[Federal Register Volume 90, Number 97 (Wednesday, May 21, 2025)]
[Notices]
[Pages 21805-21814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-09071]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103048; File No. SR-ISE-2025-15]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
of Proposed Rule Change To Amend the Short Term Option Series Program
To List Qualifying Securities
May 15, 2025.
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 May 1, 2025, 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.
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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 the Short Term Option Series Program
in Supplementary Material .03 of Options 4, Section 5 to permit the
listing of up to two Monday and Wednesday expirations for options on
certain individual stocks or Exchange-Traded Fund Shares.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/ise/rulefilings,
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
The Exchange proposes to amend the Short Term Option Series Program
in Supplementary Material .03 of Options 4, Section 5. Specifically,
the Exchange proposes to permit the listing of up to two Monday and
Wednesday expirations for options on certain individual stocks or
Exchange-Traded Fund Shares (collectively ``Qualifying Securities'').
Currently, as set forth in Supplementary Material .03 to Options 4,
Section 5, after an option class has been approved for listing and
trading on the Exchange as a Short Term Option Series pursuant to
Options 1, Section 1(a)(49),\3\ the Exchange may open for
[[Page 21806]]
trading on any Thursday or Friday that is a business day (``Short Term
Option Opening Date'') series of options on that class that expire at
the close of business on each of the next five Fridays that are
business days and are not Fridays in which standard expiration options
series, Monthly Options Series, or Quarterly Options Series expire
(``Friday Short Term Option Expiration Dates''). The Exchange may have
no more than a total of five Short Term Option Expiration Dates
(``Short Term Option Weekly Expirations''). Further, if the Exchange is
not open for business on the respective Thursday or Friday, the Short
Term Option Opening Date for Short Term Option Weekly Expirations will
be the first business day immediately prior to that respective Thursday
or Friday. Similarly, if the Exchange is not open for business on a
Friday, the Short Term Option Expiration Date for Short Term Option
Weekly Expirations will be the first business day immediately prior to
that Friday.
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\3\ Options 1, Section 1(a)(49) provides that a Short Term
Option Series means a series in an option class that is approved for
listing and trading on the Exchange in which the series is opened
for trading on any Monday, Tuesday, Wednesday, Thursday or Friday
that is a business day and that expires on the Monday, Wednesday or
Friday of the following business week that is a business day, or, in
the case of a series that is listed on a Friday and expires on a
Monday, is listed one business week and one business day prior to
that expiration. If a Tuesday, Wednesday, Thursday or Friday is not
a business day, the series may be opened (or shall expire) on the
first business day immediately prior to that Tuesday, Wednesday,
Thursday or Friday. For a series listed pursuant to this section for
Monday expiration, if a Monday is not a business day, the series
shall expire on the first business day immediately following that
Monday.
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Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of Supplementary Material .03 to
Options 4, Section 5 that expire at the close of business on each of
the next two Mondays, Tuesdays, Wednesdays, and Thursdays,
respectively, that are business days beyond the current week and are
not business days in which standard expiration options series, Monthly
Options Series, or Quarterly Options Series expire (``Short Term Option
Daily Expirations'').\4\ For those symbols listed in Table 1, the
Exchange may have no more than a total of two Short Term Option Daily
Expirations beyond the current week for each of Monday, Tuesday,
Wednesday, and Thursday expirations, as applicable, at one time.
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\4\ As set forth in Table 1 of Supplementary Material .03 to
Options 4, Section 5, the Exchange currently permits expirations in
SPY, IWM, QQQ on Mondays, Tuesdays, Wednesdays and Thursdays. Also,
the Exchange permits expirations in GLD, SLV and TLT on Mondays and
Wednesdays. Finally, the Exchange permits expirations in USO and UNG
on Wednesdays.
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Proposal
At this time, the Exchange proposes to expand the Short Term Option
Series Program to permit certain Qualifying Securities to list up to
two Monday and Wednesday expirations in addition to the Friday weekly
expiration.
