Notice2026-07780
Self-Regulatory Organizations; Nasdaq Texas, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NTX Options Price Improvement Auction
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 22, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 77 (Wednesday, April 22, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 77 (Wednesday, April 22, 2026)]
[Notices]
[Pages 21573-21576]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07780]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105263; File No. SR-NasdaqTX-2026-017]
Self-Regulatory Organizations; Nasdaq Texas, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
NTX Options Price Improvement Auction
April 17, 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 April 13, 2026, Nasdaq Texas, LLC (``Nasdaq Texas'' 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NTX Options Rules to permit
orders for the accounts of Market Makers assigned to the options class
to be solicited for the Initiating Order \3\ submitted for execution
against an agency order into a Price Improvement Auction (``PRISM'').
---------------------------------------------------------------------------
\3\ The ``Initiating Order'' is the order comprised of principal
interest or a solicited order(s) submitted to trade against the
order the submitting Participant represents as agent (the ``PRISM
Order'').
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaqtx/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaqtx/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 3, Section 13, Price
Improvement Auction (``PRISM''), to permit orders by Participants in a
PRISM Auction to trade against the PRISM Orders \4\ for the accounts of
Market Makers assigned to the options class. Cboe Exchange, Inc.
(``Cboe'') recently received approval to amend its rules in an
identical manner.\5\ The Exchange also proposes an amendment to Options
5, Section 4 relating to the handling of Immediate-or-Cancel Orders.\6\
---------------------------------------------------------------------------
\4\ PRISM Orders are orders entered by a Participant and
represented as agent.
\5\ See Securities Exchange Act Release No. 105049 (March 19,
2026), 91 FR 14057 (March 24, 2026) (SR-Cboe-2025-090).
\6\ ``Immediate-or-Cancel'' or ``IOC'' is a Market Order or
Limit Order to be executed in whole or in part upon receipt. Any
portion not so executed is cancelled.. See Options 3, Section
7(b)(2).
---------------------------------------------------------------------------
Background
A PRISM Auction is an electronic auction intended to provide a
PRISM Order with the opportunity to receive price improvement (over the
National Best Bid or Offer (``NBBO'')). There is no specific size
requirement for a PRISM Auction. Upon submitting a PRISM Order into a
PRISM, the Initiating Participant must also submit a contra-side paired
order.\7\ The Initiating Order guarantees that the PRISM Order will
receive an execution at no worse than the auction price. Upon
commencement of an auction, market participants may submit responses to
trade against the PRISM Order.\8\ At the conclusion of a PRISM Auction,
the PRISM Order will be executed in full at the best prices available,
taking into consideration all Exchange quotes, orders and PAN
responses.\9\ NTX Options' PRISM is very similar to Cboe's Automated
Price Improvement Mechanism or ``AIM.'' \10\
---------------------------------------------------------------------------
\7\ Each of these auctions requires a paired order.
\8\ See Options 3, Section 13(ii)(A)(4). Responses in PRISM are
called PAN responses.
