# Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port Fees
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 its Specialized Quote Feed [^3] or “SQF” Port pricing at Options 7, Section 9, B, “Port Fees.” [^4]
[^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* Options 3, Section 7(a)(i)(B).
[^4] On December 8, 2025 the Exchange filed SR-Phlx-2025-69. On December 16, 2025 the Exchange withdrew SR-Phlx-2025-69 and filed this rule change.
While the changes proposed herein are effective upon filing, the Exchange has designated the amendments become operative on January 1, 2026.
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**
Phlx proposes to amend its SQF Port pricing at Options 7, Section 9, B, “Port Fees” by offering an incentive to Market Makers [^5] to lower their SQF Port Fees.
[^5] 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. *See* Options 7, Section 1(c). The term “Floor Market Maker” is a Market Maker who is neither an SQT or an RSQT. A Floor Market Maker may provide a quote in open outcry. *See* Options 8, Section 2(a)(4). Only Market Makers utilize SQF Ports for quoting purposes.
Pursuant to a prior rule change, as of January 1, 2026, Phlx will assess an SQF Port Fee of $1,185 per port, per month. <sup>6</sup> At this time, the Exchange proposes to offer an opportunity to lower SQF Port Fees as of January 1, 2026. Specifically, the Exchange proposes to offer certain discounts to Market Makers that have transacted a certain percentage of Total National Volume in the prior month. For purposes of this proposal, the percentage of Total National Volume is calculated by taking the total Market Maker Penny Symbol and Market Maker Non-Penny Symbol volume (excluding index options) executed on the Exchange in the prior month and attributing a multiple of five times to that Non-Penny Symbol volume (numerator) and dividing that by Market Maker volume (“M” capacity at The Options Clearing Corporation (“OCC”)) in multiply listed options across all options exchanges (denominator or Total National Volume).
[^6]*See* Securities Exchange Act Release No. 103889 (September 5, 2025), 90 FR 43662 (September 10, 2025) (SR-Phlx-2025-40) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Options 7, Section 9).
| Tier | Percentage of Total National Volume | Percentage SQF Port discount |
| --- | --- | --- |
| 1 | less than 0.10% | 0 |
| 2 | greater than or equal to 0.10% and less than 0.25% | 10 |
| 3 | greater than or equal to 0.25% and less than 0.40% | 30 |
| 4 | greater than or equal to 0.40% | 50 |
With this proposal, a Market Maker that transacted less than 0.10% of Total National Volume in the prior month would not receive a discount on SQF Port Fees. A Market Maker that transacted greater than or equal to 0.10% and less than 0.25% of Total National Volume in the prior month will be afforded a discount of 10% on their SQF Port Fees. A Market Maker that transacted greater than or equal to 0.25% and less than 0.40% of Total National Volume in the prior month will be afforded a discount of 30% on their SQF Port Fees. Finally, a Market Maker that transacted greater than or equal to 0.40% of Total National Volume in the prior month will be afforded a discount of 50% on their SQF Port Fees. By way of example, a Market Maker that executed 3,000,000 in Penny Volume and 200,000 in Non-Penny Volume in a given month on the Exchange, where the Total National Volume was 1,000,000,000, would qualify for a discount of 50% on their SQF Port Fees ((200,000 × 5= 1,000,000) + 3,000,000 = 4,000,000 which is 0.40% of 1,000,000,000).
The Exchange proposes to calculate Market Maker Non-Penny Symbol volume at five times the weight as compared to Market Maker Penny Symbol volume because Non-Penny Symbols tend to have lower volumes and this incentive should encourage a greater amount of volume in Non-Penny Symbols. Overall, the proposed discounts should encourage Market Makers to transact additional order flow on Phlx with which other market participants may interact, for an opportunity to lower SQF Port Fees. The Exchange proposes to exclude index options as index options are generally not multiply listed.
The Exchange also proposes to add back the text which provided, “A Market Maker may not subscribe to more than 250 SQF Ports per month.” This rule text was inadvertently omitted in the rule text to SR-Phlx-2025-40 which did not indicate that rule text was to be removed. Additionally, the Exchange proposes to remove the text that states, “for ports that receive inbound quotes at any time within that month (“active port”).” SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with an SQF Port Fee that was identical to Nasdaq ISE, LLC (“ISE”).
**2. Statutory Basis**
The Exchange believes that its proposal is consistent with Section 6(b) of the Act, [^7] in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act, [^8] 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.