The Exchange proposes to define Qualifying Securities as eligible
individual stocks or Exchange-Traded Fund Shares, which are separate
and apart from the symbols listed in Table 1, that have received
approval to list additional expiries on specific symbols, that meet the
following criteria on a quarterly basis:
(1) an underlying security, as measured on the last day of the
prior calendar quarter, must have:
(A) a market capitalization of greater than 700 billion dollars
for an individual stock based on the closing price,\5\ or
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\5\ The closing price and the opening price shall be that of the
primary exchange where the security is listed.
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(B) Assets under Management (``AUM'') greater than 50 billion
dollars for an Exchange-Traded Fund Share based on net asset value
(``NAV'');
(2) monthly options volume, as measured by sides traded in the
last month preceding the quarter end, of greater than 10 million
options;
(3) a position limit of at least 250,000 contracts; and
(4) participate in the Penny Interval Program.
Each calendar quarter, the Exchange will apply the above criteria
to individual stocks and Exchange-Traded Fund Shares to determine
eligibility for the following quarter as a Qualifying Security.
Beginning on the second trading day in the first month of each calendar
quarter, the market capitalization of individual stocks shall be
calculated based on the closing price established on the primary
exchange on the last trading day of the prior calendar quarter and the
AUM for Exchange-Traded Fund Shares shall be calculated based on the
NAV established on the primary exchange on the last trading day of the
prior calendar quarter. The data establishing the volume thresholds
will be established by using data from the last month of the prior
calendar quarter from The Options Clearing Corporation. For options
listed on the first trading day of a given calendar quarter, the volume
shall be calculated using the last month of the quarter prior to the
last trading calendar quarter.\6\ ISE will make the list of Qualifying
Securities available by the close of business on the first trading day
of the quarter.\7\
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\6\ OCC data becomes available for the end of a quarter on the
first trading day of a new quarter.
\7\ ISE will make this information available on ISE's website.
This information will be freely accessible to the public.
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Eligible Qualifying Securities would be permitted to list two Short
Term Option Expiration Dates beyond the current week for each Monday
and Wednesday expiration at one time. For Qualifying Securities, the
Exchange would not list an expiry on a day where there will be an
Earnings Announcement that takes place after market close. For purposes
of this rule proposal, earnings announcements shall include official
public quarterly or yearly earnings filed with the Commission
(``Earnings Announcement'').\8\ Not listing an expiry for a Qualifying
Security on a day where there is an Earnings Announcement that takes
place after market close will avoid permitting an additional expiry on
a day where post-close price volatility may be impacted due to the
Earnings Announcement.
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\8\ For purposes of this rule proposal, pre-announcements or
``guidance'' shall not be considered an Earnings Announcement.
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Qualifying Securities that do not continue to meet the above
criteria would no longer be permitted to list Monday and Wednesday
expiries beginning on the second day of the following quarter.\9\
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\9\ The Exchange has noted the additional expiries in a proposed
Table 2 in Supplementary Material .03 to Options 4, Section 5 along
with the criteria for a Qualifying Security.
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The proposed Monday Qualifying Securities expirations will be
similar to the current Monday Expirations in SPY, QQQ, and IWM (among
other symbols that may list a Monday Expiration) in Short Term Option
Daily Expirations set forth in Supplementary Material .03 to Options 4,
Section 5, such that the Exchange may open for trading on any Friday or
Monday that is a business day (beyond the current week) series of
options on Qualifying Securities to expire on any Monday of the month
that is a business day and is not a Monday in which standard expiration
options series, Monthly Options Series, or Quarterly Options Series
expire, provided that Monday expirations that are listed on a Friday
must be listed at least one business week and one business day prior to
the expiration (``Monday Qualifying Securities Expirations'').\10\ In
the event Qualifying Securities expire on a Monday and that Monday is
the same day that a standard expiration options series, Monthly Options
Series, or Quarterly Options
[[Page 21807]]
Series expires, the Exchange would skip that week's listing and instead
list the following week; the two weeks would therefore not be
consecutive. Today, Monday expirations in SPY, QQQ, and IWM similarly
skip the weekly listing in the event the weekly listing expires on the
same day in the same class as a standard expiration options series,
Monthly Options Series, or Quarterly Options Series.
