Notice2025-15258
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Short Term Option Series Program To List Qualifying Securities
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 12, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 153 (Tuesday, August 12, 2025)</title>
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[Federal Register Volume 90, Number 153 (Tuesday, August 12, 2025)]
[Notices]
[Pages 38832-38836]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-15258]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103658; File No. SR-ISE-2025-15]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change, as Modified by Amendment No. 1, To Amend the Short Term
Option Series Program To List Qualifying Securities
August 7, 2025.
I. Introduction
On May 1, 2025, the Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the
Exchange's Short Term Option Series Program to permit the listing of up
to two Monday and Wednesday expirations for options on certain
individual stocks or Exchange-Traded Fund Shares. The proposed rule
change was published for comment in the Federal Register on May 21,
2025.\3\ On June 27, 2025, the Commission designated a longer period
within which to take action on the proposed rule change.\4\ On July 1,
2025, the Exchange filed Amendment No. 1 to the proposed rule change
(``Amendment No. 1''), which replaced and superseded the original
filing in its entirety.\5\ Amendment No. 1 was published for comment in
the Federal Register on July 15, 2025.\6\ The Commission has received
comments on the proposed rule change.\7\ The Commission is instituting
proceedings pursuant to Section 19(b)(2)(B) of the Act \8\ to determine
whether to approve or disapprove the proposed rule change, as modified
by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 103048 (May 15,
2025), 90 FR 21805.
\4\ See Securities Exchange Act Release No. 103343, 90 FR 29098
(July 2, 2025). The Commission designated August 19, 2025 as the
date by which it should approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change. See id.
\5\ Amendment No. 1 is publicly available on the Commission's
website at: <a href="https://www.sec.gov/comments/sr-ise-2025-15/srise202515-619387-1817874.pdf">https://www.sec.gov/comments/sr-ise-2025-15/srise202515-619387-1817874.pdf</a>.
\6\ See Securities Exchange Act Release No. 103434 (July 10,
2025), 90 FR 31716.
\7\ Comments on the proposed rule change are available at
<a href="https://www.sec.gov/comments/sr-ise-2025-15/srise202515.htm">https://www.sec.gov/comments/sr-ise-2025-15/srise202515.htm</a>.
\8\ 15 U.S.C. 78s(b)(2)(B).
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[[Page 38833]]
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
Currently, the Exchange may open for trading series of options on
certain symbols 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 series, Monthly Options Series or
Quarterly Options Series expire (``Short Term Option Daily
Expirations'').\9\ Table 1 in Supplementary Material .03 to Options 4,
Section 5 specifies each symbol that qualifies as a Short Term Option
Daily Expiration as well as the permitted expiration days.\10\
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\9\ See Supplementary Material .03 to Options 4, Section 5.
\10\ See id. As set forth in Table 1 of Supplementary Material
.03 to Options 4, Section 5, the Exchange currently permits
expirations in SPDR S&P 500 ETF Trust (``SPY''), iShares Russell
2000 ETF (``IWM''), and Invesco QQQ Trust (``QQQ'') on Mondays,
Tuesdays, Wednesdays and Thursdays. See Amendment No. 1, supra note
6, 90 FR at 31717, n.9. The Exchange also permits expirations in
symbols SPDR Gold Shares (``GLD''), iShares Silver Trust (``SLV''),
and iShares 20+ Year Treasury Bond ETF (``TLT'') on Mondays and
Wednesdays, as well as expirations in symbols United States Oil
Fund, LP (``USO'') and United States Natural Gas Fund, LP (``UNG'')
on Wednesdays. See id.
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The Exchange proposes to expand the Short Term Option Series
Program to permit the listing of up to two Monday and Wednesday
expirations beyond the current week for options on certain individual
stocks or Exchange-Traded Fund Shares \11\ (collectively ``Qualifying
Securities''). 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 in Supplementary
Material .03 to Options 4, Section 5, that have received approval to
list additional expiries on specific symbols, and 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,\12\ or (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) participation in the Penny
Interval Program \13\ (collectively, ``Qualifying Securities
Criteria'').\14\
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\11\ See Options 4, Section 3(h) (defining ``Exchange-Traded
Fund Shares'').
\12\ The Exchange states that the closing price and the opening
price shall be that of the primary exchange where the security is
listed. See Amendment No. 1, supra note 6, 90 FR at 31717, n.10.
\13\ See Supplementary Material .01 to Options 3, Section 3.
\14\ The Exchange has noted the additional expiries in a
proposed Table 2 in Supplementary Material .03 to Options 4, Section
5, along with the Qualifying Securities Criteria.
