Notice2026-05019
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing of a Proposed Rule Change To Adopt New Options Rule 3B To List and Trade Outcome-Related Options
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
March 16, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 50 (Monday, March 16, 2026)</title>
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[Federal Register Volume 91, Number 50 (Monday, March 16, 2026)]
[Notices]
[Pages 12652-12657]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05019]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104966; File No. SR-MRX-2026-05]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
of a Proposed Rule Change To Adopt New Options Rule 3B To List and
Trade Outcome-Related Options
March 11, 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 March 2, 2026, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') a 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 change 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 list and trade Outcome-Related Options or
``OROs.''
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/mrx/rulefilings">https://listingcenter.nasdaq.com/rulebook/mrx/rulefilings</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's proposal adopts rules at new Options 3B to govern
the listing and trading of cash-settled, European-style binary options
\3\ referred to as Outcome-Related Options or ``OROs.'' The Exchange
proposes to list and trade OROs on the Nasdaq-100[supreg] Index
(``NDX[supreg]'') \4\ as ``Nasdaq-100[supreg] OROs.'' The Exchange also
proposes to list and trade OROs on the Nasdaq-100 Micro Index[supreg]
(``XND[supreg]'') \5\ as ``XND OROs.''
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\3\ The characteristics of binary options are described in The
Options Disclosure Document or ODD. See <a href="https://www.theocc.com/getcontentasset/a151a9ae-d784-4a15-bdeb-23a029f50b70/dfc3d011-8f63-43f6-9ed8-4b444333a1d0/riskstoc.pdf">https://www.theocc.com/getcontentasset/a151a9ae-d784-4a15-bdeb-23a029f50b70/dfc3d011-8f63-43f6-9ed8-4b444333a1d0/riskstoc.pdf</a>.
\4\ The Nasdaq-100 Index is a modified market capitalization-
weighted index that includes 100 of the largest non-financial
companies listed on The Nasdaq Stock Market LLC, based on market
capitalization. It does not contain securities of financial
companies, including investment companies. Security types generally
eligible for the Nasdaq-100 Index include common stocks, ordinary
shares, American Depository Receipts, and tracking stocks. Security
or company types not included in the Nasdaq-100 Index are closed-end
funds, convertible debentures, exchange traded funds, limited
liability companies, limited partnership interests, preferred
stocks, rights, shares or units of beneficial interest, warrants,
units and other derivative securities. A description of the Nasdaq-
100 Index is available on Nasdaq's website at <a href="https://indexes.nasdaqomx.com/docs/methodology_NDX.pdf">https://indexes.nasdaqomx.com/docs/methodology_NDX.pdf</a>. The Nasdaq-100 Index
is a broad-based index, as defined in Options 4A, Section 3. See
also: <a href="https://www.nasdaq.com/NDX_NDXP_Factsheet">https://www.nasdaq.com/NDX_NDXP_Factsheet</a>.
\5\ The Nasdaq-100 Micro Index or XND is designed to reflect 1/
100th the value of the Nasdaq-100 Index. See <a href="https://www.nasdaq.com/docs/2023/08/14/XND_FactSheet.pdf">https://www.nasdaq.com/docs/2023/08/14/XND_FactSheet.pdf</a>.
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OROs on NDX and XND are distinguishable from NDX options and XND
options. OROs would entitle the buyer to receive, or the seller to pay,
a fixed amount at expiration \6\ based on whether the settlement price
of the underlying is at, above, or below a predetermined strike price
at expiration. Unlike traditional NDX options and XND options, OROs
will pay a fixed sum at expiration regardless of the magnitude of the
difference between the settlement value and the option's exercise
price.\7\
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\6\ Rules for binary return options products currently exist on
NYSE American LLC (``NYSE American'') and Cboe Exchange, Inc.
(``Cboe''). See Securities Exchange Act Release Nos. 55843 (June 1,
2007), 72 FR 31636 (June 7, 2007) (Notice); 56251 (August 14, 2007),
72 FR 46523 (August 20, 2007) (Approval) (SR-Amex-2004-27); 57642
(April 9, 2008), 73 FR 20985 (April 17, 2008) (Notice); 57850 (May
22, 2008), 73 FR 31169 (May 30, 2008) (Approval) (SR-CBOE-2006-105).
