[Federal Register Volume 90, Number 146 (Friday, August 1, 2025)]
[Notices]
[Pages 36207-36209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-14563]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103576; File No. SR-NASDAQ-2025-055]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Related to SQF Port Fees
July 29, 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 22, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
[[Page 36208]]
(``Commission'') the proposed rule change as described in Items I and
II, 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 The Nasdaq Options Market LLC's
(``NOM'') Pricing Schedule at Options 7, Section 3, Nasdaq Options
Market--Ports and Other Services, to propose a limit to the number of
Specialized Quote Feed (``SQF'') \3\ Ports a Market Maker \4\ may
subscribe to in a month.
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\3\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Market Makers to connect, send, and receive messages related
to quotes and Immediate-or-Cancel Orders into and from the Exchange.
Features include the following: (1) options symbol directory
messages (e.g., underlying instruments); (2) system event messages
(e.g., start of trading hours messages and start of opening); (3)
trading action messages (e.g., halts and resumes); (4) execution
messages; (5) quote messages; (6) Immediate-or-Cancel Order
messages; (7) risk protection triggers and purge notifications; and
(8) opening imbalance messages. The SQF Purge Interface only
receives and notifies of purge requests from the Market Maker.
Market Makers may only enter interest into SQF in their assigned
options series. Immediate-or-Cancel Orders entered into SQF are not
subject to the Order Price Protection, Market Order Spread
Protection, or Size Limitation in Options 3, Section 15(a)(1) and
(a)(2), and (b)(2), respectively. See NOM Options 3, Section
7(e)(1)(B).
\4\ The term ``Nasdaq Options Market Maker'' or ``Options Market
Maker'' or ``Market Maker'' mean an Options Participant registered
with the Exchange for the purpose of making markets in options
contracts traded on the Exchange and that is vested with the rights
and responsibilities specified in Options 2 of these Rules. See NOM
Options 1, Section 1(a)(27).
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The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings
and at the principal office of the Exchange.
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
The Exchange proposes to amend its Pricing Schedule at Options 7,
Section 3, Nasdaq Options Market--Ports and Other Services, to propose
a limit on the number of SQF Ports a Market Maker may subscribe to in a
month.
Currently, a NOM Options Market Maker is assessed an incremental
SQF Port Fee of $1,620 per port, per month for the first five ports (1-
5), $1,080 per port per month for the next 15 ports (6-20), and $540
per port per month for all port over 20 ports (21 and above).
Currently, the Exchange has no limits in place on the number of SQF
Ports a Market Maker may acquire in a month.
At this time, the Exchange proposes to limit a Market Maker to no
more than 250 SQF Ports per month.\5\ A Market Maker requires only one
SQF Port to submit quotes in its assigned options series into NOM.
While a Market Maker may elect to obtain multiple SQF Ports to organize
its business,\6\ only one SQF Port is necessary for a Market Maker to
fulfill its regulatory quoting obligations.\7\ The Exchange utilizes
ports as a secure method for Participants to submit quotes into the
Exchange's match engine and for the Exchange to send messages related
to those quotes to Participants. In order to properly regulate its
Participants and secure the trading environment, the Exchange has taken
measures to ensure access is monitored and maintained with various
controls. The Exchange believes that the proposed limit of 250 SQF
Ports per month will permit the Exchange to obtain greater efficiencies
by placing this overall limit on SQF Ports. The Exchange believes a
limit of 250 SQF Ports provides it with the appropriate bandwidth to
support future growth and new Market Makers entrants.\8\
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\5\ The Exchange issued Options Technical Alert #2025-12 to
announce the limitation.
\6\ For example, a NOM Options Market Maker may desire to
utilize multiple SQF Ports for accounting purposes, to measure
performance, for regulatory reasons or other determinations that are
specific to that Participant.
\7\ NOM Options Market Makers have various regulatory
requirements as provided for in Options 2, Section 4. Additionally,
NOM Options Market Makers have certain quoting requirements with
respect to their assigned options series as provided in Options 2,
Section 5. SQF Ports or QUO Ports may be utilized to quote on NOM
and only Market Makers may utilize these ports. The Exchange is not
limiting the number of QUO Ports at this time. ``Quote Using
Orders'' or ``QUO'' is an interface that allows Market Makers to
connect, send, and receive messages related to single-sided orders
to and from the Exchange. Order Features include the following: (1)
options symbol directory messages (e.g., underlying); (2) system
event messages (e.g., start of trading hours messages and start of
opening); (3) trading action messages (e.g., halts and resumes); (4)
execution messages; (5) order messages; and (6) risk protection
triggers and cancel notifications. Orders submitted by Market Makers
over this interface are treated as quotes. Market Makers may only
enter interest into QUO in their assigned options series. Orders
entered into QUO are not subject to the Order Price Protection or
Size Limitation in Options 3, Section 15(a)(1) and (b)(2),
respectively. See Options 3, Section 7(e)(1)(D).
