Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Nasdaq Options 9, Section 25 To Codify an Options Unbundling Rule

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104423; File No. SR-NASDAQ-2025-103]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Nasdaq Options 9, Section 25 To Codify an Options Unbundling Rule</SUBJECT> <DATE>December 17, 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 December 11, 2025, 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. <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 adopt Nasdaq Options 9, Section 25 to codify the Exchange's longstanding guidance that the unbundling of orders for any purpose other than best execution is considered conduct inconsistent with just and equitable principles of trade. The text of the proposed rule change is available on the Exchange's website at <E T="03">https://listingcenter.nasdaq.com/rulebook/nasdaq/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> The Exchange proposes to amend Nasdaq Options 9 by adding a new Section 25 to codify its longstanding guidance that it shall be considered conduct inconsistent with just and equitable principles of trade for any member, member organization, or person associated with or employed by a member or member organization (collectively, “member” or “members”) to split an order into multiple smaller orders for any purpose other than seeking the best execution of the entire order. Members of the Exchange are not allowed to engage in conduct inconsistent with just and equitable principles of trade. <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>   <E T="03">See</E> Nasdaq General 9, Section 1(a) (“A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.”). </FTNT> “Unbundling,” also known as “trade shredding,” is the practice of breaking up an order into multiple smaller orders for some purpose other than the best execution of the order. The practice of unbundling has in the past been used for purposes such as improperly maximizing commissions and fees charged to customers, distorting trade data, or circumventing rules pertaining to maximum order size. <SU>4</SU> <FTREF/> <FTNT> <SU>4</SU>   <E T="03">See, e.g.,</E> Securities Exchange Act Release No. 62667 (Aug. 9, 2010), 75 FR 50013 (Aug. 16, 2010) (File No. SR-NYSEAmex-2010-77) (Self-Regulatory Organizations; NYSE Amex, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 995NY). </FTNT> The Exchange believes that the unbundling of orders generally serves no purpose to the customer that entered the order and may cause unnecessary delays in the execution of that order. This belief has been reflected in the Exchange's longstanding regulatory guidance to its members. <SU>5</SU> <FTREF/> <FTNT> <SU>5</SU>   <E T="03">See</E> Options Regulatory Alert #2025-34 (Aug. 29, 2025), <E T="03">available at https://www.nasdaqtrader.com/MicroNews.aspx?id=ORA2025-34;</E> Options Regulatory Alert #2016-6 (Feb. 17, 2016), <E T="03">available at https://www.nasdaqtrader.com/MicroNews.aspx?id=ORA2016-6;</E> and Options Regulatory Alert #2016-4 (Jan. 22, 2016), <E T="03">available at https://www.nasdaqtrader.com/MicroNews.aspx?id=ORA2016-4.</E> </FTNT> The impermissibility of unbundling is a well-established principle across the U.S. securities markets. Other options exchanges have anti-unbundling rules or rule interpretations that are similar to the rule being adopted by the Exchange. <SU>6</SU> <FTREF/> Additionally, other exchanges have also issued regulatory guidance to their members warning them against the practice of unbundling. <SU>7</SU> <FTREF/> Finally, the Financial Industry Regulatory Authority (“FINRA”) also has its own anti-unbundling rule, FINRA Rule 5290, which specifies, in part, that “[n]o member . . . shall engage in conduct that has the intent or effect of splitting any order into multiple smaller orders for execution or any execution into multiple smaller executions for transaction reporting for the primary purpose of maximizing a monetary or in-kind amount to be received by the member . . . as a result of the execution of such orders or the transaction reporting of such executions.” <FTNT> <SU>6</SU>   <E T="03">See, e.g.,</E> NYSE American Rule 995NY(d) (“It shall be considered conduct inconsistent with just and equitable principles of trade for an ATP Holder to split an order into multiple smaller orders for any purpose other than seeking the best execution of the entire order.”), NYSE Arca Rule 11.2(g) (“An ETP Holder may not split any order into multiple orders for any purpose other than seeking the best execution of the entire order.”), and MIAX Chapter III, Rule 301, Interpretation .03 (“It shall be considered conduct inconsistent with just and equitable principles of trade and a violation of Rule 301 for a Member to split an order into multiple smaller orders for any purpose other than seeking the best execution of the entire order.”). </FTNT> <FTNT> <SU>7</SU>   <E T="03">See, e.g.,</E> Cboe Regulatory Circular RG-15-011 (Sept. 23, 2015) (“Please note that unbundling of orders greater than 5 contracts into 1 to 5 lot increments for the purpose of achieving small order preference in favor of any [Designated Primary Market-Maker] or [Lead Market-Maker] may be a violation of CBOE Rule 4.1, Just and Equitable Principles of Trade”), <E T="03">available at https://cdn.cboe.com/resources/regulation/circulars/regulatory/RG15-130.pdf.</E> </FTNT> <HD SOURCE="HD3">2. Statutory Basis</HD> The Exchange believes that its proposal is consistent with Section 6(b) of the Act, <SU>8</SU> <FTREF/> in general, and furthers the objectives of Section 6(b)(5) of the Act, <SU>9</SU> <FTREF/> 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, by deterring and helping to prevent the distortive practice of unbundling. <FTNT> <SU>8</SU>  15 U.S.C. 78f(b). </FTNT> <FTNT> <SU>9</SU>  15 U.S.C. 78f(b)(5). </FTNT> The Exchange believes that the unbundling of orders generally serves no purpose to the customer that entered the order and may cause unnecessary delays in the execution of that order. Codifying its longstanding guidance in its rulebook that unbundling is conduct inconsistent with just and equitable principles of trade is thus designed to promote just and equitable principles of trade. Additionally, by defining unbundling as the practice of splitting an order into multiple smaller orders for any purpose other than seeking the best execution of the entire order, the proposal is designed to promote best execution and thus protect investors and the public interest. Additionally, the Exchange reiterates that the proposed rule is substantively identical to NYSE American Rule 995NY(d) and it is consistent with the rules and regulatory guidance of other exchanges, as well as FINRA Rule 5290. <HD SOURCE="HD2">B. Self-Regulatory Organization's Statement on Burden on Competition</HD> 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 notes that the proposed rule will apply equally to all members of the Exchange. Additionally, in terms of intermarket competition, the Exchange notes that the proposed rule is consistent with the rules of other exchanges, as well as the rules of FINRA. <HD SOURCE="HD2">C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others</HD> No written comments were either solicited or received. <HD SOURCE="HD1">III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action</HD> 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  <SU>10</SU> <FTREF/> and subparagraph (f)(6) of Rule 19b-4 thereunder. <SU>11</SU> <F ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 13k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━