Notice2025-23815
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port Fees
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Published
December 29, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 245 (Monday, December 29, 2025)</title>
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[Federal Register Volume 90, Number 245 (Monday, December 29, 2025)]
[Notices]
[Pages 60788-60791]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23815]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104471; File No. SR-Phlx-2025-75]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port
Fees
December 19, 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 16, 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 its Specialized Quote Feed \3\ or
``SQF'' Port pricing at Options 7, Section 9, B, ``Port Fees.'' \4\
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\3\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Lead Market Makers, Streaming Quote Traders (``SQTs'') and
Remote Streaming Quote Traders (``RSQTs'') to connect, send, and
receive messages related to quotes, Immediate-or-Cancel Orders, and
auction responses into and from the Exchange. Features include the
following: (1) options symbol directory messages (e.g., underlying
and complex instruments); (2) system event messages (e.g., start of
trading hours messages and start of opening); (3) trading action
messages (e.g., halts and resumes); (4) execution messages; (5)
quote messages; (6) Immediate-or-Cancel Order messages; (7) risk
protection triggers and purge notifications; (8) opening imbalance
messages; (9) auction notifications; and (10) auction responses. The
SQF Purge Interface only receives and notifies of purge requests
from the Lead Market Maker, SQT or RSQT. Lead Market Makers, SQTs
and RSQTs may only enter interest into SQF in their assigned options
series. Immediate-or-Cancel Orders entered into SQF are not subject
to the Order Price Protection, the Market Order Spread Protection,
or Size Limitation in Options 3, Section 15(a)(1), (a)(2) and
(b)(2), respectively. See Options 3, Section 7(a)(i)(B).
\4\ On December 8, 2025 the Exchange filed SR-Phlx-2025-69. On
December 16, 2025 the Exchange withdrew SR-Phlx-2025-69 and filed
this rule change.
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While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on January 1,
2026.
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 SQF Port pricing at Options 7, Section
9, B, ``Port Fees'' by offering an incentive to Market Makers \5\ to
lower their SQF Port Fees.
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\5\ 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). The term ``Floor Market Maker'' is a Market Maker
who is neither an SQT or an RSQT. A Floor Market Maker may provide a
quote in open outcry. See Options 8, Section 2(a)(4). Only Market
Makers utilize SQF Ports for quoting purposes.
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Pursuant to a prior rule change, as of January 1, 2026, Phlx will
assess an SQF Port Fee of $1,185 per port, per month.\6\
[[Page 60789]]
At this time, the Exchange proposes to offer an opportunity to lower
SQF Port Fees as of January 1, 2026. Specifically, the Exchange
proposes to offer certain discounts to Market Makers that have
transacted a certain percentage of Total National Volume in the prior
month. For purposes of this proposal, the percentage of Total National
Volume is calculated by taking the total Market Maker Penny Symbol and
Market Maker Non-Penny Symbol volume (excluding index options) executed
on the Exchange in the prior month and attributing a multiple of five
times to that Non-Penny Symbol volume (numerator) and dividing that by
Market Maker volume (``M'' capacity at The Options Clearing Corporation
(``OCC'')) in multiply listed options across all options exchanges
(denominator or Total National Volume).
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\6\ See Securities Exchange Act Release No. 103889 (September 5,
2025), 90 FR 43662 (September 10, 2025) (SR-Phlx-2025-40) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Phlx Options 7, Section 9).
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Tier Percentage of Total National Volume Percentage SQF Port discount
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1....................................... less than 0.10%........................ 0
2....................................... greater than or equal to 0.10% and less 10
than 0.25%.
3....................................... greater than or equal to 0.25% and less 30
than 0.40%.
4....................................... greater than or equal to 0.40%......... 50
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With this proposal, a Market Maker that transacted less than 0.10%
of Total National Volume in the prior month would not receive a
discount on SQF Port Fees. A Market Maker that transacted greater than
or equal to 0.10% and less than 0.25% of Total National Volume in the
prior month will be afforded a discount of 10% on their SQF Port Fees.
