[Federal Register Volume 90, Number 236 (Thursday, December 11, 2025)]
[Notices]
[Pages 57499-57502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-22471]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104347; File No. SR-Phlx-2025-64]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx
Options 7, Section 4
December 8, 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 25, 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 the Broker-Dealer Transaction Cap
and the Floor Transaction (Open Outcry) Floor Broker Incentive Program
in 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).
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on December 1,
2025.
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
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), related to the Broker-Dealer \3\ Transaction Cap and the Floor
Transaction \4\ (Open Outcry) Floor Broker \5\ Incentive Program.
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\3\ 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).
\4\ The term ``floor transaction'' is a transaction that is
effected in open outcry on the Exchange's Trading Floor. See Options
7, Section 1(c).
\5\ The term ``Floor Broker'' means an individual who is
registered with the Exchange for the purpose, while on the Options
Floor, of accepting and handling options orders. See Phlx Options 7,
Section 1(c).
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Broker-Dealer Transaction Cap
Today, the Exchange offers a Broker-Dealer Transaction Cap whereby
each Broker-Dealer Floor Options Transaction Charge is capped at
$15,000 per transaction (including FLEX and Cabinet Options Transaction
Charges).
At this time, the Exchange proposes to specify in the rule text
that for purposes of this cap, the term ``per transaction'' includes
simple orders or with respect to complex orders, all legs of the same
complex order that are Floor Options Transaction Charges. This is the
manner in which the term ``per transaction'' is applied today by the
Exchange. The Exchange believes that this additional rule text will
make the application of the cap transparent to members and member
organizations.
Floor Transaction (Open Outcry) Floor Broker Incentive Program
Currently, Floor Brokers are paid rebates for transactions executed
on the trading floor in open outcry on qualifying volume at each
threshold level based on the below tiers. The following transactions
are not considered qualifying volume: (1) dividend, merger, short stock
interest, reversal and conversion, jelly roll, and box spread strategy
executions as defined in this Options 7, Section 4; (2) Firm Floor
Options Transactions for members executing facilitation orders pursuant
to Options 8, Section 30 when such members are trading in their own
proprietary account (including Cabinet Options Transaction Charges);
and (3)
[[Page 57500]]
Customer-to-Customer transactions. Currently, Floor Qualified
Contingent Cross Orders (``QCC'') Orders, as defined in Options 8,
Section 30(e), and electronic QCC Orders, as defined in Options 3,
Section 12, are considered qualifying volume but are not paid rebates
based on the schedule, rather Floor QCC Orders and electronic QCC
Orders are paid the QCC Rebates noted in Options 7, Section 4. Rebates
are paid on qualifying volume at each threshold level based on the
schedule below.
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Per contract rebate
Qualifying contracts Per contract rebate (non-customer on both
(customer on one side) sides)
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Tier 1............................... 0-500,000.............. $0.04 $0.10
Tier 2............................... 500,001-5,000,000...... 0.07 0.18
Tier 3............................... 5,000,001-10,000,000... 0.09 0.18
Tier 4............................... Greater than 10,000,000 0.10 0.22
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At this time, the Exchange proposes to specify that Broker-Dealer
Floor Options Transactions that are capped pursuant to the Broker-
Dealer Transaction Cap will be considered qualifying volume but would
not be paid rebates pursuant to the Floor Transaction (Open Outcry)
Floor Broker Incentive Program. While the Exchange would not pay
rebates for the capped Broker-Dealer Floor Options Transactions, these
transactions would continue to be capped and count toward qualifying
volume, therefore the Exchange believes members and member
organizations will continue to be incentivized to transact Broker-
Dealer Floor Options Transactions on Phlx.
Further, the Exchange recently amended the Floor Transaction (Open
Outcry) Floor Broker Incentive Program at Options 7, Section 4.\6\ At
the time of those changes, the Exchange did not amend the examples that
follow the rebate table to reflect changes to the examples as a result
of the amendments to add electronic QCC as qualifying volume and to
amend the per contract rebates in the two proposals.\7\ This proposal
seeks to revise examples 1 through 4 to reflect the current Floor
Transaction (Open Outcry) Floor Broker Incentive Program qualifications
and rebates and replace the outdated examples. Examples 1 through 4
would be revised as follows:
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\6\ See Securities Exchange Act Release Nos. 104034 (September
24, 2025), 90 FR 46674 (September 29, 2025) (SR-Phlx-2025-49); and
104128 (September 29, 2025), 90 FR 47441 (October 1, 2025) (SR-Phlx-
2025-55).
