Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend FINRA Rules To Address Binary Options, Options Whose Payout Is Based on Specified Metrics, and Options Cleared by a Registered Clearing Agency Other Than The Options Clearing Corporation

Issuing agencies

Full Text

<html>
<head>
<title>Federal Register, Volume 91 Issue 208 (Thursday, October 29, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 208 (Thursday, October 29, 2026)]
[Notices]
[Pages 68190-68196]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22027]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106731; File No. SR-FINRA-2026-022]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend FINRA Rules To Address Binary Options, 
Options Whose Payout Is Based on Specified Metrics, and Options Cleared 
by a Registered Clearing Agency Other Than The Options Clearing 
Corporation

October 26, 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 October 22, 2026, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rules 2220, 2351, 2357, 2360, and 
4210 to address binary options, options whose payout is based on 
specified metrics, and options cleared by a registered clearing agency 
other than The Options Clearing Corporation.
    The text of the proposed rule change is available on FINRA's 
website at <a href="http://www.finra.org">http://www.finra.org</a> and at the principal office of FINRA.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 68191]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    Multiple national securities exchanges have filed proposals with 
the Commission to list and trade new types of binary options whose 
exercise settlement amount is established at the creation of the option 
and whose payout is based on the value of an issuer's reported 
financial or operating metrics (``binary metric options''), some of 
which may be cleared by a registered clearing agency other than The 
Options Clearing Corporation (``OCC''), and the Commission has approved 
at least one such proposal.\4\ While the specific proposals vary in 
some respects, these proposals collectively reflect a new category of 
exchange-listed options product: cash-settled, European-style binary 
options whose payouts are determined solely by whether an issuer's 
reported financial or operating metric (or other specified condition), 
such as quarterly revenue, earnings per share, or another metric 
disclosed in the issuer's SEC filings, meets or exceeds a defined 
threshold at expiration. These products generally have an exercise 
settlement amount of $1, meaning that at expiration each contract pays 
either $1 or $0 depending on whether the underlying metric has met or 
exceeded the specified threshold.
---------------------------------------------------------------------------

    \4\ See, e.g., Securities Exchange Act Release No. 106659 
(October 13, 2026), 91 FR 65854 (October 16, 2026) (Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of File 
No. SR-CBOE-2026-061) (``Cboe Binary KPI Options Approval Order''); 
Securities Exchange Act Release No. 106182 (August 24, 2026), 91 FR 
55384 (August 27, 2026) (Notice of Filing of File No. SR-MEMX-2026-
25); Securities Exchange Act Release No. 106370 (September 15, 
2026), 91 FR 59199 (September 18, 2026) (Notice of Filing of File 
No. SR-NYSEARCA-2026-93); Securities Exchange Act Release No. 106367 
(September 15, 2026), 91 FR 59217 (September 18, 2026) (Notice of 
Filing of File No. SR-NYSEAMER-2026-82); SR-MRX-2026-41 (filed 
October 2, 2026).
---------------------------------------------------------------------------

    Binary metric options differ from most historically listed options 
products by referencing an underlying metric rather than a security or 
an index of securities, and in some cases by clearing through a 
registered clearing agency other than OCC.\5\ The applicable trading 
mechanics of each binary metric option are governed by the rules of the 
exchange on which the contracts are listed.
---------------------------------------------------------------------------

    \5\ Exchanges may use varying terminology in describing their 
specific products. For the purposes of FINRA rules, FINRA refers to 
all underlying metrics as ``metrics'' and the products as ``binary 
metric options.''
---------------------------------------------------------------------------

    FINRA Rule 2360 (Options) sets forth a number of requirements for 
FINRA members specific to options activity, including, among other 
things, requirements relating to position limits, large options 
position reporting (``LOPR''), delivery of disclosure documents, 
confirmations, transactions with issuers, account statements, account 
opening, recordkeeping, suitability, and supervision. Additionally, 
FINRA Rule 2220 (Options Communications) sets forth options-specific 
communications requirements and FINRA Rule 4210 (Margin Requirements) 
includes margin requirements specific to options. FINRA intends that 
the rules apply to all listed options products, including binary 
options, options on metrics, and options cleared through any registered 
clearing agency.\6\
---------------------------------------------------------------------------

