Section 1. Reserved
(a) Except with the prior written approval of the Exchange in each instance, no member or member organization shall effect, for any account in which such member or member organization 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 (whether on the Exchange or on another participating exchange) in an option contract of any class of options dealt in on the Exchange if the member or member organization has reason
to believe that, as a result of such transaction, the member or member organization or partner, officer, director or employee thereof or customer would, acting alone or in concert with others, directly or indirectly control an aggregate position: (a) of more
than 25,000, 50,000, 75,000, 200,000 or 250,000 option contracts (whether long or short), put or call option contracts on the same side of the market relating to the same underlying security, which limit is determined in accordance with section (g)(1)(a) herein,
in the case of options on a stock or Exchange-Traded Fund Share, except with respect to put or call option contracts overlying:
- INVESCO QQQ TrustSM, Series 1 ("QQQ")® for which the position limit shall be 1,800,000 contracts on the same side of the market;
- SPDR® S&P 500® ETF Trust ("SPY") for which the position limit shall be 3,600,000 contracts on the same side of the market;
- iShares® Russell 2000® ETF ("IWM"), for which the position limit shall be 1,000,000 contracts;
- Diamonds Trust ("DIA"), for which the position limit shall be 300,000 contracts on the same side of the market;
- iShares MSCI Emerging Markets ETF ("EEM"), for which the position limit shall be 1,000,000 contracts on the same side of the market;
- iShares China Large-Cap ETF ("FXI"), for which the position limit shall be 1,000,000 contracts on the same side of the market;
- iShares MSCI EAFE ETF ("EFA"), for which the position limit shall be 1,000,000 contracts on the same side of the market;
- iShares MSCI Brazil Capped ETF ("EWZ"), for which the position limit shall be 500,000 contracts on the same side of the market;
- iShares 20+ Year Treasury Bond Fund ETF ("TLT"), for which the position limit shall be 500,000 contracts on the same side of the market;
- iShares MSCI Japan ETF ("EWJ"), for which the position limit shall be 500,000 contracts on the same side of the market;
- iShares iBoxx High Yield Corporate Bond Fund (“HYG”), for which the position limit shall be 500,000 contracts on the same side of the market;
- Financial Select Sector SPDR Fund (“XLF”), for which the position limit shall be 500,000 contracts on the same side of the market;
- iShares iBoxx $ Investment Grade Corporate Bond ETF (“LQD”), for which the position limit shall be 500,000 contracts on the same side of the market;
- VanEck Vectors Gold Miners ETF (“GDX”), for which the position limit shall be 500,000 contracts on the same side of the market;
- iShares Bitcoin Trust ETF (“IBIT”), for which the position limit shall be 25,000 contracts on the same side of the market;
- Fidelity Wise Origin Bitcoin Fund, for which the position limit shall be 25,000 contracts on the same side of the market;
- ARK21Shares Bitcoin ETF, for which the position limit shall be 25,000 contracts on the same side of the market;
- Grayscale Bitcoin Trust (BTC), for which the position limit shall be 25,000 contracts on the same side of the market;
- Grayscale Bitcoin Mini Trust BTC, for which the position limit shall be 25,000 contracts on the same side of the market;
- Bitwise Bitcoin ETF, for which the position limit shall be 25,000 contracts on the same side of the market;
- iShares Ethereum ETF, for which the position limit shall be 25,000 contracts on the same side of the market;
- Fidelity Ethereum Fund, for which the position limit shall be 25,000 contracts on the same side of the market;
- Bitwise Ethereum ETF, for which the position limit shall be 25,000 contracts on the same side of the market;
- Grayscale Ethereum Trust, for which the position limit shall be 25,000 contracts on the same side of the market;
- Grayscale Ethereum Mini Trust, for which the position limit shall be 25,000 contracts on the same side of the market;
or (b) with respect to a stock or Exchange-Traded Fund Share option not dealt in on the Exchange, exceeding the applicable position limit established by the exchange on which the option contract is transacted, when the member or member organization is not
a member of that other exchange, or such other number of option contracts as may be fixed from time to time by the Exchange as the position limit for one or more classes or series. Position limits for foreign currency options shall be determined in accordance
with section (j) herein.
(b) Reserved.
