Nasdaq GEMX, LLC, a self-regulatory organization under the Securities and Exchange Commission, has proposed delaying the implementation of its revised Options Regulatory Fee methodology until July 1, 2026. This filing, submitted on December 19, 2025, and published in the Federal Register on January 2, 2026, responds to industry concerns about readiness for the changes. Effective January 2, 2026, GEMX will maintain its current fee collection approach but increase the rate from $0.0002 to $0.0008 per contract side. The move aims to provide market participants more time to adapt while ensuring the exchange can cover a portion of its regulatory expenses. This development highlights ongoing adjustments in how options exchanges fund their oversight functions, balancing operational needs with regulatory equity under the Securities Exchange Act of 1934.
Background on GEMX's Options Regulatory Fee
The Options Regulatory Fee, or ORF, is a charge that options exchanges like GEMX assess to fund the costs of supervising and regulating member activities. These fees support surveillance, investigations, and enforcement related to options trading. GEMX's ORF applies to transactions cleared by the Options Clearing Corporation in the customer range, with the fee collected from clearing members.
In August 2025, GEMX reduced its ORF from $0.0012 to $0.0009 per contract side, as detailed in filing SR-GEMX-2025-15. This adjustment followed amendments to its Regulatory Services Agreement with the Financial Industry Regulatory Authority, which lowered certain regulatory costs. A further reduction to $0.0002 per contract side occurred in October 2025 via SR-GEMX-2025-24, accounting for fines and ensuring that total regulatory revenue did not exceed expenses. These cuts reflected GEMX's efforts to align fees with actual costs, preventing over-collection.
The proposed new methodology, outlined in SR-GEMX-2025-17 and initially set for January 2, 2026, would have shifted the fee assessment to all GEMX member executions, regardless of clearing range, while continuing to focus on customer transactions. This change aimed to create a more direct link between regulatory oversight and exchange activity. However, the current filing delays this shift, removing a February 1, 2026, sunset provision that would have allowed reversion to the prior structure if issues arose.
Key Players and Regulatory Framework
GEMX, a subsidiary of Nasdaq, operates as a national securities exchange and self-regulatory organization. It files rule changes with the SEC under Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4, which require public notice and opportunity for comment. The SEC's role is to ensure such proposals promote fair and efficient markets, as seen in its publication of this notice to solicit feedback.
The Options Clearing Corporation plays a supporting role by clearing transactions, while FINRA assists through regulatory services agreements. Industry participants, including clearing members, have influenced this delay by providing feedback on implementation challenges. GEMX notified members via Options Trader Alert #2025-03, issued at least 30 days prior, emphasizing transparency.
This proposal aligns with Section 6(b)(4) of the Act, which mandates equitable allocation of reasonable fees, and Section 6(b)(5), which prohibits unfair discrimination. GEMX argues the delay and interim rate support these goals by allowing time for system adjustments without disrupting market operations.
Reasons for the Delay and Interim Adjustments
The primary driver for postponement is industry feedback highlighting insufficient readiness among clearing members to handle the new methodology. GEMX's filing notes that additional time is needed for design, testing, and implementation of changes to accommodate the revised fee collection. Originally announced in July 2025 via Options Trader Alert #2025-33, the new model was intended to give ample preparation time, but participants reportedly did not fully prepare.
In the interim, GEMX proposes maintaining the existing methodology—assessing fees on customer-range transactions cleared by OCC—but at an increased rate of $0.0008 per contract side. This rate is below the pre-October 2025 level of $0.0009 but above the current $0.0002, described by GEMX as a 'temporary modest increase.' The exchange justifies this by pointing to the 'drastic' reductions since August 2025, which were based on estimates of market share and volume. Without this adjustment, GEMX states it would under-collect relative to regulatory costs during the transition.
GEMX's filing includes data on prior reductions: from $0.0012 to $0.0009 in August, then to $0.0002 in October, ensuring revenue matched costs like those under the FINRA agreement. The proposed rate aims to offset a 'material portion' of expenses until the full methodology change on July 1, 2026.
Potential Implications and Perspectives
From a short-term perspective, the delay provides breathing room for market participants, potentially reducing operational risks associated with rushed implementations. Clearing members benefit from extended timelines to update systems, avoiding disruptions in fee processing. However, the interim rate increase could raise costs for firms handling customer transactions, though GEMX frames it as modest given prior cuts.
Longer-term, this filing underscores broader debates in options regulation about fee structures. Exchanges must balance funding oversight with competitive pressures, as excessive fees could drive volume to rivals. Perspectives vary: proponents of the delay, likely including clearing firms, see it as pragmatic, preventing errors in a complex ecosystem. Critics might argue it prolongs an outdated methodology, delaying efficiencies from the new model.
No direct legal precedents are cited in the filing, but it echoes similar SEC-approved delays in exchange rules, such as those for market data or trading system upgrades, where implementation timelines were extended based on industry input. The removal of the sunset provision signals confidence in eventual adoption, but it eliminates a safety net, potentially raising stakes for the July rollout.
The proposal's impact on competition is addressed in the filing, with GEMX asserting no undue burden. It notes that other exchanges may adjust their ORFs independently, maintaining inter-market equilibrium.
In summary, GEMX's filing addresses immediate industry needs while preserving the path to a revised ORF framework. Potential next steps include SEC review of public comments, due by January 23, 2026, which could lead to approval, disapproval, or modifications. Ongoing challenges involve ensuring all participants are prepared by July 1, 2026, amid evolving market volumes and regulatory costs. Debates may continue on optimal fee methodologies, influencing how exchanges fund oversight without over- or under-collecting.
