Notice2025-18789
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Pricing for New Functionality
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 29, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 186 (Monday, September 29, 2025)</title>
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[Federal Register Volume 90, Number 186 (Monday, September 29, 2025)]
[Notices]
[Pages 46682-46690]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18789]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104031; File No. SR-Phlx-2025-48]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Establish
Pricing for New Functionality
September 24, 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 September 17, 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 establish fees for new functionality in
connection with a technology migration.\3\
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\3\ SR-Phlx-2025-44 was filed on September 5, 2025. On September
17, 2025, SR-Phlx-2025-44 was withdrawn and this rule change was
filed.
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While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on November 1, 2025.
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 establish pricing related to new
functionality that was adopted by the Exchange in connection with a
technology migration. Specifically, the Exchange proposes to establish
pricing related to its new: (1) electronic FLEX Options functionality;
\4\ (2) Facilitation Mechanism; \5\ (3) Solicited Order Mechanism;
\6\and (4) Block Order Mechanism.\7\ Additionally, the Exchange
proposes to define several terms in Options 7, Section 1, other
conforming changes in Options 7, and a technical amendment. Each change
is described below.
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\4\ See Securities Exchange Act Release No. 103759 (August 21,
2025), 90 FR 41636 (August 26, 2025) (SR-Phlx-2025-38) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Electronic FLEX Options Rules). This rule change is immediately
effective but not yet implemented.
\5\ The Facilitation Mechanism would permit a Phlx member to
execute a transaction wherein the member seeks to facilitate a
block-size order it represents as agent (``agency order''), and/or a
transaction wherein the member solicited interest to execute against
a block-size order it represents as agent (``Facilitation Order'')
as described in Options 3, Section 11(b) and (c). This mechanism
allows members the flexibility to represent a transaction where the
member is facilitating only a portion of the order and has solicited
interest from other parties for the other portion of the order. See
Securities Exchange Act Release No. 103667 (August 8, 2025), 90 FR
39042 (August 13, 2025) (SR-Phlx-2025-35) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend PIXL and
Adopt New Auctions) (``Auction Filing''). This rule change is
immediately effective but not yet implemented.
\6\ The SOM is a process by which a member can attempt to
execute orders of 500 or more contracts it represents as agent (the
``Agency Order'') against contra orders that it solicited pursuant
to Options, Section 11(d) and (e). Each order entered into the SOM
shall be designated as all-or-none. See Auction Filing.
\7\ The Block Order Mechanism provides a means for handling
``block-sized orders'' (i.e., orders for fifty (50) contracts or
more) pursuant to Options 3, Section 11(a). See Auction Filing.
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Electronic FLEX Options
FLEX Options are customized options contracts that allow investors
to tailor contract terms for exchange-listed equity and index options.
Today, the Exchange offers FLEX Options on its trading floor as
described at Options 8, Section 34 which transactions are subject to
the pricing described in Options 7, Section 6 B.
At this time, the Exchange proposes to establish pricing for
electronic FLEX Options. By way of background, FLEX Options will be
designed to meet the needs of market participants for greater
flexibility in selecting the terms of options within the parameters of
the Exchange's rules.\8\ FLEX Options will not be preestablished for
trading and will not be listed individually for trading on the
Exchange. Rather, market participants will select FLEX Option terms and
will be limited by the parameters detailed in Options 3A, Section 3(c)
in their selection of those terms. As a result, FLEX Options would
allow investors to specify more specific, individualized investment
objectives than may be available to them in the standardized options
market.
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\8\ See supra note 3.
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FLEX Options may be submitted through an electronic FLEX Auction,
FLEX Price Improvement XL (``FLEX PIXL''), or a FLEX Solicited Order
Mechanism (``FLEX SOM'').\9\ An electronic FLEX Auction is a one-sided
mechanism through which an Exchange member organization may
electronically submit for execution an order (which may be a simple or
complex order) pursuant to the eligibility requirements in Options 3A,
Section 11(b)(1). The FLEX PIXL is a paired auction mechanism pursuant
to Options 3A, Section 12 through which an Exchange member may
electronically submit for execution an order (which may be a simple or
complex order) it represents as agent (``Agency Order'') against
principal interest or a solicited order(s) (except, if the Agency Order
is a simple order, for an order for the account of any FLEX Market
Maker with an appointment in the applicable FLEX Option class on the
Exchange) (an ``Initiating Order''), provided it submits the Agency
Order for electronic execution into a FLEX PIXL Auction pursuant to
Options 3A, Section 12. The FLEX SOM is a paired auction mechanism
pursuant to Options 3A, Section 13 through which an Exchange member
(the ``Initiating Member'') may electronically submit for execution an
order (which may be a simple or complex order) it represents as agent
(``Agency Order'') against a solicited order (``Solicited Order'') if
it submits the Agency Order for electronic execution into a FLEX SOM
Auction pursuant to Options 3A, Section 13.
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\9\ See id.
