FR 2025-06411

Nasdaq PHLX LLC has introduced a proposal for amending its Customer Rebate Program, and this proposed rule change has been submitted to the Securities and Exchange Commission for approval. The primary idea of this proposal is to simplify the rebate structure by ensuring that a member, who qualifies for two rebate incentives within a single month, receives only the higher of the two rebates rather than both. This change is intended to both streamline the rebate process and continue incentivizing member engagement with customer orders.

Summary of the Document

This document outlines Nasdaq PHLX's plan to modify its rebate policy, specifically within its Customer Rebate Program, by paying whichever is the higher rebate to a member who qualifies for two different rebate incentives in a given month. The intent is to maintain competitive pricing among exchanges and provide fair and equitable rebates to participating members.

Significant Issues and Concerns

There are several notable concerns with this proposed rule change:

1. Complex Language: The document is heavy with financial jargon and technical details, such as "PIXL Orders" and "Complex Orders," that may not be easily understood by those without an advanced understanding of financial markets.

2. Impact on Rebate Amounts: There is insufficient clarity regarding how this proposal will impact the actual rebate amounts that member organizations might receive, leaving some uncertainty about its financial implications on those organizations.

3. Competitiveness Measurement: Although the proposal emphasizes maintaining competitive pricing, it lacks information on how competitiveness will continually be measured or adjusted over time.

4. Justification and Alternatives: The document does not provide a detailed justification for why only the higher rebate should be paid, nor does it explore or mention alternative approaches that were considered.

5. Communication and Implementation: There is little discussion on how the Exchange plans to communicate this rule change to stakeholders or ensure a smooth implementation, which could pose challenges for adaptation by the involved parties.

6. Economic Impact: The proposal does not delves deeply into the economic impacts on both the Exchange's operations and those of member organizations, potentially leading to uncertainties around financial outcomes.

Broader Public Impact

Broadly speaking, the proposed change may have a nuanced impact on the market and public. By simplifying the rebate structure, it aims to create a more straightforward and predictable environment for participants, which could potentially enhance market efficiency. However, the lack of clarity on financial impacts could induce caution among members which, in turn, might affect market dynamics.

Impact on Specific Stakeholders

• Member Organizations: These entities may face mixed implications. On one hand, the policy could simplify financial forecasting and engagement strategies, but on the other, the change in rebate qualifications and the lack of dual rebate benefits may reduce financial incentives previously available to them.

• The Exchange: Nasdaq PHLX itself stands to benefit from decreased administrative complexity by managing a simpler rebate structure. However, if not communicated or implemented well, this change could invite dissatisfaction among members, affecting loyalty and participation.

Overall, while the proposed rule change is seemingly intended to maintain market competitiveness and streamline rebates, its effectiveness will largely depend on the execution and the ability of the Exchange to communicate and facilitate this transition for all involved parties.

The document outlines proposed changes to the Nasdaq PHLX LLC Pricing Schedule, specifically focusing on amendments to the Customer Rebate Program. The financial references within this proposal highlight how rebates are structured, who qualifies for them, and the amounts involved.

The document primarily discusses how rebates are applied within Nasdaq PHLX's Customer Rebate Program. Members or member organizations executing qualifying transactions can earn these rebates, which are segmented into different categories and tiers. Specifically, one provision notes that for members qualifying for Tier 4 or higher, a $0.14 per contract rebate is provided for Customer PIXL Orders that execute against a PIXL Initiating Order.

Furthermore, the document specifies additional rebates outlined in notes "" and "#". Note "" mentions a $0.02 per contract rebate for Categories A and B and a $0.03 per contract rebate for Categories C and D, contingent upon specific participant qualifications. Similarly, note "#" highlights a $0.04 per contract rebate for Category C and a $0.02 per contract rebate for Category D, which are also contingent upon the participant meeting specific requirements related to Market Access and Routing Subsidy payments.

The proposal suggests that if a member qualifies for both rebates as outlined in notes "*" and "#", only the higher rebate will be paid. This approach aims to streamline the rebate structure, preventing multiple payouts for the same transaction volume.

A significant issue identified is the lack of clarity about how these rebate changes might impact the financials of member organizations. Restricting rebate payments to the higher of the two potential rebates may affect the overall financial benefits that members could previously leverage by qualifying for both rebates.

Furthermore, there are mentions of a $500,000 Monthly Market Maker Cap that applies to electronic Option Transaction Charges and QCC Transaction Fees. This cap sets a limit on the financial exposure a Market Maker can incur, thereby providing a predictable financial ceiling for trading costs.

Overall, while the document aims to maintain competitive pricing structures and incentivize participation in the market, it lacks in-depth analysis of the potential financial impact on both the exchange and its members. Specifically, there is insufficient exploration of how this adjustment to the rebate structure could affect participants financially and how the exchange plans to communicate these changes effectively to ensure a smooth transition.