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\10\ They may also trade on Fridays, as is the case for all
options series in the Short Term Option Series Program.
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The proposed Wednesday Qualifying Securities expirations will be
similar to the current Wednesday SPY, QQQ, and IWM (among other symbols
that may list a Wednesday Expiration) in Short Term Option Daily
Expirations set forth in Supplementary Material .03 to Options 4,
Section 5, such that the Exchange may open for trading on any Tuesday
or Wednesday that is a business day (beyond the current week) series of
options on Qualifying Securities to expire on any Wednesday of the
month that is a business day and is not a Wednesday in which standard
expiration options series, Monthly Options Series, or Quarterly Options
Series expire (``Wednesday Qualifying Securities Expirations'').\11\ In
the event Qualifying Securities expire on a Wednesday and that
Wednesday is the same day that a standard expiration options series,
Monthly Options Series, or Quarterly Options Series expires, the
Exchange would skip that week's listing and instead list the following
week; the two weeks would therefore not be consecutive. Today,
Wednesday expirations in SPY, QQQ, and IWM similarly skip the weekly
listing in the event the weekly listing expires on the same day in the
same class as a standard expiration options series, Monthly Options
Series, or Quarterly Options Series.
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\11\ Id.
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The interval between strike prices for the proposed Monday and
Wednesday Qualifying Securities Expirations will be the same as those
currently applicable for SPY, QQQ, and IWM Monday and Wednesday
Expirations (among other symbols that may list a Monday or Wednesday
Expiration) in the Short Term Option Series Program.\12\ Specifically,
the Monday and Wednesday Qualifying Securities Expirations will have a
strike interval of (i) $0.50 or greater for strike prices below $100,
and $1 or greater for strike prices between $100 and $150 for all
option classes that participate in the Short Term Option Series
Program, (ii) $0.50 for option classes that trade in one dollar
increments and are in the Short Term Option Series Program, or (iii)
$2.50 or greater for strike prices above $150.\13\ As is the case with
other equity options series listed pursuant to the Short Term Option
Series Program, the Monday and Wednesday Qualifying Securities
Expirations series will be P.M.-settled.
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\12\ See Supplementary Material .03(e) to Options 4, Section 5.
The Exchange notes that equity options which have an expiration of
more than twenty-one days from the listing date would also be
subject to the intervals as noted within Supplementary Material
.03(f) to Options 4, Section 5. See also Supplementary .07 to
Options 4, Section 5.
\13\ Id.
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Pursuant to Options 1, Section 1(a)(49), with respect to the Short
Term Option Series Program, if a Monday is not a business day, the
series shall expire on the first business day immediately following
that Monday. Also, pursuant to Options 1, Section 1(a)(49), with
respect to the Short Term Option Series Program, a Wednesday expiration
series shall expire on the first business day immediately prior to that
Wednesday, e.g., Tuesday of that week if the Wednesday is not a
business day.
Currently, for each option class eligible for participation in the
Short Term Option Series Program, the Exchange is limited to opening
thirty (30) series for each expiration date for the specific class.\14\
The thirty (30) series restriction does not include series that are
open by other securities exchanges under their respective weekly rules;
the Exchange may list these additional series that are listed by other
options exchanges.\15\ With the proposed changes, this thirty (30)
series restriction would apply to Monday and Wednesday Qualifying
Securities Expirations as well. In addition, the Exchange will be able
to list series that are listed by other exchanges, assuming they file
similar rules with the Commission to list Monday and Wednesday
Qualifying Securities Expirations.
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\14\ See Supplementary Material .03(a) to Options 4, Section 5.
\15\ Id.
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With this proposal, Monday and Wednesday Qualifying Securities
Expirations would be treated similar to existing SPY, QQQ, and IWM
Monday and Wednesday Expirations. With respect to standard expiration
option series, Monday and Wednesday Qualifying Securities Expirations
will be permitted to expire in the same week in which standard
expiration option series on the same class expire.\16\ Not listing
Monday and Wednesday Qualifying Securities Expirations for one week
every month because there was a standard options series on that same
class on the Friday of that week would create investor confusion.
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\16\ Id.
