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

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104128; File No. SR-Phlx-2025-55]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 7, Section 4</SUBJECT> <DATE>September 29, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on September 26, 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. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> The Exchange proposes to amend Phlx's Pricing Schedule at Options 7, Section 4. Specifically, Phlx proposes to amend the Floor Transaction (Open Outcry) Floor Broker Incentive Program. While the changes proposed herein are effective upon filing, the Exchange has designated the amendments become operative on October 1, 2025. The text of the proposed rule change is available on the Exchange's website at <E T="03">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings,</E> and at the principal office of the Exchange. <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> Phlx proposes to amend Phlx's Pricing Schedule at 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). Specifically, Phlx proposes to amend the Floor Transaction (Open Outcry) Floor Broker Incentive Program. The Exchange proposes to amend its Floor Transaction (Open Outcry) Floor Broker Incentive Program at Options 7, Section 4. This incentive program for Floor Brokers  <SU>3</SU> <FTREF/> is designed to attract order flow to Phlx's trading floor for execution in open outcry. Currently, the Exchange pays Floor Broker certain rebates for transaction they execute on Phlx's trading floor in open outcry. Today, the following floor transactions are excluded from the rebates offered within the Floor Transaction (Open Outcry) Floor Broker Incentive Program: (1) dividend, merger, short stock interest, reversal and conversion, jelly roll, and box spread strategy executions as defined in this Options 7, Section 4; (2) Firm Floor Options Transactions for members executing facilitation orders pursuant to Options 8, Section 30 when such members are trading in their own proprietary account (including Cabinet Options Transaction Charges); and (3) Customer-to-Customer transactions. <FTNT> <SU>3</SU>  The term “Floor Broker” means an individual who is registered with the Exchange for the purpose, while on the Options Floor, of accepting and handling options orders. <E T="03">See</E> Phlx Options 7, Section 1(c). </FTNT> Today, rebates are paid on qualifying volume at each threshold level based on a four-tier rebate schedule. Floor QCC Orders, as defined in Options 8, Section 30(e), <SU>4</SU> <FTREF/> and electronic QCC Orders, as defined in Options 3, Section 12, are considered qualifying volume but are not paid rebates based on the rebate schedule, rather Floor QCC Orders and electronic QCC Orders are paid the QCC Rebates noted in Options 7, Section 4. The Exchange pays rebates based on the below schedule. <FTNT> <SU>4</SU>  Today, Floor QCC Orders are not transacted in open outcry. </FTNT> <GPOTABLE COLS="4" OPTS="L2,tp0,i1" CDEF="s25,r40,12,12"> <TTITLE> </TTITLE> <CHED H="1"> </CHED> <CHED H="1">Qualifying contracts</CHED> <CHED H="1"> Per contract rebate (customer on one side) </CHED> <CHED H="1"> Per contract rebate (non-customer on both sides) <ENT>$0.02</ENT> <ENT>$0.08</ENT> </ROW> <ROW> <ENT I="01">Tier 2</ENT> <ENT>500,001-5,000,000</ENT> <ENT>0.05</ENT> <ENT>0.16</ENT> </ROW> <ROW> <ENT I="01">Tier 3</ENT> <ENT>5,000,001-10,000,000</ENT> <ENT>0.07</ENT> <ENT>0.16</ENT> </ROW> <ROW> <ENT I="01">Tier 4</ENT> <ENT>Greater than 10,000,000</ENT> <ENT>0.08</ENT> <ENT>0.20</ENT> </ROW> </GPOTABLE> Finally, today, rebates for the Floor Transaction (Open Outcry) Floor Broker Incentive Program are capped at $2,000,000 per member or member organization in a given month. <HD SOURCE="HD3">Proposal</HD> At this time, the Exchange proposes to increase the rebates in all tiers by $0.02 per contract. The Exchange proposes to offer a per contract rebate if a Customer is on one side of $0.04 per contract for Tier 1 (0-500,000 qualifying contracts), a $0.07 per contract rebate for Tier 2 (500,001-5,000,000 qualifying contracts), a $0.09 per contract rebate for Tier 3 (5,000,001-10,000,000 qualifying contracts) and a $0.10 per contract rebate for Tier 4 (Greater than 10,000,000 qualifying contracts). The Exchange proposes to offer a per contract rebate if a Non-Customer is on both sides of $0.10 per contract for Tier 1 (0-500,000 qualifying contracts), a $0.18 per contract rebate for Tier 2 (500,001-5,000,000 qualifying contracts), a $0.18 per contract rebate for Tier 3 (5,000,001-10,000,000 qualifying contracts) and a $0.22 per contract rebate for Tier 4 (Greater than 10,000,000 qualifying contracts). The Exchange believes that the increased rebates will attract greater order flow to Phlx's trading floor. <HD SOURCE="HD3">2. Statutory Basis</HD> The Exchange believes that its proposal is consistent with Section 6(b) of the Act, <SU>5</SU> <FTREF/> in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act, <SU>6</SU> <FTREF/> 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. <FTNT> <SU>5</SU>  15 U.S.C. 78f(b). </FTNT> <FTNT> <SU>6</SU>  15 U.S.C. 78f(b)(4) and (5). </FTNT> 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.”  <SU>7</SU> <FTREF/> <FTNT> <SU>7</SU>  Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (“Regulation NMS Adopting Release”). </FTNT> Likewise, in <E T="03">NetCoalition</E> v. <E T="03">Securities and Exchange Commission</E>   <SU>8</SU> <FTREF/> (“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. <SU>9</SU> <FTREF/> 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.”  <SU>10</SU> <FTREF/> <FTNT> <SU>8</SU>   <E T="03">NetCoalition</E> v. <E T="03">SEC,</E> 615 F.3d 525 (D.C. Cir. 2010). </FTNT> <FTNT> <SU>9</SU>   <E T="03">See NetCoalition,</E> at 534-535. </FTNT> <FTNT> <SU>10</SU>   <E T="03">Id.</E> at 537. </FTNT> 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'. . . .”  <SU>11</SU> <FTREF/> 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. <FTNT> <SU>11</SU>   <E T="03">Id.</E> at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). </FTNT> The Exchange's proposal to increase rebates in the Floor Transaction (Open Outcry) Floor Broker Incentive Program is reasonable because offering greater rebates should attract additional order flow to Phlx's trading floor for execution in open outcry. Other Phlx floor members  <SU>12</SU> <FTREF/> m ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 20k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━