Overview
Options exchanges are locked in a chaotic race to recalibrate fees as their regulatory costs collide with record trading volumes. Cboe doubled its Options Regulatory Fee to $0.0002 per contract on January 2, 2026, while NYSE slashed its fee from $0.0038 to $0.0026. The whipsaw reflects a deeper crisis: exchanges collect fees based on all customer options trades cleared industrywide, not just trades on their own platforms, creating unpredictable revenue swings.
The entire industry planned to switch to an on-exchange collection model on January 2, 2026, where each exchange charges only for trades executed on its platform. But clearing members weren't ready. Every major exchange delayed implementation to July 1, 2026, forcing temporary rate adjustments to bridge the gap. With U.S. options volume hitting 13.8 billion contracts in 2025—up 22% from 2024—and retail traders driving unprecedented volatility in zero-day options, exchanges are caught between surging surveillance costs and a fee system designed for calmer times.
Key Indicators
Organizations Involved
Operates the largest U.S. options exchange network including Cboe, BZX, EDGX, and C2.
Second-largest options exchange operator with 22% market share across six trading platforms.
Operates NYSE American and NYSE Arca options exchanges with 14% combined market share.
Systemically important clearing house guaranteeing all U.S. exchange-traded options.
Federal agency regulating securities markets and self-regulatory organizations.
Trade association representing broker-dealers, investment banks, and asset managers.
Timeline
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Cboe Exchanges Double ORF
Fee ChangeCboe C2, BZX, and EDGX implement doubled ORF rates through June 30, 2026 sunset.
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Nasdaq Implements Interim Rates
Fee ChangeNasdaq NOM increases ORF to $0.0006, PHLX to $0.0022, ISE to $0.0011 as temporary bridge rates.
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NYSE Fee Cuts Take Effect
Fee ChangeNYSE Arca and NYSE American implement $0.0026 per contract ORF, down from $0.0038.
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Industry Delays Methodology Change
RegulatoryAll major exchanges postpone on-exchange ORF model from January to July 2026 after clearing members signal unpreparedness.
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Cboe Files to Double Fees
Fee ChangeCboe C2, BZX, and EDGX exchanges file to increase ORF from $0.0001 to $0.0002 effective January 2026.
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NYSE Announces Permanent Fee Cut
Fee ChangeNYSE Arca and NYSE American file to reduce ORF to $0.0026 effective January 1, 2026.
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Record 110M Contracts Cleared
Market MilestoneOCC clears record 110 million option contracts in single day, driven by retail trading surge.
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Nasdaq NOM Slashes Fee 80%
Fee ChangeNasdaq NOM drops ORF from $0.0005 to $0.00005 per contract in dramatic reduction.
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Nasdaq GEMX Reduces ORF 25%
Fee ChangeNasdaq GEMX lowers fee from $0.0012 to $0.0009 per contract amid volume growth.
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Nasdaq Files Methodology Change
RegulatoryNasdaq exchanges propose shift to on-exchange ORF collection effective January 2026.
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NYSE American Temporarily Cuts Fees
Fee ChangeNYSE American reduces ORF from $0.0038 to $0.0023 as high volumes generate excess revenue.
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Cboe Exchange Raises ORF 35%
Fee ChangeMain Cboe exchange increases ORF from $0.0017 to $0.0023 per contract citing rising costs.
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CBOE Implements First ORF
Fee StructureCBOE becomes first exchange to charge Options Regulatory Fee, initiating industrywide trend.
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CBOE Proposes Options Regulatory Fee
RegulatoryChicago Board Options Exchange first proposes ORF to fund market surveillance and regulatory functions.
Scenarios
Smooth July 2026 Transition Brings Fee Stability
Discussed by: Industry consensus reflected in exchange filings and SIFMA advocacy
Clearing members use the six-month delay to build systems for on-exchange ORF collection. By July 1, 2026, all exchanges switch to charging fees only on trades executed on their platforms. Fee rates stabilize as exchanges can better predict revenue based on their own market share rather than industrywide customer volume. Competitive pressure drives modest fee reductions as exchanges vie for order flow. The methodology eliminates cross-subsidization where trades on one exchange generate fees for another, though smaller exchanges may struggle with reduced revenue.
