Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of a Proposed Rule Change To Amend the Short Term Option Series Program Related to Qualifying Securities

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-105801; File No. SR-ISE-2026-34]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of a Proposed Rule Change To Amend the Short Term Option Series Program Related to Qualifying Securities

June 29, 2026.

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 June 15, 2026, Nasdaq ISE, LLC (“ISE” 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.

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 Short Term Option Series Program in

Supplementary Material .03 of Options 4, Section 5 with respect to Qualifying Securities.

The text of the proposed rule change is available on the Exchange's website at

https://listingcenter.nasdaq.com/rulebook/ise/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 the Short Term Option Series Program in Supplementary Material .03 of Options 4, Section 5. Specifically, the Exchange proposes to amend the Qualifying Securities to: (1) permit the listing of up to two Tuesday and Thursday Expirations for options on certain Exchange-Traded Funds that meet the current criteria in addition to the existing Monday and Wednesday Expirations; and (2) permit the listing of up to two Monday and Wednesday Expirations for options on additional Exchange-Traded Fund Shares that meet new criteria. The Exchange also proposes to designate the Exchange-Traded Fund Shares that meet the current criteria in Supplementary Material .03 to Options 4, Section 5 as “Tier 1 Qualifying Securities” and designate the Exchange-Traded Fund Shares that meet the proposed new set of criteria for Qualifying Securities that would only be permitted to trade up to two Monday and Wednesday Expirations, as “Tier 2 Qualifying Securities.”

Background

Currently, as set forth in Supplementary Material .03 to Options 4, Section 5, after an option class has been approved for listing and trading on the Exchange as a Short Term Option Series pursuant to Options 1, Section 1(a)(50),

3

the Exchange may open for trading on any Thursday or Friday that is a business day (“Short Term Option Opening Date”) series of options on that class that expire at the close of business on each of the next five Fridays that are business days and are not Fridays in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Friday Short Term Option Expiration Dates”). The Exchange may have no more than a total of five Short Term Option Expiration Dates (“Short Term Option Weekly Expirations”). Further, if the Exchange is not open for business on the respective Thursday or Friday, the Short Term Option Opening Date for Short Term Option Weekly Expirations will be the first business day immediately prior to that respective Thursday or Friday. Similarly, if the Exchange is not open for business on a Friday, the Short Term Option Expiration Date for Short Term Option Weekly Expirations will be the first business day immediately prior to that Friday.

3

Options 1, Section 1(a)(50) provides that a Short Term Option Series means a series in an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Monday, Tuesday, Wednesday, Thursday or Friday that is a business day and that expires on the Monday, Wednesday or Friday of the following business week that is a business day, or, in the case of a series that is listed on a Friday and expires on a Monday, is listed one business week and one business day prior to that expiration. If a Tuesday, Wednesday, Thursday or Friday is not a business day, the series may be opened (or shall expire) on the first business day immediately prior to that Tuesday, Wednesday, Thursday or Friday. For a series listed pursuant to this section for Monday expiration, if a Monday is not a business day, the series shall expire on the first business day immediately following that Monday.

Additionally, the Exchange may open for trading series of options on the symbols provided in Table 1 of Supplementary Material .03 to Options 4, Section 5 that expire at the close of business on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are business days beyond the current week and are not business days in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Short Term Option Daily Expirations”).

4

For those symbols listed in Table 1, the Exchange may have no more than a total of two Short Term Option Daily Expirations beyond the current week for each of Monday, Tuesday, Wednesday, and Thursday Expirations, as applicable, at one time.

4

As set forth in Table 1 of Supplementary Material .03 to Options 4, Section 5, the Exchange currently permits expirations in SPY, IWM, QQQ on Mondays, Tuesdays, Wednesdays and Thursdays. Also, the Exchange permits expirations in GLD, SLV and TLT on Mondays and Wednesdays. Finally, the Exchange permits expirations in USO and UNG on Wednesdays.

Further, the Exchange may open for trading series of options on the symbols provided in Table 2 of Supplementary Material .03 to Options 4, Section 5 that expire on the close of business on each of the next two Mondays and Wednesdays, respectively, that are business days beyond the current week and are not business days in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Qualifying Securities”). For those symbols listed in Table 2, the Exchange may have no more than a total of two Short Term Option Daily Expirations beyond the current week for each of Monday and Wednesday Expirations, at one time.

Qualifying Securities may be eligible individual stocks or Exchange-Traded Fund Shares that meet the following criteria on a quarterly basis:

(1) an underlying security, as measured on the last day of the prior calendar quarter, must have:

(A) a market capitalization of greater than 700 billion dollars for an individual stock based on the closing price,

5

or

5

The closing price and the opening price shall be that of the primary exchange where the security is listed.

(B) Assets under Management (“AUM”) greater than 50 billion dollars for an Exchange-Traded Fund Share based on net asset value (“NAV”);

(2) monthly options volume, as measured by sides traded in the last month preceding the quarter end, of greater than 10 million options;

(3) a position limit of at least 250,000 contracts; and

(4) participate in the Penny Interval Program.

Each calendar quarter, the Exchange will apply the above criteria to individual stocks and Exchange-Traded Fund Shares to determine eligibility for the following quarter as a Qualifying Security. Beginning on the second trading day in the first month of each calendar quarter, the market capitalization of individual stocks shall be calculated based on the closing price established on the primary exchange on the last trading day of the prior calendar quarter and the AUM for Exchange-Traded Fund Shares shall be calculated based on the NAV established on the primary exchange on the last trading day of the prior calendar quarter. The data establishing the volume thresholds will be established by using data from the last month of the prior calendar quarter from The Options Clearing

Corporation (“OCC”). For options listed on the first trading day of a given calendar quarter, the volume shall be calculated using the last month of the quarter prior to that calendar quarter.

6

ISE provides a list of Qualifying Securities available by close of business on the first trading day of the quarter.

7

Eligible Qualifying Securities are permitted to list two Short Term Option Expiration Dates beyond the current week for each Monday and Wednesday expiration at one time.

8

Qualifying Securities that do not continue to meet the above criteria are no longer permitted to list Monday and Wednesday Expirations beginning on the second day of the following quarter.

6

OCC data becomes available for the end of a quarter on the first trading day of a new quarter.

7

ISE posts this information on its website.

8

With respect to individual stock options, the Exchange does not list an expiry on a day when there will be an Earnings Announcement that takes place after market close with respect to individual stock to avoid permitting an additional expiry on a day where post-close price volatility may be impacted due to the Earnings Announcement. Pursuant to Supplementary Material .03 to Options 4, Section 5, an Earnings Announcement shall include official public quarterly or yearly earnings filed with the Securities and Exchange Commission.

Proposal

At this time, the Exchange proposes to amend the listing and trading of Qualifying Securities to: (1) permit the listing of up to two Tuesday and Thursday Expirations for options on certain Exchange-Traded Funds that meet the current criteria in addition to the existing Monday and Wednesday Expirations; and (2) permit the listing of up to two Monday and Wednesday Expirations for options on additional Exchange-Traded Fund Shares that meet new additional criteria. As noted above, the Exchange proposes to designate the Exchange-Traded Fund Shares that meet the current criteria in Supplementary Material .03 to Options 4, Section 5 as “Tier 1 Qualifying Securities” and designate the Exchange-Traded Fund Shares that meet the proposed new set of criteria for Qualifying Securities that would only be permitted to trade up to two Monday and Wednesday Expirations, as “Tier 2 Qualifying Securities.”

Expansion of Exchange-Traded Fund Shares Qualifying Securities

On May 1, 2025, ISE filed a rule proposal, which was approved by the SEC on January 16, 2026, to permit the listing of Qualifying Securities.

9

The Exchange began listing Qualifying Securities on January 26, 2026 on Tesla, Inc. (TSLA); NVIDIA Corporation (NVDA); Apple Inc. (AAPL); iShares Bitcoin Trust ETF (IBIT); Amazon.com, Inc. (AMZN); Meta Platforms, Inc. (META); Broadcom Inc. (AVGO); Alphabet, Inc. (GOOGL); and Microsoft Corporation (MSFT).

10

These securities continue to trade in the current calendar quarter.

9

See

Securities Exchange Act Release No. 104624 (January 16, 2026), 91 FR 2806 (January 22, 2026) (SR-ISE-2025-15) (Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Short Term Option Series Program To List Qualifying Securities) (“SR-ISE-2025-15”).

