Notice2025-14562
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to SQF Ports
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Published
August 1, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 146 (Friday, August 1, 2025)</title>
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[Federal Register Volume 90, Number 146 (Friday, August 1, 2025)]
[Notices]
[Pages 36202-36204]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14562]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103581; File No. SR-Phlx-2025-31]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Related to SQF
Ports
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, 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 the Exchange's Pricing Schedule at
Options 7, Section 9, B, Port Fees, 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 Lead Market Makers, Streaming Quote Traders (``SQTs'') and
Remote Streaming Quote Traders (``RSQTs'') to connect, send, and
receive messages related to quotes, Immediate-or-Cancel Orders, and
auction responses into and from the Exchange. Features include the
following: (1) options symbol directory messages (e.g., underlying
and complex 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; (8) opening imbalance
messages; (9) auction notifications; and (10) auction responses. The
SQF Purge Interface only receives and notifies of purge requests
from the Lead Market Maker, SQT or RSQT. Lead Market Makers, SQTs
and RSQTs 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, the Market Order Spread Protection,
or Size Limitation in Options 3, Section 15(a)(1), (a)(2) and
(b)(2), respectively. See Phlx Options 3, Section 7(a)(i)(B).
\4\ A ``Market Maker'' means a Streaming Quote Trader or a
Remote Streaming Quote Trader who enters quotations for his own
account electronically into the System. See Phlx Options 1, Section
1(b)(28).
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The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings</a>
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 9, B, Port Fees, to propose a limit on the number of SQF Ports
a Market Maker may subscribe to in a month.
Currently, a Phlx Market Maker is assessed an SQF Port Fee of
$1,375 per port, per month up to a maximum of $46,200 per month for
active ports.\5\ Currently, the Exchange has no limits in place on the
number of SQF Ports a Market Maker may acquire in a month.
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\5\ An active port receives inbound quotes at any time within
that month.
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At this time, the Exchange proposes to limit a Market Maker to no
more than 250 SQF Ports per month, regardless of whether the SQF Ports
are active ports.\6\ Further, the Exchange proposes a separate limit of
250 SQF Ports per month applies to any SQF Ports that are being
acquired in anticipation of the November 2025 technology migration
(``Fusion Ports'').\7\ A Market Maker requires only one SQF Port to
submit quotes in its assigned options series into Phlx. While a Market
Maker may elect to obtain multiple SQF Ports to organize its
business,\8\ only one SQF Port is necessary for a Market Maker to
fulfill its regulatory quoting obligations.\9\ The
[[Page 36203]]
Exchange utilizes ports as a secure method for members and member
organizations to submit quotes into the Exchange's match engine and for
the Exchange to send messages related to those quotes to members and
member organizations. In order to properly regulate its members and
member organizations 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 for current SQF Ports, regardless of whether they
are active and a separate limit of 250 SQF Ports for Fusion Ports, will
permit the Exchange to obtain greater efficiencies by placing this
overall limit on SQF Ports. The Exchange believes these limits will
provide it with the appropriate bandwidth to support future growth and
new Market Makers entrants.\10\
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\6\ The Exchange issued Options Technical Alert #2025-12 to
announce the limitation.
\7\ See <a href="https://www.nasdaqtrader.com/MicroNews.aspx?id=OTU2025-6">https://www.nasdaqtrader.com/MicroNews.aspx?id=OTU2025-6</a>. Phlx members and member organizations will need to acquire new
ports to connect to the new technology platform to accommodate the
symbol migration plan.
\8\ For example, a Phlx 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 member or member organization.
\9\ Phlx Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, Phlx Market
Makers have certain quoting requirements with respect to their
assigned options series as provided in Options 2, Section 5. SQF
Ports are the only ports utilized for quoting on Phlx and only
Market Makers may utilize these ports.
\10\ 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 15, 2025.
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 Section
6(b)(5) of the Act,\12\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 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 members
and member organizations to submit quotes into the Exchange's match
engine and for the Exchange to send messages related to those quotes to
members and member organizations. Only Phlx members and member
organizations who are approved as Market Makers may utilize an SQF
Port. Once approved, Phlx 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,\13\ only one SQF
Port is necessary for a Market Maker to fulfill its regulatory quoting
obligations.\14\ Today, most Market Makers are in possession of several
SQF Ports, and amend the number of SQF Ports from time to time. Of
note, Phlx allows members and member organizations to obtain SQF Ports
at no additional cost once they exceed a monthly fee cap,\15\ therefore
Market Makers on Phlx may be inclined to increase their total number of
SQF Ports as a result of having no incremental cost from the Exchange
because of the monthly fee cap. In fact, not all SQF Ports are actively
used by Market Makers. In order to properly regulate its members and
member organizations 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 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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\13\ See supra note 8.
\14\ See supra note 9.
\15\ Phlx assesses SQF Port Fees up to a maximum of $46,200 per
month.
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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. While some Market Makers currently have more
than 250 SQF Ports, the Exchange notes that the proposed limit would be
applied uniformly ensuring that no Market Maker has more than 250 SQF
Ports per month as a result of the proposed limit.
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 \16\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 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) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ 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 15, 2025. The Exchange notes that MRX 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 prior to the beginning of September so that the
Exchange can manage billing for its Members.
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\18\ 17 CFR 240.19b-4(f0(6).
\19\ 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
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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.\20\
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\20\ 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
<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#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="087a7d646d256b6765656d667c7b487b6d6b266f677e">[email protected]</span></a>. Please include
file number SR-Phlx-2025-31 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-Phlx-2025-31. 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 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-2025-31 and should be submitted on
or before August 22, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14562 Filed 7-31-25; 8:45 am]
BILLING CODE 8011-01-P
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