\9\ If the Initiating Participant selected the single stop price
option of the PRISM Auction, PRISM executions will occur at prices
that improve the stop price, and then at the stop price with up to
40% or such lower percentage requested by the Initiating Participant
of the initial size of the PRISM Order after Public Customer
interest is satisfied being allocated to the Initiating Participant
at the stop price. However, if only one other quote, order or PAN
response matches the stop price, then the Initiating Participant may
be allocated up to 50% of the contracts executed at such price,
provided the Initiating Participant had not designated a percentage
designation of ``Surrender'' when initiating the Auction. See
Options 3, Section 13(ii)(E)(2)(a). If the Initiating Participant
selected the auto-match option of the PRISM Auction the Initiating
Participant shall be allocated an equal number of contracts as the
aggregate size of all other quotes, orders and PAN responses at each
price point until a price point is reached where the balance of the
order can be fully executed, except that the Initiating Participant
shall be entitled to receive up to 40% (multiple competing quotes,
orders or PAN responses) or 50% (one competing quote, order or PAN
response) of the initial size of the PRISM Order at the final price
point including situations where the stop price is the final price
after Public Customer interest has been satisfied but before
remaining interest. See Options 3, Section 13(ii)(E)(2)(b). If the
Initiating Participant selected the ``stop and NWT'' option of the
PRISM Auction then allocation would be first to quotes, orders and
PAN responses at prices better than the NWT price (if any),
beginning with the best price, at each price point and next, to
quotes, orders and PAN responses at prices at the Initiating
Participant's NWT price and better than the Initiating Participant's
stop price, beginning with the NWT price. The Initiating Participant
shall be allocated an equal number of contracts as the aggregate
size of all other quotes, orders and PAN responses at each price
point, except that the Initiating Participant shall be entitled to
receive up to 40% (multiple competing quotes, orders or PAN
responses) or 50% (one competing quote, order or PAN response) of
the initial size of the PRISM Order at the final price point
including situations where the final price is the stop price, after
Public Customer interest has been satisfied but before remaining
interest. In the case of an Initiating Order with a NWT price at the
market, the Initiating Participant shall be allocated an equal
number of contracts as the aggregate size of all other quotes,
orders and PAN responses at all price points, except that the
Initiating Participant shall be entitled to receive up to 40%
(multiple competing quotes, orders or PAN responses) or 50% (one
competing quote, order or PAN response) of the initial size of the
PRISM Order at the final price point including situations where the
final price is the stop price, after Public Customer interest has
been satisfied but before remaining interest. See Options 3, Section
13(ii)(E)(2)(c).
\10\ An AIM Auction is an electronic auction intended to provide
an Agency Order with the opportunity to receive price improvement
(over the National Best Bid or Offer (``NBBO'')). Upon submitting an
Agency Order into an AIM Auction, the initiating Trading Permit
Holder (``Initiating TPH'') must also submit a contra-side second
order (``Initiating Order'') for the same size as the Agency Order.
The Initiating Order guarantees that the Agency Order will receive
an execution at no worse than the auction price. Upon commencement
of an auction, market participants may submit responses to trade
against the Agency Order. See Cboe Rule 5.37(c)(5). At the
conclusion of an AIM Auction, depending on the contra-side interest
(including auction responses) available, the Initiating Order may be
allocated a certain percentage (or more) of the Agency Order. See
Cboe Rule 5.37(e).
---------------------------------------------------------------------------
Proposal
Currently, Options 3, Section 13(i)(F) prohibits orders by
Participants in a PRISM to trade against the PRISM Orders for the
accounts of Market Makers assigned to the options class.
While market participants other than assigned Market Makers may
contribute liquidity to a PRISM Auction as either a contra-side order
or a response, assigned Market Makers, who are the
[[Page 21574]]
primary source of liquidity on the Exchange in their assigned options,
are limited in the manner in which they may provide liquidity to a
PRISM Auction. Given that contra-side orders that comprise Initiating
Orders may be allocated a percentage of the PRISM Order at the
conclusion of the PRISM Auction, the limited ability of appointed
Market Makers to participate in a PRISM Auction may reduce the
execution opportunities for these liquidity providers, which execution
opportunities are available to other market participants who may be
solicited or submit responses.
The Exchange believes that eliminating the prohibition against
assigned Market Makers acting as contra in a PRISM Auction would
enhance price improvement opportunities, particularly for retail and
smaller Public Customer orders. Allowing assigned Market Makers
registered with the Exchange to be facilitated or solicited as contras
may result in exposure of more small Public Customer orders to
potential price improvement in a PRISM Auction. The Exchange further
notes that Options 3, Section 22(d) (Limitations on Order Entry)
provides that, prior to or after submitting an order to NTX Options, an
Options Participant cannot inform another Participant or any other
third party of any of the terms of the order for purposes of violating
this Rule. This protection will remain in place under the proposed rule
change to address any potential information leakage concerns in a PRISM
Auction as Options 3, Section 22 applies to a PRISM Auction.
The Exchange believes that the restriction has become operationally
outdated in current market structure. It is common practice that Agency
Orders already involve the same Market Maker firm acting as both the
contra-side (in an away Market Maker capacity) and auction respondent
(as an assigned Market Maker registered on the Exchange). Eliminating
this restriction would reduce an arbitrary and unnecessary burden and
allow Market Makers to structure more efficient auction processes,
which may ultimately promote greater competition among Market Makers
and provide market participants with enhanced opportunities for price
improvement.