A Market Maker that transacted greater than or equal to 0.25% and less
than 0.40% of Total National Volume in the prior month will be afforded
a discount of 30% on their SQF Port Fees. Finally, a Market Maker that
transacted greater than or equal to 0.40% of Total National Volume in
the prior month will be afforded a discount of 50% on their SQF Port
Fees. By way of example, a Market Maker that executed 3,000,000 in
Penny Volume and 200,000 in Non-Penny Volume in a given month on the
Exchange, where the Total National Volume was 1,000,000,000, would
qualify for a discount of 50% on their SQF Port Fees ((200,000 x 5=
1,000,000) + 3,000,000 = 4,000,000 which is 0.40% of 1,000,000,000).
The Exchange proposes to calculate Market Maker Non-Penny Symbol
volume at five times the weight as compared to Market Maker Penny
Symbol volume because Non-Penny Symbols tend to have lower volumes and
this incentive should encourage a greater amount of volume in Non-Penny
Symbols. Overall, the proposed discounts should encourage Market Makers
to transact additional order flow on Phlx with which other market
participants may interact, for an opportunity to lower SQF Port Fees.
The Exchange proposes to exclude index options as index options are
generally not multiply listed.
The Exchange also proposes to add back the text which provided, ``A
Market Maker may not subscribe to more than 250 SQF Ports per month.''
This rule text was inadvertently omitted in the rule text to SR-Phlx-
2025-40 which did not indicate that rule text was to be removed.
Additionally, the Exchange proposes to remove the text that states,
``for ports that receive inbound quotes at any time within that month
(``active port'').'' SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with
an SQF Port Fee that was identical to Nasdaq ISE, LLC (``ISE'').
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 Sections
6(b)(4) and 6(b)(5) of the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 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.'' \9\
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\9\ 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
\10\ (``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.\11\ 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.'' \12\
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\10\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\11\ See NetCoalition, at 534-535.
\12\ 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' . . . .'' \13\ 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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\13\ 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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The proposed fee discounts for Phlx SQF Ports are reasonable
because they will attract a greater amount of order flow to Phlx with
which other market participants may interact while also lowering costs
for certain Market Makers that are able to transact greater than 0.10%
of Total National Volume in the prior month. The Exchange believes it
is reasonable to lower costs for certain Market Makers that transact
greater than 0.10% of Total National Volume on Phlx because those
Market Makers are affording other Phlx members and member organizations
an opportunity to interact with that order flow. The proposal provides
an incremental incentive for Market Makers that transact at least 0.10%
of Total National Volume, which provides a higher
[[Page 60790]]
benefit for satisfying increasingly more stringent criteria. The
Exchange believes that the value of the proposed discounts is
commensurate with the difficulty to achieve the corresponding
threshold. Additionally, the discounts may incentivize and attract more
volume and liquidity to the Exchange, which will benefit all Exchange
participants through increased opportunities to trade as well as
enhancing price discovery. The Exchange's proposed discounts are
substantially similar to Cboe Exchange, Inc.'s (``Cboe'') credit for
their BOE Bulk Port Fees.\14\
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\14\ Cboe currently offers its market makers credits on their
monthly BOE Bulk Port Fees. Specifically, if a Cboe market maker
affiliate (``affiliate'' defined as having at least 75% common
ownership between the two entities as reflected on each entity's
Form BD, Schedule A) or Cboe Appointed OFP receives a credit under
the Exchange's Volume Incentive Program (``VIP''), the Cboe market
maker will receive an access credit on their BOE Bulk Ports
corresponding to the VIP tier reached. The credit is based on the
Performance Tier earned by a market maker under Cboe's Liquidity
Provider Sliding Scale Adjustment Table. Tiers 4 and 5 earn a 40%
credit on monthly Cboe Bulk Port Fees. Cboe assesses BOE Bulk
Logical Ports a fee of $1,500 for 1 to 5 ports, a fee of $2,500 for
6 to 30 ports and a fee of $3,000 for over 30 ports. Additionally,
each BOE Bulk Logical Port will incur the logical port fee indicated
when used to enter up to 30,000,000 orders per trading day per
logical port as measured on average in a single month. Each
incremental usage of up to 30,000,000 orders per day per BOE Bulk
Logical Port will incur an additional logical port fee of $3,000 per
month. Incremental usage will be determined on a monthly basis based
on the average orders per day entered in a single month across all
subscribed BOE Bulk Logical Ports.
