Notice2026-01826
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 5050 (Series of Options Contracts Open for Trading) To Permit the Listing of Up to Two Monday and Wednesday Expirations for Options on Certain Individual Stocks or Exchange-Traded Fund Shares
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 30, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 20 (Friday, January 30, 2026)</title>
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[Federal Register Volume 91, Number 20 (Friday, January 30, 2026)]
[Notices]
[Pages 4130-4136]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01826]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104694; File No. SR-BOX-2026-02]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule
5050 (Series of Options Contracts Open for Trading) To Permit the
Listing of Up to Two Monday and Wednesday Expirations for Options on
Certain Individual Stocks or Exchange-Traded Fund Shares
January 27, 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 20, 2026, BOX Exchange LLC (``Exchange'') 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 Commission is publishing this notice to
solicit comments on the proposed rule from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rule 5050 (Series of Options
Contracts Open for Trading). Specifically, the Exchange proposes to
amend BOX IM-5050-6 (Short Term Option Series Program) to permit the
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or Exchange-Traded Fund Shares. The text of
the proposed rule change is available from the principal office of the
Exchange, at the Commission's Public Reference Room and also on the
Exchange's internet website at <a href="https://rules.boxexchange.com/rulefilings">https://rules.boxexchange.com/rulefilings</a>.
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 self-regulatory organization
included statements concerning the purpose of,
[[Page 4131]]
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 self-
regulatory organization 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 BOX Rule 5050 (Series of Options
Contracts Open for Trading). Specifically, the Exchange proposes to
amend BOX IM-5050-6 (Short Term Option Series Program) to permit the
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or Exchange-Traded Fund Shares. This is a
competitive filing that is based on a proposal submitted by Nasdaq ISE,
LLC (``Nasdaq ISE'') and approved by the Commission.\3\
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\3\ See Securities Exchange Act Release No. 104624 (January 16,
2026) (SR-ISE-2025-15) (Order Approving a Proposed Rule Change, as
Modified by Amendment No. 1, to Amend the Short Term Option Series
Program to List Qualifying Securities) (``Nasdaq ISE Filing'').
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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 Fund Shares (collectively ``Qualifying
Securities''). Currently, as set forth in IM-5050-6, after an option
class has been approved for listing and trading on the Exchange as a
Short Term Option Series pursuant to BOX Rule 100(a)(66),\4\ 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.
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\4\ Rule 100(a)(66) provides that the term ``Short Term Option
Series'' means a series in an option class that is approved for
listing and trading on BOX in which the series is opened for trading
on any Monday, Tuesday, Wednesday, Thursday or Friday that is a
business day and that expires on the Monday, Tuesday, Wednesday,
Thursday, or Friday of the next business week, or, in the case of a
series that is listed on a Friday and expires on a Monday, is listed
one business week and one business day prior to that expiration. If
a Tuesday, Wednesday, Thursday or Friday is not a business day, the
series may be opened (or shall expire) on the first business day
immediately prior to that Tuesday, Wednesday, Thursday or Friday,
respectively. For a series listed pursuant to this section for
Monday expiration, if a Monday is not a business day, the series
shall expire on the first business day immediately following that
Monday.
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Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of IM-5050-6 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'').\5\ 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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\5\ As set forth in Table 1 of IM-5050-6, 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.
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Proposal
At this time, 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 Exchange-Traded Fund Shares, 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,\6\ or
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\6\ 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 Exchange-Traded Fund Share 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 Exchange-Traded Fund Shares 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 Exchange-Traded Fund Shares 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.\7\ BOX will make the list of Qualifying Securities
available by close of business on the first trading day of the
quarter.\8\
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\7\ 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 Q3 of 2025, BOX would look at
the volume, measured in sides, for the last month of Q2 2025 or June
2025.
\8\ BOX will make this information available on BOX's 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 Announcement \9\ that takes place after market close. For
purposes of this rule proposal, earnings announcements shall include
official public quarterly or
[[Page 4132]]
yearly earnings filed with the Commission (``Earnings
Announcement'').\10\ 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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\9\ An Earnings Announcement is an official public statement of
a company's profitability for a specific period, typically a quarter
or a year.