10

See https://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2026-3.

IBIT is the only current Qualifying Security that is an Exchange-Traded Fund Share. The Exchange believes that IBIT trading has benefitted from the additional expirations that allowed market participants to precisely hedge their positions in the underlying security. At the time of filing SR-ISE-2025-15, IBIT's position limit was restricted at 25,000 contracts but that position limit increased to 250,000 contracts at a later date, thereby meeting the position limit requirements for a Qualifying Security.

11

The Exchange believes that market participants have been able to utilize the additional expirations in IBIT to closely tailor their investment and hedging decisions in these options which afforded them a reduced premium cost of buying portfolio protection, thus allowing them to better manage their risk exposure in IBIT. Further, the Exchange notes that based on current data, Financial Select Sector SPDR Fund (“XLF”) will meet the criteria for a Qualifying Security in the upcoming calendar quarter.

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IBIT commenced trading in January 2024 and options on IBIT did not commence trading until November 2024.

Tier 1 Expansion

At this time, the Exchange proposes to permit the listing and trading of Qualifying Securities on Exchange-Traded Fund Shares that meet the current criteria in Supplementary Material .03 to Options 4, Section 5 to list up to two Tuesday and Thursday Expirations in addition to the existing Monday and Wednesday Expirations and redesignate them as Tier 1 Qualifying Securities.

The proposed Tuesday Qualifying Securities expirations on Exchange-Traded Fund Shares for Tier 1 Qualifying Securities will be similar to the current Tuesday Expirations in SPDR S&P 500 ETF Trust (“SPY”), Invesco QQQ Trust (“QQQ”), and iShares Russell 2000 ETF (“IWM”) in Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Monday or Tuesday that is a business day series of options on the symbols provided in Table 1 and Table 2 that expire at the close of business on each of the next two Tuesdays that are business days and are not business days in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Tuesday Short Term Option Expiration Date”).

12

In the event Tier 1 Qualifying Securities expire on a Tuesday and that Tuesday is the same day that a standard expiration options series, Monthly Options Series, or Quarterly Options Series expires, the Exchange would skip that week's listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Tuesday Expirations in SPY, QQQ, and IWM similarly skip the weekly listing in the event the weekly listing expires on the same day in the same class as a standard expiration options series, Monthly Options Series, or Quarterly Options Series.

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They may also trade on Fridays, as is the case for all options series in the Short Term Option Series Program.

The proposed Thursday Qualifying Securities expirations on Exchange-Traded Fund Shares for Tier 1 Qualifying Securities will be similar to the current Thursday SPY, QQQ, and IWM in Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Wednesday or Thursday that is a business day series of options on the symbols provided in Table 1 and Table 2 above that expire at the close of business on each of the next two Thursdays that are business days and are not business days in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Thursday Short Term Option Expiration Date”).

13

In the event Tier 1 Qualifying Securities expire on a Thursday and that Thursday is the same day that a standard expiration options series, Monthly Options Series, or Quarterly Options Series expires, the Exchange would skip that week's listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Thursday Expirations in SPY, QQQ, and IWM similarly skip the weekly listing in the event the weekly listing expires on the same day in the same class as a standard expiration options series, Monthly Options Series, or Quarterly Options Series.

13

See id.

The interval between strike prices for the proposed Tuesday and Thursday

Tier 1 Qualifying Securities Expirations will be the same as those currently applicable for SPY, QQQ, and IWM Tuesday and Thursday Expirations (among other symbols that may list a Tuesday or Thursday Expiration) in the Short Term Option Series Program.

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Specifically, the Tuesday and Thursday Tier 1 Qualifying Securities Expirations will have a strike interval of (i) $0.50 or greater for strike prices below $100, and $1 or greater for strike prices between $100 and $150 for all option classes that participate in the Short Term Option Series Program, (ii) $0.50 for option classes that trade in one dollar increments and are in the Short Term Option Series Program, or (iii) $2.50 or greater for strike prices above $150.

15

As is the case with other equity options series listed pursuant to the Short Term Option Series Program, the Tuesday and Thursday Tier 1 Qualifying Securities Expirations series will be P.M.-settled.

14

See

Supplementary Material .03(e) to Options 4, Section 5.

15

See id.

Pursuant to Options 1, Section 1(a)(50), with respect to the Short Term Option Series Program, if a Tuesday is not a business day, the series shall expire on the first business day immediately prior to that Tuesday,

e.g.,

Monday of that week if the Tuesday is not a business day. Also, pursuant to Options 1, Section 1(a)(50), with respect to the Short Term Option Series Program, a Thursday expiration series shall expire on the first business day immediately prior to that Thursday,

e.g.,

Wednesday of that week if the Thursday is not a business day.

Currently, for each option class eligible for participation in the Short Term Option Series Program, the Exchange is limited to opening thirty (30) series for each expiration date for the specific class.

16

The thirty (30) series restriction does not include series that are open by other securities exchanges under their respective weekly rules; the Exchange may list these additional series that are listed by other options exchanges.

17

With the proposed changes, this thirty (30) series restriction would apply to Tuesday or Thursday Tier 1 Qualifying Securities Expirations as well. In addition, the Exchange will be able to list series that are listed by other exchanges, assuming they file similar rules with the Commission to list Tuesday or Thursday Tier 1 Qualifying Securities Expirations.

16

See

Supplementary Material .03(a) to Options 4, Section 5.

17

See id.

With this proposal, Tuesday or Thursday Tier 1 Qualifying Securities Expirations would be treated similarly to existing SPY, QQQ, and IWM Tuesday or Thursday Expirations. With respect to standard expiration option series, Tuesday or Thursday Tier 1 Qualifying Securities Expirations will be permitted to expire in the same week in which standard expiration option series on the same class expire.

18

Not listing Tuesday or Thursday Tier 1 Qualifying Securities Expirations for one week every month because there was a standard options series on that same class on the Friday of that week would create investor confusion.

18

See id.

Further, as with SPY, QQQ, and IWM Tuesday or Thursday Expirations, the Exchange would not permit Tuesday or Thursday Tier 1 Qualifying Securities Expirations to expire on a business day in which standard expiration option series, Monthly Options Series, or Quarterly Options Series expire.

19

Therefore, all Tuesday or Thursday Tier 1 Qualifying Securities Expirations would expire at the close of business on each of the next two Tuesdays or Thursdays, respectively, that are business days and are not business days in which standard expiration option series, Monthly Options Series, or Quarterly Options Series expire. The Exchange believes that it is reasonable to not permit two expirations on the same day in which a standard expiration option series, Monthly Options Series, or a Quarterly Options Series would expire because those options would be duplicative of each other.

19

See

Supplementary Material .03 to Options 4, Section 5.

The Exchange does not believe that any market disruptions will be encountered with the introduction of Tuesday or Thursday Tier 1 Qualifying Securities Expirations. The Exchange currently trades P.M.-settled Short Term Option Series that expire Monday, Tuesday, Wednesday and Thursday on several symbols

20

and has not experienced any market disruptions nor issues with capacity. Today, the Exchange has surveillance programs in place to support and properly monitor trading in Short Term Option Series that expire Monday, Tuesday, Wednesday and Thursday on several symbols.

21

The Exchange believes that it has the necessary capacity and surveillance programs in place to support and properly monitor trading in the proposed Tuesday or Thursday Tier 1 Qualifying Securities Expirations.

20

See supra

note 6 [sic] as well as Qualifying Securities in Table 2 in Supplementary Material of Options 4, Section 5.

21

See id.

Tier 2 Expansion

The Exchange also proposes to permit the listing of up to two Monday and Wednesday Expirations for options on additional Exchange-Traded Fund Shares that meet new additional criteria as Qualifying Securities. The Exchange believes that given the success of listing and trading Monday and Wednesday Expirations on IBIT options, expanding the Qualifying Securities program for Exchange-Traded Funds is appropriate. The Exchange proposes a different set of criteria for Qualifying Securities that are Exchange-Traded Funds that would only be permitted to trade up to two Monday and Wednesday Expirations as follows: an underlying security, as measured on the last day of the prior calendar quarter, must have: AUM greater than 25 billion dollars for an Exchange-Traded Fund Share based on NAV,

22

and monthly options volume, as measured by sides traded in the last month preceding the quarter end, of greater than 5 million options; a position limit of at least 250,000 contracts;

23

and participate in the Penny Interval Program (“Tier 2 Qualifying Securities”).