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Further, as with SPY, QQQ, and IWM Monday and Wednesday
Expirations, the Exchange would not permit Monday and Wednesday
Qualifying Securities Expirations to expire on a business day in which
standard expiration option series, Monthly Options Series, or Quarterly
Options Series expire.\17\ Therefore, all Monday and Wednesday
Qualifying Securities Expirations would expire at the close of business
on each of the next two Mondays and Wednesdays, respectively, that are
business days and are not business days in which standard expiration
option series, Monthly Options Series, or Quarterly Options Series
expire. The Exchange believes that it is reasonable to not permit two
expirations on the same day in which a standard expiration option
series, Monthly Options Series, a Quarterly Options Series would expire
because those options would be duplicative of each other.
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\17\ See Supplementary Material .03 to Options 4, Section 5.
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of Monday and Wednesday Qualifying
Securities Expirations. The Exchange currently trades P.M.-settled
Short Term Option Series that expire Monday, Tuesday, Wednesday and
Thursday on several symbols \18\ and has not experienced any market
disruptions nor issues with capacity. Today, the Exchange has
surveillance programs in place to support and properly monitor trading
in Short Term Option Series that expire Monday, Tuesday, Wednesday and
Thursday on several symbols.\19\ The Exchange believes that it has the
necessary capacity and surveillance programs in place to support and
properly monitor trading in the proposed Monday and Wednesday
Qualifying Securities Expirations.
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\18\ See supra note 4.
\19\ Id.
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Impact of Proposal
The Exchange notes that listings in the Short Term Option Series
Program comprise a significant part of the standard listings in options
markets. Table 1 demonstrates the percentage of weekly listings in the
options industry compared to monthly, quarterly, and Long-Term Option
Series for a twelve-month period from February 11, 2024 to February 11,
2025.\20\
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\20\ The Exchange sourced this information from The Options
Clearing Corporation (``OCC''). The information includes time
averaged data (the number of strikes by maturity date divided from
the number of trading days) for all 18 options markets from February
11, 2024 to February 11, 2025.
[[Page 21808]]
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Table 1
[GRAPHIC] [TIFF OMITTED] TN21MY25.000
While the Exchange is expanding the Short Term Option Series
Program to permit Monday and Wednesday Qualifying Securities
Expirations, the Exchange anticipates that it would overall add a small
number of weekly expiration dates because the Exchange will limit the
number of Qualifying Securities Expirations to two Monday expirations
and two Wednesday expirations. If today the data were applied based on
data from January 2025, the following options would meet the criteria
to be a Qualifying Security: NVIDIA Corp (``NVDA''), Tesla Inc.
(``TSLA''), Apple Inc. (``AAPL''), Amazon.com Inc. (``AMZN''), Broadcom
Inc. (``AVGO''), Alphabet Inc. (``GOOGL''), Microsoft Corp (``MSFT''),
Financial Select Sector SPDR Fund (``XLF''), and Meta Platforms Inc.
(``META'') (collectively ``Sample Qualifying Securities''). Utilizing
the Sample Qualifying Securities as a data point, expanding the Short
Term Option Series Program would account for the addition of
approximately 16% of strikes for the total number of strikes for each
of the following symbols: NVDA, TSLA, AAPL, AMZN, AVGO, GOOGL, MSFT,
and META.
Further, as shown in Table 2, weeklies comprise 52% of the total
volume of options contracts.\21\
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\21\ The chart represents industry volume in terms of overall
contracts. Weeklies comprise 52% of volume, as shown in Table 2,
while only being 19% of the strikes, as shown in Table 1. The
Exchange sourced this information from OCC. The information includes
data for all 18 options markets from February 11, 2024 to February
11, 2025.
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[[Page 21809]]
Table 2
[GRAPHIC] [TIFF OMITTED] TN21MY25.001
The Exchange believes that inner weeklies (first two weeks) represent
high volume as compared to outer weeklies (the last three weeks) and
would be more attractive to market participants.
