[Federal Register Volume 87, Number 226 (Friday, November 25, 2022)]
[Notices]
[Pages 72539-72550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25672]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96362; File No. SR-ISE-2022-25]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend ATR and 
Re-Pricing Rules in Connection With a Technology Migration to Enhanced 
Nasdaq Functionality

November 18, 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 November 9, 2022, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend certain rules in connection with a 
technology migration to enhanced Nasdaq, Inc. (``Nasdaq'') 
functionality.
    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.

[[Page 72540]]

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 enhanced Nasdaq 
functionality that will result in higher performance, scalability, and 
more robust architecture, the Exchange proposes to amend its rules to 
adopt certain trading functionality currently utilized at Nasdaq BX, 
Inc. (``BX''). As further discussed below, the Exchange is proposing to 
adopt such functionality substantially in the same form as currently on 
BX, while retaining certain intended differences between it and its 
affiliates.
    The Exchange intends to begin implementation of the proposed rule 
change by Q4 2023. ISE would commence its implementation 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.
Re-Pricing
    In connection with the technology migration, the Exchange proposes 
to adopt re-pricing functionality in Options 3, Section 4 and Section 5 
for certain orders and quotes that lock or cross an away market's 
price. The proposed functionality will be materially identical to 
current BX functionality.\3\ As further described below, the Exchange 
proposes a number of corresponding amendments throughout Options 2 and 
Options 3 in connection with adopting the re-pricing mechanism.
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    \3\ Today, BX re-prices certain orders and quotes to avoid 
locking and crossing away markets, consistent with its Trade-Through 
compliance and Locked or Crossed Markets obligations. See BX Options 
3, Sections 4(b)(6) and 5(d). See also Securities Exchange Act 
Release No. 89476 (August 4, 2020), 85 FR 48274 (August 10, 2020) 
(SR-BX-2020-017) (describing BX re-pricing mechanism in BX Options 
3, Section 5). In addition to re-pricing, the Exchange also permits 
Members to cancel their quotes by configuration.
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    The Exchange notes that today, it would cancel any unexecuted 
balances of non-routable orders that cannot be placed on the order 
book.\4\ With the technology migration, any unexecuted balances may 
rest on the order book as the Exchange would re-price an order that 
locks or crosses another market as described in this proposal.
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    \4\ Today, this would include cancelling unexecuted balances of 
non-routable orders after following the procedures set forth in 
Supplementary Material .02 to Options 5, Section 2.
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    As proposed, the System will re-price certain orders to avoid 
locking or crossing an away market's price. Orders that are designated 
as non-routable and that lock or cross an away market price will be 
automatically re-priced to the current national best offer (for bids) 
or the current national best bid (for offers) as non-displayed and 
displayed one minimum price variance (``MPV'') above (for offers) or 
below (for bids) the national best price.\5\ Upon re-pricing in this 
manner, such order will be displayed on OPRA at one MPV above (for 
offers) or below (for bids) the national best price. The order will 
remain on the Exchange's order book and will be accessible at the non-
displayed price. For example, a non-displayed limit order may be 
accessed on the Exchange by a Member if the limit order is priced 
better than the NBBO. The following example illustrates how the 
proposed re-pricing mechanism would work:
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    \5\ The Exchange notes that other rules may cause a routable or 
non-routable order to re-price in the manner described above. For 
example, the Exchange will introduce a FIND routing strategy with 
the technology migration. Orders marked as FIND (i.e., ``FIND 
Orders'') are routable in nature but could, in certain specified 
scenarios, re-price and be treated as a non-routable order in such 
cases. See e.g., Options 5, Section 4(a)(iii)(B)(4) (effective but 
not yet operative), which provides that a FIND Order received after 
an Opening Process that is marketable against the BBO when the ABBO 
is inferior to the BBO will be traded on the Exchange at or better 
than the BBO price. If the FIND Order has size remaining after 
exhausting the BBO, 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. See also Securities 
Exchange Act Release No. 94897 (May 12, 2022), 87 FR 30294 (May 18, 
2022) (SR-ISE-2022-11) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change to Amend Routing Functionality in Connection 
With a Technology Migration, including to adopt FIND Orders) 
(``Routing Filing''). The changes proposed in the Routing Filing 
will become operative at the same time as this proposal.

Symbol ABCD in a Non-Penny name
CBOE BBO at 1.00 x 1.20
DNR order to buy ABCD for 1.30 arrives
DNR buy order books at 1.20 (current national best offer) and displays 
at 1.15 (one MPV below national best offer)*
*OPRA will show the displayed price, not the booked non-displayed price

    In order to effectuate the foregoing changes, the Exchange proposes 
to amend Options 3, Section 5(c), which currently provides that the 
System automatically executes eligible orders using the Exchange's 
displayed best bid and offer (``BBO''). As amended, Options 3, Section 
5(c) would provide that the System automatically executes eligible 
orders using the Exchange's displayed best bid and offer (i.e., BBO) or 
the Exchange's non-displayed order book (``internal BBO'') \6\ if the 
best bid and/or offer on the Exchange has been re-priced pursuant to 
Options 3, Section 5(d). The proposed definition of an internal BBO, 
which will be identical to BX's definition of internal BBO in BX 
Options 3, Section 5(c), will cover re-priced orders that remain on the 
order book and are available at non-displayed prices while resting on 
the order book. The proposed re-pricing itself will be described in 
Options 3, Section 5(d). Currently, Options 3, Section 5(d) describes 
Trade-Through Compliance and Locked or Crossed Market behavior, and 
further provides that an order that is designated by the Member as 
routable would be routed in compliance with applicable Trade-Through 
and Locked and Crossed Markets restrictions.\7\ The Exchange proposes 
to add rule text within Options 3, Section 5(d) to describe the manner 
in which a non-routable order would be re-priced. Specifically, the 
Exchange proposes to state, ``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 \8\ 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) as non-displayed, 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, substantially similar to language within BX Options 3, 
Section 5(d),\9\ will

[[Page 72541]]