See also Cboe Exchange, Inc. Rules related to Binary Options as
described at Rule 4.16 and NYSE American LLC Rules related to ByRDs
at Section 17 of NYSE American's Rules.
\7\ In contrast, traditional NDX options and XND options give
the holder the right, but not the obligation to buy or sell an
underlying asset, in this case the Nasdaq-100 Index or the 1/100th
the value of the Nasdaq-100 Index, respectively, at a specified
price before or at expiration.
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OROs will provide investors with the ability to transact options
that pay a fixed sum at expiration on a listed exchange market subject
to the benefits of a centralized forum for price discovery; pre- and
post-trade transparency; standardized contract specifications; real-
time surveillance; and clearing guaranteed by The Options Clearing
Corporation (``OCC'').
As proposed, new Options 3B, would be titled ``Outcome-Related
Options.''
General Provisions
The Exchange proposes to titled Section 1 ``General Provisions.''
The trading of OROs will be subject to all rules applicable to options
on the Exchange, including, without limitation, trading rules, listing
rules and business conduct rules. The Exchange proposes new Options 3B
to address rule differences that are unique to the trading of OROs
while maintaining the applicability of the broader rulebook.
Pursuant to Options 3B, Section 1(a), titled ``Applicability of
Exchange Rules,'' Options 3B Rules will apply only to Outcome-Related
Options or ``OROs.'' Further, the trading of OROs will be subject to
all other Rules applicable to the trading of options on
[[Page 12653]]
the Exchange, including the trading rules and functionality in Options
3, unless the context otherwise requires or otherwise provided in this
Options 3B.\8\ For example, the Opening Process at Options 3, Section
8; Trading Halts at Options 3, Section 9; simple, complex and optional
risk protections at Options 3, Sections 15, 16 and 28; and Market Maker
appointments at Options 2, Section 3 and obligations at Option 2,
Section 5 shall all apply to the trading of OROs as they apply to the
trading of other options on the Exchange.
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\8\ See proposed Options 3B, Section 1(a).
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The Exchange proposes the following definitions at Options 3B,
Section 1(b), titled ``Definitions,'' that would apply to Options 3B
rules:
[ssquf] The term ``contract multiplier'' as used in reference to
OROs means the multiple applied to the exercise settlement value to
arrive at the total exercise settlement amount per contract. The
contract multiplier for OROs shall be $100.\9\
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\9\ See proposed Options 3B, Section 1(b)(1).
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[ssquf] The term ``exercise price'' as used in reference to OROs
means the value to which the settlement value of the underlying is
compared to determine whether the holder of an ORO is entitled to a pay
out on the option contract.\10\
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\10\ See proposed Options 3B, Section 1(b)(2).
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[ssquf] The term ``exercise settlement amount'' as used in
reference to OROs means the amount of cash that a holder will receive
upon exercise of the contract. The exercise settlement amount is $100.
The underlying is used to determine whether a binary option is in, at
or out of the money.\11\
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\11\ See proposed Options 3B, Section 1(b)(3).
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[ssquf] The term ``OROs'' represents binary options on the
underlying.\12\
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\12\ See proposed Options 3B, Section 1(b)(4).
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[ssquf] The term ``OROs Order'' means an order submitted in an ORO
pursuant to Options 3B.\13\
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\13\ See proposed Options 3B, Section 1(b)(5).
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[ssquf] The term ``settlement value'' is the value of the
underlying that is used to determine whether an ORO is in, at or out of
the money. OROs that are ``at-the-money,'' ``in-the-money,'' or ``out-
of-the-money'' are a function of the settlement value of the underlying
in relation to the type of ORO (i.e., put or call) and the exercise
price. OROs shall be paid out if the settlement value of the underlying
equals, exceeds or is less than the exercise price, depending on the
type of option (i.e., call or put).\14\
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\14\ See proposed Options 3B, Section 1(b)(6).
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[cir] OROs that are call option contracts would return an exercise
settlement amount if the settlement value of the underlying is at or
above the exercise price at expiration (i.e., in- or at-the-money).\15\
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\15\ See proposed Options 3B, Section 1(b)(6)(a).
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[cir] OROs that are put option contracts would return an exercise
settlement amount if the settlement value of the underlying is below
the exercise price at expiration (i.e., in-the-money).\16\
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\16\ See proposed Options 3B, Section 1(b)(6)(b).