22

Currently, Exchange-Traded Fund Shares that are Qualifying Securities must have an AUM greater than 25 [sic] billion dollars based on NAV.

23

Currently, Exchange-Traded Fund Shares that are Qualifying Securities must have a monthly options volume, as measured by sides traded in the last month preceding the quarter end, of greater than 10 million options.

As with any Qualifying Security, each calendar quarter, the Exchange will apply the above criteria to the proposed new Tier 2 Qualifying Securities to determine eligibility for the following quarter as a Qualifying Security. Beginning on the second trading day in the first month of each calendar quarter, the AUM for Exchange-Traded Fund Shares that are Tier 2 Qualifying Securities shall be calculated based on the NAV established on the primary exchange on the last trading day of the prior calendar quarter. As is the case for all Qualifying Securities, the data establishing the volume thresholds will be established by using data from the last month of the prior calendar quarter from OCC. For options listed on the first trading day of a given calendar quarter, the volume shall be calculated using the last month of the quarter prior to that calendar quarter.

24

ISE will make the list of Qualifying Securities available by

close of business on the first trading day of the quarter.

25

24

OCC data becomes available for the end of a quarter on the first trading day of a new quarter.

25

ISE will continue to make this information available on its website.

Eligible Qualifying Securities for the proposed Tier 2 Qualifying Securities would be permitted to list two Short Term Option Expiration Dates beyond the current week for each Monday and Wednesday Expirations at one time. Tier 2 Qualifying Securities that do not continue to meet the above criteria would no longer be permitted to list Monday and Wednesday Expirations beginning on the second day of the following quarter.

26

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The Exchange has noted the additional expirations in Table 2 of Supplementary Material .03 to Options 4, Section 5 along with the criteria for a Qualifying Security for the proposed Tier 2 Qualifying Securities.

The proposed Monday Tier 2 Qualifying Securities Expirations will be similar to the Monday Expirations for the existing Qualifying Securities (among other symbols that may list a Monday Expiration) in Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Friday or Monday that is a business day (beyond the current week) series of options on Tier 2 Qualifying Securities to expire on any Monday of the month that is a business day and is not a Monday in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire, provided that Monday Expirations that are listed on a Friday must be listed at least one business week and one business day prior to the expiration (“Monday Qualifying Securities Expirations”).

27

In the event Tier 2 Qualifying Securities expire on a Monday and that Monday is the same day that a standard expiration options series, Monthly Options Series, or Quarterly Options Series expires, the Exchange would skip that week's listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Monday Expirations for the existing Qualifying Securities similarly skip the weekly listing in the event the weekly listing expires on the same day in the same class as a standard expiration options series, Monthly Options Series, or Quarterly Options Series.

27

They may also trade on Fridays, as is the case for all options series in the Short Term Option Series Program.

The proposed Wednesday Tier 2 Qualifying Securities Expirations will be similar to the current Wednesday Expirations for the existing Qualifying Securities (among other symbols that may list a Wednesday Expiration) in Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Tuesday or Wednesday that is a business day (beyond the current week) series of options on Tier 2 Qualifying Securities to expire on any Wednesday of the month that is a business day and is not a Wednesday in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire (“Wednesday Qualifying Securities Expirations”).

28

In the event Tier 2 Qualifying Securities expire on a Wednesday and that Wednesday is the same day that a standard expiration options series, Monthly Options Series, or Quarterly Options Series expires, the Exchange would skip that week's listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Wednesday Expirations in existing Qualifying Securities similarly skip the weekly listing in the event the weekly listing expires on the same day in the same class as a standard expiration options series, Monthly Options Series, or Quarterly Options Series.

28

See id.

The interval between strike prices for the proposed Monday and Wednesday Tier 2 Qualifying Securities Expirations will be the same as those currently applicable for Monday and Wednesday Expirations in existing Qualifying Securities (among other symbols that may list a Monday or Wednesday Expiration) in the Short Term Option Series Program.

29

Specifically, the Monday and Wednesday Tier 2 Qualifying Securities Expirations for the proposed new Exchange-Traded Fund Shares will have a strike interval of (i) $0.50 or greater for strike prices below $100, and $1 or greater for strike prices between $100 and $150 for all option classes that participate in the Short Term Option Series Program, (ii) $0.50 for option classes that trade in one dollar increments and are in the Short Term Option Series Program, or (iii) $2.50 or greater for strike prices above $150.

30

As is the case with other equity options series listed pursuant to the Short Term Option Series Program, the Monday and Wednesday Tier 2 Qualifying Securities Expirations will be P.M.-settled.

29

See

Supplementary Material .03(e) to Options 4, Section 5.

30

See id.

As noted above, pursuant to Options 1, Section 1(a)(50), with respect to the Short Term Option Series Program, if a Monday is not a business day, the series shall expire on the first business day immediately following that Monday. Also, pursuant to Options 1, Section 1(a)(50), with respect to the Short Term Option Series Program, a Wednesday expiration series shall expire on the first business day immediately prior to that Wednesday,

e.g.,

Tuesday of that week if the Wednesday is not a business day.

As noted above, currently, for each option class eligible for participation in the Short Term Option Series Program, the Exchange is limited to opening thirty (30) series for each expiration date for the specific class.

31

The thirty (30) series restriction does not include series that are open by other securities exchanges under their respective weekly rules; the Exchange may list these additional series that are listed by other options exchanges.

32

With the proposed changes, this thirty (30) series restriction would apply to Monday and Wednesday Tier 2 Qualifying Securities Expirations as well. In addition, the Exchange will be able to list series that are listed by other exchanges, assuming they file similar rules with the Commission to list Monday and Wednesday Tier 2 Qualifying Securities.

31

See

Supplementary Material .03(a) to Options 4, Section 5.

32

See id.

With this proposal, Monday and Wednesday Tier 2 Qualifying Securities Expirations would be treated similarly to existing Monday and Wednesday Qualifying Security Expirations. With respect to standard expiration option series, Monday and Wednesday Tier 2 Qualifying Securities Expirations will be permitted to expire in the same week in which standard expiration option series on the same class expire.

33

Not listing Monday and Wednesday Tier 2 Qualifying Securities Expirations for one week every month because there was a standard options series on that same class on the Friday of that week would create investor confusion.

33

See id.

Further, as with existing Monday and Wednesday Qualifying Security Expirations, the Exchange would not permit Monday and Wednesday Tier 2 Qualifying Securities Expirations to expire on a business day in which standard expiration option series, Monthly Options Series, or Quarterly Options Series expire.

34

Therefore, all Monday and Wednesday Tier 2 Qualifying Securities Expirations would expire at the close of business on each of the next two Mondays and Wednesdays, respectively, that are business days and are not business days

in which standard expiration option series, Monthly Options Series, or Quarterly Options Series expire. The Exchange believes that it is reasonable to not permit two expirations for the proposed Tier 2 Qualifying Securities on the same day in which a standard expiration option series, Monthly Options Series, or a Quarterly Options Series would expire because those options would be duplicative of each other.

34

See

Supplementary Material .03 to Options 4, Section 5.

The Exchange does not believe that any market disruptions will be encountered with the introduction of Monday and Wednesday Tier 2 Qualifying Securities Expirations. The Exchange currently trades P.M.-settled Short Term Option Series that expire Monday, Tuesday, Wednesday and Thursday on several symbols

35

and has not experienced any market disruptions nor issues with capacity. Today, the Exchange has surveillance programs in place to support and properly monitor trading in Short Term Option Series that expire Monday, Tuesday, Wednesday and Thursday on several symbols.

36

The Exchange believes that it has the necessary capacity and surveillance programs in place to support and properly monitor trading in the proposed Monday and Wednesday Tier 2 Qualifying Securities Expirations.

35

See supra

note 4.

36

See id.

Impact of Proposal

The Exchange notes that listings in the Short Term Option Series Program comprise a significant part of the standard listings in options markets. Table 1 demonstrates the percentage of weekly listings in the options industry compared to monthly, quarterly, and Long-Term Option Series for a twelve-month period from January 1, 2025 to May 19, 2026.

37

37

The Exchange sourced this information from OCC. The information includes time averaged data (the number of strikes by maturity date divided from the number of trading days) for all 18 options markets from January 1, 2025 to May 19, 2026.