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. Identical to BX, the Exchange is specifying that the 
re-price would occur ``at the time of entry'' to avoid a locked or 
crossed market violation or a trade-through violation.\10\
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    \6\ A non-displayed order price is not visible to any market 
participants other than the submitting market participant until such 
order executes and becomes visible at that time to all market 
participants.
    \7\ Options 3, Section 5(d) also currently provides that 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 
cancelled automatically by the System at the time of receipt.
    \8\ As noted above, FIND Orders (which are inherently routable 
but could then become non-routable in specified circumstances) may 
also be re-priced. See supra note 5.
    \9\ Currently, BX Options 3, Section 5(d), in relevant part, 
provides that 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. BX intends to make a clarifying 
change in a separate rule filing to align its rule text with 
proposed ISE Options 3, Section 5(d) to also indicate that BX will 
re-price to the current national best price as non-displayed.
    \10\ After the re-price under Options 3, Section 5(d), 
continuous re-pricing could take place pursuant to Options 5, 
Section 4 if the away market price fades to inferior prices and the 
re-priced order can move closer to its original limit price. See 
supra note 5.
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    With respect to quotes, today as set forth in Options 3, Section 
4(b)(6), if, at the time of entry, a quote would cause a locked or 
crossed market violation or would cause a trade-through violation, it 
will either be re-priced and displayed at one MPV above (for offers) or 
below (for bids) the national best price or immediately cancelled, as 
configured by the Member. The Exchange now proposes to amend the quote 
re-pricing mechanism currently described in ISE Options 3, Section 
4(b)(6) by harmonizing it with BX Options 3, Section 4(b)(6).\11\ As 
amended, the quote re-pricing language in Options 3, Section 4(b)(6) 
would provide: ``If, at the time of entry, a quote 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) as non-displayed, and 
displayed at one minimum price variance above (for offers) or below 
(for bids) the national best price, or immediately cancelled, as 
configured by the Member.'' As reflected in the foregoing, the 
difference between the current and proposed re-pricing is that the 
Exchange will re-price to the current national best price under the 
proposal and book non-displayed at this price (i.e., the current 
national best price). Upon re-pricing in this manner, the order would 
then be displayed one MPV inferior to the national best price. In 
contrast, today, the Exchange re-prices and books as displayed one MPV 
inferior to the national best price. The proposed process is identical 
to how BX quote re-pricing works today.\12\
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    \11\ BX Options 3, Section 4(b)(6) provides that a quote will 
not be executed at a price that trades through another market or 
displayed at a price that would lock or cross another market. If, at 
the time of entry, a quote 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. BX intends to make a clarifying change in a separate rule 
filing to align its rule text with proposed ISE Options 3, Section 
4(b)(6) to also indicate that it will re-price to the current 
national best price as non-displayed.
    \12\ See supra note 11.
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    In connection with the introduction of the BX-like quote re-pricing 
mechanism, the Exchange also proposes to add the definition of internal 
BBO (similar to the proposed definition of internal BBO for order re-
pricing) in new subsection (7) of Options 3, Section 4(b) for quote re-
pricing. Specifically, subsection (7) will provide that the System 
automatically executes eligible quotes using the Exchange's displayed 
best bid and offer (i.e., BBO) or the Exchange's non-displayed order 
book (i.e., internal BBO) if the best bid and/or offer on the Exchange 
has been re-priced pursuant to Options 3, Section 5(d) and Options 3, 
Section 4(b)(6). The proposed addition is intended to make clear that 
quotes may now be executed using either the BBO or internal BBO, 
similar to how orders may now be executed with the proposed re-pricing 
changes.\13\ The Exchange will also make a technical amendment to 
renumber current subsection (7) of Options 3, Section 4(b) to new 
subsection (8).
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    \13\ While BX's quote re-pricing rule does not explicitly 
reference the term ``internal BBO,'' BX describes the re-pricing of 
quotes in BX Options 3, Section 4(b)(6) and also currently operates 
identically to how ISE is proposing for quotes in ISE Options 3, 
Section 4(b)(7) (the BX system automatically executes eligible 
quotes using BX's displayed best bid and offer (i.e., BX BBO) or 
BX's non-displayed order book (i.e., internal BX BBO) if the best 
bid and/or offer on BX has been re-priced pursuant to BX Options 3, 
Section 5(d) and BX Options 3, Section 4(b)(6). BX intends to file a 
separate rule change to add this clarification in BX Options 3, 
Section 4.
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    In connection with the foregoing changes, the Exchange proposes to 
add references to ``internal BBO'' throughout its rules to closely 
conform with the concept of re-pricing at an internal BBO as proposed 
in Options 3, Sections 4(b)(6), 4(b)(7), 5(c) and 5(d). First, the 
Exchange proposes to add references to the internal BBO in Options 2, 
Section 10(a), which currently describes Preferred Market Makers \14\ 
and Preferenced Orders.\15\ The Exchange proposes to amend paragraph 
(a)(3) of Options 2, Section 10, which currently stipulates that a 
Preferred Market Maker must be quoting at the NBBO at the time the 
Preferenced Order is received in order to be entitled to the Preferred 
Market Maker allocation set forth in Options 3, Section 10(c)(1)(C). As 
amended, the Rule will provide that if the Preferred Market Maker is 
quoting at the better of the internal BBO or the NBBO at the time the 
Preferenced Order is received, the allocation procedure described in 
Options 3, Section 10(c)(1)(C) shall be applied to the execution of the 
Preferenced Order. The proposal to use the term ``better of the 
internal BBO or the NBBO'' will conform to the concept of re-pricing at 
an internal BBO as proposed in Options 3, Sections 4(b)(6), 4(b)(7), 
5(c) and 5(d), and will make clear that the Preferred Market Maker must 
now be quoting at the better of the NBBO or internal BBO to be entitled 
to the Preferred Market Maker allocation.\16\ Today, BX has similar 
language governing its Directed Market Makers (``DMMs'') (analogous to 
the Exchange's Preferred Market Makers), which requires Directed Market 
Makers to be quoting at the better of the internal BBO or the NBBO in 
order to receive the Directed Market Maker allocation entitlement.\17\ 
The Exchange also proposes a corresponding change in paragraph (a)(2) 
of Options 2, Section 10, which currently states that if the Preferred 
Market Maker is not quoting at a price equal to the NBBO at the time 
the Preferenced Order is received, the allocation procedure described 
in Options 3, Section 10(c)(1)(C) shall not be applied to the execution 
of the Preferenced Order. Specifically, the Exchange proposes that the 
Preferred Market Maker will not be entitled to the allocation in 
Options 3, Section 10(c)(1)(C) if the Preferred Market Maker is not 
quoting at a price equal to or better than the better of the internal 
BBO or the NBBO at the time the Preferenced Order is received.
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    \14\ A Preferred Market Maker may be the Primary Market Maker 
appointed to the options class or any Competitive Market Maker 
appointed to the options class. See Options 2, Section 10(a).
    \15\ A Preferenced Order is an order designated to a Preferred 
Market Maker. See Options 2, Section 10.
    \16\ As discussed below, the Exchange is proposing corresponding 
changes in the Preferred Market Maker allocation rule in Options 3, 
Section 10(c)(1)(C).
    \17\ See BX Options 2, Section 10(a)(1).
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    Second, the Exchange proposes to add the concept of ``better of the 
internal BBO or the NBBO'' in Options 3, Section 10(c)(1)(B), which 
currently sets forth an enhanced Primary Market Maker allocation 
entitlement. As amended, Options 3, Section 10(c)(1)(B) will provide 
that after all Priority Customer orders have been fully executed, 
provided the Primary Market Maker's quote is at the better of the 
internal BBO or the NBBO, the Primary Market Maker shall be entitled to

[[Page 72542]]

