Notice2026-01374
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Short Term Option Series Program in Rule 4.5(d)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 26, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 16 (Monday, January 26, 2026)</title>
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[Federal Register Volume 91, Number 16 (Monday, January 26, 2026)]
[Notices]
[Pages 3268-3280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01374]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104643; File No. SR-CBOE-2026-007]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Short Term Option Series Program in Rule 4.5(d)
January 21, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 16, 2026, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend
[[Page 3269]]
the Short Term Option Series Program in Rule 4.5(d). The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Short Term Option Series Program
in Rule 4.5(d). Specifically, the Exchange proposes to permit the
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or exchange-traded funds (``ETFs)
(collectively, ``Qualifying Securities''). This is a competitive filing
based on a similar proposal submitted by Nasdaq ISE, LLC (``ISE''),\5\
which was recently approved by the Securities and Exchange Commission
(the ``Commission'').\6\
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\5\ See Securities Exchange Act Release No. 103434 (July 10,
2025) (SR-ISE-2025-15) (``ISE Amendment No. 1'').
\6\ See Securities Exchange Act Release No. 104624 (January 16,
2026) (SR-ISE-2025-15) (``ISE Approval'').
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Currently, as set forth in Rule 4.5(d), after an option class has
been approved for listing and trading on the Exchange as a Short Term
Option Series pursuant to Rule 4.5(d), the Exchange may open for
trading on any Thursday or Friday that is a business day (``Short Term
Option Opening Date'') series of options on that class that expire at
the close of business on each of the next five Fridays that are
business days and are not Fridays in which standard expiration options
series, Monthly Options Series, or Quarterly Options Series expire
(``Friday Short Term Option Expiration Dates''). The Exchange may have
no more than a total of five Short Term Option Expiration Dates
(``Short Term Option Weekly Expirations''). Further, if the Exchange is
not open for business on the respective Thursday or Friday, the Short
Term Option Opening Date for Short Term Option Weekly Expirations will
be the first business day immediately prior to that respective Thursday
or Friday. Similarly, if the Exchange is not open for business on a
Friday, the Short Term Option Expiration Date for Short Term Option
Weekly Expirations will be the first business day immediately prior to
that Friday.
Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of Rule 4.5(d) that expire at the
close of business on each of the next two Mondays, Tuesdays,
Wednesdays, and Thursdays, respectively, that are business days beyond
the current week and are not business days in which standard expiration
options series, Monthly Options Series, or Quarterly Options Series
expire (``Short Term Option Daily Expirations'').\7\ For those symbols
listed in Table 1, the Exchange may have no more than a total of two
Short Term Option Daily Expirations beyond the current week for each of
Monday, Tuesday, Wednesday, and Thursday expirations, as applicable, at
one time.
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\7\ As set forth in Table 1 of Rule 4.5(d), the Exchange
currently permits expirations in SPY, IWM, QQQ on Mondays, Tuesdays,
Wednesdays and Thursdays. Also, the Exchange permits expirations in
GLD, SLV and TLT on Mondays and Wednesdays. Finally, the Exchange
permits expirations in USO and UNG on Wednesdays. The Exchange
proposes to update the introductory paragraph under ``Short Term
Option Daily Expirations'' in Rule 4.5(d) to capitalize the term
``Monthly Option Series'' (as that is a defined term in Rule 4.5(g))
and add in ``standard expiration options series, to conform to the
introductory language in Rule 4.5(d). While standard expiration
options series generally expire on a Friday, if the Exchange is not
open for business on a Friday, the standard expiration will fall on
another day of the week, generally Thursday. This clarification
provides that series that may be opened under the Short Term Option
Series Program with expirations on these other days will not be
opened if the standard expiration options series happens to fall on
a day other than Friday.
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The Exchange proposes to expand the Short Term Option Series
Program to permit certain Qualifying Securities to list up to two
Monday and Wednesday expirations in addition to the Friday weekly
expiration. The Exchange proposes to define Qualifying Securities as
eligible individual stocks or ETFs, which are separate and apart from
the symbols listed in Table 1, that have received approval to list
additional expiries on specific symbols, that meet the following
criteria on a quarterly basis:
(1) an underlying security, as measured on the last day of the
prior calendar quarter, must have:
(A) a market capitalization of greater than 700 billion dollars for
an individual stock based on the closing price,\8\ or
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\8\ The closing price and the opening price shall be that of the
primary exchange where the security is listed.
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(B) Assets under Management (``AUM'') greater than 50 billion
dollars for an ETF based on net asset value (``NAV'');
(2) monthly options volume, as measured by sides traded in the last
month preceding the quarter end, of greater than 10 million options;
(3) a position limit of at least 250,000 contracts; and
(4) participate in the Penny Interval Program.
Each calendar quarter, the Exchange will apply the above criteria
to individual stocks and ETFs to determine eligibility for the
following quarter as a Qualifying Security. Beginning on the second
trading day in the first month of each calendar quarter, the market
capitalization of individual stocks shall be calculated based on the
closing price established on the primary exchange on the last trading
day of the prior calendar quarter and the AUM for ETFs shall be
calculated based on the NAV established on the primary exchange on the
last trading day of the prior calendar quarter. The data establishing
the volume thresholds will be established by using data from the last
month of the prior calendar quarter from The Options Clearing
Corporation. For options listed on the first trading day of a given
calendar quarter, the volume shall be calculated using the last month
of the quarter prior to that calendar quarter.\9\ The Exchange will
make the list of Qualifying Securities available by close of business
on the first trading day of the quarter.\10\
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\9\ OCC data becomes available for the end of a quarter on the
first trading day of a new quarter. For example, if the Exchange
were to list Qualifying Securities in Q1 of 2026, the Exchange would
look at the volume, measured in sides, for the last month of Q4 of
2025 (or December 2025).
\10\ The Exchange will make this information available on its
website. This information will be freely accessible to the public.
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Eligible Qualifying Securities would be permitted to list two Short
Term Option Expiration Dates beyond the current week for each Monday
and Wednesday expiration at one time. For Qualifying Securities, the
Exchange would not list an expiry on a day when there will be an
Earnings
[[Page 3270]]
Announcement \11\ that takes place after market close. For purposes of
this rule proposal, earnings announcements shall include official
public quarterly or yearly earnings filed with the Commission
(``Earnings Announcement'').\12\ Not listing an expiry for a Qualifying
Security on a day where there is an Earnings Announcement that takes
place after market close will avoid permitting an additional expiry on
a day where post-close price volatility may be impacted due to the
Earnings Announcement.
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\11\ An Earnings Announcement is an official public statement of
a company's profitability for a specific period, typically a quarter
or a year.
\12\ For purposes of this rule proposal, pre-announcements or
``guidance'' shall not be considered an Earnings Announcement.
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Qualifying Securities that do not continue to meet the above
criteria would no longer be permitted to list Monday and Wednesday
expiries beginning on the second day of the following quarter.\13\
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\13\ The Exchange has noted the additional expiries in a
proposed Table 2 in Rule 4.5(d) along with the criteria for a
Qualifying Security.
