Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend NYSE Arca Rule 5.32-O

• Published date: 02 October 2026
• FR Document: 2026-20196
• Issuer: Securities And Exchange Commission

Federal Register, Volume 91 Issue 190 (Friday, October 2, 2026)

[Federal Register Volume 91, Number 190 (Friday, October 2, 2026)]
                [Notices]
                [Pages 62773-62777]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2026-20196]
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                SECURITIES AND EXCHANGE COMMISSION
                [Release No. 34-106523; File No. SR-NYSEARCA-2026-99]
                Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
                and Immediate Effectiveness of Proposed Change To Amend NYSE Arca Rule
                5.32-O
                September 29, 2026.
                 Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
                1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
                that, on September 16, 2026, NYSE Arca, Inc. (``NYSE Arca'' or the
                ``Exchange'') filed with the Securities and Exchange Commission (the
                ``Commission'') the proposed rule change as described in Items I and II
                below, which Items have been prepared by the self-regulatory
                organization. The Commission is publishing this notice to solicit
                comments on the proposed rule change from interested persons.
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                 \1\ 15 U.S.C. 78s(b)(1).
                 \2\ 15 U.S.C. 78a.
                 \3\ 17 CFR 240.19b-4.
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                I. Self-Regulatory Organization's Statement of the Terms of Substance
                of the Proposed Rule Change
                 The Exchange proposes to amend Rules 5.32-O (Terms of Flexible
                Exchange (``FLEX'') Options). The proposed rule change is available on
                the Exchange's website at www.nyse.com and at the principal office of
                the Exchange.
                II. Self-Regulatory Organization's Statement of the Purpose of, and
                Statutory Basis for, the Proposed Rule Change
                 In its filing with the Commission, the self-regulatory organization
                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 those statements may be examined at
                the places specified in Item IV below. The Exchange has prepared
                summaries, set forth in sections A, B, and C below, of the most
                significant parts of such statements.
                A. Self-Regulatory Organization's Statement of the Purpose of, and the
                Statutory Basis for, the Proposed Rule Change
                1. Purpose
                 The Exchange proposes to amend Rules 5.32-O (Terms of FLEX Options)
                FLEX Options as it relates to FLEX Equity Options where the underlying
                security is an ETF that is eligible for cash settlement. Specifically,
                the proposed amendments would: (i) permit newly FLEX-eligible ETFs that
                satisfy heightened eligibility thresholds of $600 million average daily
                notional value and 5,616,000 shares ADV, based on the previous one-
                month period of trading statistics to be eligible for cash settlement
                as a contract term; (ii) establish tiered criteria governing the
                treatment of cash-settled FLEX ETF Options where the underlying ETF
                ceases to satisfy the requirements of Rule 5.32-O(f)(3)(ii) at the time
                of the Exchange's bi-annual review; and (iii) eliminate the existing
                provision limiting cash settlement as a contract term to no more than
                50 underlying ETFs.
                 This filing is based on substantially identical proposals by Cboe
                Exchange, Inc. (``Cboe''),\4\ Nasdaq ISE, LLC (``ISE'') \5\ and Nasdaq
                PHLX Exchange (``PHLX'').\6\
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                 \4\ See Securities Exchange Act Release No. 105929 (July 16,
                2026), 91 FR 45856 (July 21, 2026) (SR-Cboe-2026-035) (Notice of
                Filing of Amendment No. 1 and Order Approving a Proposed Rule
                Change, as Modified and Superseded by Amendment No. 1, To Amend Rule
                4.21 (Series of FLEX Options) (``Cboe Approval'').
                 \5\ See Securities Exchange Act Release No. 106015 (July 30,
                2026), 91 FR 49470 (August 4, 2026) (SR-ISE-2026-44) (Notice of
                Filing and Immediate Effectiveness of Proposed Rule Change To Amend
                FLEX Options Listing Rules) (``ISE Notice'').
                 \6\ See Securities Exchange Act Release No. 106016 (July 30,
                2026), 91 FR 49476 (August 4, 2026) (SR-PHLX-2026-49) (Notice of
                Filing and Immediate Effectiveness of Proposed Rule Change To Amend
                FLEX Electronic Options Listing Rules) (``PHLX Notice'').
