[Federal Register Volume 87, Number 96 (Wednesday, May 18, 2022)]
[Notices]
[Pages 30294-30305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10612]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94897; File No. SR-ISE-2022-11]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Routing 
Functionality in Connection With a Technology Migration

May 12, 2022.
    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 April 27, 2022, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the following sections within 
Options 5, Order Protection and Locked and Crossed Markets: Section 2, 
Order Protection; Section 3, Locked and Crossed Markets; and Section 4, 
Order Routing to Other Exchanges.
    Additionally, the Exchange proposes to make corresponding 
amendments to the following sections within Options 3, Options Trading 
Rules: Section 5, Entry and Display of Single-Leg Orders; Section 7, 
Types of Orders and Order and Quote Protocols; Section 9, Trading 
Halts; Section 10, Priority of Quotes and Orders; and Section 11, 
Auction Mechanisms. Also, amendments are proposed to the following 
sections within Options 7, Pricing Schedule: Section 1, General 
Provisions; Section 3, Regular Order Fees and Rebates; and Section 6, 
Other Options Fees and Rebates.

[[Page 30295]]

    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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
    In connection with a technology migration to an enhanced Nasdaq, 
Inc. (``Nasdaq'') functionality which results in higher performance, 
scalability, and more robust architecture, the Exchange intends to 
adopt certain trading functionality currently utilized at Nasdaq 
affiliate exchanges. Specifically, the Exchange proposes to conform the 
routing functionality available on ISE to that of Nasdaq BX, Inc.\3\ 
The Exchange proposes to amend the following sections within Options 5, 
Order Protection and Locked and Crossed Markets: Section 2, Order 
Protection; Section 3, Locked and Crossed Markets; and Section 4, Order 
Routing to Other Exchanges. Additionally, the Exchange proposes to make 
corresponding amendments to the following sections within Options 3, 
Options Trading Rules: Section 5, Entry and Display of Single-Leg 
Orders; Section 7, Types of Orders and Order and Quote Protocols; 
Section 9, Trading Halts; Section 10, Priority of Quotes and Orders; 
and Section 11, Auction Mechanisms, to account for the proposed 
amendments to Options 5. Also, amendments are proposed within the 
following sections of Options 7, Pricing Schedule: Section 1, General 
Provisions; Section 3, Regular Order Fees and Rebates; and Section 6, 
Other Options Fees and Rebates.
---------------------------------------------------------------------------

    \3\ GEMX and MRX incorporate ISE Options 5 by reference.
---------------------------------------------------------------------------

    Today, ISE Options 5 describes how ISE routes orders in options via 
Nasdaq Execution Services, LLC (``NES'') \4\ to away markets. Utilizing 
NES to route orders to away markets is optional. Today, Members may 
elect to not route orders through NES and designate those orders as Do-
Not-Route-Orders pursuant to Options 5, Section 4(b).\5\ In the event 
that NES cannot provide Routing Services, the Exchange will cancel 
orders that, if processed by the Exchange, would violate Options 5, 
Section 2 (prohibition on trade-throughs) or Options 5, Section 3 
(prohibition on locked and crossed markets).\6\ Further, ISE Options 5 
describes the manner in which ISE may route to another exchange via an 
Intermarket Sweep Order (``ISO'') \7\ under certain circumstances.\8\
---------------------------------------------------------------------------

    \4\ NES is a broker-dealer and the Routing Facility of the 
Exchange. NES routes orders in options listed and open for trading 
on the System to away markets either directly or through one or more 
third-party unaffiliated routing broker-dealers pursuant to Exchange 
Rules on behalf of the Exchange. NES is subject to regulation as a 
facility of the Exchange, including the requirement to file proposed 
rule changes under Section 19 of the Securities Exchange Act of 
1934, as amended. See Options 5, Section 4(a).
    \5\ A do-not-route order is a market or limit order that is to 
be executed in whole or in part on the Exchange only. Due to prices 
available on another options exchange (as provided in Options 5 
(Order Protection; Locked and Crossed Markets)), any balance of a 
do-not-route order that cannot be executed upon entry, or placed on 
the Exchange's limit order book, will be automatically cancelled. 
See Options 3, Section 7(m).
    \6\ See Supplementary Material .02 to Options 5, Section 4.
    \7\ Options 5, Section 1(h) provides, ``Intermarket Sweep Order 
(``ISO'')'' means a limit order for an options series that, 
simultaneously with the routing of the ISO, one or more additional 
ISOs, as necessary, are routed to execute against the full displayed 
size of any Protected Bid, in the case of a limit order to sell, or 
any Protected Offer, in the case of a limit order to buy, for the 
options series with a price that is superior to the limit price of 
the ISO. A Member may submit an Intermarket Sweep Order to the 
Exchange only if it has simultaneously routed one or more additional 
Intermarket Sweep Orders to execute against the full displayed size 
of any Protected Bid, in the case of a limit order to sell, or 
Protected Offer, in the case of a limit order to buy, for an options 
series with a price that is superior to the limit price of the 
Intermarket Sweep Order. An ISO may be either an Immediate-Or-Cancel 
Order or an order that expires on the day it is entered.''
    \8\ See Supplementary Material .01 and .07 to Options 5, Section 
2.
---------------------------------------------------------------------------

    Pursuant to Supplementary Material .02 to Options 5, Section 2, ISE 
permits certain orders to first be exposed at the NBBO to all Members 
for execution at the National Best Bid or Offer (``NBBO'') before the 
order would be routed to another market for execution (``flash 
functionality''). Currently, with respect to flash functionality, when 
an incoming order is priced at or through the Away Best Bid or Offer 
(``ABBO''), when the ABBO is better than the Exchange Best Bid or Offer 
(``BBO''), such order is exposed at the current NBBO to all Exchange 
Members for a period of time established by the Exchange not to exceed 
one (1) second. During the exposure period, Exchange Members may enter 
responses up to the size of the order being exposed in the regular 
trading increment applicable to the option.\9\ If at the end of the 
exposure period, the order is executable at the then-current NBBO and 
ISE is not at the then-current NBBO, responses that equal or better the 
NBBO will be executed in price priority, and at the same price, 
allocated pro-rata based on size, after Priority Customer orders are 
allocated.\10\ If during the exposure period, the order becomes 
executable on ISE at the prevailing NBBO, the exposure period will be 
terminated, and the order will be executed against orders and quotes on 
the order book and responses received during the exposure period.\11\ 
If during the exposure period the Exchange receives an unrelated order 
on the opposite side of the market from the exposed order that could 
trade against the exposed order at the prevailing NBBO price, the 
exposure period will be terminated and the orders will be executed.\12\ 
If after an order is exposed, the order cannot be executed in full on 
the Exchange at the then-current NBBO or better, and it is marketable, 
the lesser of the full displayed size of the Protected Bid(s) or 
Protected Offer(s) that are priced better than ISE's quote or the 
balance of the order will be sent to NES and any additional balance 
will be executed on ISE if it is marketable.\13\ Any additional

[[Page 30296]]

balance of the order that is not marketable against the then-current 
NBBO will be placed on ISE's order book.\14\ A Do-Not-Route Order that 
meets the criteria for the flash order functionality will also be 
exposed. If the Do-Not-Route Order cannot be executed in full on the 
Exchange at the then-current NBBO or better, the balance of the order 
will be placed on ISE's order book if it is not marketable against the 
then-current NBBO, or the balance of the order will be cancelled.
---------------------------------------------------------------------------

    \9\ If a trading halt is initiated during the exposure period, 
the exposure period will be terminated without execution. See 
Supplementary Material .02 to Options 5, Section 2.
    \10\ The percentage of the total number of contracts available 
at the same price that is represented by the size of a Member's 
response. See Supplementary Material .02(a) to Options 5, Section 2.
    \11\ Such interest will be executed in price priority. At the 
same price, Priority Customer Orders will be executed first in time 
priority and then all other interest (orders, quotes and responses) 
will be allocated pro-rata based on size. See Supplementary Material 
.02(b) to Options 5, Section 2.
    \12\ See Supplementary Material .02(c) to Options 5, Section 2.
    \13\ Supplementary Material .06 to Options 5, Section 2 provides 
that in addressing Public Customer orders that are not automatically 
executed because there is a displayed bid or offer on another 
exchange trading the same options contract that is better than the 
best bid or offer on the Exchange pursuant to the Supplementary 
Material of Options 5, Section 2, the Exchange will act in 
compliance with its rules and with the provisions of the Exchange 
Act and the rules thereunder, including, but not limited to, the 
requirements in Section (6)(b)(4) and (5) of the Exchange Act that 
the rules of national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
Members and issuers and other persons using its facilities, and not 
be designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
    \14\ See Supplementary Material .02(d) to Options 5, Section 2.
---------------------------------------------------------------------------

    Today, Non-Customer orders \15\ may opt out of being processed in 
accordance with Supplementary Material .02 of Options 5, Section 2.\16\ 
If a Non-Customer opts out, when the automatic execution of an incoming 
Non-Customer order would result in an impermissible Trade Through, and 
it is marketable, the lesser of the full displayed size of the 
Protected Bid(s) or Protected Offer(s) that are priced better than 
ISE's quote or the balance of the order will be sent to NES and any 
additional balance of the order will be executed on ISE if it is 
marketable. Any additional balance of the order that is not marketable 
against the then-current NBBO will be placed on ISE's order book.\17\
---------------------------------------------------------------------------

