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Notice2025-18798

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4

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Published

September 29, 2025

Issuing agencies

Securities and Exchange Commission

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[Federal Register Volume 90, Number 186 (Monday, September 29, 2025)]
[Notices]
[Pages 46674-46679]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18798]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-104034; File No. SR-Phlx-2025-49]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 4

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 18, 2025, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend various transaction fees in Options
7, Section 4, Multiply Listed Options Fees (Includes options overlying
equities, ETFs, ETNs and indexes which are Multiply Listed) (Excludes
SPY and broad-based index options symbols listed within Options 7,
Section 5.A).\3\
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\3\ SR-Phlx-2025-41 was filed on September 2, 2025. On September
10, 2025, the Exchange withdrew SR-Phlx-2025-41 and filed SR-Phlx-
2025-45. On September 18, 2025, SR-Phlx-2025-45 was withdrawn and
this proposal was filed.
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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
Phlx proposes to amend pricing within Options 7, Section 4 to: (1)
remove the current BD-Customer Facilitation waiver and replace it with
a Broker-Dealer Transaction Cap; (2) amend the Floor Broker Incentive
Program; and (3) amend the strategy caps for Floor Originated Strategy
Executions. Each change will be described below.
BD-Customer Facilitation Waiver
Today, the Exchange waives the Broker-Dealer \4\ Floor Options
Transaction Charge \5\ (including Cabinet Options Transaction Charges)
\6\ for members executing facilitation orders pursuant to Options 8,
Section 30 \7\ when such members would otherwise incur this charge for
trading in their own proprietary account contra to a Customer \8\
(``BD-Customer Facilitation''), if the member's BD-Customer
Facilitation average daily

[[Page 46675]]

volume (including both FLEX \9\ and non-FLEX transactions) exceeds
10,000 contracts per day in a given month.\10\ The Exchange proposes to
no longer offer this waiver.
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\4\ 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).
\5\ The Exchange assesses a Broker-Dealer Floor Options
Transaction Charge of $0.25 per contract in Penny and Non-Penny
Symbols.
\6\ Cabinet Options Transaction may only be executed as a floor
transaction; they are not executed electronically. A floor
transaction is a transaction that is effected in open outcry on the
Exchange's Trading Floor. See Options 7, Section 1(c). The Exchange
assesses Customers no Cabinet Options Transaction Charge. The
Exchange assesses Non-Customers a $0.10 per contract Cabinet Options
Transaction Charge. 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).
\7\ Options 8, Section 30, Crossing, Facilitation and Solicited
Orders, describes the manner in which orders may be crossed in open
outcry on the Exchange's trading floor. Facilitation orders are
among the types of orders described in Options 8, Section 30.
\8\ 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).
\9\ FLEX transactions may only be executed as a floor
transaction pursuant to Options 8, Section 34; they are not executed
electronically.
\10\ Transactions in broad-based index options symbols listed
within Options 7, Section 5.A. are excluded from waiver.
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In lieu of this waiver, the Exchange proposes a Broker-Dealer
Transaction Cap whereby each Broker-Dealer Floor Options Transaction
Charge will be capped at $15,000 per transaction (including FLEX and
Cabinet Options Transaction Charges). The Exchange believes that this
proposed new cap will incentivize Broker-Dealers to submit larger-sized
orders for execution to Phlx. Other market participants will be able to
interact with those larger-sized orders.
The Exchange also proposes to amend language in the existing text
for Firm Facilitation to modify the rule text to refer to one waiver
only.
Floor Broker Incentive Program
The Exchange proposes to amend its Floor Transaction (Open Outcry)
Floor Broker Incentive Program at Options 7, Section 4. This incentive
program for Floor Brokers \11\ is designed to attract order flow to
Phlx's trading floor for execution in open outcry. Currently, the
Exchange pays Floor Brokers certain rebates for transaction they
execute on Phlx's trading floor in open outcry. Today, Floor Brokers
are paid rebates for transactions executed on the trading floor in open
outcry. The below transactions are not considered qualifying volume for
purposes of the rebates:(1) dividend, merger, short stock interest,
reversal and conversion, jelly roll, and box spread strategy executions
as defined in this Options 7, Section 4; (2) Firm Floor Options
Transactions for members executing facilitation orders pursuant to
Options 8, Section 30 when such members are trading in their own
proprietary account (including Cabinet Options Transaction Charges);
and (3) Customer-to-Customer transactions.
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\11\ The term ``Floor Broker'' means an individual who is
registered with the Exchange for the purpose, while on the Options
Floor, of accepting and handling options orders. See Phlx Options 7,
Section 1(c).
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Today, rebates are paid on qualifying volume at each threshold
level based on the below schedule. Floor Qualified Contingent Cross
(``QCC'') Orders, as defined in Options 8, Section 30(e), are
considered qualifying volume but are not paid rebates based on the
below schedule, rather Floor QCC Order are paid the QCC Rebates noted
in Options 7, Section 4.
Today, the Exchange pays Floor Transaction (Open Outcry) Floor
Broker Incentive Program rebates on qualifying volume based on four
tiers.