Table 1

EN02JY26.068

While the Exchange is expanding the Short Term Option Series Program to permit Tuesday and Thursday Expirations for Tier 1 Qualifying Securities and Monday and Wednesday Expirations for Tier 2 Qualifying Securities, the Exchange anticipates that it would overall add a small number of weekly expiration dates because the Exchange will limit the number of Qualifying Securities Expirations to two Monday Expirations, two Tuesday Expirations, two Wednesday Expirations, and two Thursday Expirations. Currently, the following Tier 1 Qualifying Securities that are Exchange-Traded Fund Shares would receive Tuesday and Thursday Expirations: IBIT and XLF. Utilizing data for April 2026, the following Exchange-Traded Funds would qualify as Tier 2 Qualifying Securities: VanEck Semiconductor ETF (“SMH”), Energy Select Sector SPDR Fund, (“XLE”) and iShares MSCI Emerging Markets ETF (“EEM”). Expanding the Short Term Option Series Program for IBIT, XLF, SMH, XLE and EEM would account for the addition of approximately 0.16% of strikes.

Further, as shown in Table 2, weeklies comprise 59% of the total volume of options contracts.

38

38

The chart represents industry volume in terms of overall contracts. Weeklies comprise 58.5% of volume, as shown in Table 2, while only being 21.1% of the strikes, as shown in Table 1. The Exchange sourced this information from OCC. The information includes data for all 18 options markets from January 1, 2025 to May 19, 2026.

Table 2

EN02JY26.069

As is the case with existing Qualifying Securities, inner weeklies (first two weeks) represent higher volume as compared to outer weeklies (the last three weeks) and are more attractive to market participants.

In particular, the Exchange looked at the average daily contracts traded in options that met the criteria for a Qualifying Security. Specifically, for IBIT, XLF, SMH, XLE and EEM, the Exchange looked at pre-close movements between 3:30-4:00 p.m. Eastern Time (“ET”) as well as post-close movements between 4:00-5:30 p.m. ET.

Table 3, below, references the number of trading days with at least one strike break post close (comparing 4:00 p.m. ET to 5:30 p.m. ET) from January 2023 through May 2026 for the IBIT, XLF, SMH, XLE and EEM as well as SPY, QQQ and IWM. As can be seen plainly, the proposed expanded list of securities represents a significantly lower probability of a strike break historically than SPY, QQQ and IWM.

Table 3

EN02JY26.070

Table 4, below, references average annualized closing volatilities (as measured by the standard deviation of 30 seconds returns over the last 30 minutes of trading) for the IBIT, XLF, SMH, XLE and EEM from January 2022 through May 2026. Table 4 demonstrates that IBIT has an average annualized closing volatility of

generally greater than 25%, SMH has an average annualized closing volatility of generally less than 25%, and that XLF, EEM and XLE have an average annualized closing volatility of generally less than 20%.

Table 4

EN02JY26.071

Table 4, above, demonstrates that SMH and IBIT are more volatile than SPY, QQQ, IWM, XLE, XLF and EEM, however; based on Table 3, the volatility in Table 4 for SMH and IBIT does not impact the customer's exposure to the Contrary Exercise Window from 4:00 p.m. ET to 5:30 p.m. ET timeframe. In fact, the customer exposure is lower than SPY, QQQ and IWM, as demonstrated in Table 3. Per Table 4, IBIT has the highest average return which resides below 30% as measured in annualized volatility. Further, EEM is the least volatile among the symbols per Table 4. Moreover, with respect to Monday and Wednesday Expirations for SMH, XLE and EEM and Tuesday and Thursday Expirations for IBIT and XLF, there does not appear to be any excessive propensity to penetrate

39

strikes post close (4:00 p.m.-5:30 p.m. ET) in comparison to SPY, QQQ and IWM as demonstrated in Table 3. Consequently, the burden of American-style option

40

exercise management on investors is not overwhelming for the proposed Exchange-Traded Fund Shares relative to SPY, QQQ and IWM which have the largest retail participation based on volume in the industry.

39

For purposes of this rule change, “penetrating a strike” refers to the underlying asset's price moving beyond the designated strike price of an option contract.

40

The term “American-style option” means an options contract that, subject to the provisions of Options 6B, Section 1 (relating to the cutoff time for exercise instructions) and to the Rules of the Clearing Corporation, can be exercised on any business day prior to its expiration date and on its expiration date.

See

Options 1, Section 1(a)(3).

The Exchange also reviewed the number of strike breaks for calendar years 2023-2026 for IBIT, XLF, SMH, XLE and EEM between 4:00 p.m. and 5:30 p.m. ET to find the maximum

41

number of strike breaks

42

as well as the mean

43

of the number of strike breaks as evidenced by the various Table 5 charts. Table 5 demonstrates the amount of new strike breaks as a result of the Exchange's proposal for Tier 1 and Tier 2 Qualifying Securities.

41

The term “maximum” refers to the largest instance of strike breaks measured as the number of strikes crossed by the underlying security from the 4:00 p.m. ET closing price to the 9:30 a.m. ET opening price.

42

A strike break is the existence of a strike between the closing price and the opening price on the following day when there has been a penetration of a strike post-close.

43

The term “mean” refers to the average number of strike breaks when there has been a penetration of a strike post-close.

Table 5—Monday Charts

Security

Number of days

with strike

break Mondays

(4:00 p.m. ET-

5:30 p.m. ET)

Max

(strikes moved

Mondays from

4:00 p.m. to

9:30 a.m.

next day)

when strikes are

penetrated from

4:00-5:30 p.m. ET

Max

(percentage move

overnight

Mondays

when there is a

strike break

from 4:00 p.m.

to 5:30 p.m. ET)

Mean strikes

moved through

Monday when

there is an

instance of

move through

(from 4:00 p.m. to

5:30 p.m.

Monday)

2023

EEM

0

N/A

N/A

N/A

IWM

0

N/A

N/A

N/A

QQQ

0

N/A

N/A

N/A

SMH

1

0.04

0.01

0.04

SPY

1

2.21

0.53

2.21

XLE

1

0.12

0.07

0.12

XLF

0

N/A

N/A

N/A

2024

EEM

0

N/A

N/A

N/A

IWM

2

0.74

0.37

0.5

QQQ

2

2.35

0.54

1.62

SMH

2

5.89

2.90

3.67

SPY

1

2.2

0.43

2.2

XLE

1

4.94

2.66

4.94

XLF

1

0.5

0.59

0.5

2025

†

EEM

0

N/A

N/A

N/A

IWM

1

0.22

0.10

0.22

QQQ

7

14.73

3.48

3.51

SMH

3

8.32

4.50

2.97

SPY

7

17.62

3.49

3.99

XLE

0

N/A

N/A

N/A

XLF

1

0.34

0.33

0.34

2026

EEM

1

1.2

0.97

1.2

IWM

0

N/A

N/A

N/A

QQQ

0

N/A

N/A

N/A

SMH

0

N/A

N/A

N/A

SPY

0

N/A

N/A

N/A

XLE

0

N/A

N/A

N/A

XLF

0

N/A

N/A

N/A

†

For Table 5, the Exchange notes that some of the mean strikes moved through Monday when there is an instance of move through (from 4:00 p.m. to 5:30 p.m. Monday) in the 2025 chart reflect numbers that were different than the numbers shown in SR-ISE-2025-15. The difference in the numbers is a result of the application of a filter that was applied in this latest analysis to arrive at the last traded price. Specifically, certain prints were excluded because they did not represent genuine, on-time, round-lot executions. The prints that were eliminated were stale mid-day trades reported late, opening and closing auction prints not representing last price, out-of-sequence trades, fractional odd-lots that executed at an off-market price, and quotes that are not actual executions. The application of the filter was de minimis, resulting in two data points in the 2025 tables being amended, the remainder of the tables from the prior rule change remained unaffected.

The Table 6 charts, below, reviewed the number of strike breaks for calendar years 2022—2025 for IBIT, XLF, SMH, XLE and EEM between 4:00 p.m. and 5:30 p.m. ET to find the maximum number of strike breaks as well as the mean of the number of strike breaks.

Table 6—Tuesday Charts

Security

Number of days

with strike

breaks through

Tuesdays

(4:00 p.m. ET-

5:30 p.m. ET)

Max

(strikes moved

through Tuesdays

from 4:00 p.m.

to 9:30 a.m.

next day)

when strikes are

penetrated from

4:00-5:30 p.m. ET

Max

(percentage move

overnight

Tuesdays

when there is a

strike break

from 4:00 p.m.

to 5:30 p.m. ET)

Mean strikes

moved through

Tuesday when

there is an

instance of

move through

(from 4:00 p.m. to

5:30 p.m.