receive the allocation described in Options 3, Section 10(c)(1)(B)(i), 
unless the incoming order to be allocated is a Preferenced Order and 
the Primary Market Maker is not the Preferred Market Maker, in which 
case allocation would be pursuant to (c)(1)(C). The proposed changes 
will conform to the concept of re-pricing at an internal BBO as 
proposed in Options 3, Sections 4(b)(6), 4(b)(7), 5(c) and 5(d), and 
will make clear that the Primary Market Maker must now be quoting at 
the better of the NBBO or internal BBO to be entitled to the enhanced 
Primary Market Maker allocation. The Exchange notes that Nasdaq Phlx 
LLC (``Phlx'') has similar language in Phlx Options 3, Section 10 
governing Lead Market Maker (``LMM'') (analogous to the Exchange's 
Primary Market Maker) allocation.\18\ The Exchange also proposes to 
correct a citation in Options 3, Section 10(c)(1)(B)(i)(b) from 
subparagraph (a)(1)(E) to subparagraph (c)(1)(E).
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    \18\ See Phlx Options 3, Section 10(a)(1)(B).
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    Third, the Exchange proposes to add the concept of ``better of the 
internal BBO or the NBBO'' in Options 3, Section 10(c)(1)(C), which 
currently sets forth Preferred Market Maker allocation entitlement. As 
amended, Options 3, Section 10(c)(1)(C) will provide that after all 
Priority Customer orders have been fully executed, upon receipt of a 
Preferenced Order pursuant to Supplementary .01 to Options 3, Section 
10, provided the Preferred Market Maker's quote is at the better of the 
internal BBO or the NBBO, the Preferred Market Maker will be afforded a 
participation entitlement. The proposed changes will conform to the 
concept of re-pricing at an internal BBO as proposed in Options 3, 
Sections 4(b)(6), 4(b)(7), 5(c) and 5(d), and will make clear that the 
Preferred Market Maker must now be quoting at the better of the NBBO or 
internal BBO to be entitled to the Preferred Market Maker allocation. 
The Exchange notes that Phlx has similar language in Phlx Options 3, 
Section 10 governing DMM allocation.\19\
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    \19\ See Phlx Options 3, Section 10(a)(1)(C).
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    Fourth, the Exchange proposes to add the concept of ``better of the 
internal BBO or the NBBO'' throughout Options 3, Section 10(c)(1)(D), 
which currently sets forth the Primary Market Maker allocation 
entitlement for orders of five (5) contracts or fewer. As amended, 
subparagraph (i) of Options 3, Section 10(c)(1)(D) will provide that a 
Primary Market Maker is entitled to priority with respect to Orders of 
5 Contracts or Fewer if the Primary Market Maker has a quote at the 
better of the internal BBO or the NBBO with no other Priority Customer 
or Preferenced Market Maker interest present which has a higher 
priority, including when the Primary Market Maker is also the Preferred 
Market Maker. As amended, subparagraph (ii) of Options 3, Section 
10(c)(1)(D) will provide that if the Primary Market Maker is quoting at 
the better of the internal BBO or the NBBO and the Primary Market Maker 
is also the Preferred Market Maker or there is no Preferred Market 
Maker quoting at the better of the internal BBO or the NBBO, and a 
Priority Customer has a higher priority at the time of execution, the 
Priority Customer will be allocated the Orders of 5 Contracts or Fewer 
up to their displayed size pursuant Options 3, Section 10(c)(1)(A) and 
if contracts remain, the Primary Market Maker will be allocated the 
remainder. As amended, subparagraph (iii) of Options 3, Section 
10(c)(1)(D) will provide that if the Primary Market Maker is quoting at 
the better of the internal BBO or the NBBO and no Priority Customer has 
a higher priority at the time of execution and a Preferred Market 
Maker, who is not a Primary Market Maker, is quoting at the better of 
the internal BBO or the NBBO then allocation shall proceed according to 
Section 10(c)(1)(C). The proposal will conform to the concept of re-
pricing at an internal BBO as proposed in Options 3, Sections 4(b)(6), 
4(b)(7), 5(c) and 5(d). The Exchange notes that BX has similar language 
in BX Options 3, Section 10 governing LMM allocation entitlement for 
orders of five (5) contracts or fewer.\20\
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    \20\ See BX Options 3, Section 10(a)(1)(C)(2)(iii).
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Opening Process
    In connection with the technology migration, the Exchange proposes 
to amend its Opening Process in Options 3, Section 8 to adopt language 
that conforms to the proposed re-pricing structure. The Exchange 
proposes to amend Options 3, Section 8(j)(6)(A) to reflect the new BX-
like re-pricing that it is proposing to adopt, as described in the re-
pricing section above. Currently, Section 8(j)(6)(A) stipulates that 
for contracts that are not routable, pursuant to Options 3, Section 
8(j)(6), the System would cancel (i) any portion of the DNR order that 
would otherwise have to be routed to the exchange(s) disseminating the 
ABBO for an opening to occur, or (ii) any order or quote that is priced 
through the Opening Price.\21\ All other interest would remain in the 
System and be eligible for trading after opening. As it relates to DNR 
order handling, this reflects current System behavior where the 
Exchange would cancel any unexecuted balances of a non-routable order 
that cannot be placed on the order book because the residual interest 
would lock or cross an away market. With the technology migration, such 
unexecuted balances may rest on the order book as the Exchange would 
instead re-price the non-routable order that locks or crosses an away 
market to align to current BX re-pricing functionality. Accordingly, 
the Exchange proposes to replace the current rule text in Section 
8(j)(6)(A) with the following: ``Pursuant to Options 3, Section 
8(j)(6), the System will re-price DNR Orders (that would otherwise have 
to be routed to the exchange(s) disseminating the ABBO for an opening 
to occur) to the current away best offer (for bids) or the current away 
best bid (for offers) as non-displayed, and display at a price that is 
one minimum trading increment inferior to the ABBO, and disseminate 
such DNR Order as part of the new BBO.'' Proposed Section 8(j)(6)(A) 
will further provide that the System will cancel any order or quote 
that is priced through the Opening Price, and that all other interest 
will be eligible for trading after the opening. This would reflect that 
the Exchange will continue to cancel any interest priced through the 
Opening Price, and to keep all other interest in the System for trading 
after opening. Proposed Options 3, Section 8(j)(6)(A) is substantially 
similar to BX Options 3, Section 8(k)(4) and (5), and will bring 
greater transparency in how non-routable orders will be handled in the 
Opening Process.\22\
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    \21\ The Opening Price is described in Options 3, Sections 8(h) 
and (j).
    \22\ BX Options 3, Sections 8(k)(4) and (5) provide that 
pursuant to Options 3, Section 8(k)(3)(F), the System will re-price 
Do Not Route Orders (that would otherwise have to be routed to the 
exchange(s) disseminating the ABBO for an opening to occur) to a 
price that is one minimum trading increment inferior to the ABBO, 
and disseminate the re-priced DNR Order as part of the new BBO. The 
System will cancel any order or quote that is priced through the 
Opening Price. All other interest will be eligible for trading after 
opening. BX intends to align its rule to proposed ISE Options 3, 
Section 8(j)(6)(A) in a separate rule filing to clarify that DNR 
Orders in the BX opening process can re-price to the current ABBO as 
non-displayed, and display at a price that is one MPV inferior to 
the ABBO.
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Auction Mechanisms
Facilitation and Solicited Order Mechanisms
    The Exchange proposes to amend Options 3, Section 11 (Auction 
Mechanisms) to modify the entry checks for the Exchange's Facilitation 
Mechanism \23\ and Solicited Order

[[Page 72543]]

Mechanism \24\ to reflect the BX-like re-pricing changes under this 
proposal by introducing the concept of an internal BBO.\25\ As 
discussed in the re-pricing section above, the Exchange proposes to re-
price orders that would otherwise lock or cross an away market.\26\ 
Specifically, an order will be re-priced to the current national best 
offer (for bids) or the current national best bid (for offers) as non-
displayed and displayed at one MPV above (for offers) or below (for 
bids) the national best price.\27\ With this re-pricing, an Exchange 
order could be available at a price that is better than the NBBO, but 
is non-displayed (i.e., the Exchange's non-displayed order book or 
``internal BBO''). Accordingly, the Exchange proposes to add the 
concept of ``internal BBO'' in the order entry checks for the 
Facilitation and Solicited Order Mechanisms in Options 3, Sections 
11(b)(1) and (d)(1), respectively, to account for a non-displayed 
better price that may be available on the Exchange order book.
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    \23\ The Facilitation Mechanism is a process by which an 
Electronic Access Member can execute a transaction wherein the 
Electronic Access Member seeks to facilitate a block-size order it 
represents as agent, and/or a transaction wherein the Electronic 
Access Member solicited interest to execute against a block-size 
order it represents as agent. See Options 3, Section 11(b).
    \24\ The Solicited Order Mechanism is a process by which an 
Electronic Access Member can attempt to execute orders of 500 or 
more contracts it represents as agent against contra orders that it 
solicited. See Options 3, Section 11(d).
    \25\ As discussed later in the filing, while BX does not have a 
Facilitation or Solicited Order Mechanism like ISE, BX currently 
considers the internal BBO in its price improvement auction 
(``PRISM'') in a similar manner as being proposed for the ISE 
Facilitation and Solicited Order Mechanisms.
    \26\ See supra notes 5 and 8.
    \27\ See proposed Options 3, Section 5(d). See supra notes 5 and 
8.
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    In particular, the Exchange proposes to add the concept of 
``internal BBO'' in Options 3, Section 11(b)(1), which currently sets 
forth the entry checks for the Exchange's Facilitation Mechanism. As 
amended, the Rule will provide that orders must be entered into the 
Facilitation Mechanism at a price that is (A) equal to or better than 
the NBBO and the internal BBO on the same side of the market as the 
agency order unless there is a Priority Customer order on the BBO or 
the internal BBO on the same side of the market as the agency order, in 
which case the order must be entered at an improved price over the 
Priority Customer order; and (B) equal to or better than the ABBO on 
the opposite side.\28\ The proposal will make clear that with the 
introduction of the re-pricing mechanism in proposed Options 3, Section 
5(d), the System will now check orders entered into the Facilitation 
Mechanism against the internal BBO as well. In addition, the proposed 
changes will clarify that the Facilitation order must be entered at an 
improved price over the Priority Customer order where there is a 
Priority Customer order on the same side BBO or internal BBO. By way of 
example, the below examples demonstrates how the internal BBO would 
operate in the Facilitation Mechanism.
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    \28\ The Facilitation Mechanism does not check the Exchange best 
bid or offer on the opposite side of the market because any interest 
that is available on the opposite side of the market would allocate 
against the Facilitation Agency Order and provide price improvement.
---------------------------------------------------------------------------

Facilitation Passes Entry Validation Equal To or Better Than the NBBO 
and Internal BBO on the Same Side of the Market
    Assume the following:

MIAX BBO: 3.10 x 3.20
ISE BBO 3.05 x 3.25
Non-Priority Customer DNR order to buy for 3.25 arrives at ISE; books 
at 3.20 non-displayed and re-prices/displays at 3.15
ISE Internal BBO: 3.20 x 3.25
NBBO: 3.15 x 3.20

Facilitation to buy @ 3.20 arrives and is able to begin because the 
Facilitation Agency side price is at or better than the NBBO and 
internal BBO on the same side of the market and at or better than the 
ABBO on the opposite side of the market.
Facilitation Fails Entry Validation Equal To or Better Than the NBBO 
and Internal BBO on the Same Side of the Market
    Assume the following:

MIAX BBO: 3.10 x 3.20
ISE BBO 3.05 x 3.25
Non-Priority Customer DNR order to buy for 3.25 arrives at ISE; books 
at 3.20 non-displayed and re-prices/displays at 3.15
ISE Internal BBO: 3.20 x 3.25
NBBO: 3.15 x 3.20