----------------------------------------------------------------------------------------------------------------
Per contract Per contract
rebate rebate (non-
Qualifying contracts (customer on customer on
one side) both sides)
----------------------------------------------------------------------------------------------------------------
Tier 1........................................ 0-500,000....................... $0.02 $0.08
Tier 2........................................ 500,001-5,000,000............... 0.05 0.12
Tier 3........................................ 5,000,001-10,000,000............ 0.07 0.16
Tier 4........................................ Greater than 10,000,000......... 0.08 0.20
----------------------------------------------------------------------------------------------------------------

First, the Exchange proposes to amend the Floor Transaction (Open
Outcry) Floor Broker Incentive Program with respect to qualifying
volume. The Exchange proposes to amend the current rule text in Options
7, Section 4, to also include electronic QCC Orders as qualifying
volume. As amended, the rule text would state,

Rebates will be paid on qualifying volume at each threshold
level based on the below schedule. Floor QCC Orders, as defined in
Options 8, Section 30(e), and electronic QCC Orders, as defined in
Options 3, Section 12, will be considered qualifying volume but
would not be paid rebates based on the below schedule, rather Floor
QCC Orders and electronic QCC Orders would be paid the QCC Rebates
noted in Options 7, Section 4 above.

While electronic QCC Orders would count toward qualifying volume,
electronic QCC Orders, similar to Floor QCC Orders, would not be paid
rebates based on the rebate schedule, rather electronic QCC Order would
continue to be paid the QCC Rebates noted in Options 7, Section 4. This
proposed change would allow Phlx members and member organizations to
count electronic QCC Orders toward their qualifying volume to achieve
the Qualifying Contracts necessary to be paid a rebate.
The Exchange also proposes to amend the current rebate schedule at
Tier 2 with respect to qualifying contracts between 500,001-5,000,000.
Today, the Exchange pays a $0.12 per contract rebate when Non-Customers
\12\ are on both sides of the transaction. The Exchange proposes to
increase that rebate from $0.12 to $0.16 per contract. The other
rebates are not being amended.
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\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).
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The Exchange believes that the Floor Transaction (Open Outcry)
Floor Broker Incentive Program will attract greater order flow to
Phlx's trading floor as a result of the proposed changes.