Tuesday)

2023

IWM

0

N/A

N/A

N/A

QQQ

3

4.91

1.70

3.17

SPY

3

3.18

0.70

1.5

XLF

0

N/A

N/A

N/A

2024

IBIT **

1

4.28

4.14

4.28

IWM

2

3.54

1.73

2.41

QQQ

8

10.67

2.33

4.39

SPY

3

7.11

1.31

5.27

XLF

1

0.8

0.96

0.8

2025

IBIT

5

4.14

3.28

2.15

IWM

2

5.54

2.96

2.78

QQQ

11

13.79

3.10

4.4

SPY

7

13.17

2.50

3.5

XLF

0

N/A

N/A

N/A

2026

IBIT

1

1.36

1.27

1.36

IWM

3

8.8

3.48

4.95

QQQ

5

5.91

0.92

4.21

SPY

4

5.56

0.85

4.09

XLF

0

N/A

N/A

N/A

** IBIT commenced trading in January 2024 and options on IBIT did not commence trading until November 2024.

Table 7—Wednesday Charts

Security

Number of days with strike break through Wednesdays (4:00 p.m. ET—5:30 p.m. ET)

Max (strikes moved through Wednesdays from 4:00 p.m. to 9:30 a.m. next day) when strikes are penetrated from 4:00-5:30 p.m. ET

Max (percentage move overnight Wednesdays when there is a strike break from 4:00 p.m. to 5:30 p.m. ET)

Mean strikes moved through Wednesdays when there is an instance of move through (from 4:00 p.m. to 5:30 p.m. Wednesdays)

2023

EEM

0

N/A

N/A

N/A

IWM

2

1.09

0.63

0.87

QQQ

6

7.59

2.29

4.38

SMH

7

16.76

6.48

7.12

SPY

5

4.08

0.99

2.63

XLE

3

2.92

1.62

1.03

XLF

1

0.12

0.19

0.12

2024

EEM

0

N/A

N/A

N/A

IWM

1

2.22

1.02

2.22

QQQ

16

11.16

2.37

4.16

SMH

7

10.67

5.43

3.32

SPY

7

9.67

1.72

4.79

XLE

0

N/A

N/A

N/A

XLF

0

N/A

N/A

N/A

2025 ***

EEM

2

1.84

2.10

1.27

IWM

2

9.52

4.70

5.3

QQQ

15

19.87

4.17

6.06

SMH

6

4.67

5.35

3.61

SPY

10

19.45

3.45

7.24

XLE

0

N/A

N/A

N/A

XLF

1

3.9

3.89

3.9

2026

EEM

0

N/A

N/A

N/A

IWM

1

1.09

0.40

1.09

QQQ

5

5.68

0.94

2.01

SMH

6

1.97

0.99

1.26

SPY

4

5.27

0.77

2.66

XLE

0

N/A

N/A

N/A

XLF

0

N/A

N/A

N/A

*** For Table 7, the Exchange notes that some of the mean strikes moved through Wednesdays when there is an instance of move through (from 4:00 p.m. to 5:30 p.m. Monday) in the 2025 chart reflect numbers that were different than the numbers shown in SR-ISE-2025-15. The difference in the numbers is a result of the application of a filter that was applied in this latest analysis to arrive at the last traded price. Specifically, certain prints were excluded because they did not represent genuine, on-time, round-lot executions. The prints that were eliminated were stale mid-day trades reported late, opening and closing auction prints not representing last price, out-of-sequence trades, fractional odd-lots that executed at an off-market price, and quotes that are not actual executions. The application of the filter was de minimis, resulting in two data points in the 2025 tables being amended, the remainder of the tables from the prior rule change remained unaffected.

Table 8—Thursday Charts

Security

Number of days with strike break through Thursdays (4:00 p.m. ET—5:30 p.m. ET)

Max (strikes moved through Thursdays from 4:00 p.m. to 9:30 a.m. next day) when strikes are penetrated from 4:00-5:30 p.m. ET

Max (percentage move overnight Thursdays when there is a strike break from 4:00 p.m. to 5:30 p.m. ET)

Mean strikes moved through Thursdays when there is an instance of move through (from 4:00 p.m. to 5:30 p.m. Thursdays)

2023

IWM

0

N/A

N/A

N/A

QQQ

5

7.08

2.27

2.15

SPY

3

5.18

1.24

2.51

XLF

0

N/A

N/A

N/A

2024

IBIT

2

1.4

1.28

0.92

IWM

0

N/A

N/A

N/A

QQQ

11

9.08

1.98

3.53

SPY

5

7.43

1.37

3.44

XLF

0

N/A

N/A

N/A

2025

IBIT

6

4.8

3.72

2.79

IWM

0

N/A

N/A

N/A

QQQ

12

9.8

1.91

3.82

SPY

7

5.55

0.94

2.39

XLF

1

0.2

0.20

0.2

2026

IBIT

0

N/A

N/A

N/A

IWM

1

3.88

1.46

3.88

QQQ

7

6.8

1.05

3.75

SPY

7

6.22

0.90

2.99

XLF

1

1.08

1.01

1.08

Because the Exchange proposes to limit the number of Monday, Tuesday, Wednesday and Thursday Qualifying Securities Expirations to two expirations beyond the current week, the Exchange believes that the addition of these Tier 1 and Tier 2 Qualifying Securities Expirations, as applicable, should encourage Market Makers to continue to deploy capital more efficiently and improve displayed market quality.

44

Utilizing IBIT, XLF, SMH, XLE and EEM as a proxy, the marginal increase in the number of occurrences of strike breaks in 2023 would be 13 with the addition of these expirations. Also, the marginal increase in the number of occurrences of strike breaks in 2024 would be 15 with the addition of these expirations. Further, there would be a marginal increase of 25 instances of strike breaks in 2025. Finally, there would be a marginal increase of 9 instances of strike breaks in 2026.

44

Market Makers include Primary Market Makers and Competitive Market Makers.

See

Options 1, Section 1(a)(21). Today, Primary Market Makers and Competitive Market Makers are required to quote a specified time in their assigned options series.

See

Options 2, Section 5.

In the observed time period (2023 to 2026), there would be a marginal increase of 11 instances of strike breaks on Monday Expirations after regular trading hours. There would be a marginal increase of 8 instances of strike breaks on Tuesday Expirations after regular trading hours. There would be a marginal increase of 33 instances of strike breaks on Wednesday Expirations after regular trading hours. There would be a marginal increase of 10 instances of strike breaks on Thursday Expirations after regular trading hours.

Similar to SPY, QQQ and IWM Monday, Tuesday, Wednesday and Thursday Expirations, the introduction of Monday and Wednesday for Tier 2 and Tuesday and Thursday for Tier 1 Qualifying Securities Expirations will, among other things, expand hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that the proposal would permit only the most liquid securities to have the additional Tier 1 Tuesday and Thursday Expirations and Tier 2 Monday and Wednesday Expirations. The Exchange believes that offering these additional expirations in the Qualifying Securities would permit Market Makers and other market participants to precisely hedge their positions in the underlying security with the additional expirations.

Finally, the Exchange considered the impact of a market participant's propensity to rationally exercise outstanding options contracts by the tender of an exercise notice (“Contrary Exercise Advice”).

45

Specifically, ISE examined SPY data from April 2, 2025 (a day where there was a significant drop after the close).

46

On April 2, 2025, SPY settled at 4:00 p.m. at $564.52.

47

At 5:00 p.m., SPY was trading at $552.42.

48

Every call option with a April 2, 2025 expiration date and a strike price below $564 was automatically exercised by OCC, unless OCC received Contrary Exercise Advices from a market participant.

49

ISE obtained the amount of long open interest in the customer or “C” range

50

at OCC starting at the close of the prior trading day and added customer long activity that executed on April 2, 2025 to that figure.

51

Next, ISE subtracted the liquidating activity for customers, and examined the quantity of Contrary Exercise Advices received by OCC on April 2, 2025 and compared that figure to the number of customers that did not abandon their calls rationally relative to the number of customers who entered into options contracts. The data below in Table 9 and Table 10

52

applies to calls in SPY in the customer range at OCC for expiration date April 2, 2025.

