Options and Equity Market Structure – A Deep Dive

An Update from OIC: Options Markets and Impact of SEC Equity Market Structure Proposals


Recently, SIFMA’s Ellen Greene participated in the Washington Outlook panel discussion at the 2023 Options Industry Conference in Nashville.

In these prepared remarks for the Conference, Ellen describes:

  • Today’s options markets, including continued retail investor participation, which remains above pre-pandemic levels;
  • What’s ahead and how the SEC’s four equity market structure proposals, released in December 2022, may impact the options industry; and
  • SIFMA’s continued engagement on critical issues to promote further investor growth and market resiliency.


U.S. options trading volume has doubled since 2019 and in 2022, as reported by Cboe, the industry saw total options volume grow to over 10 billion contracts for the first time.

This robust growth in options includes retail participation, which peaked in 2022 and, while it has eased, remains above pre-pandemic levels.

Volumes remain elevated in the year to date. According to the Options Clearing Corporation, over 1 billion total contracts were cleared in March 2023, an increase of 12% year-over-year and the highest month on record.

SIFMA’s Market Structure Survey – which reflects on 2022 and looks ahead to 2023 – revealed that equity and listed options trading representatives, as well as exchange representatives, expect the range for multi-listed options volumes to be 30-40 million contracts with the majority of respondents expecting retail investor participation to remain about the same.

What these numbers show is the growth resulting from the incredibly efficient and resilient listed options markets, and that they continue to gain traction with investors.

On December 14, 2022, the SEC issued four proposals that would completely overhaul the regulations governing U.S. equity market structure, including how orders are priced, executed and displayed to the public. Taken together, they total over 1,600 pages of proposed rulemaking that will also impact listed options.

A measured, data-driven review of the U.S. equity market structure, and specifically Reg NMS (which was adopted 22 years ago), has been a SIFMA priority for many years. SIFMA presented recommendations designed to enhance the current structure to the SEC and Congress in 2013, 2014 and 2017.

The substantial changes proposed by the SEC are complex and interrelated with material impacts on all market participants, as well as retail and institutional investors.

Unlike most rulemaking, Congress – or the SEC – has not identified any problems in the equity markets; putting into question what the proposals would be designed to correct.

Indeed, it is our view that these proposals are likely to create many more problems than solutions.

The proposals specifically cover:

  • SEC Rule 605 – Disclosure of Order Execution Information;
  • Tick Sizes, Access Fees, and Transparency of Better Priced Orders;
  • Regulation Best Execution; and
  • Enhancing Order Competition.

Broadly speaking, SIFMA has noted our concerns around two main areas:

  1. First, the effects of each proposal are uncertain; the cumulative effect even more so. The SEC did not consider or discuss numerous, critical operational questions nor the associated costs or benefits that arise through intersecting proposals.
  2. Second, the proposals have not been supported by robust economic analyses which utilized reliable, publicly available data. This means the purported benefits are largely theoretical and uncertain, while the costs are underestimated.

Rather than moving forward with their four proposals, the better course of action would be for the SEC to update Rule 605 to ensure that the reports accurately reflect the execution quality that investors enjoy today. This would allow the Commission, stakeholders and market observers and academics to review more complete and current data. Then, and only then, can we determine whether or not a market failure exists and if so, how best to address it.

SIFMA’s focus on options market structure is a priority and our listed options committee is engaged on a wide range of issues impacting market structure, regulation, risk, and operational resiliency, as well as providing industry input on exchange and SEC rulemaking.

We look forward to continued engagement on these critical issues to promote further investor growth and ensure we meet the goal of regulators and market participants: to promote market resiliency so that the U.S. equity and options markets continue to benefit investors and play an essential role in capital formation.

Ellen Greene is Managing Director, Equity and Options Market Structure at SIFMA. In this capacity, she is the staff advisor for both the Equity Markets & Trading Committee and the Listed Options Trading Committee. Ellen also leads SIFMA’s advocacy work on the Consolidated Audit Trail through SIFMA’s CAT Task Force.