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The proposed Monday Qualifying Securities expirations will be
similar to the current Monday Expirations in SPY, QQQ, and IWM (among
other symbols that may list a Monday Expiration) in Short Term Option
Daily Expirations, as set forth in Rule 4.5(d), such that the Exchange
may open for trading on any Friday or Monday that is a business day
(beyond the current week) series of options on Qualifying Securities to
expire on any Monday of the month that is a business day and is not a
Monday in which standard expiration options series, Monthly Options
Series, or Quarterly Options Series expire, provided that Monday
expirations that are listed on a Friday must be listed at least one
business week and one business day prior to the expiration (``Monday
Qualifying Securities Expirations'').\14\ In the event Qualifying
Securities expire on a Monday and that Monday is the same day that a
standard expiration options series, Monthly Options Series, or
Quarterly Options Series expires, the Exchange would skip that week's
listing and instead list the following week; the two weeks would
therefore not be consecutive. Today, Monday expirations in SPY, QQQ,
and IWM similarly skip the weekly listing in the event the weekly
listing expires on the same day in the same class as a standard
expiration options series, Monthly Options Series, or Quarterly Options
Series.
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\14\ They may also trade on Fridays, as is the case for all
options series in the Short Term Option Series Program.
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The proposed Wednesday Qualifying Securities expirations will be
similar to the current Wednesday SPY, QQQ, and IWM (among other symbols
that may list a Wednesday Expiration) in Short Term Option Daily
Expirations set forth in Rule 4.5(d), such that the Exchange may open
for trading on any Tuesday or Wednesday that is a business day (beyond
the current week) series of options on Qualifying Securities to expire
on any Wednesday of the month that is a business day and is not a
Wednesday in which standard expiration options series, Monthly Options
Series, or Quarterly Options Series expire (``Wednesday Qualifying
Securities Expirations'').\15\ In the event Qualifying Securities
expire on a Wednesday and that Wednesday is the same day that a
standard expiration options series, Monthly Options Series, or
Quarterly Options Series expires, the Exchange would skip that week's
listing and instead list the following week; the two weeks would
therefore not be consecutive. Today, Wednesday expirations in SPY, QQQ,
and IWM similarly skip the weekly listing in the event the weekly
listing expires on the same day in the same class as a standard
expiration options series, Monthly Options Series, or Quarterly Options
Series.
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\15\ See id.
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The interval between strike prices for the proposed Monday and
Wednesday Qualifying Securities Expirations will be the same as those
currently applicable for SPY, QQQ, and IWM Monday and Wednesday
Expirations (among other symbols that may list a Monday or Wednesday
Expiration) in the Short Term Option Series Program.\16\ Specifically,
the Monday and Wednesday Qualifying Securities Expirations will have a
strike interval of (i) $0.50 or greater for strike prices below $100,
and $1 or greater for strike prices between $100 and $150 for all
option classes that participate in the Short Term Option Series
Program, (ii) $0.50 for option classes that trade in one dollar
increments and are in the Short Term Option Series Program, or (iii)
$2.50 or greater for strike prices above $150.\17\ As is the case with
other equity options series listed pursuant to the Short Term Option
Series Program, the Monday and Wednesday Qualifying Securities
Expirations series will be P.M.-settled.
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\16\ See Rule 4.5(d)(5). The Exchange notes that equity options
which have an expiration of more than 21 days from the listing date
would also be subject to the intervals as noted within Rule
4.5(d)(6).
\17\ See Rule 4.5(d)(5).
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Pursuant to Rule 4.5(d), with respect to the Short Term Option
Series Program, if a Monday is not a business day, the series shall
expire on the first business day immediately following that Monday, and
a Wednesday expiration series shall expire on the first business day
immediately prior to that Wednesday, e.g., Tuesday of that week if the
Wednesday is not a business day. Currently, for each option class
eligible for participation in the Short Term Option Series Program, the
Exchange is limited to opening thirty (30) series for each expiration
date for the specific class.\18\ The thirty (30) series restriction
does not include series that are open by other securities exchanges
under their respective weekly rules; the Exchange may list these
additional series that are listed by other options exchanges.\19\ With
the proposed changes, this thirty (30) series restriction would apply
to Monday and Wednesday Qualifying Securities Expirations as well. In
addition, the Exchange will be able to list series that are listed by
other exchanges, assuming they file similar rules with the Commission
to list Monday and Wednesday Qualifying Securities Expirations.
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\18\ See Rule 4.5(d)(1).
\19\ See id.
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With this proposal, Monday and Wednesday Qualifying Securities
Expirations would be treated similar to existing SPY, QQQ, and IWM
Monday and Wednesday Expirations. With respect to standard expiration
option series, Monday and Wednesday Qualifying Securities Expirations
will be permitted to expire in the same week in which standard
expiration option series on the same class expire.\20\ Not listing
Monday and Wednesday Qualifying Securities Expirations for one week
every month because there was a standard options series on that same
class on the Friday of that week would create investor confusion.
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\20\ See Rule 4.5(d)(2).
\21\ See 4.5(d).
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Further, as with SPY, QQQ, and IWM Monday and Wednesday
Expirations, the Exchange would not permit Monday and Wednesday
Qualifying Securities Expirations to expire on a business day in which
standard expiration option series, Monthly Options Series, or Quarterly
Options Series expire.\21\ Therefore, all Monday and Wednesday
Qualifying Securities Expirations would expire at the close of business
on each of the next two Mondays and Wednesdays, respectively, that are
business days and are not business days in which standard expiration
option series, Monthly Options Series, or
[[Page 3271]]
Quarterly Options Series expire. The Exchange believes that it is
reasonable to not permit two expirations on the same day in which a
standard expiration option series, Monthly Options Series, a Quarterly
Options Series would expire because those options would be duplicative
of each other. The Exchange does not believe that any market
disruptions will be encountered with the introduction of Monday and
Wednesday Qualifying Securities Expirations. The Exchange currently
trades P.M.-settled Short Term Option Series that expire Monday,
Tuesday, Wednesday and Thursday on several symbols \22\ and has not
experienced any market disruptions nor issues with capacity. Today, the
Exchange has surveillance programs in place to support and properly
monitor trading in Short Term Option Series that expire Monday,
Tuesday, Wednesday and Thursday on several symbols.\23\ The Exchange
believes that it has the necessary capacity and surveillance programs
in place to support and properly monitor trading in the proposed Monday
and Wednesday Qualifying Securities Expirations.
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\22\ Abandoning an option means electing not to take delivery of
stock that would occur through Auto Exercise at The Options Clearing
Corporation (``OCC''). ``Auto-exercise'' or ``automatic exercise''
in options trading refers to the procedure where a long option
(either a call or a put) that is in-the-money at the time of
expiration is automatically exercised on the holder's behalf by OCC.
\23\ See id.