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Each calendar quarter, the Exchange would apply the Qualifying
Securities Criteria to individual stocks and Exchange-Traded Fund
Shares to determine eligibility for the following quarter as a
Qualifying Security.\15\ 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.\16\ The
data establishing the volume thresholds would be established by using
data from the last month of the prior calendar quarter from The Options
Clearing Corporation (``OCC'').\17\ For options listed on the first
trading day of a given calendar quarter, the volume would be calculated
using the last month of the quarter prior to that calendar quarter.\18\
The Exchange would make the list of Qualifying Securities available by
close of business on the first trading day of the quarter.\19\
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\15\ See proposed Supplementary Material .03 to Options 4,
Section 5. The Exchange states that the number of individual stocks
currently meeting all four criteria for a Qualifying Security is
eight and, as of June 27, 2025, one Exchange-Traded Fund Share
currently meets all four criteria for a Qualifying Security that
does not already have Monday and Wednesday expirations. See
Amendment No. 1, supra note 6, 90 FR at 31729.
\16\ See proposed Supplementary Material .03 to Options 4,
Section 5.
\17\ See id.
\18\ Id. The Exchange states that OCC data becomes available for
the end of a quarter on the first trading day of a new quarter. See
Amendment No. 1, supra note 6, 90 FR at 31718, n.11.
\19\ See id. at 31718. The Exchange states that it would make
this information freely accessible to the public on ISE's website.
See id. at 31718, n.12.
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For Qualifying Securities, the Exchange would be permitted to list
two Short Term Option Daily Expiration Dates beyond the current week
for each Monday and Wednesday expiration at one time. The Exchange
would not list an expiry on a day when there will be an earnings
announcement that takes place after market close. Earnings
announcements would include official public quarterly or yearly
earnings filed with the Commission (``Earnings Announcement'').\20\ The
Exchange states that Qualifying Securities that do not continue to meet
the above criteria would no longer be permitted to be listed as Monday
and Wednesday expirations beginning on the second day of the following
quarter.\21\
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\20\ See proposed Supplementary Material .03 to Options 4,
Section 5. The Exchange states that pre-announcements or
``guidance'' shall not be considered an Earnings Announcement. See
Amendment No. 1, supra note 6, 90 FR at 31718, n.14.
\21\ See id. at 31718.
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The Exchange states that the proposed Monday Qualifying Securities
expirations would 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,\22\
or Quarterly Options Series \23\ 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'').\24\ 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 Series expires, the Exchange would skip that week's
listing and instead list the following week; therefore, the two weeks
would not be consecutive.\25\
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\22\ In the Monthly Options Series, the Exchange may list and
trade options series that expire at the close of business on the
last business day of a calendar month. See Supplementary Material
.09 to Options 4, Section 5.
\23\ In the Quarterly Options Series, the Exchange may list and
trade options series that expire at the close of business on the
last business day of a calendar quarter. See Supplementary Material
.04 to Options 4, Section 5.
\24\ See Amendment No. 1, supra note 6, 90 FR at 31718.
\25\ See id. 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.
See id.
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Additionally, the proposed Wednesday Qualifying Securities
expirations would be similar to the current Wednesday expirations in
SPY, QQQ, and IWM (among other symbols that may list a Wednesday
Expiration) in Short Term Option Daily Expirations
[[Page 38834]]
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'').\26\ 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; therefore, the
two weeks would not be consecutive.\27\
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\26\ See id.
\27\ See id. 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.
See id.
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Monday and Wednesday Qualifying Securities Expirations would be
treated similar to existing SPY, QQQ, and IWM Monday and Wednesday
expirations.\28\ The interval between strike prices for the proposed
Monday and Wednesday Qualifying Securities Expirations would be the
same as those currently applicable to the Short Term Option Series
Program.\29\ As is the case with other equity options series listed
pursuant to the Short Term Option Series Program, the proposed Monday
and Wednesday Qualifying Securities Expirations series would be p.m.-
settled.\30\
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\28\ See id.
\29\ See id. Specifically, the Monday and Wednesday Qualifying
Securities Expirations would 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. See Supplementary Material .03(e) to Options 4,
Section 5.
\30\ See Amendment No. 1, supra note 6, 90 FR at 31718.
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In support of its proposal, the Exchange 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 Expirations.\31\ The
Exchange also represents 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.\32\ Additionally, the Exchange states that it does not
believe that any market disruptions would be encountered with the
introduction of Monday and Wednesday Qualifying Securities
Expirations.\33\ The Exchange currently trades p.m.-settled Short Term
Option Series that expire Monday, Tuesday, Wednesday, and Thursday on
several symbols,\34\ and states that it has not experienced any market
disruptions nor issues with capacity.\35\
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\31\ See id. at 31730.