45

A Contrary Exercise Advice may be exercised during the time period specified in the Rules of the Clearing Corporation by the tender to the Clearing Corporation of an exercise notice in accordance with the Rules of the Clearing Corporation. An exercise notice may be tendered to the Clearing Corporation only by the Clearing Member in whose account such options contract is carried with the Clearing Corporation. Members may establish fixed procedures as to the latest time they will accept exercise instructions from customers.

See

Options 6B, Section 1. Option holders have until 5:30 p.m. Eastern Time (“ET”) on the business day of expiration, or, in the case of a standardized equity option expiring on a day that is not a business day, on the business day immediately prior to the expiration date to make a final exercise decision to exercise or not exercise an expiring option. Members may not accept exercise instructions for customer or non-customer accounts after 5:30 p.m. ET.

See

FINRA Rule 2360(a)(23)(A)(iii). A Contrary Exercise Advice is a form approved by the national options exchanges, FINRA or The Options Clearing Corporation for use by a member to submit a final exercise decision committing an options holder to either: (1) not exercise an option position which would automatically be exercised pursuant to The Options Clearing Corporation's Ex-by-Ex procedure; or (2) to exercise a standardized equity option position which would not automatically be exercised pursuant to The Options Clearing Corporation's Ex-by-Ex procedure.

See

FINRA Rule 2360(a)(23)(A)(iv).

46

On April 2, 2025, President Trump announced a series of tariffs on imports, which he called “Liberation Day”. This news impacted markets generally and remains the largest post-close movement since 2023. To that end, the Liberation Day data point is the most useful data point to understand the customer's rational exercise and assignment behavior in the Contrary Exercise Window.

47

The data was obtained from OCC by request.

48

See id.

49

See id.

50

The “C” range at OCC includes customer transactions, professional transactions and transactions executed by broker-dealers that are not affiliated with a clearing member that clear in the “C” range at OCC.

51

See id.

52

Table 9 and Table 10 should be read together.

Table 9

Strike

Longs held on 4/1/2025 *

Buys to open or expand a position

Aggregate longs held

Open contracts

at EOD which are

eligible for

Auto-ex on

April 2, 2025 EOD

553

104

265

369

45

554

340

795

1135

258

555

2240

4135

6375

238

556

619

5582

6201

142

557

582

9235

9817

52

558

587

14683

15270

72

559

705

22931

23636

70

560

2218

49336

51554

316

561

2284

55318

57602

1014

562

1941

67057

68998

55

563

1339

83871

85210

87

564

1222

78612

79834

533

* The term “long position” means a person's interest as the holder of one or more options contracts.

See

Options 1, Section 1(a)(20).

Table 10

Strike

Aggregate

liquidation of longs

Liquidation ratio

(%)

Contracts where

abandon

instructions were issued

Unabandoned

and

unliquidated contracts

(auto-

exercised by OCC)

Contracts unabandoned or unliquidated as a % of total long contracts held during the day

Percentage of unabandoned and unliquidated

contracts as

compared to open contracts

553

324

87.80

22

23

6.23

51.11

554

877

77.27

187

71

6.26

27.52

555

6137

96.27

53

185

2.90

77.73

556

6059

97.71

88

54

0.87

38.03

557

9765

99.47

2

50

0.51

96.15

558

15198

99.53

49

23

0.15

31.94

559

23566

99.70

26

44

0.19

62.86

560

51238

99.39

240

76

0.15

24.05

561

56588

98.24

994

20

0.03

1.97

562

68943

99.92

16

39

0.06

70.91

563

85123

99.90

25

62

0.07

71.26

564

79301

99.33

467

66

0.08

12.38

The data indicates that the vast majority of open contracts (over 90%) were liquidated by customers prior to the close. Of the remaining open contracts, a substantial portion were rationally abandoned. In considering what constitutes rational activity on the part of a market participant in determining whether to exercise, especially in the strike near the 5:00 p.m. price, it must be taken into consideration that some market participants may elect to hold a contract given the illiquidity of the time period, and the desire for long exposure despite a trade price that may be lower. In other words, it cannot be assumed that customers are unaware of the market conditions for SPY after the close on April 2, 2025, or their ability to liquidate. Also, it cannot be assumed that the customer would always liquidate in these circumstances. In reviewing Tables 9 and 10 together, customers with calls in SPY on April 2, 2025 had a very high liquidation ratio which is evidenced by comparing the unabandoned contracts to the entire pool of long contracts throughout the day. Finally, the amount of unliquidated and unabandoned call contracts in Table 10 represents a de minimis amount (less than 1%) when considering that SPY trades millions of contracts each day.

The Exchange also examined the out-of-the-money or “OTM” activity on the puts in SPY on April 2, 2025 for customers. The data below in Table 11 and Table 12

53

applies to puts in SPY in the customer range at OCC for expiration date April 2, 2025.

53

Table 11 and Table 12 should be read together.

Table 11

Strike

Longs held on 4/1/2025 EOD

Buys to open or expand a position on

4/2/2025

Aggregate longs held on 4/2

Open contracts at EOD on 4/2 that are eligible for OTM

exercise

553

2008

17807

19815

1992

554

3575

23220

26795

2459

555

6271

67698

73969

5009

556

3177

37457

40634

2648

557

3094

47699

50793

1573

558

3091

66130

69221

7063

559

2492

82114

84606

16366

560

3382

118564

121946

17481

561

1707

76970

78677

5660

562

435

75447

75882

6552

563

581

75463

76044

6522

564

399

50724

51123

197

Table 12

Strike

Aggregate

liquidation of longs

Liquidation ratio

(%)

Contracts where OTM exercise

instructions were received by OCC

Puts# where no OTM

exercise

instructions

were given

Contracts not exercised as a % of long

contracts held throughout the day

Percentage of put contracts where no OTM exercise

instructions

were given

553

17823

89.95

833

1159

5.85

58.18

554

24336

90.82

791

1668

6.23

67.83

555

68960

93.23

1436

3573

4.83

71.33

556

37986

93.48

1170

1478

3.64

55.82

557

49220

96.90

557

1016

2.00

64.59

558

62158

89.80

3064

3999

5.78

56.62

559

68240

80.66

15642

724

0.86

4.42

560

104465

85.66

16745

736

0.60

4.21

561

73017

92.81

5415

245

0.31

4.33

562

69330

91.37

6436

116

0.15

1.77

563

69522

91.42

6443

79

0.10

1.21

564

50926

99.61

180

17

0.03

8.63

# The term “put” means an options contract under which the holder of the option has the right, in accordance with the terms and provisions of the option, to sell to the Clearing Corporation the number of shares of the underlying security covered by the options contract.

See

Options 1, Section 1(a)(44).

With respect to the put data for SPY on April 2, 2025, it can be observed that out-of-the-money options were either liquidated or exercised. Only a small percentage of options went unexercised. Additionally, it can be observed that very few puts remained unexercised at the higher strikes where opportunity for profit and less risk exists. This is in contrast to puts on lower strikes where opportunity for profit relative to the risk of the short is greater. In particular, with respect to the risk exposure of put writers, the exposure to an event similar to April 2, 2025 for the proposed Wednesday Expirations would be substantially similar to the current risk that a put writer is exposed to with Friday expirations. In other words, the day of the expiry does not increase or decrease the amount of risk of a put writer, but for the premium difference. Additionally, the Exchange believes that since the rational abandonment and out-of-the-money exercise rates were so high, as evidenced in Tables 9 and 10, it is clear that customers are largely aware of the exposure between 4:00 and 5:00 p.m. ET and therefore, the risk from the unliquidated position is undertaken knowingly.

In determining the rational in-the-money abandonment or out-of-the-money exercise, the Exchange elected not to consider the amount of contracts rationally exercised/abandoned divided by the amount of open contracts at the end of the day. The Exchange believes that this data point fails to consider the outsized amount of liquidation customers undertake prior to the Contrary Exercise Window.

54

In other words, the amount of liquidations taken by customers prior to the Contrary Exercise Window is evidence that market participants are informed and electing to accept a premium in lieu of the potential to maximize the value of their option in the Contrary Exercise Window. The Exchange believes that the amount of open contracts in these options is de minimis and, therefore, any evidence of an option trader's failure to act rationally would skew the percentage in such a way to exaggerate the perception of the risk averting behaviors. For example, taken to an extreme, if 3 contracts are left open in an option that trades over 100,000 in a given day, and 2 options are not rationally exercised this would amount to 66.6% of non-rationally exercised/abandoned contracts. In this example, 3 options are not rationally exercised out of the 3 open contracts or 100%. The Exchange does not believe this comparison yields a result that is insightful. For this reason, the Exchange opted to compare the amount of irrational failures to exercise/abandon to the total amount of contracts that were open during that trading day. The Exchange believes its method of comparison provides a better risk determination.