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The Exchange proposes to establish the following per contract
pricing for
[[Page 46683]]
simple and complex order transactions in Options 7, Section 6.B:
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Fee for
Fee for FLEX Fee for FLEX responses to
Market participant auctions PIXL and SOM FLEX PIXL and
SOM orders
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Market Maker/Lead Market Maker................................ $0.10 $0.07 $0.50
Broker-Dealer................................................. 0.10 0.07 0.50
Firm.......................................................... 0.10 0.07 0.50
Professional.................................................. 0.10 0.07 0.50
Customer...................................................... 0.00 0.00 0.50
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The Exchange also proposes at new note 1 of Options 7, Section 6.B
that for all executions in FLEX NDX and FLEX XND orders, the applicable
index options fees in Options 7, Section 5.A will apply.\10\ As such,
for FLEX NDX orders, the Exchange will assess Customers \11\ a $0.25
per contract fee and Non-Customers \12\ a $0.75 per contract fee for
both electronic simple and complex orders pursuant to Options 7,
Section 5.A. Additionally, a surcharge of $0.25 per contract would be
assessed to Non-Customers for FLEX NDX orders pursuant to note 1 of
Options 7, Section 5, A. A surcharge of $1.50 per contract will be
assessed to electronic simple Non-Customer orders that remove liquidity
pursuant to note 3 of Options 7, Section 5.A. A surcharge of $0.50 per
contract will be assessed to all Non-Customer complex executions in NDX
pursuant to note 5 of Options 7, Section 5.A. A surcharge of $0.25 per
contract will be assessed to all Customer complex executions in NDX
pursuant to note 6 of Options 7, Section 5.A. Finally, a surcharge of
$0.25 per contract will be assessed to all market participants for
simple and complex executions in NDX with a premium price of $25.00 or
greater pursuant to note 7 of Options 7, Section 5.A. For FLEX XND
orders, the Exchange will not assess Customers a fee and will assess
Non-Customers a $0.10 per contract fee or both electronic simple and
complex orders. A surcharge for XND of $0.10 per contract will be
assessed to Non-Customers pursuant to note 2 of Options 7, Section
5.A.\13\
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\10\ ``NDX'' means A.M. or P.M. settled options on the full
value of the Nasdaq 100[supreg] Index. ``XND'' are options on the
Nasdaq 100 Micro Index, representing 1/100th of the value of Nasdaq
100 Index.
\11\ The term ``Customer'' applies to any transaction that is
identified by a member or member organization for clearing in the
Customer range at The Options Clearing Corporation (``OCC'') which
is not for the account of a broker or dealer or for the account of a
``Professional'' (as that term is defined in Options 1, Section
1(b)(45)). See Options 7, Section 1(c).
\12\ The term ``Non-Customer'' applies to transactions for the
accounts of Lead Market Makers, Market Makers, Firms, Professionals,
Broker-Dealers and JBOs. See Options 7, Section 1(c).
\13\ The XND Incentive Program in Options 7, Section 5, B would
not apply to FLEX XND Options orders, only the pricing in Options 7,
Section 5, A.
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Flex Auction Fees
An Exchange member may electronically submit a FLEX order into an
electronic FLEX Auction pursuant to Options 3A, Section 11(b). For the
FLEX Auction, the Exchange proposes assessing simple and complex orders
a $0.10 per contract for Market Makers,\14\ and Lead Market Makers,\15\
Broker-Dealers,\16\ Firms,\17\ and Professionals.\18\ The Exchange
proposes assessing no fees for Customers. Fees apply to the originating
and contra order.
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\14\ The term ``Market Maker'' is defined in Options 1, Section
1(b)(28) as a member of the Exchange who is registered as an options
Market Maker pursuant to Options 2, Section 12(a). A Market Maker
includes SQTs and RSQTs as well as Floor Market Makers. The term
``Streaming Quote Trader'' or ``SQT'' is defined in Options 1,
Section 1(b)(55) as a Market Maker who has received permission from
the Exchange to generate and submit option quotations electronically
in options to which such SQT is assigned. The term ``Remote
Streaming Quote Trader'' or ``RSQT'' is defined in Options 1,
Section 1(b)(49) as a Market Maker that is a member affiliated with
an RSQTO with no physical trading floor presence who has received
permission from the Exchange to generate and submit option
quotations electronically in options to which such RSQT has been
assigned. A Remote Streaming Quote Trader Organization or ``RSQTO,''
which may also be referred to as a Remote Market Making Organization
(``RMO''), is a member organization in good standing that satisfies
the RSQTO readiness requirements in Options 2, Section 1(a). See
Options 7, Section 1(c).
\15\ The term ``Lead Market Maker'' applies to transactions for
the account of a Lead Market Maker (as defined in Options 2, Section
12(a)). A Lead Market Maker is an Exchange member who is registered
as an options Lead Market Maker pursuant to Options 2, Section
12(a). An options Lead Market Maker includes a Remote Lead Market
Maker which is defined as an options Lead Market Maker in one or
more classes that does not have a physical presence on an Exchange
floor and is approved by the Exchange pursuant to Options 2, Section
11. See Options 7, Section 1(c).
\16\ 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).
\17\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation. See Options 7,
Section 1(c).
\18\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Options 7, Section 1(c).
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FLEX PIXL and SOM Fees
An Exchange member may electronically submit a FLEX order into a
FLEX PIXL and FLEX SOM pursuant to Options 3A, Section 12 and Options
3A, Section 13, respectively.
For the FLEX PIXL and FLEX SOM, the Exchange proposes assessing
simple and complex orders a $0.07 per contract for Market Makers, and
Lead Market Makers, Broker-Dealers, Firms, and Professionals. The
Exchange proposes assessing no fees to Customers. Pursuant to proposed
note 2 of Options 7, Section 6.B, the fees will apply to the
originating and contra order.
Fees for FLEX PIXL and SOM Responses
Any member other than an Initiating Member may submit responses to
a FLEX PIXL and FLEX SOM pursuant to Options 3A, Section 12(c)(5) and
Options 3A, Section 13(c)(5), respectively. For responses to a FLEX
PIXL and FLEX SOM, the Exchange proposes assessing simple and complex
orders a $0.50 per contract for Market Makers, and Lead Market Makers,
Broker-Dealers, Firms, Professionals, and Customers. Fees apply to the
originating and contra order.
For all executions in electronic FLEX NDX and electronic FLEX XND
orders, the applicable index options fees in Options 7, Section 5, A
will apply in a FLEX PIXL and FLEX SOM.
The Exchange believes that its proposed electronic FLEX pricing
will attract electronic FLEX Orders to the Exchange.