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[ssquf] The term ``underlying'' means the security that the
Clearing Corporation \17\ shall utilize to determine whether an ORO is
in, at or out of the money. With respect to an index, the underlying
shall mean any of the securities that are the basis for the calculation
of the index.\18\
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\17\ The term ``Clearing Corporation'' means The Options
Clearing Corporation. See General 1, Section 1(a)(3).
\18\ See proposed Options 3B, Section 1(b)(7).
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OROs contracts would have an exercise settlement amount that is
established at the creation of the option of $100 for an OROs Order
pursuant to Options 3B, Section 1(b)(3). OROs would be paid out if the
settlement value of the underlying equals, exceeds or is less than the
exercise price, depending on the type of option (i.e., call or
put).\19\ As proposed, a call option on OROs would pay $1.00 if the
settlement price is at or above the strike price at expiration.\20\
Conversely, a put option on OROs would pay $1.00 per contract if the
settlement price is below the strike price at expiration.\21\ The
``settlement value'' for OROs shall be the price of the underlying that
is used to determine whether an ORO is in, at or out of the money.\22\
The underlying shall mean the security that the Clearing Corporation
would utilize to determine whether an ORO is in, at or out of the
money.\23\ In the case of an index, the underlying shall mean any of
the securities that are the basis for the calculation of the index.\24\
An OROs Order would mean an order submitted in an ORO pursuant to
Options 3B.\25\
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\19\ See proposed Options 3B, Section 1(b)(6).
\20\ See proposed Options 3B, Section 1(b)(6)(a).
\21\ See proposed Options 3B, Section 1(b)(6)(b).
\22\ See proposed Options 3B, Section 1(b)(6)(b).
\23\ See proposed Options 3B, Section 1(b)(7).
\24\ See id.
\25\ See proposed Options 3B, Section 1(b)(5).
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Hours of Business
Section 2 of Options 3B would be titled ``Hours of Business.''
Pursuant to proposed Options 3B, Section 1(c), the trading hours for
OROs would be the same as the trading hours as set forth in Options 3,
Section 1.\26\
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\26\ Options 3, Section 1(d) provides that options on a broad-
based index, as defined in Options 4A, Section 2 may be traded on
the Exchange until 4:15 p.m. each business day.
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Units of Trading and Premium
Section 3 of Options 3B would be titled ``Units of Trading and
Premium.'' Pursuant to proposed Options 3B, Section 3(a), bids and
offers for OROs must be expressed in U.S. dollars.\27\ Pursuant to
proposed Options 3B, Section 3(b), OROs may have a premium range \28\
from $0.01 to $1.00.\29\
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\27\ See proposed Options 3B, Section 3(a).
\28\ The premium is the price paid or received when entering an
OROs Order.
\29\ See proposed Options 3B, Section 3(b).
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Minimum Trading Increment
Section 4 of Options 3B would be titled ``Minimum Trading
Increments.'' Pursuant to proposed Options 3B, Section 4(a), OROs may
be entered in a minimum increment of $0.01. Today, NDX options trade in
$0.05 and $0.10 increments pursuant to Options 3, Section 3(a). Today,
XND options trade in $0.01 increments.\30\ The Exchange notes that Cboe
Rule 5.4(c)(1) permits binary options with a minimum increment of
$0.01.\31\
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\30\ See ISE Supplementary Material .04 to Options 3, Section 3.
\31\ Cboe Rule 5.4(c)(1) states that the exchange establishes
the minimum increment for bids and offers on orders for binary
options on a class-by-class basis, which may not be less than $0.01.
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The Exchange notes that MRX Options 4A Rules are incorporated by
reference to Nasdaq ISE, LLC (``ISE'') Options 4A Rules. ISE
Supplementary Material .04 to Options 3, Section 3, Minimum Trading
Increments, notes that XND options trade in $0.01 increments.\32\ At
this time, the Exchange proposes to add rule text to MRX Supplementary
Material .04 to Options 3, Section 3, Minimum Trading Increments, that
is identical to ISE Supplementary Material .04 to Options 3, Section 3
to make clear that XND trades in a $0.01 increment.
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\32\ Specifically, ISE Supplementary Material .04 to Options 3,
Section 3 states that, Options on the Nasdaq 100 Micro Index (XND)
(as long as QQQ options (``QQQ'') participate in the Penny Interval
Program) shall have a minimum increment of $.01.
