Nasdaq PHLX Upgrades Complex Orders – Traders Rejoice Quietly
Published Date: 4/21/2025
Notice
Summary
Nasdaq PHLX is updating its complex order system to match other exchanges, making trading smoother and safer for options traders. These changes include new order types and risk protections, and they take effect immediately with no extra costs. Traders and market makers will benefit from faster, clearer rules starting now!
Analyzed Economic Effects
5 provisions identified: 2 benefits, 0 costs, 3 mixed.
Phlx adopts ISE/MRX legging rules
The Exchange is replacing Phlx's complex order rules with functionality identical to ISE and MRX for Legging Orders and Complex Orders. As of the filing on April 3, 2025 (immediately effective), Phlx will permit a Legging Order to be generated for one or both legs of a two-legged Complex Options Order, and two Legging Orders related to the same Complex Options Order can be generated and both can execute.
ACE parameter replaced with set price limits
Phlx will remove its existing ACE parameter and replace it with price limits identical to ISE and MRX. The System will not permit any leg of a complex strategy to trade through the NBBO by more than the lesser of (i) an absolute amount not to exceed $0.10, and (ii) a percentage of the NBBO not to exceed 500%. Members can also use a Do-Not-Trade-Through (DNTT) instruction.
Faster leg generation interval
Phlx proposes to change the System's evaluation interval for generating Legging Orders from 500 milliseconds to 100 milliseconds. That means the exchange will re-check whether to generate Legging Orders much more frequently after complex order or NBBO/PBBO changes.
Legging orders use minimum price increment
Phlx will change Legging Order pricing so Legging Orders are generated and executed in the minimum increment for the options series rather than in non-minimum increments and then rounded. This aligns Phlx behavior with ISE and MRX.
No customer/market-maker capacity on legging orders
The Exchange will treat Legging Orders as having no Public Customer or Market Maker capacity on the single-leg limit order book, regardless of whether the Complex Options Order that generated them came from a Public Customer or Market Maker. That means Legging Orders do not carry participant-type priority on the single-leg book.
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