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Phlx believes it is reasonable to offer fee discounts to those
Market Makers that primarily provide and post liquidity to the
Exchange, as it should encourage Market Makers to continue to
participate on the Exchange and add liquidity. Greater liquidity
benefits all market participants by providing more trading
opportunities and tighter spreads. The proposal would also mitigate the
costs incurred by Market Makers on Phlx.
Calculating Market Maker Non-Penny Symbol volume at five times the
weight as compared to Penny Symbol volume is reasonable, equitable and
not unfairly discriminatory as Non-Penny Symbols tend to have lower
volumes and this incentive should encourage a greater amount of volume
in Market Maker Non-Penny Symbols.\15\ The Exchange proposes to
calculate the Market Maker Non-Penny Symbol volume in an uniform manner
for all members and member organizations. The Exchange proposes to
exclude index options as index options are generally not multiply
listed. Index Options would be uniformly excluded.
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\15\ Penny Symbols typically are more liquid symbols.
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A Phlx Market Maker requires only one SQF Port to submit quotes in
its assigned options series into Phlx. A Phlx Market Maker may submit
all quotes through one SQF Port. While a Phlx Market Maker may elect to
obtain multiple SQF Ports to organize its business,\16\ only one SQF
Port is necessary for a Phlx Market Maker to fulfill its regulatory
quoting obligations.\17\
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\16\ For example, a Phlx Market Maker may desire to utilize
multiple SQF Ports for accounting purposes, to measure performance,
for regulatory reasons or other determinations that are specific to
that member organization.
\17\ Phlx Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, Phlx Market
Makers have certain quoting requirements with respect to their
assigned options series as provided in Options 2, Section 5. SQF
Ports are the only quoting protocol available on Phlx and only
Market Makers may utilize SQF Ports.
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The proposed fee discounts for Phlx SQF Ports are equitable and not
unfairly discriminatory as they would apply uniformly to each Phlx
Market Maker. The Exchange would uniformly calculate the Market Maker's
percentage each month. Although only Market Makers may receive the
proposed discounts, the Exchange notes that Market Makers are valuable
market participants that provide liquidity in the marketplace and incur
costs that other market participants do not incur. Unlike other market
participants, Market Makers are required to provide continuous two-
sided quotes on a daily basis,\18\ and are subject to various
obligations associated with providing liquidity.\19\ While the Exchange
is not offering a discount to those Market Makers that transact less
than 0.10% of Total National Volume, the Exchange notes that these
Market Makers transact a much lower amount of contracts on Phlx as
compared to other Market Makers who qualify for a discount. In some
cases, these Market Makers are not executing the requisite amount of
Penny Symbols or Non-Penny Symbols to obtain the discount. Market
Makers are required to demonstrate that they have significant market-
making and/or Lead Market Maker experience in a broad array of
securities, a proven ability to interact with order flow in all types
of markets, and a willingness and ability to make competitive markets
on the Exchange and otherwise to promote the Exchange in a manner that
is likely to enhance the ability of the Exchange to compete
successfully for order flow in the options it trades, among other
things.\20\ The Exchange believes that all Market Makers are capable of
quoting tighter or in a greater amount of options classes to obtain the
requisite volume to achieve a discount.
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\18\ See Phlx Options 2, Section 5.
\19\ See Phlx Options 2, Section 4.