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Listings
Section 5 of Options 3B would be titled ``Listings.'' Pursuant to
proposed Options 3B, Section 5(a), titled ``OROs Classes,'' the
Exchange authorizes OROs on the Nasdaq-100 Index or NDX (``Nasdaq-100
OROs'') and on the Nasdaq-100 Micro Index or XND (``XND OROs''). The
listing of Nasdaq-100 OROs and XND OROs would be subject to Options 4A
Rules \33\ unless otherwise specified. Nasdaq-100 OROs and XND OROs
will trade independently of and
[[Page 12654]]
in addition to other standard options on NDX or XND, respectively.
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\33\ As noted above, MRX incorporates ISE Options 4A Rules by
reference.
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Similar to NDX and XND options,\34\ Nasdaq-100 OROs and XND OROs
will be P.M.-settled.\35\ Options 3B, Section 5(a)(1) would be titled
``P.M.-Settled'' and state, that the Exchange authorizes P.M.-Settled
Nasdaq-100 OROs and XND OROs pursuant to Options 4A, Section 12(a)(5).
As a result, exercise will result in delivery of cash on the business
day following expiration.\36\
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\34\ Today, the Exchange authorizes P.M.-Settled NDX and XND
options pursuant to Options 4A, Section 12(a)(6)(i).
\35\ See proposed Options 3B, Section 5(a)(1). Of note, Nasdaq-
100 OROs and XND OROs would not trade A.M.-Settled. Today, NDX
options trade A.M.-Settled.
\36\ The last day of trading for P.M.-settled index options
shall be the business day of expiration, or, in the case of an
option contract expiring on a day that is not a business day, on the
last business day before its expiration date. See Options 4A,
Section 12(a)(6).
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Similar to NDX and XND options,\37\ Nasdaq-100 OROs and XND OROs
shall be subject to the Nonstandard Expirations Program pursuant to
Supplementary Material .07 to Options 4A, Section 12.\38\ Options 3B,
Section 5(a)(2) would be titled ``Nonstandards Expiration Program.''
The Nonstandard Expirations Program would permit Nasdaq-100 OROs and
XND OROs to open for trading weekly expirations that expire on any
Monday, Tuesday, Wednesday, Thursday or Friday (other than the third
Friday-of-the-month or days that coincide with an EOM expiration).
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\37\ Today, NDX options and XND options are subject to the
Nonstandard Expirations Program as specified in Supplementary
Material .07 to Options 4A, Section 12.
\38\ See proposed Options 3B, Section 5(a)(2).
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Further, as proposed, similar to NDX options and XND options,\39\
the Exchange may also list (i) Nasdaq-100 OROs whose settlement value
is the price of the Nasdaq-100 Index as reported by The Nasdaq Stock
Market, LLC (``Nasdaq'') at the conclusion of the Nasdaq Closing Cross
pursuant to Nasdaq Equity 4, Rule 4757 \40\ (P.M.-Settled third Friday-
of-the-month NDX options series); and (ii) XND OROs whose settlement
value is derived from the price of the Nasdaq-100 Index as reported by
Nasdaq at the conclusion of the Nasdaq Closing Cross pursuant to Nasdaq
Equity 4, Rule 4757 (P.M.-Settled).\41\
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\39\ Today, NDX options and XND options may also list options
whose exercise settlement value is the closing value of the Nasdaq-
100 Index on the expiration day (P.M.-settled third Friday-of-the-
month NDX options series) and the Nasdaq 100 Micro Index (``XND'')
whose exercise settlement value is derived from closing prices on
the expiration day (``P.M.-settled'').. See Options 4A, Section
12(a)(6)(i).
\40\ The Nasdaq Closing Cross is Nasdaq's auction process used
to determine the official closing price of Nasdaq-listed securities
at 4:00 p.m. Eastern Time. See Equity 4, Rule 4757. As explained in
this proposal, OROs will be P.M.-Settled.
\41\ See proposed Options 3B, Section 5(a)(2)(a).
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As proposed in Options 3B, Section 5(a)(3), the reporting authority
for Nasdaq-100 OROs and XND OROs shall be The Nasdaq Stock Market.
Options 3B, Section 5(a)(3) would be titled ``Reporting Authority.''
Pursuant to proposed Options 3B, Section 5(b), titled ``Permissible
Series,'' the Exchange approves Nasdaq-100 OROs and XND OROs for
listing and trading pursuant to Options 3B. Nasdaq-100 OROs and XND
OROs are a separate class from other options overlying the Nasdaq-100
Index.