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                Background
                 Generally, FLEX Equity Options are settled by physical delivery of
                the underlying security,\7\ while all FLEX Index Options are settled in
                cash.\8\ In February 2020, however, the Exchange amended Rule 5.32-O to
                permit cash settlement for up to 50 FLEX Equity Options with an
                underlying security that is an ETF meeting certain criteria: an average
                daily notional value of $500 Million or more and a national average
                daily volume of 4,680,000 shares, measured over the prior six-month
                period. Where more than 50 ETFs qualify, the Exchange selects the 50
                with the highest average daily volume.\9\
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                 \7\ See Rule 5.32-O(f)(3)(i).
                 \8\ See Rule 5.32-O(e)(2) and (3). Similarly, pursuant to
                Exchange rules, Binary Return Derivatives (``ByRDs'') are also
                settled in cash (See Rule 5.82-O(b)) and, as discussed below, cash
                settlement is also permitted in the over-the-counter (``OTC'')
                market.
                 \9\ See Rule 5.32-O(f)(3)(ii)(B). See also Securities Exchange
                Release No. 104692 (January 27, 2026), 91 FR 4145 (January 27, 2026)
                (SR-NYSEARCA-2026-4) (Notice of Filing and Immediate Effectiveness
                of a Proposed Rule Change to Amend Rules 5.32-O and 5.35-O Related
                to Flexible Exchange Options).
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                 The Exchange adopted these specific thresholds to limit cash-
                settled FLEX ETF Options to the most highly liquid and actively-traded
                ETFs, thereby mitigating concerns about susceptibility to manipulation
                at settlement. With respect to the notional value threshold, the
                Exchange determined that average daily notional value is an appropriate
                proxy for selecting underlying securities that are not readily
                susceptible to manipulation for purposes of establishing a settlement
                price. The Exchange noted that average daily notional value takes into
                account both the trading activity and the price of an underlying
                security. As a general matter, the more expensive an underlying
                security's price, the less cost-effective manipulation could become.
                Further, manipulation of the price of a security encounters greater
                difficulty the more volume that is traded.
                 With respect to the ADV threshold, the Exchange determined that a
                requirement of 4,680,000 shares per day is appropriate because it
                represents average trading in the underlying ETF of approximately 200
                shares per second, a level of continuous trading activity that the
                Exchange believes meaningfully limits the ability to influence the
                ETF's price for purposes of establishing a settlement value. The
                Exchange acknowledged that no security is immune from all manipulation,
                but determined that the combination of these two requirements would
                appropriately limit cash settlement of FLEX ETF Options to underlying
                securities that are less susceptible to manipulation.
                 Under this framework, the Exchange conducts a bi-annual review on
                January 1 and July 1 of each year to identify qualifying ETFs. The rule
                caps the number of eligible underlying ETFs at 50; if more than 50 ETFs
                satisfy the criteria, the Exchange selects the top 50 by highest ADV.
                This cap was designed to prevent the scope of cash-settled FLEX ETF
                Options from expanding considerably without a corresponding evaluation
                of whether the level of the requirements remains reasonable, while
                still providing flexibility to add ETFs given that the initial list of
                eligible ETFs numbered well below 50 at the time of
                [[Page 62774]]
                adoption. In the event a previously eligible ETF fails to satisfy the
                criteria at the time of a bi-annual review, any new positions overlying
                that ETF must be physically settled and any existing open cash-settled
                positions may be traded only to close. This provision was designed to
                address how to wind down outstanding cash-settled positions in an ETF
                that no longer qualifies under the liquidity and volume criteria,
                thereby addressing manipulation concerns while still permitting market
                participants to exit existing positions.
