Notice2025-12810
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Lower the Options Regulatory Fee (ORF)
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Published
July 10, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 130 (Thursday, July 10, 2025)</title>
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[Federal Register Volume 90, Number 130 (Thursday, July 10, 2025)]
[Notices]
[Pages 30710-30713]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-12810]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103392; File No. SR-NASDAQ-2025-050]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
to Lower the Options Regulatory Fee (ORF)
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, The Nasdaq Stock Market LLC (``Nasdaq'' 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 decrease The Nasdaq Options Market LLC
(``NOM'') Options Regulatory Fee or ``ORF.''
While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on August 1,
2025.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings</a>, 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.
[[Page 30711]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NOM proposes to decrease its ORF at Options 7, Section 5 from
$0.0014 to $0.0005 per contract side effective August 1, 2025.
Background on Current ORF
Today, NOM assesses its ORF for each Customer option transaction
that is either: (1) executed by a Participant \3\ on NOM; or (2)
cleared by a NOM Participant at OCC in the Customer range, even if the
transaction was executed by a non-member of NOM, regardless of the
exchange on which the transaction occurs.\4\ If the OCC clearing member
is a NOM Participant, ORF is assessed and collected on all ultimately
cleared Customer contracts (after adjustment for CMTA \5\); and (2) if
the OCC clearing member is not a NOM Participant, ORF is collected only
on the cleared Customer contracts executed at NOM, taking into account
any CMTA instructions which may result in collecting the ORF from a
non-member.\6\ The current NOM ORF is $0.0014 per contract side.
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\3\ The term ``Options Participant'' or ``Participant'' mean a
firm, or organization that is registered with the Exchange pursuant
to Options 2A of these Rules for purposes of participating in
options trading on NOM Options as a ``Nasdaq Options Order Entry
Firm'' or ``Nasdaq Options Market Maker.'' See Options 1, Section
1(a)(39).
\4\ The Exchange uses reports from OCC when assessing and
collecting the ORF. Market participants must record the appropriate
account origin code on all orders at the time of entry of the order.
The Exchange represents that it has surveillances in place to verify
that members mark orders with the correct account origin code.
\5\ CMTA or Clearing Participant Trade Assignment is a form of
``give-up'' whereby the position will be assigned to a specific
clearing firm at OCC.
\6\ By way of example, if Broker A, an NOM Participant, routes a
Customer order to CBOE and the transaction executes on CBOE and
clears in Broker A's OCC Clearing account, ORF will be collected by
NOM from Broker A's clearing account at OCC via direct debit. While
this transaction was executed on a market other than NOM, it was
cleared by an NOM Participant in the member's OCC clearing account
in the Customer range, therefore there is a regulatory nexus between
NOM and the transaction. If Broker A was not an NOM Participant,
then no ORF should be assessed and collected because there is no
nexus; the transaction did not execute on NOM nor was it cleared by
an NOM Participant.
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Today, in the case where a Participant both executes a transaction
and clears the transaction, the ORF will be assessed to and collected
from that Participant. Today, in the case where a Participant executes
a transaction and a different Participant clears the transaction, the
ORF will be assessed to and collected from the Participant who clears
the transaction and not the Participant who executes the transaction.
Today, in the case where a non-member executes a transaction at an away
market and a Participant clears the transaction, the ORF will be
assessed to and collected from the Participant who clears the
transaction. Today, in the case where a Participant executes a
transaction on NOM and a non-member clears the transaction, the ORF
will be assessed to the Participant that executed the transaction on
NOM and collected from the non-member who cleared the transaction.
Today, in the case where a Participant executes a transaction at an
away market and a non-member ultimately clears the transaction, the ORF
will not be assessed to the Participant who executed the transaction or
collected from the non-member who cleared the transaction because the
Exchange does not have access to the data to make absolutely certain
that ORF should apply. Further, the data does not allow the Exchange to
identify the Participant executing the trade at an away market.
ORF Revenue and Monitoring of ORF
Today, the Exchange monitors the amount of revenue collected from
the ORF (``ORF Regulatory Revenue'') to ensure that it, in combination
with other regulatory fees and fines, does not exceed Options
Regulatory Costs.\7\ In determining whether an expense is considered an
Options Regulatory Cost, the Exchange reviews all costs and makes
determinations if there is a nexus between the expense and a regulatory
function. The Exchange notes that fines collected by the Exchange in
connection with a disciplinary matter offset Options Regulatory Cost.