Similar to NDX and XND options,\42\ Nasdaq-100 OROs and XND OROs
may expire at three (3)-month intervals, in consecutive weeks or in
consecutive months and may list up to 12 standard (monthly)
expirations.\43\ Similar to NDX and XND options,\44\ Nasdaq-100 OROs
and XND OROs shall be European-style exercise.\45\
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\42\ See Options 4A, Section 12(a)(3).
\43\ See proposed Options 3B, Section 5(b)(1).
\44\ See Options 4A, Section 12(a)(4).
\45\ See proposed Options 3B, Section 5(b)(2).
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Nasdaq-100 OROs and XND OROs would be subject to the provisions of
Options 4A with respect to weekly expirations provided, however, that
weekly expirations would only be P.M.-Settled.\46\ New series in weekly
expirations on Nasdaq-100 OROs and XND OROs may be added up to and
including on the expiration date for an expiring weekly expiration.
Further, the Exchange may open for trading end of month (EOM)
expirations on Nasdaq-100 OROs and XND OROs to expire on last trading
day of the month. EOMs on OROs would be subject to all provisions of
Options 4A, except that EOMs on Nasdaq-100 OROs and XND OROs shall only
be P.M.-Settled. New series in EOMs on Nasdaq-100 OROs and XND OROs may
be added up to and including on the expiration date for an expiring
EOM. Finally, the Exchange may list long term index options series
(``LEAPS'') on Nasdaq-100 OROs and XND OROs that expire from twelve
(12) to sixty (60) months from the date of issuance.\47\
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\46\ Today, NDX options are both A.M.-Settled and P.M.-Settled.
\47\ See Options 4A, Section 12(b)(2) and (3).
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Proposed Options 3B, Section 5(c), titled ``Terms,'' provides the
terms for submitting an ORO Order for a OROs series to the System, the
submitting Member must include one of each of the following terms in
the OROs Order: (1) underlying index (the contract multiplier is 100);
(2) type of option (i.e., put or call); (3) expiration date; and (4)
exercise price.\48\
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\48\ See proposed Options 3B, Section 5(c).
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Proposed Options 3B, Section 5(d), titled ``Determination of
Settlement Value,'' provides the determination for settlement value.
For Nasdaq-100 OROs, the settlement value shall be the price of the
Nasdaq-100 Index as reported by Nasdaq at the conclusion of the Nasdaq
Closing Cross pursuant to Nasdaq Equity 4, Rule 4757. The settlement
value for XND OROs shall be a price that is derived from the price of
the Nasdaq-100 Index as reported by Nasdaq at the conclusion of the
Nasdaq Closing Cross pursuant to Nasdaq Equity 4, Rule 4757.
Proposed Options 3B, Section 5(e), titled ``Adjustment,'' provides
the manner in which adjustments will be handled. OROs contracts are
subject to adjustment only in accordance with and to the extent
specified in the By-Laws and Rules of the Clearing Corporation. When
any such adjustment has been determined, an announcement shall be made
by the Exchange and shall become effective as of the time specified in
such announcement.
Proposed Options 3B, Section 5(f), titled ``Position Limits,''
states that the position limits for OROs in Options 4A, Section 6,
Position Limits for Broad-Based Index Options, shall not apply to OROs,
rather the position limits for OROs shall be equal to 25,000 contracts
on the same side of the market. Position limits in OROs shall not be
aggregated with other options contracts for the underlying. OROs shall
not be subject to the exemptions from position limits in Options 4A,
Section 9, Exemptions from Position Limits.
Further, proposed Options 3B, Section 5(f)(1), titled ``Reporting
of Position Limits,'' states that with respect to positions in OROs,
the minimum position in an account which must be reported shall be 200
contracts.\49\ Pursuant to Options 3B, Section 5(f)(1)(a), titled
``Market Side,'' for purposes of the position limits set forth
subparagraph (f) of this Rule, long positions in put OROs and short
positions in call OROs shall be considered to be on the same side of
the market; and short positions in put OROs and long positions in call
OROs shall be considered to be on the same side of the market.
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\49\ See proposed Options 3B, Section 5(f)(1).