Other Changes
With the addition of pricing for FLEX electronic transaction fees,
the Exchange proposes to amend the pricing in Options 7, Section 6, B
to retitle the
[[Page 46684]]
section from ``FLEX Transaction Fees'' to ``FLEX Floor Transaction Fees
and FLEX Electronic Transaction Fees'' to distinguish FLEX floor and
electronic FLEX pricing. Further, the Exchange proposes the insertion
of a subtitle in this section of ``FLEX Floor Transaction Fees.'' Also,
the Exchange proposes to amend ``FLEX Multiply Listed Options'' to
instead state ``FLEX Floor Multiply Listed Options.'' Finally, the
Exchange proposes to add ``Floor'' or ``floor'' to the current text of
the second bullet after the chart in Options 7, Section 6, B to
distinguish FLEX floor and electronic. The existing text would be
amended to state,
The Floor FLEX transaction fees for a Firm will be waived for
members executing floor facilitation orders pursuant to Options 8,
Section 30 when such members are trading in their own proprietary
account. In addition, FLEX transaction fees for a Broker-Dealer will
be waived for members executing floor facilitation orders pursuant
to Options 8, Section 30 when such members would otherwise incur
this charge for trading in their own proprietary account contra to a
Customer (``BD-Customer Facilitation''), if the member's BD-Customer
Facilitation average daily volume (including both Floor FLEX and
non-Floor FLEX transactions) exceeds 10,000 contracts per day in a
given month.
Crossing Orders
The Exchange proposes to create a new Options 7, Section 6.F titled
``Crossing Orders.'' The Exchange proposes to define a ``Crossing
Order'' in Options 7, Section 1(c) as an order executed in the
Exchange's Facilitation Mechanism pursuant to Options 3, Section 11(b)
or (c) or Solicited Order Mechanism pursuant to Options 3, Section
11(d) or (e). For purposes of this Pricing Schedule, orders executed in
the Block Order Mechanism pursuant to Options 3, Section 11(a) are also
considered Crossing Orders. The Exchange proposes to state in new
Options 7, Section 6.F that, ``The below transaction fees apply to
Crossing Orders.
Simple Order Fees and Rebates
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Facilitation
Fee for Fee for and
Market participant crossing responses to solicitation
orders crossing break-up
orders rebate
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Penny Symbols
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Market Maker/Lead Market Maker.................................. $0.17 $0.50 N/A
Broker-Dealer................................................... 0.17 0.50 (0.20)
Firm............................................................ 0.17 0.50 (0.20)
Professional.................................................... 0.17 0.50 (0.20)
Customer........................................................ 0.00 0.50 (0.20)
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Non-Penny Symbols
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Market Maker/Lead Market Maker.................................. $0.17 $1.10 N/A
Broker-Dealer................................................... 0.17 1.10 (0.20)
Firm............................................................ 0.17 1.10 (0.20)
Professional.................................................... 0.17 1.10 (0.20)
Customer........................................................ 0.00 1.10 (0.20)
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The Exchange proposes to adopt Penny Symbol and Non-Penny Symbol
Fees for Crossing Orders of $0.17 per contract for Non-Customers. No
Penny Symbol or Non-Penny Symbol Fee for Crossing Orders would be
assessed to a Customer. These fees would apply to the originating and
contra order.\19\ The Exchange proposes to define the term ``Responses
to Crossing Order'' at Options 7, Section 1(c) to mean any contra-side
interest submitted after the commencement of an auction in the
Exchange's Facilitation Mechanism, Solicited Order Mechanism, or Block
Order Mechanism. The Exchange proposes to assess all market
participants a $0.50 per contract Fee for Response to Crossing Orders
in Penny Symbols. The Exchange proposes to assess all market
participants a $1.10 per contract Fee for Response to Crossing Orders
in Non-Penny Symbols. The Exchange proposes to pay a Penny Symbol and
Non-Penny Symbol Facilitation and Solicitation Break-up Rebate \20\ of
$0.20 per contract to all market participants except Market Makers and
Lead Market Makers. These rebates will be paid on contracts submitted
to the Facilitation and Solicited Order Mechanisms that do not trade
with their contra order, except when those contracts trade against pre-
existing orders and quotes on the Exchange's order books. The
applicable Fee for Responses to Crossing Orders is applied to any
contracts for which a rebate is provided.\21\ Additionally, the
applicable Fee for Responses to Crossing Orders is applied to any
contracts for which a rebate is provided.
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\19\ See proposed note 3 of Options 7, Section 6.F.
\20\ Block Orders are not paired orders.
\21\ See proposed note 4 of Options 7, Section 6.F.
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The Exchange believes that these proposed fees will attract simple
Crossing Orders to the Exchange with a potential for price improving
orders.
Next, the Exchange proposes to add a title of ``Complex Order Fees
and Rebates'' to Options 7, Section 6.F, and adopt Crossing Order Penny
Symbol and Non-Penny Symbols pricing as follows:
[[Page 46685]]
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Facilitation Facilitation
Fee for Fee for and and
Fee for responses to responses to solicitation solicitation
Market participant crossing crossing crossing break-up break-up
orders orders for orders for non- rebate for rebate for non-
penny symbols penny symbols penny symbols penny symbols
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Market Maker/Lead Market Maker.. $0.17 $0.50 $1.10 N/A N/A
Broker-Dealer................... 0.17 0.50 1.10 (0.20) (0.20)
Firm............................ 0.17 0.50 1.10 (0.20) (0.20)
Professional.................... 0.17 0.50 1.10 (0.20) (0.20)
Customer........................ 0.00 0.50 1.10 (0.20) (0.20)
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The Exchange proposes to adopt Penny Symbol and Non-Penny Symbol
Complex Order Fees for Crossing Orders of $0.17 per contract for Non-
Customers. No Penny Symbol or Non-Penny Symbol Complex Order Fees for
Crossing Orders would be assessed to a Customer. These fees would apply
to the originating and contra order \22\ and fees would be charged for
all legs.\23\ Complex Order Fees for Responses to Crossing Orders for
Penny Symbols would be $0.50 per contract for all market participants.