    \6\ Historically, listed options have settled based on the price 
of an individual security or security index and clear through OCC; 
as a result, FINRA rules generally refer to options with these 
existing structures and clearing arrangement. Additionally, although 
certain types of binary options are already listed and traded on 
exchanges, some FINRA rules also do not clearly contemplate binary 
option structures.
---------------------------------------------------------------------------

    FINRA is therefore proposing amendments to Rules 2220, 2360, and 
4210 to clarify the application of existing options requirements to 
binary options, options on metrics, and options cleared through a 
registered clearing agency other than OCC, which would include the new 
binary metric options products discussed above. As described in further 
detail below, the proposed rule change would accomplish this goal by 
updating the definitional framework under Rule 2360 to, among other 
clarifying changes, add new terms for binary options, registered 
clearing agencies, and underlying metrics; clarify the application of 
position limit and LOPR requirements in Rule 2360 to binary options and 
options on metrics; amend the disclosure document delivery requirement 
in Rule 2360 to include options issued by a registered clearing agency 
other than OCC; update provisions throughout Rules 2220, 2357, 2360, 
and 4210 to refer to registered clearing agencies generally rather than 
specifically to OCC, as appropriate; update provisions throughout Rules 
2220 and 2360 to incorporate references to ``metric;'' and update Rules 
2351 and 2360 to make other needed changes, including updating cross-
references, making stylistic changes, and minor corrections to existing 
provisions.
    The proposed changes are collectively designed to clarify the 
application of existing options requirements to binary options, options 
on metrics, and options cleared by any registered clearing agency, such 
that the rules apply to such options--including binary metric options--
in a manner that is substantially comparable to other listed options 
products.
Proposed Amendments to Rule 2360
    Rule 2360 establishes a comprehensive regulatory framework 
governing members' options trading activity. Rule 2360(a) sets forth a 
number of definitions for terms used in Rule 2360, including to 
distinguish between standardized options (i.e., listed options) and 
conventional options, (i.e., over-the-counter or ``OTC'' options). Rule 
2360(b) clarifies the applicability of Rule 2360 and sets forth 
provisions regarding positions and exercise limits, LOPR requirements, 
delivery of disclosure documents, confirmations, transactions with 
issuers, account statements, account openings, recordkeeping, 
suitability, and supervision. Rule 2360(c) sets forth requirements for 
the portfolio margining disclosure statement and acknowledgement, and 
Supplementary Material .01 through .03 to Rule 2360 provide 
illustrative examples of position limit requirements, further 
explanation regarding the delta hedging exemption control relationship, 
and clarification regarding position limits for exchange-traded funds. 
The proposed changes to Rule 2360 are described in greater detail 
below.
Definitions
    FINRA is proposing changes to Rule 2360(a) to include three new 
defined terms. First, FINRA proposes to add a new defined term, 
``Registered Clearing Agency,'' meaning a clearing agency registered 
with the Commission pursuant to Section 17A of the Exchange Act.\7\ 
This proposed definition is necessary to enable FINRA's options rules 
to apply to listed options regardless of which SEC-registered clearing 
agency issues or guarantees the contracts. FINRA is making several 
changes throughout Rule 2360 to replace references to OCC with 
Registered Clearing Agency.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1(a).
---------------------------------------------------------------------------

    Second, FINRA proposes to add a new defined term, ``binary 
option,'' meaning a cash-settled option contract having an exercise 
settlement amount that is established at the creation of the option and 
where the option holder is entitled to the exercise settlement amount 
only if the settlement value of the binary option overlying a security, 
index, or

[[Page 68192]]

metric, at expiration, (1) equals or is greater than the exercise price 
for a call binary option, or (2) is less than the exercise price for a 
put binary option. The proposed definition would further provide that 
the applicable trading mechanics for such contracts are governed by the 
rules of the exchange on which they are listed. This proposed 
definition is intended to broadly encompass a variety of binary options 
structures.\8\
---------------------------------------------------------------------------

    \8\ The proposed definition of ``binary option'' is derived from 
the definitions proposed in the exchange filings referenced in note 
4, supra, and is drafted broadly to accommodate the various 
structures and terminologies used across those proposals.
---------------------------------------------------------------------------

