Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4

<html>
<head>
<title>Federal Register, Volume 91 Issue 2 (Monday, January 5, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 2 (Monday, January 5, 2026)]
[Notices]
[Pages 309-311]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-24230]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-104523; File No. SR-Phlx-2025-74]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 7,
Section 4

December 30, 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.
---------------------------------------------------------------------------

\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 Options 7, Section 4, Multiply
Listed Options Fees (Includes options overlying equities, ETFs, ETNs
and indexes which are Multiply Listed) (Excludes SPY and broad-based
index options symbols listed within Options 7, Section 5.A).
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 pricing within Options 7, Section 4 with
respect to strategy caps for Floor Originated Strategy Executions.
Today, the Exchange permits the following strategy executions: (1)
dividend strategy,\3\ merger strategy,\4\ short stock interest
strategy,\5\ reversal and conversion strategies,\6\ jelly roll
strategy,\7\ and a box spread strategy.\8\ To qualify for a strategy
cap,\9\ the buy and sell side of a transaction must originate either
from the Exchange Trading Floor or as a Floor Qualified Contingent
Cross Order.\10\ Currently, in lieu of the Options Transactions Charges
in Options 7, Section 4 for Penny Symbols and Non-Penny Symbols, the
Exchange pays a $0.01 rebate per contract on any strategy execution
that meets the qualifications noted in the table in Options 7, Section
4. Therefore, for a dividend strategy, a Lead Market Maker,\11\ Market
Maker,\12\ Professional,\13\ Firm \14\ and Broker-Dealer \15\ that
executed on the same

[[Page 310]]

trading day in the same class of options when such members are trading:
(1) in their own proprietary accounts; or (2) on an agency basis, is
paid a $0.01 rebate per contract. For a merger, short stock interest
and box spread strategy, a Lead Market Maker, Market Maker,
Professional, Firm and Broker-Dealer that executed on the same trading
day for all classes of options in the aggregate when such members are
trading (1) in their own proprietary accounts; or (2) on an agency
basis, is paid a $0.01 rebate per contract. Finally, for reversal and
conversion and jelly roll strategies, a Lead Market Maker, Market
Maker, Professional, Firm and Broker-Dealer that executed on the same
trading day for all classes of options in the aggregate when such
members are trading (1) in their own proprietary accounts; or (2) on an
agency basis, is paid a $0.01 rebate per contract. Finally, Customers
are not assessed a fee and do not receive a rebate for strategy
transactions.
---------------------------------------------------------------------------

\3\ A dividend strategy is defined as transactions done to
achieve a dividend arbitrage involving the purchase, sale and
exercise of in-the-money options of the same class, executed the
first business day prior to the date on which the underlying stock
goes ex-dividend. See Options 7, Section 4.
\4\ A merger strategy is defined as transactions done to achieve
a merger arbitrage involving the purchase, sale and exercise of
options of the same class and expiration date, executed the first
business day prior to the date on which shareholders of record are
required to elect their respective form of consideration, i.e., cash
or stock. See Options 7, Section 4.
\5\ A short stock interest strategy is defined as transactions
done to achieve a short stock interest arbitrage involving the
purchase, sale and exercise of in-the-money options of the same
class. See Options 7, Section 4.
\6\ Reversal and conversion strategies are transactions that
employ calls and puts of the same strike price and the underlying
stock. Reversals are established by combining a short stock position
with a short put and a long call position that shares the same
strike and expiration. Conversions employ long positions in the
underlying stock that accompany long puts and short calls sharing
the same strike and expiration. See Options 7, Section 4.
\7\ A jelly roll strategy is defined as transactions created by
entering into two separate positions simultaneously. One position
involves buying a put and selling a call with the same strike price
and expiration. The second position involves selling a put and
buying a call, with the same strike price, but with a different
expiration from the first position. See Options 7, Section 4.
\8\ A box spread strategy is a strategy that synthesizes long
and short stock positions to create a profit. Specifically, a long
call and short put at one strike is combined with a short call and
long put at a different strike to create synthetic long and
synthetic short stock positions, respectively. See Options 7,
Section 4.
\9\ Of note, NDX, NDXP, and XND Options Transactions are
excluded from strategy cap pricing.
\10\ See Phlx's Pricing Schedule at Options 7, Section 4. A
Floor Qualified Contingent Cross Order is comprised of an
originating order to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent trade coupled
with a contra-side order or orders totaling an equal number of
contracts. The term ``qualified contingent trade'' shall have the
same meaning set forth in Options 3, Section 12(a)(3). See Options
8, Section 30(e).
\11\ The term ``Lead Market Maker'' applies to transactions for
the account of a Lead Market Maker (as defined in Options 2, Section
12(a)). A Lead Market Maker is an Exchange member who is registered
as an options Lead Market Maker pursuant to Options 2, Section
12(a). An options Lead Market Maker includes a Remote Lead Market
Maker which is defined as an options Lead Market Maker in one or
more classes that does not have a physical presence on an Exchange
floor and is approved by the Exchange pursuant to Options 2, Section
11. See Options 7, Section 1(c).
\12\ 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. The term
``Streaming Quote Trader'' or ``SQT'' is defined in Options 1,
Section 1(b)(55) as a Market Maker who has received permission from
the Exchange to generate and submit option quotations electronically
in options to which such SQT is assigned. The term ``Remote
Streaming Quote Trader'' or ``RSQT'' is defined in Options 1,
Section 1(b)(49) as a Market Maker that is a member affiliated with
an RSQTO with no physical trading floor presence who has received
permission from the Exchange to generate and submit option
quotations electronically in options to which such RSQT has been
assigned. A Remote Streaming Quote Trader Organization or ``RSQTO,''
which may also be referred to as a Remote Market Making Organization
(``RMO''), is a member organization in good standing that satisfies
the RSQTO readiness requirements in Options 2, Section 1(a). See
Options 7, Section 1(c).
\13\ The term ``Professional'' applies to transactions for the
accounts of Professionals, as defined in Options 1, Section 1(b)(45)
means any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s). See Options 7, Section 1(c).
\14\ The term ``Firm'' applies to any transaction that is
identified by a member or member organization for clearing in the
Firm range at The Options Clearing Corporation. See Options 7,
Section 1(c).
\15\ The term ``Broker-Dealer'' applies to any transaction which
is not subject to any of the other transaction fees applicable
within a particular category. See Options 7, Section 1(c).
---------------------------------------------------------------------------

