90 FR 146 pgs. 36202-36204 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to SQF Ports
Type: NOTICEVolume: 90Number: 146Pages: 36202 - 36204
Pages: 36202, 36203, 36204Docket number: [Release No. 34-103581; File No. SR-Phlx-2025-31]
FR document: [FR Doc. 2025-14562 Filed 7-31-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103581; File No. SR-Phlx-2025-31]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to SQF Ports
July 29, 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 July 22, 2025, Nasdaq PHLX LLC ("Phlx" or "Exchange") filed with the Securities and Exchange Commission ("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.
Footnotes:
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 Exchange's Pricing Schedule at Options 7, Section 9, B, Port Fees, to propose a limit to the number of Specialized Quote Feed ("SQF")? 3 Ports a Market Maker? 4 may subscribe to in a month.
Footnotes:
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 Phlx Options 3, Section 7(a)(i)(B).
4 ?A "Market Maker" means a Streaming Quote Trader or a Remote Streaming Quote Trader who enters quotations for his own account electronically into the System. See Phlx Options 1, Section 1(b)(28).
The text of the proposed rule change is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings 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 its Pricing Schedule at Options 7, Section 9, B, Port Fees, to propose a limit on the number of SQF Ports a Market Maker may subscribe to in a month.
Currently, a Phlx Market Maker is assessed an SQF Port Fee of $1,375 per port, per month up to a maximum of $46,200 per month for active ports. 5 Currently, the Exchange has no limits in place on the number of SQF Ports a Market Maker may acquire in a month.
Footnotes:
5 ?An active port receives inbound quotes at any time within that month.
[top] At this time, the Exchange proposes to limit a Market Maker to no more than 250 SQF Ports per month, regardless of whether the SQF Ports are active ports. 6 Further, the Exchange proposes a separate limit of 250 SQF Ports per month applies to any SQF Ports that are being acquired in anticipation of the November 2025 technology migration ("Fusion Ports"). 7 A Market Maker requires only one SQF Port to submit quotes in its assigned options series into Phlx. While a Market Maker may elect to obtain multiple SQF Ports to organize its business, 8 only one SQF Port is necessary for a Market Maker to fulfill its regulatory quoting obligations. 9 The
Footnotes:
6 ?The Exchange issued Options Technical Alert #2025-12 to announce the limitation.
7 ? See https://www.nasdaqtrader.com/MicroNews.aspx?id=OTU2025-6. Phlx members and member organizations will need to acquire new ports to connect to the new technology platform to accommodate the symbol migration plan.
8 ?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 or member organization.
9 ?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 ports utilized for quoting on Phlx and only Market Makers may utilize these ports.
10 ?The Exchange will periodically review the SQF Port limit. If the Exchange elects to amend the limit it will file a rule proposal with the Commission.
The Exchange proposes to implement the 250 SQF Ports per month limit on August 15, 2025.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act, 11 in general, and furthers the objectives of Section 6(b)(5) of the Act, 12 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.
Footnotes:
11 ?15 U.S.C. 78f(b).
12 ?15 U.S.C. 78f(b)(5).
The Exchange's proposal to limit a Market Maker to no more than 250 SQF Ports per month is consistent with the Act because it will allow the Exchange to obtain greater efficiencies in its overall connectivity management. The Exchange utilizes ports as a secure method for members and member organizations to submit quotes into the Exchange's match engine and for the Exchange to send messages related to those quotes to members and member organizations. Only Phlx members and member organizations who are approved as Market Makers may utilize an SQF Port. Once approved, Phlx Market Makers may subscribe to SQF Ports to submit quotes into the Exchange. While a Market Maker may elect to obtain multiple SQF Ports to organize its business, 13 only one SQF Port is necessary for a Market Maker to fulfill its regulatory quoting obligations. 14 Today, most Market Makers are in possession of several SQF Ports, and amend the number of SQF Ports from time to time. Of note, Phlx allows members and member organizations to obtain SQF Ports at no additional cost once they exceed a monthly fee cap, 15 therefore Market Makers on Phlx may be inclined to increase their total number of SQF Ports as a result of having no incremental cost from the Exchange because of the monthly fee cap. In fact, not all SQF Ports are actively used by Market Makers. In order to properly regulate its members and member organizations and secure the trading environment, the Exchange has taken measures to ensure access is monitored and maintained with various controls that will protect investors and the public interest. Specifically, the Exchange ensures that information security safeguards, upgrades, and general port management are in effect for all SQF Ports regardless of whether the SQF Port is actively in use. As a result of these efforts, the Exchange incurs costs to manage and maintain its SQF Ports and the secure environment surrounding its platform.
Footnotes:
13 ? See supra note 8.
14 ? See supra note 9.
15 ?Phlx assesses SQF Port Fees up to a maximum of $46,200 per month.
The Exchange's proposal is intended to permit it to govern its connectivity management in a reasonable manner while protecting investors and the general public by obtaining greater efficiencies with the limit on SQF Ports. The Exchange believes that its proposal is consistent with the Act in that it will provide the Exchange the ability to maintain the appropriate bandwidth to support future growth and new Market Makers entrants thereby removing impediments to and perfect the mechanism of a free and open market.
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 Exchange does not believe that its proposal will place any category of market participant at a competitive disadvantage. While some Market Makers currently have more than 250 SQF Ports, the Exchange notes that the proposed limit would be applied uniformly ensuring that no Market Maker has more than 250 SQF Ports per month as a result of the proposed limit.
The Exchange does not believe that its proposal will place an undue burden on intra-market competition because any exchange may elect to adopt a similar limit.
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? 16 and subparagraph (f)(6) of Rule 19b-4 thereunder. 17
Footnotes:
16 ?15 U.S.C. 78s(b)(3)(A)(iii).
17 ?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.
A proposed rule change filed under Rule 19b-4(f)(6)? 18 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii), 19 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. The Exchange requests that the Commission waive the 30-day operative delay contained in Rule 19b-4(f)(6)(iii) so that the Exchange may implement the proposal on August 15, 2025. The Exchange notes that MRX does not prorate SQF Port Fees and, therefore, the Exchange requests that the Commission waive the operative delay so that the 250 SQF Port Fee limit may be in place prior to the beginning of September so that the Exchange can manage billing for its Members.
Footnotes:
18 ?17 CFR 240.19b-4(f0(6).
19 ?17 CFR 240.19b-4(f)(6)(iii).
[top] The Commission believes that waiver of the operative delay is consistent with the protection of investors and the
Footnotes:
20 ?For purposes only of waiver the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
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
• Use the Commission's internet comment form ( https://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include file number SR-Phlx-2025-31 on the subject line.
Paper Comments
• 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-2025-31. 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 ( https://www.sec.gov/rules/sro.shtml ). 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-2025-31 and should be submitted on or before August 22, 2025.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 21
Footnotes:
21 ?17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14562 Filed 7-31-25; 8:45 am]
BILLING CODE 8011-01-P