Notice2026-09744
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 1
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Published
May 15, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 94 (Friday, May 15, 2026)</title>
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[Federal Register Volume 91, Number 94 (Friday, May 15, 2026)]
[Notices]
[Pages 28086-28088]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09744]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105465; File No. SR-NASDAQ-2026-043]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Options 7, Section 1
May 12, 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 30, 2026, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend The Nasdaq Options Market LLC
(``NOM'') Pricing Schedule in connection with a technology migration.
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments will become operative on
July 27, 2026.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/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
NOM proposes to amend Options 7, Section 1, General Provisions, to
define the terms ``Exposed Order'' and ``Lead Market Maker.'' Both
terms are being introduced into NOM's Rules in connection with a
technology migration commencing July 27, 2026.\3\
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\3\ See <a href="https://www.nasdaqtrader.com/MicroNews.aspx?id=OTU2026-2">https://www.nasdaqtrader.com/MicroNews.aspx?id=OTU2026-2</a>.
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Exposed Order
As part of this technology migration, NOM introduced the concept of
an Exposed Order in Options 5, Section 4, Routing.\4\ ``Exposure'' or
``exposing'' an order means a notification sent to Participants with
the price, size, and side of interest that is available for
execution.\5\ Exposure applies to both
[[Page 28087]]
routed orders and non-routed or ``DNR Orders.'' The order exposure
process permits the Exchange to apply a Route Timer \6\ prior to the
initial and any subsequent routing of an order and allows routing of
the order after exposure occurs (during open trading) every time an
order becomes marketable against the ABBO.\7\
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\4\ See SR-NASDAQ-2026-039 (not yet noticed).
\5\ See id.
\6\ For purposes of Options 5, Section 4, a Route Timer shall
not exceed one second and shall begin at the time orders are
accepted into the System, and the System will consider whether an
order can be routed at the conclusion of each Route Timer.
\7\ See supra note 4.
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At this time, the Exchange proposes to amend Options 7, Section
1(c) to provide,
An ``Exposed Order'' is an order that is broadcast via an order
exposure alert as described within Options 5, Section 4 (Order
Routing). Unless otherwise noted in Options 7, Section 2 pricing,
Exposed Orders will be assessed the applicable ``Taker'' Fee and any
order or quote that executes against an Exposed Order during a Route
Timer will be paid/assessed the applicable ``Maker'' Rebate/Fee.
As proposed, the defined term would apply a Taker Fee, where
applicable, to an executed Exposed Order. If an order or quote is
allocated against the Exposed Order during the Route Timer described in
Options 5, Section 4, the Exchange would pay or assess the applicable
Maker Rebate or Maker Fee. The Exchange believes that the proposal will
provide increased opportunities for participation in executions on the
Exchange, facilitate the Exchange's ability to bring together
Participants, and encourage more robust competition for orders.
Lead Market Maker
At this time, the Exchange also proposes to define a Lead Market
Maker. The concept of a Lead Market Maker was introduced in a recent
rule change.\8\ The Exchange proposes to state at Options 7, Section
1(c),
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\8\ See supra note 4.
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The term ``Lead Market Maker'' or (``LMM'') applies to a
registered NOM Market Maker that is approved pursuant to Options 2,
Section 3 to be the LMM in an options class (options classes).
The Exchange is introducing this term at this time to distinguish
between a Market Maker and Lead Market Maker for purposes of pricing
that will be introduced in subsequent rule proposals.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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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\9\ See 15 U.S.C. 78f(b).
\10\ See 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to the Pricing Schedule are reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for order flow, which
constrains its pricing determinations. The fact that the market for
order flow is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated, ``[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' . . . '' \11\
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\11\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (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 Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention to determine
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.'' \12\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.' '' \13\ As a
result, the Commission has historically relied on competitive forces to
determine whether a fee proposal is equitable, fair, reasonable, and
not unreasonably or unfairly discriminatory. ``If competitive forces
are operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \14\
Accordingly, ``the existence of significant competition provides a
substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \15\
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\13\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep.
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\14\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
\15\ See id.