\7\ SR-Phlx-2025-49 amended the Tier 2 rebate from $0.12 to
$0.16 per contract for Non-Customer on both sides. SR-Phlx-2025-50
increased the rebates in all tiers by $0.02 per contract. The
Exchange previously offered a per contract rebate if a Customer is
on one side of $0.04 per contract for Tier 1 (0-500,000 qualifying
contracts), a $0.07 per contract rebate for Tier 2 (500,001-
5,000,000 qualifying contracts), a $0.09 per contract rebate for
Tier 3 (5,000,001-10,000,000 qualifying contracts) and a $0.10 per
contract rebate for Tier 4 (Greater than 10,000,000 qualifying
contracts). As amended, the Exchange now offers a per contract
rebate if a Non-Customer is on both sides of $0.10 per contract for
Tier 1 (0-500,000 qualifying contracts), a $0.18 per contract rebate
for Tier 2 (500,001-5,000,000 qualifying contracts), a $0.18 per
contract rebate for Tier 3 (5,000,001-10,000,000 qualifying
contracts) and a $0.22 per contract rebate for Tier 4 (Greater than
10,000,000 qualifying contracts).
Example 1: A Floor Broker that executes a total of 2,000,000
qualified contracts in a month comprised of (1) Floor QCC Order
volume of 600,000 contracts; (2) Floor Transaction Open Outcry
Customer volume of 400,000 contracts; and (3) Floor Transaction Open
Outcry volume with Non-Customers on both sides of 1,000,000
contracts, will be paid $0.07 per contract for the 400,000 or
$28,000 for the Floor Transaction Open Outcry Customer volume and
$0.18 per contract for the 1,000,000 or $180,000 for the Floor
Transaction Open Outcry volume with Non-Customers on both sides,
equaling a total Floor Broker Incentive Program Rebate of $208,000
for that month. The 600,000 contracts of executed Floor QCC Orders
would be paid the applicable QCC Rebate as described in Options 7,
Section 4 above.
Example 2: A Floor Broker that executes floor transactions with
a mix of Customer on one side and Non-Customer on both sides in a
given month totaling 2,000,000 contracts (with no Floor QCC volume)
will be paid a rebate tied to the requisite rebate schedule based on
timestamp of the execution. Utilizing Example 1, assume: (1) 100,000
contracts had a Customer on one side, those transactions would be
paid at $0.04 per contract ($4,000); (2) 400,000 contracts had a
Non-Customer on both sides, those transactions would be paid at
$0.10 per contract ($40,000): (3) 400,000 contracts had a Customer
on one-side, those transactions would be paid at $0.07 per contract
($28,000): and (4) 1,100,000 contracts had a Non-Customer on both
sides, those transaction would be paid at $0.18 per contract
($198,000), for a total rebate of $270,000 for that month.
Example 3: A Floor Broker that executes floor transactions with
a Customer on one side in a given month totaling 10,500,000
contracts (with no Floor QCC volume) will be paid $0.04 per contract
for the first 500,000 contracts ($20,000), $0.07 per contract for
the next 4,500,000 floor transaction contracts ($315,000), $0.09 per
contract for the next 5,000,000 floor transaction contracts
($450,000), and $0.10 per contract for the final 500,000 floor
transaction contracts ($50,000), for a total rebate of $835,000 for
that month.
Example 4: A Floor Broker that executes floor transactions with
Non-Customer on both sides in a given month totaling 10,500,000
contracts (with no Floor QCC volume) will be paid $0.10 per contract
for the first 500,000 contracts ($50,000), $0.18 per contract for
the next 4,500,000 floor transaction contracts ($810,000), $0.18 per
contract for the next 5,000,000 floor transaction contracts
($900,000), and $0.22 per contract for the final 500,000 floor
transaction contracts ($110,000) for a total rebate of $1,870,000
for that month.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 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.'' \10\
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\10\ 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
\11\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of
[[Page 57501]]
market data fees against a challenge claiming that Congress mandated a
cost-based approach.\12\ 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.'' \13\
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\11\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\12\ See NetCoalition, at 534-535.
