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Cboe BZX adopts tiered bid-ask limits for options market makers

Cboe BZX adopts tiered bid-ask limits for options market makers

Rule Changes

New rule caps spreads at $5 for options expiring within 270 days, $15 for longer-dated contracts

Yesterday: SEC publishes notice; BZX rule takes effect

Overview

Updated 46 minutes ago

Cboe BZX Exchange now caps its options market makers' bid-ask spreads at $5 for contracts expiring within 270 days, and $15 for contracts expiring later. The Securities and Exchange Commission (SEC) published notice of the change on October 6, 2026, and it took effect immediately.

The rule replaces a single $5 cap that applied to every options series regardless of expiration. It mirrors frameworks already in place at Cboe Options and Cboe EDGX, part of a push to standardize quote-quality rules across the Cboe family of exchanges.

Why it matters

Investors trading options expiring beyond 270 days may now see wider market-maker spreads, up to $15 instead of $5.

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Key Indicators

$5
Max bid-ask spread for options expiring in 270 days or less
Applies to shorter-dated series under the amended Rule 22.6(c).
$15
Max bid-ask spread for options expiring in more than 270 days
Accounts for reduced liquidity and wider theoretical values in long-term options.
270 days
Time-to-expiration threshold
The dividing line between the $5 and $15 maximum differentials.
3
Cboe exchanges with the tiered framework
BZX, Cboe Options, and Cboe EDGX now share the same $5/$15 structure.

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Organizations Involved

Timeline

September 2026 October 2026

4 events Latest: Yesterday
Tap a bar to jump to that date
  1. SEC publishes notice; BZX rule takes effect

    Latest Regulatory

    The SEC publishes notice of the BZX rule change, which takes effect immediately under Rule 19b-4(f)(6).

  2. Cboe BZX files rule change with SEC

    Rule Change

    BZX files to amend Rule 22.6, adding a time-to-expiration tier to market maker bid-ask differentials.

  3. Cboe EDGX files tiered bid-ask rule change

    Rule Change

    Cboe EDGX Exchange files a similar rule change to adopt $5/$15 bid-ask differentials under its Rule 22.6.

  4. Cboe Exchange files matching rule

    Rule Change

    Cboe Exchange files a rule change to adopt the same tiered framework under Rule 5.52.

Scenarios

1

SEC lets BZX rule stand after comment period

Likely Resolves by Dec 5, 2026

Discussed by: The rule took effect immediately under SEC Rule 19b-4(f)(6), which covers changes that do not significantly affect investor protection or competition.

The SEC published the notice and opened a comment period. Unless the SEC finds the rule inconsistent with the Securities Exchange Act, it stays in effect. The rule mirrors frameworks at Cboe Options and Cboe EDGX that the SEC has not suspended.

2

SEC suspends BZX rule after comments

Unlikely Resolves by Dec 5, 2026

Discussed by: The SEC retains authority under Section 19(b)(3)(C) of the Securities Exchange Act to suspend a rule change that appears inconsistent with the Act.

If commenters argue the wider $15 differential harms investors in long-dated options, the SEC could suspend the rule and start proceedings to disapprove it. That would be an unusual step for a rule matching frameworks already in place at other exchanges.

3

Rival exchanges adopt matching tiered frameworks

Possible Resolves by Q2 2027

Discussed by: The BZX filing notes that time-to-expiration tiering is an established concept across options exchanges, citing Cboe Options, ISE, and Phlx.

If the BZX rule stands, options exchanges without tiered frameworks may file similar changes to keep their market maker requirements competitive. The BZX filing cites ISE Options and Phlx as already using time-to-expiration tiers.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2007-2008

Options penny pilot (2007-2008)

In 2007, the SEC approved a pilot program reducing the minimum price increment for options in 13 classes from $0.05 to $0.01. The pilot later expanded to more classes, narrowing bid-ask spreads and changing how market makers quoted prices.

Then

Spreads narrowed and trading volumes rose in the affected classes.

Now

Penny quoting became standard across US options markets, reshaping market maker economics.

Why this matters now

Shows how SEC-driven changes to options quote standards ripple through market making, much like BZX's new tiered differentials.

April 2001

Decimalization of US equities (2001)

On April 9, 2001, all US stock exchanges completed the switch from fractional pricing to decimals. The change narrowed minimum spreads from $0.0625 to $0.01.

Then

Bid-ask spreads narrowed sharply, cutting trading costs for investors.

Now

Market makers adapted to thinner margins, and the SEC later studied the effects on liquidity.

Why this matters now

A precedent for how quote standard changes alter market maker behavior and investor costs.

Sources

(4)