    Third, FINRA proposes to add a new defined term, ``underlying 
metric,'' meaning a metric underlying an option, including any 
financial or operating metric or condition on which an option's payout 
is based. This proposed definition would complement the existing 
definitions of ``underlying security'' and ``underlying index.''
    In addition to these newly defined terms, FINRA proposes to 
consolidate and replace the existing definitions of ``standardized 
equity option'' and ``standardized index option,'' with a single, 
unified definition of ``standardized option'' that encompasses any 
options contract issued, or subject to issuance, by a Registered 
Clearing Agency that is not a FLEX Option and not an OCC Cleared OTC 
Option. The consolidated definition identifies standardized equity 
options, standardized index options, and standardized metric options as 
examples of standardized options. This proposed consolidation preserves 
the existing treatment of standardized equity options and standardized 
index options while ensuring standardized binary options listed on 
national securities exchanges and issued or guaranteed by a Registered 
Clearing Agency are subject to the same treatment. Conforming changes 
would be made throughout Rule 2360 to reflect this new consolidated 
term.
    FINRA also proposes conforming and clarifying amendments to various 
other definitions set forth in Rule 2360(a). First, FINRA proposes to 
amend the definitions of ``call,'' ``put,'' ``class of options,'' and 
``series of options'' to add ``metric'' alongside ``security'' and 
``index,'' so that these terms explicitly include options overlying a 
metric. Corresponding conforming amendments are proposed to the 
definitions of ``exercise price,'' ``expiration date,'' ``FLEX Equity 
Option'' (to be renamed as ``FLEX Option'' as described below), 
``clearing member,'' ``conventional option,'' ``conventional index 
option,'' ``covered,'' ``OCC Cleared OTC Option,'' ``options trading,'' 
and ``underlying security.'' \9\
---------------------------------------------------------------------------

    \9\ Where appropriate, certain definitions have also been 
revised to ensure consistent reference to all three terms: 
``security,'' ``index,'' and ``metric.''
---------------------------------------------------------------------------

    Second, FINRA proposes conforming and clarifying amendments to the 
definitions of ``clearing member,'' ``conventional index option,'' 
``conventional option,'' ``covered,'' ``expiration date,'' ``FLEX 
Equity Option'' (to be renamed as ``FLEX Option'' as described below), 
``options trading,'' and ``underlying security'' to replace references 
to OCC with references to a Registered Clearing Agency. The definitions 
of ``call'' and ``put'' would also be amended to remove unnecessary and 
duplicative language specifically referencing OCC.
    Third, FINRA proposes conforming and clarifying amendments to the 
definition of ``exercise price'' to explicitly reference cash-settled 
options, including binary options and options on metrics. For cash-
settled options, the proposed rule change would define ``exercise 
price'' as the price or value (measured in the applicable units (e.g., 
amount of currency, percentage, or number)) to which the settlement 
value of the underlying index, security, or metric is compared to 
determine whether the holder is entitled to receive a dollar amount, 
which may be a fixed exercise settlement amount in the case of a binary 
option.
    Finally, FINRA proposes to make other simplifying and clarifying 
changes to the definitions in Rule 2360(a), including to revise the 
defined term ``FLEX Equity Option'' to refer to ``FLEX Option,'' 
redesignate paragraph numbers to reflect new and consolidated 
definitions, and update cross-references.

