Cboe Tweaks S&P Options Pricing: Smarter Trades, Same Old Game
Published Date: 6/6/2025
Notice
Summary
Cboe Exchange is updating its system that helps traders get better prices on complex S&P 500 options orders made up of flexible and regular option series. This change makes the automated price improvement process smoother and more efficient, starting right away. Traders using these complex orders could see quicker, smarter price improvements with no extra fees or delays.
Analyzed Economic Effects
4 provisions identified: 1 benefits, 2 costs, 1 mixed.
10-Contract Cap on SPX FLEX v. Non-FLEX
The Exchange will apply a maximum size of 10 contracts to the smallest leg of SPX Agency Orders that contain a non-FLEX SPX leg when it determines to do so for a trading session (for example, Regular Trading Hours or Global Trading Hours). The Exchange will announce any determination to apply the 10-contract cap via Exchange notice and intends FLEX v. Non-FLEX Orders to be subject to the same maximum size treatment as non-FLEX SPX complex orders.
Electronic Price Improvement for Small SPX Orders
The Exchange states it will handle SPX FLEX v. Non-FLEX Orders submitted into FLEX AIM in the same manner as non-FLEX SPX complex orders so that smaller SPX orders can continue to receive electronic price-improvement opportunities while larger, more complicated SPX orders are handled on the trading floor. The Exchange noted this treatment is intended to preserve price improvement opportunities for smaller orders, including retail customers.
Nonconforming Orders Ineligible Electronically
SPX FLEX v. Non-FLEX Agency Orders that are nonconforming will not be eligible for electronic processing and therefore will not be eligible for FLEX AIM Auctions. The rule change is intended to prevent participants from attaching a small FLEX SPX leg to a large non-FLEX SPX leg to circumvent the maximum contract size rule.
Order Breakups Prohibited and Monitored
The Exchange will treat a pattern where an initiating FLEX trader breaks an Agency Order into separate orders to gain a higher allocation percentage or to circumvent the maximum quantity as conduct inconsistent with just and equitable principles of trade and a violation of Rule 8.1. The Exchange says its surveillance program will monitor for such allocation-related break up violations.
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