Methodology Change Delayed Again, Fee Chaos Continues
Discussed by: Implied risk in Nasdaq's December 2025 filings citing implementation challenges
Technical complexity and lack of industry coordination force another delay beyond July 2026. Exchanges extend their temporary rates indefinitely. Without a functioning on-exchange model, fee volatility persists as exchanges struggle to match revenue with costs amid unpredictable trading patterns. Some exchanges abandon the methodology change entirely, returning to the status quo. SIFMA and major broker-dealers escalate complaints to the SEC about competitive distortions. The regulatory uncertainty creates planning challenges for market makers and clearing firms managing fee exposure.
Retail Trading Collapse Triggers Fee Crisis
Discussed by: Market risk analysis extrapolating from 2022 retail trading decline during bear market
A market downturn or regulatory crackdown on zero-day options causes retail trading to crater. Daily volumes plunge from 59 million to 35 million contracts. Exchanges that raised fees expecting sustained high volumes face severe revenue shortfalls. Cboe's doubled ORF generates only half the projected revenue. Exchanges implement emergency mid-year fee increases. Some smaller platforms become financially unviable, triggering consolidation. OCC clearing fees rise to compensate for lower volumes. The crisis exposes how dependent exchange regulatory funding has become on speculative retail options activity.
SEC Intervention Forces Fee Transparency
Discussed by: Optiver and SIFMA critiques of opaque regulatory budget calculations
Growing complaints about inconsistent fees and lack of transparency in regulatory budget calculations prompt SEC action. The Commission proposes new rules requiring exchanges to publicly disclose detailed regulatory cost breakdowns and fee calculation methodologies. Exchanges must justify why indirect expenses constitute 35-38% of regulatory costs. The scrutiny reveals significant variation in efficiency across platforms. Some exchanges face pressure to reduce fees after their cost structures prove inflated. The intervention fundamentally changes the self-regulatory model, shifting more oversight to the SEC.
Historical Context
Payment for Order Flow Reforms (2000-2001)
2000-2001What Happened
NYSE and Nasdaq faced regulatory scrutiny over payment for order flow practices that created conflicts between broker incentives and customer best execution. The SEC investigated whether brokers were routing retail orders to exchanges based on kickbacks rather than price quality. Market makers defended payments as legitimate liquidity incentives while critics argued they harmed retail investors through worse execution.
Outcome
Short term: SEC adopted disclosure rules requiring brokers to inform customers about payment arrangements.
Long term: Payment for order flow became standard practice in options markets, enabling commission-free trading but creating ongoing debates about hidden costs to retail investors.
Why It's Relevant
Today's ORF debate mirrors earlier conflicts over who pays for market infrastructure and whether retail investors bear hidden costs through fee structures they don't understand.
Flash Crash Market Structure Reforms (2010-2012)
2010-2012What Happened
The May 6, 2010 flash crash exposed fragility in fragmented market structure across dozens of trading venues. Regulators discovered exchanges had different circuit breakers, fee structures, and data feeds creating coordination failures. The SEC and CFTC implemented reforms including synchronized circuit breakers, consolidated audit trails, and stricter coordination requirements across exchanges and asset classes.
Outcome
Short term: Exchanges implemented uniform circuit breakers and limit-up/limit-down mechanisms within two years.
Long term: The Consolidated Audit Trail launched in 2020 after years of delay, creating centralized surveillance across all exchanges at enormous cost to industry.
Why It's Relevant
Current ORF methodology chaos—with exchanges delaying coordinated changes due to technical unpreparedness—echoes the fragmentation failures exposed in 2010.
Decimalization and Tick Size Wars (2001)
2001What Happened
U.S. stock exchanges switched from fractional pricing to decimals, reducing minimum tick sizes from 1/16th of a dollar to one cent. The change dramatically compressed spreads and trading profits, forcing exchanges to compete more aggressively on fees and technology. Some predicted decimalization would bankrupt market makers and reduce liquidity. Instead, trading volumes exploded as lower spreads attracted new participants, though profitability per trade collapsed.
Outcome
Short term: Average spreads fell by 30-40% while trading volumes increased substantially, particularly in liquid stocks.
Long term: Tick size compression triggered consolidation among market makers and drove innovation in high-frequency trading as firms sought to profit from smaller price movements at higher volumes.
Why It's Relevant
Today's options volume explosion driven by retail traders parallels post-decimalization volume growth, creating similar challenges in funding regulatory infrastructure designed for lower-volume markets.