(c) It shall be the responsibility of each member and member organization accepting orders for opening transactions (purchase or writing) in options contracts of any class of options dealt in on the Exchange to inform their customers of the applicable position
limits and not to accept any such orders from any customer in any instance in which such member or member organization has reason to believe that such customer, acting alone or in concert with others, has exceeded or is attempting to exceed such position limits.
(d) For the purpose of computing the aggregate position limits established by this Rule, long positions in call option contracts are aggregated with short positions in put option contracts and short positions in call option contracts are aggregated with
long positions in put option contracts.
(e) The Exchange will not approve any opening purchase or writing transaction or the carrying of any position that would exceed the limits established by this Rule except in highly unusual circumstances. An exemption will be granted to a member or member
organization only under the following circumstances:
(i) the exemption request must be submitted in writing to an Options Exchange Official and set forth the facts justifying the exemption;
(ii) if the exemption is sought by a registered options trader, the registered options trader must hold an assignment in the option;
(iii) the applicant's position must be near the current position limit (generally within 10% of the current limit); and
(iv) the character of trading in the option has been such as to support an exemption request; the applicant's participation in the market in the period prior to the exemption request has been significant
in terms of daily volume.
A position limit exemption requires the approval of an Options Exchange Official. The exemption is effective at the time a decision is communicated; retroactive exemptions will not be granted. The size
and duration of an exemption will be determined on a case-by-case basis. An exemption usually will be granted only until the nearest expiration.
(f) Lead Market Makers. The Exchange may establish higher position limits for Lead Market Makers' transactions than those applicable with respect to other accounts. Whenever a Lead Market Maker reasonably anticipates that he may exceed such position limits
in the performance of his function of assisting in the maintenance of a fair and orderly market, he must seek an exemption in writing in accordance with this Rule.
A position limit exemption requires the approval of an Options Exchange Official. The exemption is effective at the time a decision is communicated; retroactive exemptions will not be granted. The size and duration of an exemption will be determined on a
case-by-case basis. An exemption usually will be granted only until the nearest expiration.
(g) Equity Option Position Limits.
(i) The position limit shall be 250,000 contracts for options:
(a) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 100,000,000 shares during the most recent six-month trading period; or
(b) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 75,000,000 shares during the most recent six-month trading period and has at least 300,000,000 shares currently
outstanding;
(ii) The position limit shall be 200,000 contracts for options:
(a) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 80,000,000 shares during the most recent six-month trading period; or
(b) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 60,000,000 shares during the most recent six-month trading period and has at least 240,000,000 shares currently
outstanding;
(iii) The position limit shall be 75,000 contracts for options:
(a) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 40,000,000 shares during the most recent six-month trading period; or
(b) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 30,000,000 shares during the most recent six-month trading period and has at least 120,000,000 shares currently
outstanding.
(iv) The position limit shall be 50,000 contracts for options:
(a) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 20,000,000 shares during the most recent six-month trading period; or
(b) on an underlying stock or Exchange-Traded Fund Share which had trading volume of at least 15,000,000 shares during the most recent six-month trading period and has at least 40,000,000 shares currently
outstanding.
(v) The position limit shall be 25,000 contracts for all other options.
(h) The Exchange will review the volume and outstanding share information of all underlying stocks and Exchange-Traded Fund Shares every six months to determine which limit shall apply. A higher limit will be effective on the date set by the Exchange, while
any change to a lower limit will take effect after the last expiration then trading, unless the requirement for the same or a higher limit is met at the time of an intervening six-month review. However, if, subsequent to a six-month review, an increase in
volume and/or outstanding shares would make a stock or Exchange-Traded Fund Share eligible for a higher position limit prior to the next review, the Exchange in its discretion may immediately increase such position limit.
(i) Except with the prior written approval of the Exchange in each instance, no member or member organization shall effect for any account in which such member or member organization has an interest or for the account of any partner, officer, director or
employee thereof or for the account of any customer, a purchase or sale transaction (whether on the Exchange or on or through the facilities of, or otherwise subject to the rules of, another national securities exchange or national securities association)
in a stock index warrant if the member or member organization has reason to believe that as a result of such transaction the member or member organization or partner, officer, director or employee thereof or customer would, acting alone or in concert with
others, directly or indirectly, control an aggregate position in a stock index warrant issue, or in all warrants issued on the same stock index, on the same side of the market, in excess of the position limits specified in sections (c) and (d).