\8\ The Exchange will periodically review the SQF Port limit. If
the Exchange elects to amend the limit it will file a rule proposal
with the Commission.
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The Exchange proposes to implement the 250 SQF Ports per month
limit on August 1, 2025.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposal to limit a Market Maker to no more than 250
SQF Ports per month is consistent with the Act because it will allow
the Exchange to obtain greater efficiencies in its overall connectivity
management. The Exchange utilizes ports as a secure method for
Participants to submit quotes into the Exchange's match engine and for
the Exchange to send messages related to those quotes to Participants.
Only NOM Participants who are approved as Market Makers may utilize an
SQF Port. Once approved, NOM Options Market Makers may subscribe to SQF
Ports to submit quotes into the Exchange. While a Market Maker may
elect to obtain multiple SQF Ports to organize its business,\11\ only
one SQF Port is necessary for a Market Maker to fulfill its regulatory
quoting obligations.\12\ Today, most Market Makers are in possession of
several SQF Ports, and amend the number of SQF Ports from time to time.
In fact, not all SQF Ports are actively used by Market Makers. In order
to properly regulate its Participants and secure the trading
environment, the Exchange has taken measures to ensure access is
monitored and maintained with various controls that will protect
investors and the public interest. Specifically, the Exchange ensures
that information security safeguards, upgrades, and general port
management are in effect
[[Page 36209]]
for all SQF Ports regardless of whether the SQF Port is actively in
use. As a result of these efforts, the Exchange incurs costs to manage
and maintain its SQF Ports and the secure environment surrounding its
platform.
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\11\ See supra note 6.
\12\ See supra note 7.
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The Exchange's proposal is intended to permit it to govern its
connectivity management in a reasonable manner while protecting
investors and the general public by obtaining greater efficiencies with
the limit on SQF Ports. The Exchange believes that its proposal is
consistent with the Act in that it will provide the Exchange the
ability to maintain the appropriate bandwidth to support future growth
and new Market Makers entrants thereby removing impediments to and
perfect the mechanism of a free and open market.
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 necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the Exchange does not believe
that its proposal will place any category of market participant at a
competitive disadvantage because all Market Makers will uniformly be
permitted to subscribe to no more than 250 SQF Ports per month. Today,
no Market Maker has exceeded 250 SQF Ports.
The Exchange does not believe that its proposal will place an undue
burden on intra-market competition because any exchange may elect to
adopt a similar limit.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The Exchange
requests that the Commission waive the 30-day operative delay contained
in Rule 19b-4(f)(6)(iii) so that the Exchange may implement the
proposal on August 1, 2025. The Exchange notes that NOM does not
prorate SQF Port Fees and, therefore, the Exchange requests that the
Commission waive the operative delay so that the 250 SQF Port Fee limit
may be in place at the beginning of the month so that the Exchange can
manage billing for its Participants.
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\15\ 17 CFR 240.19b-4(f0(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest.
The Exchange issued an Options Technical Alert to announce the
limitation. The Exchange states that the proposed rule change is
intended to permit it to govern its connectivity management in a
reasonable manner while protecting investors and the general public by
obtaining greater efficiencies with the limit on SQF Ports and will
provide the Exchange the ability to maintain the appropriate bandwidth
to support future growth and new Market Makers entrants. In addition,
the Exchange notes that it does not prorate SQF Port Fees and a waiver
of the operative delay will allow the 250 SQF Port Fee limit to be in
place at the beginning of the month so that the Exchange can manage
billing for its Participants. Accordingly, the Commission hereby waives
the 30-day operative delay and designates the proposed rule change
operative upon filing.\17\
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\17\ For purposes only of waiver the 30-day operative delay, the
Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
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-NASDAQ-2025-055 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-NASDAQ-2025-055. 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 filing 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-NASDAQ-2025-055 and should be submitted
on or before August 22, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14563 Filed 7-31-25; 8:45 am]
BILLING CODE 8011-01-P