Update - Cboe Options Allows FLEX and Non-FLEX Instruments on Complex FLEX Orders

In general, a complex FLEX order with FLEX and non-FLEX legs may be submitted to the Exchange for electronic processing via FLEX AIM, FLEX SAM, or FLEX Single-Sided Auctions; or to the Cboe Trading Floor for manual handling in Open Outcry, subject to the following:

• Electronic FLEX Auction: A FLEX vs. non-FLEX order submitted for an electronic FLEX Auction must be in a conforming ratio, include a price for each FLEX Option leg but no price for each non-FLEX Option leg, and must include a net price.

• Open Outcry handling: A FLEX vs. non-FLEX order submitted to the Cboe Trading Floor for manual handling may be in any ratio and may optionally include a price for any FLEX Option leg but no price for each non-FLEX Option leg, and must include a net price.

• Complex FLEX orders with a non-FLEX option leg may not be submitted in percentage terms, and will not support the DAC order type.

• SPX/W FLEX vs. Non-FLEX orders will be subject to the AIM size cap applicable to all SPX complex orders for the particular trading session, noting the AIM size cap for SPX/W in the RTH session is ‘10’. For example, an AIM order to sell 10 FLEX SPX and Buy 30 Non-FLEX SPX will be accepted, however an order to sell 11 FLEX SPX and Buy 33 Non-FLEX SPX will be rejected.

As with all FLEX orders, there will be no book for complex FLEX orders that include non-FLEX legs. Any non-FLEX leg(s) of a FLEX vs. non-FLEX order will not be allowed to leg into the simple book.

Complex FLEX orders with a non-FLEX option leg are eligible only via FIX order entry protocol. No FIX order entry changes are necessary to support this enhancement.

To support this enhancement, a new Symbol Mapping message will be added to the FLEX feed. Symbol Mapping messages only refer to Listed option symbols and will appear before Complex FLEX Instrument Definition messages as necessary. FLEX instruments will still receive FLEX Instrument Definition messages.

Please see the Cboe Titanium US Options FLEX Feed Specification for complete details.

All FLEX vs. non-FLEX orders are considered non-conforming, regardless of ratio, and will be subject to distinct pricing requirements for each leg, specifically:

• The execution price of each non-FLEX leg may not be worse than the NBBO and must improve the price of any priority customer order on the local book.

• For electronically-executed orders, the execution price of each FLEX leg may be automatically adjusted by the system as necessary to fit within the net price.

• If any non-FLEX leg of an electronic order cannot execute at a price meeting applicable NBBO and priority customer requirements, the entire order will be cancelled.

Example 1: Specified FLEX leg price is retained to meet net execution price

• Complex Instrument CI0001 includes a non-FLEX leg and a FLEX leg:
  • Leg 1: DEC Call with strike price of 10 – Buy 1 (non-FLEX)
  • Leg 2: NOV Call with strike price of 10.01 – Sell 1 (FLEX)
• FLEX Order Auction: Buy 10 CI0001 for 1.25
• Leg 1 (non-FLEX) Specified price on order: N/A
• NBBO for Leg 1 is 2.15 @ 2.30, with no Priority Customers at the BBO
• Leg 2 (FLEX) Specified price on order: 1.00
• Response 1: Sell 5 @ 1.18
• Response 2: Sell 5 @ 1.19
• Response 1 sells 5 @ 1.18. Leg 1 prints 2.18 and Leg 2 prints 1.00.
• Response 2 sells 5 @ 1.19. Leg 1 prints 2.19 and Leg 2 prints 1.00.

Example 2: Specified FLEX leg price is adjusted to meet net execution price

• Complex Instrument CI0001 includes a non-FLEX leg and a FLEX leg:
  • Leg 1: DEC Call with strike price of 10 – Buy 1 (non-FLEX)
  • Leg 2: NOV Call with strike price of 10.01 – Sell 1 (FLEX)
• FLEX Order Auction: Buy 10 CI0001 @ 1.25
• Leg 1 (Non-FLEX) Specified price on order: N/A
• NBBO for Leg 1 is 2.20 @ 2.30, with no Priority Customers at the BBO
• Leg 2 (FLEX) specified price on order: 1.00
• Response 1: Sell 5 @ 1.18
• Response 2: Sell 5 @ 1.19
• Response 1 sells 5 @ 1.18. Leg 1 prints 2.20 and Leg 2 prints 1.02.
• Response 2 sells 5 @ 1.19. Leg 1 prints 2.20 and Leg 2 prints 1.01.

Example 3: Non-FLEX leg is adjusted to meet NBBO requirements with a Priority Customer on the BBO, FLEX leg is adjusted to meet net execution price

• Complex Instrument CI0001 includes a non-FLEX leg and a FLEX leg:
  • Leg 1: DEC Call with a strike price of 10 – Buy 1 (non-FLEX)
  • Leg 2: NOV Call with a strike rice of 10.01 – Sell 1 (FLEX)
• FLEX Order Auction: Buy 10 CI0001 @ 1.25
• Leg 1 (Non-FLEX) Specified price on order: N/A
• NBBO for Leg 1 is 2.20 @ 2.30, with a Priority Customer on the local Best Bid
• Leg 2 (FLEX) Specified price on order: 1.00
• Response 1: Sell 5 @ 1.18
• Response 2: Sell 5 @ 1.19
• Response 1 sells 5 @ 1.18. Leg 1 prints 2.21 and Leg 2 prints 1.03.
• Response 2 sells 5 @ 1.19. Leg 1 prints 2.21 and Leg 2 prints 1.02.