Complex Order Fees for Responses to Crossing Orders for Non-Penny
Symbols would be $1.10 per contract for all market participants.
Rebates would be paid per contract per leg for contracts submitted to
Facilitation and Solicitation Mechanisms that do not trade with their
contra order, except when those contracts trade against pre-existing
orders and quotes on the Exchange's order books. Additionally, the
applicable Fees for Responses to Crossing Orders is applied to any
contracts for which a rebate is provided.\24\ The Exchange proposes to
pay a Complex Order Penny Symbol and Non-Penny Symbol Facilitation and
Solicitation Break-up Rebate \25\ of $0.20 per contract to all market
participants except Market Makers and Lead Market Makers. Today, any
solicited contra orders entered by Members into the Facilitation
Mechanism to trade against Agency Orders may not be for the account of
a Market Maker that is assigned to the options class.\26\ Further, any
solicited contra orders entered by Members to trade against Agency
Orders may not be for the account of a Market Maker that is assigned to
the options class.\27\
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\22\ See proposed note 5 of Options 7, Section 6.F.
\23\ See proposed note 6 of Options 7, Section 6.F.
\24\ See proposed note 7 of Options 7, Section 6.F.
\25\ Block Orders are not paired orders.
\26\ See Supplementary Material .01 to Options 3, Section 11.
\27\ See Supplementary Material .03 to Options 3, Section 11.
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The Exchange believes that its proposed pricing for Crossing Orders
will attract orders to Phlx's new auction mechanisms.
Other Pricing Changes
The Exchange proposes to amend a technical error in Options 7,
Section 1, General Provisions by capitalizing the word ``exchange.''
The Exchange also proposes to add three new defined terms in Options 7,
Section 1. First, the Exchange proposes to define a ``Complex Order''
and a ``Simple Order'' to clarify the Exchange's Pricing Schedule with
respect to these terms. A ``Complex Order'' would be defined as an
order involving the simultaneous purchase and/or sale of two or more
different options series in the same underlying security, as provided
in Options 3, Section 14, as well as Stock-Option Orders.\28\ A
``Simple Order'' would be defined as an order that consists of only a
single option series and is not submitted with a stock leg. Second, the
Exchange proposes to define an existing term, ``order exposure alert.''
The Exchange proposes to state in Options 7, Section 1(c) that an
``order exposure alert'' is an order that is broadcast to market
participants as described in Options 5, Section 4(a), Order Routing.
Order exposure alert only applies to Simple Orders. The Exchange
believes these new definitions will add context to the Exchange's
current Pricing Schedule.
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\28\ The Exchange recently amend Options 3, Section 14 related
to Complex Orders to define the term Stock-Options Orders and remove
the COLA functionality. 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). This rule
change is immediately effective but not yet implemented.
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The Exchange proposes a change to Options 7, Section 3 to the
bullet that currently states, ``A non-Complex electronic auction
includes the Quote Exhaust \29\ auction and, for purposes of these
fees, the opening process. A Complex electronic auction includes, but
is not limited to, the Complex Order Live Auction (``COLA''). The
Exchange recently removed the COLA auction from its rules.\30\ In light
of that recent rule change the Exchange proposes to revise the current
language of that bullet to state, ``a non-Complex electronic auction
would be the opening process. A Complex electronic auction includes,
but is not limited to, an Exposure Complex Auction pursuant to
Supplementary Material .01 to Options 3, Section 14.'' This new text
will align to new Options 3, Section 14 functionality.\31\ The same
change is proposed to the same language in Options 7, Section 4.
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\29\ The Exchange removed the Quote Exhaust functionality. See
Securities Exchange Act Release No. 101989 (December 30, 2024), 89
FR 106888 (December 30, 2024) (SR-Phlx-2024-71). SR-Phlx-2024-71 is
effective but not yet operative. SR-Phlx-2024-71 would be operative
at the same time as this rule change as they are both part of the
same technology migration.
\30\ See supra note 27.
\31\ See id.
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Further, with respect to an Exposure Complex Auction pursuant to
Supplementary Material .01 to Options 3, Section 14, the Exchange
proposes to note in Options 7, Section 3, Part B that ``During an
Exposure Complex Auction pursuant to Supplementary Material .01 to
Options 3, Section 14, the originating side of the auction order will
be assessed the applicable Fee for Adding Liquidity or rebate, and the
contra side will be assessed the applicable Fee for Removing Liquidity
or rebate.'' Also, the Exchange proposes to note with respect to the
Marketing Fee, that additionally, no Marketing Fees will be assessed on
the contra side order that executed against the originating order in a
Exposure Complex Auction pursuant to Supplementary Material .01 to
Options 3, Section 14. An Exposure Auction is automatically initiated
when a member submits an eligible complex order that is marked for
price improvement.\32\ Because Exposure Complex Auctions are initiated
by Complex Orders entered on the Complex Order book, they are assessed
the pricing applicable to all other Complex Orders executed on the
complex order book. Specifically, the
[[Page 46686]]
Exchange proposes to treat the originating side of Exposure Complex
Auction orders as adding liquidity and the contra side as taking
liquidity for the purpose of determining applicable fees and rebates in
Options 7, Section 3. Because the Exchange assesses the Marketing Fee
when the contra-party to the execution is a Customer and where the
Market Maker is adding liquidity, the Exchange proposes to not assess
the Marketing Fee against the contra-side of the Exposure Complex
Auction that removes liquidity in Penny Symbols. Today, Marketing Fees
are not assessed on transactions which execute against an order for
which the Exchange broadcasts an order exposure alert in Penny Symbols.
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\32\ See Phlx Supplementary Material .01 to Options 3, Section
14.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\33\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\34\ 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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\33\ 15 U.S.C. 78f(b).
\34\ 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.'' \35\
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\35\ 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
\36\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of
a market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\37\ 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.'' \38\
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\36\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\37\ See NetCoalition, at 534-535.
