Notice2025-23658
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend PHLX Equity 6, Section 4 (Exchange Sharing of PSX Participant Risk Settings) To Permit the Allocation of Responsibility to Clearing Members
Primary source
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Published
December 23, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 244 (Tuesday, December 23, 2025)</title>
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[Federal Register Volume 90, Number 244 (Tuesday, December 23, 2025)]
[Notices]
[Pages 60162-60164]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23658]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104452; File No. SR-PHLX-2025-70]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend PHLX
Equity 6, Section 4 (Exchange Sharing of PSX Participant Risk Settings)
To Permit the Allocation of Responsibility to Clearing Members
December 18, 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 10, 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 PHLX Equity 6, Section 4 (Exchange
Sharing of PSX Participant Risk Settings) to permit the allocation of
responsibility to clearing members, and to make some technical changes
to that rule.
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.
[[Page 60163]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend PHLX Equity 6, Section 4 to permit
the allocation of responsibility to clearing members. Specifically, the
Exchange proposes to add a new Section 4(b) (Clearing Member
Designation) to allow a PSX Participant that does not self-clear to
allocate responsibility for establishing and adjusting its risk levels
to a clearing member that clears transactions on behalf of the PSX
Participant.\3\ A clearing member guarantees transactions executed on
the Exchange for PSX Participants with whom it has entered into a
clearing arrangement, and therefore bears the risk associated with
those transactions. Because a clearing member bears the risk on behalf
of its associated PSX Participant, the Exchange believes that it is
appropriate for the clearing member to have knowledge of what risk
settings the PSX Participant may utilize within the Exchange's trading
system, as well as the option to set and adjust the risk levels.
Therefore, the Exchange proposes to make a PSX Participant's risk
settings in PHLX Equity 6, Section 5 available to a clearing member, as
well as the option to set and adjust the risk levels, if authorized by
a PSX Participant.
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\3\ The term ``PSX Participant'' has the meaning set forth in
PHLX Equity 1, Section 1(c).
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For clarification, the Exchange does not guarantee that these risk
controls will be sufficiently comprehensive to meet all of a PSX
Participant's needs, nor are the controls designed to be the sole means
of risk management, and using these controls will not necessarily meet
a PSX Participant's obligations required by Exchange or federal rules--
including, without limitation, Rule 15c3-5 under the Act \4\ (``Rule
15c3-5''). Use of the Exchange's risk settings in PHLX Equity 6,
Section 5 will not automatically constitute compliance with Exchange or
federal rules, and the responsibility for compliance with all Exchange
and federal rules remains with the PSX Participant.\5\
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\4\ 17 CFR 240.15c3-5.
\5\ See SEC Division of Trading and Markets, Responses to
Frequently Asked Questions Concerning Risk Management Controls for
Brokers or Dealers with Market Access (Apr. 15, 2014), available at
<a href="https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/divisionsmarketregfaq-0">https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/divisionsmarketregfaq-0</a>.
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If a PSX Participant chooses to designate responsibility to a
clearing member, the PSX Participant may view any risk levels
established by the clearing member pursuant to proposed PHLX Equity 6,
Section 4(b). Even if a clearing member is designated, a PSX
Participant will continue to be notified by the Exchange of any action
taken regarding its trading activity. A PSX Participant may revoke the
responsibility it has allocated to a clearing member at any time.
The Exchange also proposes labeling current rule PHLX Equity 6,
Section 4(a) as PHLX Equity 6, Section 4(a) (Sharing Risk Settings).
Additionally, the Exchange proposes to make a technical correction to
PHLX Equity 6, Section 4(a). That rule currently refers to ``the
commentary below,'' but the rule has no associated commentary. What
happened is that in 2021, as part of a major rulebook reorganization
effort, the Exchange redesignated PSX Rule 3215 as PHLX Equity 6,
Section 4 and Section 5.\6\ The text of PSX Rule 3215, minus its
commentary, was redesignated as PHLX Equity 6, Section 4. Meanwhile,
the commentary to PSX Rule 3215 was redesignated as PHLX Equity 6,
Section 5. Therefore, the Exchange proposes substituting the reference
to ``the commentary below'' in PHLX Equity 6, Section 4(a) with a
reference to PHLX Equity 6, Section 5. The substance of the newly
labeled and corrected PHLX Equity 6, Section 4(a) remains unchanged.
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\6\ See Securities Exchange Act Release No. 91058 (Feb. 4,
2021), 86 FR 8966 (Feb. 10, 2021), at 8969 (File No. SR-Phlx-2021-
04) (Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Relocate Its PSX Equity and General Rules From Its Current Rulebook
Into Its New Rulebook Shell and Make Other Changes to the Phlx
Rules).