[^7] 15 U.S.C. 78f(b).
[^8] 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.” [^9]
[^9] 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*[^10] (“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. [^11] 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.” [^12]
[^10]*NetCoalition* v. *SEC,* 615 F.3d 525 (D.C. Cir. 2010).
[^11]*See NetCoalition,* at 534-535.
[^12]*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' . . . .” [^13] 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.
[^13]*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 proposed fee discounts for Phlx SQF Ports are reasonable because they will attract a greater amount of order flow to Phlx with which other market participants may interact while also lowering costs for certain Market Makers that are able to transact greater than 0.10% of Total National Volume in the prior month. The Exchange believes it is reasonable to lower costs for certain Market Makers that transact greater than 0.10% of Total National Volume on Phlx because those Market Makers are affording other Phlx members and member organizations an opportunity to interact with that order flow. The proposal provides an incremental incentive for Market Makers that transact at least 0.10% of Total National Volume, which provides a higher benefit for satisfying increasingly more stringent criteria. The Exchange believes that the value of the proposed discounts is commensurate with the difficulty to achieve the corresponding threshold. Additionally, the discounts may incentivize and attract more volume and liquidity to the Exchange, which will benefit all Exchange participants through increased opportunities to trade as well as enhancing price discovery. The Exchange's proposed discounts are substantially similar to Cboe Exchange, Inc.'s (“Cboe”) credit for their BOE Bulk Port Fees. [^14]
[^14] Cboe currently offers its market makers credits on their monthly BOE Bulk Port Fees. Specifically, if a Cboe market maker affiliate (“affiliate” defined as having at least 75% common ownership between the two entities as reflected on each entity's Form BD, Schedule A) or Cboe Appointed OFP receives a credit under the Exchange's Volume Incentive Program (“VIP”), the Cboe market maker will receive an access credit on their BOE Bulk Ports corresponding to the VIP tier reached. The credit is based on the Performance Tier earned by a market maker under Cboe's Liquidity Provider Sliding Scale Adjustment Table. Tiers 4 and 5 earn a 40% credit on monthly Cboe Bulk Port Fees. Cboe assesses BOE Bulk Logical Ports a fee of $1,500 for 1 to 5 ports, a fee of $2,500 for 6 to 30 ports and a fee of $3,000 for over 30 ports. Additionally, each BOE Bulk Logical Port will incur the logical port fee indicated when used to enter up to 30,000,000 orders per trading day per logical port as measured on average in a single month. Each incremental usage of up to 30,000,000 orders per day per BOE Bulk Logical Port will incur an additional logical port fee of $3,000 per month. Incremental usage will be determined on a monthly basis based on the average orders per day entered in a single month across all subscribed BOE Bulk Logical Ports.
Phlx believes it is reasonable to offer fee discounts to those Market Makers that primarily provide and post liquidity to the Exchange, as it should encourage Market Makers to continue to participate on the Exchange and add liquidity. Greater liquidity benefits all market participants by providing more trading opportunities and tighter spreads. The proposal would also mitigate the costs incurred by Market Makers on Phlx.
Calculating Market Maker Non-Penny Symbol volume at five times the weight as compared to Penny Symbol volume is reasonable, equitable and not unfairly discriminatory as Non-Penny Symbols tend to have lower volumes and this incentive should encourage a greater amount of volume in Market Maker Non-Penny Symbols. [^15] The Exchange proposes to calculate the Market Maker Non-Penny Symbol volume in an uniform manner for all members and member organizations. The Exchange proposes to exclude index options as index options are generally not multiply listed. Index Options would be uniformly excluded.
[^15] Penny Symbols typically are more liquid symbols.
A Phlx Market Maker requires only one SQF Port to submit quotes in its assigned options series into Phlx. A Phlx Market Maker may submit all quotes through one SQF Port. While a Phlx Market Maker may elect to obtain multiple SQF Ports to organize its business, [^16] only one SQF Port is necessary for a Phlx Market Maker to fulfill its regulatory quoting obligations. [^17]
[^16] 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 organization.
[^17] 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 quoting protocol available on Phlx and only Market Makers may utilize SQF Ports.
