[Federal Register Volume 90, Number 232 (Friday, December 5, 2025)]
[Notices]
[Pages 56244-56246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-21988]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104292; File No. SR-Phlx-2025-61]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Legging
Orders
December 2, 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 November 19, 2025, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``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 its Legging Order functionality at
Options 3, Section 7(k).
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/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 previously filed a rule proposal to align all Complex
Order functionality on Phlx to Nasdaq ISE, LLC (``ISE'') and Nasdaq
MRX, LLC (``MRX'') Complex Order functionality.\3\ Specifically, the
Exchange adopted Legging Order functionality identical to ISE and MRX
Options 3, Section 7(k).\4\
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\3\ See Securities Exchange Act Release No. 102862 (April 15,
2025), 90 FR 16731 (April 21, 2025) (SR-Phlx-2025-17) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Amend
Phlx's Complex Order Functionality) (``Complex Order Filing''). SR-
Phlx-2025-17 proposed the same operative date as this proposal as
they are both part of the same technology migration.
\4\ See id.
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On Phlx, if a Legging Order is created from a Complex Order with a
lower priority (i.e., Non-Customer Order) at the same price and,
thereafter, a Complex Order with a higher priority arrives (i.e.,
Customer), the prior lower priority Legging Order would be removed and
replaced with the Legging Order for the Complex Order with a higher
priority. This is consistent with Phlx's allocation methodology. On
Phlx bids and offers at the same price on the Complex Order Book will
be executed pro-rata based on size with Customer priority.\5\ Phlx's
allocation methodology
[[Page 56245]]
differs from ISE and MRX where bids and offers at the same price on the
Complex Order Book are executed in time priority.\6\
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\5\ Phlx Options 3, Section 14(d)(2) permits execution in time
priority or pro-rata based on size. Phlx will utilize pro-rata based
on size allocation with Customer priority when it implements the
Complex Order Filing.
\6\ ISE and MRX Options 3, Section 14(d)(2) permits execution in
time priority or pro-rata based on size.
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Recently adopted rule text at Options 3, Section 7(k)(1) \7\
provides that a Legging Order may be automatically generated for one or
both leg(s) of a Complex Options Order resting on top of the Complex
Order Book at a price: (i) that matches or improves upon the best
displayed bid or offer on the single-leg limit order book; and (ii) at
which the net price can be achieved when the other leg is executed
against the best displayed bid or offer on the single-leg limit order
book, excluding other Legging Orders. Further, recently adopted Options
3, Section 7(k)(4) \8\ states, ``A Legging Order is automatically
removed from the single-leg limit order book if: . . . (vii) a Legging
Order is generated by a different Complex Order in the same leg at a
better price or the same price for a participant with a higher price
priority.'' However, recently adopted Options 3, Section 7(k)(2) \9\
describes when Legging Orders will not be generated and states, among
other things that, ``A Legging Order will not be generated: . . . (iv)
if there is already a Legging Order in that options series on the same
side of the market at the same price.'' The language in Options 3,
Section 7(k)(2)(iv) does not currently align with the rule text in
Options 3, Section 7(k)(1) or Options 3, Section 7(k)(4)(vii) given
that Phlx's allocation methodology includes Customer priority.
Accordingly, at this time the Exchange proposes to amend Options 3,
Section 7(k)(2)(iv) to more accurately state a Legging Order will not
be generated if there is already a Legging Order in that options series
for a Complex Options Order with higher priority on the same side of
the market at the same price. The proposed change to Options 3, Section
7(k)(2)(iv) will reflect Phlx's Customer priority allocation
methodology and make Options 3, Section 7(k)(2)(iv) consistent with
Options 3, Section 7(k)(4)(vii).
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\7\ See supra note 3.
\8\ See supra note 3.
\9\ See supra note 3.
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Implementation
The Exchange will implement this rule change at the same time as
the Complex Order Filing.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest for the reasons discussed below.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposal to amend Options 3, Section 7(k)(2)(iv) to
provide that a Legging Order will not be generated if there is already
a Legging Order in that options series for a Complex Options Order with
higher priority on the same side of the market at the same price is
consistent with the Act. The proposed amendment to Options 3, Section
7(k)(2)(iv) accounts for Phlx's allocation methodology and removes any
ambiguity in the rule as to the System's process of generating Legging
Orders. Of note, ISE and MRX bids and offers at the same price on the
Complex Order Book are executed in time priority.\12\
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\12\ ISE and MRX Options 3, Section 14(d)(2) permits execution
in time priority or pro-rata based on size.
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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 necessary or appropriate in
furtherance of the purposes of the Act.
Phlx's proposal to amend Options 3, Section 7(k)(2)(iv) does not
impose an undue burden on intra-market competition because the amended
rule would be applied in a uniform manner to the generation of all
Legging Orders by the System.
Phlx's proposal to amend Options 3, Section 7(k)(2)(iv) does not
impose an undue burden on inter-market competition as other options
exchanges may adopt Legging Orders and similar rules for the generation
of such orders.
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 prior to 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, if consistent
with the protection of investors and the public interest, the proposed
rule change has become effective pursuant to Section 19(b)(3)(A)(iii)
of the Act \13\ and Rule 19b-4(f)(6) 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, along
with a brief description and text of 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 proposal
may become operative at the same time as SR-Phlx-2025-17.\17\ The
Exchange states that waiver of the operative delay will allow the
Exchange to amend its rules to make the Legging Order provision in
Options 3, Section 7(k)(2)(iv) consistent with the Exchange's
allocation methodology at the same time that the Exchange implements
the new Legging Order functionality in SR-Phlx-2025-17. The Commission
believes that waiver of the operative delay is consistent with the
protection of investors and the public interest. Waiver of the
operative delay will help to ensure that the Legging Order provision in
Options 3, Section 7(k)(2)(iv) accurately reflects that the Exchange
will not generate a Legging Order when there is already a Legging Order
in the series at the same price on the same side of the market for a
Complex Options Order with higher priority. The Exchange states that
not generating a Legging Order in this circumstance is consistent with
Exchange's allocation methodology, which includes Customer priority. In
addition, the proposal does not raise new or novel regulatory issues.
Accordingly, the Commission hereby waives the 30-day operative delay
and
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designates the proposal operative upon filing.\18\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See supra note 3 and accompanying text.
\18\ For purposes only of waiving 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 under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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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-2025-61 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-2025-61. 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-Phlx-2025-61 and should be submitted on
or before December 26, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12) and (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-21988 Filed 12-4-25; 8:45 am]
BILLING CODE 8011-01-P