The Exchange believes there is general demand for alternative
expirations in Monday and Wednesday Qualifying Securities Expirations
based on a similar analysis. In particular, the Exchange looked at the
average daily contracts traded in options that met the criteria for a
Qualifying Security. Specifically, for each of the Sample Qualifying
Securities, the Exchange looked at pre-close movements between 3:30-
4:00 p.m. Eastern Time (``ET'') as well as post-close movements between
4:00-5:30 p.m. ET.
Table 3, below, references the number of occurrences of strike
breaks through post close (comparing 4:00 p.m. ET to 5:30 p.m. ET) from
2022 through 2024 for the Sample Qualifying Securities and SPY, QQQ and
IWM.
Table 3
[GRAPHIC] [TIFF OMITTED] TN21MY25.002
[[Page 21810]]
Table 4, below, references average annualized closing volatilities
(as measured by the standard deviation of 30 seconds returns over the
last 30 minutes of trading) for the Sample Qualifying Securities from
2022 through 2024. Table 4 shows that the Sample Qualifying Securities
have an average annualized closing volatility of generally less than
20%.
Table 4, above, demonstrates that the Sample Qualifying Securities
are more volatile than SPY, QQQ and IWM.
Table 4
[GRAPHIC] [TIFF OMITTED] TN21MY25.003
Given that these are individual stocks it is reasonable to expect
that they have idiosyncratic characteristics (increasing their
volatility) relative to broad based Exchange-Traded Fund Shares like
SPY, QQQ and IWM. None, however, are demonstrating average returns that
are more than double that of IWM. Moreover, on Mondays and Wednesdays
the Sample Qualifying Securities do not show any excessive propensity
to penetrate strikes post close (4:00 p.m.-5:30 p.m. ET) in comparison
to SPY, QQQ and IWM. Consequently, the burden of American-style option
\22\ exercise management on investors is not overwhelming relative to
SPY, QQQ and IWM which have the largest retail participation based on
volume in the industry.
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\22\ The term ``American-style option'' means an options
contract that, subject to the provisions of Options 6B, Section 1
(relating to the cutoff time for exercise instructions) and to the
Rules of the Clearing Corporation, can be exercised on any business
day prior to its expiration date and on its expiration date. See
Options 1, Section 1(a)(3).
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The Exchange also reviewed the number of strike breaks for calendar
year 2024 for the Sample Qualifying Securities between 4:00 p.m. and
5:30 p.m. ET to find the maximum \23\ number of strike breaks \24\ as
well as the mean \25\ of the number of strike breaks as evidenced by
Table 5.
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\23\ Maximum means the largest instance of strike breaks
measured as the number of strikes crossed by the underlying security
from the 4:00 p.m. ET closing price to the 9:30 a.m. ET opening
price.
\24\ A strike break is the existence of a strike between the
closing price and the opening price on the following day when there
has been a penetration of a strike post-close.
\25\ Mean is the average number of strike breaks when there has
been a penetration of a strike post-close.
Table 5--Monday, Non-Earnings Announcement
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Mean strikes moved through
Number of days with strike Max (strikes moved through Max (percentage move on a non-Earnings
break through on non- on Mondays from 4:00 p.m. to overnight on non-earnings Announcement Monday when
Security earnings announcement 9:30 a.m. next day) when announcement Mondays when there is an instance of move
Mondays (4:00 p.m. ET-5:30 strikes are penetrated from there is a strike break from through (from 4:00 p.m. to
p.m. ET) 4:00-5:30 p.m. ET 4:00 p.m. to 5:30 p.m. ET) 5:30 p.m. on a non-earnings
(%) announcement Monday)
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AAPL............................ 0 0.00 0.00 0.00
AMZN............................ 0 0.00 0.00 0.00
AVGO............................ 9 6.50 2.16 1.99
GOOGL........................... 0 0.00 0.00 0.00
META............................ 3 1.31 0.69 0.78
MSFT............................ 1 1.94 1.23 1.94
NVDA............................ 6 7.42 2.10 5.24
TSLA............................ 3 5.19 2.80 3.40
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[[Page 21811]]
Table 6, below, reviewed the number of strike breaks for calendar
year 2024 for the Sample Qualifying Securities,\26\ excluding Wednesday
\27\ for scheduled Earning Announcements, between 4:00 p.m. and 5:30
p.m. ET to find the maximum number of strike breaks as well as the mean
of the number of strike breaks.