(j) Foreign Currency Option Position Limits
(i) The position limit shall be 300,000 contracts for options on the following foreign currency: the Mexican peso, the Brazilian real, the Chinese yuan, the Danish krone, the Norwegian krone, the Russian
ruble, the South African rand, the South Korean won, the Swedish krona,
(ii) The position limit shall be 600,000 contracts for options on the following foreign currency: the British pound, the Swiss franc, the Canadian dollar, the Australian dollar, the Japanese yen, and
the New Zealand dollar
(iii) The position limit shall be 1,200,000 contracts for options on the following foreign currency: the Euro.
(iv) However, if a foreign currency option (FCO or WCO) and a PHLX FOREX Option™ are listed on the same underlying currency (e.g. a Euro foreign currency option and a Euro PHLX FOREX Option), then the
position for each such option on the same underlying currency will be aggregated for purposes of determining compliance with the position limit established in this rule.
(k) Control exists, under General 1, Section 1, Options 1, Section 1, and Options 9, Section 15, when it is determined that an individual or entity (1) makes investment decisions for an account or accounts, or (2) materially influences directly or indirectly
the actions of any person who makes investment decisions.
(a) In addition, control will be presumed in the following circumstances:
(1) among all parties to a joint account who have authority to act on behalf of the account;
(2) among all general partners to a partnership account;
(3) when an individual or entity (1) holds an ownership interest of 10 percent or more in an entity (ownership interest of less than 10 percent will not preclude aggregation), or (2) shares in 10 percent
or more of profits and/or losses of an account;
(4) when accounts have common directors or management;
(5) where a person or entity has the authority to execute transactions in an account;
(b) Control, presumed by one or more of the above findings or circumstances, can be rebutted by proving the factor does not exist or by showing other factors which negate the presumption of control.
The rebuttal proof must be submitted by affidavit and/or such other documentary evidence as may be appropriate in the circumstances. The Exchange will also consider the following factors in determining if aggregation of accounts is required:
(1) similar patterns of trading activity among separate entities;
(2) the sharing of kindred business purposes and interests;
(3) whether there is common supervision of the entities which extends beyond assuring adherence to each entity's investment objectives and/or restrictions;
(4) the degree of contact and communication between directors and/or managers of separate accounts.
(c) Initial determinations under this Interpretation shall be made by Regulatory staff of the Exchange. A member or customer directly affected by such a determination may ask the Exchange to reconsider
but may not request any other review or appeal, except in the context of a disciplinary proceeding.
(l) Equity Option Hedge Exemptions. The following qualified hedge transactions and positions described in paragraphs 1-5 below shall be exempt from established position limits as prescribed under sections (g) and (d)(i) above. Hedge transactions and positions
established pursuant to paragraphs (6) and (7) below are subject to a position limit equal to five (5) times the standard limit established under sections (g) and (d)(i).
(1) Where each option contract is "hedged" or "covered" by 100 shares of the underlying security or securities convertible into such underlying security, or, in the case of an adjusted option contract
the same number of shares represented by the adjusted contract; (i) long call and short stock; (ii) short call and long stock; (iii) long put and long stock; (iv) short put and short stock.
(2) A long call position accompanied by a short put position, where the long call expires with the short put, and the strike price of the long call and short put is equal, and where each long call and
short put position is hedged with 100 shares (or other adjusted number of shares) of the underlying security or securities convertible into such stock ("reverse conversion").
(3) A short call position accompanied by a long put position where the short call expires with the long put, and the strike price of the short call and long put is equal and where each short call and
long put position is hedged with 100 shares (or other adjusted number of shares) of the underlying security or securities convertible into such stock ("conversion").
(4) A short call position accompanied by a long put position, where the short call expires with the long put, and the strike price of the short call equals or exceeds the long put, and where each short
call and long put position is hedged with 100 shares of the underlying security (or other adjusted number of shares). Neither side of the short call, long put position can be in-the-money at the time of the position is established ("collar").
(5) A long call position accompanied by a short put position where the long call expires with the short put and the strike price of the long call equals or exceeds the short put and where each long call
and short put position is hedged with 100 shares of the underlying security (or other adjusted number of shares). Neither side of the long call, short put position can be in-the- money at the time the position is established ("reverse collar").
