We examine the effects of an order cancellation fee on limit order flow and execution quality in the PHLX options market. The cancellation fee on professional order flow is effective in reducing the rate at which limit orders are canceled. While the cancellation fee discourages the submission of...

Equity options exchanges in the United States use one of two models to execute marketable orders: the maker-taker model or the payment for order flow (PFOF) model. Exchanges utilizing the maker-taker model charge liquidity demanders a taker fee to access their liquidity. Exchanges utilizing the...