    \15\ The term ``Non-Customer'' means a person or entity that is 
a broker or dealer in securities. See Options 1, Section 1(a)(24).
    \16\ See Supplementary Material .04 to Options 5, Section 2.
    \17\ See Supplementary Material .04(a) to Options 5, Section 2.
---------------------------------------------------------------------------

    Today, Sweep Orders \18\ will not be processed in accordance with 
Supplementary Material .02 of this Options 5, Section 2. Rather, when 
the automatic execution of an incoming Sweep Order would result in an 
impermissible Trade Through, and it is marketable, the lesser of the 
full displayed size of the Protected Bid(s) or Protected Offer(s) that 
are priced better than ISE's quote or the balance of the order will be 
sent to NES and any additional balance of the order will be executed on 
ISE if it is marketable. Any portion of the order not executed shall be 
cancelled.\19\ If a Sweep Order is not marketable when it is submitted 
to the Exchange, it shall be cancelled.\20\
---------------------------------------------------------------------------

    \18\ A Sweep Order is a limit order that is to be executed in 
whole or in part on the Exchange and the portion not so executed 
shall be routed pursuant to Supplementary Material .05 to Options 5, 
Section 2 to Eligible Exchange(s) for immediate execution as soon as 
the order is received by the Eligible Exchange(s). Any portion not 
immediately executed by the Eligible Exchange(s) shall be canceled. 
If a Sweep Order is not marketable when it is submitted to the 
Exchange, it shall be canceled. See Options 3, Section 7(s).
    \19\ See Supplementary Material .05(a) to Options 5, Section 2.
    \20\ See Supplementary Material .05(b) to Options 5, Section 2.
---------------------------------------------------------------------------

Proposal
    The Exchange proposes to amend ISE's order routing functionality to 
conform to that of BX Options 5, Section 4. As part of the technology 
migration, Nasdaq seeks to conform certain trading functionality to 
functionality currently available on other Nasdaq affiliated options 
markets to create a similar routing experience for market participants 
across the Nasdaq options markets. Similar to BX, ISE would continue to 
route orders to away markets via NES. Similar to BX, ISE would offer 
the following order types for routing: DNR Order, FIND Order and SRCH 
Order. Each order type for routing will be explained below.
    ISE would no longer offer flash functionality because the proposed 
routing functionality, similar to BX, would permit an order to be 
exposed for a period of time that would allow other Members to trade 
with the order prior to the order routing to an away market. ISE 
proposes to remove the rule text related to flash functionality within 
Supplementary Material .02 to Options 5, Section 2.
    Sweep Orders were adopted on ISE in 2014, to supplement ISE's away 
market routing capabilities.\21\ Sweep Orders do not enter the flash 
functionality process of Supplementary Material .02 of Options 5, 
Section 2 and are processed separately. This proposal would eliminate 
the Sweep Order type within Options 3, Section 7(s) and remove the 
Sweep Order routing discussion within Supplementary Material .05 to 
Options 5, Section 2. Sweep Orders are not necessary to facilitate the 
routing of Public Customer and Non-Customer orders to away markets 
because the proposed routing functionality would route all orders to 
away markets uniformly. Additionally, uniformly, all orders would be 
subject to re-pricing if the order would otherwise lock or cross an 
away market. The Exchange would continue to not cancel marketable 
orders that could not be executed on ISE because the order would lock 
or cross an away market, rather the order would be re-priced with the 
new routing functionality.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 72816 (August 12, 
2014), 79 FR 48811 (August 18, 2014) (SR-ISE-2014-37) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change on Non-
Customer Linkage and Sweep Orders). Prior to the introduction of 
Sweep Orders, the Exchange only routed Public Customer orders to 
away markets and cancelled any marketable Non-Customer orders that 
could not be executed on the ISE in compliance with the Options 
Order Protection and Locked/Crossed Market Plan. Sweep Orders were 
intended to facilitate the routing of Public Customer and Non-
Customer orders to away markets.
---------------------------------------------------------------------------

    With the new routing process, a Route Timer would begin for each 
order that is subject to routing on the Exchange. While Members may not 
opt out of the Route Timer, as is the case today, the proposed routing 
process would create a uniform streamlined process for routing all 
orders (FIND and SRCH) where a market participant has elected to have 
an order routed; Member may continue to elect to not have their orders 
routed. The new routing process does not distinguish as between Public 
Customer orders and Non-Customer orders, rather all orders would be 
processed in the same manner. Further, the proposed routing process 
would serve to further harmonize routing across Nasdaq affiliated 
markets.
    The Exchange also proposes to remove Supplementary Material .04 to 
Options 5, Section 2, which sets forth routing procedures for Non-
Customer orders that opt out of being processed under the flash 
functionality. The Exchange has proposed to replace its current away 
routing regime with the proposed FIND and SRCH order routing types. The 
processing of Sweep Orders and the routing procedures under 
Supplementary Material .04 to Options 5, Section 2 were established as 
alternative routing procedures to the flash functionality and because 
the Exchange proposes to eliminate the flash order functionality, these 
routing procedures are no longer needed under the proposed routing 
procedures.
    Finally, the rule text within Supplementary Material .06 to Options 
5, Section 2,\22\ relating to Public Customer orders that are not 
automatically executed because there is a displayed bid or offer on 
another exchange trading the same options contract that is better than 
the best bid or offer on the Exchange, would be removed as handling of 
Public Customer orders is being amended to conform to BX Options 4 
handling. The Exchange will explain that handling below. The rule text 
within Supplementary Material .06 to Options 5, Section 2 was adopted 
in 2009 when ISE adopted new rules to implement the Options Order 
Protection and Locked/Crossed Market Plan.\23\ ISE

[[Page 30297]]

continues to be subject to compliance with its Rules, the Act, and the 
rules thereunder, including Sections 6(b)(4) and (5) of the Act \24\ 
which require the Exchange to: (1) Provide for the equitable allocation 
of reasonable dues, fees, and other charges among its participants and 
other persons using its facilities; and (2) prohibit unfair 
discrimination among customers, issuers, brokers or dealers. As noted 
in the Approval Order to SR-ISE-2009-27, Customers may choose to avoid 
having their orders routed away by entering their order with an 
Immediate-or-Cancel \25\ or Fill-or-Kill designation \26\ in addition 
to the DNR functionality.
---------------------------------------------------------------------------

    \22\ See note 13 above.
    \23\ See Securities Exchange Act Release No. 60559 (August 21, 
2009), 74 FR 44425 (August 28, 2009) (SR-ISE-2009-27) (Order 
Granting Approval of a Proposed Rule Change as Modified by Amendment 
No. 1 Thereto To Adopt Rules Implementing the Options Order 
Protection and Locked/Crossed Market Plan).
    \24\ 15 U.S.C. 78f(b)(4) and (5).
    \25\ An immediate-or-cancel order is a limit order that is to be 
executed in whole or in part upon receipt. Any portion not so 
executed is to be treated as cancelled. An immediate-or-cancel order 
entered by a Market Maker through the Specialized Quote Feed 
protocol will not be subject to the (i) Limit Order Price Protection 
and Size Limitation Protection as defined in Options 3, Section 
15(b)(2) and (3); or (ii) Limit Order Price Protection as defined in 
Supplementary Material .07(d) to Options 3, Section 14. See Options 
3, Section 7(b)(3).
    \26\ A fill-or-kill order is a limit order that is to be 
executed in its entirety as soon as it is received and, if not so 
executed, treated as cancelled. See Options 3, Section 7(b)(2).
---------------------------------------------------------------------------

    The Exchange proposes to remove the Supplementary Material to 
Options 5, Section 3 \27\ which describes how an order would be handled 
when the price of an incoming limit order that is not executable upon 
entry would lock or cross a Protected Quotation because that 
functionality is being amended with this filing. Specifically, today, 
the order would be handled in accordance with the provisions of 
Supplementary Material .02, .04 or .05 to Options 5, Section 2, as 
applicable. The Exchange's proposal removes Supplementary Material .02, 
.04 and .05 to Options 5, Section 2, therefore this section would no 
longer be possible as the current order handling is being amended with 
this proposal.
---------------------------------------------------------------------------

    \27\ Supplementary Material .01 to Options 5, Section 3 
provides, ``When the price of an incoming limit order that is not 
executable upon entry would lock or cross a Protected Quotation, 
such order shall be handled in accordance with the provisions of 
Supplementary Material .02, .04 or .05 to Options 5, Section 2, as 
applicable.''
---------------------------------------------------------------------------