                 In connection with the adoption of this framework, the Exchange
                committed to conducting a five-year review of cash-settled FLEX ETF
                Option trading activity and furnishing the Commission with five annual
                reports. Pursuant to this commitment, the Exchange has submitted two
                annual monitoring reports to the Commission covering the two years of
                trading. The report assessed trading volume and open interest in cash-
                settled FLEX ETF options relative to physically settled options on the
                same underlying ETFs, market maker participation, the liquidity of the
                market for such options products and the underlying ETF, and any
                manipulation concerns arising in connection with the trading of cash-
                settled FLEX ETF Options under the proposed rule. The reports also
                discuss any recommendations the Exchange may have for enhancements to
                the listing standards based on its review. The Exchange had no
                recommendations for enhancements to the listing standards based on its
                reviews. The Exchange had no open investigation, inquiry, or
                enforcement matter relating to the manipulation of cash-settled FLEX
                ETF options or their underlying ETFs.
                 As discussed in the Cboe Approval, Cboe noted that it submitted two
                annual monitoring reports to the Commission covering the periods of
                August 1, 2023 through July 31, 2024 and August 1, 2024 through July
                31, 2025, respectively.\10\ The reports assessed trading volume and
                open interest in cash-settled FLEX ETF options relative to physically
                settled options on the same underlying ETFs, market maker
                participation, position limit activity, and manipulation concerns.\11\
                Cboe had no recommendations for enhancements to the listing standards
                based on either review.\12\ Also, Cboe noted that in both review
                periods, neither Cboe nor any affiliated Cboe securities exchange had
                an open investigation, inquiry, or enforcement matter relating to the
                manipulation of cash-settled FLEX ETF options or their underlying
                ETFs.\13\ Financial Industry Regulatory Authority (``FINRA''), acting
                as Cboe's regulatory services provider for position limit surveillance,
                confirmed the same finding for both periods.\14\ While both of Cboe's
                reports note that certain regulatory matters arose during each period
                involving the applicable ETFs or related physically-settled options,
                Cboe's surveillance and investigatory staff confirmed in each instance
                that the activity did not appear to relate to manipulation of an ETF
                for the purpose of benefiting a cash-settled FLEX ETF option
                position.\15\
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                 \10\ See Cboe Approval, supra note 4.
                 \11\ See Id.
                 \12\ See Id.
                 \13\ See Id.
                 \14\ See Id.
                 \15\ See Id.
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                 The review period reflects broad and stable market maker
                participation across the eligible underlying ETFs. Cboe stated that the
                highest levels of FLEX market maker participation were observed in SPY
                (9 to 12 per month), QQQ (6 to 10 per month), and IWM (3 to 15 per
                month).\16\ Cboe noted that participation in less actively traded
                eligible ETFs was more limited but consistent across both periods,
                reflecting a well-supported and liquid product across the eligible
                universe.\17\
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                 \16\ See Id.
                 \17\ See Id.
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                Proposal
                 The Exchange proposes to amend Rule 5.32-O(f)(3)(ii) to refine two
                aspects of the framework governing cash-settled FLEX ETF Options and to
                eliminate the 50- ETF cap. First, the Exchange proposes to permit newly
                FLEX-eligible ETFs to qualify for cash settlement as a contract term
                based on one month of trading statistics outside of the Exchange's
                regular bi-annual review cycle.\18\ Second, the Exchange proposes to
                replace the existing provision governing ETFs that cease to satisfy the
                eligibility criteria with a tiered framework that more precisely
                calibrates treatment to the actual state of open interest in cash-
                settled FLEX ETF Options overlying the affected ETF.\19\ Third, the
                Exchange proposes to eliminate the existing cap limiting cash
                settlement as a contract term to no more than 50 underlying ETFs.\20\
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                 \18\ See proposed Rule 5.32-O(f)(3)(ii)(A).
                 \19\ See proposed Rule 5.32-O(f)(3)(ii)(B).
                 \20\ See proposed Rule 5.32-O(f)(3)(ii)(A).
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                One-Month Lookback for Newly Eligible ETFs
                 Under the current rule, the Exchange determines eligible underlying
                ETFs bi-annually, on January 1 and July 1 of each year, using six
                months of prior trading statistics, with newly eligible ETFs permitted
                to list cash-settled FLEX options beginning on February 1 and August 1,
                respectively. No mechanism currently exists to add newly FLEX-eligible
                ETFs to the eligible list between bi-annual reviews. As a result, an
                ETF that becomes FLEX-eligible after a bi-annual review has been
                conducted may not be considered for cash-settled FLEX ETF Option
                eligibility for up to six months, even if it otherwise satisfies the
                notional value and ADV requirements of Rule(f)(3)(ii).