Proposal
At this time, the Exchange proposes to remove the $0.01 strategy
rebates described in the table at Options 7, Section 4 and instead
assess no transaction charges on any permissible strategy executions
defined in Options 7, Section 4 that meet the qualifications. For a
dividend strategy, a Lead Market Maker, Market Maker, Professional,
Firm and Broker-Dealer that executed on the same trading day in the
same class of options when such members are trading: (1) in their own
proprietary accounts; or (2) on an agency basis, are subject to no
transaction fee. For a merger, short stock interest and box spread
strategy, a Lead Market Maker, Market Maker, Professional, Firm and
Broker-Dealer that executed on the same trading day for all classes of
options in the aggregate when such members are trading (1) in their own
proprietary accounts; or (2) on an agency basis, are subject to no
transaction fee. Finally, for reversal and conversion and jelly roll
strategies, a Lead Market Maker, Market Maker, Professional, Firm and
Broker-Dealer that executed on the same trading day for all classes of
options in the aggregate when such members are trading (1) in their own
proprietary accounts; or (2) on an agency basis, are subject to no
transaction fee. As is the case today, Customers are not assessed a fee
nor receive a rebate for strategy transactions.
The Exchange believes that despite the removal of the $0.01 rebate
for qualifying strategy executions, the proposed pricing will continue
to attract strategy executions to Phlx as it assesses no transaction
fee for qualifying strategy executions
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\16\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------

\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

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.'' \18\
---------------------------------------------------------------------------

\18\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------

Likewise, in NetCoalition v. Securities and Exchange Commission
\19\ (``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.\20\ 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.'' \21\
---------------------------------------------------------------------------

\19\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\20\ See NetCoalition, at 534-535.
\21\ Id. at 537.
---------------------------------------------------------------------------

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'. . . .'' \22\ 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.
---------------------------------------------------------------------------

\22\ 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)).
---------------------------------------------------------------------------

The Exchange's proposal to amend the strategy execution pricing to
assess no transaction fee on qualifying strategy executions is
reasonable because despite the removal of the $0.01 rebate for
qualifying strategy executions, the proposed pricing will continue to
attract strategy executions to Phlx. Also, Customers will continue to
pay no strategy execution fees.
The Exchange's proposal to amend the strategy execution pricing to
assess no transaction fee on qualifying strategy executions is
equitable and not unfairly discriminatory because the Exchange would
uniformly assess no transaction fee to qualifying strategy executions
for all members and member organizations.

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.
Inter-Market Competition
The proposal does not impose an undue burden on inter-market
competition. The Exchange believes its proposal remains competitive
with other options markets and will offer market participants with
another choice of where 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. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. 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.
Intra-Market Competition
The Exchange's proposal to amend the strategy execution pricing to
assess no transaction fee on qualifying strategy executions does not
impose an undue

[[Page 311]]

burden on competition because the Exchange would uniformly assess no
transaction fee to qualifying strategy executions for all members and
member organizations.

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.\23\
---------------------------------------------------------------------------

\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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#592b2c353c743a3634343c372d2a192a3c3a773e362f"><span class="__cf_email__" data-cfemail="4230372e276f212d2f2f272c3631023127216c252d34">[email&#160;protected]</span></a>. Please include
file number SR-Phlx-2025-74 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-2025-74. 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-2025-74 and should be submitted on
or before January 26, 2026.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-24230 Filed 1-2-26; 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>

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4

Federal Register Citation

Suggested Web Citation