Applicability

    Rule 2360(b)(1) clarifies the applicability of Rule 2360. Rule 
2360(b)(1) provides, among other things, that paragraphs (b)(3) through 
(12) of Rule 2360 apply only to standardized and conventional options 
on common stock. FINRA proposes to amend that provision to clarify that 
such limitation applies except as otherwise provided in those 
subparagraphs. The proposed rule change is intended to ensure that 
provisions within paragraphs (b)(3) through (12) that are expressly 
tailored to index options or binary options, such as the proposed 
binary options position limit and LOPR provisions discussed further 
below, are not limited by the general applicability language in Rule 
2360(b)(1).
Position Limits
    Rule 2360(b)(3) establishes position limits for options. FINRA is 
not proposing substantive changes to the existing provisions governing 
position limits for standardized equity options, standardized index 
options, conventional options, and FLEX Options. FINRA proposes to add 
a new paragraph (b)(3)(D) to Rule 2360 specifically addressing binary 
options position limits. Under this proposed provision, except in 
highly unusual circumstances and with FINRA's prior written approval 
pursuant to the Rule 9600 Series for good cause shown, no member shall 
effect for any account in which such member has an interest, or for the 
account of any partner, officer, director or employee thereof, or for 
the account of any customer, an opening transaction in any class of 
binary option if the member has reason to believe that, as a result of 
such transaction, the member, partner, officer, director, employee, or 
customer, would, acting alone or in concert with others, directly or 
indirectly, hold or control or be obligated in respect of an aggregate 
position in excess of the position limits established by the exchange 
on which the binary option trades. This proposed provision parallels 
the existing position limits provision applicable to standardized 
equity options. Thus, the proposed rule change is intended to apply 
substantially comparable position limit requirements to positions in 
binary options, consistent with FINRA's approach to position limits for 
other listed options products.
    FINRA also proposes conforming changes to Rule 2360(b)(6) 
(Liquidation of Positions and Restrictions on Access) to add references 
to options overlying a metric. The proposed rule change would clarify 
that FINRA's existing authority relating to positions that exceed 
applicable position limits applies to options overlying a metric in the 
same manner as it applies to options overlying a security or index.
Reporting of Options Positions
    Rule 2360(b)(5) sets forth requirements for reporting options 
positions, generally referred to as the ``LOPR requirements.'' Existing 
provisions refer to an underlying ``security or index'' and require a 
member that conducts a business in standardized options (but that is 
not a member of the listing exchange) to file position reports with 
FINRA when a reportable position threshold is reached, i.e., an 
aggregate position of 200 or more

[[Page 68193]]

options contracts on the same side of the market.\10\ FINRA proposes to 
add an explicit reference to ``metric'' so that the reporting 
obligation clearly extends to options on metrics.
---------------------------------------------------------------------------

    \10\ Rule 2360(b)(5)(A)(i)b.
---------------------------------------------------------------------------

    Additionally, exchanges have proposed reporting and aggregation 
conventions for the treatment of binary metric options contracts for 
purposes of options position reporting requirements that may differ 
from the conventions for other listed options.\11\ FINRA therefore 
proposes to amend its rules to require a member to determine its 
aggregate position for standardized options in accordance with the 
contract equivalency conventions established by the exchange on which 
such standardized options are listed. FINRA believes the proposed rule 
change would promote consistency for market participants.
---------------------------------------------------------------------------

    \11\ For example, Cboe Exchange Inc. provides that, for purposes 
of reporting requirements, 100 binary KPI option contracts equal one 
standard option contract, given that binary KPI options have a 
multiplier of one while standard equity option contracts have a 
multiplier of 100. See Cboe Binary KPI Options Approval Order, supra 
note 4, 91 FR 65854, 65860.
---------------------------------------------------------------------------