The Exchange is proposing to amend Options 3, Section 13(i)(F) to
permit orders for the accounts of Market Makers in an assigned options
class to be solicited for the initiating order submitted for execution
against an PRISM Order in all options into a PRISM Auction. The
Exchange believes providing assigned Market Makers with an additional
way to participate in a PRISM Auction will expand available liquidity
for this auction, which may increase execution and price improvement
opportunities for Public Customers orders in a PRISM. The Exchange
notes that no similar restriction applies to crossing transactions in
open outcry trading.\11\ Brokers seeking liquidity to execute against
customer orders on the trading floor regularly solicit assigned Floor
Market Makers in the applicable class for this liquidity, as they are
generally the primary source of liquidity in a class. Therefore, the
Exchange believes the proposed rule change will further align open
outcry and the PRISM Auction and the execution and price improvement
opportunities available in both these auctions by permitting the same
participants to be solicited as the contra-side in a PRISM Auction
across all options at all times.
---------------------------------------------------------------------------
\11\ See e.g., Nasdaq Phlx LLC Rules at Options 8 Rules.
---------------------------------------------------------------------------
In addition to Cboe, the Exchange notes the electronic price
improvement auction of another options exchange currently permits
orders for the accounts of appointed market-makers to be solicited as
the contra orders for that auction.\12\
---------------------------------------------------------------------------
\12\ See NYSE American, Inc. (``American'') Rule 971.1NY and
NYSE Pillar Options FIX Gateway Protocol Specification, Section 5.2,
New Cross Order. See also <a href="https://www.nyse.com/markets/american-options/cube-customer-best-execution">https://www.nyse.com/markets/american-options/cube-customer-best-execution</a>.
---------------------------------------------------------------------------
Options 5, Section 4
The Exchange proposes to amend subparagraph (a) at Options 5,
Section 4, Order Routing, which currently states, ``Immediate-or-Cancel
(``IOC'') Orders will be cancelled immediately if not executed, and
will not be routed.'' The Exchange proposes to instead state that,
``Immediate-or-Cancel (``IOC'') Orders will be rejected and will not be
routed.'' While the current sentence reflects the operation of IOC
Orders as provided in Options 3, Section 7(b)(2), within the context of
routing, the sentence may be confusing. Options 5, Section 4 explains
the manner in which various order types are handled differently for
purposes of routing. An IOC Order will not rest on the order book by
its definition and cannot route. The Exchange proposes to amend the
language to be clear that IOC Orders are not subject to routing and
therefore would be rejected. This proposed language is consistent with
Options 3, Section 7(b)(2) and makes clear the treatment of IOC Orders
for purposes of Options 5, Section 4.
Implementation
The Exchange proposes to implement these proposed changes on or
before Q3 2026. The Exchange will issue an Options Trader Alert
indicating the date the changes will be implemented.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change will promote just
and equitable principles of trade and remove impediments to and perfect
the mechanism of a free and open market and a national market system
because it will provide the primary liquidity providers on the Exchange
with an additional way to participate in a PRISM Auction. Additionally,
by permitting brokers to solicit primary liquidity providers in a class
for a PRISM Auction the Exchange believes brokers will be able to more
efficiently locate liquidity to fill their customer orders,
particularly during times of volatility. As a result, the Exchange
believes the proposed rule change will likely expand available
liquidity for a PRISM Auction, which may create additional execution
and price improvement opportunities for customers at all times, which
ultimately benefits investors.
The Exchange believes the proposed rule change is consistent with
the Act because it will further align open outcry and PRISM Auctions
and the execution and price improvement opportunities available in both
auctions by permitting the same participants to be solicited as contras
in both types of auctions across all options. Currently, assigned
Market Makers may be solicited with respect to crossing transactions on
trading floors but may not be solicited with respect to electronic
transactions.\15\ The Exchange believes there is no reason to restrict
Market Makers' ability to provide liquidity into electronic auctions
when they are able to similarly provide that liquidity in open outcry
trading. As noted above, the electronic price improvement auction of
another options exchange currently permits orders for
[[Page 21575]]
the accounts of assigned market makers to be solicited as the contra
orders for that auction.\16\
---------------------------------------------------------------------------
\15\ Phlx's trading floor does not have a similar restriction.