                 The Exchange proposes to address this gap by permitting, outside of
                the regular bi-annual review, the Exchange to determine that a newly
                FLEX-eligible ETF satisfies heightened notional value and trading
                volume requirements of $600 million average daily notional value and
                5,616,000 shares ADV based on the previous one-month period of trading
                statistics. Any ETF satisfying such requirements on that basis shall be
                eligible for cash settlement as a contract term.
                 The Exchange believes a one-month lookback is appropriate in this
                context because an ETF that has newly become FLEX-eligible and
                simultaneously satisfies both the $600 million average daily notional
                value threshold and the 5,616,000-share ADV requirement over the prior
                month has already demonstrated the degree of liquidity and trading
                activity that the eligibility criteria are designed to capture. These
                thresholds represent a 20% increase over the standard $500 million and
                4,680,000-share thresholds that apply to the bi-annual review,
                reflecting the Exchange's determination that heightened criteria are
                appropriate for ETFs seeking to qualify based on a shorter lookback
                period. The Exchange believes Cboe's and its annual monitoring reports
                demonstrate that the existing criteria are an effective proxy for
                identifying ETFs that are not readily susceptible to manipulation.
                Requiring newly eligible ETFs to await the next bi-annual review before
                becoming eligible for cash settlement would delay investor access to
                the product.
                 Cboe's back-testing analysis of newly listed FLEX ETFs supports the
                appropriateness of the heightened thresholds.\21\ Under the standard
                eligibility criteria ($500 million average daily notional value and
                4,680,000 shares ADV), ten ETFs would have qualified based on one month
                of trading data. Under the 20% increased
                [[Page 62775]]
                thresholds ($600 million average daily notional value and 5,616,000
                shares ADV), only eight ETFs qualified. Cboe noted that the two ETFs
                excluded by the heightened thresholds did not qualify at their next
                six-month bi-annual review, demonstrating that the heightened
                thresholds effectively filter out ETFs whose initial trading activity
                may not be sustained.
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                 \21\ For purposes of the back-testing analysis, Cboe reviewed
                all newly listed FLEX-eligible ETFs from January 1, 2025 through
                April 6, 2026.
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                 The Exchange believes the heightened thresholds for the one-month
                lookback appropriately address the concern that a newly listed ETF may
                experience elevated trading activity in its initial period that is not
                representative of sustained liquidity. By requiring newly eligible ETFs
                to satisfy thresholds that are 20% above the standard bi-annual review
                criteria, the Exchange ensures that only those ETFs demonstrating a
                meaningfully higher level of liquidity and trading activity--beyond
                what may reflect initial market interest--are eligible for cash
                settlement based on the shorter lookback period.
                 Further, the Exchange represents that it will continue to monitor
                the one-month lookback criteria on an ongoing basis to assess the
                appropriateness of the threshold. As part of this ongoing monitoring,
                the Exchange will evaluate whether the heightened criteria continue to
                effectively identify ETFs with sustained liquidity and trading
                activity, and will propose adjustments to the threshold if warranted by
                the Exchange's review.
                Tiered Criteria for ETFs Ceasing To Satisfy Eligibility Requirements
                 Under the current rule, if the Exchange determines at the time of a
                bi-annual review that an underlying ETF ceases to satisfy the
                eligibility criteria, any new position overlying that ETF must be
                physically settled and any existing open cash-settled positions may be
                traded only to close. While this provision addresses the wind-down of
                cash-settled activity in a straightforward manner, it does not
                distinguish between ETFs with active open interest and those with no
                meaningful cash-settled activity, nor does it account for the
                possibility that an ETF may temporarily fall below the eligibility
                thresholds and subsequently recover.