Delivery of Disclosure Documents
    Rule 2360(b)(11)(A)(i) requires each member to deliver OCC's 
current Options Disclosure Document (``ODD'') to each customer at or 
prior to the time such customer's account is approved for trading 
options issued by OCC, other than an OCC Cleared OTC Option. 
Thereafter, a copy of each amendment to the ODD must be distributed to 
each customer to whom the member previously delivered the ODD not later 
than the time a confirmation of a transaction in the category of 
options to which the amendment pertains is delivered to such customer. 
FINRA proposes to amend Rule 2360(b)(11)(A)(i), which currently 
requires delivery of OCC's disclosure document to customers approved 
for trading OCC-issued options. Under the proposed rule change, members 
would instead be required to deliver the current disclosure document of 
the applicable Registered Clearing Agency to customers approved for 
trading options issued by that Registered Clearing Agency, other than 
OCC Cleared OTC Options. The proposed rule change would also require 
delivery of amendments to such disclosure documents in a manner 
substantially consistent with the existing requirements applicable to 
OCC disclosure documents.
    FINRA also proposes conforming changes to Rule 2360(b)(16)(D) 
(Account Agreement) to reflect the delivery of disclosure documents 
issued by any Registered Clearing Agency and to require customers 
engaging in transactions in options issued by such Registered Clearing 
Agency to acknowledge receipt of the applicable disclosure document and 
agreement to be bound by the rules of the applicable Registered 
Clearing Agency.
    The proposed rule change is intended to preserve the existing 
customer disclosure framework regardless of which Registered Clearing 
Agency issues or guarantees the contracts. These changes would ensure 
that members remain subject to substantially comparable disclosure 
obligations and customers receive substantially comparable disclosures 
regarding the characteristics and risks of standardized options.
Confirmations
    FINRA Rule 2360(b)(12) requires members to provide customers with 
written confirmations containing specified information regarding 
options transactions, including the underlying security or index. FINRA 
proposes to amend Rule 2360(b)(12) to add a reference to an underlying 
``metric.'' The proposed rule change clarifies the application of the 
existing confirmation requirements to options on metrics by requiring 
confirmations to identify the underlying metric, as applicable, thus 
ensuring that customers receive comparable information for options on 
metrics as they receive for other listed options products.
Transactions With Issuers
    Rule 2360(b)(13) provides that no member shall enter a transaction 
for the sale (writing) of a call option contract for the account of any 
corporation which is the issuer of the underlying security thereof. 
FINRA proposes to amend Rule 2360(b)(13) to also encompass a 
corporation that is the subject of the underlying metric, thereby 
clarifying the rule's application to options on metrics. FINRA believes 
the proposed change is appropriate to clarify that options on metrics 
are covered by the prohibition on selling call options for the account 
of an issuer given the substantially similar potential conflicts of 
interest that may be present for such transactions.
Other Amendments to Rule 2360
    FINRA proposes conforming amendments throughout Rule 2360(b) to 
replace OCC-specific references with references to a Registered 
Clearing Agency in provisions governing rights and obligations of 
holders and writers (paragraph (b)(9)), confirmations (paragraph 
(b)(12)), account agreements (paragraph (b)(16)(D)), violation of rules 
(paragraph (b)(21)), and stock transfer tax (paragraph (b)(22)).
    Finally, FINRA proposes conforming and stylistic amendments to 
various provisions of Rule 2360 and its Supplementary Material to 
renumber paragraphs to reflect amended provisions, update cross-
references, appropriately refer to newly defined or amended defined 
terms, and make various stylistic changes.
Proposed Amendments to Rule 2220
    Rule 2220 governs members' communications with the public 
concerning options, including provisions specific to standardized 
options. The existing definition of ``standardized option'' in Rule 
2220(a)(2) refers to issuance by OCC and to the terms of the option 
including the amount of the underlying security. The proposed rule 
change would amend the definition to replace the reference to OCC with 
a reference to a Registered Clearing Agency, as defined in Rule 
2360(a), and to add ``index or metric'' to the list of standardized 
terms alongside ``underlying security.'' This proposed change would 
clarify that the options communications requirements applicable to 
standardized options apply to options on metrics.
Proposed Amendments to Rules 2351 and 2357
    The FINRA Rule 2350 Series establishes specific requirements for 
trading in index warrants, currency index warrants and currency 
warrants, including, among other things, account approval, suitability, 
communications with the public, and recordkeeping requirements. Rule 
2351 provides for the general applicability of the Rule 2350 Series to 
these warrant products and defines specified terms used in the Rule 
2350 Series, while Rule 2357 extends the Rule 2220 options 
communications requirements to such products. Although the Rule 2350 
Series would not apply to binary metric options, FINRA is proposing two 
conforming changes to these rules in connection with the proposed 
changes to Rule 2360 described above. First, the proposed rule change 
would amend the cross-reference in Rule 2351 to the ``control'' 
definition in Rule 2360(a)(6) to reflect the renumbering of the 
paragraphs setting forth the definitions in Rule 2360(a). Second, the 
proposed rule change would update Rule 2357 to replace the reference to 
OCC with a reference to a Registered Clearing Agency.

[[Page 68194]]