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The Exchange will announce the implementation date of the change
described in this filing in an Equity Trader Alert at least 30 days
prior to implementation. At present, the Exchange expects that the
functionality described in this filing will be ready for implementation
in the first quarter of 2026, although that time frame is subject to
change.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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As a preliminary matter, the Exchange notes that this proposal is
not novel. Earlier this year The Nasdaq Stock Market LLC made a
parallel change to its rulebook.\9\ The language of Nasdaq Equity 6,
Section 4(b) is substantively identical to the new rule text proposed
by the Exchange in the present filing.\10\
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\9\ See Securities Exchange Act Release No. 103211 (June 9,
2025), 90 FR 25095 (June 13, 2025) (File No. SR-NASDAQ-2025-043)
(Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change to
Amend Equity 6, Section 4 (Exchange Sharing of Participant Risk
Settings) to Permit the Allocation of Responsibility to Clearing
Members) (``Nasdaq Filing'').
\10\ As adopted in the Nasdaq Filing, this Nasdaq rule reads as
follows: ``Clearing Member Designation. A Participant that does not
self-clear may allocate the responsibility for establishing and
adjusting the risk levels identified in Equity 6, Section 5 to a
clearing member that clears transactions on behalf of the
Participant, if designated in a manner prescribed by the Exchange. A
Participant that chooses to allocate responsibility to its clearing
member may view any risk levels established by the clearing member
pursuant to this Rule, and will be notified of any action taken by
the Exchange with respect to its trading activity. A Participant may
revoke responsibility allocated to its clearing member pursuant to
this paragraph at any time, if designated in a manner prescribed by
the Exchange.''
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The Exchange believes that the proposed amendment to PHLX Equity 6,
Section 4 would provide clearing members, who have assumed certain
risks of PSX Participants, greater control over risk tolerance and
exposure on behalf of their correspondent PSX Participant, while
helping to ensure that both the PSX Participant and its clearing member
are aware of developing issues.
A clearing member guarantees transactions executed on Nasdaq for
members with whom it has entered into a clearing arrangement, and
therefore bears the risk associated with those transactions. The
Exchange therefore believes that it is appropriate for a clearing
member to have knowledge of what risk settings a PSX Participant may
utilize within the Exchange's trading system, as well as the option to
set and
[[Page 60164]]
adjust the risk levels. The proposal will permit a clearing member with
whom a PSX Participant has entered into a clearing arrangement to
better monitor and manage the potential risks assumed by the clearing
member, thereby providing the clearing member with greater control and
flexibility over setting its own risk tolerance and exposure and aiding
the clearing member in complying with the requirements of the Act.
The Exchange also believes that the proposed amendment will assist
PSX Participants and clearing members in managing their financial
exposure which, in turn, could enhance the integrity of trading on the
securities markets and help to ensure the stability of the financial
system. Moreover, a PSX Participant may revoke responsibility allocated
to its clearing member at any time.
The Exchange believes that the proposed rule change does not
unfairly discriminate among PSX Participants because the use of the
risk settings under PHLX Equity 6, Section 5 would be available to all
PSX Participants and their clearing members, if authorized. In
addition, because all orders on the Exchange pass through the
Exchange's risk checks, there would be no difference in the latency
experienced by PSX Participants who have opted to use the risk settings
versus those who have not opted to use them.\11\
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\11\ All Exchange orders pass through basic risk checks
regardless of whether a PSX Participant opts into a risk setting.
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Additionally, the Exchange believes that relabeling PHLX Equity 6,
Section 4(a) as PHLX Equity 6, Section 4(a) (Sharing Risk Settings),
and correcting the reference to the ``commentary'' in that rule to its
current location in PHLX Equity 6, Section 5, are consistent with the
Act because they make PHLX Equity 6, Section 4 easier to understand and
navigate, which should aid all PSX Participants in following the rules
of the Exchange.
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. The proposed rule change is
designed to provide PSX Participants and their clearing members with
additional means to monitor and control risk. The proposed rule may
increase confidence in the proper functioning of the markets and
contribute to additional competition among trading venues and broker-
dealers. Rather than impede competition, the proposal is designed to
facilitate more robust risk management by PSX Participants and clearing
members, which, in turn, could enhance the integrity of trading on the
securities markets and help to ensure the stability of the financial
system. Additionally, the changes to PHLX Equity 6, Section 4(a) will
not have any impact on competition, as they are merely technical in
nature.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#641611080149070b0909010a1017241701074a030b12"><span class="__cf_email__" data-cfemail="2153544d440c424e4c4c444f5552615244420f464e57">[email protected]</span></a>. Please include
file number SR-PHLX-2025-70 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-2025-70. 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-2025-70 and should be submitted on
or before January 13, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23658 Filed 12-22-25; 8:45 am]
BILLING CODE 8011-01-P
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