\38\ 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'. . . .'' \39\
---------------------------------------------------------------------------
\39\ 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)).
---------------------------------------------------------------------------
Indeed, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is only one of eighteen
options exchanges to which market participants may direct their order
flow. Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. Within the
foregoing context, the proposal represents a reasonable attempt by the
Exchange to attract additional order flow to the Exchange and increase
its market share relative to its competitors.
Electronic FLEX Options
The Exchange believes that the proposed electronic FLEX Options
pricing is reasonable because the fees remain competitive with fees of
other options exchanges and will attract electronic FLEX order flow to
Phlx. The Exchange's proposed fees for the FLEX Auction, FLEX PIXL, and
FLEX SOM are comparable with those of ISE's electronic FLEX Auction,
FLEX PIXL and FLEX SOM.\40\ For the FLEX Auction, the Exchange proposes
assessing $0.10 per contract for Non-Customers. The Exchange proposes
assessing no fees for Customers for the FLEX Auction. For the FLEX PIXL
and FLEX SOM, the Exchange proposes assessing $0.07 per contract for
Non-Customers. The Exchange proposes assessing no fees for Customers
for the FLEX PIXL and FLEX SOM and the fees apply to the originating
and contra order. For responses to the FLEX PIXL and FLEX SOM, the
Exchange proposes assessing $0.50 per contract to all market
participants. These fees are reasonable because they are competitive
with market dynamics and consider the price improvement opportunities
of the order mechanisms. In particular, the Exchange believes that it
is reasonable to assess a slightly lower fee of $0.07 per contract for
Non-Customers in FLEX PIXL and FLEX SOM compared to the $0.10 per
contract fee for Non-Customers in electronic FLEX Auctions because the
Exchange seeks to incentivize more activity in FLEX PIXL and FLEX SOM
for potential price improvement.
---------------------------------------------------------------------------
\40\ See Nasdaq ISE, LLC's Pricing Schedule at Options 7,
Section 6, D.
---------------------------------------------------------------------------
Further, the Exchange believes that the fees are an equitable
allocation and are not unfairly discriminatory. The fees for the FLEX
Auction, FLEX PIXL and FLEX SOM, and the responses to the FLEX PIXL and
FLEX SOM will apply in a like manner to all similarly situated members
except for Customers, who will be assessed no fees in the FLEX Auction
and FLEX PIXL and FLEX SOM. The Exchange believes that it is equitable
and not unfairly discriminatory to assess more favorable pricing for
Customers as this order flow enhances liquidity on the Exchange to the
benefit of all market participants by providing more trading
opportunities, which in turn attracts Market Makers and other market
participants who may interact with this order flow. The Exchange
believes that the differential between the proposed Fees for FLEX PIXL
and SOM of $0.07 per contract for Non-Customers and $0.00 for Customers
in both Penny and Non-Penny Symbols for simple and complex orders as
compared to the proposed Fees for Reponses to FLEX PIXL and SOM Orders
of $0.50 per contract for all participants for Penny and Non-Penny
Symbols for simple and complex orders is equitable and not unfairly
discriminatory. The lower proposed Fees for FLEX PIXL and SOM should
encourage members to initiate these auctions in Penny and Non-Penny
Symbols in simple and complex orders. Members responding to these
auctions would be assessed the same or higher proposed Fees for
Responses to FLEX PIXL and SOM Orders as compared to the fees to remove
liquidity from the order book for simple and complex orders.\41\ While
the proposed Fees for
[[Page 46687]]
Responses to FLEX PIXL and SOM Orders are the same or higher, the
Exchange believes that these fees for simple and complex orders in
Penny and Non-Penny Symbols remain competitive with ISE \42\ and will
continue to encourage members to initiate FLEX PIXL and SOM auctions in
Penny and Non-Penny Symbols in the simple and complex order books. The
liquidity the Exchange is able to attract in these auctions provides
other members an opportunity to engage with these auction orders and
participate in the trade by breaking-up the auction order or being
allocated in the auction. Members would not be able to respond to the
auctions if such auctions never commence.
---------------------------------------------------------------------------
\41\ The Exchange assesses an Options Transaction Charge of
$0.48 per contract to Professionals, Broker-Dealers, and Firms, an
Options Transaction Charge of $0.22 per contract to Lead Market
Makers and Market Makers, and no fees to Customers, in Penny
Symbols, to remove liquidity from the simple and complex order
books. The Exchange assesses an Options Transaction Charge of $0.75
per contract to Professionals, Broker-Dealers and Firms, an Options
Transaction Charge of $0.25 per contract to Lead Market Makers and
Market Makers, and no fees to Customers, in Non-Penny Symbols, to
remove liquidity from the simple and complex order books. See
Options 7, Section 4. The Exchange assesses Non-Customers a $0.48
per contract Fee for Removing Liquidity and assesses Customers a
$0.41 per contract Fee for Removing Liquidity in SPY in the simple
order book in Penny and Non-Penny Symbols. The Exchange assesses
Professionals, Broker-Dealers and Firms and a Fee for Removing
Liquidity of $0.50 per contract, Lead Market Makers and Market
Makers a Fee for Removing Liquidity of $0.43 per contract, and no
fees to Customers to remove SPY liquidity from the complex order
book in Penny and Non-Penny Symbols. See Options 7, Section 3.
\42\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
---------------------------------------------------------------------------
As it relates to the FLEX NDX and FLEX XND pricing described above,
the Exchange believes that its proposal is reasonable because it will
assess the same fees for FLEX NDX and FLEX XND orders as it does today
for non-FLEX NDX and non-FLEX XND orders. Similar to non-FLEX NDX and
non-FLEX XND, the Exchange seeks to recoup the operational costs for
listing proprietary products.\43\ Also, pricing by symbol is a common
practice on many U.S. options exchanges as a means to incentivize order
flow to be sent to an exchange for execution in particular products.