See Phlx Options 8 Rules.
\16\ See supra notes 5 and 12.
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed rule change will
promote competition in PRISM Auctions, including competition to
initiate PRISM Auctions, which will remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors. The Exchange believes the
availability of this liquidity to PRISM Auctions will positively affect
the experience for PRISM Orders and overall quality of the auctions.
Furthermore, the Exchange believes increasing the number of market
participants available to be solicited may increase competition to
provide initiating orders, which may lead to a PRISM Auction being
initiated at a better price. More market participants competing to
provide initiating orders may lead to solicited parties providing more
aggressive initial prices. The Exchange believes the ability of all
market participants, including appointed market makers that did not
submit an initiating order, to submit responses to a PRISM Auction will
continue to provide competition for executions against PRISM Orders.
The Exchange believes any risk that assigned Market Makers may
misuse the nonpublic information of an upcoming PRISM Auction is de
minimis. Options 3, Section 13(v) prohibits a pattern or practice of
submitting orders or quotes or the purpose of disrupting or
manipulating PRISM Auctions, and Options 9, Section 9 requires
Participants to establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the misuse of material,
nonpublic information by Members and their associated persons. Finally,
Options 3, Section 22(d) (Limitations on Order Entry) provides that,
prior to or after submitting an order to NTX Options, an Options
Participant cannot inform another Options Participant or any other
third party of any of the terms of the order for purposes of violating
the Rule.
The Exchange believes the proposed rule change is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers because it will permit orders for accounts of assigned Market
Makers to be solicited in the same manner as orders for the accounts of
all other market participants. Currently, all market participants other
than assigned Market Makers may be solicited as the contra and submit
responses in PRISM Auctions for all options. Given the additional costs
and obligations associated with being an assigned Market Maker, the
Exchange does not believe these Market Makers should have fewer
execution opportunities with respect to volume submitted for execution
through PRISM Auctions and not for electronic execution against
interest in the book. The Exchange believes the proposed rule change
will provide all Market Makers on the Exchange with the same ability to
participate in PRISM Auctions in all options at all times, which may
further increase execution and price improvement opportunities for
market participants.
Options 5, Section 4
The Exchange's proposal to amend Options 5, Section 4(a) is
consistent with the Act because it will bring greater clarity to the
current rule text by clearly explaining that IOC Orders will not route.
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 does not believe the proposed rule change will impose
any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because it
provides the same execution opportunities in PRISM Auctions to assigned
Market Makers that are currently available to all other market
participants. Additionally, the proposed rule change will further align
open outcry and electronic auctions and the execution and price
improvement opportunities available in both auctions by permitting the
same participants to be solicited as contra-side in auctions across all
options.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because it
relates to orders submitted into PRISM Auctions on the Exchange.
Additionally, the Exchange notes that, in addition to Cboe, the rules
of at least one other options exchange permits orders for the accounts
of assigned market makers to be solicited as contra orders for that
exchange's electronic price improvement auction.\17\ The Exchange
believes the proposed rule change may improve price competition within
PRISM Auctions, because the primary liquidity providers will be able to
increase participation in PRISM Auctions.
---------------------------------------------------------------------------
\17\ See supra note 12.
---------------------------------------------------------------------------
Options 5, Section 4
The Exchange's proposal to amend Options 5, Section 4(a) does not
impose an undue burden on competition, rather the proposal clarifies
the current 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
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
[[Page 21576]]
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5b292e373e76383436363e352f281b283e38753c342d"><span class="__cf_email__" data-cfemail="4f3d3a232a622c2022222a213b3c0f3c2a2c61282039">[email protected]</span></a>. Please include
file number SR-NasdaqTX-2026-017 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-NasdaqTX-2026-017. 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-NasdaqTX-2026-017 and should be
submitted on or before May 13, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-07780 Filed 4-21-26; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 22, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.