Facilitation to buy @ 3.15 arrives and is rejected because the 
Facilitation Agency side price is not at or better than the internal 
BBO on the same side of the market.
    Similarly, the Exchange proposes to add the concept of ``internal 
BBO'' in Options 3, Section 11(d)(1), which currently sets forth the 
entry checks for the Exchange's Solicited Order Mechanism. As amended, 
the Rule will provide that orders must be entered into the Solicited 
Order Mechanism at a price that is equal to or better than the NBBO and 
the internal BBO on both sides of the market; provided that, if there 
is a Priority Customer order on the BBO or internal BBO, the order must 
be entered at an improved price over the Priority Customer order. 
Similar to the proposed changes for the Facilitation Mechanism, the 
proposal will make clear that with the introduction of the re-pricing 
mechanism in proposed Options 3, Section 5(d), the System will now 
check orders entered into the Solicited Order Mechanism against the 
internal BBO as well. In addition, the proposed changes will clarify 
that the order entered into the Solicited Order Mechanism must be 
entered at an improved price over the Priority Customer order where 
there is a Priority Customer order on either side of the BBO or 
internal BBO. By way of example, the below examples demonstrates how 
the internal BBO would operate in the Solicited Order Mechanism.
Solicitation Passes Entry Validation Equal To or Better Than the NBBO 
and Internal BBO on Both Sides of the Market
MIAX BBO: 3.10 x 3.20
ISE BBO 3.05 x 3.25
Non-Priority Customer DNR order to sell for 3.05 arrives at ISE; books 
at 3.10 non-displayed and re-prices/displays at 3.15
ISE Internal BBO: 3.05 x 3.10
NBBO: 3.10 x 3.15

Solicitation to buy @ 3.10 arrives and is able to begin because the 
Solicitation Agency side price is at or better than the NBBO and 
internal BBO on both sides of the market.
Solicitation Fails Entry Validation Equal To or Better Than the NBBO 
and Internal BBO On Both Sides of the Market
MIAX BBO: 3.10 x 3.20
ISE BBO 3.05 x 3.25
Non-Priority Customer DNR order to sell for 3.05 arrives at ISE; books 
at 3.10 non-displayed and re-prices/displays at 3.15
ISE Internal BBO: 3.05 x 3.10
NBBO: 3.10 x 3.15

Solicitation to buy @ 3.15 arrives and is rejected because the 
Solicitation Agency side price is not at or better than the internal 
BBO on both sides of the market.
    Lastly, the Exchange proposes a clarifying change in Options 3, 
Section 11(b)(1), which governs the entry checks for the Facilitation 
Mechanism. Specifically, the Exchange proposes to amend the provision 
as follows: ``Orders must be entered into the Facilitation Mechanism at 
a price that is (A) equal to or better than the NBBO and the internal 
BBO on the same side of the market as the agency order unless there is 
a Priority Customer order on the same

[[Page 72544]]

side of the market as the agency order. . .'' The proposed change does 
not change current System behavior, and is meant to align the language 
in the Priority Customer order clause relating to the same side of the 
market as the agency order more closely with similar language in the 
preceding clause.
Price Improvement Mechanism
    The Exchange proposes to amend Options 3, Section 13 (Price 
Improvement Mechanism for Crossing Transactions) to modify the entry 
checks for the Exchange's Price Improvement Mechanism (``PIM'') to 
reflect the BX-like re-pricing changes under this proposal.\29\ The 
Exchange proposes to amend Options 3, Section 13(b)(1) to provide, ``If 
the Agency Order is for less than 50 option contracts, and if the 
difference between the National Best Bid and National Best Offer 
(``NBBO'') or the difference between the internal best bid and internal 
best offer is $0.01, the Crossing Transaction must be entered at $0.01 
better than the NBBO and the internal BBO on the opposite side of the 
market from the Agency Order and better than the limit order or quote 
on the Nasdaq ISE order book on the same side of the Agency Order.'' 
\30\ The addition of ``internal BBO'' herein is similar to the changes 
proposed for the Facilitation and Solicited Order Mechanisms discussed 
above in that the Exchange is reflecting the proposed re-pricing 
changes in its PIM rule as illustrated by the example below.
---------------------------------------------------------------------------

    \29\ BX intends to file a rule change to amend BX Options 3, 
Section 13 to similarly refer to an ``internal BBO.''
    \30\ Currently, Options 3, Section 13(b)(1) provides that if the 
Agency Order is for less than 50 option contracts, and if the 
difference between the National Best Bid and National Best Offer 
(``NBBO'') is $0.01, the Crossing Transaction must be entered at one 
minimum price improvement increment better than the NBBO on the 
opposite side of the market from the Agency Order and better than 
the limit order or quote on the Nasdaq ISE order book on the same 
side of the Agency Order.
---------------------------------------------------------------------------

    Today, an Agency Order for less than 50 contracts could begin a PIM 
if the difference between the NBBO is $0.01. With this change, an 
Agency Order for less than 50 contracts could begin a PIM if the 
difference between the NBBO or between the internal BBO is $0.01. Below 
is an example of the how the System would treat an order for less than 
50 contracts where the internal BBO is greater than the NBBO with 
respect to the rule text within Options 3, Section 13(b)(1).
    Assume ISE Market Maker quotes an option series at 1.09 (10) x 1.15 
(10).
    Next assume ABBO quotes that option series at 1.10 (10) x 1.11 
(10).
    Assume an order locks the ABBO quote with a buy order in that 
options series of 5 @ 1.11.
    With the proposed repricing, this order would book at 1.11 and 
display 1 MPV (penny in this case) away at 1.10 on the order book.
    In this scenario:
    [ssquf] the PIM to buy 49 @ 1.10 would be rejected;
    [ssquf] the PIM to buy 49 @ 1.11 would be rejected;
    [ssquf] the PIM to sell 49 @ 1.10 would be rejected; and
    [ssquf] the PIM to sell 49 @ 1.11 would be rejected.
    This proposed new rule text accounts for a non-displayed better 
price that may be available on the order book. A similar change is 
proposed for the Crossing Transaction within that same paragraph. 
Additionally, in lieu of stating ``one minimum price improvement 
increment'' the Exchange proposes to replace that rule text with 
``$0.01.'' Amending the rule text to $0.01 does not amend the current 
System operation, rather it more simply states what that minimum 
increment is today. The Exchange proposes similar changes within 
Options 3, Section 13(b)(2) to add references to ``difference between 
the internal BBO'' and ``$0.01.'' \31\ Below is an example of the how 
the System would treat an order for 50 contracts or more where the 
internal BBO is greater than the NBBO with respect to the rule text 
within Options 3, Section 13(b)(2).
---------------------------------------------------------------------------

    \31\ See supra note 29.
---------------------------------------------------------------------------

    Assume ISE Market Maker quotes an option series at 1.09 (10) x 1.15 
(10).
    Next assume ABBO quotes that option series at 1.10 (10) x 1.11 
(10).
    Assume an order locks the ABBO quote with a buy order in that 
option series at 5 @ 1.11.
    With the proposed repricing this order would book at 1.11 and 
display 1 MPV (penny in this case) away at 1.10 on the order book.
    In this scenario:
    [ssquf] the PIM to buy 50 @ 1.10 would be rejected;
    [ssquf] the PIM to buy 50 @ 1.11 would be rejected;
    [ssquf] the PIM to sell 50 @ 1.10 would be rejected; and
    [ssquf] the PIM to sell 50 @ 1.11 would be accepted and would begin 
a PIM auction.
    Assuming no other interest arrives during the PIM auction timer, 
this order would trade at the end of the auction timer, thereby filling 
the order 5 @ 1.11 and the remainder would allocate to the contra side/
counter side order.
Acceptable Trade Range
    As set forth in Options 3, Section 15(a)(2)(A), the Exchange 
currently offers an Acceptable Trade Range (``ATR'') risk protection 
that sets dynamic boundaries within which quotes and orders may trade. 
ATR is designed to guard against the System from experiencing dramatic 
price swings by preventing the immediate execution of quotes and orders 
beyond the thresholds set by the protection. With the proposed adoption 
of the BX-like re-pricing mechanism described above, the Exchange 
proposes to introduce an iterative process for ATR wherein the Exchange 
will attempt to execute interest that exceeds the outer limit of the 
ATR for a brief period of time while that interest is automatically re-
priced in the manner discussed below. The Exchanges notes that today, 
it would cancel rather than re-price any interest that exceeds the 
outer limit of the ATR. The proposed changes will harmonize the 
Exchange's ATR with BX's ATR.\32\
---------------------------------------------------------------------------

    \32\ See BX Options 3, Section 15(b)(1). As discussed further 
below, the Exchange will also add references to ``internal BBO'' in 
the ATR reference price description. BX intends to file a similar 
rule change to clarify this behavior.
---------------------------------------------------------------------------