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\7\ The regulatory costs for options comprise a subset of the
Exchange's regulatory budget that is specifically related to options
regulatory expenses and encompasses the cost to regulate all
Participants' options activity (``Options Regulatory Cost'').
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ORF Regulatory Revenue, when combined with all of the Exchange's
other regulatory fees and fines, is designed to recover the Options
Regulatory Costs to the Exchange of the supervision and regulation of
member Customer options business including performing routine
surveillances, investigations, examinations, financial monitoring, and
policy, rulemaking, interpretive, and enforcement activities. Options
Regulatory Costs include direct regulatory expenses and certain
indirect expenses in support of the regulatory function. The direct
expenses include in-house and third-party service provider costs to
support the day-to-day regulatory work such as surveillance,
investigations and examinations. The indirect expenses are only those
expenses that are in support of the regulatory functions, such areas
include Office of the General Counsel, technology, finance, and
internal audit. Indirect expenses will not exceed 35% of the total
Options Regulatory Costs, in which case direct expenses could be 65% or
more of total Options Regulatory Costs.\8\
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\8\ Direct and indirect expenses are based on the Exchange's
2025 Regulatory Budget.
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Proposal for August 1, 2025
At this time, the Exchange proposes to decrease NOM's ORF from
$0.0014 to $0.0005 per contract side, effective August 1, 2025, as a
result of a decrease to its FINRA Regulatory Services Agreement
(``RSA'') fees. Recently, the Exchange amended its FINRA RSA resulting
in less cost to the Exchange thereby impacting Options Regulatory
Costs.
NOM notes that there can be no assurance that the Options
Regulatory Costs for the remainder of 2025 will not differ materially
from these expectations and prior practice, nor can the Exchange
predict with certainty whether options volume will remain at the
current level going forward. The Exchange notes however, that when
combined with regulatory fees and fines, the ORF Regulatory Revenue
that may be generated utilizing an ORF rate of $0.0014 per contract
side may result in ORF Regulatory Revenue which exceeds the Exchange's
estimated Options Regulatory Costs for 2025. The Exchange therefore
proposes to reduce its ORF to $0.0005 per contract side to ensure that
ORF Regulatory Revenue does not exceed the Exchange's estimated Options
Regulatory Costs in 2025. Particularly, the Exchange believes that
reducing the ORF when combined with all of the Exchange's other
regulatory fees and fines, would allow the Exchange to continue
covering its Options Regulatory Costs, while lessening the potential
for generating excess revenue that may otherwise occur using the rate
of $0.0014 per contract side.\9\ The Exchange notified Participants of
the proposed decrease to the ORF through an Options Trader Alert.\10\
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\9\ The Exchange notes that its regulatory responsibilities with
respect to Participant compliance with options sales practice rules
have largely been allocated to FINRA under a 17d-2 agreement. The
ORF is not designed to cover the cost of that options sales practice
regulation.
\10\ See Options Trader Alert #2025-27.
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The Exchange will continue to monitor the amount of ORF Regulatory
Revenue collected from the ORF to
[[Page 30712]]
ensure that ORF Regulatory Revenue, in combination with its other
regulatory fees and fines, does not exceed Options Regulatory Costs. If
the Exchange determines that to be the case, the Exchange will adjust
the ORF by submitting a fee change filing to the Commission and
notifying \11\ its Participants via an Options Trader Alert.\12\
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\11\ The Exchange will provide Participants with such notice at
least 30 calendar days prior to the effective date of the change.
\12\ The Exchange notes that in connection with this proposal,
it provided the Commission confidential details regarding the
Exchange's projected regulatory revenue, including projected revenue
from ORF, along with a projected regulatory expense.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\13\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\14\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its members, and other persons using its facilities.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \15\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed reduction of ORF is reasonable
because it would help ensure that ORF Regulatory Revenue does not
exceed a material portion of the Exchange's ORF Regulatory Costs. As
noted above, the ORF is designed to recover a material portion, but not
all, of the Exchange's ORF Regulatory Costs. Further, the Exchange
believes the proposed fee change is reasonable because Customer
transactions will be subject to a lower ORF than the rate that would
otherwise be in effect on August 1, 2025.
