NYSE American LLC, a self-regulatory organization under the Securities and Exchange Commission, has filed a proposed rule change to decrease its Options Regulatory Fee, or ORF, from $0.0038 per contract to $0.0026 per contract, effective January 1, 2026. The filing also includes a temporary waiver of the fee from December 1 through December 31, 2025. Announced in the Federal Register on December 16, 2025, this move addresses rising options trading volumes that have led to higher-than-expected fee collections. The change seeks to align revenue from the ORF with the actual costs of regulating options trading on the exchange, preventing overcollection while maintaining funding for essential oversight functions. This development highlights broader challenges in the options market, where sustained high activity has strained existing fee structures, prompting exchanges to recalibrate their approaches to regulatory funding.
Background on the Options Regulatory Fee
The ORF is a fee imposed by NYSE American on its ATP Holders, which are firms authorized to trade on the exchange, for options transactions cleared through the Options Clearing Corporation in the customer range. As detailed in the filing, the fee supports the exchange's legal, regulatory, and surveillance operations. Regulatory funds like the ORF must be used exclusively for these purposes, as stipulated in the exchange's operating agreement and reinforced by SEC approvals, such as Release No. 87993 from January 2020.
Introduced to cover a material portion of regulatory expenses without exceeding them, the ORF is collected indirectly through clearing firms by the OCC. It applies regardless of where the transaction occurs, but only to customer-range trades. The filing notes that customer trading requires more intensive oversight, involving labor-heavy examinations of firm-customer relationships, compared to proprietary trading. This distinction justifies focusing the fee on customer volumes, which have driven much of the recent market surge.
Historically, NYSE American has adjusted the ORF in response to volume fluctuations. Earlier in 2025, the exchange temporarily reduced the fee to $0.0023 per contract through December 31, as outlined in SEC Release No. 103507 from July 2025. Despite this, persistent high volumes have continued to generate excess collections, necessitating the current proposal.
Key Elements of the Proposed Change
The core of the filing is a two-part adjustment to the ORF. First, NYSE American proposes waiving the fee entirely for the month of December 2025. This waiver aims to prevent overcollection for the year, given that options volumes remained elevated in the latter half of 2025. Data from the OCC shows customer average daily volume climbing from 45.5 million contracts in June to over 61 million in October, with total average daily volume following a similar upward trend.
Second, starting January 1, 2026, the fee would resume at the reduced rate of $0.0026 per contract. This rate is based on the exchange's projections of regulatory costs, including staff, technology, and third-party services for surveillance and enforcement. The filing emphasizes that the adjustment ensures collections cover a material portion of these costs without surpassing them, in line with Section 6(b) of the Securities Exchange Act of 1934, which requires equitable allocation of fees.
Notifications to market participants are a critical aspect. The exchange issued a Trader Update on October 31, 2025, providing at least 30 days' notice of the waiver, and plans similar advance notice for the rate change. This allows firms to adjust their systems accordingly.
Legal and Statutory Basis
The proposal invokes Sections 6(b)(4) and 6(b)(5) of the Securities Exchange Act, arguing that the change equitably allocates fees and avoids unfair discrimination. By applying uniformly to all ATP Holders on customer transactions, it maintains fairness. The filing also references the exchange's obligations under Rule 19b-4, enabling immediate effectiveness upon filing, subject to potential SEC suspension.
Precedents include similar ORF adjustments by other exchanges, such as those approved in recent years to respond to volume spikes post-2020. For instance, the allocation of regulatory responsibilities among self-regulatory organizations via 17d-2 agreements, as noted in SEC Release No. 85097 from February 2019, underscores the collaborative framework for overseeing position limits and manipulation across markets.
Implications and Perspectives
In the short term, the waiver and reduction could lower costs for clearing firms and their customers, potentially encouraging continued high-volume trading. Firms might pass savings to clients, fostering market liquidity. However, this could also reduce the exchange's immediate revenue, though the filing asserts it prevents excess accumulation.
Long-term implications involve the sustainability of the ORF model. The exchange hints at broader reform, planning a rule change by early 2026 to assess fees only on transactions occurring on its platform, aligning with industry feedback for consistent billing. This could simplify collections but might shift burdens among exchanges with varying volumes.
Perspectives vary. Market participants benefiting from lower fees may view this positively, as it reduces trading costs amid high volumes. Regulators and exchanges emphasize the need to fund robust oversight to prevent misconduct, such as manipulation or front-running. Critics might argue that frequent adjustments signal instability in the fee structure, potentially complicating compliance for firms. Supporters, however, see it as adaptive regulation in a dynamic market.
Forward-Looking Considerations
This proposal underscores the challenges of balancing regulatory funding with market realities. Key takeaways include the responsiveness of exchanges to volume trends and the push toward ORF reform. Future steps may involve SEC approval of a revised model, ongoing volume monitoring, and potential further adjustments if collections deviate from costs. Debates will likely center on equitable fee distribution across the industry, ensuring effective regulation without undue burdens.