    The Exchange also proposes to make certain conforming amendments 
within Options 3. First, the Exchange proposes to remove rule text 
within Options 3, Section 5(b)(1) which relates to flash functionality. 
Options 3, Section 5(b)(1) provides, ``Orders that are not 
automatically executed will be handled as provided in Supplementary 
Material .02 to Options 5, Section 2; provided that Members may specify 
that a Non-Customer order should instead be accepted and immediately 
canceled automatically by the System at the time of receipt.'' This 
rule text would no longer be necessary as the flash functionality is 
being eliminated.
    The Exchange also proposes to renumber Options 3, Section 5(b)(2) 
as Options 3, Section 5(b)(1).
    The Exchange proposes to amend Options 3, Section 9, Trading Halts, 
at subparagraph (d)(2). Among other things, the trading halt rule 
describes the processing of Market Orders exposed at the NBBO pursuant 
to Supplementary Material. 02 to Options 5, Section 2 after a trading 
halt. This rule text is no longer necessary with the elimination of 
flash functionality.
    The Exchange also proposes to amend Options 3, Section 10(a)(ii) 
\28\ to remove a reference to the flash functionality that is being 
eliminated. The Exchange also proposes to renumber Options 3, Section 
10(a)(i) and (ii) as Options 3, Section 10(a)(1) and (2) to conform the 
numbering in that rule and correct a citation within Options 3, Section 
10(c)(1)(B)(i)(b) from subparagraph (a)(1)(E) to subparagraph 
(c)(1)(E). The Exchange proposes to amend Options 3, Section 11(g) \29\ 
to remove a reference to the flash functionality that is being 
eliminated.
---------------------------------------------------------------------------

    \28\ Options 3, Section 10(a)(ii) provides, ``Applicability. 
This rule does not apply to the Block Order Mechanism described 
within Options 3, Section 11(a), the Facilitation Mechanism 
described within Options 3, Section 11(b), the Solicited Order 
Mechanism described within Options 3, Section 11(d), the Price 
Improvement Mechanism described within Options 3, Section 13, orders 
described within Options 3, Section 12 or an exposure period as 
provided in Options 5, Section 2 at Supplementary Material .02, 
unless Options 3, Section 10 is specifically referenced within ISE 
Rules applicable to the aforementioned functionality.''
    \29\ Options 3, Section 11(g) provides, ``Concurrent Complex 
Order and single leg auctions. An auction in the Block Order 
Mechanism at Options 3, Section 11(a), Facilitation Mechanism at 
Options 3, Section 11(b), Solicited Order Mechanism at Options 3, 
Section 11(d), or Price Improvement Mechanism at Options 3, Section 
13(d), respectively, or an exposure period as provided in 
Supplementary Material .02 to Options 5, Section 2, for an option 
series may occur concurrently with a Complex Order Exposure Auction 
at Supplementary Material .01 to Options 3, Section 14, Complex 
Facilitation Auction at Options 3, Section 11(c), Complex Solicited 
Order Auction at Options 3, Section 11(e), or Complex Price 
Improvement Mechanism auction at Options 11, Section 13(e), 
respectively, for a Complex Order that includes that series. To the 
extent that there are concurrent Complex Order and single leg 
auctions involving a specific option series, each auction will be 
processed sequentially based on the time the auction commenced. At 
the time an auction concludes, including when it concludes early, 
the auction will be processed pursuant to Options 3, Section 11(a), 
(b), (d), or Section 13(a) or Supplementary Material .02 to Options 
5, Section 2, as applicable, for the single option, or pursuant to 
Supplementary Material .01 to Options 3, Section 14, Options 3, 
Section 11(c), 11(e), Options 3, Section 13(e), as applicable, for 
the Complex Order, except as provided for at Options 3, Section 
13(e)(4)(vi).''
---------------------------------------------------------------------------

    Finally, the Exchange proposes to amend Options 7, Pricing 
Schedule, to remove all references to pricing related to the flash 
functionality. This would include the description of a Flash Order \30\ 
within Options 7, Section 1, General Provisions; the pricing for Flash 
Orders within Options 7, Section 3, Regular Order Fees and Rebates; 
\31\ and the waiver of the Marketing Fee for Flash Orders within 
Options 7, Section 6, Other Options Fees and Rebates.\32\
---------------------------------------------------------------------------

    \30\ A ``Flash Order'' is an order that is exposed at the 
National Best Bid or Offer by the Exchange to all members for 
execution, as provided under Supplementary Material .02 to Options 
5, Section 2. Unless otherwise noted in Section 3 pricing, Flash 
Orders will be assessed the applicable ``Taker'' Fee for the 
initiation of a Flash Order and will be paid/assessed the applicable 
``Maker'' Rebate/Fee for responses. See Options 7, Section 1.
    \31\ A market participant's order that initiates a Flash Order 
will be assessed the appropriate Taker Fee in Section 3. All market 
participant responses to Flash Orders in Select Symbols will be 
paid/assessed the appropriate Maker Rebate/Fee in Section 3. 
Responses to Flash Orders in Non-Select Symbols will be $0.25 per 
contract for non-Priority Customers and $0.00 for Priority 
Customers. See Options 7, Section 3 at note 17. The Exchange 
proposes to reserve note 17 within Options 7, Section 3.
    \32\ Today, Marketing fees are waived NDX, NQX, MNX, Flash 
Orders and for Complex Orders in all symbols. See Options 7, Section 
6E.
---------------------------------------------------------------------------

    The Exchange proposes to re-title Options 5, Section 4 as ``Order 
Routing'' similar to BX Options 5, Section 4. Proposed new Options 5, 
Section 4(a) defines various terms similar to BX such as ``exposure'' 
and ``exposing'', except for terms specific to ISE such as utilizing 
``Member'' instead of ``Participant'' and not capitalizing the term 
``Order Book''.\33\
---------------------------------------------------------------------------

    \33\ The Exchange is not defining a ``System Routing Table'' 
within this rule similar to BX as that term is not utilized 
elsewhere in the rule.
---------------------------------------------------------------------------

    As noted above, the Exchange proposes to offer 2 new routing 
strategies, FIND and SRCH, as well as an option to ``Do Not Route'' or 
``DNR.'' Additionally, the Exchange proposes to amend Options 3, 
Section 7 to add a new Supplementary Material .04 that provides, 
``Routing Strategies. Orders may be entered on the Exchange with a 
routing strategy of FIND or SRCH, or, in the alternative, an order may 
be marked Do-Not-Route (``DNR'') as provided in Options 5, Section 4 
through FIX only.'' The addition of this sentence will make clear which 
routing strategies may be utilized when submitting an order type and it 
will provide a citation to the routing rule for ease of reference. 
Routing options may be combined with all available order types and 
times-in-force, with the exception of order types

[[Page 30298]]

and times-in-force whose terms are inconsistent with the terms of a 
particular routing option. Also, the Exchange would remove the current 
description of ``Do-Not-Route Orders'' within Options 3, Section 7(m).
    With respect to order entry protocols, the Exchange notes that FIX 
\34\ is the only order entry protocol on ISE that permits routing. 
OTTO,\35\ another order entry protocol on ISE, does not permit routing.
---------------------------------------------------------------------------

    \34\ ``Financial Information eXchange'' or ``FIX'' is an 
interface that allows Members and their Sponsored Customers to 
connect, send, and receive messages related to orders and auction 
orders to the Exchange. Features include the following: (1) 
Execution messages; (2) order messages; (3) risk protection triggers 
and cancel notifications; and (4) post trade allocation messages. 
See Supplementary Material .03(a) to Options 3, Section 7.
    \35\ ``Ouch to Trade Options'' or ``OTTO'' is an interface that 
allows Members and their Sponsored Customers to connect, send, and 
receive messages related to orders, auction orders, and auction 
responses to 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) order 
messages; (6) risk protection triggers and cancel notifications; (7) 
auction notifications; (8) auction responses; and (9) post trade 
allocation messages. See Supplementary Material .03(b) to Options 3, 
Section 7.
---------------------------------------------------------------------------

    Proposed Options 5, Section 4(a) provides that the System \36\ will 
route FIND and SRCH Orders with no other contingencies. Of note, 
Immediate-or-Cancel Orders (``IOC'') will be canceled immediately if 
not executed, and will not be routed. ISE's System would first check 
the order book for available contracts for potential execution against 
the FIND or SRCH Orders. After the System checks the order book for 
available contracts, orders are sent to other available market centers 
for potential execution. When checking the order book, the System will 
seek to execute at the price at which it would send the order to an 
away market.\37\
---------------------------------------------------------------------------

    \36\ The term ``System'' means the electronic system operated by 
the Exchange that receives and disseminates quotes, executes orders 
and reports transactions. See Options 1, Section (a)(50).
    \37\ See proposed Options 5, Section 4(a). With respect to 
Reserve Orders, only the displayed portion of the order would be 
exposed.
---------------------------------------------------------------------------

    The System will initiate a Route Timer for each FIND or SRCH order 
it receives that locks/crosses an away market price. An order will not 
route to an away market before the conclusion of the Route Timer which 
shall not exceed one second and shall begin at the time orders are 
accepted into the System. At the conclusion of each Route Timer, the 
System will consider whether an order can be routed. While the Route 
Timer is running, each order will be exposed \38\ on the Nasdaq ISE 
Order Feed.\39\ This exposure allows other Members to interact with the 
order before it is routed to an away market. If an incoming order is 
joining an already established BBO price when the ABBO is locked or 
crossed with the BBO such order will join the established BBO price and 
no exposure notification will be sent, otherwise a notification will be 
sent. Also, an order exposure will be sent when the order size is 
modified. For purposes of this Rule, the Exchange's opening process is 
governed by Options 3, Section 8 and includes an opening after a 
trading halt (``Opening Process''). The order routing process would be 
available to Members from 9:30 a.m. Eastern Time until market close and 
shall route orders as described within proposed Options 5, Section 4. 
Finally, all routing of orders shall comply with Options 5, Options 
Order Protection and Locked and Crossed Market Rules.
---------------------------------------------------------------------------