(6) A long call position accompanied by a short put position with the same strike price and a short call position accompanied by a long put position with a different strike price ("box spread").
(7) A listed option position hedged on a one-for-one basis with an over-the-counter ("OTC") option position on the same underlying security. The strike price of the listed option position and corresponding
OTC option position must be within one strike of each other and no more than one expiration month apart.
(8) For those strategies described under (2), (3), and (4) above, one component of the option strategy may be an OTC option contract guaranteed or endorsed by the firm maintaining the proprietary position
or carrying the customer account.
(9) An OTC option contract is defined as an option contract that is not listed on a National Securities Exchange or cleared at The Options Clearing Corporation.
(m) Firm Facilitation Exemption. A member organization may be exempt from established position limits for equity option positions (including Exchange- Traded Fund Share option positions) held in its proprietary account where such position will facilitate
an order for a customer of that member organization, provided that such position satisfies the following:
(i) Maximum limit: the facilitating position may exceed the applicable position limit by two times that limit, in addition to the allowable amount. For example, where the position limit is 25,000 contracts,
a firm facilitation exemption is available for an additional 50,000 contracts. This exemption is in addition to any other exemptions available under Exchange Rules.
(ii) Approval Procedure: prior approval from an Options Exchange Official and the submission of a complete Firm Facilitation Form, which must be kept current, are required. Approval may be granted on
the basis of verbal representations, in which case the member organization shall submit to the Regulatory staff of the Exchange a completed form respecting such approval within two business days or the time specified when approval is granted. A member organization
may request an exemption based on interest expressed by its customer, prior to obtaining an order. This exemption is not available where either the customer or facilitation order are all or none or fill or kill orders.
(a) The facilitation firm shall promptly provide the Exchange with information or documents requested concerning the exempted and hedging positions. A copy of all applicable order tickets must be provided
to the Regulatory staff of the Exchange on the day of execution.
(b) The facilitation firm shall establish and liquidate its own as well as its customer's option, stock and Exchange-Traded Fund Share positions in an orderly fashion, and not in a manner calculated
to cause unreasonable price fluctuations or unwarranted price changes nor with a view toward taking advantage of any differential in price between a group of securities and an overlying stock index option. The facilitation firm shall notify the Exchange of
any material change in the exempted option position or hedge. The facilitation firm shall not increase the exempt option position once it is liquidated, unless prior approval is again received pursuant to this Rule.
(iii) Facilitation Procedure: compliance with the facilitation procedures of Options 8, Section 30(b) is required, such that the terms of the order are disclosed and the market quoted, with bidding/offering
by the facilitation firm providing an opportunity for the trading crowd to participate. is required, such that the terms of the order are disclosed and the market quoted, with bidding/offering by the facilitation firm providing an opportunity for the trading
crowd to participate.
(iv) Hedge: to remain qualified, the facilitation firm must hedge all exempt option positions within five business days after the execution of the order and furnish the Exchange's Regulatory staff with
documentation reflecting the resulting hedged positions.
(v) Violations of these requirements, absent reasonable justification or excuse, shall result, in addition to any disciplinary action, in withdrawal of the exemption and may form the basis for subsequent
denial of an application for an exemption hereunder.
(n) Delta-Based Equity Hedge Exemption. The Delta-Based Equity Hedge Exemption is in addition to the standard limit and other exemptions available under Exchange Rules, interpretations and policies.
(i) An equity option position of a member or non-member affiliate of a member that is delta neutral shall be exempt from established position limits as prescribed in this General 1, Section 1, Options
1, Section 1, subject to the following:
(a) The term "delta neutral" refers to an equity option position that is hedged, in accordance with a permitted pricing model, by a position in the underlying security or one or more instruments relating
to the underlying security, for the purpose of offsetting the risk that the value of the option position will change with incremental changes in the price of the security underlying the option position.
(1) In the case of an equity option position for which the underlying security is an ETF that is based on the same index as an index option, the equity option position and any position in the underlying
ETF may be combined with such an index option position and/or correlated instruments as defined in subparagraph (A) of Supplementary .04(A), in accordance with Options 4A, Section 6 - Delta-Based Index Hedge Exemption, for calculation of the delta-based equity
hedge exemption.
