The Chicago Board Options Exchange (Cboe) stands as a cornerstone of the U.S. financial markets, operating the largest options exchange in the nation. With a legacy of innovation and market leadership, Cboe provides traders, institutions, and investors with diverse, efficient, and transparent platforms for equity options trading. This comprehensive overview explores the structure, functionality, and strategic advantages of Cboe’s four U.S.-listed cash equity options exchanges, each tailored to meet the evolving needs of modern market participants.
The Four Cboe Options Exchanges
Cboe operates four distinct options exchanges, each designed with unique matching logic, fee models, and technological frameworks to support a wide range of trading strategies and participant types.
Cboe Options Exchange (C1)
As the flagship exchange and the largest in the U.S., Cboe Options Exchange—legally known as Cboe Exchange, Inc.—combines a hybrid trading model featuring both open outcry and electronic systems. This dual approach preserves the benefits of floor-based trading while embracing high-speed digital execution.
- Matching Model: Hybrid (Classic Model)
- Trading System: Open outcry + electronic
- Fee Model: Maker-taker structure incentivizes liquidity provision
This blend supports institutional traders who value human interaction for large block trades while accommodating algorithmic strategies through robust electronic connectivity.
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Cboe C2 Options Exchange (C2)
Launched to meet growing demand for fully automated trading, Cboe C2 Options Exchange operates as an all-electronic platform using a pro-rata allocation model. This ensures fair distribution of liquidity among multiple market makers during fast-moving markets.
- Matching Model: Pro-rata
- Trading System: All-electronic
- Fee Model: Maker-taker
The pro-rata model reduces toxic order flow and minimizes adverse selection, making it ideal for high-frequency traders and passive market makers seeking stable participation.
Cboe BZX Options Exchange (BZX)
Originally home to the first fully electronic options exchange in the U.S., Cboe BZX Options Exchange continues to lead in innovation with a price-time priority model that rewards speed and precision.
- Matching Model: Price-time priority
- Trading System: All-electronic
- Fee Model: Maker-taker
BZX is particularly favored by algorithmic traders due to its transparent queue system and low-latency infrastructure. It also hosts popular products such as Weeklys® and SPX options.
Cboe EDGX Options Exchange (EDGX)
Designed for deep liquidity and institutional-grade performance, Cboe EDGX Options Exchange employs a sophisticated matching engine combining pro-rata allocation with customer priority and designated market maker (DMM) oversight.
- Matching Model: Classic Pro-Rata / Customer Priority / DMM Model
- Trading System: All-electronic
- Fee Model: Maker-taker
This hybrid logic enhances price discovery and protects retail investors by prioritizing customer orders while maintaining robust market-making support.
Core Features Driving Market Confidence
Several key features distinguish Cboe’s ecosystem from competitors and contribute to its status as a trusted venue for options trading.
Strategy-Based Margining
Cboe pioneered strategy-based margining, allowing traders to use defined-risk strategies like spreads and straddles with reduced capital requirements. This lowers barriers to entry and improves capital efficiency across portfolios.
Portfolio Margining Rules
For sophisticated investors, Cboe supports portfolio margining, which calculates risk at the aggregate level rather than per-position. This approach enables greater leverage for diversified holdings while maintaining systemic safety.
Weeklys® and Expanded Expiry Options
Cboe introduced Weeklys®—options contracts with Friday expirations in weeks without standard monthly expiries—offering traders more flexibility in timing and hedging strategies. These are available across major indices and equities.
Recent Market Developments
Cboe remains at the forefront of structural changes in the options landscape.
On July 2, 2025, Citadel Securities LLC assumed interim Designated Primary Market Maker (DPM) responsibilities on EDGX Options following Morgan Stanley & Co., LLC's termination of its DPM appointments. This transition was executed seamlessly under Cboe Rule 3.53(f), ensuring continued liquidity and price stability across affected classes.
Additionally, Cboe announced plans to introduce Complex Quoting on BOE Bulk Quoting Ports effective August 18, 2025, enhancing efficiency for multi-leg strategy orders on the Cboe Options Exchange (C1). The upgrade is pending regulatory approval and aims to streamline complex trade submissions for institutional users.
A recent expansion of the Penny Program across all Cboe-affiliated exchanges—including BZX, C1, C2, and EDGX—further improves price granularity for select underlying securities, promoting tighter spreads and increased accessibility.
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Why Traders Choose Cboe
Traders gravitate toward Cboe due to its:
- Market depth and liquidity across all four exchanges
- Innovative product design, including Weeklys® and SPX options
- Regulatory compliance and transparency
- Robust technology infrastructure supporting low-latency trading
- Flexible margin solutions that optimize capital usage
These factors collectively make Cboe a preferred destination for both retail and institutional participants.
Frequently Asked Questions (FAQ)
Q: What is the largest options exchange in the U.S.?
A: The Cboe Options Exchange (C1) is the largest options exchange in the United States by volume and market share.
Q: Are all Cboe options exchanges electronic?
A: No—only the Cboe Options Exchange (C1) uses a hybrid model with open outcry; C2, BZX, and EDGX are fully electronic.
Q: What is a DPM in options trading?
A: A Designated Primary Market Maker (DPM) is responsible for maintaining fair and orderly markets by providing continuous two-sided quotes and managing volatility in assigned option classes.
Q: What are Weeklys®?
A: Weeklys® are short-term options contracts that expire weekly, offering traders more frequent opportunities to hedge or speculate on price movements.
Q: How does pro-rata allocation work?
A: In a pro-rata model, incoming orders are filled proportionally among multiple market makers at the same price level, reducing front-running risks and promoting fairness.
Q: Can individual investors trade on Cboe exchanges?
A: Yes—while institutions dominate volume, retail investors access Cboe-listed options through brokerage platforms that route orders to these exchanges.
Keywords: Cboe Options Exchange, options trading, equity options, market makers, strategy-based margining, portfolio margining, Weeklys options, DPM
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