[[Page 46676]]

Strategy Caps for Floor Originated Strategy Executions
Today, the Exchange permits the following of strategy executions:
(1) dividend strategy,\13\ merger strategy,\14\ short stock interest
strategy,\15\ reversal and conversion strategies,\16\ jelly roll
strategy,\17\ and a box spread strategy.\18\
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\13\ A dividend strategy is defined as transactions done to
achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed the
first business day prior to the date on which the underlying stock
goes ex-dividend. See Options 7, Section 4.
\14\ A merger strategy is defined as transactions done to
achieve a merger arbitrage involving the purchase, sale and exercise
of options of the same class and expiration date, executed the first
business day prior to the date on which shareholders of record are
required to elect their respective form of consideration, i.e., cash
or stock. See Options 7, Section 4.
\15\ A short stock interest strategy is defined as transactions
done to achieve a short stock interest arbitrage involving the
purchase, sale and exercise of in-the-money options of the same
class. See Options 7, Section 4.
\16\ Reversal and conversion strategies are transactions that
employ calls and puts of the same strike price and the underlying
stock. Reversals are established by combining a short stock position
with a short put and a long call position that shares the same
strike and expiration. Conversions employ long positions in the
underlying stock that accompany long puts and short calls sharing
the same strike and expiration. See Options 7, Section 4.
\17\ A jelly roll strategy is defined as transactions created by
entering into two separate positions simultaneously. One position
involves buying a put and selling a call with the same strike price
and expiration. The second position involves selling a put and
buying a call, with the same strike price, but with a different
expiration from the first position. See Options 7, Section 4.
\18\ A box spread strategy is a strategy that synthesizes long
and short stock positions to create a profit. Specifically, a long
call and short put at one strike is combined with a short call and
long put at a different strike to create synthetic long and
synthetic short stock positions, respectively. See Options 7,
Section 4.
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To qualify for a strategy cap,\19\ the buy and sell side of a
transaction must originate either from the Exchange Trading Floor or as
a Floor Qualified Contingent Cross Order.\20\ Currently, the Exchange
offers certain daily and month caps of $0.00, therefore no transaction
charges are assessed on any permissible strategy execution defined in
Options 7, Section 4 that meet the qualifications. For a dividend
strategy, a Lead Market Maker,\21\ Market Maker,\22\ Professional,\23\
Firm \24\ and Broker-Dealer that executed on the same trading day in
the same class of options when such members are trading: (1) in their
own proprietary accounts; or (2) on an agency basis, they are subject
to no cap.\25\ For a merger, short stock interest and box spread
strategy, a Lead Market Maker, Market Maker, Professional, Firm and
Broker-Dealer that executed on the same trading day for all classes of
options in the aggregate when such members are trading (1) in their own
proprietary accounts; or (2) on an agency basis, they are subject to no
cap.\26\ Finally, for reversal and conversion and jelly roll
strategies, a Lead Market Maker, Market Maker, Professional, Firm and
Broker-Dealer that executed on the same trading day for all classes of
options in the aggregate when such members are trading (1) in their own
proprietary accounts; or (2) on an agency basis, they are subject to no