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In ISE Amendment No. 1, ISE presented data demonstrating that
listings in the Short Term Option Series Program comprise a significant
part of the standard listings in the options market based on data ISE
sourced from OCC.\24\ The percentage of weekly listings in the options
industry compared to monthly, quarterly, and long-term option
(``LEAPS'') series for a 12-month period from February 11, 2024 to
February 11, 2025 was 19% compared to 61%, 1%, and 19%,
respectively.\25\ While the proposed rule change would expand the Short
Term Option Series Program to permit Monday and Wednesday Qualifying
Securities Expirations, the Exchange anticipates that it would overall
add a small number of weekly expiration dates because the Exchange will
limit the number of Qualifying Securities Expirations to two Monday
expirations and two Wednesday expirations. Based on data from January
2025, ISE indicated the following options would meet the criteria to be
a Qualifying Security: NVIDIA Corp. (``NVDA''), Tesla Inc. (``TSLA''),
Apple Inc. (``AAPL''), <a href="http://Amazon.com">Amazon.com</a> Inc. (``AMZN''), Broadcom Inc.
(``AVGO''), Alphabet Inc. (``GOOGL''), Microsoft Corp. (``MSFT''),
Financial Select Sector SPDR Fund (``XLF''), and Meta Platforms Inc.
(``META'') (collectively, ``Sample Qualifying Securities''). Utilizing
the Sample Qualifying Securities as a data point, ISE indicated the
Short Term Option Series Program would account for the addition of
approximately 16% of strikes for the total number of strikes for each
of the following symbols: NVDA, TSLA, AAPL, AMZN, AVGO, GOOGL, MSFT,
and META.\26\
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\24\ The information included time averaged data (the number of
strikes by maturity date divided from the number of trading days)
for all 18 options markets from February 11, 2024 to February 11,
2025. See ISE Amendment No. 1 at 31719.
\25\ See id. (Table 1).
\26\ See ISE Amendment No. 1 at 31720.
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For the same time period, ISE also indicated that weeklies
comprised 52% of the total volume of option contracts (compared to 34%,
2%, and 12% for monthlys, quarterlys, and LEAPS, respectively).\27\ The
Exchange believes that inner weeklies (first two weeks) represent high
volume as compared to outer weeklies (the last three weeks) and would
be more attractive to market participants. In particular, ISE looked at
the average daily contracts traded in options that met the criteria for
a Qualifying Security. Specifically, for each of the Sample Qualifying
Securities, ISE looked at pre-close movements between 3:30 and 4:00
p.m. Eastern Time (``ET'') as well as post-close movements between 4:00
and 5:30 p.m. ET. ISE presented data presenting the number of trading
days with at least one strike break post close (comparing 4:00 p.m. ET
to 5:30 p.m. ET) from 2022 through 2024 for the Sample Qualifying
Securities and SPY, QQQ, and IWM.\28\ ISE further presented data
referencing average annualized closing volatilities (as measured by the
standard deviation of 30 seconds returns over the last 30 minutes of
trading) for the Sample Qualifying Securities from 2022 through 2024,
which data showed that the Sample Qualifying Securities had an averaged
annualized closing volatility of generally less than 20%.\29\ This data
demonstrated that the Sample Qualifying Securities are generally more
volatile at the close than SPY, QQQ, and IWM.
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\27\ ISE based this on industry volume in terms of overall
contracts based on information sourced from OCC for all 18 options
markets from February 11, 2024 to February 11, 2025. See id. (Table
2).
\28\ See ISE Amendment No. 1 at 31721 (Table 3).
\29\ See ISE Amendment No. 1 at 31721 (Table 4).
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Given that these are individual stocks it is reasonable to expect
that they have idiosyncratic characteristics (increasing their
volatility) relative to broad based ETFs like SPY, QQQ and IWM. None,
however, are demonstrating average returns that are more than double
that of IWM. Moreover, on Mondays and Wednesdays, the ISE data
demonstrates that the Sample Qualifying Securities do not show any
excessive propensity to penetrate \30\ strikes post close (4:00 p.m.-
5:30 p.m. ET) in comparison to SPY, QQQ and IWM. Consequently, the
burden of American-style option \31\ exercise management on investors
is not overwhelming relative to SPY, QQQ and IWM which have the largest
retail participation based on volume in the industry.
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\30\ For purposes of this rule change, ``penetrating a strike''
refers to the underlying asset's price moving beyond the designated
strike price of an option contract.
\31\ The term ``American-style option'' means an options
contract that, subject to the provisions of Rule 6.20 (relating to
the cutoff time for exercise instructions) and to OCC Rules, can be
exercised on any business day prior to its expiration date and on
its expiration date. See Rule 1.1 (definition of ``American-style
option'').
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ISE also reviewed the number of strike breaks for calendar years
2022 through 2025 for the Sample Qualifying Securities between 4:00
p.m. and 5:30 p.m. ET to find the maximum \32\ number of strike breaks
\33\ as well as the mean \34\ of the number of strike breaks as
evidenced in the tables below:
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\32\ The term ``maximum'' refers to the largest instance of
strike breaks measured as the number of strikes crossed by the
underlying security from the 4:00 p.m. ET closing price to the 9:30
a.m. ET opening price.
\33\ A strike break is the existence of a strike between the
closing price and the opening price on the following day when there
has been a penetration of a strike post-close.
\34\ The term ``mean'' refers to the average number of strike
breaks when there has been a penetration of a strike post-close.
[[Page 3272]]
Monday, Non-Earnings Announcement Charts
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Mean strikes
Max (strikes moved through on
Number of days moved through on Max (percentage a non-earnings
with strike break non-earnings move overnight on announcement
through on non- announcement non-earnings Monday when there
earnings Mondays from 4:00 announcement is an instance of
Security announcement p.m. to 9:30 a.m. Mondays when move through
Mondays (4:00 next day) when there is a strike (from 4:00 p.m.
p.m. ET-5:30 p.m. strikes are break from 4:00 to 5:30 p.m. on a
ET) penetrated from p.m. to 5:30 p.m. non-earnings
4:00-5:30 p.m. ET ET) (%) announcement
Monday)
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2022
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AAPL................................ 1 2.33 1.63 2.33
AMZN................................ 9 14.10 4.32 4.94
AVGO................................ 3 2.76 1.36 1.80
FB.................................. 1 6.28 8.00 6.28
GOOGL............................... 9 22.86 5.13 5.96
IWM................................. 4 2.04 1.02 0.84
MSFT................................ 0 N/A N/A N/A
NVDA................................ 1 0.21 0.24 0.21
QQQ................................. 4 5.30 1.81 2.31
SPY................................. 7 8.33 2.27 2.68
TSLA................................ 3 4.33 3.21 3.09
XLF................................. 4 0.98 1.24 0.56
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2023
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AAPL................................ 0 N/A N/A N/A
AMZN................................ 0 N/A N/A N/A
AVGO................................ 6 5.18 2.03 3.24
GOOGL............................... 1 2.78 1.02 2.78
IWM................................. 0 N/A N/A N/A
META................................ 1 0.18 0.15 0.18
MSFT................................ 0 N/A N/A N/A
NVDA................................ 1 3.24 1.85 3.24
QQQ................................. 0 N/A N/A N/A
SPY................................. 1 2.21 0.52 2.21
TSLA................................ 1 0.66 0.46 0.66
XLF................................. 0 N/A N/A N/A
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2024
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AAPL................................ 0 N/A N/A N/A
AMZN................................ 0 N/A N/A N/A
AVGO................................ 9 6.50 2.10 1.99
GOOGL............................... 0 N/A N/A N/A
IWM................................. 2 0.74 0.36 0.5
META................................ 3 1.31 0.68 0.78
MSFT................................ 1 1.94 1.22 1.94
NVDA................................ 6 7.42 3.44 5.24
QQQ................................. 2 2.35 0.54 1.62
SPY................................. 1 2.2 0.43 2.2
TSLA................................ 3 5.19 2.80 3.40
XLF................................. 1 0.5 0.59 0.5
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2025
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AAPL................................ 0 N/A N/A N/A
AMZN................................ 0 N/A N/A N/A
AVGO................................ 4 13.95 9.05 4.63
GOOGL............................... 1 0.00 0.01 0.00
IWM................................. 1 0.22 0.10 0.22
META................................ 2 1.91 0.69 1.23
MSFT................................ 1 0.18 0.12 0.18
NVDA................................ 5 6.16 6.31 2.72
QQQ................................. 4 14.73 3.48 5.37
SPY................................. 5 17.62 3.49 4.86
TSLA................................ 3 4.35 2.81 2.38
XLF................................. 0 N/A N/A N/A
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* With respect to GOOGL, it had a strike break post-close but mean reverted to the closing price by the open the
next day.
