Notice2026-03020
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 9, Section 13 to Exempt Box Spread From Position Limits and To Amend Various Phlx Rules
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Published
February 17, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 31 (Tuesday, February 17, 2026)</title>
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[Federal Register Volume 91, Number 31 (Tuesday, February 17, 2026)]
[Notices]
[Pages 7314-7317]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03020]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104821; File No. SR-Phlx-2026-04]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 9,
Section 13 to Exempt Box Spread From Position Limits and To Amend
Various Phlx Rules
February 11, 2026.
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 January 28, 2026, 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 and II 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 Options 2, Section 11 (Lead Market
Maker Appointments); Options 3, Section 8 (Options Opening Process);
Options 3, Section 10 (Electronic Execution Priority and Processing in
the System); Options 3, Section 14 (Complex Orders); Options 3, Section
15 (Simple Order Risk Protections); Options 3, Section 22 (Limitations
on Order Entry); Options 8, Section 25 (Floor Allocation); Options 8,
Section 34 (FLEX Trading); Options 8, Section 39 (Option Minor Rule
Violations and Order and Decorum Regulations); and Options 9, Section
13 (Position Limits).
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings</a>,
and at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 2, Section 11 (Lead Market
Maker Appointments); Options 3, Section 8 (Options Opening Process);
Options 3, Section 10 (Electronic Execution Priority and Processing in
the System); Options 3, Section 14 (Complex Orders); Options 3, Section
15 (Simple Order Risk Protections); Options 3, Section 22 (Limitations
on
[[Page 7315]]
Order Entry); Options 8, Section 25 (Floor Allocation); Options 8,
Section 34 (FLEX Trading); Options 8, Section 39 (Option Minor Rule
Violations and Order and Decorum Regulations); Options 9, Section 13
(Position Limits). Each rule change will be described below.
Options 2, Section 11
The Exchange proposes to re-letter Options 2, Section 11(i) as (g)
and to correct a cross-citation to paragraph (d) of Options 2, Section
11 to paragraph (e). The proposed amendments are non-substantive.
Options 3, Section 8
The Exchange proposes to add the words ``unmatched contracts'' in
Options 3, Section 8, Opening Process. The addition of this rule text
at Options 3, Section 8(k)(A) will add context to the words ``side of
the imbalance.'' The same language appears in Nasdaq ISE, LLC (``ISE'')
Options 3, Section 8(j)(1). This amendment is non-substantive.
Options 3, Section 10
The Exchange proposes to relocate the rule text in Options 3,
Section 10(b) which states,
Applicability. This rule does not apply to the Block Order
Mechanism described within Options 3, Section 11(a), the Facilitation
Mechanism described within Options 3, Section 11(b), the Solicited
Order Mechanism described within Options 3, Section 11(d), PIXL
described within Options 3, Section 13, and orders described within
Options 3, Section 12, unless Options 3, Section 10 is specifically
referenced within Phlx Rules applicable to the aforementioned
functionality.
The Exchange proposes to relocate this rule text, without change,
immediately before Options 3, Section 10(c) so that the priority
overlays appear after subparagraph (a) to Options 3, Section 10. This
amendment is non-substantive.
Options 3, Section 14
The Exchange proposes to relocate the description of a Cancel-
Replacement Complex Order from Options 3, Section 14(a)(15) to Options
3, Section 14(a)(20), without change, within the Complex Order rule.
Relocating this rule text will harmonize the rule text with ISE Options
3, Section 14(a)(20). This amendment is non-substantive.
Options 3, Section 15
The Exchange proposes to remove the words ``as is the case today,''
from Options 3, Section 15(c)(3) which describes the Post-Only Quoting
Protection. This rule text is unnecessary in this rule. This amendment
is non-substantive.
Options 3, Section 22
The Exchange proposes to amend Options 3, Section 22, Limitations
on Order Entry, to amend ``Members'' to ``Member'' in Options 3,
Section 22(a). This technical amendment is non-substantive.
Options 8, Section 34
The Exchange inadvertently numbered Options 3, Section 34(i) with
duplicate (2)s. At this time, the Exchange proposes to renumber Options
3, Section 34(i) as (1)-(5). This technical amendment is non-
substantive.
Options 9, Section 13
Phlx proposes to amend Options 9, Section 13, Position Limits, at
subparagraph (l) which currently states,
Equity Option Hedge Exemptions. The following qualified hedge
transactions and positions described in paragraphs 1-5 below shall be
exempt from established position limits as prescribed under sections
(g) and (d)(i) above. Hedge transactions and positions established
pursuant to paragraphs (6) and (7) below are subject to a position
limit equal to five (5) times the standard limit established under
sections (g) and (d)(i).