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Proposed Options 3B, Section 5(g), titled ``Exercise Limits,'' the
exercise limits specified in Options 4A, Section 10, Exercise Limits,
shall not apply to OROs. OROs will automatically be
[[Page 12655]]
exercised at expiration if the settlement value of the underlying is
equal to or greater than the exercise price of call OROs or less than
the exercise price in the case of put OROs. Further, OROs are not
subject to the rules in: (i) Options 6B, Exercises and Deliveries; and
(ii) Options 9, Section 10, Other Restrictions on Options Transactions
and Exercise, as that Section 10 relates to exercises.
Types of Orders; Order and Quote Protocols
Options 3B, Section 6 shall be titled ``Types of Orders; Order and
Quote Protocols.'' The Exchange may determine to make any eligible
order types and times-in-force, respectively, in Options 3, Section 7,
Types of Orders and Order and Quote Protocols, available on a class or
System basis to be submitted as OROs Orders. Eligible OROs Orders shall
include all order types in Options 3, Section 7 except for: (1) Market
Orders at Options 3, Section 7(a); (2) Stop Orders at Options 3,
Section 7(d); and (3) Stop Limit Orders at Options 3, Section 7(e).
Pursuant to Options 3B, Section 6(b), all order and quote protocols
in Supplementary Material .03 to Options 3, Section 7 are available for
OROs.
Pursuant to Options 3B, Section 6(c), OROs Orders may be submitted
in both simple and complex order books. OROs Orders may be entered as
complex orders as specified in Options 3, Section 14, except that a
Stock-Complex Order as defined in Options 3, Section 14(a)(3) is not
permitted. OROs Orders may be submitted into any of the auction
mechanisms specified in Options 3, Sections 11 (Auction Mechanisms) or
13 (Price Improvement Mechanism for Crossing Transactions). OROs Orders
may be submitted as a Crossing Orders, as specified in Options 3,
Section 12, except that OROs Orders may not be submitted as a Qualified
Contingent Cross Order or a Complex Qualified Contingent Cross Order
subject to Options 3, Section 12(c) and (d), respectively.
Obvious Errors
Options 3B, Section 7, shall be titled ``Obvious Error.'' Pursuant
to Options 3B, Section 7(a), for purposes of OROs Orders, the Obvious
Error provisions in Options 3, Section 20, Nullification and Adjustment
of Options Transactions including Obvious Errors, shall apply except
that with respect to Options 3, Section 20(c), the adjusted price
(including any applicable adjustment under subparagraph (c)(4)(A) for
Non-Customer transactions) shall not exceed the applicable exercise
settlement amount for OROs, which is $1.
Suitability and Risk Disclosures
Market participants that elect to transact in OROs should receive a
copy of the ODD from their broker-dealer.\50\ The ODD explains the
risks inherent in options trading and binary options.\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.
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\50\ See FINRA Rule 2360(b)(16)(A).
\51\ See supra note 3.
\52\ See FINRA Rule 2111.
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Surveillance
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to OROs that it applies to the Exchange's other options
products.\53\ Additionally, the Exchange is a member of the Intermarket
Surveillance Group (``ISG'') under the Intermarket Surveillance Group
Agreement. ISG members work together to coordinate surveillance and
investigative information sharing in the stock, options, and futures
markets. Further, the Exchange has a Regulatory Services Agreement
(``RSA'') with the Financial Industry Regulatory Authority (``FINRA'').
Pursuant to a multi-party 17d-2 joint plan, all options exchanges
allocate regulatory responsibilities to FINRA to conduct certain
options-related market surveillance that are common to rules of all
options exchanges. The Exchange believes that its existing surveillance
and reporting safeguards are designed to deter and detect possible
manipulative behavior which might potentially arise from listing and
trading OROs.
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\53\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
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Capacity
The Exchange represents that it has the necessary systems capacity
to support trading OROs. Further, the Exchange believes that the
Options Price Reporting Authority or ``OPRA'' has the necessary systems
capacity to handle the additional traffic associated with the listing
of OROs series. Because the proposal is limited to one class, the
Exchange believes any additional traffic that may be generated from the
introduction of Nasdaq-100 OROs and XND OROs will be manageable.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\54\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\55\ in particular, in that it
is designed to promote just and equitable principles of trade, 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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\54\ 15 U.S.C. 78f(b).
\55\ 15 U.S.C. 78f(b)(5).