\10\ 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.\11\
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\11\ The Exchange has noted the additional expiries in a
proposed Table 2 in IM-5050-6 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 set forth in IM-5050-6, 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'').\12\ In the event Qualifying Securities would
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 of Monday Qualifying Securities
Expirations would therefore not be consecutive. Today, Monday
expirations in SPY, QQQ, and IWM similarly skip the weekly listing in
the event the weekly listing would expire 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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\12\ 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 IM-5050-6, 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'').\13\ In the event Qualifying Securities would
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 of Wednesday
Qualified Securities Expirations would therefore not be consecutive.
Today, Wednesday expirations in SPY, QQQ, and IWM similarly skip the
weekly listing in the event the weekly listing would expire 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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\13\ 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.\14\ 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 in Related non-short Term Options and are in the Short Term
Option Series Program, or (iii) $2.50 or greater for strike prices
above $150.\15\ 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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\14\ See BOX IM-5050-6. The Exchange notes that equity options
which have an expiration of more than twenty-one days from the
listing date would also be subject to the intervals as noted within
IM-5050-6. See also IM-5050-11.
\15\ See id.
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Pursuant to Rule 100(a)(66), 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.
Also, pursuant to Rule 100(a)(66), with respect to the Short Term
Option Series Program, 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.\16\
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.\17\ 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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\16\ See BOX IM-5050-6.
\17\ 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.\18\ 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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\18\ See id.
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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.\19\ 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 Quarterly Options Series
expire. The
[[Page 4133]]
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.
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\19\ See BOX IM-5050-6.
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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 \20\ and has not experienced any market
disruptions nor issues with capacity.\21\ 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.\22\ 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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\20\ See supra note 5.
\21\ In its filing to permit the listing of up to two Monday and
Wednesday expirations for options on certain Qualifying Securities,
ISE provided charts and analysis demonstrating the percentage of
weekly listings in the options industry compared to monthly,
quarterly, and Long-Term Options Series for a twelve-month period
ending on February 11, 2025. The information includes time averaged
data (the number of strikes by maturity date divided from the number
of trading days) for all 18 options markets through February 11,
2025. The ISE Filing provides further that the Sample Qualifying
Securities (selected based on January 2025 data) have an average
annualized closing volatility of generally less than 20% and are
more volatile than SPY, QQQ and IWM, but given that these are
individual stocks it is reasonable to expect that they have
idiosyncratic characteristics (increasing their volatility) relative
to broad based Exchange-Traded Fund Shares like SPY, QQQ and IWM.
ISE sourced this information, which are estimates, from OCC. See
Securities Exchange Act Release No. 103434 (July 10, 2025), 90 FR
31716 (July 15, 2025) (SR-ISE-2025-15) (Notice of Filing of
Amendment No. 1 to a Proposed Rule Change to Amend the Short Term
Option Series Program to List Qualifying Securities).
\22\ See supra note 5.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\23\ in general, and Section 6(b)(5) of the Act,\24\ in
particular, in that it is 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 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.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
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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 Exchange-Traded Fund Shares
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 Exchange-Trade Fund Share,
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. As provided in the ISE
filing, this requirement represents substantially less than 1% of
individual stocks (only eight (8) individual stocks currently exist as
of January 1, 2025) and substantially less than 1% of Exchange-Traded
Fund Shares (only seven (7) Exchange-Traded Fund Shares currently exist
as of January 1, 2025, pursuant to Rule 5020, to trade additional
expiries) traded.\25\ Therefore, an individual stock or Exchange-Traded
Fund Share that meets the aforementioned market capitalization and
volume requirements are highly liquid and could be viewed as stable
securities, as evidenced by the 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.\26\
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\25\ See Securities Exchange Act Release No. 103434 (July 10,
2025), 90 FR 31716 (July 15, 2025) (SR-ISE-2025-15) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change to Amend the
Short Term Option Series Program to List Qualifying Securities).
\26\ Id.
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The Exchange notes that with respect to position limits, Rule
3120(d)(5) provides, that ``[t]o be eligible for the 250,000 contract
limit, either the most recent six (6) 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 seventy-five (75) million shares and the
underlying security must have at least 300 million shares currently
outstanding.'' The 250,000 contract position limit is the highest
position limit with the exception of certain products listed in IM-
3120-2. Options that qualify for the 250,000 position (and exercise)
limit are highly liquid securities that have met the stringent
requirements noted in Rule 3120(d)(5) 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.\27\ 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).
