Nasdaq Lets Hot ETFs Settle FLEX Options in Cash
Published Date: 8/4/2026
Notice
Summary
Nasdaq ISE is updating its FLEX Options rules to allow certain ETFs with high trading activity to use cash settlement. This change affects traders dealing with FLEX Equity Options on ETFs and kicks in right away, aiming to make trading smoother and more flexible. No new fees are mentioned, but the new rules set clear standards for when ETFs qualify or lose this cash settlement option.
Analyzed Economic Effects
4 provisions identified: 4 benefits, 0 costs, 0 mixed.
One‑Month Lookback to Qualify ETFs
If an ETF newly becomes FLEX-eligible, the Exchange may make it eligible for cash-settled FLEX Equity Options based on the previous one-month trading period if it meets heightened thresholds of $600,000,000 average daily notional value and 5,616,000 shares average daily volume (ADV). This allows such ETFs to qualify for cash-settlement outside the regular bi-annual review cycle.
Tiered Wind‑Down for Ineligible ETFs
If an ETF fails the eligibility criteria at a bi-annual review, the Exchange will apply a tiered approach: if no open interest existed in cash-settled FLEX ETF options in the prior six months, new positions must be physically settled and open cash-settled positions may only be closed. If open interest did exist, new cash-settled positions are permitted for one year from the bi-annual review date, after which new positions must be physically settled unless the ETF regains eligibility at a bi-annual review during that year.
Removal of 50‑ETF Cap
The Exchange will remove the existing numerical cap that limited cash-settled FLEX Equity Options to no more than 50 underlying ETFs. Any ETF that satisfies the established eligibility criteria may be eligible for cash-settlement as a contract term.
Rule Change Operative Immediately
The Commission waived the usual 30-day operative delay and made the proposed amendments operative upon filing (filed July 29, 2026). The rule changes therefore took effect immediately upon filing.
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