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OROs will provide investors with the ability to transact options
that pay a fixed sum at expiration on a listed exchange market subject
to the benefits of a centralized forum for price discovery; pre- and
post-trade transparency; standardized contract specifications; real-
time surveillance; and the centralized clearing guaranteed by OCC,
thereby promoting just and equitable principles of trade. Further, the
introduction of OROs will provide advantages to the investing public
that are not provided for by other options overlying the Nasdaq-100
Index. OROs offer investors a relatively low risk security where the
risk reduction results from knowing the maximum risk exposure when the
contract is written. While there may be variations in the exercise
settlement amount, the maximum exercise settlement amount is set at
listing, and the maximum risk therefore is limited and known at
listing. Also, as proposed, the trading of OROs will be subject to all
other Rules applicable to the trading of options on the Exchange,
including, without limitation, the trading rules, listing rules and
business conduct rules, unless the context otherwise requires or
otherwise provided in Options 3B.\56\
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\56\ See proposed Options 3B, Section 1(a). For example, the
Opening Process at Options 3, Section 8; Trading Halts at Options 3,
Section 9; simple, complex and optional risk protections at Options
3, Sections 15, 16 and 28; and Market Maker appointments at Options
2, Section 3 and obligations at Option 2, Section 5 shall all apply
to the trading of OROs as they apply to the trading of other options
on the Exchange.
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The Exchange proposes a minimum increment of $0.01 for Nasdaq-100
OROs and XND OROs. Today, NDX options trade in $0.05 and $0.10
increments \57\ and XND options trade in $0.01 increments.\58\ The
Exchange believes that the proposed minimum increment, which is
identical to Cboe's
[[Page 12656]]
increment for binary options,\59\ will permit these options to trade in
intervals similar to other index products in the industry. Further,
adding rule text at MRX Supplementary Material .04 to Options 3,
Section 3 that is identical to ISE Supplementary Material .04 to
Options 3, Section 3 is consistent with the Act because it will make
clear that XND trades in a $0.01 increment.\60\
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\57\ See Options 3, Section 3(a).
\58\ See ISE Supplementary Material .04 to Options 3, Section 3.
\59\ Cboe Rule 5.4(c)(1) states that the exchange establishes
the minimum increment for bids and offers on orders for binary
options on a class-by-class basis, which may not be less than $0.01.
\60\ Proposed MRX Supplementary Material .04 to Options 3,
Section 3 would state that, Options on the Nasdaq 100 Micro Index
(XND) (as long as QQQ options (``QQQ'') participate in the Penny
Interval Program) shall have a minimum increment of $.01.
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The remainder of the proposed rules permit trading in Nasdaq-100
OROs and XND OROs in a manner similar to the trading of NDX options and
XND options, respectively. Similar to NDX options and XND options,\61\
Nasdaq-100 OROs and XND OROs will be P.M.-settled.\62\ Similar to NDX
options and XND options,\63\ Nasdaq-100 OROs and XND OROs would be
subject to the Nonstandard Expirations Program as specified in
Supplementary Material .07 to Options 4A, Section 12.\64\ Similar to
NDX options,\65\ the Exchange may also list Nasdaq-100 OROs whose
settlement value is the price of the Nasdaq-100 Index as reported by
Nasdaq at the conclusion of the Nasdaq Closing Cross pursuant to Nasdaq
Equity 4, Rule 4757 (P.M.-settled third Friday-of-the-month).\66\
Similar to XND options, the Exchange may also list XND OROs who
settlement value price is derived from the price of the Nasdaq-100
Index as reported by Nasdaq at the conclusion of the Nasdaq Closing
Cross pursuant to Nasdaq Equity 4, Rule 4757. Similar to NDX options
and XND options,\67\ Nasdaq-100 OROs and XND OROs may expire at three
(3)-month intervals, in consecutive weeks or in consecutive months and
may list up to 12 standard (monthly) expirations.\68\
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\61\ Today, the Exchange authorizes P.M.-Settled NDX options and
XND options pursuant to Options 4A, Section 12(a)(6).
\62\ See proposed Options 3B, Section 5(a)(1).
\63\ Today, NDX options and XND options are subject to the
Nonstandard Expirations Program as specified in Supplementary
Material .07 to Options 4A, Section 12.
\64\ See proposed Options 3B, Section 5(a)(2).