cap.\27\ The Exchange notes that Customers are not subject to the
strategy cap because Customers are not assessed Options Transaction
Charges within Options 7, Section 4.
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\19\ Of note, NDX, NDXP, and XND Options Transactions are
excluded from strategy cap pricing.
\20\ See Phlx's Pricing Schedule at Options 7, Section 4. A
Floor Qualified Contingent Cross Order is comprised of an
originating order to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent trade coupled
with a contra-side order or orders totaling an equal number of
contracts. The term ``qualified contingent trade'' shall have the
same meaning set forth in Options 3, Section 12(a)(3). See Options
8, Section 30(e).
\21\ 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).
\22\ 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).
\23\ 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).
\24\ 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).
\25\ If transacted on an agency basis, the daily cap will apply
per beneficial account.
\26\ See id. For example, if a Lead Market Maker executed
reversal and conversion strategies only in AAPL options, and
otherwise met the qualifications for a reversal and conversion cap,
the proposed $700 daily cap would apply. If the Lead Market Maker
executed reversal and conversion strategies in AAPL and SPY options,
and otherwise met the qualifications for a reversal and conversion
cap, the proposed $1,000 daily cap would apply.
\27\ See id.
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At this time, the Exchange proposes to no longer apply a Strategy
Cap to strategy executions and instead pay certain rebates. The
Exchange proposes to re-title ``Strategy Caps'' within Options 7,
Section 4 as ``Strategy Fees and Rebates'' and also amend the rule text
beneath the title. The Exchange also proposes to amend the paragraph
under the table and in Options 7, Section 6, B to change references to
the ``Strategy Cap'' to ``Strategy pricing.'' Further, the Exchange
proposes to add the following, ``The below fees/rebates are in lieu of
the Options Transactions Charges in Options 7, Section 4 for Penny and
Non-Penny Symbols.''
The Exchange is proposing to amend the Strategy Cap table to re-
title ``Daily/Monthly Cap'' to ``Fee/Rebate Per Contract'' and pay a
$0.01 rebate per contract on any strategy execution that meet the
qualifications noted in the table. Therefore, for a dividend strategy,
a Lead Market Maker, Market Maker, Professional, Firm and Broker-Dealer
that executed on the same trading day in the same class of options when
such members are trading: (1) in their own proprietary accounts; or (2)
on an agency basis, will be paid a $0.01 rebate per contract. For a
merger, short stock interest and box spread strategy, a Lead Market
Maker, Market Maker, Professional, Firm and Broker-Dealer that executed
on the same trading day for all classes of options in the aggregate
when such members are trading (1) in their own proprietary accounts; or
(2) on an agency basis, they will be paid a $0.01 rebate per contract.
Finally, for reversal and conversion and jelly roll strategies, a Lead
Market Maker, Market Maker, Professional, Firm and Broker-Dealer that
executed on the same trading day for all classes of options in the
aggregate when such members are trading (1) in their own proprietary
accounts; or (2) on an agency basis, will be paid a $0.01 rebate per
contract. Finally, Customers would continue to pay no fees on strategy
transactions with this proposal. The Exchange proposes the following be
added to the end of the paragraph under the newly titled ``Strategy
Fees and Rebates'' section, ``Customers will not be assessed a fee