Proposed Amendments to Rule 4210
    Rule 4210(f)(2) sets forth strategy-based margin requirements for 
options. Various definitions in Rule 4210(f)(2)(A) contain references 
to OCC. FINRA proposes to replace those references with references to 
``the Registered Clearing Agency that guarantees the option contract'' 
in the definitions of ``aggregate discount amount,'' ``American-style 
option,'' ``call,'' ``put,'' ``current cash market price,'' ``European-
style option,'' ``exercise settlement amount,'' and ``expiration 
date.'' These changes would ensure that these definitions continue to 
operate appropriately where an option contract is guaranteed by a 
registered clearing agency other than OCC.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Exchange Act,\12\ which 
requires, among other things, that FINRA rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest. FINRA believes that the proposed rule change 
will ensure that the investor protection and market integrity 
requirements under FINRA's existing rules governing options clearly and 
appropriately apply to all categories of exchange-listed options 
products. The proposed rule change is designed primarily to clarify the 
application of existing FINRA requirements to binary options, options 
on metrics, and options cleared through a registered clearing agency 
other than OCC--including binary metric options--and thus to preserve 
substantially comparable regulatory treatment for all listed options 
products and promote consistent application of FINRA's options 
framework. Further, FINRA's options rules apply to the options 
activities of all FINRA members. Clarifying the application of FINRA's 
options requirements to all listed options products therefore promotes 
the clear and consistent application of FINRA's options framework 
across all FINRA members. FINRA believes this application of its 
options framework promotes just and equitable principles of trade and 
protects investors and the public interest.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    FINRA believes the proposed amendments relating to binary options 
are consistent with Section 15A(b)(6) of the Act because they clarify 
the application of FINRA's existing options framework to listed options 
with a binary payout structure. In particular, the proposed amendments 
are designed to ensure that FINRA members are subject to substantially 
comparable requirements with respect to binary options as to other 
types of listed options, promoting just and equitable principles of 
trade and protecting investors and the public interest.
    FINRA believes the proposed amendments relating to standardized 
options cleared by a registered clearing agency other than OCC are 
consistent with Section 15A(b)(6) of the Act. FINRA's existing options 
rules contain numerous references to OCC, reflecting the historical 
clearing structure for listed options. The proposed amendments are 
designed to ensure that FINRA's options framework continues to operate 
appropriately where an option is issued or guaranteed by another 
registered clearing agency. By providing for substantially comparable 
regulatory treatment without regard to the registered clearing agency 
associated with a listed option, including with respect to customer 
disclosures and other investor protections, the proposed amendments 
promote consistent application of FINRA's options requirements and 
protect investors and the public interest.
    FINRA believes the proposed amendments relating to options 
overlying metrics are consistent with Section 15A(b)(6) of the Act 
because they clarify that FINRA's existing options requirements apply 
where the underlying interest is a metric rather than an individual 
security's price or index's value. The proposed amendments are designed 
to ensure the application of FINRA's existing regulatory protections, 
including requirements relating to position reporting, confirmations, 
and transactions with issuers, to options overlying metrics. FINRA 
believes that providing consistent regulatory treatment of options 
activity regardless of whether an option overlies a security, index, or 
metric promotes just and equitable principles of trade and protects 
investors and the public interest.
    Finally, FINRA believes the proposed clarifying and conforming 
amendments are consistent with Section 15A(b)(6) of the Act. These 
amendments are designed to improve the clarity, consistency, and 
operation of FINRA's options rules in light of the foregoing changes, 
including by consolidating related definitions, updating cross-
references and terminology, and making other conforming changes. FINRA 
believes these amendments will facilitate the clear and consistent 
application of FINRA's options rules by members and thereby promote 
just and equitable principles of trade and protect investors and the 
public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Economic Impact Assessment
    FINRA has undertaken an economic impact assessment to analyze the 
potential economic impacts of the proposed rule change, including 
anticipated costs, benefits, distributional and competitive effects, 
relative to the applicable baseline, and the alternatives considered in 
assessing how best to meet FINRA's regulatory objectives.
Regulatory Need
    As discussed above, multiple national securities exchanges have 
filed proposed rule changes to list and trade binary metric options, 
which may be cleared by a Registered Clearing Agency other than OCC, 
and the Commission has approved at least one such filing. Current FINRA 
rules governing listed options activity were developed principally 
around listed options that settle based on the price of an individual 
security or index and that clear through OCC. While FINRA intends for 
its options framework to apply broadly to listed options products, 
current rule text does not expressly address certain listed options 
structures, including options overlying metrics, binary options, and 
options cleared by a Registered Clearing Agency other than OCC. As a 
result, uncertainty and associated costs may arise regarding the 
application of existing FINRA requirements to such products. The 
proposed rule change would clarify that the existing rules for listed 
options apply broadly to all listed options products, including binary 
options, options on metrics, and options cleared by a Registered 
Clearing Agency other than OCC.