    \38\ For purposes of this Rule, ``exposure'' or ``exposing'' an 
order shall mean a notification sent to Members with the price, 
size, and side of interest that is available for execution. See 
proposed Options 5, Section 4(a).
    \39\ Nasdaq ISE Order Feed (``Order Feed'') provides information 
on new orders resting on the book (e.g., price, quantity and market 
participant capacity). In addition, the feed also announces all 
auctions. The data provided for each option series includes the 
symbols (series and underlying security), put or call indicator, 
expiration date, the strike price of the series, and whether the 
option series is available for trading on ISE and identifies if the 
series is available for closing transactions only. The feed also 
provides order imbalances on opening/reopening. See Options 3, 
Section 23(a)(2).
---------------------------------------------------------------------------

    With respect to priority when routing as proposed within Options 5, 
Section 4(a)(i), orders sent to other markets do not retain time 
priority with respect to other orders in the System and the System 
shall continue to execute other orders while routed orders are away at 
another market center. Once routed by the System, an order becomes 
subject to the rules and procedures of the destination market 
including,\40\ but not limited to, order cancellation. A routed order 
can be for less than the original incoming order's size. If a routed 
order is subsequently returned to the Exchange, in whole or in part, 
that routed order, or its remainder, shall receive a new time stamp 
reflecting the time of its return to the System, unless any portion of 
the original order remains on the System, in which case the routed 
order shall retain its timestamp and its priority.\41\ As proposed, the 
priority when routing is the same as priority described in BX Options 
5, Section 4(a)(i).
---------------------------------------------------------------------------

    \40\ Members whose orders are routed to away markets shall be 
obligated to honor such trades that are executed on away markets to 
the same extent they would be obligated to honor a trade executed on 
the Exchange. See proposed Options 5, Section 4(a)(ii).
    \41\ See proposed Options 5, Section 4(a)(i).
---------------------------------------------------------------------------

    The Exchange proposes to relocate current Options 5, Section 4(f) 
into proposed Options 5, Section 4(a)(ii). This is identical to rule 
text within BX Options 5, Section 4(a)(ii).
    The Exchange proposes to remove the following sentence within 
current Options 5, Section 4, ``The Exchange may automatically route 
ISOs to other exchanges under certain circumstances, including pursuant 
to Supplementary Material .02 to Options 5, Section 2 (``Routing 
Services''). In connection with such services, the following shall 
apply:.'' This sentence is no longer necessary and is being replaced by 
proposed Options 5, Section 4(a).
    The Exchange proposes to retain the current provisions regarding 
NES within current Options 5, Section 4(a)-(e) and re-letter those 
paragraphs (A)-(E) to correspond with lettering within BX Options 5, 
Section 4 which contains similar rule text. No substantive amendments 
are proposed to those paragraphs.
    The Exchange also proposes to update a citation within new Options 
5, Section 4(a)(ii)(B) from Options 3, Section 7(m), which is being 
reserved, to proposed Options 5, Section 4(a)(iii)(A). Finally, the 
Exchange proposes to conform a citation to subparagraph (d) to ``D'' 
within new Options 5, Section 4(a)(ii)(E).
    The Exchange proposes to add the new routing order types within 
proposed Options 5, Section 4(iii). The Exchange proposes to state, 
``The following order types are available:''. Of note, a routing option 
may be combined with all available order types and times-in-force noted 
within Options 3, Section 7, with the exception of order types and 
times-in-force whose terms are inconsistent with the terms of a 
particular routing option.\42\
---------------------------------------------------------------------------

    \42\ See proposed Options 5, Section 4(a).
---------------------------------------------------------------------------

    The proposed first routing option is a DNR Order. The proposed rule 
text is substantively the same as BX Options 5, Section 4(iii)(A). The 
Exchange proposes to describe a DNR Order within proposed Options 5, 
Section 4(iii)(A). A DNR Order will never be routed outside of the 
Exchange regardless of the prices displayed by away markets. In order 
to avoid trading through, a DNR Order may execute on the Exchange at a 
price equal to or better than, but not inferior to, the best away 
market price. If an away market is at a better price, the DNR Order 
will remain in the Exchange's order book and would display re-priced. 
Specifically, the Exchange would re-price the DNR Order

[[Page 30299]]

at a price one minimum price variation (``MPV'') inferior to that away 
best bid/offer. For example, if the DNR Order is locking or crossing 
the ABBO, the DNR Order shall be entered into the order book at the 
ABBO price and displayed one MPV away from the ABBO. The Exchange would 
immediately expose the order at the ABBO to Members, provided the 
option series has opened for trading. Of note, today, ISE would cancel 
any unexecuted balances that cannot be placed on the order book. With 
the re-platform, any unexecuted balances may rest on the order book as 
the Exchange would re-price an order that locks or crosses an away 
market as described within this proposal.
    Any incoming order interacting with a DNR Order that is resting on 
the Exchange's order book would execute at the ABBO price, unless the 
ABBO is improved to a price which crosses the DNR Order's already 
displayed price. In the case where the ABBO crosses the DNR Order's 
price, the incoming order will execute at the previous ABBO price as 
the away market crossed a displayed price. Away markets have similar 
obligations not to trade through ISE's market. In the case where the 
ABBO is improved to a price which locks the DNR Order's displayed 
price, the incoming order will execute at the DNR Order's displayed 
price. Should the best away market move to an inferior price level, the 
DNR Order will automatically re-price from its one MPV inferior to the 
original ABBO and display one MPV away from the new ABBO or its 
original limit price, and expose such orders at the new ABBO. Once an 
order is booked to the order book at its original limit price, it will 
remain at that price until executed or cancelled. Thereafter, should 
the best away market improve its price such that it locks or crosses 
the DNR Order limit price on the order book, the Exchange will execute 
the resulting incoming order that is routed from the away market that 
locked or crossed the DNR Order limit price. By way of example, 
consider the following sequence of events in the System for a DNR 
Order:

9:45:00:00:00--MIAX Quote 0.95 x 1.20
9:45:00:00:10--OPRA updates MIAX BBO 0.95 x 1.20
9:45:00:00:20--ISE Local BBO Quote 1.00 x 1.15
9:45:00:00:30--OPRA disseminates ISE BBO updates: 1.00 x 1.15
9:45:00:00:35: CBOE Quote 1.00 x 1.12
9:45:00:00:45--OPRA disseminates CBOE BBO 1.00 x 1.12
9:45:00:00:50--DNR Order: Buy 5 @1.15 (exposes @ABBO of 1.12, 
displays 1 MPV from ABBO @1.11)
9:45:00:00:51--OPRA disseminates ISE BBO updates: 1.11 x 1.15 (1.11 
being the DNR Order displaying 1 MPV from ABBO)
9:45:00:00:60--MIAX Quote updates to 1.00 x 1.10 (1.10 crosses the 
displayed DNR Order price, violating locked/crossed market rules; 
henceforth, we need not protect this price)
9:45:00:00:65--OPRA disseminates MIAX BBO 1.00 x 1.10
9:45:00:00:75--ISE Market Maker Order to Sell 5 @1.09
9:45:00:00:76--Market Maker Order immediately executes against DNR 
Order 5 contracts @1.12 (1.12 being the `previous' ABBO price 
disseminated by CBOE before the receipt of the DNR Order that was 
subsequently and illegally crossed by MIAX's 2nd quote)
9:45:00:00:77--OPRA disseminates ISE BBO updates: 1.00 x 1.15 
(reverts back to BBO set by ISE Local Quote since the DNR Order has 
executed)

    Members may also elect to route their orders. The Exchange proposes 
to offer market participants two choices for routing options orders: 
FIND and SRCH. At a high level, a FIND Order will only attempt to route 
once and then post to the order book; it will not be eligible for 
routing until the next time the option series is subject to a new 
Opening Process.\43\ In contrast, a SRCH Order may route at any time, 
including during and after an Opening Process. A SRCH Order that rests 
on the order book may be routed to an away market if it is locked or 
crossed by an away market. Each of these proposed options for routing 
will be explained in greater detail below.
---------------------------------------------------------------------------

    \43\ As explained below, FIND Orders that are not marketable 
with the ABBO upon receipt will be treated as DNR for the remainder 
of the trading day and post to the Order Book, even in the event 
that there is a new Opening Process after a trading halt.
---------------------------------------------------------------------------

