Notice2025-23237
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Options 7, Section 4
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Published
December 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 241 (Thursday, December 18, 2025)</title>
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[Federal Register Volume 90, Number 241 (Thursday, December 18, 2025)]
[Notices]
[Pages 59256-59259]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23237]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104400; File No. SR-Phlx-2025-66]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx
Options 7, Section 4
December 15, 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 December 1, 2025, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Monthly Market Maker Cap and
Monthly Firm Fee Cap 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).
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 its Pricing Schedule at Options 7, Section
4, Multiply Listed Options Fees (Includes options overlying equities,
ETFs, ETNs and indexes which are Multiply Listed) (Excludes SPY and
broad-based index options symbols listed within Options 7, Section 5.A)
to amend rule text related to the Monthly Market Maker Cap and the
Monthly Firm Fee Cap. Each change is described below.
Monthly Market Maker Cap
Today, Lead Market Makers \3\ and Market Makers \4\ 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) Qualified Contingent Cross (``QCC'') Transaction
Fees (as defined in Exchange Options 3, Section 12 and Floor QCC
Orders, as defined in Options 8, Section 30(e)).\5\ Currently, 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 Market Maker Cap. Further,
today, 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
[[Page 59257]]
Cap are assessed fees per contract 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,
which includes for purposes of this fee, the opening process.\6\
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\3\ 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).
\4\ 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. See Options
7, Section 1(c).
\5\ The trading activity of separate Lead Market Maker and
Market Maker member organizations is aggregated in calculating the
Monthly Market Maker Cap if there is Common Ownership between the
member organizations.
\6\ A Complex electronic auction includes, but is not limited
to, an Exposure Complex Auction pursuant to Supplementary Material
.01 to Options 3, Section 14. Also, transactions which execute
against an order for which the Exchange broadcast an order exposure
alert or Exposure Complex Auction in an electronic auction will be
subject to this fee.
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The Exchange proposes to amend the rule text by relocating current
text and adding new text. The Exchange propose to state: Lead Market
Makers and Market Makers are subject to a ``Monthly Market Maker Cap''
of $500,000 for:
[Oslash] electronic Option Transaction Charges, excluding: (i)
surcharges; (ii) options overlying broad-based index options symbols
listed (as defined in Options 7, Section 5.A), (iii) dividend, merger,
short stock interest, reversal and conversion, jelly roll and box
spread strategy executions (as defined in this Options 7, Section 4);
(iv) Crossing Order Fees (as defined in Options 7, Section 6, F); and
(v) FLEX Electronic Transaction Fees (as defined in Options 7, Section
6, B); and
[Oslash] QCC Transaction Fees (as defined in this Options 7,
Section 4).
For this section of the Pricing Schedule, the Exchange is
relocating rule text concerning dividend, merger, short stock interest,
reversal and conversion, jelly roll and box spread strategy executions
without substantive change. The Exchange proposes exclusions for
Crossing Order \7\ Fees and FLEX \8\ Electronic Transaction Fees in the
added rule text. The Exchange recently adopted new pricing to Phlx's
Pricing Schedule related to its new functionality \9\ that was similar
to pricing on Nasdaq ISE, LLC (``ISE''). Among other changes, SR-Phlx-
2025-48 adopted pricing \10\ for its (1) new electronic FLEX
functionality pursuant to Options 3A, (2) Facilitation Mechanism
pursuant to Options 3, Section 11(b) and (c), (3) Solicited Order
Mechanism pursuant to Options 3, Section 11(d) and (e), and (4) Block
Order Mechanism pursuant to Options 3, Section 11(a).\11\ The Exchange
inadvertently did not include rule text about the new pricing for
Crossing Order Fees and FLEX Electronic Transaction Fees with respect
to the Monthly Market Maker Cap.\12\ At this time, the Exchange
proposes to note that Crossing Order Fees and FLEX Electronic
Transaction Fees are excluded from the Monthly Market Maker Cap.
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\7\ The term ``Crossing Order'' shall mean an order executed in
the 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. See Options 7, Section 1(c).
\8\ FLEX Options are customized options contracts that allow
investors to tailor contract terms for exchange-listed equity and
index options. See Phlx Options 3A.
\9\ See Securities Exchange Act Release No. 104031 (September
24, 2025), 90 FR 46682 (September 29, 2025) (SR-Phlx-2025-48)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Establish Pricing for New Functionality).
\10\ This new functionality is being migrated to Phlx's trading
platform over a five week timeframe on a symbol by symbol basis. The
migration will be complete on December 8, 2025. See <a href="https://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2025-32">https://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2025-32</a>.
\11\ 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. The
Solicited Order Mechanism or ``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 3, Section 11(d) and (e). Each order
entered into the SOM shall be designated as all-or-none. 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).
\12\ ISE does not offer a market maker cap.