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\27\ See BOX Rule 7260. 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.
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The number of individual stocks currently meeting all four criteria
for a Qualifying Security is eight (8) and the number of Exchange-
Traded Fund Shares currently meeting all four criteria for a Qualifying
Security that do not already have Monday and Wednesday expirations is
one (1) 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
Exchange-Traded Fund Shares.
The Exchange would not list an expiry on a Qualifying Security on a
day where there will be an Earnings
[[Page 4134]]
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.\28\ The Exchange believes that the proposal will allow
Participants 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.
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\28\ Today, Market Makers are required to quote a specified time
in their assigned options series. See BOX Rule 8050.
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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, BOX lists other Monday and Wednesday
expirations.\29\
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\29\ See BOX IM-5050-6 at Table 1.
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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 IM-5050-6 that
currently apply to SPY, QQQ and IWM Monday and Wednesday Expirations is
justified. The ISE Filing provided that, related to calls in SPY on
April 2, 2025, 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. As provided in the ISE
Filing, 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, the ISE Filing
provides that out-of-the-money options were either liquidated or
exercised. Only a small percentage of put 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 ISE Filing,
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.
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.\30\ 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.\31\ Therefore, the Exchange does not believe that
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or Exchange-Traded Fund Shares is
inconsistent with the Act.
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\30\ See FINRA Rule 2111.
\31\ 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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BOX represents that it has an adequate surveillance program in
place to detect manipulative trading in the proposed option
expirations, in the same way that it monitors trading in the current
Short Term Option Series for Monday and Wednesday SPY, QQQ and IWM
expirations. The Exchange also represents that it has the necessary
system capacity to support the new 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
[[Page 4135]]
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 not necessary or appropriate in
furtherance of the purposes of the Act. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed as a
competitive response to a filing submitted by Nasdaq ISE that was
recently approved by the Commission.\32\
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\32\ See supra note 3.
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While the proposal will expand the Short Term Options Expirations
to allow Monday and Wednesday Qualifying Security Expirations to be
listed on BOX, the Exchange believes that this limited expansion for
Monday and Wednesday expirations for options on Qualifying Securities
will not impose an undue burden on competition; rather, it will meet
customer demand. The Exchange would uniformly apply the Qualifying
Security criteria to options in individual stocks and Exchange-Traded
Fund Shares. The Exchange believes that Participants will continue to
be able to expand hedging tools and tailor their investment and hedging
needs more effectively in the Qualifying Securities.
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 the proposal will impose any burden
on inter-market competition, as nothing prevents other options
exchanges from proposing similar rules to list and trade Monday and
Wednesday Qualifying Security Expirations. Further, the Exchange does
not believe the proposal will impose any burden on intra-market
competition, as all market participants will be treated in the same
manner under this proposal.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 prior to 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, if consistent
with the protection of investors and the public interest, the proposed
rule change has become effective pursuant to Section 19(b)(3)(A)(iii)
of the Act \33\ and Rule 19b-4(f)(6) thereunder.\34\
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\33\ 15 U.S.C. 78s(b)(3)(A)(iii).
\34\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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) \35\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\36\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. According to the
Exchange, waiver of the operative delay would allow the Exchange to
compete with one other exchange that has approval to list and trade the
same option series.\37\ 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 30-day
operative delay and designates the proposal operative upon filing.\38\
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\35\ 17 CFR 240.19b-4(f)(6).
\36\ 17 CFR 240.19b-4(f)(6)(iii).
\37\ See supra note 3.
\38\ 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 shall institute proceedings under
Section 19(b)(2)(B) \39\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\39\ 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#5e2c2b323b733d3133333b302a2d1e2d3b3d70393128"><span class="__cf_email__" data-cfemail="addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db">[email protected]</span></a>. Please include
file number SR-BOX-2026-02 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-BOX-2026-02. 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
[[Page 4136]]
to file number SR-BOX-2026-02 and should be submitted on or before
February 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12) and (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-01826 Filed 1-29-26; 8:45 am]
BILLING CODE 8011-01-P
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