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\26\ Of note, not all Sample Qualifying Securities had Earnings
Announcements on a Wednesday.
\27\ There were no Earnings Announcements on Mondays for the
Sample Qualifying Securities.
Table 6--Wednesday, Non-Earnings Announcement
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Mean strikes moved through
Number of days with strike Max (strikes moved through Max (percentage move on a non-earnings
breaks through on non- on non-earnings announcement overnight on non-earnings announcement Wednesday when
Security earnings announcement Wednesdays from 4:00 p.m. to announcement Wednesdays when there is an instance of move
Wednesdays (4:00 p.m. ET- 9:30 a.m. next day) when there is a strike break from through (from 4:00 p.m. to
5:30 p.m. ET) strikes are penetrated from 4:00 p.m. to 5:30 p.m. ET) 5:30 p.m. on a non-earnings
4:00-5:30 p.m. ET (%) announcement Wednesday)
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AAPL............................ 0 0.00 0.00 0.00
AMZN............................ 1 2.77 3.92 2.77
AVGO............................ 15 10.85 4.42 3.71
GOOGL........................... 3 3.20 3.20 2.86
META............................ 5 5.52 2.31 2.66
MSFT............................ 2 6.09 3.72 4.11
NVDA............................ 15 8.32 3.32 2.82
TSLA............................ 3 12.46 14.58 7.13
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Because the Exchange proposes to limit the number of Monday and
Wednesday Qualifying Securities Expirations to two expirations beyond
the current week, the Exchange believes that the addition of these
Monday and Wednesday Qualifying Securities Expirations should encourage
Market Makers to continue to deploy capital more efficiently and
improve displayed market quality.\28\ Utilizing the Sample Qualifying
Securities as a proxy, the marginal increase in the number of
occurrences of strike breaks in 2024 would be sixty-six (66) with the
addition of these parameters. Further, there would be a marginal
increase of twenty-two (22) instances of strike breaks in 2024 on
Monday expiries after regular trading hours, and a marginal increase of
forty-four (44) instances of strike breaks in 2024 on Wednesday
expiries without Earnings Announcements after regular trading hours.
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\28\ Market Makers include Primary Market Makers and Competitive
Market Makers. See Options 1, Section 1(a)(21). Today, Primary
Market Makers and Competitive Market Makers are required to quote a
specified time in their assigned options series. See Options 2,
Section 5.
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Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Securities Expirations
will, among other things, expand hedging tools available to market
participants and allow for a reduced premium cost of buying portfolio
protection. The Exchange believes that the proposal would permit only
the most liquid securities to have the additional Monday and Wednesday
Qualifying Security Expirations. The Exchange believes that offering
these additional expiries in the Qualifying Securities would permit
Market Makers and other market participants to precisely hedge their
positions in the underlying security with the additional expiries in
lieu of hedging only with Friday expirations.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\29\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\30\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(5).
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Similar to Monday expirations in SPY, QQQ, and IWM, the proposal to
permit Monday and Wednesday Qualifying Security Expirations, subject to
the proposed limitation of two expirations beyond the current week,
would protect investors and the public interest by providing the
investing public and other market participants more choice and
flexibility to closely tailor their investment and hedging decisions in
these options and allow for a reduced premium cost of buying portfolio
protection, thus allowing them to better manage their risk exposure.
The Exchange believes that there is general demand for alternative
expirations based on the analysis discussed above.
The Exchange believes that the proposed criteria for Qualifying
Securities requires individual stocks and Exchange-Traded Fund Shares
to be highly liquid. A market capitalization measured on the last day
of the prior calendar quarter based on the closing price of the
underlying, of greater than 700 billion dollars for an individual
stock, or AUM of 50 billion dollars for an Exchange-Trade Fund Share,
in conjunction with the monthly options volume requirement of greater
than 10 million options as measured by sides traded in the last month
preceding the quarter end, is very restrictive. This requirement
represents substantially less than 1% of individual stocks (only eight
(8) individual stocks currently exist as of January 1, 2025) and
substantially less than 1% of Exchange-Traded Fund Shares (only seven
(7) Exchange-Traded Fund Shares currently exist as of January 1, 2025,
of which five (5) are eligible, today, pursuant to Options 4, Section
3, to trade additional expiries) traded.\31\ Therefore, an individual
stock or Exchange-Traded Fund Share that meets aforementioned market
capitalization and volume requirements are highly liquid and could be
viewed as stable securities. Table 7, below, demonstrates the very low
average realized volatility experienced by the Sample Qualifying
Securities in the last 30 minutes of trading before the close in 2024
as compared to any security that traded an average of more than 100
options contracts per day.