\32\ See id. at 31719.
\33\ See id.
\34\ See supra note 10.
\35\ See Amendment No. 1, supra note 6, 90 FR at 31719.
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Further, the Exchange provides data utilizing a sample of
Qualifying Securities (``Sample Qualifying Securities'') compared to
broad-based Exchange-Traded Fund Shares like SPY, QQQ, and IWM, to
estimate the impact of the proposal on the options market.\36\ Based on
its analysis of this data, the Exchange estimates that the proposal
would add approximately 16% of strikes for the total number of strikes
for eight of the nine Sample Qualifying Securities.\37\ The Exchange
also measured average annualized closing volatilities for the Sample
Qualifying Securities from 2022 through 2024 and determined that the
Sample Qualifying Securities have an average annualized closing
volatility of generally less than 20%\38\ and that the Sample
Qualifying Securities are more volatile than SPY, QQQ, and IWM.\39\
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\36\ See id. at 31719-30. The Sample Qualifying Securities would
meet the proposed criteria to be a Qualifying Security based on
January 2025 data. The Sample Qualifying Securities are NVIDIA Corp
(``NVDA''), Tesla Inc. (``TSLA''), Apple Inc. (``AAPL''), <a href="http://Amazon.com">Amazon.com</a>
Inc. (``AMZN''), Broadcom Inc. (``AVGO''), Alphabet Inc.
(``GOOGL''), Microsoft Corp (``MSFT''), Financial Select Sector SPDR
Fund (``XLF''), and Meta Platforms Inc. (``META''). See id. at
31720.
\37\ See id.
\38\ See id. at 31721.
\39\ See id. at 31722. The Exchange currently lists Monday and
Wednesday expirations in SPY, QQQ, and IWM. See supra note 10.
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The Exchange also conducted an analysis to estimate the impact of
the proposal on strike breaks \40\ occurring on non-Earnings
Announcement Mondays and non-Earnings Announcement Wednesdays from 2022
through 2025, utilizing the Sample Qualifying Securities as a proxy.
The Exchange states that, in 2024, the proposal would have resulted in
66 additional strike breaks with the addition of these expirations (22
strike breaks in 2024 on Monday expiries after regular trading hours,
and 44 strike breaks in 2024 on Wednesday expiries after regular
trading hours).\41\
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\40\ 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. See Amendment No. 1,
supra note 6, 90 FR at 31722, n.31.
\41\ See id. at 31724.
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In addition, using SPY data from Wednesday, April 2, 2025,\42\ the
Exchange conducted an analysis to estimate the proposal's impact by
examining a customer's propensity to rationally exercise or abandon
outstanding options contracts by the tender of an exercise notice.\43\
The Exchange states that over 90% of open call contracts were
liquidated by customers prior to the close, and a substantial portion
of the remaining open call contracts were rationally abandoned.\44\ In
particular, customers with calls in SPY on April 2, 2025 had a high
liquidation ratio and fewer than 1% of call contracts were unliquidated
and unabandoned.\45\ With regard to put data for SPY on April 2, 2025,
the Exchange states that out-of-the-money options were either
liquidated or exercised and only a small percentage of options went
unexercised.\46\ According to the Exchange, very few puts remained
unexercised at the higher strikes.\47\ The Exchange states that the
risk exposure to an event similar to April 2, 2025 for the proposed
Wednesday expirations would be substantially similar to the current
risk that a put writer is exposed to with Friday expirations.\48\ The
Exchange concluded that since the rational abandonment and out-of-the-
money exercise rates were so high, customers are largely aware of the
exposure between 4:00 and 5:00 p.m. ET so they knowingly undertake the
risk from the unliquidated position.\49\
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\42\ The Exchange states that this was a day in which there was
a significant drop in the price of SPY after the close. See id. at
31725.
\43\ See id. at 31725-28.
\44\ See id. at 31726.
\45\ See id.
\46\ See id. at 31727.
\47\ See id.
\48\ See id.
\49\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2025-15, as Modified by Amendment No. 1, and Grounds for Disapproval
Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \50\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy
[[Page 38835]]
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
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\50\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\51\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from commenters with respect to, the proposed
rule change's consistency with the Act, and in particular, Section
6(b)(5) of the Act, which requires, among other things, that the rules
of a national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, 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.\52\
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\51\ Id.
\52\ 15 U.S.C. 78f(b)(5).
