Trading Index FLEX Options in Open Outcry
FLEX trades may also be conducted on the Cboe trading floor through open-outcry trading. FLEX trades executed in open-outcry are reflected on the CFLEX system upon completion.
Step One: RFQ Initiation
The RFQ sequence for open outcry FLEX trades is as follows.
- The Submitting Trading Permit Holder (TPH) contacts the FLEX Help Desk to generate an electronic RFQ to the appropriate crowd PAR Official.
- The trading crowd PAR Official announces the RFQ to the trading crowd.
Step Two: Responsive Quotes
Market Makers, Trading Permit Holders and Floor Brokers acting on behalf of customers will provide Responsive Quotes that are not bound by affirmative quoting obligations.
- Responsive Quotes must be communicated to the Submitting TPH within the Request Response Time, which will be a minimum of five minutes.
- Responsive Quotes are made verbally in the trading crowd at the end of the Request Response Time. No transaction may take place until the Request Response Time has expired.
Step Three: Accepting the Best Bid or Offer
FLEX quotes are generated in response to an RFQ rather than from an order. The Submitting TPH is under no obligation to accept the best bid or offer. If the best bid or offer is not promptly accepted, the quotes are no longer valid.
- The Submitting TPH decides whether to accept the best bid or offer.
- Upon notification of acceptance of a bid or offer by the Submitting TPH, the FLEX Help Desk will disseminate a last sale message as well as enter the transaction into the trade match system and generate a trade confirmation for the parties involved. Generally, only a Submitting TPH may accept quotes made in response to an RFQ. There are two exceptions to this:
1- If the Submitting TPH decides not to accept the BBO made in response to the RFQ, any Market Maker, TPH Organization, or Floor Broker on behalf of a customer, may accept the best bid or offer up to the size currently represented, or;
2- If the Submitting TPH accepts the best bid or offer, but there is excess size available at that best bid or offer, any Market Maker, TPH Organization, or Floor Broker acting on behalf of a customer, may trade the balance available. The Submitting TPH has priority over any party wishing to trade the requested option series up to the full notional amount specified in the RFQ (subject to the requirements of Section 11(a) of the Exchange Act). If a party other than the Submitting TPH wishes to trade that option series, and none of the above conditions are met, the other party must submit a new RFQ in order to generate Responsive Quotes upon which a transaction may occur.
Quotes are only available upon submission of an RFQ and secondary trading is conducted under the same procedures as series-creating transactions. However, for secondary trading, RFQs can only specify the strike price in the existing numerical format for that FLEX Option series, not a percentage format. Size may be specified in dollars, or number of contracts.
FLEX Options with a settlement value based on the opening prices of the index component stocks in their primary market are not traded on the day the settlement value is determined. For example, if an S&P 500 call, that is European-style and has an opening-settlement basis, expires on a Wednesday, the last trading day for that option would generally be Tuesday. Please refer to "Exercises" for further information.
Information Regarding Open FLEX Series
To see FLEX options that have been created and have open interest, check the OCC website: www.theocc.com.
The trading hours for Index FLEX Options are from 8:30 A.M. to 3:15 P.M. Central Time (Chicago time). However, no RFQ may be presented to the FLEX Official for open outcry trading unless there is sufficient time prior to the close of trading for the entire trade process to be completed.