\65\ Today, NDX options and XND options may also list options
whose exercise settlement value is the closing value of the Nasdaq-
100 Index on the expiration day (P.M.-settled third Friday-of-the-
month NDX options series) and the Nasdaq 100 Micro Index (``XND'')
whose exercise settlement value is derived from closing prices on
the expiration day (``P.M.-settled''). See Options 4A, Section
12(a)(6)(i).
\66\ See proposed Options 3B, Section 5(a)(2)(a).
\67\ See Options 4A, Section 12(a)(3).
\68\ See proposed Options 3B, Section 5(b)(1).
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The Exchange's proposed position limit for the OROs of 25,000
contracts on the same side \69\ promotes just and equitable principles
of trade. The proposed position limit of 25,000 contracts reasonably
balances the promotion of a free and open market for these securities
with minimization of incentives for market manipulation. A position
limit of 25,000 contracts is the lowest position limit available in the
options industry. The proposed position limit is conservative given the
size and liquidity of Nasdaq-100 Index constituents, thereby
substantially reducing the feasibility of price distortion. Further the
price of each constituent in the Nasdaq-100 Index is independently
formed, therefore there is no single price input that determines the
index, rather the various market prices are aggregated. Finally, the
Nasdaq-100 reflects continuous market pricing of constituents. As
proposed the closing price is based on the Nasdaq Closing Cross, a
robust auction mechanism with significant volume and oversight and the
highest-volume trading event of the day for securities comprising the
Nasdaq-100 Index. Therefore, the proposed position limit is consistent
with the Act as it addresses concerns related to manipulation and
protection of investors because the position limit is extremely
conservative and more than appropriate.
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\69\ Position limits in OROs would not be aggregated with other
options contracts where the overlying is the Nasdaq-100 Index. OROs
shall not be subject to the exemptions from position limits in
Options 4A, Section 9.
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The proposed adjustments to OROs with respect to the Obvious Error
provisions \70\ are designed to promote just and equitable principles
of trade, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system, as the proposal
would ensure that OROs Orders that are deemed Obvious Errors are
appropriately adjusted given the nature of these contracts.
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\70\ See Options 3B, Section 7.
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Further, market participants that elect to transact in OROs should
receive a copy of the ODD from their broker-dealer.\71\ The ODD
explains the risks inherent in options trading and binary options.\72\
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.\73\ 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. These measures are all designed
to protect investors and the public interest.
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\71\ See FINRA Rule 2360(b)(16)(A).
\72\ See supra note 3.
\73\ See FINRA Rule 2111.
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Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to OROs that apply to the Exchange's other options
products.\74\ Additionally, the Exchange is a member of ISG under the
Intermarket Surveillance Group Agreement. ISG members work together to
coordinate surveillance and investigative information sharing in the
stock, options, and futures markets. In addition, the Exchange has an
RSA with the FINRA. Pursuant to a multi-party 17d-2 joint plan, all
options exchanges allocate regulatory responsibilities to FINRA to
conduct certain options-related market surveillance that are common to
rules of all options exchanges. The Exchange believes that its existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading OROs.
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\74\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
---------------------------------------------------------------------------
Finally, the Exchange represents that it has the necessary systems
capacity to support trading OROs. Further, the Exchange believes that
OPRA has the necessary systems capacity to handle the additional
traffic associated with the listing of OROs series. Because the
proposal is limited to one class, the Exchange believes any additional
traffic that may be generated from the introduction of Nasdaq-100 OROs
and XND OROs will be manageable.
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's proposal to list Nasdaq-100 OROs and XND OROs does
not impose an undue burden on intra-market competition as any Member
may transact OROs.
The Exchange's proposal to list Nasdaq-100 OROs and XND OROs does
not impose an undue burden on inter-market competition as competitors
have rules for similar products.\75\
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\75\ See Cboe Rule 4.16. See also NYSE American related to ByRDs
at Section 17 of NYSE American's Rules.
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[[Page 12657]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
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#d3a1a6bfb6feb0bcbebeb6bda7a093a0b6b0fdb4bca5"><span class="__cf_email__" data-cfemail="8efcfbe2eba3ede1e3e3ebe0fafdcefdebeda0e9e1f8">[email protected]</span></a>. Please include
file number SR-MRX-2026-05 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-MRX-2026-05. 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-MRX-2026-05 and should be submitted on
or before April 6, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\76\
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\76\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05019 Filed 3-13-26; 8:45 am]
BILLING CODE 8011-01-P
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