[[Page 3273]]
ISE further reviewed the number of strike breaks for calendar years
2022 through 2025 for the Sample Qualifying Securities,\35\ excluding
Wednesdays,\36\ for scheduled Earnings Announcements between 4:00 p.m.
and 5:30 p.m. ET to find the maximum number of strike breaks as well as
the mean of the number of strike breaks as evidenced in the tables
below:
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\35\ Of note, not all Sample Qualifying Securities had Earnings
Announcements on a Wednesday.
\36\ There were no Earnings Announcements on Mondays for the
Sample Qualifying Securities.
Wednesday, Non-Earnings Announcement Charts
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Mean strikes
moved through on
Max (strikes Max (percentage a non-earnings
Number of days moved through on move overnight on announcement
with strike break non-earnings non-earnings Wednesday when
through on non- announcement announcement there is an
Security earnings Wednesdays from Wednesdays when instance of move
announcement 4:00 p.m. to 9:30 there is a strike through (from
Wednesdays (4:00 a.m. next day) break from 4:00 4:00 p.m. to 5:30
p.m. ET-5:30 p.m. when strikes are p.m. to 5:30 p.m. p.m. on a non-
ET) penetrated from ET) (%) earnings
4:00-5:30 p.m. ET announcement
Wednesday)
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2022
----------------------------------------------------------------------------------------------------------------
AAPL................................ 0 N/A N/A N/A
AMZN................................ 14 35.50 5.89 8.35
AVGO................................ 9 4.85 2.13 2.07
FB.................................. 2 31.20 24.15 21.22
GOOGL............................... 10 8.73 1.86 4.22
IWM................................. 7 3.71 1.80 2.07
MSFT................................ 2 1.54 1.23 1.14
NVDA................................ 6 8.88 6.20 5.05
QQQ................................. 10 10.75 3.26 4.39
SPY................................. 9 10.94 2.59 4.47
TSLA................................ 8 12.73 8.33 3.45
XLF................................. 6 0.84 1.04 0.42
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2023
----------------------------------------------------------------------------------------------------------------
AAPL................................ 1 1.08 1.61 1.08
AMZN................................ 3 5.30 5.04 3.05
AVGO................................ 11 10.31 2.94 2.64
FB.................................. 6 7.32 5.35 3.59
GOOGL............................... 2 1.09 0.63 0.87
IWM................................. 1 1.70 1.45 1.70
MSFT................................ 2 3.67 2.92 3.00
NVDA................................ 3 4.20 2.48 2.06
QQQ................................. 6 7.59 2.29 4.38
SPY................................. 5 4.08 0.99 2.63
TSLA................................ 4 6.39 7.88 2.50
XLF................................. 1 0.12 0.19 0.12
----------------------------------------------------------------------------------------------------------------
2024
----------------------------------------------------------------------------------------------------------------
AAPL................................ 0 N/A N/A N/A
AMZN................................ 1 2.77 3.92 2.77
AVGO................................ 15 10.85 4.42 3.71
GOOGL............................... 3 3.20 5.03 2.86
IWM................................. 1 2.22 1.02 2.22
META................................ 5 5.52 2.56 2.66
MSFT................................ 2 6.09 3.72 4.11
NVDA................................ 15 8.32 3.32 2.82
QQQ................................. 16 11.16 2.37 4.16
SPY................................. 7 9.67 1.72 4.79
TSLA................................ 1 1.70 2.06 1.70
XLF................................. 0 N/A N/A N/A
----------------------------------------------------------------------------------------------------------------
2025
----------------------------------------------------------------------------------------------------------------
AAPL................................ 1 7.36 8.21 7.36
AMZN................................ 1 5.20 6.64 5.20
AVGO................................ 5 11.45 6.65 6.19
GOOGL............................... 1 2.38 3.79 2.38
IWM................................. 2 9.52 4.70 7.39
META................................ 3 15.55 6.66 7.17
MSFT................................ 2 3.35 2.14 1.90
[[Page 3274]]
NVDA................................ 4 6.91 6.26 2.56
QQQ................................. 7 19.87 4.17 7.22
SPY................................. 5 19.45 3.45 8.35
TSLA................................ 1 7.03 6.21 7.03
XLF................................. 1 3.90 3.89 3.90
----------------------------------------------------------------------------------------------------------------
Because the Exchange proposes to limit the number of Monday and
Wednesday Qualifying Securities Expirations to two expirations beyond
the current week, the Exchange believes that the addition of these
Monday and Wednesday Qualifying Securities Expirations should encourage
Market-Makers to continue to deploy capital more efficiently and
improve displayed market quality.\37\ Utilizing the Sample Qualifying
Securities as a proxy, ISE determined the marginal increase in the
number of occurrences of strike breaks in 2024 would be 66 with the
addition of these expirations. Further, there would be a marginal
increase of 22 instances of strike breaks in 2024 on Monday expiries
after regular trading hours, and a marginal increase of 44 instances of
strike breaks in 2024 on Wednesday expiries without Earnings
Announcements after regular trading hours.
---------------------------------------------------------------------------
\37\ Market-Makers include Designated Primary Market-Makers
(``DPMs''), Lead Market-Makers (``LMMs''), and Preferred Market-
Makers (``PMMs''). Each Market-Maker is required to quote a
specified time in their assigned options series. See Rules 5.52
(Market-Makers Quotes), 5.54 (DPMs), 5.55 (LMMs), and 5.56 (PMMs).
---------------------------------------------------------------------------
Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Securities Expirations
will, among other things, expand hedging tools available to market
participants and allow for a reduced premium cost of buying portfolio
protection. The Exchange believes that the proposal would permit only
the most liquid securities to have the additional Monday and Wednesday
Qualifying Security Expirations. The Exchange believes that offering
these additional expiries in the Qualifying Securities would permit
Market Makers and other market participants to precisely hedge their
positions in the underlying security with the additional expiries in
lieu of hedging only with Friday expirations.