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The Commission received one comment letter opposed to the
proposal.\53\ This commenter stated that the addition of Monday and
Wednesday Qualifying Securities Expirations would, among other things,
``increase the operational risk and complexity in the options market,
[would] increase costs to broker-dealers and exchanges, and could
negatively impact retail investors, without providing sufficient
benefits to justify these risks and costs.'' \54\ The commenter stated
that Monday and Wednesday expirations in single-stock options could
exacerbate risks ``particularly for high-volume, news-sensitive names,
where market-impacting events often occur between Monday and
Wednesday'',\55\ and that ``[u]nexpected earnings releases or
correlated macroeconomic news events may lead to broken spreads, out-
of-the-money (`OTM') assignments, and potential account deficits.''
\56\ Furthermore, the commenter stated that, among other things, the
proposal would ``introduce greater uncertainty in the extended trading
session,'' \57\ ``impose substantial costs on affected firms'' through
the hiring of necessary additional staff and development of systems and
hardware,\58\ and that ``[a]dditional expirations have the potential to
both confuse and harm retail investors'' such as through ``assignment
risk based on post-close price changes for customers who may believe
that their option positions closed out-of-the-money as of the 4 p.m.
(ET) regular market closure.'' \59\ Accordingly, the commenter stated
that additional analysis of the proposal is required, including an
analysis of the ``anticipated costs of the proposal on end investors''
and the proposal's impact on retail investors and the options market
overall.\60\
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\53\ See Letter from Nathaniel Pomeroy, Principal, Wolverine
Execution Services, LLC, dated June 17, 2025 (``Wolverine Letter'').
The commenter also requested that the Commission, in the
alternative, extend the proposal's comment period for an additional
60 days to allow market participants additional time to evaluate and
provide feedback on the proposal. See id. at 1, 4.
\54\ Id. at 1.
\55\ Id.
\56\ Id. at 2.
\57\ Id.
\58\ Id. at 3.
\59\ Id.
\60\ Id. at 3-4.
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The Exchange submitted a comment letter responding to the
commenter.\61\ In its response, the Exchange stated that the options
industry trades broad-based index options with daily expirations and
has progressively added exchange-traded products with non-Friday
expiries since 2016 (e.g., SPY, QQQ, and IWM) without experiencing
``increased costs or complexity resulting from their addition.'' \62\
While the Exchange acknowledged that the proposed additional expiries
would permit trading on certain days when news events are occurring,
the Exchange also noted that the liquidity provision of the Qualifying
Securities exceeds the liquidity available in some exchange-traded
products that currently have additional expiries. The Exchange stated
that ``the data does not demonstrate the `exacerbated risks''' shared
by the commenter.\63\ The Exchange stated that the commenter's concerns
regarding added operational risk and complexity from the additional
expirations exist today for broker-dealers in managing the risks
attendant to Friday expirations in every options series.\64\ The
Exchange asserted that the small number of options symbols that would
currently be considered Qualifying Securities does not pose such an
operational risk that would require additional resources on a firm and
industry level.\65\ The Exchange further stated that it 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.\66\ Finally, the Exchange stated that it believes the
proposal would provide investors additional choice and flexibility when
trading options in highly liquid instruments and allow for a reduced
premium cost of buying portfolio protection to better manage risk
exposure.\67\
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\61\ See Letter from Angela Dunn, Principal Associate General
Counsel, Nasdaq, ISE, LLC, dated July 9, 2025 (``Exchange Response
Letter'').
\62\ Id. at 1-2.
\63\ See id. at 2. The Exchange pointed to the additional
analysis provided in Amendment No. 1 on the impact of the proposal,
including data surrounding strike breaks. See id.
\64\ See id. at 2, 4.
\65\ See id. at 3.
\66\ See id.
\67\ See id. at 1, 4.
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The Commission subsequently received one comment letter that
provided qualified support of the proposal, conditioned on a modified
implementation of the proposal by the Exchange.\68\ The commenter
stated that it generally supports the proposed Monday and Wednesday
Qualifying Securities Expirations,\69\ but recommended that the
Exchange list Monday and Wednesday Qualifying Securities Expirations in
one or two individual securities at first, study the impact of the
trading of those expirations on customers and the listed options
market, and then add Monday and Wednesday Qualifying Securities
Expirations to more securities if supported by the study.\70\
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\68\ See Letter from Joseph Corcoran, Managing Director and
Associate General Counsel, and Gerald O'Hara, Vice President and
Assistant General Counsel, Securities Industry and Financial Markets
Association, dated August 5, 2025 (``SIFMA Letter'').
\69\ See id. at 1, 2, 7.
\70\ See id. at 1-2, 5.