    Currently, subparagraph (i) of Options 3, Section 15(a)(2)(A) 
provides that the System will calculate an ATR to limit the range of 
prices at which an order or quote will be allowed to execute. The ATR 
is calculated by taking the reference price, plus or minus a value to 
be determined by the Exchange (i.e., the reference price-(x) for sell 
orders and the reference price + (x) for buy orders).\33\ ATR is not 
available for All-or-None Orders. Subparagraph (ii) provides that the 
reference price is the National Best Bid (``NBB'') for sell orders/
quotes and the National Best Offer (``NBO'') for buy orders/quotes.\34\ 
The reference price is calculated upon receipt of a new order or quote, 
provided that if the applicable NBB or NBO price is improved at the 
time an order is routed to an away market, a new reference price is 
calculated based on the NBB or NBO at that time. Today, as set forth in 
subparagraph (iii), if an order or quote reaches the outer limit of the 
ATR without being fully executed,

[[Page 72545]]

then any unexecuted balance will be cancelled.
---------------------------------------------------------------------------

    \33\ The ATR settings values are tied to the option premium and 
will be set out in the ATR table in the ISE system settings document 
on a publicly available website. The ISE settings will be identical 
to BX ATR. The Exchange would notify all Members through an Options 
Trader Alert if it determined to amend that value and also publish 
the settings on a publicly available website.
    \34\ In the event of a crossed ABBO, ATR will use the NBO 
instead of the NBB for incoming sell orders and the NBB instead of 
the NBO for incoming buy orders as the reference price.
---------------------------------------------------------------------------

    The Exchange now proposes to amend this rule to adopt an iterative 
process like BX wherein an order/quote that reaches its ATR boundary 
will be paused for a brief period of time to allow more liquidity to be 
collected, before the order/quote is automatically re-priced and a new 
ATR is calculated. Specifically, the Exchange proposes to amend 
subparagraph (iii) of Options 3, Section 15(a)(2)(A) to provide that if 
an order or quote reaches the outer limit of the ATR (``Threshold 
Price'') without being fully executed, it will be posted at the 
Threshold Price for a brief period, not to exceed one second (``Posting 
Period''), to allow the market to refresh and determine whether or not 
more liquidity will become available (on the Exchange or any other 
exchange if the order is designated as routable) within the posted 
price of the order or quote before moving on to a new Threshold Price. 
Upon posting, either the current Threshold Price of the order/quote or 
an updated NBB for buy orders/quotes or the NBO for sell orders/quotes 
(whichever is higher for a buy order/quote or lower for a sell order/
quote) then becomes the reference price for calculating a new ATR. If 
the order/quote remains unexecuted after the Posting Period, a new 
Acceptable Trade Range will be calculated and the order/quote will 
execute, route, or post up to the new Threshold Price. This process 
will repeat until either (1) the order/quote is executed, cancelled, or 
posted at its limit price or (2) the order/quote has been subject to a 
configurable number of instances of the ATR as determined by the 
Exchange \35\ (in which case it will be returned).\36\ The proposed 
changes will be functionally identical to BX's ATR, as set forth in BX 
Options 3, Section 15(b)(1)(A).
---------------------------------------------------------------------------

    \35\ The Exchange intends to initially set the configurable 
number to 5 iterations, similar to BX. The Exchange would issue an 
Options Trader Alert if it determined to amend that timeframe and 
also publish the settings on a publicly available website.
    \36\ Under this proposal, DNR orders that are locked against the 
ABBO will pause their ATR iterations (i.e., a new ATR will not be 
calculated based on the reference price at that time) and will 
remain this way until the ATR process can be completed. This will be 
the same as BX DNR order handling. Returning an order to the 
customer means that the order would be cancelled.
---------------------------------------------------------------------------

    In light of the foregoing changes, the Exchange also proposes to 
update the reference price definition in subparagraph (ii) to provide 
that upon receipt of a new order or quote, the reference price will now 
be the better of the NBB or internal best bid for sell orders/quotes 
and the better of the NBO or internal best offer for buy orders/quotes 
or the last price at which the order/quote is posted, whichever is 
higher for a buy order/quote or lower for a sell order/quote.\37\
---------------------------------------------------------------------------

    \37\ The additions of ``internal BBO'' in this rule text are 
consistent with the proposed re-pricing described above.
---------------------------------------------------------------------------

    This will be functionally identical to BX's ATR reference price, as 
set forth in BX Options 3, Section 15(b)(1).\38\
---------------------------------------------------------------------------

    \38\ BX Options 3, Section 15(b)(1) states, in relevant part, 
that ``[t]he system will calculate an Acceptable Trade Range to 
limit the range of prices at which an order will be allowed to 
execute. The Acceptable Trade Range is calculated by taking the 
reference price, plus or minus a value to be determined by the 
Exchange. (i.e., the reference price-(x) for sell orders and the 
reference price + (x) for buy orders). Upon receipt of a new order, 
the reference price is the NBB for sell orders and the NBO for buy 
orders or the last price at which the order is posted whichever is 
higher for a buy order or lower for a sell order.'' The Exchange 
notes that BX's rule does not reference ``quotes,'' but BX's ATR 
currently applies to both orders and quotes like the Exchange's ATR. 
The Exchange further notes that BX's rule does not refer to an 
``internal BBO'' but that today, BX's ATR reference price also takes 
the the better of the NBB (NBO) or internal best bid (best offer) 
for sell (buy) orders/quotes, or the last price at which the order/
quote is posted.
---------------------------------------------------------------------------

    In addition, the Exchange proposes in new subparagraph (iv) \39\ 
that during the Posting Period, the Exchange will disseminate as a 
quotation: (1) the Threshold Price for the remaining size of the order/
quote triggering the ATR and (2) on the opposite side of the market, 
the best price will be displayed using the ``non-firm'' indicator 
message in accordance with the specifications of the network processor. 
This would allow the order or quote setting the ATR Threshold Price to 
retain priority in the Exchange book and also prevent any later-entered 
order from accessing liquidity ahead of it. If the Exchange were to 
display trading interest available on the opposite side of the market, 
that trading interest would be automatically accessible to later-
entered orders during the period when the order triggering the ATR is 
paused. This is identical to how BX currently disseminates such 
interest during the ATR Posting Period.\40\ Identical to BX, following 
the Posting Period, the Exchange will return to a normal trading state 
and disseminate its best bid and offer.\41\
---------------------------------------------------------------------------

    \39\ The Exchange will make a related change to update current 
subparagraph (iv) to subparagraph (v).
    \40\ See BX Options 3, Section 15(b)(1)(B). Like BX today, with 
the proposed changes, route timers pursuant to Options 5, Section 
4(a), will continue to run on the Exchange during ATR iterations and 
``firm'' quote posting can occur if, for example, the order is re-
priced to one MPV away from the ABBO pursuant to proposed Options 3, 
Section 5(d) to comply with the trade-through and locked or crossed 
market restrictions pursuant to Options 5, Section 2. In such cases, 
the quotation will disseminate as a ``firm'' quote.
    \41\ See BX Options 3, Section 15(b)(1)(B).
---------------------------------------------------------------------------

    Importantly, the ATR is neutral with respect to away markets. The 
order may route to other destinations to access liquidity priced within 
the ATR provided the order is designated as routable, as shown in the 
example below.\42\ With the proposed changes, if the order still 
remains unexecuted, this process will repeat \43\ until the order is 
executed, cancelled, or posted at its limit price. Pursuant to Options 
5, Section 4, if after an order is routed to the full size of an away 
exchange and additional size remains available for the routed order, 
the remaining contracts will be posted on the Exchange's order book at 
a price that assumes the away market has been fully executed and 
exhausted by the routed order.\44\ This practice of routing and then 
posting is consistent with the national market system plan governing 
trading and routing of options orders and the Exchange policies and 
procedures that implement that plan.\45\
---------------------------------------------------------------------------

    \42\ When a Threshold Price is calculated, an order can route 
and execute at away venues at multiple prices that are at or better 
than the calculated Threshold Price.
    \43\ As proposed in Options 3, Section 15(a)(2)(A)(iii)(2), the 
Exchange will establish a maximum number of ATR iterations until the 
order or quote is returned back to the Member.
    \44\ See Options 5, Section 4(a)(iii) (effective but not yet 
operative).
    \45\ See Options Order Protection and Locked/Crossed Markets 
Plan, Securities Exchange Act Release No. 60405 (July 30, 2009), 74 
FR 39362 (August 6, 2009).
---------------------------------------------------------------------------

    The following examples illustrate the proposed ATR functionality.
Example 1
    Assume that the Acceptable Trade Range is set for $0.05 and the 
following quotations are posted in all markets:

                                              Away Exchange Quotes
----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
GEMX............................................              10           $0.75           $0.90              10
AMEX............................................              10            0.75            0.92              10