[[Page 46677]]

nor receive a rebate for strategy transactions'' to make clear that
Customers would continue to not be assessed a fee.'' Finally, the
Exchange proposes to remove the sentence that states, ``If transacted
on an agency basis, the daily cap will apply per beneficial account''
from the table for the various strategies as the Exchange will no
longer offer a cap.
The Exchange believes that its proposal will incentivize Lead
Market Makers, Market Makers, Professionals, Firms and Broker-Dealers
to transact a greater number of strategies on Phlx.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\28\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\29\ 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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\28\ 15 U.S.C. 78f(b).
\29\ 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.'' \30\
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\30\ 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
\31\ (``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.\32\ 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.'' \33\
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\31\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\32\ See NetCoalition, at 534--535.
\33\ 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'. . . .'' \34\ Although the court and
the SEC were discussing the cash equities markets, the Exchange
believes that these views apply with equal force to the options
markets.
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\34\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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BD-Customer Facilitation Waiver
The Exchange's proposal to remove the BD-Customer Facilitation
waiver and instead offer a Broker-Dealer Transaction Cap is reasonable.
The Exchange seeks to incentivize Broker-Dealers to direct additional
orders to the Exchange. The current waiver seeks to accomplish this by
requiring Customer Facilitation average daily volume of 10,000
contracts per day in a given month to receive the waiver for
facilitation orders, while the new cap applies to each order submitted
by a Broker-Dealer to limit cost. The current waiver sought to
incentivize crossing orders to be sent to the Exchange while the
proposed new cap incentivizes Broker-Dealers to send larger sized
orders to benefit from the incentive. The Exchange believes that its
current proposal has the potential to bring additional orders to the
Exchange with which other market participants may interact,
particularly given the potential for the orders being sized larger.
The Exchange's proposal to remove the BD-Customer Facilitation
waiver and instead offer a Broker-Dealer Transaction Cap is equitable
and not unfairly discriminatory. Today, Customers are not assessed
Options Transaction Charges. Lead Market Makers and Market Makers are
offered a Monthly Market Maker Cap of $500,000 \35\ to offset their
Options Transaction Charges. Finally, Firms are subject to a $250,000
``Monthly Firm Fee Cap'' \36\ to offset their Options Transaction
Charges. The Exchange believes that it is equitable and not unfairly
discriminatory to likewise provide Broker-Dealers an incentive to
offset their Options Transaction Charges for large orders.
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\35\ Lead Market Makers and Market Makers are subject to a
``Monthly Market Maker Cap'' of $500,000 for: (i) electronic Option
Transaction Charges, excluding surcharges and excluding options
overlying broad-based index options symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction Fees (as defined in Exchange
Options 3, Section 12 and Floor QCC Orders, as defined in Options 8,
Section 30(e)). The trading activity of separate Lead Market Maker
and Market Maker member organizations will be aggregated in
calculating the Monthly Market Maker Cap if there is Common
Ownership between the member organizations. All dividend, merger,
short stock interest, reversal and conversion, jelly roll and box
spread strategy executions (as defined in this Options 7, Section 4)
will be excluded from the Monthly Market Maker Cap. Lead Market
Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols, $0.18 per
contract Fee for Removing Liquidity in Penny Symbols, $0.18 per
contract in Non-Penny Symbols, and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee. See Options 7,
Section 4.
\36\ Firms are subject to a $250,000 ``Monthly Firm Fee Cap''.
Firm Floor Option Transaction Charges and QCC Transaction Fees in
the aggregate for one billing month that exceed the Monthly Firm Fee
Cap per member or member organization, when such members or member
organizations are trading in their own proprietary account, will be
subject to a reduced transaction fee of $0.02 per capped contract
unless there is no fee or the fee is waived. All dividend, merger,
short stock interest, reversal and conversion, jelly roll, and box
spread strategy executions (as defined in this Options 7, Section 4)
are excluded from the Monthly Firm Fee Cap. Transactions in broad-
based index options symbols listed within Options 7, Section 5.A.
are excluded from the Monthly Firm Fee Cap. QCC Transaction Fees are
included in the calculation of the Monthly Firm Fee Cap. See Options
7, Section 4.
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[[Page 46678]]