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The commenter raised the potential risks to customers of ``post-
close price changes on the day of expiration.'' \71\ Commenting on the
Exchange's analysis of customer propensity to rationally exercise
options contracts by the tender of an exercise notice (using SPY
options on April 2, 2025),\72\ the commenter stated that the ``impacts
of post-close price changes on a single expiration date across several
individual securities that meet the requirements to be listed as
Qualifying Securities . . . could result in losses, even if the number
of unabandoned and unliquidated contracts is not a significant
percentage of the total number of contracts traded on that day.'' \73\
The commenter stated that ``there were still measurable impacts on
investors, broker-dealers,
[[Page 38836]]
and the markets as a result of those holders whose call options were
exercised and who ended up owning shares of SPY at the lower post-close
price.'' \74\
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\71\ Id. at 4.
\72\ See supra notes 42-49 and accompanying text.
\73\ SIFMA Letter at 4.
\74\ Id.
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The commenter also explained that the proposal could result in
increased operational risks for broker-dealers and OCC clearing
members.\75\ The commenter stated that broker-dealers could have to
modify their risk management controls and procedures to take into
account ``the potential assignment risk associated with daily
expirations of single-stock options.'' \76\ Because these daily single
stock options would require physical delivery, broker-dealers would
need to enhance their risk management procedures and controls around
customer options trading to accommodate the likelihood of post-close
movements in the price of the underlying securities.\77\ The commenter
stated that ``broker-dealers employ risk management practices that may
include setting risk bands at thresholds that result in issuing
contrary exercise instructions or closing out certain [out-of-the-
money] strikes'' and that these ``decisions, whether made by individual
customers or by broker-dealers on customers' behalf, are more difficult
for investors that utilize options spreads.'' \78\ The commenter noted
the operational challenges imposed by the proposal on retail broker-
dealer risk management decisions, in particular, because their
customers tend to have options positions on both sides of the market
and are also monitored at the individual account level.\79\ The
commenter explained that if the Exchange were to initially limit
implementation of the Monday and Wednesday Qualifying Securities
Expirations to two securities, then broker-dealers could evaluate
trading and modify their risk management processes accordingly.\80\
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\75\ See id. at 2, 4-5, 6.
\76\ Id. at 5.
\77\ See id. at 2, 5. The commenter stated that ``[p]ost-close
price changes could cause options positions to be exercised and
assigned based on the 4:00 p.m. ET closing price where the resulting
positions in the underlying securities are immediately unprofitable
(or profitable) based on the underlying price of the security at
5:30 p.m. ET.'' Id. at 3. The commenter also stated that
enhancements to broker-dealer and other market participant risk
management processes would be needed to accommodate increased
expiration day options trading. See id. at 2.
\78\ Id. at 4.
\79\ See id. at 5, n.15.
\80\ See id. at 2, 5, 7.
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The commenter added that the OCC has introduced ``a new intraday
margin add-on charge for OCC clearing members'' which, with the
proposed Monday and Wednesday Qualifying Securities Expirations ``may
result in market participants having less capital to deploy in
providing liquidity.'' \81\ The commenter stated that that the proposal
could also result in ``enhanced margin and/or capital holdings by
clearing firms and broker-dealers'' due to the resulting increase in
expiration day options trading.\82\ The commenter also recommended that
the OCC educate its clearing members about ``the nuances of monitoring
the post-close period and processing contrary exercise instructions
because operational failure by a single clearing member can affect
other clearing members, market participants, and the options market in
general.'' \83\
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\81\ Id. at 6.
\82\ Id.
\83\ Id.
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, including the issues raised by commenters and
the Exchange's response, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule
change, as modified by Amendment No. 1, is consistent with Sections
6(b)(5) or any other provision of the Act, or the rules and regulations
thereunder. Although there do not appear to be any issues relevant to
approval or disapproval that would be facilitated by an oral
presentation of data, views, and arguments, the Commission will
consider, pursuant to Rule 19b-4 under the Act,\84\ any request for an
opportunity to make an oral presentation.\85\
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\84\ 17 CFR 240.19b-4.
\85\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (Jun. 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change, as modified by
Amendment No.1, should be approved or disapproved by September 2, 2025.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by September 16, 2025. The
Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, in addition to any
other comments they may wish to submit about the proposed rule change.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5725223b327a34383a3a323923241724323479303821"><span class="__cf_email__" data-cfemail="3e4c4b525b135d5153535b504a4d7e4d5b5d10595148">[email protected]</span></a>. Please include
file number SR-ISE-2025-15 on the subject line.
Paper Comments
<bullet> 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-ISE-2025-15 and should be submitted by
September 2, 2025. Rebuttal comments should be submitted by September
16, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\86\
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\86\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-15258 Filed 8-11-25; 8:45 am]
BILLING CODE 8011-01-P
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