IEX Options Launch: New Exchange Challenges Options Trading Status Quo
Published Date: 3/19/2025
Notice
Summary
IEX is planning to launch a new options trading platform called IEX Options and has proposed rules to govern how options will be traded there. This affects investors and traders who use IEX, with the SEC reviewing the rules and accepting public comments until April 21, 2025. If approved, this could open up fresh trading opportunities and possibly impact trading costs and strategies.
Analyzed Economic Effects
5 provisions identified: 1 benefits, 3 costs, 1 mixed.
Market-maker net-capital minimums
IEX proposes minimum net capital requirements of $200,000 for Registered Market Makers and $1,000,000 for Specialists (see proposed Rule 23.180 and proposed Rule 23.130(c)(1)(H)). These requirements apply to Options Market Makers and Specialists registering and maintaining appointments on IEX Options.
350-microsecond execution delay
IEX proposes a fixed de minimis delay of 350 microseconds on incoming order and quote messages so IEX can update its view of the market before processing orders and quotes. The delay is set in proposed Rule 22.100(n) and would not be configurable by the Exchange.
Options Risk Parameter (ORP) changes
IEX proposes an optional Options Risk Parameter (ORP) that the Exchange will determine on a class-by-class basis to protect Market Makers from excessive risk from execution of stale quotes. The ORP can cancel or reprice quotes, revises the quote instability calculation to assess option-series value, adds a delta bound band to exclude series outside the band, and uses a quote instability threshold range of 0–1 (0%–100%).
New market-making quoting obligations
IEX proposes that Market Makers maintain continuous two-sided quoting (defined as 90% of the time) and quote in at least 60% of non-adjusted series for Registered Market Makers and at least 90% for Specialists for options with less than nine months to expiration. The proposal also limits orders a Market Maker may submit in classes where it has no appointment to no more than 25% of all contracts the Market Maker executes on the Exchange in any calendar quarter.
No index options at launch
IEX is not proposing to trade index options at this time and therefore is not proposing rules for listing and trading index options. Under the current proposal, IEX Options would list and trade individual equity options but not index options.
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