                 The Exchange proposes to replace this provision with a tiered
                framework that more precisely calibrates the treatment of an ineligible
                ETF to the actual state of the market for cash-settled FLEX ETF Options
                overlying that ETF. Under the proposed framework, if no open interest
                in cash-settled FLEX Equity Options overlying the ETF exists during the
                previous six-month period at the time of the bi-annual review
                determination, the existing treatment will apply: any new position must
                be physically settled and any open cash-settled positions may be traded
                only to close. Where open interest in cash-settled FLEX Equity Options
                overlying the ETF does exist during the previous six-month period, the
                Exchange will permit the opening of new cash-settled positions in that
                ETF for a period of one year from the date of the bi-annual review,
                after which any new position must be physically settled and any
                remaining open cash-settled positions may be traded only to close. This
                one-year continuation period is intended to provide market participants
                holding or seeking to manage existing cash-settled positions with a
                reasonable and predictable runway to do so, rather than abruptly
                restricting new position activity at the time of the bi-annual review
                determination.
                 The proposed framework also includes a recovery provision: if the
                underlying ETF satisfies the eligibility criteria at the time of either
                bi-annual review conducted during the one-year continuation period,
                that period will terminate and the ETF will resume full eligibility for
                cash settlement as a contract term. The Exchange believes this
                provision appropriately accounts for the possibility that an ETF's
                trading statistics may fluctuate around the eligibility thresholds and
                prevents an unnecessarily disruptive wind-down in cases where the ETF
                promptly returns to eligibility.
                Elimination of the 50-ETF Cap
                 The Exchange also proposes to eliminate the existing provision
                limiting cash settlement as a contract term to no more than 50
                underlying ETFs. The cap was adopted at the outset of the program to
                prevent the scope of cash-settled FLEX ETF Options from expanding
                considerably without a corresponding evaluation of whether the level of
                the eligibility requirements remained reasonable. While the number of
                ETFs satisfying the eligibility criteria remained well below 50 during
                the initial period of the program's operation, over the two-year period
                that Cboe monitored the market, the number of qualifying ETFs has grown
                to exceed that threshold (as of February 1, 2026, 60 ETFs were
                eligible), such that the cap now operates as an active constraint on
                the availability of cash-settled FLEX ETF Options on ETFs that
                otherwise satisfy the established eligibility criteria. The Exchange
                does not believe this result is consistent with the purpose of the cap,
                which was intended as a programmatic guardrail rather than a permanent
                numerical ceiling. As noted above, neither the Exchange nor Cboe
                identified manipulation concerns in their reviews. Given the same
                eligibility criteria and position and exercise limits would apply to
                any cash-settled FLEX ETF option, as would the Exchange's surveillance
                program, the Exchange believes the 50-ETF cap is no longer necessary.
                The Exchange believes these protections and the eligibility criteria
                themselves sufficiently mitigate any manipulation concerns associated
                with cash-settled FLEX ETF Options.
                 The Exchange also notes that, consistent with its commitment in the
                original proposal, it will continue to furnish the Commission with
                annual reports for the remainder of the five-year review period. The
                Exchange believes that the continued reporting commitment, together
                with the proposed amendments, appropriately positions the cash-settled
                FLEX ETF Option framework to address the operational gaps identified
                through the Exchange's review to date while preserving the monitoring
                mechanisms that allow the Exchange and the Commission to evaluate the
                ongoing impact of the program.
                2. Statutory Basis
                 The Exchange believes that the proposed rule change is consistent
                with Section 6(b) of the Act,\22\ in general, and furthers the
                objectives of Section 6(b)(5) of the Act,\23\ in that it is designed to
                prevent fraudulent and manipulative acts and practices, to promote just
                and equitable principles of trade, to foster cooperation and
                coordination with persons engaged in facilitating transactions in
                securities, to remove impediments to and perfect the mechanism of a
                free and open market and a national market system and, in general, to
                protect investors and the public interest. In addition, the Exchange
                believes that the proposed rule change is consistent with the Section
                6(b)(5) \24\ requirement that the rules of an exchange not be designed
                to permit unfair discrimination between customers, issuers, brokers, or
                dealers.
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                 \22\ 15 U.S.C. 78f(b).
                 \23\ 15 U.S.C. 78f(b)(5).
                 \24\ 15 U.S.C. 78f(b)(5).