FIND Order
    The Exchange proposes to adopt a new routing option at Options 5, 
Section 4(a)(iii)(B) for FIND Orders. The routing process for a FIND 
Order is the same as BX Options 5, Section 4(a)(iii)(B). As noted 
above, a FIND Order is an order that is: (i) Routable at the conclusion 
of an Opening Process; and (ii) routable upon receipt during regular 
trading, after an option series is open. Each order marked as ``FIND'' 
that is submitted after an Opening Process would initiate a Route Timer 
and route in the order in which its Route Timer ends. FIND Orders that 
are not marketable with the ABBO upon receipt will be treated as DNR 
for the remainder of the trading day, and will not be subject to 
routing even in the event that there is a new Opening Process after a 
trading halt. At the end of an Opening Process, any FIND Order that is 
priced through the Opening Price, which is defined within ISE Options 
3, Section 8(a)(3), will be cancelled, and any FIND Order that is at or 
inferior to the Opening Price will execute or book pursuant to ISE 
Opening Process at Options 3, Section 8(j). The Opening Process is 
described in greater detail within Options 3, Section 8.
    With respect to FIND Orders, Options 5, Section 4(a)(iii)(B)(2) 
provides that generally, a FIND Order will be included in the displayed 
BBO at its limit price, unless the FIND Order locks or crosses the 
ABBO, in which case it will be entered into the order book at the ABBO 
price and displayed at one MPV inferior to the ABBO. If there exists a 
locked ABBO when the FIND Order is entered onto the order book, the 
FIND Order will be entered into the order book at the ABBO price and 
displayed and re-priced one MPV inferior to the ABBO. If during a Route 
Timer, ABBO markets move and the FIND Order becomes non-marketable 
against the ABBO and BBO, the FIND Order will post on the order book at 
its limit price. If the FIND Order is locked or crossed by away quotes, 
it will route at the completion of the Route Timer. However, if the 
ABBO worsens but remains better than the BBO, the FIND Order will re-
price and be re-exposed at the new price(s) without interrupting the 
Route Timer.
    If, during the Route Timer, any new interest arrives opposite the 
FIND Order that is equal to or better than the ABBO price, the FIND 
Order will trade against such new interest at the ABBO price, unless 
the ABBO is improved to a price which crosses the FIND Order's already 
displayed price, in which case the incoming order will execute at the 
previous ABBO price as the away market crossed a displayed price. 
Paragraph (a)(iii)(B)(2) of Options 5, Section 4 is intended to 
describe the possible scenarios that may occur during a Route Timer 
that has been initiated for a FIND Order. The Exchange believes that 
describing these scenarios in this introductory paragraph will provide 
a basis to understand certain FIND Order behaviors in certain 
circumstances and eliminate the need to have these circumstances 
repeated throughout the rule. The proposed remaining paragraphs outline 
System behavior in various circumstances taking into consideration away 
market pricing to provide market participants with expected outcomes.
    Proposed ISE Options 5, Section 4(a)(iii)(B)(3) sets forth a 
scenario where a FIND Order received after an Opening Process is not 
marketable against the BBO or the ABBO. In this case, the FIND Order 
will be entered into the order book at its limit price and treated as

[[Page 30300]]

DNR for the remainder of the trading day, even if there is a new 
Opening Process after a trading halt. As noted above, the FIND Order 
will only attempt to route once.
    Proposed ISE Options 5, Section 4(a)(iii)(B)(4) describes a 
scenario where a FIND Order received after an Opening Process is 
marketable against the BBO when the ABBO is inferior to the BBO. In 
this case the FIND Order will be traded on the Exchange at or better 
than the BBO price. If the FIND Order has size remaining after 
exhausting the BBO, the Exchange proposes that it may: (1) Trade at the 
next BBO price (or prices) if the order price is locking or crossing 
that price (or prices) up to and including the ABBO price, (2) be 
entered into the order book at its limit price, or (3) if locking or 
crossing the ABBO, be entered into the order book at the ABBO price and 
displayed one MPV away from the ABBO. The FIND Order will be treated as 
DNR for the remainder of the trading day, even in the event that there 
is a new Opening Process after a trading halt.
    Proposed ISE Options 5, Section 4(a)(iii)(B)(5) describes a 
scenario where a FIND Order received after an Opening Process is 
marketable against the BBO when the ABBO is equal to the BBO. In this 
case, the FIND Order will be traded on the Exchange at the BBO. If the 
FIND Order has size remaining after exhausting the BBO, it will 
initiate a Route Timer, and expose the FIND Order at the ABBO to allow 
market participants an opportunity to interact with the remainder of 
the FIND Order. During the Route Timer, the FIND Order will be included 
in the BBO at a price one MPV away from the ABBO. If during the Route 
Timer, the ABBO markets move such that the FIND Order is no longer 
marketable against the ABBO, the Exchange proposes that it may: (i) 
Trade at the next BBO price (or prices) if the FIND Order price is 
locking or crossing that price (or prices), and/or (ii) be entered into 
the order book at its limit price if not locking or crossing the BBO.
    Proposed ISE Options 5, Section 4(a)(iii)(B)(6) describes a 
scenario where at the end of the Route Timer pursuant to subparagraph 
(5) above, the FIND Order is still marketable with the ABBO. In this 
case, the FIND Order will route to an away market up to a size equal to 
the lesser of either: (1) An away market's size or (2) the remaining 
size of the FIND Order. If the FIND Order still has remaining size 
after routing, the Exchange proposes that it will (i) trade at the next 
BBO price or better, subject to the order's limit price, and, if 
contracts still remain unexecuted, the remaining size will be routed to 
away markets disseminating the same price as the BBO, or (ii) be 
entered into the order book and posted either at its limit price or re-
priced one MPV away if the order would otherwise lock or cross the 
ABBO. If size still remains, as is always the case, the FIND Order will 
not be eligible for routing until the next time the option series is 
subject to a new Opening Process, which may include a re-opening after 
a trading halt.
    Proposed ISE Options 5, Section 4(a)(iii)(B)(7) describes a 
scenario where a FIND Order is received after an Opening Process that 
is marketable against the ABBO when the ABBO is better than the BBO. In 
this case, the FIND Order will initiate a Route Timer, and expose the 
order at the ABBO to allow Members and other market participants an 
opportunity to interact with the FIND Order. As described within ISE 
Options 5, Section 4(a)(iii)(B)(8), if, at the end of the Route Timer 
pursuant to subparagraph (7) above, the ABBO is still at the best price 
and is marketable with the FIND Order, the order will route to the away 
market(s) whose disseminated price(s) is better than the BBO, up to a 
size equal to the lesser of either: (1) The away markets' size, or (2) 
the remaining size of the FIND Order. If the FIND Order still has 
remaining size after such routing, it will (i) trade at the BBO price 
or better, subject to the order's limit price, and, if contracts still 
remain unexecuted, the remaining size will be routed to away markets 
disseminating the same price as the BBO, or (ii) be entered into the 
order book and posted either at its limit price or re-priced one MPV 
away if the order would otherwise lock or cross the ABBO. If the FIND 
Order still has remaining size it will not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process, which may include a re-opening after a trading halt.
    Finally, proposed ISE Options 5, Section 4(a)(iii)(B)(9) provides 
that a FIND Order that is routed to an away market(s) will be marked as 
an Intermarket Sweep Order ``ISO'' and designated as an IOC order.
SRCH Orders
    The Exchange proposes to adopt a SRCH Order functionality at 
proposed Options 5, Section 4(a)(iii)(C). The routing process for a 
SRCH Order is the same as BX Options 5, Section 4(a)(iii)(C). A SRCH 
Order is routable at any time the option series is open for trading. A 
SRCH Order on the order book during an Opening Process (including a re-
opening following a trading halt), whether it is received prior to an 
Opening Process or it is a Good-Till-Canceled Order \44\ (``GTC'') SRCH 
Order from a prior day, may be routed as part of an Opening Process. 
Similar to FIND Orders, SRCH Orders would initiate their own Route 
Timers and route in the order in which their Route Timers end.
---------------------------------------------------------------------------

    \44\ A Good-Till-Canceled Order is an order to buy or sell that 
remains in force until the order is filled, canceled or the option 
contract expires; provided, however, that GTC Orders will be 
canceled in the event of a corporate action that results in an 
adjustment to the terms of an option contract. See ISE Options 3, 
Section 7(r).
---------------------------------------------------------------------------

    Proposed ISE Options 5, Section 4(a)(iii)(C)(1) provides, similar 
to a FIND Order, that at the end of an Opening Process, any SRCH Order 
that is priced through the Opening Price, as defined within Options 3, 
Section 8(a)(iii), will be cancelled, and any SRCH Order that is at or 
inferior to the Opening Price will execute or book pursuant to Options 
3, Section 8(k). With respect to both FIND and SRCH Orders, Options 3, 
Section 8 provides a process whereby ISE arrives at an Opening Price. 
The System cancels any order or quote priced through the Opening Price 
which was not able to be satisfied either by routing to an away 
destination or trading in full as part of the opening trade.\45\
---------------------------------------------------------------------------

    \45\ See Options 3, Section 8(j)(6)(A). The Exchange notes that 
``priced through the Opening Price'' within Options 3, Section 8 is 
intended to mean buying interest with a price higher than the 
Opening Price and selling interest with a price lower than the 
Opening Price.
---------------------------------------------------------------------------