(b) An equity option position that is not delta neutral shall be subject to position limits in accordance with this Rule (subject to the availability of other position limit exemptions). Only the option
contract equivalent of the net delta of such position shall be subject to the appropriate position limit.
(1) The term "options contract equivalent of the net delta" means the net delta divided by the number of shares that equate to one option contract on a delta basis.
(2) The term "net delta" means, at any time, the number of shares and/or units of trade (either long or short) required to offset the risk that the value of an equity option position will change with
incremental changes in the price of the security underlying the option position, as determined in accordance with a permitted pricing model.
(c) A "permitted pricing model" means -
(1) A pricing model maintained and operated by The Options Clearing Corporation ("OCC Model");
(2) A pricing model maintained and used by a member subject to consolidated supervision by the Commission pursuant to Appendix E of Commission rule 15c3-1, or by an affiliate that is part of such member's
consolidated supervised holding company group, in accordance with its internal risk management control system and consistent with the requirements of Appendices E or G, as applicable, to SEC Rule 15c3-1 and SEC Rule 15c3-4 under the Act, as amended from time
to time, in connection with the calculation of risk-based deductions from capital or capital allowances for market risk thereunder, provided that the member or affiliate of a member relying on this exemption in connection with the use of such model is an entity
that is part of such member's consolidated supervised holding company group;
(3) A pricing model maintained and used by a financial holding company or a company treated as a financial holding company under the Bank Holding Company Act of 1956, or by an affiliate that is part
of either such company's consolidated supervised holding company group, in accordance with its internal risk management control system and consistent with:
(i) the requirements of the Board of Governors of the Federal Reserve System, as amended from time to time, in connection with the calculation of risk-based adjustments to capital for market risk under
capital requirements of the Board of Governors of the Federal Reserve System, provided that the member or affiliate of a member relying on this exemption in connection with the use of such model is an entity that is part of such company's consolidated supervised
holding company group; or
(ii) the standards published by the Basel Committee on Banking Supervision, as amended from time to time and as implemented by such company's principal regulator, in connection with the calculation of
risk based deductions or adjustments to or allowances for the market risk capital requirements of such principal regulator applicable to such company - where "principal regulator" means a member of the Basel Committee on Banking Supervision that is the home
country consolidated supervisor of such company - provided that the member or affiliate of a member relying on this exemption in connection with the use of such model is an entity that is part of such company's consolidated supervised holding company group;
(4) A pricing model maintained and used by an OTC derivatives dealer registered with the SEC pursuant to SEC Rule 15c3-1(a)(5) in accordance with its internal risk management control system and consistent
with the requirements of Appendix F to SEC Rule 15c3-1 and SEC Rule 15c3-4 under the Act, as amended from time to time, in connection with the calculation of risk-based deductions from capital for market risk thereunder, provided that only such OTC derivatives
dealer and no other affiliated entity (including a member) may rely on this subparagraph (c)(4); or
(5) A pricing model used by a national bank under the National Bank Act maintained and used in accordance with its internal risk management control system and consistent with the requirements of the
Office of the Comptroller of the Currency, as amended from time to time, in connection with the calculation of risk-based adjustments to capital for market risk under capital requirements of the Office of the Comptroller of the Currency, provided that only
such national bank and no other affiliated entity (including a member) may rely on this subparagraph (c)(5).
(d) Effect on Aggregation of Accounts
(1) Members and non-member affiliates who rely on this exemption must ensure that the permitted pricing model is applied to all positions in or relating to the security underlying the relevant option
position that are owned or controlled by such member or non-member affiliate.
(2) Notwithstanding subparagraph (d)(1), the net delta of an option position held by an entity entitled to rely on this exemption, or by a separate and distinct trading unit of such entity, may be calculated
without regard to positions in or relating to the security underlying the option position held by an affiliated entity or by another trading unit within the same entity, provided that:
(i) the entity demonstrates to the Exchange's satisfaction that no control relationship, as defined in section (k) to this Rule; and
(ii) the entity has provided the Exchange written notice in advance that it intends to be considered separate and distinct from any affiliate or, as applicable, which trading units within the entity
are to be considered separate and distinct from each other for purposes of this exemption.