Finally, the Exchange considered ISE's analysis of the impact of a
market participant's propensity to rationally exercise outstanding
options contracts by the tender of an exercise notice (``Contrary
Exercise Advice'').\38\ Specifically, ISE examined SPY data from April
2, 2025 (a day where there was a significant drop after the close).\39\
On April 2, 2025, SPY settled at 4:00 p.m. at $564.52.\40\ At 5:00
p.m., SPY was trading at $552.42.\41\ Every call option with a April 2,
2025 expiration date and a strike price below $564 was automatically
exercised by OCC, unless OCC received Contrary Exercise Advices from a
market participant.\42\ ISE obtained the amount of long \43\ open
interest in the customer or ``C'' range \44\ at OCC starting at the
close of the prior trading day and added customer long activity that
executed on April 2, 2025 to that figure. Next, ISE subtracted the
liquidating activity for customers and examined the quantity of
Contrary Exercise Advices received by OCC on April 2, 2025 and compared
that figure to the number of customers that did not abandon their calls
rationally relative to the number of customers who entered into options
contracts. The data in the tables below (which should be read together)
applies to calls in SPY in the customer range at OCC for expiration
date April 2, 2025.
---------------------------------------------------------------------------
\38\ A Contrary Exercise Advice may be exercised during the time
period specified in OCC Rules by the tender to OCC of an exercise
notice in accordance with OCC Rules. An exercise notice may be
tendered to OCC only by the Clearing TPH in whose account such
options contract is carried with OCC. TPHs may establish fixed
procedures as to the latest time they will accept exercise
instructions from customers. See Rule 6.20. Option holders have
until 5:30 p.m. ET on the business day of expiration, or, in the
case of a standardized equity option expiring on a day that is not a
business day, on the business day immediately prior to the
expiration date to make a final exercise decision to exercise or not
exercise an expiring option. TPHs may not accept exercise
instructions for customer or non-customer accounts after 5:30 p.m.
ET. See FINRA Rule 2360(a)(23)(A)(iii). A Contrary Exercise Advice
is a form approved by the national options exchanges, FINRA or OCC
for use by a member to submit a final exercise decision committing
an options holder to either: (1) not exercise an option position
which would automatically be exercised pursuant to OCC's Ex-by-Ex
procedure; or (2) to exercise a standardized equity option position
which would not automatically be exercised pursuant to OCC's Ex-by-
Ex procedure. See FINRA Rule 2360(a)(23)(A)(iv).
\39\ On April 2, 2025, President Trump announced a series of
tariffs on imports, which he called ``Liberation Day.'' This news
impacted markets generally.
\40\ ISE obtained this data from OCC upon request.
\41\ See id.
\42\ See id.
\43\ The term ``long position'' means a person's interest as the
holder of one or more options contracts. See Rule 1.1 (definition of
``long position'').
\44\ The ``C'' range at OCC includes customer transactions,
professional transactions and transactions executed by broker-
dealers that are not affiliated with a clearing member that clear in
the ``C'' range at OCC.
[[Page 3275]]
Open Interest
----------------------------------------------------------------------------------------------------------------
Open contracts
at EOD that
Longs held on Buys to open Aggregate are eligible
Strike 4/1/2025 or expand a longs held for auto-ex on
position April 2, 2025
EOD
----------------------------------------------------------------------------------------------------------------
553............................................. 104 265 369 45
554............................................. 340 795 1,135 258
555............................................. 2,240 4,135 6,375 238
556............................................. 619 5,582 6,201 142
557............................................. 582 9,235 9,817 52
558............................................. 587 14,683 15,270 72
559............................................. 705 22,931 23,636 70
560............................................. 2,218 49,336 51,554 316
561............................................. 2,284 55,318 57,602 1,014
562............................................. 1,941 67,057 68,998 55
563............................................. 1,339 83,871 85,210 87
564............................................. 1,222 78,612 79,834 533
----------------------------------------------------------------------------------------------------------------
Liquidating Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contracts Percentage of
Unabandoned unabandoned or unabandoned
Contracts and unliquidated and
Aggregate Liquidation where abandon unliquidated as a % of unliquidated
Strike liquidation of ratio (%) instructions contracts total long contracts as
longs were issued (auto- contracts held compared to
exercised by during the day open contracts
OCC) (%) (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
553..................................................... 324 87.80 22 23 6.23 51.11
554..................................................... 877 77.27 187 71 6.26 27.52
555..................................................... 6,137 96.27 53 185 2.90 77.73
556..................................................... 6,059 97.71 88 54 0.87 38.03
557..................................................... 9,765 99.47 2 50 0.51 96.15
558..................................................... 15,198 99.53 49 23 0.15 31.94
559..................................................... 23,566 99.70 26 44 0.19 62.86
560..................................................... 51,238 99.39 240 76 0.15 24.05
561..................................................... 56,588 98.24 994 20 0.03 1.97
562..................................................... 68,943 99.92 16 39 0.06 70.91
563..................................................... 85,123 99.90 25 62 0.07 71.26
564..................................................... 79,301 99.33 467 66 0.08 12.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
This data aggregated by ISE indicates \45\ that the vast majority
of open contracts (over 90%) were liquidated by customers prior to the
close. Of the remaining open contracts, a substantial portion were
rationally abandoned. In considering what constitutes rational activity
on the part of a market participant in determining whether to exercise,
especially in the strike near the 5:00 p.m. price, it must be taken
into consideration that some market participants may elect to hold a
contract given the illiquidity of the time period, and the desire for
long exposure despite a trade price that may be lower. In other words,
it cannot be assumed that customers are unaware of the market
conditions for SPY after the close on April 2, 2025, or their ability
to liquidate. Also, it cannot be assumed that the customer would always
liquidate in these circumstances. In reviewing the above tables
together, customers with calls in SPY on April 2, 2025 had a very high
liquidation ratio which is evidenced by comparing the unabandoned
contracts to the entire pool of long contracts throughout the day.
Finally, the amount of unliquidated and unabandoned call contracts in
the above table represents a de-minimis amount (less than 1%) when
considering that SPY trades millions of contracts each day.
---------------------------------------------------------------------------
\45\ See ISE Amendment No. 1 at 31725 (Tables 7 and 8).
---------------------------------------------------------------------------
ISE also examined the out-of-the-money or ``OTM'' activity on the
puts in SPY on April 2, 2025 for customers. The data in the below
tables (which should be read together) applies to puts \46\ in SPY in
the customer range at OCC for expiration date April 2, 2025.
---------------------------------------------------------------------------
\46\ The term ``put'' means an option contract under which the
holder of the option has the right, in accordance with the terms and
provisions of the option and OCC Rules, to sell to OCC (a) for
equity options, the number of units of the underlying security
covered by the option contract, at a price per unit equal to the
exercise price, or (b) for index options, the current index value
times the index multiplier upon the timely exercise of the option.
See Rule 1.1 (definition of ``put'').
