[Federal Register Volume 90, Number 130 (Thursday, July 10, 2025)]
[Notices]
[Pages 30743-30745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12812]
[[Page 30743]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103396; File No. SR-Phlx-2025-25]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx
Options 7, Section 4
July 7, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 1, 2025, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx's Pricing Schedule at Options
7, Section 4, ``Multiply Listed Options Fees (Includes options
overlying equities, ETFs, ETNs and indexes which are Multiply Listed)
(Excludes SPY and broad-based index options symbols listed within
Options 7, Section 5.A)'' to amend certain Qualified Contingent Cross
(``QCC'') rebates.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings,
at the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its Pricing Schedule at Options 7, Section
4, ``Multiply Listed Options Fees (Includes options overlying equities,
ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY and
broad-based index options symbols listed within Options 7, Section
5.A).'' Specifically, Phlx proposes to amend its QCC Rebates.
Today, the Exchange assesses a $.20 per contract QCC Transaction
Fee for a Lead Market Maker,\3\ Market Maker,\4\ Firm \5\ and Broker-
Dealer.\6\ Customers \7\ and Professionals \8\ are not assessed a QCC
Transaction Fee. QCC Transaction Fees apply to electronic QCC Orders
\9\ and Floor QCC Orders.\10\
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\3\ The term ``Lead Market Maker'' applies to transactions for
the account of a Lead Market Maker (as defined in Options 2, Section
12(a)). A Lead Market Maker is an Exchange member who is registered
as an options Lead Market Maker pursuant to Options 2, Section
12(a). An options Lead Market Maker includes a Remote Lead Market
Maker which is defined as an options Lead Market Maker in one or
more classes that does not have a physical presence on an Exchange
floor and is approved by the Exchange pursuant to Options 2, Section
11. See Options 7, Section 1(c). The term ``Floor Lead Market
Maker'' is a member who is registered as an options Lead Market
Maker pursuant to Options 2, Section 12(a) and has a physical
presence on the Exchange's trading floor. See Options 8, Section
2(a)(3).
\4\ The term ``Market Maker'' is defined in Options 1, Section
1(b)(28) as a member of the Exchange who is registered as an options
Market Maker pursuant to Options 2, Section 12(a). A Market Maker
includes SQTs and RSQTs as well as Floor Market Makers. See Options
7, Section 1(c). The term ``Floor Market Maker'' is a Market Maker
who is neither an SQT or an RSQT. A Floor Market Maker may provide a
quote in open outcry. See Options 8, Section 2(a)(4).
\5\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation. See Options 7,
Section 1(c).
\6\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category. See Options 7, Section 1(c).
\7\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(b)(45)). See Options 7, Section 1(c).
\8\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Options 7, Section 1(c).
\9\ Electronic QCC Orders are described in Options 3, Section
12.
\10\ Floor QCC Orders are described in Options 8, Section 30(e).
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Today, Phlx pays various QCC Rebates based on certain criteria.
Today, the Exchange pays a QCC Rebate of $0.12 per contract on
electronic QCC Orders, as defined in Options 3, Section 12, and Floor
QCC Orders, as defined in Options 8, Section 30(e), when a QCC Order is
comprised of a Customer or Professional order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side. Today, the Exchange also pays a rebate of $0.17 per contract in
the event that a member or member organization executes greater than
750,000 qualifying QCC contracts in a given month. Additionally, today,
the Exchange pays a QCC Rebate of $0.22 per contract in the event that
a member or member organization executes (1) greater than 750,000
qualifying QCC contracts in a given month, (2) Floor Originated
Strategy Executions in excess of 1,250,000 contracts in a given month,
and (3) at least 40% of the member or member organization's QCC
executed contracts in that month are comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on the other side.
Also, today, the Exchange pays a QCC Rebate of $0.14 per contract
on electronic QCC Orders, as defined in Options 3, Section 12, and
Floor QCC Orders, as defined in Options 8, Section 30(e), when a QCC
Order is comprised of a Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on one side and a Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the other side. The Exchange pays a
rebate of $0.19 per contract in the event that a member or member
organization executes greater than 750,000 qualifying QCC contracts in
a given month. The Exchange pays a rebate of $0.27 per contract in the
event that a member or member organization executes: (1) greater than
750,000 qualifying QCC contracts in a given month, (2) Floor Originated
Strategy Executions in excess of 1,250,000 contracts in a given month,
and (3) at least 40% of the member or member organization's QCC
executed contracts in that month are comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on the other side.
Today, these QCC rebates are paid to Floor Brokers on all
qualifying executed electronic QCC Orders, as defined in Options 3,
Section 12, and Floor QCC Orders, as defined in Options 8, Section
30(e), except where the transaction is either: (i) Customer-to-
Customer; (ii)
[[Page 30744]]
Customer-to-Professional; (iii) Professional-to-Professional or (iv) a
dividend, merger, short stock interest, reversal and conversion, jelly
roll, and box spread strategy executions (as defined in Options 7,
Section 4). Further, today, volume resulting from all executed
electronic QCC Orders and Floor QCC Orders, including Customer-to-
Customer, Customer-to-Professional, and Professional-to-Professional
transactions and excluding dividend, merger, short stock interest or
reversal or conversion strategy executions, is aggregated in
determining the applicable member or member organization qualifying QCC
contract volume in a given month.