The Exchange had designed the ORF to generate ORF Regulatory
Revenue that would be less than the amount of the Exchange's ORF
Regulatory Costs to ensure that it, in combination with its other
regulatory fees and fines, does not exceed ORF Regulatory Costs, which
is consistent with the view of the Commission that regulatory fees be
used for regulatory purposes and not to support the Exchange's business
operations. As discussed above, however, after review of its ORF
Regulatory Costs and ORF Regulatory Revenue, which includes revenues
from ORF and other regulatory fees and fines, the Exchange determined
that absent a reduction in ORF it may collect ORF Regulatory Revenue
which would exceed its ORF Regulatory Costs. Indeed, the Exchange notes
that when taking into account the lower cost resulting from the amended
FINRA RSA, it estimates the ORF may generate ORF Regulatory Revenue
that would cover more than the approximated Exchange's projected ORF
Regulatory Costs. As such, the Exchange believes it's reasonable and
appropriate to reduce the ORF amount from $0.0014 to $0.0005 per
contract side.
The Exchange also believes the proposed fee change is equitable and
not unfairly discriminatory in that it is charged to all Participants
on all their transactions that clear in the Customer range at OCC.\16\
The Exchange believes the ORF ensures fairness by assessing higher fees
to those Participants that require more Exchange regulatory services
based on the amount of Customer options business they conduct.
Regulating Customer trading activity is much more labor intensive and
requires greater expenditure of human and technical resources than
regulating non-Customer trading activity, which tends to be more
automated and less labor-intensive. For example, there are costs
associated with main office and branch office examinations (e.g., staff
expenses), as well as investigations into Customer complaints and the
terminations of registered persons. As a result, the costs associated
with administering the Customer component of the Exchange's overall
regulatory program are materially higher than the costs associated with
administering the non-Customer component of its regulatory program.
Moreover, the Exchange notes that it has broad regulatory
responsibilities with respect to activities of its Participants, a
small portion of which takes place on away exchanges. Indeed, the
Exchange cannot effectively review for such conduct without looking at
and evaluating activity regardless of where it transpires. In addition
to its own surveillance programs, the Exchange also works with other
SROs and exchanges on intermarket surveillance related issues. Through
its participation in the Intermarket Surveillance Group (``ISG'') \17\
the Exchange shares information and coordinates inquiries and
investigations with other exchanges designed to address potential
intermarket manipulation and trading abuses. Accordingly, there is a
strong nexus between the ORF and the Exchange's regulatory activities
with respect to Customer trading activity of its Participants.
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\16\ If the OCC clearing member is a NOM Participant, ORF will
be assessed and collected on all cleared Customer contracts (after
adjustment for CMTA); and (2) if the OCC clearing member is not a
NOM Participant, ORF will be collected only on the cleared Customer
contracts executed at NOM, taking into account any CMTA instructions
which may result in collecting the ORF from a non-member.
\17\ ISG is an industry organization formed in 1983 to
coordinate intermarket surveillance among the self-regulatory
organizations by cooperatively sharing regulatory information
pursuant to a written agreement between the parties. The goal of the
ISG's information sharing is to coordinate regulatory efforts to
address potential intermarket trading abuses and manipulations.
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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. This proposal does not create
an unnecessary or inappropriate intra-market burden on competition
because ORF applies to all customer activity, thereby raising ORF
Regulatory Revenue to offset Options Regulatory Cost. It also
supplements the regulatory revenue derived from non-customer activity.
The Exchange notes, however, the proposed change is not designed to
address any competitive issues. Indeed, this proposal does not create
an unnecessary or inappropriate inter-market burden on competition
because it is a regulatory fee that supports regulation in furtherance
of the purposes of the Act. The Exchange is obligated to ensure that
the amount of ORF Regulatory Revenue collected from the ORF, in
combinations with its other regulatory fees and fines, does not exceed
Options Regulatory Cost.
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) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\
thereunder. At any time within 60 days of the filing of the proposed
rule
[[Page 30713]]
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 will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f).
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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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2052554c450d434f4d4d454e5453605345430e474f56"><span class="__cf_email__" data-cfemail="7c0e091019511f1311111912080f3c0f191f521b130a">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-050 on the subject line.
Paper Comments
<bullet> 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-2025-050. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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-NASDAQ-2025-050 and should
be submitted on or before July 31, 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).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-12810 Filed 7-9-25; 8:45 am]
BILLING CODE 8011-01-P
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