Other options exchanges price by symbol.\44\ Further, the Exchange
notes that with its products, market participants are offered an
opportunity to either transact non-standard NDX or non-standard XND or
separately execute PowerShares QQQ Trust (``QQQ'') options.\45\
Offering products such as QQQ provides market participants with a
variety of choices in selecting the product they desire to utilize to
transact the Nasdaq 100[supreg] Index.\46\ When exchanges are able to
recoup costs associated with offering proprietary products, it
incentivizes growth and competition for the innovation of additional
products.
---------------------------------------------------------------------------
\43\ For example, in analyzing an obvious error, the Exchange
would have additional data points available in establishing a
theoretical price for a multiply listed option as compared to a
proprietary product, which requires additional analysis and
administrative time to comply with Exchange rules to resolve an
obvious error.
\44\ See pricing for Russell 2000 Index (``RUT'') on Chicago
Board Options Exchange, Incorporated's (``CBOE'') Fees Schedule and
on CBOE C2 Exchange, Inc.'s (``C2'') Fees Schedule.
\45\ QQQ is an exchange-traded fund based on the Nasdaq
100[supreg] Index.
\46\ QQQ options overlie the same index as NDX, namely the
Nasdaq 100[supreg] Index. This relationship between QQQ options and
NDX options is similar to the relationship between RUT and the
iShares Russell 2000 Index (``IWM''), which is the ETF on RUT.
---------------------------------------------------------------------------
The Exchange believes that the proposed FLEX NDX and FLEX XND fees
are equitable and not unfairly discriminatory because Non-Customers
will be assessed the same level of pricing across the board whereas
Customers will be assessed lower fees or no fees. The Exchange believes
it is equitable and not unfairly discriminatory to assess lower fees
for Customers because Customer order flow enhances liquidity on the
Exchange to the benefit of all market participants by providing more
trading opportunities, which in turn attracts Market Makers and other
market participants who may interact with this order flow.
Crossing Orders
The Exchange's proposed pricing for Simple and Complex Crossing
Orders is reasonable in several respects. The Exchange's proposed Fees
for Crossing Orders of $0.17 per contract for Non-Customers are
competitive and will attract orders to these new mechanisms on Phlx.
ISE has comparable pricing for the same auctions.\47\ The Exchange's
proposed Fees for Responses to Crossing Orders of $0.50 per contract
for all market participants is reasonable as the Exchange believes that
these fees are competitive and will attract orders to these new
mechanisms on Phlx. ISE has comparable pricing for the same
auctions.\48\ Further, the Exchange proposes to incentivize other
market participants to interact with Simple and Complex Order
Facilitation and Solicited Orders by paying a Break-up Rebate to all
market participants except Market Makers and Lead Market Makers of
$0.20 per contract. The Exchange believes that these Break-up rebates
will encourage use of the Facilitation and Solicitation Mechanisms
thereby creating order interaction for these auctions. Specifically,
the Exchange believes that the proposed rebates will encourage
increased originating simple and complex Market Maker/Lead Market
Maker, Broker-Dealer, Firm and Customer order flow to the Facilitation
and Solicitation Mechanisms, thereby potentially increasing the
initiation of and volume executed through such auctions. Additional
auction order flow provides market participants with additional trading
opportunities at potentially improved prices. The Exchange further
believes that the proposed Facilitation and Solicitation Break-up
rebates are set at reasonable rates because they are aligned with
pricing on ISE, which has the same auctions.\49\
---------------------------------------------------------------------------
\47\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
Of note, ISE's Professional Fees for Crossing Orders related to the
Solicited Order Mechanism are $0.00 per contract.
\48\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
\49\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
---------------------------------------------------------------------------
The Exchange's proposed pricing for Simple and Complex Fees for
Crossing Orders is equitable and not unfairly discriminatory. The
Exchange believes that it is equitable and not unfairly discriminatory
to assess Customers no Fees for Crossing Orders, thereby offering
Customers more favorable pricing, because Customer order flow enhances
liquidity on the Exchange to the benefit of all market participants by
providing more trading opportunities, which in turn attracts Market
Makers and other market participants who may interact with this order
flow. Assessing uniform Simple and Complex Order Fees for Crossing
Orders to Non-Customers is equitable and not unfairly discriminatory.
The Exchange's proposal to assess all market participants uniform
Simple and Complex Order Fees for Responding to Crossing Orders in
Penny Symbols of $0.50 per contract and in Non-Penny Symbols of $1.10
per contract is equitable and not unfairly discriminatory. The Exchange
believes that the differential between the proposed Fees for Crossing
Order (the fees that apply to the originating and contra-side orders)
of $0.17 per contract for Non-Customers and $0.00 for Customers in both
Penny and Non-Penny Symbols for simple orders as compared to the
proposed Fees for Reponses to Crossing Orders of $0.50 per contract for
all participants in Penny Symbols and $1.10 per contract for Non-Penny
Symbols for simple orders is equitable and not unfairly discriminatory.
Additionally, the Exchange believes that the differential between the
proposed Fees for Crossing Orders (the fees that apply to the
originating and contra-side orders) of $0.17 per contract for Non-
Customers and $0.00 for Customers in both Penny and Non-Penny Symbols
for complex orders as compared to the proposed Fees for Reponses to
Crossing Orders of $0.50 per contract for all participants in Penny
Symbols and $1.10 per contract
[[Page 46688]]
for all participants in Non-Penny Symbols for complex orders is
equitable and not unfairly discriminatory. The lower Fees for Crossing
Orders should encourage members to initiate Facilitation Mechanisms,
Complex Facilitation Mechanisms, Solicitation Mechanisms, Complex
Solicitation Mechanisms and Block Orders in Penny and Non-Penny Symbols
in simple and complex orders. Members responding to these auctions
would be assessed the same or higher proposed Fees for Reponses to
Crossing Orders as compared to the fees to remove liquidity from the
order book for simple and complex orders.\50\ While the Fees for
Reponses to Crossing Orders are the same or higher, the Exchange
believes these fees for simple and complex orders in Penny and Non-
Penny Symbols remain competitive with ISE \51\ and will continue to
encourage members to initiate Facilitation Mechanisms, Complex
Facilitation Mechanisms, Solicitation Mechanisms, Complex Solicitation
Mechanisms and Block Orders in Penny and Non-Penny Symbols in the
simple and complex order books. The liquidity the Exchange is able to
attract in these auctions provides other members an opportunity to
engage with auction orders and participate in the trade by breaking-up
the auction order or being allocated in the auction. Members would not
be able to respond to the auctions if such auctions never commence.