[[Page 3276]]
OTM Open Interest
----------------------------------------------------------------------------------------------------------------
Open contracts
Buys to open Aggregate at EOD on 4/2
Strike Longs held on or expand a longs held on that are
4/1/2025 position on 4/ 4/2/2025 eligible for
2/2025 OTM exercise
----------------------------------------------------------------------------------------------------------------
553............................................. 2,008 17,807 19,815 1,992
554............................................. 3,575 23,220 26,795 2,459
555............................................. 6,271 67,698 73,969 5,009
556............................................. 3,177 37,457 40,634 2,648
557............................................. 3,094 47,699 50,793 1,573
558............................................. 3,091 66,130 69,221 7,063
559............................................. 2,492 82,114 84,606 16,366
560............................................. 3,382 118,564 121,946 17,481
561............................................. 1,707 76,970 78,677 5,660
562............................................. 435 75,447 75,882 6,552
563............................................. 581 75,463 76,044 6,522
564............................................. 399 50,724 51,123 197
----------------------------------------------------------------------------------------------------------------
OTM Liquidating Activity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of
Contracts Contracts not put contracts
Aggregate where OTM Puts where no exercised as a where no OTM
Strike liquidation of Liquidation exercise OTM exercise % of long exercise
longs ratio (%) instructions instructions contracts held instructions
were received were given throughout the were given
by OCC day (%) (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
553..................................................... 17,823 89.95 833 1,159 5.85 58.18
554..................................................... 24,336 90.82 791 1,668 6.23 67.83
555..................................................... 68,960 93.23 1,436 3,573 4.83 71.33
556..................................................... 37,986 93.48 1,170 1,478 3.64 55.82
557..................................................... 49,220 96.90 557 1,016 2.00 64.59
558..................................................... 62,158 89.80 3,064 3,999 5.78 56.62
559..................................................... 68,240 80.66 15,642 724 0.86 4.42
560..................................................... 104,465 85.66 16,745 736 0.60 4.21
561..................................................... 73,017 92.81 5,415 245 0.31 4.33
562..................................................... 69,330 91.37 6,436 116 0.15 1.77
563..................................................... 69,522 91.42 6,443 79 0.10 1.21
564..................................................... 50,926 99.61 180 17 0.03 8.63
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to this put data for SPY on April 2, 2025 gathered by
ISE,\47\ it can be observed that out-of-the-money options were either
liquidated or exercised. Only a small percentage of options went
unexercised. Additionally, it can be observed that very few puts
remained unexercised at the higher strikes where opportunity for profit
and less risk exists. This is in contrast to puts on lower strikes
where opportunity for profit relative to the risk of the short is
greater. In particular, with respect to the risk exposure of put
writers, the exposure to an event similar to April 2, 2025 for the
proposed Wednesday expirations would be substantially similar to the
current risk that a put writer is exposed to with Friday expirations.
In other words, the day of the expiry does not increase or decrease the
amount of risk of a put writer, but for the premium difference.
Additionally, the Exchange believes that since the rational abandonment
and out-of-the-money exercise rates were so high, as evidenced in the
above tables, it is clear that customers are largely aware of the
exposure between 4:00 and 5:00 p.m. ET and therefore, the risk from the
unliquidated position is undertaken knowingly.
---------------------------------------------------------------------------
\47\ See ISE Amendment No. 1 at 31726-31727 (Tables 9 and 10).
---------------------------------------------------------------------------
In determining the rational in-the-money abandonment or out-of-the-
money exercise, ISE indicated it elected not to consider the amount of
contracts rationally exercised/abandoned divided by the amount of open
contracts at the end of the day. ISE indicated that it believed that
this data point fails to consider the outsized amount of liquidation
customers undertake prior to the Contrary Exercise Window.\48\ In other
words, the amount of liquidations taken by customers prior to the
Contrary Exercise Window is evidence that market participants are
informed and electing to accept a premium in lieu of the potential to
maximize the value of their option in the Contrary Exercise Window. ISE
observed that the amount of open contracts in these options is de
minimis and, therefore, any evidence of an option trader's failure to
act rationally would skew the percentage in such a way to exaggerate
the perception of the risk averting behaviors. For example, taken to an
extreme, if three contracts are left open in an option that trades over
100,000 in a given day, and two options are not rationally exercised
this would amount to 66.6% of non-rationally exercised/abandoned
contracts. In this example, three options
[[Page 3277]]
are not rationally exercised out of the three open contracts or 100%,
which comparison did not yield a result that was insightful. For this
reason, ISE indicated it opted to compare the amount of irrational
failures to exercise/abandon to the total amount of contracts that were
open during that trading day. The Exchange believes ISE's method of
comparison provides a better risk determination.
---------------------------------------------------------------------------
\48\ A ``Contrary Exercise Window'' refers to a specific
timeframe during which an options holder can submit a Contrary
Exercise Advice. Option holders who hold expiring options have until
5:30 p.m. ET on the day of expiration to make a final exercise
decision to exercise or not exercise the option. TPHs may establish
an earlier time to accept exercise instructions for customer or non-
customer accounts (typically by 5:00 p.m. ET) but may not accept
instructions after 5:30 p.m. ET. See <a href="https://www.finra.org/rules-guidance/notices/information-notice-020321">https://www.finra.org/rules-guidance/notices/information-notice-020321</a>.
---------------------------------------------------------------------------
The Options Disclosure Document (``ODD'') notes the risks of option
exercises:
To exercise an option that is not subject to automatic exercise,
the holder must direct his brokerage firm to give exercise
instructions to OCC. In order to ensure that an option is exercised
on a particular day, the holder must direct his brokerage firm to
exercise before the firm's cut-off time for accepting exercise
instructions for that day. Different firms may have different cut-
off times for accepting exercise instructions from customers, and
those cut-off times may be different for different options.
A brokerage firm's cut-off time for accepting exercise
instructions becomes critical on the last trading day before an
option expires. An option that expires unexercised becomes
worthless. An option holder who intends to exercise an option before
expiration must give exercise instructions to his brokerage firm
before the firm's cut-off time for accepting exercise instructions
on the last trading day before expiration. If the expiration date of
an option falls on a day on which an options market is open for
trading in that option, a brokerage firm's last cut-off time for
accepting exercise instructions prior to the option's expiration may
be on the expiration date. Investors should be aware of their
brokerage firm's policies in this regard. Many brokerage firms
accept standing instructions to exercise, or have procedures for the
exercise of, every option which is in the money by a specified
amount at expiration. These procedures often incorporate by
reference OCC's administrative procedures that provide for the
exercise of every option that is in the money by a specified amount
at expiration unless the Clearing Firm carrying the option in its
accounts instructs OCC not to exercise the option. Investors should
determine from their brokerage firm the applicable cut-off times,
the firm's procedures for submitting exercise instructions, and
whether any of their options are subject to automatic exercise.
Investors should also determine whether the exercise of their
options is subject to standing instructions of their brokerage firm,
and, if so, they should discuss with the firm the potential
consequences of such instructions.\49\
---------------------------------------------------------------------------
\49\ The ``How to Exercise'' section in the ODD describes how to
utilize the Contrary Exercise Advice. See <a href="https://www.theocc.com/getmedia/a151a9ae-d784-4a15-bdeb-23a029f50b70/riskstoc.pdf">https://www.theocc.com/getmedia/a151a9ae-d784-4a15-bdeb-23a029f50b70/riskstoc.pdf</a>.