Phlx will be counted as qualifying volume for the Floor Transaction
(Open Outcry) Floor Broker Incentive Program and those electronic QCC
Order will uniformly be paid rebates based on the schedule in Options
7, Section 4 for rebates.
The Exchange's proposal to increase Tier 2 of the rebate schedule
with respect to qualifying contracts between 500,001-5,000,000, when
Non-Customers are on both sides of the transaction, from $0.12 to $0.16
per contract rebate is reasonable because the higher rebate may attract
additional order flow to Phlx's open outcry in an effort to earn the
higher rebate. Other Phlx floor members may interact with the orders
exposed in open outcry on the Exchange's trading floor.
The Exchange's proposal to increase Tier 2 of the rebate schedule
with respect to qualifying contracts between 500,001-5,000,000, when
Non-Customers are on both sides of the transaction, from $0.12 to $0.16
per contract rebate is equitable and not unfairly discriminatory
because the Exchange will uniformly pay qualifying Floor Brokers the
increased rebate to all qualifying members. Further, the Exchange
believes its proposed increased floor transaction rebates for a Non-
Customer on both sides is equitable and not unfairly discriminatory
when compared to the rebate for a Customer on one side with the same
number of qualifying contracts because Customers are not assessed a
Floor Options Transaction Charge for Penny and Non-Penny Symbols. In
contrast, the Exchange notes that Non-Customers, except Professionals,
are assessed Floor Options Transaction Charges in Penny and Non-Penny
Symbols. The Exchange proposes to pay higher rebates where there is a
Non-Customer on both sides of a trade because a Floor Broker attracting
Customer order flow can more easily attract Customer orders which are
not assessed a floor transaction fee as compared to attracting a Non-
Customer order which would pay a transaction fee to execute on Phlx's
trading floor.
The Exchange believes that it is reasonable to pay rebates on
qualifying volume for transactions executed on the trading floor,
because it is necessary from a competitive standpoint to offer this
rebate to the executing Floor Broker to attract order flow to the
trading floor. The rebate is meant to assist Floor Brokers to recruit
business on an agency basis. The Floor Broker may use all or part of
the rebate to offset its fees. The Exchange expects that the rebate
offered to executing Floor Brokers will allow them to price their
services at a level that will enable them to attract order flow from
market participants who would otherwise enter these orders
electronically from off the floor. To the extent that Floor Brokers are
able to attract these qualifying volume, other floor participants may
interact with this order flow in open outcry. The Exchange believes
that it is equitable and not unfairly discriminatory to pay rebates on
qualifying volume for transactions executed on the trading floor,
because Floor Brokers would be uniformly paid the rebates based on
qualifying volume and the parties to the transaction.
Strategy Caps for Floor Originated Strategy Executions
The Exchange's proposal to amend the Strategy Cap pricing to pay a
$0.01 per contract rebate on qualifying strategy executions is
reasonable because the Exchange desires to attract qualifying strategy
transactions to Phlx and this rebate will incentivize Lead Market
Makers, Market Makers, Professionals, Firms and Broker-Dealers to
transact a greater number of strategies on Phlx. Customers pay no
Options Transaction Charges on strategy executions today and would
continue to pay no fees.
The Exchange's proposal to pay a $0.01 per contract rebate on
qualifying strategy executions is equitable and not unfairly
discriminatory because the Exchange would uniformly pay the rebate to
all qualifying Non-Customers. Customers continue to not be assessed an
Options Transaction Charge for strategy executions.

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
BD-Customer Facilitation Waiver
The Exchange's proposal to remove the BD-Customer Facilitation
waiver and instead offer a Broker-Dealer Transaction Cap does not
impose an undue burden on competition. Today, Customers are not
assessed Options Transaction Charges. Lead Market Makers and Market
Makers are offered a Monthly Market Maker Cap of $500,000 \37\ to
offset their Options Transaction Charges. Finally, Firms are subject to
a $250,000 ``Monthly Firm Fee Cap'' \38\ to offset their Options
Transaction Charges. For the aforementioned reasons, the Exchange

[[Page 46679]]