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\31\ Only one (1) of the seven (7) Exchange-Traded Fund Shares
is eligible because the iShares Bitcoin Trust ETF position limit is
restricted at 25,000 contracts pursuant to Supplementary Material
.01 to Options 9, Section 13, although it would otherwise qualify
for a higher position limit pursuant to Options 9, Section 13(d).
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[[Page 21812]]
Table 7
[GRAPHIC] [TIFF OMITTED] TN21MY25.004
The Exchange notes that with respect to position limits, Options 9,
Section 13(d)(5) provides, that ``[t]o be eligible for the 250,000
contract limit, either the most recent six (6) month trading volume of
the underlying security must have totaled at least 100 million shares
or the most recent six-month trading volume of the underlying security
must have totaled at least seventy-five (75) million shares and the
underlying security must have at least 300 million shares currently
outstanding.'' The 250,000 contract position limit is the highest
position limit by Exchange rule. Options that qualify for the 250,000
position (and exercise) limit are highly liquid securities that have
met the stringent requirements noted in Options 9, Section 13(d)(5) to
qualify for the highest position limit.
Finally, a Qualifying Security must participate in the Penny
Interval Program. In order to qualify for the Penny Interval Program,
an options class must be among the 300 most actively traded multiply
listed option classes overlying securities priced below $200.\32\ The
most actively traded options classes are included in the Penny Interval
Program based on certain objective criteria (trading volume thresholds
and initial price tests).
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\32\ See Supplementary Material .01(b) to Options 3, Section 3.
Each December OCC ranks all multiply listed option classes based on
National Cleared Volume for the six full calendar months from June 1
through November 30 for determination of the most actively traded
option classes.
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The number of individual stocks currently meeting all four criteria
for a Qualifying Security is eight (8) and the number of Exchange-
Traded Fund Shares currently meeting all four criteria for a Qualifying
Security that do not already have Monday and Wednesday expirations is
one (1). Both totals represent less than 0.2% of all securities with
options listed. The Exchange believes that since individual stocks are
the dominant constituents of the broad-based indexes (e.g., S&P 500
Index and Nasdaq-100 Index), the improvement in price transparency
brought about by Monday and Wednesday trading will offer Market Makers
and investors better volatility pricing which will inform trading on
the related products to these indexes. The Exchange believes that the
proposed criteria for Qualifying Securities is consistent with the
protection of investors and the general public because the criteria
targets the most liquid individual stocks and Exchange-Traded Fund
Shares.
The Exchange would not list an expiry on a Qualifying Security on a
day where there will be an Earnings Announcement that takes place after
market close to avoid post-close price volatility that may arise from
the Earnings Announcement and which may impact exercise and/or
assignment decisions.
Qualifying Securities that do not continue to meet the above
criteria would no longer be permitted to list Monday and Wednesday
expiries in the following quarter, although the Qualifying Security
would potentially have two weeks of strikes already listed which will
persist. These remaining listings could continue to be traded until
they expire.
With this proposal, overall, the Exchange would add a small number
of Monday and Wednesday Qualifying Security Expirations by limiting the
addition of two Monday expirations and two Wednesday expirations beyond
the current week. The addition of Monday and Wednesday Qualifying
Security Expirations would remove impediments to and perfect the
mechanism of a free and open market by encouraging Market Makers to
continue to deploy capital more efficiently and improve displayed
market quality.\33\ The Exchange believes that the proposal will allow
Members to expand hedging tools and tailor their investment and hedging
needs more effectively in Qualifying Securities as these funds are most
likely to be utilized by market participants to hedge the underlying
asset classes.