Finally, the Exchange proposed Break-up rebates of $0.20 per contract
for all market participants, except Market Makers and Lead Markets, in
Simple and Complex Order Facilitation and Solicitation auctions in
Penny and Non-Penny Symbols is equitable and not unfairly
discriminatory because the proposed rebates will apply equally to all
non-Market Maker originating orders submitted to the Facilitation and
Solicited Order Mechanisms that do not trade with their contra orders
(except when those originating contracts trade against pre-existing
orders and quotes on the Exchange's order books). While Market Makers
will not receive the Facilitation and Solicitation Break-up rebates,
the Exchange believes that the application of the rebate is equitable
and not unfairly discriminatory because Market Makers have certain
limitations by rule. Any solicited contra orders entered by Members
into the Facilitation Mechanism to trade against Agency Orders may not
be for the account of a Market Maker that is assigned to the options
class.\52\ Further, any solicited contra orders entered by Members to
trade against Agency Orders may not be for the account of a Market
Maker that is assigned to the options class.\53\
---------------------------------------------------------------------------
\50\ See supra note 41.
\51\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
\52\ See Supplementary Material .01 to Options 3, Section 11.
\53\ See Supplementary Material .03 to Options 3, Section 11.
---------------------------------------------------------------------------
Other Pricing Changes
The Exchange's proposal to amend a technical error in Options 7,
Section 1, General Provisions by capitalizing the word ``exchange'' is
non-substantive. The Exchange's proposal to add three new defined terms
in Options 7, Section 1 for ``Complex Order,'' ``Simple Order,'' and
``order exposure alert'' is reasonable, equitable and not unfairly
discriminatory because it will add more context to the current Pricing
Schedule but it will not amend how the current pricing is assessed or
paid.
The Exchange's proposal to amend Options 7, Sections 3 and 4 to
change the rule text to remove functionality that no longer exists \54\
and add language around functionality that was recently adopted and
would apply as a non-Complex electronic auction and Complex electronic
auction \55\ is reasonable, equitable and not unfairly discriminatory
because it will align with recent changes to the Rulebook and provide
context around the new pricing that the Exchange is adopting with the
current proposal.
---------------------------------------------------------------------------
\54\ See supra notes 27 and 28.
\55\ See supra note 27.
---------------------------------------------------------------------------
Finally, for purposes of Options 7, Section 3, Part B, treating the
originating side of the Exposure Complex Orders as the maker and the
contra side as the taker is reasonable, equitable and not unfairly
discriminatory because in this scenario the Market Maker is removing
liquidity from the order book and the Exchange would handle all orders
in the same manner. Also, not applying the Marketing Fee to the contra
side order of an Exposure Complex Order that executed against the
originating order is reasonable, equitable and not unfairly
discriminatory because the Exchange assesses the Marketing Fee when the
contra-party to the execution is a Customer and where the Market Maker
is adding liquidity. The Exchange would not assess the Marketing Fee
uniformly in this manner. Today, Marketing Fees are not assessed on
transactions that execute against an order for which the Exchange
broadcasts an order exposure alert in Penny Symbols.
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
Electronic FLEX Options
Because competitors are free to modify their own fees in response,
the Exchange believes that the degree to which fee changes in this
market may impose any burden on competition is extremely limited. The
Exchange will apply the same fees to all similarly situated members
except for Customers in the FLEX Auction and FLEX PIXL and FLEX SOM
considering that Customers are historically assessed the lowest fees
compared to other market participants. Customer order flow enhances
liquidity on the Exchange to the benefit of all market participants by
providing more trading opportunities, which in turn attracts Market
Makers and other market participants who may interact with this order
flow. The Exchange believes that the differential between the proposed
Fees for FLEX PIXL and SOM of $0.07 per contract for Non-Customers and
$0.00 for Customers in both Penny and Non-Penny Symbols for simple and
complex auctions as compared to the proposed Fees for Reponses to FLEX
PIXL and SOM Orders of $0.50 per contract for Penny and Non-Penny
Symbols for simple and complex orders does not impose an undue burden
on competition. The
[[Page 46689]]
lower Fees for FLEX PIXL and SOM described above should encourage
members to initiate these auctions in Penny and Non-Penny Symbols in
simple and complex orders. Members responding to these auctions would
be assessed the same or higher proposed Fees for Responses to FLEX PIXL
and SOM Orders as compared to the fees to remove liquidity from the
order book for simple and complex orders.\56\ While the Fees for
Responses to FLEX PIXL and SOM Orders are the same or higher, the
Exchange believes that these fees for simple and complex orders in
Penny and Non-Penny Symbols remain competitive with ISE \57\ and will
continue to encourage members to initiate FLEX PIXL and SOM auctions in
Penny and Non-Penny Symbols in the simple and complex order books. The
liquidity the Exchange is able to attract in the form of these auctions
provides other members an opportunity to engage with auction orders and
participate in the trade by breaking-up the auction order or being
allocated in the auction. Members would not be able to respond to the
auctions if such auctions never commence. Nasdaq does not believe that
the proposed fee changes place an unnecessary burden on competition.
---------------------------------------------------------------------------
\56\ See supra note 41.
\57\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
---------------------------------------------------------------------------
Crossing Orders
The Exchange's proposed pricing for Simple and Complex Fees for
Crossing Orders does not impose an undue burden on competition.