[[Page 72546]]

 
PHLX............................................              10            0.75            0.94              10
----------------------------------------------------------------------------------------------------------------


                                                ISE Price Levels
----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
ISE.............................................              10           $0.75           $0.90              10
ISE.............................................  ..............  ..............            0.95              10
ISE.............................................  ..............  ..............            0.97              10
ISE.............................................  ..............  ..............            1.00              20
----------------------------------------------------------------------------------------------------------------

    ISE receives a routable order to buy 70 contracts at $1.10. The 
Acceptable Trade Range is $0.05 and the reference price is the National 
Best Offer-$0.90. The Acceptable Trade Range threshold is then $0.90 + 
$0.05 = $0.95 which is the Threshold Price. The order is allowed to 
execute up to and including $0.95.
     10 contracts will be executed at $0.90 against ISE.
     10 contracts will be executed at $0.90 against GEMX.
     10 contracts will be executed at $0.92 against AMEX.
     10 contracts will be executed at $0.94 against PHLX.
     10 contracts will be executed at $0.95 against ISE.
     Then, after executing at multiple price levels, the order 
is posted at the Threshold Price of $0.95 for a brief period not to 
exceed one second (``Posting Period'') to determine whether additional 
liquidity will become available.
     During the Posting Period, a new Acceptable Trade Range 
Threshold Price of $1.00 is determined (new reference price of $0.95 + 
$0.05 = $1.00).
     If, during the Posting Period (brief pause not to exceed 1 
second), no liquidity becomes available within the order's posted price 
of $0.95, then at the conclusion of the Posting Period, the System will 
execute 10 contracts at $0.97, and 10 contracts at $1.00.\46\
---------------------------------------------------------------------------

    \46\ The brief pause described above will not disadvantage 
customers seeking the best price in any market. For example, if in 
the example above an NYSE ARCA quote of $0.75 x $0.96 with size of 
10 x 10 is received, a routable order would first route to NYSE ARCA 
at $0.96, then execute against ISE at $0.97.
---------------------------------------------------------------------------

    Similarly, if a new order is received when a previous order has 
reached the Acceptable Trade Range threshold, the Threshold Price will 
be used as the reference price for the new Acceptable Trade Range 
threshold. Both orders would then be allowed to execute up (down) to 
the new Threshold Price.
Example 2

                                              Away Exchange Quotes
----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
GEMX............................................              10           $0.75           $0.90              10
AMEX............................................              10            0.75            0.92              10
PHLX............................................              10            0.75            0.94              10
----------------------------------------------------------------------------------------------------------------


                                                ISE Price Levels
----------------------------------------------------------------------------------------------------------------
                    Exchange                         Bid size        Bid price      Offer price     Offer size
----------------------------------------------------------------------------------------------------------------
ISE.............................................              10           $0.75           $0.90              10
ISE.............................................  ..............  ..............            0.95              10
ISE.............................................  ..............  ..............            1.05              20
----------------------------------------------------------------------------------------------------------------

    ISE receives a routable order to buy 60 contracts at $1.10. The 
Acceptable Trade Range is $0.05 and the reference price is the National 
Best Offer-$0.90. The Acceptable Trade Range Threshold Price is then 
$0.90 + $0.05 = $0.95 which is the Threshold Price. The order is 
allowed to execute up to and including $0.95.
     10 contracts will be executed at $0.90 against ISE.
     10 contracts will be executed at $0.90 against GEMX.
     10 contracts will be executed at $0.92 against AMEX.
     10 contracts will be executed at $0.94 against PHLX.
     10 contracts will be executed at $0.95 against ISE.
     Then, after executing at multiple price levels, the order 
is posted at $0.95 for a Posting Period (brief period not to exceed one 
second) to determine whether additional liquidity will become 
available.
     No new liquidity was received during the Posting Period. A 
new Acceptable Trade Range Threshold Price of $1.00 is determined (new 
reference price of $0.95 + $0.05 = $1.00).
     If, during the previous Posting Period, a second order is 
received to buy 10 contracts at $1.25, the two orders would then post 
at the new Acceptable Trade Range Threshold price of $1.00 for another 
Posting Period (brief period not to exceed one second) to determine 
whether additional liquidity will become available.

[[Page 72547]]

     A new Acceptable Trade Range Threshold Price of $1.05 will 
be calculated.
     If no additional liquidity becomes available within the 
posted price of the orders ($1.00) during the Posting Period, the 
orders would execute 10 contracts each against the order on the ISE 
book at $1.05 at the conclusion of the Posting Period.
Example 3
    Assume the following:
    Acceptable Trade Range is configured to $0.07.
    ABBO 1.91 (10) x 2.01 (10).
    Buy order 1 @ 2.00.
    DNR Order to Buy 1 @ 2.01-slides back to display at 2.00.
    MM1 Quote 1.99 (10) x 2.12 (10).
    Order1 Buy 10 @ 1.94.
    Order2 Buy 10 @ 1.93.
    Order3 Buy 5 @ 1.92.
    Order4 Buy 5 @ 1.91.
    Order to Sell 100 @ 1.90 comes in.
     First trades 1 @ 2.01 with slid DNR order.
     Then trades 1 @ 2.00 with other buy order.
     Then trades 10 @ 1.99 with MM quote (then quote purges 
since bid side volume has been exhausted).
     Then trades with Order1 (10 @ 1.94).
     Then posts 78 @1.94, the ATR Threshold (calculated by 
taking the initial reference price of 2.01 (i.e., the better of the 
internal best bid and NBB) minus the 0.07 Acceptable Trade Range).
    After the ATR Posting Period completes:
     Trades 10 @ 1.93 with Order2.
     Trades 5 @ 1.92 with Order3.
     Trades 5 @ 1.91 with Order4.
     Posts to book at 1.91 non-displayed and re-prices to 
display 1 MPV (penny) from ABBO at 1.92, exposes 58 @ 1.91.
    After route timer passes:
     Routes 10 @ 1.91 to ABBO.
     Posts to book at its limit with remaining 48 @ 1.90.\47\
---------------------------------------------------------------------------

    \47\ See supra note 40 regarding route timer.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to add clarifying language in the 
first sentence of subparagraph (i) of Options 3, Section 15(a)(2)(A) 
that the System will calculate the ATR after the Opening Process.\48\ 
This is a clarifying change that does not amend current functionality. 
ATR does not apply until after the Opening Process because the order 
book (and the ATR reference price) is established once options series 
are open for trading.
---------------------------------------------------------------------------

    \48\ While BX's ATR does not have this clarification today, BX's 
ATR likewise applies after the Opening Process.
---------------------------------------------------------------------------

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 Section 
6(b)(5) of the Act,\50\ 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.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f(b).
    \50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Generally, the Exchange's proposal is intended to add or align 
certain System functionality with functionality currently offered on BX 
in order to provide a more consistent technology offering across 
affiliated Nasdaq options exchanges. A more harmonized technology 
offering, in turn, will simplify technology implementation, changes, 
and maintenance by market participants of the Exchange that are also 
participants on Nasdaq affiliated options exchanges. The Exchange's 
proposal also seeks to provide greater harmonization between the rules 
of the Exchange and BX, which would result in greater uniformity, and 
less burdensome and more efficient regulatory compliance by market 
participants. As such, the proposal would foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities and would remove impediments to and perfect the mechanism of 
a free and open market and a national market system. The Exchange 
believes that more consistent rules will increase the understanding of 
the Exchange's operations for market participants that are also 
participants on the Nasdaq affiliated options exchanges, thereby 
contributing to the protection of investors and the public interest. 
The Exchange believes that such changes would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because the proposed changes would promote transparency in 
Exchange rules and reducing potential confusion, thereby ensuring that 
Members, regulators, and the public can more easily navigate the 
Exchange's rulebook and better understand how options trading is 
conducted on the Exchange.
Re-Pricing
    The Exchange believes that re-pricing quotes and orders that would 
otherwise lock or cross an away market, as proposed in Options 3, 
Sections 4(b)(6), 5(c) and (d), is consistent with the Act. Today, BX 
re-prices such quotes and orders by re-pricing them to the current 
national best price as non-displayed, and displaying them one MPV away 
from the best bid or offer.\51\ This behavior is consistent with the 
protection of investors and the general public because it affords 
Members the ability to obtain the best price offered among the various 
options markets while not locking or crossing an away market. With the 
proposed changes, the Exchange will continue to not trade through an 
away market. As a result, the Exchange's proposal would be consistent 
with the Options Order Protection and Locked/Crossed Market Plan. Any 
quote or non-routable order that locks or crosses an away market on the 
Exchange would be re-priced as a result of this amendment. The proposed 
changes to Options 3, Section 4(b)(6) will clearly articulate the 
proposed re-pricing mechanism, and will provide Members with additional 
information as to how quotes will be handled by the System when those 
quotes would lock or cross an away market. As discussed above, the 
difference between the current and proposed quote re-pricing is that 
the Exchange will re-price to the current national best price under the 
proposal as non-displayed (instead of re-pricing and displaying one MPV 
inferior as it does today). The Exchange will continue to display one 
MPV inferior to the national best price under this proposal. As such, 
the proposed quote re-pricing mechanism will continue to prevent the 
Exchange from disseminating a price that locks or crosses another 
market. This process is identical to how BX quote re-pricing functions 
today, as described in BX Options 3, Section 4(b)(6).
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    \51\ See BX Options 3, Sections 4(b)(6), 5(c) and (d).
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    In connection with the introduction of the BX-like quote re-pricing 
mechanism, the Exchange also proposes to add the definition of internal 
BBO (similar to the proposed definition of internal BBO for order re-
pricing) in Options 3, Section 4(b)(7). As discussed above, the 
proposed addition is intended to make clear that quotes may now be 
executed using either the BBO or internal BBO if the Exchange best bid 
or offer has been re-priced pursuant to the order re-pricing mechanism 
proposed in Options 3, Section 5(d) and the quote re-pricing mechanism 
proposed in Options 3, Section 4(b)(6). As noted above, BX handles 
quotes in the same manner as proposed for ISE Options 3, Section 
4(b)(7).\52\
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    \52\ See supra note 13.
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    The proposed changes to Options 3, Section 5(c) will allow the 
Exchange to