First, the Exchange proposes to remove references to subparagraph
(d)(i) which do not exist in the rule and instead cite to subparagraph
(a) which contains position limits for certain securities.
Second, the Exchange proposes to correct an error with respect to
hedge transactions to permit box spreads to be exempt from established
position limits as prescribed under Options 9, Section 13(a) \3\ and
(g).
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\3\ The reference to Options 9, Section 13(d)(i) is being
amended to subparagraph (a) with this proposal.
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Currently, the rule text states that hedge transactions and
positions established pursuant to Options 9, Section 13(l)(6) and (7)
below are subject to a position limit equal to five (5) times the
standard limit established under Options 9, Section 13(g) and
(d)(i).\4\ Paragraph (l)(6) references a box spread \5\ and paragraph
(l)(7) references OTC options positions.\6\
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\4\ See id.
\5\ Options 9, Section 13(l)(6) states that a long call position
accompanied by a short put position with the same strike price and a
short call position accompanied by a long put position with a
different strike price (``box spread'').
\6\ Options 9, Section 13(l)(7) states that a listed option
position hedged on a one-for-one basis with an over-the-counter
(``OTC'') option position on the same underlying security. The
strike price of the listed option position and corresponding OTC
option position must be within one strike of each other and no more
than one expiration month apart.
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Phlx filed a rule proposal making clear that the five times
standard was limited to OTC options contracts,\7\ however Phlx
inadvertently cited to Options 9, Section 14(l)(6) when it relocated
rules in a subsequent rule change that copied SR-Cboe-2003-30.\8\ The
five times standard should apply only to OTC options contracts as
evidenced by NYSE Arca, Inc. (``NYSE Arca'') Commentary .07 to Rule
5.17-O, Commentary .09 to NYSE American LLC (``NYSE American'') Rule
904, and FINRA Rule 2360(b)(3)(A)(ii).
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\7\ See Securities Exchange Act Release No. 45889 (May 9, 2002),
67 FR 34980 (May 16, 2002) (SR-Phlx-2002-33) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change by the Philadelphia
Stock Exchange, Inc. To Eliminate Position and Exercise Limits for
Certain Qualified Hedge Strategies).
\8\ See Securities Exchange Act Release No. 51322 (March 4,
2005), 70 FR 12260 (March 11, 2005) (SR-Phlx-2005-17) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change and
Amendment No. 1 Thereto Relating to Position Limits and Exercise
Limits).
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At this time, the Exchange proposes to remove the citation to
Options 9, Section 14(l)(6) with respect to a position limit equal to
five (5) times the standard limit. The Exchange proposes to add
paragraph (l)(6) to the list of exempt transactions in the first
sentence of Options 9, Section 14(l) to properly reflect that box
spreads are exempt from the position limits prescribed under Options 9,
Section 13(a) and (d). At this time, the Exchange has been applying a
stricter standard. With this change, members and member organizations
would not have a position limit for a box spread and, therefore, would
not have to unwind any position as a result of this amendment.
Market Maker and Lead Market Maker Defined
The Exchange proposes to amend various references to the term
``Specialist.'' Phlx removed the word ``Specialist'' in a prior rule
change \9\ and replaced the word with ``Lead Market Maker.'' The
Exchange inadvertently missed some changes in Options 3, Section 25;
Options 8, Section 34; and Options 8, Section 39. Further, the Exchange
proposes to replace the word ``ROT'' with ``Market Maker'' in Options
8, Section 25. The term ``ROT'' was removed in SR-Phlx-2020-03 as well.
These amendments are non-substantive.
[[Page 7316]]
The Exchange also proposes to change ``a'' to ``an'' within Options 8,
Section 25(a). This amendment is non-substantive. The Exchange also
proposes to renumber Options 8, Section 25(c)(3)(B)(3) as Options 8,
Section 25(c)(3)(B)(iv).
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\9\ See Securities Exchange Act 88213 (February 14, 2020), 85 FR
9859 (February 20, 2020) (SR-Phlx-2020-03) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Relocate Rules
From Its Current Rulebook Into Its New Rulebook Shell) (``Rulebook
Relocation'').
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Finally, the Exchange proposes to reserve Options 3, Section 26.
This section is being reserved as another rule is proposed in this
section for ISE.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange's proposal to re-letter Options 2, Section 11(i) as
(g) and to correct a cross-citation to paragraph (d) of Options 2,
Section 11 to paragraph (e) are non-substantive.
