NYSE Arca Proposes FLEX Options Rule Cleanup
Published Date: 7/7/2026
Notice
Summary
NYSE Arca wants to update its rules for FLEX Options, which let investors customize their trading contracts. These changes aim to make trading smoother and clearer for everyone involved. The updates could affect investors and traders using FLEX Options, with no big cost changes announced, and the new rules could roll out soon after approval.
Analyzed Economic Effects
5 provisions identified: 2 benefits, 2 costs, 1 mixed.
Cash Settlement Allowed for 50 Non-ETF Stocks
The Exchange proposes to allow cash settlement as a contract term for up to 50 non-ETF FLEX Equity Options whose underlying security has (over the prior six-month period) an average daily notional value of at least $500,000,000 and a national average daily volume of at least 4,680,000 shares. The Exchange identified 143 non-ETF securities that met these criteria as of December 31, 2025, and would permit the top 50 (by its selection method) to have cash-settled FLEX options.
Position Limits Apply to Cash-Settled FLEX
Positions in all FLEX Equity Options that are settled in cash under the proposed Rule 5.32-O(f)(3)(ii) would be subject to the Exchange's position limits in Rule 5.35-O and the exercise limits in Rule 5.36-O. As of December 31, 2025, the applicable position limit for each qualifying underlying would be 250,000 contracts under Rule 6.8, Commentary .06(e).
Exchange-Traded Alternative to OTC Options
The Exchange expects that some market participants who currently trade cash-settled customized options in the OTC market (e.g., hedge funds, proprietary trading firms, and pension funds) may migrate to exchange-traded cash-settled FLEX non-ETF Equity Options, which would be cleared through OCC and subject to standardized contract terms and Exchange surveillance. The Exchange asserts this could increase transparency, reduce counterparty credit risk, and may open these instruments to more retail investors.
Eligibility Metric Switch to Notional Value
Where more than 50 ETFs or more than 50 non-ETF securities qualify for cash-settled FLEX options, the Exchange will select the 50 qualifying securities with the highest average daily notional value rather than the highest average daily share volume. The notional-value metric uses the sum of trade share counts multiplied by execution price averaged over the prior six-month period.
OCC Clearance Required Before Trading
Cash-settled FLEX non-ETF Equity Options would not be available for trading on the Exchange until the Options Clearing Corporation (OCC) represents to the Exchange that it is fully able to clear and settle such options. The Exchange also represents it and OPRA have systems capacity to handle additional traffic.
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