TL;DR: SEC research and Cboe-sourced statistics cited in federal working papers show that retail participation in listed options has grown substantially, and that same-day contracts now account for a large share of trading in one of the market's busiest option classes. Regulators have also studied how order-routing incentives and limit-order behavior shape what individual traders actually pay to execute. Read together, the public record makes a data-driven case about retail options activity without needing an unverifiable win-rate claim to carry the story.
Key Takeaways
- The U.S. options market has seen unprecedented growth in scale, complexity, and retail participation over the past decade.
- 0DTE options reached 43% of trading volume in Cboe's SPXW S&P 500 options series [1].
- Retail customers using non-marketable limit orders in actively traded, slightly out-of-the-money 0DTE options were at the best bid or offer more than half the time in recent data.
- In the SEC's original study of payment for order flow, quotes for options priced under $20 sat at the maximum allowable width 49% of the time on one of the exchanges examined [2].
- The gap between headline retail growth and decades of documented execution-cost friction is the thread regulators keep returning to, and it's worth understanding before assuming either side of that story on its own.
How Big Is Retail Participation in the Options Market Right Now?
The SEC's market structure research office treats the past decade as a genuine inflection point for options trading. Its own framing is direct: the U.S. options market has evolved into a critical component of modern market structure, with unprecedented growth in scale, complexity, and retail participation over the past decade. The agency convened a dedicated roundtable on options market structure in April 2026 specifically to work through the implications of that growth.
One of the clearest signals of retail-driven change shows up in same-day contracts. Zero-days-to-expiration options, better known as 0DTE, reached 43% of trading volume in Cboe's SPXW S&P 500 options series [1]. That concentration in a single ultra-short-dated product line is unusual for an asset class that, not long ago, was dominated by monthly and weekly expirations. It suggests that a meaningful slice of retail flow has shifted its time horizon dramatically, trading contracts that live and die within a single session rather than holding positions across weeks.
That shift matters for anyone trying to read order flow or volatility signals, because a market where nearly half the volume in a benchmark product expires by the closing bell behaves differently than one built around longer-dated positioning. Liquidity, gamma exposure, and dealer hedging all compress into the same few hours, which is exactly the kind of environment where intraday signal detection becomes more valuable, not less.
What Has the SEC Found About Order Flow and Execution Costs?
Long before 0DTE became a retail phenomenon, the SEC was already scrutinizing how retail orders get routed and priced. In its special study of payment for order flow and internalization, the agency's Office of Compliance Inspections and Examinations and Office of Economic Analysis examined order routing across specialists and exchanges. That study found that some order-routing arrangements involved payments as high as $13.00 per contract [2]. It also found that quotes for options priced under $20 sat at the maximum allowable spread width 49% of the time on one of the exchanges studied [2].
Those numbers come from a study published in December 2000, so they describe a market structure that predates the multi-listing, high-speed, largely electronic options market retail traders interact with today. Even so, the underlying questions the study raised — who gets paid to route retail orders, and whether quoted spreads reflect real trading costs — are the same questions regulators are still asking in 2026 roundtables on options market structure. The framework built in that original study is the reason regulators today have a vocabulary and methodology for evaluating whether retail orders get fair execution, even as the technology underneath has changed completely.
How Do Retail Traders Actually Behave in the 0DTE Market?
A more recent piece of SEC-affiliated research goes straight at retail behavior inside the 0DTE market itself. A DERA working paper published in March 2025 examined how customers use non-marketable limit orders, or NMLOs, when trading same-day options [1]. The researchers found that for actively traded, slightly out-of-the-money options, customers submitting NMLOs were at the best bid or offer more than half the time in recent data [1]. They also found that a large share of 0DTE volume comes from these customer NMLOs, and that this order flow executes at low cost despite the wide quoted spreads typical of low-value, short-dated contracts [1].
That finding cuts against a common assumption about 0DTE trading — that cheap, moments-from-expiration options are an automatic wealth transfer to market makers because of how wide their quoted spreads look. The research suggests the picture is more mixed than the lottery-ticket narrative implies, because customers who use limit orders instead of marketable orders can compete on price rather than simply accepting whatever the market maker is quoting. That distinction between a marketable order and a non-marketable limit order is not a technicality; it is the difference between paying the spread and setting your own price and waiting.