Market participants that elect to transact in options should
receive a copy of the ODD from their broker-dealer.\50\ The ODD
explains the risks inherent in options trading.\51\ Broker-dealers must
have a reasonable basis to believe that a recommended transaction or
investment strategy involving a security or securities is suitable for
the customer.\52\ Suitability rules are intended to distinguish the
trading of customers with those of professional traders who are likely
to have distinct risk/reward profiles, risk tolerance and capital.
---------------------------------------------------------------------------
\50\ See FINRA Rule 2360(b)(16)(A).
\51\ See generally <a href="https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document">https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document</a>.
\52\ See FINRA Rule 2111.
---------------------------------------------------------------------------
Finally, the Exchange believes there is general demand for
alternative expirations in Monday and Wednesday Qualifying Securities
Expirations. ISE calculated the percentage of SPY options volume, from
2018 to 2025, versus the number of days until expiration, which
demonstrated a clear preference for shorter-dated options trading.\53\
---------------------------------------------------------------------------
\53\ See ISE Amendment No. 1 at 31728 (Table 11).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\54\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \55\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \56\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78f(b).
\55\ 15 U.S.C. 78f(b)(5).
\56\ Id.
---------------------------------------------------------------------------
In particular, similar to Monday expirations in SPY, QQQ, and IWM,
the proposal to permit Monday and Wednesday Qualifying Security
Expirations, subject to the proposed limitation of two expirations
beyond the current week, would protect investors and the public
interest by providing the investing public and other market
participants more choice and flexibility to closely tailor their
investment and hedging decisions in these options and allow for a
reduced premium cost of buying portfolio protection, thus allowing them
to better manage their risk exposure. The Exchange believes that the
proposed criteria for Qualifying Securities requires individual stocks
and ETFs to be highly liquid. A market capitalization measured on the
last day of the prior calendar quarter based on the closing price of
the underlying, of greater than 700 billion dollars for an individual
stock, or AUM of 50 billion dollars for an ETF, in conjunction with the
monthly options volume requirement of greater than 10 million options
as measured by sides traded in the last month preceding the quarter
end, is very restrictive. This requirement represents substantially
less than 1% of individual stocks (only eight individual stocks existed
as of January 1, 2025) and substantially less than 1% of ETFs (only
seven ETFs existed as of January 1, 2025, of which five are eligible
pursuant to Rule 4.5(d) to trade additional expiries) traded.\57\
Therefore, an individual stock or ETF that meets the aforementioned
market capitalization and volume requirements are highly liquid and
could be viewed as stable securities. Data gathered by ISE regarding
the average daily options contracts traded compared to the average
closing volatility in the last 30 minutes of the trading day \58\
demonstrated a very low average realized volatility experienced by the
Sample Qualifying Securities in the last 30 minutes of trading before
the close in 2024 as compared to any security that traded an average of
more than 100 options contracts per day.
---------------------------------------------------------------------------
\57\ As of January 15, 2026, the other two ETFs would be
eligible to trade additional expiries pursuant to the proposed rule
change.
\58\ See ISE Amendment No. 1 at 31729 (Table 7).
---------------------------------------------------------------------------
The Exchange notes that with respect to position limits, Rule 8.30,
Interpretation and Policy .02(e) provides, that ``[t]o be eligible for
the 250,000 contract limit, either the most recent six-month trading
volume of the underlying security must have totaled at least 100
million shares; or the most recent six-month trading volume of the
underlying security must have totaled at least 75,000,000 shares and
the underlying security must have at least 300,000,000 shares currently
outstanding.'' The 250,000 contract position limit is the highest
position limit by Exchange rule. Options that qualify for the 250,000
position (and
[[Page 3278]]
exercise) limit are highly liquid securities that have met the
stringent requirements noted in Rule 8.30, Interpretation and Policy
.02 to qualify for the highest position limit.
Finally, a Qualifying Security must participate in the Penny
Interval Program. In order to qualify for the Penny Interval Program,
an options class must be among the 300 most actively traded multiply
listed option classes overlying securities priced below $200.\59\ The
most actively traded options classes are included in the Penny Interval
Program based on certain objective criteria (trading volume thresholds
and initial price tests).
---------------------------------------------------------------------------
\59\ See Rule 5.4(d). Each December OCC ranks all multiply
listed option classes based on National Cleared Volume for the six
full calendar months from June 1 through November 30 for
determination of the most actively traded option classes.
---------------------------------------------------------------------------
The number of individual stocks currently meeting all four criteria
for a Qualifying Security was eight, and the number of ETFs currently
meeting all four criteria for a Qualifying Security that do not already
have Monday and Wednesday expirations was one, as of June 27, 2025.
Both totals represent less than 0.2% of all securities with options
listed. The Exchange believes that since individual stocks are the
dominant constituents of the broad-based indexes (e.g., S&P 500 Index
and Nasdaq-100 Index), the improvement in price transparency brought
about by Monday and Wednesday trading will offer Market Makers and
investors better volatility pricing which will inform trading on the
related products to these indexes. The Exchange believes that the
proposed criteria for Qualifying Securities is consistent with the
protection of investors and the general public because the criteria
targets the most liquid individual stocks and ETFs.
The Exchange would not list an expiry on a Qualifying Security on a
day where there will be an Earnings Announcement that takes place after
market close to avoid post-close price volatility that may arise from
the Earnings Announcement and which may impact exercise and/or
assignment decisions.
Qualifying Securities that do not continue to meet the above
criteria would no longer be permitted to list Monday and Wednesday
expiries in the following quarter, although the Qualifying Security
would potentially have two weeks of strikes already listed which will
persist. These remaining listings could continue to be traded until
they expire.
With this proposal, overall, the Exchange would add a small number
of Monday and Wednesday Qualifying Security Expirations by limiting the
addition of two Monday expirations and two Wednesday expirations beyond
the current week. The addition of Monday and Wednesday Qualifying
Security Expirations would remove impediments to and perfect the
mechanism of a free and open market by encouraging Market Makers to
continue to deploy capital more efficiently and improve displayed
market quality.\60\ The Exchange believes that the proposal will allow
TPHs to expand hedging tools and tailor their investment and hedging
needs more effectively in Qualifying Securities as these funds are most
likely to be utilized by market participants to hedge the underlying
asset classes.
---------------------------------------------------------------------------
\60\ Today, Designated Primary Market-Makers and Market-Makers
are required to quote a specified time in their assigned options
series. See Rules 5.52(d) and 5.54(a).
---------------------------------------------------------------------------
Similar to SPY, QQQ, and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Security Expirations is
consistent with the Act as it will, among other things, expand hedging
tools available to market participants and allow for a reduced premium
cost of buying portfolio protection. The Exchange believes that Monday
and Wednesday Qualifying Security Expirations will allow market
participants to purchase options on Qualifying Securities based on
their timing as needed and allow them to tailor their investment and
hedging needs more effectively, thus allowing them to better manage
their risk exposure. Today, the Exchange lists other Monday and
Wednesday expirations.\61\
---------------------------------------------------------------------------
\61\ See Rule 4.5(d), Table 1.