The Exchange's proposal to (1) add the words ``unmatched
contracts'' in Options 3, Section 8, Opening Process; (2) relocate the
rule text in Options 3, Section 10(b); (3) relocate the description of
a Cancel-Replacement Complex Order from Options 3, Section 14(a)(15) to
Options 3, Section 14(a)(20); (4) remove the words ``as is the case
today,'' from Options 3, Section 15(c)(3); (5) amend ``Members'' to
``Member'' in Options 3, Section 22(a); (6) renumber Options 8, Section
34(i) as (1)-(5); (7) replace the term ``Specialist'' with ``Lead
Market Maker'' and the word ``ROT'' with ``Market Maker''; and (8)
reserve Options 3, Section 26, are consistent with the Act as these
amendments are non-substantive technical amendments to the rules.
Phlx's proposal to amend Options 9, Section 14(1) to correct an
error with respect to hedge transactions to permit box spreads to be
exempt from established position limits as prescribed under Options 9,
Section 13(a) and (d) is consistent with the Act. Current Options 9,
Section 14(l)(6) references a box spread \12\ and current Options 9,
Section 14(l)(8) references OTC options positions.\13\ Phlx filed a
rule proposal making clear that the five times standard was limited to
OTC options contracts,\14\ however Phlx inadvertently cited to Options
9, Section 14(l)(6) when it relocated rules in a subsequent rule change
that copied SR-Cboe-2003-30.\15\ Removing the citation to Options 9,
Section 14(l)(6) with respect to a position limit equal to five (5)
times the standard limit and adding paragraph (l)(6) to the list of
exempt transactions in the first sentence of Options 9, Section 14(l)
would properly reflect that box spreads are exempt from the position
limits prescribed under Options 9, Section 13(a) and (d). At this time,
the Exchange has been applying a stricter standard.\16\
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\12\ Options 9, Section 14(l)(6) states that a long call
position accompanied by a short put position with the same strike
price and a short call position accompanied by a long put position
with a different strike price (``box spread'').
\13\ Options 9, Section 14(l)(8) states that a listed option
position hedged on a one-for-one basis with an over-the-counter
(``OTC'') option position on the same underlying security. The
strike price of the listed option position and corresponding OTC
option position must be within one strike of each other and no more
than one expiration month apart.
\14\ See Securities Exchange Act Release No. 45889 (May 9,
2002), 67 FR 34980 (May 16, 2002) (SR-Phlx-2002-33) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc. To Eliminate Position and Exercise
Limits for Certain Qualified Hedge Strategies).
\15\ See Securities Exchange Act Release No. 51322 (March 4,
2005), 70 FR 12260 (March 11, 2005) (SR-Phlx-2005-17) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change and
Amendment No. 1 Thereto Relating to Position Limits and Exercise
Limits).
\16\ A similar change is being proposed to Nasdaq ISE, LLC rules
at Options 9, Section 14.
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Today, NYSE Arca Commentary .07 to Rule 5.17-O, Commentary .09 to
NYSE American Rule 904 and FINRA Rule 2360(b)(3)(A)(ii) apply the five
times standard only to OTC options contracts and exempt box spreads
from their position limit rules. At this time, the Exchange has been
applying a stricter standard. With this change, members and member
organizations would not have a position limit for a box spread and,
therefore, would not have to unwind any position as a result of this
amendment.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange's proposal to amend Options 9, Section 13(l) to remove
a reference to box spreads at paragraph (l)(6) so that they do not
appear to have five times the position limit does not impose an undue
burden on intra-market competition because all Phlx members and member
organization that transact box spreads would be exempt from the
position limits in Options 9, Section 13(a) and (d).
The Exchange's proposal to amend Options 9, Section 13(l) to remove
a reference to box spreads at paragraph (l)(6) so that they do not
appear to have five times the position limit does not impose an undue
burden on inter-market competition as other options exchanges \17\ have
similar position limit rules that exempt box spreads from position
limits.
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\17\ See NYSE Arca Commentary .07 to Rule 5.17-O, Commentary .09
to NYSE American Rule 904 and FINRA Rule 2360(b)(3)(A)(ii).
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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 \18\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 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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A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\21\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that the
proposed rule change may become operative immediately upon filing. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest as
the proposal raises no new or novel issues. Accordingly, the Commission
waives the 30-day operative delay and
[[Page 7317]]
designates the proposed rule change to be operative upon filing.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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#b0c2c5dcd59dd3dfddddd5dec4c3f0c3d5d39ed7dfc6"><span class="__cf_email__" data-cfemail="5624233a337b35393b3b333822251625333578313920">[email protected]</span></a>. Please include
file number SR-Phlx-2026-04 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-2026-04. 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-2026-04 and should be submitted on
or before March 10, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-03020 Filed 2-13-26; 8:45 am]
BILLING CODE 8011-01-P
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