Fed Hears Pleas to Ease Rules on Banks in Options Markets

Amid the coronavirus outbreak, the options market has been a crucial tool for investors seeking to protect themselves from the wild swings of stock prices. Now, just as trading is surging, exchanges are warning that regulations could sideline banks that keep the market functioning.

At issue are capital rules that determine how much risk Wall Street banks, which clear options trades, can take on behalf of their clients. Top officials at Cboe Global Markets Inc., Nasdaq Inc. and the New York Stock Exchange told the Federal Reserve last week that a jump in buying and selling was putting market makers perilously close to hitting their bank-imposed limits. The exchanges urged the Fed to give banks more leeway to handle the increased demand, according to a copy of a letter reviewed by Bloomberg.