The proposed fee discounts for Phlx SQF Ports are equitable and not unfairly discriminatory as they would apply uniformly to each Phlx Market Maker. The Exchange would uniformly calculate the Market Maker's percentage each month. Although only Market Makers may receive the proposed discounts, the Exchange notes that Market Makers are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. Unlike other market participants, Market Makers are required to provide continuous two-sided quotes on a daily basis, [^18] and are subject to various obligations associated with providing liquidity. [^19] While the Exchange is not offering a discount to those Market Makers that transact less than 0.10% of Total National Volume, the Exchange notes that these Market Makers transact a much lower amount of contracts on Phlx as compared to other Market Makers who qualify for a discount. In some cases, these Market Makers are not executing the requisite amount of Penny Symbols or Non-Penny Symbols to obtain the discount. Market Makers are required to demonstrate that they have significant market-making and/or Lead Market Maker experience in a broad array of securities, a proven ability to interact with order flow in all types of markets, and a willingness and ability to make competitive markets on the Exchange and otherwise to promote the Exchange in a manner that is likely to enhance the ability of the Exchange to compete successfully for order flow in the options it trades, among other things. [^20] The Exchange believes that all Market Makers are capable of quoting tighter or in a greater amount of options classes to obtain the requisite volume to achieve a discount.
[^18]*See* Phlx Options 2, Section 5.
[^19]*See* Phlx Options 2, Section 4.
[^20]*See* Phlx Options 2, Section 1(a)(2).
The Exchange's proposal to add back the text which provided, “A Market Maker may not subscribe to more than 250 SQF Ports per month” is reasonable, equitable and not unfairly discriminatory as that rule text was inadvertently not displayed in the rule text to SR-Phlx-2025-40 and was not intended to be removed. There was no mention of its removal in SR-Phlx-2025-40. The Exchange's proposal to remove the words “for ports that receive inbound quotes at any time within that month (“active port”)” is reasonable, equitable and not unfairly discriminatory as SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with an SQF Port Fee that was identical to ISE. Other rule text that mentioned active SQF Ports was removed in SR-Phlx-2025-40.
**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 proposed fee discounts for Phlx SQF Ports do not impose a burden on competition because they would apply uniformly to each Phlx Market Maker and the Exchange would uniformly calculate the Market Maker's percentage each month. Although only Market Makers may receive the proposed discounts, the Exchange notes that Market Makers are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. Unlike other market participants, Market Makers are required to provide continuous two-sided quotes on a daily basis, [^21] and are subject to various obligations associated with providing liquidity. [^22] Further, while the Exchange is not offering a discount to those Market Makers that transact less than 0.10% of Total National Volume, the Exchange notes that these Market Makers transact a much lower amount of contracts on Phlx as compared to other Market Makers that qualify for the discount and/or these Market Makers are not executing the requisite amount of Penny Symbols or Non-Penny Symbols to obtain the discount. The Exchange's proposal does not impose an undue burden on competition because Market Makers are required to demonstrate that they have significant market-making and/or Lead Market Maker experience in a broad array of securities, a proven ability to interact with order flow in all types of markets, and a willingness and ability to make competitive markets on the Exchange and otherwise to promote the Exchange in a manner that is likely to enhance the ability of the Exchange to compete successfully for order flow in the options it trades, among other things. [^23] The Exchange believes that all Market Makers are capable of quoting tighter or in a greater amount of options classes to obtain the requisite volume to achieve a discount.
[^21]*See* Phlx Options 2, Section 5.
[^22]*See* Phlx Options 2, Section 4.
[^23]*See* Phlx Options 2, Section 1(a)(2).
The Exchange's proposal to add back the text which provided, “A Market Maker may not subscribe to more than 250 SQF Ports per month” does not impose an undue burden on competition as that rule text was inadvertently not displayed in the rule text to SR-Phlx-2025-40 and was not intended to be removed. There was no mention of its removal in SR-Phlx-2025-40. Also, the Exchange's proposal to remove the words “for ports that receive inbound quotes at any time within that month (“active port”)” does not impose an undue burden on competition as SR-Phlx-2025-40 replaced Phlx's SQF Port Fee with an SQF Port Fee that was identical to ISE. Other rule text that mentioned active SQF Ports was removed in SR-Phlx-2025-40.
In terms of inter-market competition, 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 options exchanges. In addition to the Exchange, market participants have alternative options exchanges that they may participate on and direct their order flow. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing options exchanges to maintain their competitive standing in the financial markets.
**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. [^24]
[^24] 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**
• Use the Commission's internet comment form ( *https://www.sec.gov/rules/sro.shtml* ); or
• Send an email to *[email protected].* Please include file number SR-Phlx-2025-75 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-2025-75. 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-2025-75 and should be submitted on or before January 20, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. [^25]
[^25] 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.