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Product LoginFriday, August 29, 2025
Options Regulatory Alert #2025 - 34
PHLX – Unbundling of Orders
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Members and member organizations are reminded that the unbundling of orders for the sole purpose of achieving the Lead Market Maker (LMM) or Preferred Market Maker (PMM) allocation preference for orders of 5 contracts or fewer may be considered conduct inconsistent with just and equitable principles of trade. See Phlx and GEMX Rules Options 3, Section 10(a)(1)(D); BX Rule Options 3, Section 10(a)(1)(C); ISE and MRX Rules Options 3, Section 10(c)(1)(D) (“Entitlement for Orders of 5 contracts or fewer”), and NOM Rule Options 3, Section 10(a)(1)(C) (“Priority Overlays Applicable to Size Pro-Rata Execution Algorithm”). The 5 contracts or fewer guarantee is in place to incentivize member organizations to register as LMMs/PMMs, not to provide a means for a member organization to unbundle a larger order into smaller components and send the components to market centers where the member organization, or others, receive preferences on additional contracts from the same initial order. Additionally, unbundling an order into separate orders for the purpose of gaining a higher allocation percentage in a price-improvement auction than the Member submitting the orders into the price-improvement auction otherwise would have received may be considered conduct inconsistent with just and equitable principles of trade. See Phlx Rule Options 3, Section 13(e); BX Rule Options 3, Section 13(v); GEMX, MRX, and ISE Supplementary Material .01 to Options 3, Section 13. This alert reiterates longstanding guidance provided in Options Regulatory Alerts #2016-4 and #2016-6. Members and member organizations also are reminded of their obligation to establish and maintain supervisory systems, including written supervisory procedures, reasonably designed to achieve compliance with the above rules. See Phlx, BX, and NOM Rules General 9, Section 20 (Supervision); NOM, BX, ISE, GEMX, and MRX Rules Options 9, Section 2 (Adherence to Law). Questions regarding this Regulatory Alert may be directed to the contacts below:
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