    Similar to the FIND Order proposal, the Exchange proposes to add a 
paragraph at proposed ISE Options 5, Section 4(a)(iii)(C)(2), which is 
intended to describe at the outset possible scenarios that may occur 
during a Route Timer, including if the ABBO moves and if marketable new 
interest arrives. In the paragraphs that follow, paragraph (C)(2) would 
apply in the case where a Route Timer is initiated. Proposed ISE 
Options 5, Section 4(a)(iii)(C)(2) would provide that, generally, 
during a Route Timer a SRCH Order will be included in the displayed BBO 
at its limit price, unless the SRCH Order locks or crosses the ABBO, in 
which case it will be entered into the order book at the ABBO price and 
displayed one MPV inferior to the ABBO. If there exists a locked ABBO 
when the SRCH Order is entered onto the order book, the SRCH Order will 
be entered into the order book at the ABBO price and displayed one MPV 
inferior to the ABBO. Once on the order book, the SRCH Order may route 
if it is locked or crossed by an away market.
    If during a Route Timer, ABBO markets move such that the SRCH Order 
is no longer marketable against the ABBO or BBO, the SRCH Order will

[[Page 30301]]

book on the order book at its limit price. If, during the Route Timer, 
any new interest arrives opposite the SRCH Order that is equal to or 
better than the ABBO price, the SRCH Order will trade against such new 
interest at the ABBO price, unless the ABBO is improved to a price 
which crosses the SRCH Order's already displayed price, in which case 
the incoming order will execute at the previous ABBO price as the away 
market crossed a displayed price. If the ABBO worsens but remains 
better than the BBO, the SRCH Order will re-price and be re-exposed at 
the new price(s) without interrupting the Route Timer. If an ABBO locks 
or crosses the SRCH Order during a new Route Timer, which would 
subsequently initiate at the conclusion of any Route Timer if interest 
remains, the SRCH Order may route to the away market at the ABBO at the 
conclusion of such Route Timer. Finally, if the SRCH Order is locked or 
crossed by away quotes, it will route at the completion of the Route 
Timer. The System will route and execute contracts contemporaneously at 
the end of the Route Timer.
    As noted herein and proposed within proposed ISE Options 5, Section 
4(a)(iii)(C)(3), a SRCH Order received after an Opening Process that is 
not marketable against the BBO or the ABBO will be entered into the 
order book at its limit price. Once on the order book, the SRCH Order 
is eligible for routing if it is locked or crossed by an away market.
    Proposed ISE Options 5, Section 4(a)(iii)(C)(4) presents a scenario 
where a SRCH Order received after an Opening Process is marketable 
against the BBO when the ABBO is inferior to the BBO. In this case, the 
SRCH Order will trade at or better than the BBO price. If the SRCH 
Order has size remaining after exhausting the BBO, the Exchange 
proposes that it may: (1) Trade at the next BBO price (or prices) if 
the order price is locking or crossing that price (or prices) up to and 
including the ABBO price, and/or (2) be routed, subject to a Route 
Timer, to away markets if all Exchange interest at better or equal 
prices has been exhausted, and/or (3) be entered into the order book at 
its limit price if not locking or crossing the BBO or the ABBO.
    Proposed ISE Options 5, Section 4(a)(iii)(C)(5) provides a scenario 
where the SRCH Order received after an Opening Process is marketable 
against the BBO when the ABBO is equal to the BBO. In this case, the 
SRCH Order will trade at the BBO. If the SRCH Order has size remaining 
after exhausting the BBO, it will initiate a Route Timer and expose the 
SRCH Order at the ABBO to allow Members an opportunity to interact with 
the remainder of the SRCH Order. During the Route Timer, the SRCH Order 
will be included in the BBO at a price one MPV away from the ABBO.
    Proposed ISE Options 5, Section 4(a)(iii)(C)(6) provides that if at 
the end of the Route Timer pursuant to subparagraph (5), the SRCH Order 
is still marketable with the ABBO, the SRCH Order will route to an away 
market up to a size equal to the lesser of either: (1) The away 
market's size, or (2) the remaining size of the SRCH Order. If after 
that the SRCH Order still has remaining size after routing, it may: (i) 
Trade at the next BBO price (or prices) if the order price is locking 
or crossing that price (or prices) up to the ABBO price, and/or (ii) be 
entered into the order book at its limit price if not locking or 
crossing the BBO or the ABBO.
    Proposed ISE Options 5, Section 4(a)(iii)(C)(7) provides a scenario 
where a SRCH Order received after an Opening Process is marketable 
against the ABBO when the ABBO is better than the BBO. In this case, 
the SRCH Order will initiate a Route Timer, and expose the SRCH Order 
at the ABBO to allow Members an opportunity to interact with the SRCH 
Order. If during the Route Timer, the ABBO markets move such that the 
SRCH Order is no longer marketable against the ABBO, it may: (i) Trade 
at the next BBO price (or prices) if the SRCH Order price is locking or 
crossing that price (or prices), and/or (ii) be entered into the order 
book at its limit price if not locking or crossing the BBO.
    Proposed ISE Options 5, Section 4(a)(iii)(C)(8) provides that if at 
the end of the Route Timer pursuant to subparagraph (7), the ABBO is 
still the best price and is marketable with the SRCH Order, the order 
will route to the away market(s) whose disseminated price(s) is better 
than the BBO, up to a size equal to the lesser of either: (1) The away 
markets' size, or (2) the remaining size of the SRCH Order. However, if 
the SRCH Order still has remaining size after such routing, the 
Exchange proposes that it may: (i) Trade at the next BBO price (or 
prices) if the order price is locking or crossing that price (or 
prices) up to the ABBO price, and/or (ii) be entered into the order 
book at its limit price if not locking or crossing the BBO or the ABBO.
    Finally, as proposed in ISE Options 5, Section 4(a)(iii)(C)(9), and 
similar to FIND Orders, a SRCH Order that is routed to an away 
market(s) will be marked as an ISO and designated as an IOC Order.
Re-Pricing
    Currently, Options 3, Section 5(b) provides that orders, other than 
Intermarket Sweep Orders (as defined in Options 5, Section 1(h)), will 
not be automatically executed by the System at prices inferior to the 
NBBO (as defined in Options 5, Section 1(j)).\46\ Orders that are not 
automatically executed are handled pursuant to the flash functionality 
as provided in Supplementary Material .02 to Options 5, Section 2; 
provided that Members may specify that a Non-Customer order should 
instead be accepted and immediately cancelled automatically by the 
System at the time of receipt. Orders are not executed at a price that 
trades through another market or displayed at a price that would lock 
or cross another market. An order that is designated by the Member as 
routable is routed in compliance with applicable Trade-Through and 
Locked and Crossed Markets restrictions.\47\
---------------------------------------------------------------------------

    \46\ Options 5, Section 1(j) provides, `` `NBBO' means the 
national best bid and offer in an options series as calculated by an 
Eligible Exchange.''
    \47\ See Options 3, Section 5(d).
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 5(c) to specify 
that the System will automatically execute eligible orders using the 
Exchange's displayed BBO or the Exchange's non-displayed order book 
(``internal BBO'') if the best bid and/or offer on the Exchange has 
been re-priced. With this change, a DNR order that locks or crosses the 
ABBO may re-price and rest on the order book. Today, the DNR Order that 
locks or crosses the ABBO would be cancelled. The re-pricing itself is 
proposed to be described within Options 3, Section 5(c) and (d) similar 
to BX Options 3, Section 5(c) and (d). Currently, Options 3, Section 
5(d) describes Trade-Through Compliance and Locked or Crossed Market 
behavior.
    The Exchange proposes to add rule text within Options 3, Section 
5(d) to describe how a non-routable order would be re-priced and remove 
rule text that describes the flash functionality, which is being 
eliminated, and language providing that, in lieu of using the flash 
functionality, Members may specify that a Non-Customer order should 
instead be cancelled automatically by the System at the time of 
receipt.
    Specifically, the Exchange proposes to state within Options 3, 
Section 5(c), ``The System automatically executes eligible orders using 
the Exchange's displayed best bid and offer (``BBO'') or the Exchange's 
non-displayed order book (``internal BBO'') if the best bid and/or 
offer on the Exchange has been re-priced pursuant to subsection (d)

[[Page 30302]]

below.'' Also, the Exchange proposes to state within Options 3, Section 
5(d), ``An order that is designated by a Member as non-routable will be 
re-priced in order to comply with applicable Trade-Through and Locked 
and Crossed Markets restrictions. If, at the time of entry, an order 
that the entering party has elected not to make eligible for routing 
would cause a locked or crossed market violation or would cause a 
trade-through violation, it will be re-priced to the current national 
best offer (for bids) or the current national best bid (for offers) and 
displayed at one minimum price variance above (for offers) or below 
(for bids) the national best price.'' The Exchange believes that the 
addition of this language, similar to language within BX Options 3, 
Section 5(d), will provide Members with additional information as to 
the manner in which orders are handled by the System when those orders 
would lock or cross an away market.
Supplementary Material to Options 5, Section 2
    The Exchange proposes to remove the rule text within Supplementary 
Material .01 to Options 5, Section 2 that provides,

    All public customer ISOs entered by an Electronic Access Member 
on behalf of an Eligible Exchange shall be represented on the 
Exchange as Priority Customer Orders, as defined in Options 1, 
Section 1(a)(38). There shall be no obligation on Electronic Access 
Members to determine whether the public customer for whom the 
Eligible Exchange is routing an ISO meets the definition of a 
Priority Customer.

