FINRA Updates Its Rules for Binary and Metric-Based Options
Published Date: 10/29/2026
Notice
Summary
FINRA is updating its rules to cover new types of options like binary options and those based on specific payout metrics, plus options cleared by agencies other than the usual one. This affects investors and firms trading these options, ensuring clearer rules and safer markets. The changes took effect right after filing on October 22, 2026, with no immediate cost impact but better oversight ahead.
Analyzed Economic Effects
7 provisions identified: 5 benefits, 2 costs, 0 mixed.
Binary Metric Options Now Defined
FINRA added new definitions for “binary option” and “underlying metric” and consolidated its “standardized option” definition to explicitly include options on metrics. Binary metric options are described as cash-settled, European-style contracts that generally have an exercise settlement amount of $1 and pay either $1 or $0 at expiration depending on whether a specified metric meets a threshold. FINRA says these option products are now subject to FINRA's existing options rules in a substantially comparable manner.
Position Limits Apply to Binary Options
FINRA added Rule 2360(b)(3)(D) to apply position limits to binary options. Members may not effect an opening transaction that would cause an aggregate position to exceed the position limits set by the exchange for that binary option, except in highly unusual circumstances with FINRA's prior written approval under the Rule 9600 Series.
Firms May Incur Compliance Costs
FINRA warns that participating firms may incur costs to update systems, supervisory procedures, training materials, account-opening processes, disclosure practices, reporting processes, and other operational controls to accommodate binary metric options and other products covered by the amendments.
Position Reporting Expanded to Metrics
FINRA amended its large options position reporting (LOPR) rules to explicitly cover options on metrics and kept the reportable threshold of an aggregate position of 200 or more option contracts on the same side of the market. Members must determine aggregate positions in accordance with contract equivalency conventions established by the listing exchange (for example, an exchange may treat 100 binary KPI option contracts as equivalent to one standard option contract).
Clearing-Agency Disclosure for Customers
Members must deliver the current disclosure document of the applicable Registered Clearing Agency to customers approved for trading options issued by that clearing agency (instead of only delivering the OCC Options Disclosure Document). Members must also distribute amendments to those disclosure documents and require customers trading such options to acknowledge receipt and agree to be bound by the applicable clearing agency's rules.
Confirmations Must Show Underlying Metric
FINRA amended confirmation requirements to require that written trade confirmations for options identify the underlying metric where applicable, just as confirmations identify an underlying security or index for other options.
Issuer-Related Sale Prohibition Extended
FINRA amended the rule that prohibits a member from entering a transaction for the sale (writing) of a call option for the account of a corporation that is the issuer of the underlying security to also cover a corporation that is the subject of the underlying metric. This clarifies the prohibition applies where the option overlying a metric could present similar issuer conflicts.
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