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Exposed Order
The Exchange's proposal to define an Exposed Order for purposes of
pricing in Options 7, Section 1(c) is reasonable because it will
provide inform Participants how pricing will be applied to both the
Exposed Order and any order or quote that allocates against the Exposed
Order. As proposed, the applicable Taker Fee would apply to an executed
Exposed Order, and the applicable Maker Rebate or Maker Fee would apply
to an order or quote that is allocated against the Exposed Order during
the Route Timer. The Exchange believes that the proposed pricing will
provide increased opportunities for participation in executions on the
Exchange, facilitate the Exchange's ability to bring together
Participants, and encourage more robust competition for orders. Order
exposure has the potential to result in more efficient executions for
Participants, because responses to Exposed Orders may produce faster
executions. Order exposure also ensures that Exposed Orders will
receive executions only at a price at least as favorable as the price
disseminated by the best away market at the time the order was
received. Further, the Exchange believes that it is reasonable,
equitable and not unfairly discriminatory to apply the Taker Fee to
Exposed Orders and the Maker Rebate or Maker Fee to any order or quote
that executes against an Exposed Order during a Route Timer. An Exposed
Order that would route to an away market if not otherwise executed on
NOM takes liquidity from the Exchange's order book while a quote or
order that executes against the Exposed Order during the Route Timer is
making liquidity in response to the notification sent to Participants
indicating that the order is available for execution. Nasdaq Texas, LLC
similarly assesses a Taker Fee on an exposed order and pays or
[[Page 28088]]
assesses a Maker Rebate or Maker Fee to any order or quote that
executes against the exposed order during the Route Timer.\16\
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\16\ See NTX Options at Options 7, Section 1(c).
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The Exchange's proposal to define an Exposed Order for purposes of
pricing in Options 7, Section 1(c) is equitable and not unfairly
discriminatory because the proposed pricing for Exposed Orders would be
applied uniformly to all orders subject to the Exchange's Route Timer,
as described in Options 5, Section 4.
Lead Market Maker
The Exchange's proposal to define a Lead Market Maker at Options 7,
Section 1(c) is reasonable because the defined term will distinguish a
Market Maker from a Lead Market Maker for purposes of pricing.
The Exchange's proposal to define a Lead Market Maker for purposes
of pricing in Options 7, Section 1(c) is equitable and not unfairly
discriminatory because all Lead Market Makers would be uniformly
subject to pricing applicable to Lead Market Makers which pricing may
be distinguishable from the pricing applicable to Market Makers, as
noted in the Pricing Schedule.
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.
Intermarket Competition
The Exchange believes its proposal remains competitive with other
options markets and will offer market participants another choice of
venue to transact options. The Exchange notes that it operates in a
highly competitive market in which market participants can readily
favor competing venues if they deem fee levels at a particular venue to
be excessive, or rebate opportunities available at other venues to be
more favorable. Because competitors are free to modify their own fees
in response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited.
Intramarket Competition
The Exchange's proposal to define an Exposed Order for purposes of
pricing in Options 7, Section 1(c) does not impose an undue burden on
competition because the proposed pricing for Exposed Orders would be
applied uniformly to all orders subject to the Exchange's Route Timer,
as described in Options 5, Section 4.
The Exchange's proposal to define a Lead Market Maker for purposes
of pricing in Options 7, Section 1(c) does not impose an undue burden
on competition because all Lead Market Makers would be uniformly
subject to pricing applicable to Lead Market Makers, which pricing may
be distinguishable from the pricing applicable to Market Makers, as
noted in the Pricing Schedule.
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.\17\
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\17\ 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#0e7c7b626b236d6163636b607a7d4e7d6b6d20696178"><span class="__cf_email__" data-cfemail="c0b2b5aca5eda3afadada5aeb4b380b3a5a3eea7afb6">[email protected]</span></a>. Please include
file number SR-NASDAQ-2026-043 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-NASDAQ-2026-043. 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-NASDAQ-2026-043 and
should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-09744 Filed 5-14-26; 8:45 am]
BILLING CODE 8011-01-P
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