54

A “Contrary Exercise Window” refers to a specific timeframe during which an options holder can submit a Contrary Exercise Advice. Option holders who hold expiring options have until 5:30 p.m. Eastern Time (ET) on the day of expiration to make a final exercise decision to exercise or not exercise the option. Members may establish an earlier time to accept exercise instructions for customer or non-customer accounts (typically by 5:00 p.m. ET) but may not accept instructions after 5:30 p.m. ET.

See https://www.finra.org/rules-guidance/notices/information-notice-020321.

The ODD provides information on options exercise and a brokerage firm's cut-off time for accepting exercise instructions as follows:

To exercise an option that is not subject to automatic exercise, the holder must direct his brokerage firm to give exercise instructions to OCC. In order to ensure that an option is exercised on a particular day, the holder must direct his brokerage firm to exercise before the firm's cut-off time for accepting exercise instructions for that day. Different firms may have different cut-off times for accepting exercise instructions from customers, and those cut-off times may be different for different options.

A brokerage firm's cut-off time for accepting exercise instructions becomes critical on the last trading day before an option expires. An option that expires unexercised becomes worthless. An option holder who intends to exercise an option before expiration must give exercise instructions to his brokerage firm before the firm's cut-off time for accepting exercise instructions on the last trading day before expiration. If the expiration date of an option falls on a day on which an options market is open for trading in that option, a brokerage firm's last cut-off time for accepting exercise instructions prior to the option's expiration may be on the expiration date. Investors should be aware of their brokerage firm's policies in this regard. Many brokerage firms accept standing instructions to exercise, or have procedures for the exercise of, every option which is in the money by a specified amount at expiration. These procedures often incorporate by reference OCC's administrative procedures that provide for the exercise of every option that is in the money by a specified amount at expiration unless the Clearing Firm carrying the option in its accounts instructs OCC not to exercise the option. Investors should determine from their brokerage firm the applicable cut-off times, the firm's procedures for submitting exercise instructions, and whether any of their options are subject to automatic exercise. Investors should also determine whether the exercise of their options is subject to standing instructions of their brokerage firm, and, if so, they should discuss with the firm the potential consequences of such instructions.

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The “How to Exercise” section in the ODD describes how to utilize the Contrary Exercise Advice.

See https://www.theocc.com/getmedia/a151a9ae-d784-4a15-bdeb-23a029f50b70/riskstoc.pdf.

Market participants that elect to transact in options should receive a copy of the ODD from their broker-dealer.

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The ODD explains the risks inherent in options trading.

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Broker-dealers must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.

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Suitability rules are intended to distinguish the trading of customers with those of professional traders who are likely to have distinct risk/reward profiles, risk tolerance and capital.

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See

FINRA Rule 2360(b)(16)(A).

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See https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document.

58

See

FINRA Rule 2111.

Finally, the Exchange believes there is general demand for alternative expirations in Monday, Tuesday, Wednesday and Thursday Qualifying Securities Expirations. Table 13 below displays the percentage of SPY options volume, from 2018-2026, versus the number of days until expiration.

Table 13

EN02JY26.072

Table 13 displays a clear preference for shorter-dated options trading.

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,

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in general, and furthers the objectives of Section 6(b)(5) of the Act,

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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.

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15 U.S.C. 78f(b).

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15 U.S.C. 78f(b)(5).

The proposal to permit Tuesday and Thursday Tier 1 Qualifying Securities Expirations and Monday and Wednesday Tier 2 Qualifying Security Expirations, subject to the proposed

limitation of two expirations beyond the current week, would protect investors and the public interest by providing the investing public and other market participants more choice and flexibility to closely tailor their investment and hedging decisions in these options and allow for a reduced premium cost of buying portfolio protection, thus allowing them to better manage their risk exposure.

The Exchange believes that the proposed criteria for Tier 1 Qualifying Securities requires Exchange-Traded Fund Shares to be highly liquid. An AUM of 50 billion dollars for an Exchange-Traded Fund Share, in conjunction with the monthly options volume requirement of greater than 10 million options as measured by sides traded in the last month preceding the quarter end, is very restrictive. This requirement represents substantially less than 1% of Exchange-Traded Fund Shares. IBIT and XLF would be eligible today for the additional Tuesday and Thursday Qualifying Security Expirations. Therefore, an Exchange-Traded Fund Share that meets the aforementioned market capitalization and volume requirements is highly liquid and could be viewed as a stable security.

Further, with respect to the Tier 2 Qualifying Securities, which have a lower AUM of 25 billion dollars and monthly options volume as measured by sides traded in the last month preceding the quarter end, of greater than 5 million options for an Exchange-Traded Fund Share, the Exchange believes that despite the lower criteria, these Exchange-Traded Fund Shares represent highly liquid securities. This requirement also represents substantially less than 1% of Exchange-Traded Fund Shares. SMH, XLE and EEM would be eligible today for the additional Monday and Wednesday Qualifying Security Expirations based on the proposed criteria. Therefore, an Exchange-Traded Fund Share that meets the aforementioned market capitalization and volume requirements would also be highly liquid and could be viewed as a stable security.

The table below demonstrates the very low average realized volatility experienced by IBIT, XLF, SMH, XLE and EEM in the last 30 minutes of trading before the close in 2026 as compared to any security that traded an average of more than 100 options contracts per day.

EN02JY26.073

The Exchange notes that with respect to position limits, Options 9, Section 13(d)(5) provides, that “[t]o be eligible for the 250,000 contract limit, either the most recent six (6) month trading volume of the underlying security must have totalled at least 100 million shares or the most recent six-month trading volume of the underlying security must have totalled at least seventy-five (75) million shares and the underlying security must have at least 300 million shares currently outstanding.” The 250,000 contract position limit is the highest position limit by Exchange rule. Options that qualify for the 250,000 position (and exercise) limit are highly liquid securities that have met the stringent requirements noted in Options 9, Section 13(d)(5) to qualify for the highest position limit.

Finally, a Qualifying Security must participate in the Penny Interval Program. In order to qualify for the Penny Interval Program, an options class must be among the 300 most actively traded multiply listed option classes overlying securities priced

below $200.

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The most actively traded options classes are included in the Penny Interval Program based on certain objective criteria (trading volume thresholds and initial price tests).

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See

Supplementary Material .01(b) to Options 3, Section 3. Each December OCC ranks all multiply listed option classes based on National Cleared Volume for the six full calendar months from June 1 through November 30 for determination of the most actively traded option classes.

The improvement in price transparency brought about by the existing Monday and Wednesday Qualifying Security Expirations offers Market Makers and investors better volatility pricing which informs trading on the related products to these indexes. The Exchange believes that the proposed criteria for Tier 1 Qualifying Securities remains consistent with the protection of investors and the general public because the criteria targets the most liquid Exchange-Traded Fund Shares. The addition of Tuesday and Thursday Qualifying Security Expirations would further provide Market Makers and investors with volatility pricing clarity. Further, the expansion of the Qualifying Securities program for Tier 2 would engender the same benefits to a select few additional Exchange-Traded Fund Shares.

Qualifying Securities that do not continue to meet the above criteria would no longer be permitted to list Monday, Tuesday, Wednesday or Thursday Expirations in the following quarter, although the Qualifying Security would potentially have two weeks of strikes already listed which will persist. These remaining listings could continue to be traded until they expire.

With this proposal, overall, the Exchange would add a small number of additional Tuesday and Thursday Tier 1 Qualifying Security Expirations and new Monday and Wednesday Tier 2 Qualifying Securities and would continue to limit the addition of two Monday, Tuesday, Wednesday and Thursday Expirations, respectively, beyond the current week. These additional Monday, Tuesday, Wednesday and Thursday Tier 1 and Tier 2 Qualifying Security Expirations would remove impediments to and perfect the mechanism of a free and open market by encouraging Market Makers to continue to deploy capital more efficiently and improve displayed market quality.