PFOF Era vs. 0DTE Era: What Changed in Market Structure?
Placing these two strands of SEC research side by side shows how far both the questions and the tools have moved, even though the underlying concern — retail execution quality — has stayed constant.
| Research | Published | Market Focus | Sourced Figure |
|---|---|---|---|
| SEC Payment for Order Flow & Internalization Special Study | December 2000 | Specialist order routing, quoting behavior | Quotes at maximum width: 49% for options under $20 bid on one exchange [2] |
| SEC/DERA 0DTE Limit Order Working Paper | March 2025 | Customer limit-order use in same-day options | 43% of SPXW volume is 0DTE [1] |
| SEC Options Market Structure Roundtable | April 2026 | Broad review of scale, complexity, retail participation | Growth in scale, complexity, and retail participation over the past decade |
The 2000 study was built around a market dominated by specialists and payment arrangements between firms; the questions were about who got paid to route an order, not about what the retail trader chose to do with their own order type. The 2025 paper flips that lens toward the customer's own behavior — what happens when a retail trader chooses a limit order over a marketable one in the fastest-moving corner of the options market. The 2026 roundtable sits above both, trying to reconcile decades of structural change with a market that now runs on 0DTE volume and algorithmic execution rather than floor specialists.
What that progression tells you is that retail options trading has not gotten simpler over the past two and a half decades — it has gotten faster, more concentrated in short expirations, and more dependent on the trader's own order-type choices rather than on what a specialist decided to do with a payment arrangement. The tools retail traders need to navigate that environment have to keep pace with the same shift, which is exactly why order-type discipline and real-time flow reading matter more in a 0DTE-heavy market than they did in the specialist-driven market the 2000 study described.
Why This Matters
As of 2026, the SEC is actively revisiting options market structure through a dedicated roundtable, and the questions on the table trace directly back to the growth in retail participation the agency has already documented. That is not a coincidence. A market where same-day contracts account for 43% of volume in a benchmark product like SPXW is a market where execution mechanics, order-type choice, and intraday liquidity conditions carry more weight than they did even five years ago [1].
For retail traders, the practical takeaway is that order type is not a minor technical setting — it is one of the few execution variables entirely within a trader's control, and the research on 0DTE customer behavior suggests it materially affects outcomes. For anyone building or using analytics tools around options flow, the same lesson applies at a different scale: the market structure retail traders operate inside today is closer to the 2025 0DTE research than to the 2000 payment-for-order-flow study, and tools built for reading that market need to reflect current expiration-day dynamics rather than a specialist-era model of how orders get filled.
FAQ
Q: What share of Cboe SPXW trading is 0DTE? A: Same-day contracts make up a substantial share of volume in the S&P 500 SPXW options series, according to research the SEC has cited. The exact figure and its source are covered in the body section above rather than restated here.
Q: Did the SEC conclude that payment for order flow harms retail traders? A: The agency's original study focused on measuring quoting behavior, execution costs, and routing incentives rather than issuing a simple verdict. It built the framework regulators still use to evaluate execution quality today.
Q: Are wide quoted spreads on 0DTE options automatically bad for retail traders? A: Not necessarily. SEC-affiliated researchers found that customers who use limit orders instead of marketable orders can end up paying far less than the quoted spread would suggest.
Q: Has retail participation in the options market grown over the past decade? A: Yes. SEC market structure research describes the past decade as a period of significant growth in retail participation, alongside rising scale and complexity across the options market.
Q: What is a non-marketable limit order, and why does it matter for 0DTE traders? A: It is an order priced away from the current market that waits to be filled rather than executing immediately at the quoted price. It matters because it lets a trader compete with market makers on price instead of accepting whatever the quote happens to be.
Sources
[1] sec.gov, "Hope at a Reasonable Price: Customer Use of Limit Orders in the 0DTE Market". https://www.sec.gov/files/dera-hope-reasonable-prc-2503.pdf
[2] sec.gov, "Special Study: Payment for Order Flow and Internalization in the Options Markets". https://www.sec.gov/news/studies/ordpay.htm
