So basically they make two firms, and each quarter swap which firm is doing the business in order to get privileges that only firms that haven't traded much in the previous period would earn. I wonder how they thought the SEC would not find this out, that there's two companies outside a financial centre with owners of the same name and birthdate, alternating their trades.
I wonder if it's going to be considered a loophole that will be closed or an abuse. I suppose it could be either.
The other thing, gaming the algos, I have a good idea of how it might have happened.
You see, options people (the ones I know) are not as technologically sophisticated as stock people or futures people. Many of them rely on quite simple systems to quote their orders. Several of these are off-the-shelf systems with functions you'd expect: an autotrader than joins the BBO in some size, on every single option, not particularly fast either. This works fine most of the time because options traders are not overly concerned with the action on a specific option; they need to know their delta/gamma/vega, and those can all be thrown in a big bucket to be hedged as appropriate. The spread is normally quite wide, so as long as you're not being gamed on everything, you have ample room to lock in some profits.
People writing sophisticated algos (whom I also know) know how to do an ignore size, ie don't just blindly follow a tiny order.