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The Exchange believes that the proposal will continue to allow Members to expand hedging tools and tailor their investment and hedging needs more effectively in Qualifying Securities as these funds are most likely to be utilized by market participants to hedge the underlying asset classes.

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Today, Primary Market Makers and Market Makers are required to quote a specified time in their assigned options series.

See

Options 2, Section 5.

Similar to SPY, QQQ, and IWM the additional Tuesday and Thursday Tier 1 Qualifying Securities, as well as the new Monday and Wednesday Expirations for Tier 2 Qualifying Securities, are consistent with the Act as they will, among other things, expand hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that the Tier 1 and Tier 2 Qualifying Security Expirations will allow market participants to purchase options on Qualifying Securities based on their timing as needed and allow them to tailor their investment and hedging needs more effectively, thus allowing them to better manage their risk exposure.

In particular, the Exchange believes the Short Term Option Series Program has been successful to date and that proposed Tier 1 and Tier 2 Qualifying Security Expirations (Monday, Tuesday, Wednesday and Thursday) should simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the month in the same way that the Short Term Option Series Program has expanded the landscape of hedging.

There are no material differences in the treatment of SPY, QQQ and IWM Tuesday and Thursday Qualifying Security Expirations compared to the proposed Tuesday and Thursday Tier 1 Qualifying Security Expirations. Further, there are no material differences in the treatment of current Qualifying Securities that will qualify as Tier 1 Monday and Wednesday Expirations compared to the proposed Monday and Wednesday Tier 2 Qualifying Security Expirations.

The data in Table 9 and Table 10 in the Purpose section, related to calls in SPY on April 2, 2025, indicates that the vast majority of open contracts (over 90%) were liquidated by customers prior to the close. Of the remaining open contracts, a substantial portion were rationally abandoned. In considering what constitutes rational activity on the part of a market participant in determining whether to exercise, especially in the strike near the 5:00 p.m. price, it must be taken into account that some market participants may elect to hold a contract given the illiquidity of the time period, and the desire for long exposure despite a trade price that may be lower. In other words, it cannot be assumed that customers are unaware of the market conditions, or their ability to liquidate. Also, it cannot be assumed that the customer would always liquidate in these circumstances. In reviewing Tables 9 and 10, customers with calls in SPY on April 2, 2025 had a very high liquidation ratio which is evidenced by comparing the unabandoned contracts to the entire pool of long contracts throughout the day. With respect to the put data for SPY on April 2, 2025, it can be observed in Table 9 and Table 10 in the Purpose section that out-of-the-money options were either liquidated or exercised. Only a small percentage of put options went unexercised. Additionally, it can be observed that very few puts remained unexercised at the higher strikes where opportunity for profit and less risk exists. This is in contrast to puts on lower strikes where opportunity for profit relative to the risk of the short is greater. In particular, with respect to the risk exposure of put writers, the exposure to an event similar to April 2, 2025 for the proposed Wednesday Expirations would be substantially similar to the current risk that a put writer is exposed to with Friday expirations. In other words, the day of the expiry does not increase or decrease the amount of risk of a put writer, but for the premium difference. Additionally, the Exchange believes that since the rational abandonment and out-of-the-money exercise rates were so high, as evidenced in Tables 9 and 10, it is clear that customers are largely aware of the exposure between 4:00 and 5:00 p.m. ET and therefore, the risk from the unliquidated position is undertaken knowingly.

Additionally, market participants that elect to utilize options receive a copy of the ODD which explains the risks inherent in options trading. Also, broker-dealers must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.

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Suitability rules are intended to distinguish the trading of customers with those of professional traders who are likely to have distinct risk/reward profiles, risk tolerance and capital. Regardless of whether the account is self-directed or options are being recommended, broker-dealers must perform due diligence on the customer and collect information about the customer to support a determination that options trading is appropriate for the customer. Options accounts are subject to specific supervisory reviews, including, among others, reviewing the compatibility of

options transactions with investment objectives and with the types of transactions for which the account was approved, and are subject to other FINRA rules that apply when opening customer accounts, including among others, customer identification requirements under anti-money laundering rules.

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Therefore, ISE does not believe that listing of up to two Monday and Wednesday Expirations for options on certain individual stocks or Exchange-Traded Fund Shares is inconsistent with the Act.

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See

FINRA Rule 2111.

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See https://www.finra.org/rules-guidance/notices/21-15.

ISE represents that it has an adequate surveillance program in place to detect manipulative trading in the proposed option expirations, in the same way that it monitors trading in the current Qualifying Security expirations. The Exchange also represents that it has the necessary system capacity to support the new expirations. Finally, the Exchange does not believe that any market disruptions will be encountered with the introduction of these option expirations. As discussed above, the Exchange believes that its proposal is a modest expansion of weekly expiration dates for Qualifying Security Expirations given that it will be limited to two expirations beyond the current week.

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 that is not necessary or appropriate in furtherance of the purposes of the Act.

While the proposal will expand the Short Term Options Expirations to allow Tuesday and Thursday Tier 1 Qualifying Securities for Exchange-Traded Funds to be listed in addition to Monday and Wednesday Qualifying Securities, the Exchange believes that this limited expansion for Tuesday and Thursday Tier 1 Qualifying Securities for Exchange-Traded Funds will not impose an undue burden on competition; rather, it will meet customer demand. The Exchange would uniformly continue to apply the Qualifying Security criteria to options in individual stocks and Exchange-Traded Fund Shares. The Exchange believes that Members will continue to be able to expand hedging tools and tailor their investment and hedging needs more effectively in the Qualifying Securities.

Similar to SPY, QQQ and IWM Tuesday and Thursday Expirations, the introduction of Tuesday and Thursday Expirations for Tier 1 Qualifying Security Expirations on Exchange-Traded Fund Shares does not impose an undue burden on competition. The Exchange believes that it will, among other things, expand the hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that Tuesday and Thursday Tier 1 Qualifying Security Expirations will allow market participants to purchase options on Exchange-Traded Fund Shares that meet the criteria based on their timing as needed and allow them to tailor their investment and hedging needs more effectively.

The Exchange does not believe the proposal will impose any burden on inter-market competition, as nothing prevents other options exchanges from proposing similar rules to list and trade Tuesday and Thursday Tier 1 Qualifying Security Expirations on Exchange-Traded Fund Shares. Further, the Exchange does not believe the proposal will impose any burden on intra-market competition, as all market participants will be treated in the same manner under this proposal.

With respect to the proposed expansion of Monday and Wednesday Expirations for Tier 2 Qualifying Securities that are Exchange-Traded Fund Shares, in addition to the current Monday and Wednesday Qualifying Securities, the Exchange believes that this limited expansion will not impose an undue burden on competition; rather, it will meet customer demand. The Exchange would uniformly continue to apply the Qualifying Security criteria to options in individual stocks and Exchange-Traded Fund Shares that are Tier 1 and Tier 2 Qualifying Securities. The Exchange believes that Members will continue to be able to expand hedging tools and tailor their investment and hedging needs more effectively in the Qualifying Securities.

Similar to Monday and Wednesday Expirations for Qualifying Securities for Exchange-Traded Funds, the introduction of Monday and Wednesday Expirations for Tier 2 Qualifying Securities that are Exchange-Traded Fund Shares does not impose an undue burden on competition. The Exchange believes that it will, among other things, expand the hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that Monday and Wednesday Expirations for Tier 2 Qualifying Securities will allow market participants to purchase options on Exchange-Traded Fund Shares that meet the criteria based on their timing as needed and allow them to tailor their investment and hedging needs more effectively.

The Exchange does not believe the proposal will impose any burden on inter-market competition, as nothing prevents other options exchanges from proposing similar rules to list and trade Monday and Wednesday Expirations for Tier 2 Qualifying Securities that are Exchange-Traded Fund Shares. Further, the Exchange does not believe the proposal will impose any burden on intra-market competition, as all market participants will be treated in the same manner under this proposal.

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

Within 45 days of the date of publication of this notice in the

Federal Register

or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:

(A) by order approve or disapprove the proposed rule change, or

(B) institute proceedings to determine whether the proposed rule change should be 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-ISE-2026-34 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-ISE-2026-34. 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-ISE-2026-34 and should be submitted on or before July 23, 2026.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.

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17 CFR 200.30-3(a)(12).

Sherry R. Haywood,

Assistant Secretary.

[FR Doc. 2026-13357 Filed 7-1-26; 8:45 am]

BILLING CODE 8011-01-P