Not surprisingly, as three additional

options exchanges have jumped into trading

Nasdaq 100 unit trust

(QQQ) - Get Report

options, the markets have begun paying brokerage firms for their orders. ,

Industry sources say marketmakers and specialist firms are paying anywhere from 80 cents to as much as $1.75 a contract for orders in QQQ options, higher than typical rates on other options contracts.

The QQQ contract was the second most-active option in 2000, even though it previously been exclusively listed on the

American Stock Exchange

, the second-largest U.S. options exchange. Last week, the

Chicago Board Options Exchange

, the nation's largest, began listing the options. The CBOE was followed by the

Pacific Exchange

and the all-electronic

International Securities Exchange

. On Monday, the

Philadelphia Stock Exchange

will begin listing QQQ options.

Even in a climate where competition among the exchanges is already heated by increasingly tight margins and the domination of larger players, QQQ options may prove an interesting battlefield.

The unit trust and corresponding options became wildly popular as investors sought a one-stop investment to play the Nasdaq's strength in 1999 and early 2000. Despite the Nasdaq's horrific performance over the past year, the QQQ has remained vibrant, in both its equity and options incarnations, because it provides an easy way to speculate on any kind of movement in the index.

Exchanges long desired to trade Qubes, as the shares are known, because they are so popular and thus would generate revenue for the exchanges. Market makers and specialists also found them appealing as


, the QQQ options specialist at the Amex, saw huge volume on the contract.

Payment for order flow -- the practice of options specialists and marketmakers paying brokerage and order-routing firms for their orders -- has prompted concerns that brokerages will route orders to the exchange that paid them instead of trying to improve execution prices for their customers.

On the execution and trading side of the equation, the multiple listing of QQQ options has garnered positive reviews from options market participants. Across the board, the liquidity in the options is great, says Keith Keenan, vice president of institutional trading at

Wall Street Access


"We've always believed (multiple) listing has been positive," says Keenan, adding "more competition creates better prices." Now that the Amex has to compete with other exchanges, market makers are going to make only bigger and tighter markets, he says.

On the CBOE, the designated primary market maker is

Wolverine Trading

; on the P-Coast the lead market maker is

Knight Financial Products

, a unit of

Knight Trading


; and on the ISE the primary market maker is

Hull Trading

, a unit of

Goldman Sachs

(GS) - Get Report


GPZ Trading

will serve as specialist in QQQ options on the PHLX when trading begins Monday.