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                One-Month Lookback for Newly Eligible ETFs
                 The Exchange believes the proposed one-month lookback for newly
                FLEX-eligible ETFs is consistent with the Act because it removes an
                impediment to the offering of cash-settled FLEX ETF Options on ETFs
                that have already demonstrated the liquidity and trading activity that
                the eligibility criteria are designed to capture, without
                [[Page 62776]]
                compromising the manipulation-resistant features of those criteria.
                Under the current rule, an ETF that becomes FLEX-eligible after a bi-
                annual review has been conducted must wait up to six months before it
                may be considered for cash-settled FLEX ETF Option eligibility, even if
                it satisfies both the $600 million average daily notional value
                threshold and the 5,616,000-share ADV requirement at the time it
                becomes FLEX-eligible. The Exchange believes this gap is not necessary
                to protect against manipulation.
                 An ETF that satisfies both heightened thresholds over the prior
                one-month period has demonstrated a degree of liquidity and breadth of
                trading activity exceeding that which the six-month bi-annual review is
                designed to identify as indicative of reduced susceptibility to
                manipulation. 

The heightened thresholds, which represent a 20% increase over the standard $500 million and 4,680,000-share thresholds applicable to the bi-annual review, are designed to account for the possibility that a newly listed ETF may experience elevated trading activity in its initial period that is not representative of sustained liquidity. As noted above, Cboe's and the Exchange's annual monitoring reports have demonstrated the existing eligibility criteria are an effective and reliable proxy for identifying ETFs that are not readily susceptible to manipulation, and neither Cboe nor the Exchange has identified any manipulation concerns in connection with cash-settled FLEX ETF Options or their underlying ETFs during that period. The Exchange therefore believes that permitting a one-month lookback for newly FLEX-eligible ETFs between bi-annual reviews, subject to the heightened thresholds, removes an impediment to and perfects the mechanism of a free and open market and protects investors and the public interest by providing timely investor access to a cash- settlement alternative on ETFs that satisfy the established eligibility criteria, while maintaining the protections afforded by those criteria. Cboe's back-testing analysis further supports the consistency of the heightened thresholds with the Act's anti-manipulation objectives. Under the standard criteria, ten newly listed FLEX ETFs would have qualified based on one month of trading data, but under the 20% increased thresholds only 8 qualified. The two names excluded (AMDL and SIVR) did not qualify at their next six-month bi-annual review, confirming that the heightened thresholds effectively identify and exclude ETFs whose initial trading statistics do not reflect sustained market activity. The Exchange believes this empirical evidence demonstrates that the heightened thresholds are reasonably designed to prevent ETFs with potentially transient liquidity from qualifying for cash settlement based on the shorter lookback period. Tiered Criteria for ETFs Ceasing To Satisfy Eligibility Requirements The Exchange believes the proposed tiered framework for ETFs that cease to satisfy the eligibility criteria at the time of a bi-annual review is consistent with the Act because it is reasonably designed to prevent fraudulent and manipulative acts and practices while also promoting just and equitable principles of trade and protecting investors. The current rule applies a single, uniform wind-down treatment to any ETF that falls below the eligibility thresholds at bi- annual review, regardless of whether active open interest in cash- settled FLEX ETF Options overlying that ETF exists. The Exchange believes this one-size-fits-all approach does not adequately account for the legitimate interests of market participants that hold existing cash-settled positions or that need the ability to open new positions to manage existing risk exposure in an ETF that has temporarily fallen below the thresholds. The proposed tiered framework addresses this concern in a manner consistent with the Act's investor protection and anti-manipulation objectives. Where no open interest in cash-settled FLEX ETF Options overlying the affected ETF has existed during the previous six-month period, the current treatment would continue to apply, because the Exchange believes an immediate restriction on new cash-settled positions would not disrupt market participants' activity. Where open interest does exist at the time of the bi-annual review, the proposed one-year continuation period provides market participants with a reasonable and predictable runway to manage existing positions, which the Exchange believes promotes just and equitable principles of trade. The Exchange further believes that the recovery provision, under which the continuation period terminates and full eligibility is restored if the ETF satisfies the criteria at either bi-annual review during the one-year period, is consistent with the Act because it prevents an unnecessarily disruptive wind-down where an ETF's trading statistics temporarily dip below the eligibility thresholds and then recover, and it reinforces the principle