Nasdaq PHLX Tweaks FLEX Trading Rules for Smoother Floors
Published Date: 5/8/2025
Notice
Summary
Nasdaq PHLX is updating its FLEX options trading rules to make floor trading smoother and more efficient for traders using these special contracts. These changes kick in right away and align with other recent updates, helping traders save time and possibly money. If you trade FLEX options on the Phlx exchange, get ready for a faster, clearer trading experience starting now!
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
FLEX Orders Must Be Reported to FBMS
The Exchange will require FLEX Orders (and Cabinet Orders represented in the trading crowd) to be recorded in Phlx's Options Floor Based Management System (FBMS) so executed FLEX contracts are reported to OPRA and sent to the OCC for clearing. The Exchange also removed its RFQ process, including the BBO Improvement Interval Process, as part of these changes.
Cash-Settled FLEX ETF Options Eligibility
Phlx will permit FLEX Equity Options on certain ETFs to be settled in cash if the ETF has an average daily notional value of $500,000,000 or more and an average daily volume (ADV) of at least 4,680,000 shares, measured over the prior six-month period. The Exchange will review qualifying ETFs bi-annually on January 1 and July 1, permit cash settlement as a contract term for no more than 50 ETFs, and if an ETF ceases to meet the criteria, new positions on that ETF must be physically settled while existing cash-settled positions may only be traded to close.
Position Limits for Cash-Settled FLEX ETF Options
FLEX Equity Options generally will have no position limits, except cash-settled FLEX Equity Options overlying ETFs will be subject to the position limits in Options 9, Section 13 and exercise limits in Options 9, Section 15, and positions in those cash-settled FLEX ETF Options will be aggregated with positions in physically-settled non-FLEX options on the same ETF. Of the 43 ETFs that met the initial $500 million notional and 4,680,000 ADV criteria for the June 1, 2024–January 1, 2025 period, 30 would have a 250,000-contract position limit; 6 would have a 500,000 limit; 4 would have a 1,000,000 limit; 1 would have a 1,800,000 limit; and 1 would have a 3,600,000 limit.
Allow P.M.-Settled FLEX Third-Friday Index Options
Phlx will allow p.m.-settled FLEX Index Options that expire on or within two business days of a third Friday-of-the-month expiration day for a non-FLEX option (so-called FLEX PM Third Friday Options). The Exchange notes that the Nasdaq-100 Index (NDX) and 1/100 Nasdaq-100 (XND) are the broad-based indexes that may be listed as FLEX PM Third Friday Options.
Minimum Exercise Sizes for FLEX Options
The minimum exercise size for FLEX Equity Options and FLEX Currency Options will be 25 contracts (or the remaining size of the position). The minimum exercise size for FLEX Index Options will be $1,000,000 underlying equivalent value (or the remaining underlying equivalent value of the position). Broad-based FLEX Index Options listed in Options 4A, Section 6(a) will have no exercise limits.
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Department and Agencies
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