    Current ISE Options 5, Section 4(f) provides, ``Entering Members 
whose orders are routed to away markets shall be obligated to honor 
such trades that are executed on away markets to the same extent they 
would be obligated to honor a trade executed on the Exchange.'' The 
Exchange believes that Options 5, Section 4(f), which is proposed to be 
relocated to Options 5, Section 4(a)(ii), is more expansive than 
Supplementary Material .01 to Options 5, Section 4 and would apply to 
the indicator for the type of market participant. Furthermore, 
obligations associated with submitting ISO Orders are born by the 
member submitting the ISO Order. Each Exchange's rules describe how ISO 
Orders may be utilized.\48\
---------------------------------------------------------------------------

    \48\ See e.g., Phlx Options 3, Section 7(b)(3), The Nasdaq 
Options Market LLC Options 3, Section 7(a)(7), and BX Options 3, 
Section 7(a)(6).
---------------------------------------------------------------------------

    The Exchange proposes to remove the rule text within Supplementary 
Material .07 to Options 5, Section 2 that provides, ``All orders 
entered on the Exchange and routed to another exchange via an ISO 
pursuant to the Supplementary Material of this Options 5, Section 2 
that result in an execution shall be binding on the Member that entered 
such orders.'' As noted above, current ISE Options 5, Section 4(f) 
provides that, ``Entering Members whose orders are routed to away 
markets shall be obligated to honor such trades that are executed on 
away markets to the same extent they would be obligated to honor a 
trade executed on the Exchange.'' Supplementary Material .07 to Options 
5, Section 2 refers to orders entered pursuant to the flash 
functionality pursuant to Supplementary Material .02 to Options 5, 
Section 2, which will be eliminated and, therefore, renders the rule 
text within Supplementary Material .07 to Options 5, Section 2 
unnecessary.
Supplementary Material to Options 5, Section 4
    The Exchange proposes to remove the rule text within Supplementary 
Material .01 to Options 5, Section 4 that provides, ``Options 5, 
Section 4 does not prohibit NES or third-party unaffiliated routing 
broker-dealers used by NES from designating a preferred market-maker at 
the other exchange to which the order is being routed pursuant to 
Options 5, Section 4.'' As noted above, current Options 5, Section 4(f) 
provides, ``Entering Members whose orders are routed to away markets 
shall be obligated to honor such trades that are executed on away 
markets to the same extent they would be obligated to honor a trade 
executed on the Exchange.'' The Exchange believes that this rule is 
more expansive than Supplementary Material .01 to Options 5, Section 4 
and would apply to designating a preferred market-maker.
    The Exchange proposes to remove the rule text within the 
Supplementary Material .02 to Options 5, Section 4 that provides, ``In 
the event that NES cannot provide Routing Services, the Exchange will 
cancel orders that, if processed by the Exchange, would violate Options 
5, Section 1 (prohibition on trade-throughs) or Options 5, Section 3 
(prohibition on locked and crossed markets).'' The Exchange's proposal 
to re-price orders which would otherwise lock or cross an away market 
would cause an order, that was subject to routing, to rest on the order 
book in the event that NES was unable to provide routing services. The 
Exchange proposes to remove the rule text within Supplementary Material 
.02 to Options 5, Section 4 to permit the Exchange to re-price and rest 
such orders on the order book, similar to DNR Orders.
    Finally, the Exchange proposes to renumber the rule text within 
Supplementary Material .03 to Options 5, Section 4 to .01.
Implementation
    The Exchange intends to begin implementation of the proposed rule 
change for ISE prior to December 22, 2023. Separately, the Exchange 
plans to begin implementation of the proposed rule change prior to 
December 23, 2022, with respect to MRX, and prior to September 1, 2023, 
with respect to GEMX. Each implementation would commence with a limited 
symbol migration and continue to migrate symbols over several weeks. 
The Exchange will issue an Options Trader Alert to Members to provide 
notification of the symbols that will migrate and the relevant dates 
for each exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\49\ in general, and furthers the objectives of 
Sections 6(b)(4) and Section 6(b)(5) of the Act,\50\ 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 and is designed to promote just 
and equitable principles of trade and to protect investors and the 
public interest. The Exchange's proposal to adopt routing strategies, 
that are substantially the same as BX, with respect to DNR, FIND, and 
SRCH Orders is consistent with the Act because the functionality will 
provide ISE Members the same flexibility for routing orders that is 
afforded to BX Participants today.\51\ With this proposal, Members 
would continue to route orders to away markets to obtain the best 
price, while also accessing ISE's order book. Further, with this 
proposal, Members will have the added ability to elect a particular 
routing strategy, FIND or SRCH, when routing their order. Also, Members 
may continue to elect not to route their order, as is the case today.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f(b).
    \50\ 15 U.S.C. 78f(b)(4) and (5).
    \51\ See BX Options 5, Section 4, Order Routing.
---------------------------------------------------------------------------

    Additionally, today, orders that are not automatically executed are 
handled pursuant to the flash functionality as provided in 
Supplementary Material .02 to Options 5, Section 2; provided that 
Members may specify that a Non-

[[Page 30303]]

Customer order should instead be accepted and immediately cancelled 
automatically by the System at the time of receipt. This proposal 
eliminates flash functionality and proposes to re-price orders that 
would otherwise lock or cross an away market. As is the case today, an 
order that is designated by the Member as routable will route in 
compliance with applicable Trade-Through and Locked and Crossed Markets 
restrictions.
    While the Exchange is eliminating the current flash functionality, 
ISE is proposing to adopt order routing strategies that include a Route 
Timer that, similar to flash functionality, will continue to advertise 
orders prior to routing them in an attempt to obtain a local execution. 
Unlike the flash functionality where Non-Customer orders may opt out, 
the Route Timer will be established for each order that may route. 
During the Route Timer, similar to the flash functionality, Members may 
enter responses up to the size of the order being exposed. However, 
unlike flash functionality, an order that matches the price of an order 
during the Route Time will trade against that order without waiting for 
the Route Timer to complete. In contrast, with flash functionality, 
orders allocate at the end of the timer, with the exception of specific 
scenarios that will cause early termination \52\ and allocate pursuant 
to Options 3, Section 10, with Priority Customers executing first in 
time and all other market participant orders being allocated size pro-
rata.
---------------------------------------------------------------------------

    \52\ See Supplementary Material .02(b) and (c) to Options 5, 
Section 2.
---------------------------------------------------------------------------

    The Exchange's proposal to remove Sweep Orders within Supplementary 
Material .05 to Options 5, Section 2 and Options 3, Section 7(s) is 
consistent with the Act as a Sweep Order would no longer be necessary 
without the flash functionality and Sweep Orders would be discontinued. 
Sweep Orders do not enter the flash functionality process of 
Supplementary Material .02 of Options 5, Section 2 and are processed 
separately. Sweep Orders are not necessary to facilitate the routing of 
Public Customer and Non-Customer orders to away markets because the 
proposed routing functionality would route all orders to away markets 
uniformly. Additionally, uniformly, all orders would be subject to re-
pricing if the order would otherwise lock or cross an away market. The 
Exchange would continue to not cancel marketable orders that could not 
be executed on ISE because the order would lock or cross an away 
market, rather the order would be re-priced with the new routing 
functionality. With the new routing process, a Route Timer would begin 
for each order that is subject to routing on the Exchange. While 
Members may not opt out of the Route Timer, as is the case today, the 
proposed routing process would create a uniform streamlined process for 
routing all orders (FIND and SRCH) where a market participant has 
elected to have an order routed; Members may continue to elect to not 
have their orders routed. The new routing process does not distinguish 
as between Public Customer orders and Non-Customer orders, rather all 
orders would be processed in the same manner. Further, the proposed 
routing process would serve to further harmonize routing across Nasdaq 
affiliated markets.
    The Exchange's proposal to remove Supplementary Material .04 to 
Options 5, Section 2, which sets forth routing procedures for Non-
Customer orders that opt out of being processed under the flash 
functionality is consistent with the Act. The Exchange's proposal 
replaces its current away routing regime with the proposed FIND and 
SRCH order routing types; all orders would be processed in a uniform 
manner. The processing of Sweep Orders and the routing procedures under 
Supplementary Material .04 to Options 5, Section 2 were established as 
alternative routing procedures to the flash functionality and because 
the Exchange proposes to eliminate the flash order functionality, these 
routing procedures are no longer needed under the proposed routing 
procedures.
    NES will continue to route orders to away markets on behalf of ISE. 
Orders executed on ISE would continue to not trade through away 
markets. Orders would execute at the best price, whether locally or on 
an away market. For these above reasons, the Exchange believes that 
eliminating the flash functionality and adopting routing functionality 
similar to BX will continue to protect investors and the general public 
by continuing to provide Members with an ability to route to away 
markets at the best price in the event ISE is not at the best price or 
elect not to route.
    The Exchange's proposal to offer two new routing strategies to 
Members, similar to BX, is consistent with the Act as it will provide 
Members with a greater choice when routing. FIND and SRCH Orders will 
route away when ISE is not at the best price. All Members may elect to 
route orders, as FIND or SRCH, or elect not to route orders (DNR 
Orders).
    Re-pricing orders that would otherwise lock or cross an away 
market, as proposed within Options 3, Section 5 is consistent with the 
Act. Today, BX re-prices orders by displaying them one MPV away from 
the best bid or offer.\53\ This behavior is consistent with the 
protection of investors and the general public because it affords 
Participants the ability to obtain the best price offered among the 
various options markets while not locking or crossing an away market. 
As noted above, the Exchange would continue to not trade through an 
away market. Any order that locks or crosses an away market on ISE 
would be re-priced as a result of this amendment. This would include 
DNR orders resting on the order book and FIND and SRCH Orders that have 
not yet routed and are subject to a Route Timer.
---------------------------------------------------------------------------