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The Exchange also proposes to update the citations to the pricing
that is being referenced in the Monthly Market Maker Cap and also
conforming the format of the citations to that pricing.
Monthly Firm Fee Cap
Today, Firms \13\ 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, are subject
to a reduced transaction fee of $0.02 per capped contract unless there
is no fee or the fee is waived. Today, 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. Today, transactions in broad-
based index options symbols listed within Options 7, Section 5.A. are
excluded from the Monthly Firm Fee Cap. Finally, today, QCC Transaction
Fees are included in the calculation of the Monthly Firm Fee Cap.
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\13\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at OCC. See Options 7, Section 1(c).
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At this time, as the Monthly Firm Fee Cap currently applies to Firm
Floor Options Transaction Charges, the Exchange proposes to
specifically note that ``Electronic Options Transaction Charges are
excluded from the Monthly Firm Fee Cap.'' The Exchange notes that this
proposed text does not substantively amend the Monthly Firm Fee Cap,
rather it will complete the list of excluded transaction charges.
Finally, the Exchange proposes to add a citation for QCC Transaction
Charges.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 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.'' \16\
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\16\ 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
\17\ (``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-
[[Page 59258]]
based approach.\18\ 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.'' \19\
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\17\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\18\ See NetCoalition, at 534-535.
\19\ 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'. . . .'' \20\ 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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\20\ 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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Monthly Market Maker Cap
The Exchange's proposal to relocate and amend current rule text is
reasonable, equitable and not unfairly discriminatory because the
revised rule text makes clear what rule text is included and excluded
in a transparent manner with citations to the rule text.
The Exchange's proposal to add new rule text to exclude Crossing
Order Fees and FLEX Electronic Transaction Fees from the Monthly Market
Maker Cap is reasonable. The recently adopted \21\ auction pricing for
Crossing Order Fees and FLEX Electronic Transaction Fees needs to be
addressed for purposes of the Monthly Market Maker Cap. In terms of
auction pricing, PIXL is the only other auction on Phlx and it is
explicitly addressed in the rule text. The remainder of the pricing
that is discussed in the Monthly Market Maker cap is order book
pricing. Excluding these auctions (Crossing Order Fees and FLEX
Electronic Transaction Fees) is reasonable because the pricing is new
and the Phlx migration is not complete.\22\ Phlx is seeking to
encourage market participants to utilize this new functionality which
is currently not available for all symbols until the migration is
complete on December 8, 2025. Once the migration is complete, Phlx will
consider whether to amend its cap to include the auctions or certain
auction transactions to encourage greater activity in the auctions.
Further, when Phlx adopted the pricing in SR-Phlx-2025-48 it was
mirroring pricing offered on ISE. ISE does not offer a similar market
maker cap.
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\21\ See Securities Exchange Act Release No. 104031 (September
24, 2025), 90 FR 46682 (September 29, 2025) (SR-Phlx-2025-48)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Establish Pricing for New Functionality).
\22\ Only a handful of symbols are trading on the migrated
platform.
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The Exchange's proposal to add new rule text to exclude Crossing
Order Fees and FLEX Electronic Transaction Fees from the Monthly Market
Maker Cap is equitable and not unfairly discriminatory because the
Exchange would exclude Crossing Order Fees and FLEX Electronic
Transaction Fees from the Monthly Market Maker Cap in a uniform manner
for all Phlx members and member organizations.
Monthly Firm Fee Cap
The Exchange's proposal to specifically note that electronic
Options Transaction Charges are excluded from the Monthly Firm Fee Cap
and add a citation for QCC Transaction Charges is reasonable, equitable
and not unfairly discriminatory as these amendments are non-substantive
technical amendments to further clarify existing rule text.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where to transact options. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
Intra-Market Competition
The Exchange's proposal to add new rule text to exclude Crossing
Order Fees and FLEX Electronic Transaction Fees from the Monthly Market
Maker Cap does not impose an undue burden on competition because the
Exchange would exclude Crossing Order Fees and FLEX Electronic
Transaction Fees from the Monthly Market Maker Cap in a uniform manner
for all Phlx members and member organizations.
The Exchange's proposal to specifically note that electronic
Options Transaction Charges are excluded from the Monthly Firm Fee Cap
and add a citation for QCC Transaction Charges does not impose an undue
burden on competition because these amendments are non-substantive
technical amendments to further clarify existing rule text.
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.\23\
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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#a9dbdcc5cc84cac6c4c4ccc7dddae9daccca87cec6df"><span class="__cf_email__" data-cfemail="afdddac3ca82ccc0c2c2cac1dbdcefdccacc81c8c0d9">[email protected]</span></a>. Please include
file number SR-Phlx-2025-66 on the subject line.
[[Page 59259]]
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-2025-66. 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-2025-66 and should be submitted on
or before January 8, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23237 Filed 12-17-25; 8:45 am]
BILLING CODE 8011-01-P
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