\20\ See Phlx Options 2, Section 1(a)(2).
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The Exchange's proposal to add back the text which provided, ``A
Market Maker may not subscribe to more than 250 SQF Ports per month''
is reasonable, equitable and not unfairly discriminatory as that rule
text was inadvertently not displayed in the rule text to SR-Phlx-2025-
40 and was not intended to be removed. There was no mention of its
removal in SR-Phlx-2025-40. The Exchange's proposal to remove the words
``for ports that receive inbound quotes at any time within that month
(``active port'')'' is reasonable, equitable and not unfairly
discriminatory as SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with an
SQF Port Fee that was identical to ISE. Other rule text that mentioned
active SQF Ports was removed in SR-Phlx-2025-40.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
In terms of intra-market competition, the proposed fee discounts
for Phlx SQF Ports do not impose a burden on competition because they
would apply uniformly to each Phlx Market Maker and the Exchange would
uniformly calculate the Market Maker's percentage each month. Although
only Market Makers may receive the proposed discounts, the Exchange
notes that Market Makers are valuable market participants that provide
liquidity in the marketplace and incur costs that other market
participants do not incur. Unlike other market participants, Market
Makers are required to provide continuous two-sided quotes on a daily
basis,\21\ and are subject to various obligations associated with
providing liquidity.\22\ Further, while the Exchange is not offering a
discount to those Market Makers that transact less than 0.10% of Total
National Volume, the Exchange notes that these Market Makers transact a
much lower amount of contracts on Phlx as compared to other Market
Makers that qualify for the discount and/or these Market Makers are not
executing the requisite amount of Penny Symbols or Non-Penny Symbols to
obtain the discount. The
[[Page 60791]]
Exchange's proposal does not impose an undue burden on competition
because Market Makers are required to demonstrate that they have
significant market-making and/or Lead Market Maker experience in a
broad array of securities, a proven ability to interact with order flow
in all types of markets, and a willingness and ability to make
competitive markets on the Exchange and otherwise to promote the
Exchange in a manner that is likely to enhance the ability of the
Exchange to compete successfully for order flow in the options it
trades, among other things.\23\ The Exchange believes that all Market
Makers are capable of quoting tighter or in a greater amount of options
classes to obtain the requisite volume to achieve a discount.
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\21\ See Phlx Options 2, Section 5.
\22\ See Phlx Options 2, Section 4.
\23\ See Phlx Options 2, Section 1(a)(2).
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The Exchange's proposal to add back the text which provided, ``A
Market Maker may not subscribe to more than 250 SQF Ports per month''
does not impose an undue burden on competition as that rule text was
inadvertently not displayed in the rule text to SR-Phlx-2025-40 and was
not intended to be removed. There was no mention of its removal in SR-
Phlx-2025-40. Also, the Exchange's proposal to remove the words ``for
ports that receive inbound quotes at any time within that month
(``active port'')'' does not impose an undue burden on competition as
SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with an SQF Port Fee that
was identical to ISE. Other rule text that mentioned active SQF Ports
was removed in SR-Phlx-2025-40.
In terms of inter-market competition, 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
options exchanges. In addition to the Exchange, market participants
have alternative options exchanges that they may participate on and
direct their order flow. In sum, if the changes proposed herein are
unattractive to market participants, it is likely that the Exchange
will lose market share as a result. Accordingly, the Exchange does not
believe that the proposed changes will impair the ability of members or
competing options exchanges to maintain their competitive standing in
the financial markets.
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.\24\
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\24\ 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#e496918881c9878b8989818a9097a4978187ca838b92"><span class="__cf_email__" data-cfemail="88fafde4eda5ebe7e5e5ede6fcfbc8fbedeba6efe7fe">[email protected]</span></a>. Please include
file number SR-Phlx-2025-75 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-2025-75. 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-2025-75 and should be submitted on
or before January 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23815 Filed 12-23-25; 8:45 am]
BILLING CODE 8011-01-P
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