(3) Notwithstanding subparagraph (d)(1) or (d)(2), a member or non-member affiliate who relies on this exemption shall designate, by prior written notice to the Exchange, each trading unit or entity
whose option positions are required under Exchange Rules to be aggregated with the option positions of such member or non-member affiliate that is relying on this exemption for purposes of compliance with Exchange position limits or exercise limits. In any
such case:
(i) the permitted pricing model shall be applied, for purposes of calculating such member's or affiliate's net delta, only to the positions in or relating to the security underlying any relevant option
position owned and controlled by those entities and trading units who are relying on this exemption; and
(ii) the net delta of the positions owned or controlled by the entities and trading units who are relying on this exemption shall be aggregated with the non-exempt option positions of all other entities
and trading units whose options positions are required under Exchange Rules to be aggregated with the option positions of such member or affiliate.
(e) Obligations of Members and Affiliates
(1) A member that relies on this exemption for a proprietary equity options position:
(i) must provide a written certification to the Exchange that it is using a permitted pricing model pursuant to subparagraph (c) in this Rule; and
(ii) by such reliance authorizes any other person carrying for such member an account including, or with whom such member has entered into, a position in or relating to a security underlying the relevant
option position to provide to the Exchange or the Clearing Corporation such information regarding such account or position as the Exchange or Clearing Corporation may request as part of the Exchange's confirmation or verification of the accuracy of any net
delta calculation under this exemption.
(2) The equity option positions of a non-member relying on this exemption must be carried by a member with which it is affiliated.
(3) A member carrying an account that includes an equity option position for a nonmember affiliate that intends to rely on this exemption must obtain from such nonmember:
(i) a written certification to the Exchange that it is using a permitted pricing model pursuant to subparagraph (c) in this Rule; and
(ii) a written statement confirming that such non-member affiliate:
(a) is relying on this exemption;
(b) will use only a permitted pricing model for purposes of calculating the net delta of its option positions for purposes of this exemption;
(c) will promptly notify the member if it ceases to rely on this exemption;
(d) authorizes the member to provide to the Exchange or the Clearing Corporation such information regarding positions of the non-member affiliate as the Exchange or Clearing Corporation may request as
part of the Exchange's confirmation or verification of the accuracy of any net delta calculation under this exemption; and
(e) if the non-member affiliate is using the OCC Model, has duly executed and delivered to the Exchange such documents as the Exchange may require to be executed and delivered to the Exchange as a condition
to reliance on this exemption.
(f) Reporting.
(g) Each member (other than an Exchange market-maker using the OCC model) that holds or carries an account that relies on this exemption shall report, in accordance with Options 6E, Section 2, all equity
option positions (including those that are delta neutral) that are reportable thereunder. Each such member on its own behalf or on behalf of a designated aggregation unit pursuant to section (n)(1)(d) herein shall also report, in accordance with Options 6E,
Section 2, for each such account that holds an equity option position subject to this exemption in excess of the levels specified in this Rule, the net delta and the options contract equivalent of the net delta of such position.
(h) Records.
Each member relying on this exemption shall:
(i) retain, and undertake reasonable efforts to ensure that any non-member affiliate of the member relying on this exemption retains, a list of the options, securities and other instruments underlying
each option position net delta calculation reported to the Exchange hereunder, and
(ii) produce such information to the Exchange upon request.
(o) Exemptions Granted by Other Options Exchanges. A member may rely upon any available exemptions from applicable position limits granted from time to time by another options exchange for any options contract traded on the Exchange provided that such member:
(1) provides the Exchange with a copy of any written exemption issued by another options exchange or a written description of any exemption issued by another options exchange other than in writing containing
sufficient detail for Exchange Regulatory staff to verify the validity of that exemption with the issuing options exchange, and
(2) fulfills all conditions precedent for such exemption and complies at all times with the requirements of such exemption with respect to the member's trading on the Exchange.
Adopted Feb. 3, 2020 (20-03); amended Mar. 5, 2020 (20-08), operative April 4, 2020; amended Mar. 5, 2020 (20-08), operative April 4, 2020; amended Jun. 17, 2020 (SR-Phlx-2020-30); amended November 19, 2021 (SR-Phlx-2021-70); amended Dec. 23, 2022
(SR-Phlx-2022-50); amended Nov. 4, 2024 (SR-Phlx-2024-53); amended Nov. 21, 2024 (SR-Phlx-2024-64); amended Apr. 10, 2025 (SR-Phlx-2025-18).