\13\ 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'. . . .'' \14\ 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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\14\ 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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Broker-Dealer Transaction Cap
The Exchange's proposal to state that the term ``per transaction''
as it relates to the Broker-Dealer Transaction Cap would include simple
orders or with respect to complex orders, all legs of the same complex
order that are Floor Options Transaction Charges is reasonable because
the additional rule text brings transparency to the manner in which the
cap is currently applied by the Exchange. Specifically, all simple
orders are included and the legs of the same complex order are
included.
The Exchange's proposal to state that the term ``per transaction''
as it relates to the Broker-Dealer Transaction Cap would include simple
orders or with respect to complex orders, all legs of the same complex
order that are Floor Options Transaction Charges is equitable and not
unfairly discriminatory because the Exchange would apply the cap
uniformly to all eligible Phlx members and member organizations.
Floor Transaction (Open Outcry) Floor Broker Incentive Program
The Exchange's proposal to specify that Broker-Dealer Floor Options
Transactions that are capped pursuant to the Broker-Dealer Transaction
Cap will be considered qualifying volume but would not be paid rebates
pursuant to the Floor Transaction (Open Outcry) Floor Broker Incentive
Program is reasonable. While the Exchange would not pay rebates for the
capped Broker-Dealer Floor Options Transactions, these transactions
would continue to be capped and count toward qualifying volume,
therefore the Exchange believes members and member organizations will
continue to be incentivized to transact Broker-Dealer Floor Options
Transactions on Phlx.
The Exchange's proposal to specify that Broker-Dealer Floor Options
Transactions that are capped pursuant to the Broker-Dealer Transaction
Cap will be considered qualifying volume but would not be paid rebates
pursuant to the Floor Transaction (Open Outcry) Floor Broker Incentive
Program is equitable and not unfairly discriminatory because the
Exchange would uniformly count the capped Broker-Dealer Floor Options
Transactions as qualifying volume and uniformly would not pay rebates
pursuant to the Floor Transaction (Open Outcry) Floor Broker Incentive
Program to any Phlx member or member organization.
The Exchange's proposal to replace examples 1 through 4 in the
Floor Transaction (Open Outcry) Floor Broker Incentive Program with
updated examples that reflect the current qualifying volume and rates
is reasonable because the examples will provide members and member
organizations with clear examples as to the manner in which the
Exchange currently calculate the rebates.
The Exchange's proposal to replace examples 1 through 4 in the
Floor Transaction (Open Outcry) Floor Broker Incentive Program with
updated examples that reflect the current qualifying volume and rates
is equitable and not unfairly discriminatory because the Exchange
uniformly applies the rebate methodology to calculate the rebates and,
therefore, the revised examples could therefore apply to all members
and member organizations.
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.
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
The Exchange's proposal to state that the term ``per transaction''
as it relates to the Broker-Dealer Transaction Cap would include simple
orders or with respect to complex orders, all legs of the same complex
order that are Floor Options Transaction Charges does not impose an
undue burden on competition because the Exchange would apply the cap
uniformly to all eligible Phlx members and member organizations.
The Exchange's proposal to specify that Broker-Dealer Floor Options
Transactions that are capped pursuant to the Broker-Dealer Transaction
Cap will be considered qualifying volume but would not be paid rebates
pursuant to the Floor Transaction (Open Outcry) Floor Broker Incentive
Program does not impose an undue burden on competition because the
Exchange would uniformly count the capped Broker-Dealer Floor Options
Transactions as qualifying volume and uniformly would not pay rebates
pursuant to the Floor Transaction (Open Outcry) Floor Broker Incentive
Program to any Phlx member or member organization.
The Exchange's proposal to replace examples 1 through 4 in the
Floor Transaction (Open Outcry) Floor Broker Incentive Program with
updated examples that reflect the current qualifying volume and rates
does not impose an undue burden on competition because the Exchange
uniformly applies the rebate methodology to calculate the rebates and,
therefore, the revised examples could therefore apply to all members
and member organizations.
[[Page 57502]]
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.\15\
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\15\ 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-2025-64 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-2025-64. 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-2025-64 and should be submitted on
or before January 2, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-22471 Filed 12-10-25; 8:45 am]
BILLING CODE 8011-01-P