Wha is the 'Order Book Official'

An order book official (OBO) is the trading floor participant responsible for maintaining a list of public market or limit orders of a specific option class using the "market-marker" system of executing orders. The purpose is to maintain a fair and orderly market in the assigned options, including executing orders sent in by member firms. The OBO is compensated by a salary paid to him /her by the exchange.

BREAKING DOWN 'Order Book Official'

Order book officials are employees of the exchange and cannot trade for their own account. Their sole responsibility is to maintain the market for their assigned listed options, including executing orders remaining on the book. The term is sometimes used in reference to a current list of public market or limit orders for a given exchange. For example, a list of specific public orders awaiting execution on the Chicago Board Options Exchange (CBOE) could be referred to as the "order book official".

This differs from designated market maker (DMM), formerly known as specialist on the NYSE or other exchanges who, as members of the exchange, must trade their own account in addition to the OBO functions of maintaining a fair and orderly market and executing orders on the book.

The OBO is also responsible for maintaining a book of limit and stop orders left for him /her by the public. Members may not leave such orders. When the order's specific conditions are met, that order is then executed.

Role of the Order Book Official

Trading on an options exchange includes many different functions. Unlike other exchanges, including stock exchange, the CBOE divides the designated market maker (specialist) function into two separate functions. A market maker, who acts as a dealer with his /her own inventory, and an order book official, who handles the book of customer limit orders.

The market maker posts bids and offers for a given options contract. They also cannot deal directly with the public. They also must maintain a continuous market by always posting their bids and offers.

The order book official keeps track of these posts for an assigned group of options and makes sure the market remains fluid and fair. OBOs may not act as dealers and do not hold inventory.

The floor broker is a middleman acting as an agent for clients, indirectly giving them the best access possible to the exchange floor. The floor broker does not hold inventory.

Public orders take priority over orders from market makers and floor brokers.

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