that the eligibility criteria, rather than arbitrary timing, are the appropriate determinant of cash-settlement eligibility. Taken together, the Exchange believes the tiered framework is a reasonable means to address manipulation concerns while not unduly burdening market participants with existing cash-settled positions, as it eliminates the current immediate disruption to their investment strategies. Elimination of the 50-ETF Cap The Exchange believes the elimination of the 50-ETF cap is consistent with the Act because the cap is no longer necessary to protect against the concerns it was designed to address and, as currently operative, functions as an impediment to the offering of cash-settled FLEX ETF Options on ETFs that otherwise satisfy the established eligibility criteria. The cap was adopted at the outset of the program to prevent the scope of cash-settled FLEX ETF Options from expanding considerably without a corresponding evaluation of whether the level of the eligibility requirements remained reasonable. While the number of qualifying ETFs remained well below 50 during the initial period of the program's operation, that number has more recently grown to exceed the cap, such that the cap now actively restricts the availability of cash-settled FLEX ETF Options on ETFs that fully satisfy the notional value and ADV requirements of Rule 5.32-O. The Exchange believes that retaining this arbitrary restriction is inconsistent with the Act's objectives because Cboe's two-year monitoring record demonstrates that the eligibility criteria themselves limit the availability of cash settlement to FLEX ETF Options. The liquidity and trading activity requirements mitigate manipulation concerns for any ETF that satisfies those requirements, not just the top 50. During the first two years that cash-settled FLEX ETF Options were available on Cboe, it identified (and its annual monitoring reports demonstrated) no manipulation concerns in connection with cash-settled FLEX ETF Options or their underlying ETFs. The Exchange did not identify any manipulation in its two years of monitoring. The Exchange believes the eligibility criteria, position and exercise limits, and surveillance program applicable to the 50 ETFs eligible for FLEX options with cash-settlement provide adequate protections against manipulation and market disruption to all ETFs that satisfy the criteria, regardless of the number of qualifying ETFs. The Exchange therefore believes that eliminating the cap [[Page 62777]] removes an impediment to and perfects the mechanism of a free and open market, protects investors and the public interest, and is otherwise consistent with the Act. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In this regard and as indicated above, the Exchange notes that the rule change is substantially similar in all material respects to proposals submitted by Cboe, ISE and PHLX.\25\ --------------------------------------------------------------------------- \25\ Cboe Approval Order, ISE Notice and PHLX Notice, supra notes 4-6. --------------------------------------------------------------------------- The Exchange does not believe that the proposed rule change will impose any burden on inter-market competition as the proposal is not competitive in nature. The Exchange expects that all option exchanges have or will adopt substantively similar proposals, such that the Exchange's proposal would benefit competition. For these reasons, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange's proposal does not burden intra- market competition because all Options Trading Permit (``OTP'') Holders and OTP Firms would be subject to the proposed changes to Rule 5.32-O. The Exchange believes that the proposed rule change will also provide additional opportunities for market participants to continue to efficiently achieve their investment and trading objectives for equity options on the Exchange. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \26\ and Rule 19b-4(f)(6) thereunder.\27\ Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b- 4(f)(6) thereunder. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78s(b)(3)(A)(iii). \27\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \28\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\29\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. Waiver of the 30-day operative delay would allow the Exchange to immediately align its rules with the current rules of Cboe, ISE and PHLX. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing. --------------------------------------------------------------------------- \28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 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. The Exchange has satisfied this requirement. \29\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- At any time within 60 days of the filing of such 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) \30\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \30\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- 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 Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include file number SR-NYSEARCA-2026-99 on the subject line. Paper Comments 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-NYSEARCA-2026-99. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-NYSEARCA-2026-99 and should be submitted on or before October 23, 2026. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\31\ --------------------------------------------------------------------------- \31\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Sherry R. Haywood, Assistant Secretary. [FR Doc. 2026-20196 Filed 10-1-26; 8:45 am] BILLING CODE 8011-01-P