Section 19. Other Restrictions on Exchange Options Transactions and Exercises
(a) Phlx may impose such restrictions on transactions or exercises in one or more series of options of any class traded on Phlx as the Exchange's Regulation Department in its judgment deems advisable in the interests of maintaining a fair and orderly market
in options contracts or in underlying securities, or otherwise deems advisable in the public interest or for the protection of investors.
i. During the effectiveness of such restrictions, no member or member organization shall, for any account in which it has an interest or for the account of any customer, engage in any transaction or
exercise in contravention of such restrictions.
ii. Notwithstanding the foregoing, during the ten (10) business days prior to the expiration date of a given series of options, other than index options, which shall include such expiration date for
an option contract that expires on a business day, no restriction on exercise under this Section may be in effect with respect to that series of options. With respect to index options, restrictions on exercise may be in effect until the opening of business
on the business day of their 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 the expiration date.
iii. Exercises of American-style, cash-settled index options shall be prohibited during any time when trading in such options is delayed, halted, or suspended, subject to the following exceptions:
(1) The exercise of an American-style, cash-settled index option may be processed and given effect in accordance with and subject to the Rules of The Options Clearing Corporation while trading in the
option is delayed, halted, or suspended if it can be documented, in a form prescribed by Phlx Regulation, that the decision to exercise the option was made during allowable time frames prior to the delay, halt, or suspension;
(2) Exercises of expiring American-style, cash-settled index options shall not be prohibited on the business day of expiration, or in the case of an option contract expiring on a day that is not a business
day, the last business day prior to their expiration;
(3) Exercises of American-style, cash-settled index options shall not be prohibited during a trading halt that occurs at or after 4:00 p.m. Eastern time. In the event of such a trading halt, exercises
may occur through 4:20 p.m. Eastern time. In addition, if trading resumes following such a trading halt pursuant to the procedures described in Options 3, Section 9 and Options 4A, Section 18, exercises may occur during the resumption of trading and for five
(5) minutes after the close of the resumption of trading. The provisions of this subparagraph (a)(iii)(3) are subject to the authority of the Board to impose restrictions on transactions and exercises pursuant to paragraph (a) of this Rule; and
(4) Phlx may determine to permit the exercise of American-style, cash-settled index options while trading in such options is delayed, halted, or suspended.
(b) Whenever the issuer of a security underlying a call option traded on Phlx is engaged or proposes to engage in a public underwritten distribution ("public distribution") of such underlying security or securities exchangeable for or convertible into such
underlying security, the underwriters may request that Phlx impose restrictions upon all opening writing transactions in such options at a "discount" where the resulting short position will be uncovered ("uncovered opening writing transactions").
i. In addition to a request, the following conditions are necessary for the imposition of restrictions:
(1) less than a majority of the securities to be publicly distributed in such distribution are being sold by existing security holders;
(2) the underwriters agree to notify Phlx Regulation upon the termination of their stabilization activities; and
(3) the underwriters initiate stabilization activities in such underlying security on a national securities exchange when the price of such security is either at a "minus" or "zero minus" tick.
ii. Upon receipt of such a request and determination that the conditions listed above are met, Phlx Regulation shall impose the requested restrictions as promptly as possible but no earlier than fifteen
(15) minutes after members or member organizations shall have been notified and shall terminate such restrictions upon request of the underwriters or when Phlx Regulation otherwise discovers that stabilizing transactions by the underwriters has been terminated.
iii. For purposes of paragraph (b) of this Rule, an uncovered opening writing transaction in a call option will be deemed to be effected at a "discount" when the premium in such transaction is either:
(1) in the case of a distribution of the underlying security not involving the issuance of rights and in the case of a distribution of securities exchangeable for or convertible into the underlying security,
less than the amount by which the underwriters' stabilization bid for the underlying security exceeds the exercise price of such option; or
(2) in the case of a distribution being offered pursuant to rights, less than the amount by which the underwriters' stabilization bid in the underlying security at the subscription price exceeds the
exercise price of such option.
Adopted Feb. 3, 2020 (20-03).
Section 24. Violation Of By-Laws And Rules Of Options Clearing Corporation