Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules 5.32-O and 5.35-O Related to Flexible Exchange Options
Published Date: 1/30/2026
Notice
Summary
NYSE Arca is updating its rules to let certain FLEX Equity Options be settled in cash instead of stocks. This change affects traders using these flexible options and kicks in right away, making trading smoother and more flexible. No big money changes, just smarter ways to settle deals faster and easier.
Analyzed Economic Effects
6 provisions identified: 2 benefits, 2 costs, 2 mixed.
Cash Settlement Allowed for Certain FLEX ETF Options
The Exchange now allows some FLEX Equity Options where the underlying is an ETF to be settled in cash instead of by delivering shares. To qualify, an ETF must have, measured over the prior six-month period, an average daily notional value of $500,000,000 or more and a national average daily volume of at least 4,680,000 shares.
When an ETF Loses Eligibility, New Positions Must Be Physical
If, following a bi‑annual review, an ETF no longer meets the $500 million average daily notional or 4,680,000 ADV requirements, any new FLEX option positions on that ETF must be physically-settled. Open cash-settled FLEX ETF Option positions on that ETF may only be traded to close.
Position and Exercise Limits Apply and Are Aggregated
Cash-settled FLEX ETF Options will be subject to the Exchange's position limits (Rule 6.8-O) and exercise limits (Rule 6.9-O), and positions in cash-settled FLEX ETF Options will be aggregated with physically-settled options on the same underlying ETF. Of the 50 ETFs identified as currently eligible, 34 have a 250,000-contract position limit, 10 have a 500,000-contract limit, four (EEM, EFA, FIX, and IWM) have a 1,000,000-contract limit, QQQ has a 1,800,000-contract limit, and SPY has a 3,600,000-contract limit (position limits as of June 30, 2025).
Exchange Listing May Move OTC Trades to OCC‑Cleared Exchange
The Exchange expects some market participants who trade OTC cash-settled FLEX ETF Options (for example, hedge funds, proprietary trading firms, and pension funds) to migrate to exchange-traded, OCC-cleared cash-settled FLEX ETF Options. Exchange trading would standardize terms, reduce counterparty credit risk by using the Options Clearing Corporation (OCC), and increase price transparency.
Selection Cap and Biannual Eligibility Review
The Exchange will permit cash settlement as a contract term for no more than 50 underlying ETFs that meet the $500 million average daily notional and 4,680,000 ADV criteria. The Exchange will determine eligibility bi‑annually using the prior six months of trading data on January 1 and July 1, and newly qualified securities will be permitted cash settlement beginning February 1 and August 1 following each review.
Certain Bitcoin Trusts Excluded from FLEX Trading
The Exchange will not authorize for trading a FLEX Equity Option class (either cash-settled or physically-settled) on the iShares Bitcoin Trust (IBIT), the Grayscale Bitcoin Trust (GBTC), the Grayscale Bitcoin Mini Trust (BTC), and the Bitwise Bitcoin ETF (BITB). If the Exchange later decides to allow FLEX trading on such options, it will do so by submitting a 19b-4 rule filing.
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