believes that providing Broker-Dealers an incentive to offset their
Options Transaction Charges does not impose an undue burden on
competition.
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\37\ Lead Market Makers and Market Makers are subject to a
``Monthly Market Maker Cap'' of $500,000 for: (i) electronic Option
Transaction Charges, excluding surcharges and excluding options
overlying broad-based index options symbols listed within Options 7,
Section 5.A; and (ii) QCC Transaction Fees (as defined in Exchange
Options 3, Section 12 and Floor QCC Orders, as defined in Options 8,
Section 30(e)). The trading activity of separate Lead Market Maker
and Market Maker member organizations will be aggregated in
calculating the Monthly Market Maker Cap if there is Common
Ownership between the member organizations. All dividend, merger,
short stock interest, reversal and conversion, jelly roll and box
spread strategy executions (as defined in this Options 7, Section 4)
will be excluded from the Monthly Market Maker Cap. Lead Market
Makers or Market Makers that (i) are on the contra-side of an
electronically-delivered and executed Customer order, excluding
responses to a PIXL auction; and (ii) have reached the Monthly
Market Maker Cap will be assessed fees as follows: $0.05 per
contract Fee for Adding Liquidity in Penny Symbols, $0.18 per
contract Fee for Removing Liquidity in Penny Symbols, $0.18 per
contract in Non-Penny Symbols, and $0.18 per contract in a non-
Complex electronic auction, including the Quote Exhaust auction and,
for purposes of this fee, the opening process. A Complex electronic
auction includes, but is not limited to, the Complex Order Live
Auction (``COLA''). Transactions which execute against an order for
which the Exchange broadcast an order exposure alert in an
electronic auction will be subject to this fee. See Options 7,
Section 4.
\38\ Firms are subject to a $250,000 ``Monthly Firm Fee Cap''.
Firm Floor Option Transaction Charges and QCC Transaction Fees in
the aggregate for one billing month that exceed the Monthly Firm Fee
Cap per member or member organization, when such members or member
organizations are trading in their own proprietary account, will be
subject to a reduced transaction fee of $0.02 per capped contract
unless there is no fee or the fee is waived. All dividend, merger,
short stock interest, reversal and conversion, jelly roll, and box
spread strategy executions (as defined in this Options 7, Section 4)
are excluded from the Monthly Firm Fee Cap. Transactions in broad-
based index options symbols listed within Options 7, Section 5.A.
are excluded from the Monthly Firm Fee Cap. QCC Transaction Fees are
included in the calculation of the Monthly Firm Fee Cap. See Options
7, Section 4.
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Floor Broker Incentive Program
The Exchange's proposal to amend its Floor Transaction (Open
Outcry) Floor Broker Incentive Program to permit electronic QCC Orders,
as defined in Options 3, Section 12, to be considered qualifying volume
for purposes of the program and not pay rebates for transactions
executed on electronic QCC Orders does not impose an undue burden on
competition as all Phlx Floor Broker electronic QCC Order flow entered
on Phlx will be counted as qualifying volume for the Floor Transaction
(Open Outcry) Floor Broker Incentive Program and those electronic QCC
Order will uniformly be paid rebates based on the schedule in Options
7, Section 4 for rebates.
The Exchange's proposal to increase Tier 2 of the rebate schedule
with respect to qualifying contracts between 500,001-5,000,000, when
Non-Customers are on both sides of the transaction, from $0.12 to $0.16
per contract rebate does not impose an undue burden on competition
because the Exchange will uniformly pay qualifying Floor Brokers the
increased rebate to all qualifying members. Further, the Exchange
believes its proposed increased floor transaction rebates for a Non-
Customer on both sides does not impose an undue burden on competition
when compared to the rebate for a Customer on one side with the same
number of qualifying contracts, because Customers are not assessed a
Floor Options Transaction Charge for Penny and Non-Penny Symbols. In
contrast, the Exchange notes that Non-Customers, except Professionals,
are assessed Floor Options Transaction Charges in Penny and Non-Penny
Symbols. The Exchange proposes to pay higher rebates where there is a
Non-Customer on both sides of a trade because a Floor Broker attracting
Customer order flow can more easily attract Customer orders which are
not assessed a floor transaction fee as compared to attracting a Non-
Customer order which would pay a transaction fee to execute on Phlx's
trading floor.
The Exchange believes that it does not impose an undue burden on
competition to pay rebates on qualifying volume for transactions
executed on the trading floor, because Floor Brokers would be uniformly
paid the rebates based on qualifying volume and the parties to the
transaction.
Strategy Caps for Floor Originated Strategy Executions
The Exchange's proposal to pay a $0.01 per contract rebate on
qualifying strategy executions is equitable and not unfairly
discriminatory because the Exchange would uniformly pay the rebate to
all qualifying Non-Customers. Customers continue to not be assessed an
Options Transaction Charge for strategy executions.

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.\39\
---------------------------------------------------------------------------

\39\ 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#d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3"><span class="__cf_email__" data-cfemail="ee9c9b828bc38d8183838b809a9dae9d8b8dc0898198">[email&#160;protected]</span></a>. Please include
file number SR-Phlx-2025-49 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-2025-49. 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-2025-49 and should be submitted on
or before October 20, 2025.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18798 Filed 9-26-25; 8:45 am]
BILLING CODE 8011-01-P

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