Customers will be assessed no Fees for Crossing Orders, thereby
offering Customers more favorable pricing, because Customer order flow
enhances liquidity on the Exchange to the benefit of all market
participants by providing more trading opportunities, which in turn
attracts Market Makers and other market participants who may interact
with this order flow. Assessing uniform Simple and Complex Order Fees
for Crossing Orders to Non-Customers does not impose an undue burden on
competition. The Exchange's proposal to assess all market participants
uniform Simple and Complex Order Fees for Responding to Crossing Orders
in Penny Symbols of $0.50 per contract and in Non-Penny Symbols of
$1.10 per contract does not impose an undue burden on competition.
The Exchange believes that the differential between the proposed
Fees for Crossing Order (the fees that apply to the originating and
contra-side orders) of $0.17 per contract for Non-Customers and $0.00
for Customers in both Penny and Non-Penny Symbols for simple orders as
compared to the proposed Fees for Reponses to Crossing Orders of $0.50
per contract for all participants in Penny Symbols and $1.10 per
contract for all participants in Non-Penny Symbols for simple orders
does not impose an undue burden on competition. Additionally, the
Exchange believes that the differential between the proposed Fees for
Crossing Order (the fees that apply to the originating and contra-side
orders) of $0.17 per contract for Non-Customers and $0.00 for Customers
in both Penny and Non-Penny Symbols for complex orders as compared to
the proposed Fees for Reponses to Crossing Orders of $0.50 per contract
for all participants in Penny Symbols and $1.10 per contract for all
participants in Non-Penny Symbols for complex orders does not impose an
undue burden on competition. The lower Fees for Crossing Orders
described above should encourage members to initiate Facilitation
Mechanisms, Complex Facilitation Mechanisms, Solicitation Mechanisms,
Complex Solicitation Mechanisms and Block Orders in Penny and Non-Penny
Symbols in simple and complex orders. Members responding to these
auctions would be assessed the same or higher proposed Fees for
Reponses to Crossing Orders as compared to the fees to remove liquidity
from the order book for simple and complex orders.\58\ While the Fees
for Reponses to Crossing Orders are the same or higher, the Exchange
believes these fees for simple and complex orders in Penny and Non-
Penny Symbols remain competitive with ISE \59\ and will continue to
encourage members to initiate Facilitation Mechanisms, Complex
Facilitation Mechanisms, Solicitation Mechanisms, Complex Solicitation
Mechanisms and Block Orders in Penny and Non-Penny Symbols in the
simple and complex order books. The liquidity the Exchange is able to
attract in these auctions provides other members an opportunity to
engage with auction orders and participate in the trade by breaking-up
the auction order or being allocated in the auction. Members would not
be able to respond to the auctions if such auctions never commence.
Finally, the Exchange proposed Break-up rebates of $0.20 per contract
for all market participants, except Market Makers and Lead Markets, in
Simple and Complex Order Facilitation and Solicitation auctions in
Penny and Non-Penny Symbols does not impose an undue burden on
competition because the proposed rebates will apply equally to all non-
Market Maker originating orders submitted to the Facilitation and
Solicited Order Mechanisms that do not trade with their contra orders
(except when those originating contracts trade against pre-existing
orders and quotes on the Exchange's order books). While Market Makers
will not receive the Facilitation and Solicitation Break-up rebates,
the Exchange believes that the application of the rebates does not
impose an undue burden on competition because Market Makers have
certain limitations by rule. Any solicited contra orders entered by
Members into the Facilitation Mechanism to trade against Agency Orders
may not be for the account of a Market Maker that is assigned to the
options class.\60\ Further, any solicited contra orders entered by
Members to trade against Agency Orders may not be for the account of a
Market Maker that is assigned to the options class.\61\
---------------------------------------------------------------------------
\58\ See supra note 41.
\59\ See ISE's Pricing Schedule at Options 7, Sections 3 and 4.
\60\ See Supplementary Material .01 to Options 3, Section 11.
\61\ See Supplementary Material .03 to Options 3, Section 11.
---------------------------------------------------------------------------
Other Pricing Changes
The Exchange's proposal to add three new defined terms in Options
7, Section 1 for ``Complex Order,'' ``Simple Order,'' and ``order
exposure alert'' does not impose an undue burden on competition, rather
it will add more context to the current Pricing Schedule but it will
not amend how the current pricing is assessed or paid. The Exchange's
proposal to amend Options 7, Sections 3 and 4 to change the rule text
to remove functionality that no longer exists \62\ and add language
around functionality that was recently adopted and would apply as a
non-Complex electronic auction and Complex electronic auction \63\ does
not impose an undue burden on competition, rather it will align with
recent changes to the Rulebook and provide context around the new
pricing that the Exchange is adopting with the current proposal.
---------------------------------------------------------------------------
\62\ See supra notes 27 and 28.
\63\ See supra note 27.
---------------------------------------------------------------------------
For purposes of Options 7, Section 3, Part B, treating the
originating side of the Exposure Complex Orders as the maker and the
contra side as the taker does not impose an undue burden on competition
because the Exchange would handle all orders in the same manner. Also,
not applying the Marketing Fee to the contra side order of an Exposure
Complex Order that executed against the originating order does not
impose an undue burden on
[[Page 46690]]
competition because the Exchange would not assess the Marketing Fee
uniformly in this manner.
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.\64\
---------------------------------------------------------------------------
\64\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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
<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#e193948d84cc828e8c8c848f9592a1928482cf868e97"><span class="__cf_email__" data-cfemail="7d0f081118501e1210101813090e3d0e181e531a120b">[email protected]</span></a>. Please include
file number SR-Phlx-2025-48 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-2025-48. 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-2025-48 and
should be submitted on or before October 20, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
---------------------------------------------------------------------------
\65\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18789 Filed 9-26-25; 8:45 am]
BILLING CODE 8011-01-P
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