    \53\ See BX Options 3, Section 5.
---------------------------------------------------------------------------

    The Exchange's proposal describes a number of potential routing 
scenarios to provide Members with greater transparency as to the manner 
in which the System would handle their order. The proposed rule also 
serves to inform Members about potential outcomes if a member elects to 
mark their order as ``DNR.'' The various scenarios are intended to 
bring greater transparency to the Exchange's Rules.
    The Exchange's proposal to only utilize FIX to route orders is 
consistent with the Act because the OTTO protocol is not designed for 
routing. Today, Members may not route orders through OTTO and this will 
not be changing as a result of the change in routing rules. Members on 
ISE may submit and route all orders through FIX. OTTO is an optional 
port available to all Members on ISE for the submission of orders.
    The Exchange's proposal to remove the rule text within 
Supplementary Material .01 to Options 5, Section 2 is consistent with 
the Act. Today, ISE Options 5, Section 4(f) requires Members to honor 
trades that are executed on away markets to the same extent they would 
be obligated to honor a trade executed on the Exchange. This is the 
case for all options exchanges that receive routing instructions from 
their members. Today, an ISE Member that submits an order and does not 
mark that order as DNR would be subject to the flash functionality and 
routing rules within Options 5, Section 4. If that order routed to an 
away market, the Member would be obligated to honor that trade on the 
away market. Supplementary Material .01 to Options 5, Section 2 would 
require a public customer ISO entered by an Electronic Access Member to 
be represented on the Exchange as a

[[Page 30304]]

Priority Customer Order \54\ pursuant to Options 1, Section 1(a)(38). 
On ISE, a public customer order from an away market equates to a 
Priority Customer Order on ISE. Supplementary Material .01 to Options 
5, Section 2 further states that there is no obligation for an 
Electronic Access Member to determine whether the public customer order 
from the away market meets the definition of a Priority Customer. As 
specified in Options 5, Section 4(f), Members are required to honor 
trades from away markets. A trade from an away market from a public 
customer would be honored on ISE as a Priority Customer without the 
need for additional due diligence. Finally, obligations associated with 
submitting ISO Orders are born by the member submitting the ISO Order. 
Each Exchange's rules describe how ISO Orders may be utilized.\55\
---------------------------------------------------------------------------

    \54\ Options 1, Section 1(a)(38) provides that the term 
``Priority Customer'' means a person or entity that (i) is not a 
broker or dealer in securities, and (ii) does not place more than 
390 orders in listed options per day on average during a calendar 
month for its own beneficial account(s).
    \55\ See note 48 above.
---------------------------------------------------------------------------

    The Exchange's proposal to remove the rule text within 
Supplementary Material .07 to Options 5, Section 2 is consistent with 
the Act. Supplementary Material .07 to Options 5, Section 2 refers to 
orders entered pursuant to the flash functionality within Supplementary 
Material .02 to Options 5, Section 2, which will be eliminated, and, 
therefore, renders the rule text within Supplementary Material .07 to 
Options 5, Section 2 unnecessary.
    The Exchange's proposal to remove the rule text within 
Supplementary Material .01 to Options 5, Section 4 is consistent with 
the Act. Supplementary Material .01 to Options 5, Section 4 states that 
Options 5, Section 4 does not prohibit NES or third-party unaffiliated 
routing broker-dealers used by NES from designating a preferred market-
maker at the other exchange to which the order is being routed pursuant 
to Options 5, Section 4. The Exchange believes that it is not necessary 
to retain this rule text, as Options 5, Section 4(f) obligates Members 
to honor such trades that are executed on away markets, to the same 
extent they would be obligated to honor a trade executed on the 
Exchange. The Exchange notes that once an order is routed to an away 
market, the rules of the away market are in effect. For example, if an 
order was routed from Nasdaq ISE to Nasdaq Phlx LLC (``Phlx''), the 
Phlx rules would apply with respect to the execution of that order. The 
ISE Member would be required to honor the trade executed on Phlx 
pursuant to Phlx's rules.
    The Exchange's proposal to remove the rule text within the 
Supplementary Material .02 to Options 5, Section 4 is consistent with 
the Act because the Exchange proposes to re-price orders which would 
otherwise lock or cross an away market. This proposal would permit the 
Exchange to re-price and rest such orders on the order book, similar to 
DNR Orders.
    The Exchange's proposal to remove pricing related to flash 
functionality is reasonable, equitable and not unfairly discriminatory 
because the flash functionality would no longer be available to any 
Member. It is reasonable to remove the fees related to flash orders and 
the references to flash orders from the Pricing Schedule because the 
Exchange is removing the flash functionality from its Rulebook. 
Additionally, it is equitable and not unfairly discriminatory to remove 
the fees related to flash orders and the references to flash orders 
from the Pricing Schedule because no Exchange Member would be able to 
utilize the flash functionality once it is removed from the System.

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.
    The Exchange's proposal to adopt routing, similar to BX,\56\ does 
not impose an undue burden on inter-market competition as the proposal 
will permit ISE Members to continue to route orders to away markets to 
obtain the best price, while also accessing ISE's order book, albeit 
with new routing options that are afforded to BX Participants today. 
The FIND and SRCH routing options would be available to all ISE 
Members. Finally, the options not to route (DNR Order) would continue 
to be offered to all ISE Members.
---------------------------------------------------------------------------

    \56\ See BX Options 5, Section 4, Order Routing.
---------------------------------------------------------------------------

    The Exchange's proposal to remove Sweep Orders within Supplementary 
Material .05 to Options 5, Section 2 and Options 3, Section 7(s) does 
not impose an undue burden on competition because a Sweep Order would 
no longer be necessary without the flash functionality and Sweep Orders 
would be discontinued.
    The Exchange's proposal to only utilize FIX to route order does not 
impose an undue burden on competition because the OTTO protocol is not 
designed for routing. Today, Members may not route orders through OTTO 
and this will not be changing as a result of the change in routing 
rules. Members on ISE may submit and route all orders through FIX. OTTO 
is an optional port available to all Members on ISE for submitting 
orders.
    The Exchange's proposal to re-price orders that would lock or cross 
away markets does not impose an undue burden on inter-market 
competition. Similar to BX Options 5, Section 4, the Exchange would re-
price orders one MPV away from the best bid or offer. Better priced 
orders would continue to be accessible on ISE's order book. ISE would 
continue to not trade through an away market. Any order that locks or 
crosses an away market on ISE would be re-priced as a result of this 
amendment. This would include DNR orders resting on the order book and 
FIND and SRCH Orders that have not yet routed and are subject to a 
Route Timer.
    The Exchange's proposal to remove the rule text within 
Supplementary Material .01 to Options 5, Section 2, Supplementary 
Material .07 to Options 5, Section 2 and Supplementary Material .01 to 
Options 5, Section 4 does not impose an undue burden on competition 
because ISE Options 5, Section 4(f) already requires Members to honor 
trades that are executed on away markets to the same extent they would 
be obligated to honor a trade executed on the Exchange. This would 
apply to the indicator for the type of market participant and 
designating a preferred market-maker, as well as obviate the need for 
redundant or unnecessary rule text.
    The proposal to remove Supplementary Material .07 to Options 5, 
Section 2 does not impose an undue burden on competition. This rule 
discusses the obligation of a member who has entered an order on the 
Exchange that is routed away via an ISO pursuant to the flash 
functionality. The Exchange is proposing to remove the flash 
functionality, so the rule is no longer needed. In addition, 
obligations associated with submitting ISO Orders are born by the 
member submitting the ISO Order. Each Exchange's rules describe how ISO 
Orders may be utilized.\57\ Finally, the Exchange's proposal to remove 
the rule text within the Supplementary Material .02 to Options 5, 
Section 4 does not impose an undue burden on competition because the 
Exchange proposes to re-price orders which would otherwise lock or 
cross an away market.
---------------------------------------------------------------------------

    \57\ See note 48 above.
---------------------------------------------------------------------------

    The Exchange's proposal to remove pricing related to flash 
functionality does not impose an undue burden on competition because 
the flash

[[Page 30305]]

functionality would no longer be available to any Member.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \58\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\59\
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78s(b)(3)(A).
    \59\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ISE-2022-11 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-2022-11. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ISE-2022-11 and should be submitted on 
or before June 8, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\60\
---------------------------------------------------------------------------

    \60\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10612 Filed 5-17-22; 8:45 am]
BILLING CODE 8011-01-P