Options Remix: Cboe Adds FLEX to Complex Order Mix
Published Date: 2/3/2025
Notice
Summary
Cboe Exchange is updating its rules to let traders mix flexible options (FLEX) with regular options in one complex order. This change makes trading more flexible and could help investors manage their trades better. The SEC gave this update a speedy thumbs-up, so it’s ready to roll out soon with no extra costs announced.
Analyzed Economic Effects
6 provisions identified: 5 benefits, 0 costs, 1 mixed.
Combine FLEX and Listed Legs in One Order
The Exchange now allows a single complex FLEX order to include both FLEX option series and non-FLEX (listed) option series (a “FLEX v. Non-FLEX Order”), so you no longer must submit separate orders to execute a strategy with both types of legs. The SEC approved the rule change on January 28, 2025.
Pricing Protections for Non‑FLEX Legs
The non-FLEX legs of a FLEX v. Non-FLEX Order may not execute at prices worse than the BBO or the NBBO and must respect Priority Customer protection (they must trade at a price better than resting Priority Customer interest on the Simple Book). If a non-FLEX leg cannot execute at a permissible price, the entire FLEX v. Non-FLEX Order will be cancelled.
Obvious/Error Adjustments for Non‑FLEX Legs
If a non-FLEX leg of a FLEX v. Non-FLEX Order qualifies as an Obvious Error or Catastrophic Error under Rule 6.5, that non-FLEX leg will be adjusted per the stated adjustment rules regardless of the counterparty; however, if adjusting would make a customer's net execution price worse, that non-FLEX leg will be nullified, and if any leg is nullified the entire transaction is nullified.
Different Exercise Styles Allowed
The Exchange removed the prior requirement that all legs of a complex FLEX order must have the same exercise style, so you may combine legs with different exercise styles in a single complex FLEX order. This change is intended to give traders more flexibility to shape strategies.
Non‑FLEX Legs Cannot Leg Into Simple Book
When you submit a FLEX v. Non-FLEX Order, any non-FLEX (listed) option leg may not leg into the Exchange's Simple Book. The rule aims to improve execution and processing of these combined orders and to protect resting Simple Book priority customer interest.
Nonconforming Orders May Need Manual Handling
In classes the Exchange determines, a nonconforming FLEX v. Non-FLEX Order (e.g., leg ratios outside prescribed ranges) will not be eligible for electronic processing and may only be submitted for manual handling and open outcry. This applies to orders with ratios less than 0.333 or greater than 3.00, per the Exchange's nonconforming definition.
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