[[Page 72548]]

define an internal BBO in its Rules when describing re-priced orders 
that remain on the order book and are available at non-displayed prices 
while resting on the order book. The proposed changes to Options 3, 
Section 5(d) will clearly articulate the proposed re-pricing mechanism 
itself, and provide Members with additional information as to how 
orders are handled by the System when those orders would lock or cross 
an away market. The Exchange notes that allocation priority for re-
priced orders would be consistent with the current rules in Options 3, 
Section 10(c).
    The Exchange also believes that the related proposals to add 
references to internal BBO in Options 2, Section 10 and Options 3, 
Section 10 are consistent with the Act. Overall, the proposed addition 
of internal BBO will ensure that the rules conform to the concept of 
re-pricing at an internal BBO as proposed in Options 5(c) and (d) and 
will make clear that a re-priced order is accessible on the Exchange's 
order book at the non-displayed price. Specifically, the Exchange 
believes that adding references to the internal BBO in the allocation 
rules for Preferred Market Makers and Primary Market Makers will make 
clear that in connection with the proposed re-pricing mechanism, such 
market participants must now be quoting at the better of the NBBO or 
the internal BBO in order to be entitled to the applicable allocations 
set forth in their respective rules. The introduction of the internal 
BBO would have no impact on a Primary Market Maker's quoting 
obligations as Primary Market Makers do not need to be at the NBBO 
today, or as proposed, the better of NBBO or the internal BBO in order 
to meet their quoting obligations.\53\ The Exchange also notes that the 
proposed quote re-pricing mechanism described above will allow the 
Primary Market Maker or Preferred Market Maker to re-price to the 
internal BBO and receive their enhanced allocation when the internal 
BBO is better than the NBBO.\54\ In addition, by not providing the 
enhanced allocation for Market Makers that are not at the internal BBO 
when it is better than the NBBO, the Exchange is protecting investors 
with more aggressively priced interest by allocating to them first. The 
Exchange does not believe that Market Makers should be entitled to 
enhanced allocations in the foregoing instance given that there are 
better available internal BBO prices on the market. Like BX, the 
Exchange believes that the overall benefit to the marketplace is that 
market participants will be able to obtain the best price offered among 
the various options markets while avoiding a trade-through or locked or 
cross market violation.
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    \53\ Quoting obligations include, for example, a Market Maker's 
continuous quoting obligations. See Options 2, Section 5(e).
    \54\ Market Makers are incentivized to quote at the internal BBO 
as there is sufficient market information provided to quote 
accordingly. BX and Phlx also allow their Lead Market Makers and 
Directed Market Makers to re-price to the internal BBO and receive 
their enhanced allocation when the internal BBO is better than the 
NBBO. See BX and Phlx Options 3, Section 10. The Nasdaq Options 
Market LLC (``NOM'') also re-prices orders and quotes but does not 
have the concept of a Lead Market Makers or Directed Market Markers.
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Opening Process
    The Exchange believes that the proposed changes to the Opening 
Process in Options 3, Section 8 are consistent with the Act. 
Specifically, the Exchange believes that the proposed changes to 
Options 3, Section 8(j)(6)(A) will bring greater transparency as to how 
non-routable orders will be handled during the Opening Process. As 
discussed above, the Exchange proposes to no longer cancel any 
unexecuted portions of a DNR Order that locks or crosses an away 
market, and instead will re-price the DNR Order to the current away 
best offer (for bids) or the current away best bid (for offers) as non-
displayed, and display a price that is one minimum trading increment 
inferior to the ABBO, and disseminate such DNR Order as part of the new 
BBO. The proposed changes reflect the new BX-like re-pricing mechanism 
that the Exchange is proposing to adopt as part of the technology 
migration. The Exchange believes that the proposed re-pricing of DNR 
Orders during the Opening Process is consistent with the protection of 
investors and the general public because it affords Members the ability 
to obtain the best price offered among the various options markets 
while not locking or crossing an away market. As discussed above, 
proposed Options 3, Section 8(j)(6)(A) will also continue to reflect 
that the Exchange will cancel any interest that is priced through the 
opening price and keep all other interest in the System for trading 
after opening. The Exchange notes with the proposed changes, Options 3, 
Section 8(j)(6)(A) will be substantially similar to BX Options 3, 
Section 8(k)(4) and (5), thereby promoting greater consistency among 
the rules of Nasdaq affiliated options exchanges.\55\ Finally, the 
proposed changes to the Opening Process attempts to maximize the number 
of contracts executed on the Exchange during such Opening Process, 
while taking into consideration away market interests and ensuring that 
better away prices are not traded through.
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    \55\ See supra note 22.
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Auction Mechanisms
Facilitation and Solicited Order Mechanisms
    The Exchange believes that the proposed addition of ``or the 
internal BBO'' in the entry check provisions for the Facilitation and 
Solicited Order Mechanisms at Options 3, Sections 11(b)(1) and (d)(1), 
respectively, is consistent with the Act. The proposed changes will 
account for BX-like re-pricing, which would result in an Exchange order 
being available at a price that is better than the NBBO but is non-
displayed. The proposed changes to add ``or the internal BBO'' will 
make clear that the System will now check orders entered into those 
auction mechanisms against a non-displayed order book priced better 
than the NBBO as well the NBBO.\56\ As a result, the proposed changes 
would ensure that Members submitting an order through the Facilitation 
Mechanism or Solicited Order Mechanism submit such orders at the best 
price, which (i) for the Facilitation Mechanism, must be at a price 
that is equal to or better than the displayed NBBO and the non-
displayed BBO (i.e., the internal BBO) on the same side of the market 
as the agency order, and (ii) for the Solicited Order Mechanism, must 
be at a price that is equal to or better than the NBBO and the internal 
BBO on both sides of the market.\57\
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    \56\ Today, BX and Phlx similarly consider the internal BBO when 
initiating their price improvement auctions, BX PRISM and Phlx PIXL. 
The Exchange would continue to abide by the rules approved by the 
Commission and not commence an auction in the Facilitation or 
Solicited Order Mechanisms or in PIM if better priced interest was 
resting on the book.
    \57\ As proposed, for the Facilitation Mechanism, if there is a 
Priority Customer order on the BBO or internal BBO on the same side 
of the market as the agency order, the order must be entered at an 
improved price over the Priority Customer order. For the Solicited 
Order Mechanism, if there is a Priority Customer order on the BBO or 
internal BBO on either side of the market, the order must be entered 
at an improved price over the Priority Customer order.
---------------------------------------------------------------------------

    The Exchange also believes that the clarifying changes in Options 
3, Section 11(b)(1) relating to Facilitation order entry checks are 
consistent with the Act as the proposed changes seek to align the 
language in the Priority Customer order clause relating to the same 
side of the market as the agency order more closely with similar 
language in the preceding clause and clarify current System behavior. 
Similarly, the Exchange believes that the clarifying changes in Options 
3, Section 11(d)(1) relating to Solicited Order Mechanism