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\33\ Today, Primary Market Makers and Market Makers are required
to quote a specified time in their assigned options series. See
Options 2, Section 5.
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Similar to SPY, QQQ, and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Security Expirations is
consistent with the Act as
[[Page 21813]]
it will, among other things, expand hedging tools available to market
participants and allow for a reduced premium cost of buying portfolio
protection. The Exchange believes that Monday and Wednesday Qualifying
Security Expirations will allow market participants to purchase options
on Qualifying Securities based on their timing as needed and allow them
to tailor their investment and hedging needs more effectively, thus
allowing them to better manage their risk exposure. Today, ISE lists
other Monday and Wednesday expirations.\34\
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\34\ See ISE Supplementary Material .03 at Options 4, Section 5
at Table 1.
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In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Monday and Wednesday
Qualifying Security Expirations should simply expand the ability of
investors to hedge risk against market movements stemming from economic
releases or market events that occur throughout the month in the same
way that the Short Term Option Series Program has expanded the
landscape of hedging.
There are no material differences in the treatment of SPY, QQQ and
IWM Monday and Wednesday Expirations compared to the proposed Monday
and Wednesday Qualifying Security Expirations. Given the similarities
between SPY, QQQ and IWM Monday and Wednesday Expirations and the
proposed Monday and Wednesday Qualifying Security Expirations, the
Exchange believes that applying the provisions in Supplementary
Material .03 to Options 4, Section 5 that currently apply to SPY, QQQ
and IWM Monday and Wednesday Expirations is justified.
ISE represents that it has an adequate surveillance program in
place to detect manipulative trading in the proposed option
expirations, in the same way that it monitors trading in the current
Short Term Option Series for Monday SPY, QQQ and IWM expirations. The
Exchange also represents that it has the necessary system capacity to
support the new expirations. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of these option expirations. As discussed above, the Exchange believes
that its proposal is a modest expansion of weekly expiration dates for
Monday and Wednesday Qualifying Security Expirations given that it will
be limited to two Monday expirations and two Wednesday expirations
beyond the current week.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
While the proposal will expand the Short Term Options Expirations
to allow Monday and Wednesday Qualifying Security Expirations to be
listed on ISE,\35\ the Exchange believes that this limited expansion
for Monday and Wednesday expirations for options on Qualifying
Securities will not impose an undue burden on competition; rather, it
will meet customer demand. The Exchange would uniformly apply the
Qualifying Security criteria to options in individual stocks and
Exchange-Traded Fund Shares. The Exchange believes that Members will
continue to be able to expand hedging tools and tailor their investment
and hedging needs more effectively in the Qualifying Securities.
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\35\ As noted above, Nasdaq, Phlx, BX, GEMX and MRX incorporate
ISE Options 4, Section 5 by reference, so the proposed changes
herein will apply to those markets as well.
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Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the
introduction of Monday and Wednesday Qualifying Security Expirations
does not impose an undue burden on competition. The Exchange believes
that it will, among other things, expand the hedging tools available to
market participants and allow for a reduced premium cost of buying
portfolio protection. The Exchange believes that Monday and Wednesday
Qualifying Security Expirations will allow market participants to
purchase options on Qualifying Securities based on their timing as
needed and allow them to tailor their investment and hedging needs more
effectively.
Further, not adding an expiry for a Qualifying Security on a day
where there will be an Earnings Announcement that takes place after
market close does not impose an undue burden on competition as the
Exchange would uniformly apply this practice to the listing of all
Qualifying Securities.
The Exchange does not believe the proposal will impose any burden
on inter-market competition, as nothing prevents other options
exchanges from proposing similar rules to list and trade Monday and
Wednesday Qualifying Security Expirations. Further, the Exchange does
not believe the proposal will impose any burden on intra-market
competition, as all market participants will be treated in the same
manner under this proposal.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-ISE-2025-15 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-2025-15. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the 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
[[Page 21814]]
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 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-ISE-2025-15 and should be submitted on or before June 11, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09071 Filed 5-20-25; 8:45 am]
BILLING CODE 8011-01-P