Proposal
At this time, the Exchange proposes to amend the aforementioned
rebate to pay a higher rebate when a QCC Order is comprised of a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on one side
and a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on
the other side.. In this case, the Exchange proposes to pay a rebate of
$0.30 per contract (instead of $0.27 per contract) in the event that a
member or member organization executes: (1) greater than 750,000
qualifying QCC contracts in a given month, (2) Floor Originated
Strategy Executions in excess of 1,250,000 contracts in a given month,
and (3) at least 40% of the member or member organization's QCC
executed contracts in that month are comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on the other side.
The Exchange is not otherwise proposing to amend the other rebates
and would continue to pay QCC Rebates on all qualifying executed
electronic QCC Orders and Floor QCC Orders as described herein.
The Exchange proposal to increase the rebate from $0.27 to $0.30
per contract will encourage Phlx members and member organizations to
transact a greater number of QCC Orders on the Exchange.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\12\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \13\
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\13\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission
\14\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\15\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \16\
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\14\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\15\ See NetCoalition, at 534-535.
\16\ Id. at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . ..'' \17\ Although the court and the
SEC were discussing the cash equities markets, the Exchange believes
that these views apply with equal force to the options markets.
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\17\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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The Exchange's proposal to increase a QCC Rebate to $0.30 per
contract (as compared to $0.27 per contract) when a QCC Order is
comprised of a Lead Market Maker, Market Maker, Broker-Dealer, or Firm
order on one side and a Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on the other side, provided the qualifications \18\ are
met is reasonable because the increase rebate will encourage Phlx
members and member organizations to transact a greater number of
qualifying QCC contracts and Floor Originated Strategy Executions on
Phlx.
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\18\ The proposed $0.30 per contract rebate would apply in the
event that a member or member organization executes: (1) greater
than 750,000 qualifying QCC contracts in a given month, (2) Floor
Originated Strategy Executions in excess of 1,250,000 contracts in a
given month, and (3) at least 40% of the member or member
organization's QCC executed contracts in that month are comprised of
a Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on
one side and Lead Market Maker, Market Maker, Broker-Dealer, or Firm
order on the other side.
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The Exchange's proposal to increase a QCC Rebate to $0.30 per
contract (as compared to $0.27 per contract) when a QCC Order is
comprised of a Lead Market Maker, Market Maker, Broker-Dealer, or Firm
order on one side and a Lead Market Maker, Market Maker, Broker-Dealer,
or Firm order on the other side, provided the qualifications \19\ are
met is equitable and not unfairly discriminatory because all members
and member organizations may qualify for QCC Rebates, provided they
transact the requisite volume. Further, the proposed higher rebate of
$0.30 per contract, when the QCC Order is comprised of a Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on one side and a
Lead Market Maker, Market Maker, Broker-Dealer, or Firm order on the
other side, is equitable and not unfairly discriminatory because the
Exchange assesses a QCC Transaction Fee of $0.20 per contract for Lead
Market Makers, Market Makers, Firms and Broker-Dealers and does not
assess a QCC Transaction Fee on Customers and Professionals. The
current rebate of $0.22 per contract, when a QCC Order is comprised of
a Customer or Professional order on one side and a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on the other side, is lower
as compared to the proposed $0.30 per contract rebate because Customers
and Professionals do not pay a QCC Transaction Fee whereas Lead Market
Makers, Market Makers, Broker-Dealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
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\19\ See id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not
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necessary or appropriate in furtherance of the purposes of the Act.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
Intra-Market Competition
In terms of intra-market competition, the Exchange's proposal to
increase a QCC Rebate to $0.30 per contract (as compared to $0.27 per
contract) when a QCC Order is comprised of a Lead Market Maker, Market
Maker, Broker-Dealer, or Firm order on one side and a Lead Market
Maker, Market Maker, Broker-Dealer, or Firm order on the other side,
provided the qualifications \20\ are met does not impose an undue
burden on intra-market competition because all members and member
organizations may qualify for QCC Rebates, provided they transact the
requisite volume. Further, the proposed higher rebate of $0.30 per
contract, when the QCC Order is comprised of a Lead Market Maker,
Market Maker, Broker-Dealer, or Firm order on one side and a Lead
Market Maker, Market Maker, Broker-Dealer, or Firm order on the other
side, is equitable and not unfairly discriminatory because the Exchange
assesses a QCC Transaction Fee of $0.20 per contract for Lead Market
Makers, Market Makers, Firms and Broker-Dealers and does not assess a
QCC Transaction Fee on Customers and Professionals. The current rebate
of $0.22 per contract, when a QCC Order is comprised of a Customer or
Professional order on one side and a Lead Market Maker, Market Maker,
Broker-Dealer, or Firm order on the other side, is lower as compared to
the proposed $0.30 per contract rebate because Customers and
Professionals do not pay a QCC Transaction Fee whereas Lead Market
Makers, Market Makers, Broker-Dealers, and Firms pay a $0.20 per
contract QCC Transaction Fee.
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\20\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\21\
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-Phlx-2025-25 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-Phlx-2025-25. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-Phlx-2025-25 and should be
submitted on or before July 31, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-12812 Filed 7-9-25; 8:45 am]
BILLING CODE 8011-01-P