. "U.S. Options Auction Process Specification." https://cdn.cboe.com/resources/membership/US_Options_Auction_Process_Specification.pdf
4. NYSE. "U.S. Equity Options Market Models." https://www.nyse.com/data-insights/us-equity-options-market-models

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.