[[Page 68195]]

Economic Baseline
    The economic baseline for this analysis is the application of 
FINRA's current rules in a market where exchanges have received, or may 
receive, Commission approval of proposed rule changes to list and trade 
binary metric options. Under the baseline, FINRA members considering 
participation in these products would need to determine how existing 
FINRA requirements apply to various listed options structures not 
expressly addressed under current rule text, including options based on 
metrics, binary options, and options cleared by a Registered Clearing 
Agency other than OCC. This uncertainty could result in additional 
legal, compliance, and operational costs and may delay or deter 
participation by some firms, potentially imposing limitations and costs 
on customers who seek to trade these option contracts.
Economic Benefits and Costs
    The proposed rule change would affect FINRA members that currently 
participate, or may participate in the future, in listed options 
activity involving any of the options products addressed by the 
proposed amendments. By clarifying the application of FINRA rules to 
these products, the proposed rule change may reduce legal, compliance, 
and operational uncertainty and promote more consistent regulatory 
treatment across products. To the extent that exchanges introduce 
additional products with similar characteristics in the future, the 
proposed rule change may also reduce the need for subsequent conforming 
changes to FINRA's rules, avoiding delay and uncertainty to market 
participants in such circumstances.
    The magnitude of these benefits depends on the extent of member 
participation, on their own behalf or on behalf of customers, in binary 
metric options products, or other products addressed by the proposed 
rule change, and the degree to which uncertainty under the current 
rules would otherwise delay or deter such activity. By clarifying the 
application of FINRA rules to binary options, options on metrics, and 
options cleared by a Registered Clearing Agency other than OCC, the 
proposed amendments may facilitate participation by FINRA members and 
may expand the range of firms through which customers can access these 
products to the extent that uncertainty under the current rules would 
otherwise have delayed or deterred such activity. Any such effect would 
be incremental to the effects of an exchange's introduction of the 
product or changes to clearance of a product and the Commission's 
approval of the applicable exchange and any clearing agency proposals.
    Participating firms may incur costs to update systems, supervisory 
procedures, training materials, account-opening processes, disclosure 
practices, reporting processes, and other operational controls 
necessary to accommodate binary metric options or other products 
addressed by the proposed rule change. The magnitude of these costs 
would vary depending on a firm's business model, existing options 
infrastructure, and expected level of participation in these products. 
Members are likely to incur the compliance and operational costs 
associated with the proposed amendments only where the anticipated 
business opportunities are deemed sufficient to justify participation 
in binary metric options or other options products.
    Competitive and distributional effects may differ across firms 
based on the extent of their activities in binary metric options or 
other options products addressed by the proposed rule change. Members 
already participating in existing options markets may face lower 
incremental costs than firms requiring new systems or commercial 
arrangements to participate in options markets, and costs may vary 
depending on a member's role as an introducing, carrying, or clearing 
firm.
    The economic impact and competitive and distributional effects of 
the proposed rule change may vary based, in part, on the extent to 
which the requirements applicable to FINRA members under the proposed 
rule change differ from the requirements applicable to members of 
exchanges listing options products addressed by the proposed rule 
change.
Alternatives
    No alternatives were considered.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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 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) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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. 
FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. Waiver of the operative 
delay would allow FINRA to update its rules immediately consistent with 
developments in exchange-listed options related to binary options, 
including binary metric options, and options cleared by a registered 
clearing agency other than the OCC. This should help to ensure 
consistent regulatory treatment of all market participants trading 
binary options, including binary metric options. For these reasons, the 
Commission finds that waiver of the operative delay is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission waives the 30-day operative delay and designates the 
proposed rule change to be operative upon filing.\17\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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).
---------------------------------------------------------------------------

    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) \18\ of the Act to determine whether the proposed 
rule should be approved or disapproved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2)(B).

---------------------------------------------------------------------------

[[Page 68196]]

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#7604031a135b15191b1b131802053605131558111900"><span class="__cf_email__" data-cfemail="7301061f165e101c1e1e161d0700330016105d141c05">[email&#160;protected]</span></a>. Please include 
File Number SR-FINRA-2026-022 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-FINRA-2026-022. 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 FINRA. 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-FINRA-2026-022 and should be submitted on or 
before November 19, 2026.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-22027 Filed 10-28-26; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>