[[Page 72549]]

order entry checks are consistent with the Act as the proposed changes 
seek to align the language in the Priority Customer order clause with 
the preceding clause and clarify current System behavior. The Exchange 
believes that the proposed changes will promote transparency in the 
Rulebook, and reduce potential confusion by Members and investors.
Price Improvement Mechanism
    Similarly, the Exchange's proposal to amend Options 3, Section 
13(b)(1) and (b)(2) to account for re-pricing, which would result in an 
ISE order being available at a price which is better than the NBBO but 
is non-displayed, is consistent with the Act. The addition of ``or the 
internal BBO'' will make clear that a non-displayed order book priced 
better than the NBBO would cause a PIM auction to initiate. Stating 
``$0.01'' in lieu of ``one minimum price improvement increment'' is 
consistent with the Act as this non-substantive amendment more simply 
states the current minimum increment.\58\ Similar to the changes 
described above for the Facilitation and Solicited Order Mechanisms, 
the proposed changes for PIM would ensure that Members submitting an 
order through PIM submit such orders at the best price, which must be 
(i) better than the displayed NBBO and non-displayed BBO (i.e., the 
internal BBO) on the Exchange's order book when the PIM is less than 50 
contracts and the difference between the NBBO or the difference between 
the internal BBO is $0.01 wide or (ii) equal to or better than the 
displayed NBBO and internal BBO when the PIM is 50 contracts or more, 
or if the difference between the NBBO or the difference between the 
internal BBO is greater than $0.01.\59\
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    \58\ See supra note 55.
    \59\ Provided they are better than any limit order or quote on 
the same side of the Nasdaq ISE order book as the PIM agency order 
for both scenarios.
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Acceptable Trade Range
    The Exchange believes that the proposed changes to its ATR risk 
protection in Options 3, Section 15(a)(2)(A) are consistent with the 
Act. The Exchange is proposing to introduce an iterative process for 
ATR wherein an order/quote that reaches the outer limit of the ATR 
(i.e., the Threshold Price) without being fully executed will be paused 
for a brief Posting Period to allow more liquidity to be collected and 
determine whether or not more liquidity will become available (on the 
Exchange or an away market if the order is designated as routable) 
within the posted price of the order/quote before moving on to a new 
Threshold Price. The Threshold Price, at which the order is posted, 
would then become the new reference price,\60\ and a new ATR would be 
calculated. The Exchange notes that the proposed iterative ATR process 
is identical to current BX ATR functionality in BX Options 3, Section 
15(b)(1), and therefore is not new or novel.
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    \60\ As described above, if a new NBB is received that is 
greater than a buy order posted at the Threshold Price, or a new NBO 
is received that is lower than a sell order posted at the Threshold 
Price, the new NBB (for buy orders) or NBO (for sell orders) would 
become the new reference price.
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    The Exchange believes that with the proposed changes, ATR will 
continue to reduce the negative impacts of sudden, unanticipated 
volatility in individual Exchange options, serve to preserve an orderly 
market in a transparent manner, increase overall market confidence, and 
promote fair and orderly markets and the protection of investors. The 
proposed ATR iterative process should also continue to result in 
greater continuity in prices as it is designed to prevent immediate or 
rapid executions at far away prices, thereby protecting investors and 
the public interest. As discussed above, the Exchange is bounding how 
far interest can trade into the depth of the Exchange's book based on 
the best prices that are available to the market. The Exchange 
therefore believes that its proposal protects investors and the public 
interest by basing the ATR reference price on the best available 
prices.
    The Exchange also believes that the addition of configurable 
instances of iterations when the ATR would apply will provide Members 
with more certainty as to the application of the rule.\61\
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    \61\ See supra notes 33 and 35.
---------------------------------------------------------------------------

    The Exchange believes that disseminating a ``non-firm'' indicator 
message during the Posting Period, as discussed above, is consistent 
with its obligations under the SEC Quote Rule.\62\ As discussed above, 
this would allow the order or quote setting the ATR Threshold Price to 
retain priority in the Exchange book and also prevent any later-entered 
order from accessing liquidity ahead of it. If the Exchange were to 
display trading interest available on the opposite side of the market, 
that trading interest would be automatically accessible to later-
entered orders during the period when the order triggering the ATR is 
paused. The ``non-firm'' indicator is meant to relieve eligible 
exchanges from having to apply locked and crossed rules to the 
quotation of the market.\63\ Since the opposite side interest is likely 
to be traded through at the completion of the Posting Period, the 
Exchange would display that interest as ``non-firm'' to alleviate away 
exchanges from having to apply lock/crossed violation protections (when 
routing) against this price.\64\
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    \62\ See 17 CFR 242.602(a)(3).
    \63\ To the away venue, this quotation is simply the top of book 
quotation on ISE (which could be made of orders and/or quotes).
    \64\ In addition, Options 5, Section 1(k) defines ``Non-Firm'' 
as, with respect to Quotations, that Members of a Eligible Exchange 
are relieved of their obligation to be firm for their Quotations 
pursuant to Rule 602 under the Exchange Act.
---------------------------------------------------------------------------

    The fact that the Exchange is experiencing volatility that is 
strong enough to trigger the ATR mechanism qualifies as an unusual 
market condition. The Exchange expects such situations to be rare, and 
it has set the current parameters of the mechanism at levels that 
ensures that it is triggered quite infrequently. In addition, the 
proposed ATR mechanism will cause the market to pause for no more than 
one second to try to dampen volatility, the same pause that currently 
exists on BX. Importantly, the brief pause occurs only after the 
Exchange has already executed transactions--potentially at multiple 
price levels--rather than pausing before executing any transactions in 
the hopes of attracting initial liquidity.
    Finally, the Exchange believes that the proposed clarifying 
language to add that the System will calculate ATR after the Opening 
Process will better articulate current System behavior. ATR does not 
apply until after the opening because the order book (and the ATR 
reference price) is established once options series are open for 
trading.

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 operates in a 
competitive market and regularly competes with other options exchanges 
for order flow. As discussed above, the Exchange is re-platforming its 
System in connection with the technology migration to enhanced Nasdaq 
functionality, which the Exchange believes would promote competition 
among options exchanges by potentially attracting additional order flow 
to the Exchange with the enhanced trading platform. The basis for the 
majority of the proposed rule changes are the rules of the Nasdaq 
affiliated options exchanges, which

[[Page 72550]]

have been previously filed with the Commission as consistent with the 
Act.
    The quote re-pricing proposal in Options 3, Section 4(b)(6) and (7) 
will be functionally identical to BX quote re-pricing in Options 3, 
Section 4(b)(6).\65\ The order re-pricing proposal in Options 3, 
Section 5(c) and (d) will be functionally identical to BX order re-
pricing in BX Options 3, Section 5(c) and (d).\66\ Also, the proposed 
ATR enhancement in Options 3, Section 15(a)(2)(A) will be functionally 
identical to BX ATR in BX Options 3, Section 15(b)(1).
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    \65\ See supra note 13.
    \66\ The re-pricing rule changes impact the following rule 
provisions: Options 2, Section 10; Options 3, Section 8(j)(6)(A); 
Options 3, Section 10(c)(1)(B), (C) and (D)(i)-(iii); Options 3, 
Section 11(b)(1) and (d)(1); and Options 3, Section 13(b)(1) and 
(2).
---------------------------------------------------------------------------

    The Exchange reiterates that the proposed rule change is being 
proposed in the context of the technology migration to enhanced Nasdaq 
functionality. As such, the Exchange believes that this proposed rule 
change is necessary to permit fair competition among options exchanges 
because the proposed rule changes will permit ISE to re-price orders 
and quotes similar to BX. Additionally, with this proposal, ISE would 
be able to offer its Members the same ATR functionality currently 
available to BX Participants. The Exchange further believes the 
proposed rule change will benefit Members by providing a more 
consistent technology offering, as well as consistent rules, for market 
participants on the Nasdaq affiliated options exchanges.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as the majority 
of the proposed changes will apply to all Members. ATR allows Members 
to potentially receive better prices for their aggressive orders or 
quotes as they work through the ATR Threshold Prices and look to 
accumulate additional interest at each posted price during the Posting 
Periods. Re-pricing affords Members the ability to obtain the best 
price offered among the various options markets while continuing to be 
consistent with the Options Order Protection and Locked/Crossed Market 
Plan, as discussed above. The ability to leverage these mechanisms to 
achieve better prices for market participants will drive competition 
from Members to provide tighter markets and more liquidity in order to 
participate in the trading opportunities while still being bound by 
reasonable risk protections.

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, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \67\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\68\
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    \67\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \68\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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-2022-25 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-2022-25. 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 such 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-2022-25 and should be submitted on 
or before December 16, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\69\
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    \69\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25672 Filed 11-23-22; 8:45 am]
BILLING CODE 8011-01-P