SEC Probes Nasdaq's FLEX Options Overhaul: Traders on Edge
Published Date: 1/31/2025
Notice
Summary
The SEC is reviewing a proposed rule change from Nasdaq ISE that would update how FLEX options trade on the floor. This includes new rules for certain FLEX options tied to ETFs and special settlement times, plus combined limits on FLEX and regular options. The decision could affect traders and investors soon, with the SEC taking extra time to decide by late January 2025.
Analyzed Economic Effects
3 provisions identified: 2 benefits, 1 costs, 0 mixed.
Aggregate FLEX and Non‑FLEX Limits
The Exchange proposed requiring that position and exercise limits for FLEX Options be aggregated with non‑FLEX options in certain circumstances and providing further detail to exercise limits. If approved, traders would need to count FLEX and non‑FLEX option positions together for applicable limits.
New FLEX PM Third-Friday Options
The Exchange proposed allowing p.m.-settled FLEX Index Options that expire on or within two business days of a third Friday-of-the-month expiration for a non-FLEX option (called "FLEX PM Third Friday Options"). If approved, traders and investors could trade these new FLEX PM Third Friday Options on the Exchange.
Cash-Settled FLEX on Certain ETFs
The Exchange proposed permitting FLEX Options on certain exchange-traded funds (ETFs) to be cash-settled (instead of physical delivery) if the underlying security meets prescribed criteria, and to set the applicable position and exercise limits for those options. If approved, holders or traders of those ETFs could see FLEX options that settle in cash under the stated criteria.
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Key Dates
Department and Agencies
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