---------------------------------------------------------------------------
In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Monday and Wednesday
Qualifying Security Expirations should simply expand the ability of
investors to hedge risk against market movements stemming from economic
releases or market events that occur throughout the month in the same
way that the Short Term Option Series Program has expanded the
landscape of hedging.
There are no material differences in the treatment of SPY, QQQ and
IWM Monday and Wednesday Expirations compared to the proposed Monday
and Wednesday Qualifying Security Expirations. Given the similarities
between SPY, QQQ and IWM Monday and Wednesday Expirations and the
proposed Monday and Wednesday Qualifying Security Expirations, the
Exchange believes that applying the provisions in Rule 4.5(d)that
currently apply to SPY, QQQ and IWM Monday and Wednesday Expirations is
justified.
The data gathered by ISE in the tables above related to calls in
SPY on April 2, 2025,\62\ indicates that the vast majority of open
contracts (over 90%) were liquidated by customers prior to the close.
Of the remaining open contracts, a substantial portion were rationally
abandoned. In considering what constitutes rational activity on the
part of a market participant in determining whether to exercise,
especially in the strike near the 5:00 p.m. price, it must be taken
into account that some market participants may elect to hold a contract
given the illiquidity of the time period, and the desire for long
exposure despite a trade price that may be lower. In other words, it
cannot be assumed that customers are unaware of the market conditions,
or their ability to liquidate. Also, it cannot be assumed that the
customer would always liquidate in these circumstances. In reviewing
these tables, ISE observed that customers with calls in SPY on April 2,
2025 had a very high liquidation ratio which is evidenced by comparing
the unabandoned contracts to the entire pool of long contracts
throughout the day. With respect to the put data for SPY on April 2,
2025, ISE observed in the data it gathered as presented above \63\ that
out-of-the-money options were either liquidated or exercised. Only a
small percentage of put options went unexercised. Additionally, ISE
observed that very few puts remained unexercised at the higher strikes
where opportunity for profit and less risk exists. This is in contrast
to puts on lower strikes where opportunity for profit relative to the
risk of the short is greater. In particular, with respect to the risk
exposure of put writers, the exposure to an event similar to April 2,
2025 for the proposed Wednesday expirations would be substantially
similar to the current risk that a put writer is exposed to with Friday
expirations. In other words, the day of the expiry does not increase or
decrease the amount of risk of a put writer, but for the premium
difference. Additionally, the Exchange believes that since the rational
abandonment and out-of-the-money exercise rates were so high, as
evidenced by the data gathered by ISE presented above,\64\ it is clear
that customers are largely aware of the exposure between 4:00 and 5:00
p.m. ET and therefore, the risk from the
[[Page 3279]]
unliquidated position is undertaken knowingly.
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\62\ See ISE Amendment No. 1 at 31725 (Tables 7 and 8).
\63\ See ISE Amendment No. 1 at 31726-31727 (Tables 9 and 10).
\64\ See id.
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Additionally, market participants that elect to utilize options
receive a copy of the ODD which explains the risks inherent in options
trading. Also, broker-dealers must have a reasonable basis to believe
that a recommended transaction or investment strategy involving a
security or securities is suitable for the customer.\65\ Suitability
rules are intended to distinguish the trading of customers with those
of professional traders who are likely to have distinct risk/reward
profiles, risk tolerance and capital. Regardless of whether the account
is self-directed or options are being recommended, broker-dealers must
perform due diligence on the customer and collect information about the
customer to support a determination that options trading is appropriate
for the customer. Options accounts are subject to specific supervisory
reviews, including, among others, reviewing the compatibility of
options transactions with investment objectives and with the types of
transactions for which the account was approved, and are subject to
other FINRA rules that apply when opening customer accounts, including
among others, customer identification requirements under anti-money
laundering rules.\66\ Therefore, the Exchange does not believe that
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or ETFs is inconsistent with the Act.
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\65\ See FINRA Rule 2111.
\66\ See <a href="https://www.finra.org/rules-guidance/notices/21-15">https://www.finra.org/rules-guidance/notices/21-15</a>.
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The Exchange represents that it has the necessary systems capacity
to support the new expirations. The Exchange believes that its existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior which might arise from listing and
trading options with Monday and Wednesday expirations, including for
any Qualifying Securities, in the same way that it monitors trading the
current Short Term Option Series for SPY, QQQ, and IWM with Monday and
Wednesday expirations. Finally, the Exchange does not believe that any
market disruptions will be encountered with the introduction of these
option expirations. As discussed above, the Exchange believes that its
proposal is a modest expansion of weekly expiration dates for Monday
and Wednesday Qualifying Security Expirations given that it will be
limited to two Monday expirations and two Wednesday expirations beyond
the current week.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, but rather will meet customer
demand. The Exchange would uniformly apply the Qualifying Security
criteria to options in individual stocks and ETFs. The Exchange
believes that Trading Permit Holders (``TPHs'') will continue to be
able to expand hedging tools and tailor their investment and hedging
needs more effectively in the Qualifying Securities. All market
participants will be treated in the same manner under this proposal.
Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Security Expirations
does not impose an undue burden on competition. The Exchange believes
that it will, among other things, expand the hedging tools available to
market participants and allow for a reduced premium cost of buying
portfolio protection. The Exchange believes that Monday and Wednesday
Qualifying Security Expirations will allow market participants to
purchase options on Qualifying Securities based on their timing as
needed and allow them to tailor their investment and hedging needs more
effectively.
Further, not adding an expiry for a Qualifying Security on a day
where there will be an Earnings Announcement that takes place after
market close does not impose an undue burden on competition as the
Exchange would uniformly apply this practice to the listing of all
Qualifying Securities.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as the
Commission recently approved a substantively identical rule change of
another options exchange.\67\
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\67\ See ISE Amendment No. 1 and ISE Approval.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \68\ and Rule 19b-4(f)(6) thereunder.\69\
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \70\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\71\
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\68\ 15 U.S.C. 78s(b)(3)(A)(iii).
\69\ 17 CFR 240.19b-4(f)(6).
\70\ 15 U.S.C. 78s(b)(3)(A)(iii)
\71\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \72\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\73\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing.
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\72\ 17 CFR 240.19b-4(f)(6).
\73\ 17 CFR 240.19b-4(f)(6)(iii).
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According to the Exchange, the proposed rule change is a
competitive response to a substantively identical filing submitted by
Nasdaq ISE that was recently approved by the Commission.\74\ The
Commission believes that the proposed rule change presents no novel
issues and that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and
[[Page 3280]]
designates the proposed rule change as operative upon filing.\75\
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\74\ See supra note 6.
\75\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings under
Section 19(b)(2)(B) \76\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\76\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5123243d347c323e3c3c343f2522112234327f363e27"><span class="__cf_email__" data-cfemail="c5b7b0a9a0e8a6aaa8a8a0abb1b685b6a0a6eba2aab3">[email protected]</span></a>. Please include
file number SR-CBOE-2026-007 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CBOE-2026-007. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CBOE-2026-007 and should be submitted on
or before February 17, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\77\
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\77\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-01374 Filed 1-23-26; 8:45 am]
BILLING CODE 8011-01-P
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