Notice2025-23934
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port Fees
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Published
December 30, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 246 (Tuesday, December 30, 2025)</title>
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[Federal Register Volume 90, Number 246 (Tuesday, December 30, 2025)]
[Notices]
[Pages 61194-61197]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23934]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104488; File No. SR-ISE-2025-41]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port
Fees
December 22, 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 December 16, 2025, 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 its Specialized Quote Feed \3\ or
``SQF'' Port pricing at Options 7, Section 7, C, ``Ports and Other
Services.'' \4\
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\3\ ``Specialized Quote Feed'' or ``SQF'' is an interface that
allows Lead Market Makers, Streaming Quote Traders (``SQTs'') and
Remote Streaming Quote Traders (``RSQTs'') to connect, send, and
receive messages related to quotes, Immediate-or-Cancel Orders, and
auction responses into and from the Exchange. Features include the
following: (1) options symbol directory messages (e.g., underlying
and complex instruments); (2) system event messages (e.g., start of
trading hours messages and start of opening); (3) trading action
messages (e.g., halts and resumes); (4) execution messages; (5)
quote messages; (6) Immediate-or-Cancel Order messages; (7) risk
protection triggers and purge notifications; (8) opening imbalance
messages; (9) auction notifications; and (10) auction responses. The
SQF Purge Interface only receives and notifies of purge requests
from the Lead Market Maker, SQT or RSQT. Lead Market Makers, SQTs
and RSQTs may only enter interest into SQF in their assigned options
series. Immediate-or-Cancel Orders entered into SQF are not subject
to the Order Price Protection, the Market Order Spread Protection,
or Size Limitation in Options 3, Section 15(a)(1), (a)(2) and
(b)(2), respectively. See Options 3, Section 7(a)(i)(B).
\4\ On December 8, 2025 the Exchange filed SR-ISE-2025-38. On
December 16, 2025 the Exchange withdrew SR-ISE-2025-38 and filed
this rule change.
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While the changes proposed herein are effective upon filing, the
Exchange has designated the amendments become operative on January 1,
2026.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/ise/rulefilings">https://listingcenter.nasdaq.com/rulebook/ise/rulefilings</a>,
and at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 61195]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
ISE proposes to amend its SQF Port pricing at Options 7, Section 7,
C, ``Ports and Other Services'' by offering an incentive to Market
Makers \5\ to lower their SQF Port Fees.
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\5\ The term ``Market Makers'' refers to ``Competitive Market
Makers'' and ``Primary Market Makers'' collectively. See Options 1,
Section 1(a)(22). Only Market Makers utilize SQF Ports for quoting
purposes.
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Currently, ISE assesses an SQF Port Fee of $1,185 per port, per
month. At this time, the Exchange proposes to offer an opportunity to
lower SQF Port Fees. Specifically, the Exchange proposes to offer
certain discounts to Market Makers that have transacted a certain
percentage of Total National Volume in the prior month. For purposes of
this proposal, the percentage of Total National Volume is calculated by
taking the total Market Maker Penny Symbol and Market Maker Non-Penny
Symbol volume (excluding index options) executed on the Exchange in the
prior month and attributing a multiple of five times to that Non-Penny
Symbol volume (numerator) and dividing that by Market Maker volume
(``M'' capacity at The Options Clearing Corporation (``OCC'')) in
multiply listed options across all options exchanges (denominator or
Total National Volume).
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Tier Percentage of total national volume Percentage SQF port discount
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1....................................... less than 0.10......................... 0
2....................................... greater than or equal to 0.10% and less 10
than 0.25%.
3....................................... greater than or equal to 0.25% and less 30
than 0.40%.
4....................................... greater than or equal to 0.40%......... 50
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With this proposal, a Market Maker that transacted less than 0.10%
of Total National Volume in the prior month would not receive a
discount on SQF Port Fees. A Market Maker that transacted greater than
or equal to 0.10% and less than 0.25% of Total National Volume in the
prior month will be afforded a discount of 10% on their SQF Port Fees.
A Market Maker that transacted greater than or equal to 0.25% and less
than 0.40% of Total National Volume in the prior month will be afforded
a discount of 30% on their SQF Port Fees. Finally, a Market Maker that
transacted greater than or equal to 0.40% of Total National Volume in
the prior month will be afforded a discount of 50% on their SQF Port
Fees. By way of example, a Market Maker that executed 3,000,000 in
Penny Volume and 200,000 in Non-Penny Volume in a given month on the
Exchange, where the Total National Volume was 1,000,000,000, would
qualify for a discount of 50% on their SQF Port Fees ((200,000 x 5=
1,000,000) + 3,000,000 = 4,000,000 which is 0.40% of 1,000,000,000).
The Exchange proposes to calculate Market Maker Non-Penny Symbol
volume at five times the weight as compared to Market Maker Penny
Symbol volume because Non-Penny Symbols tend to have lower volumes and
this incentive should encourage a greater amount of volume in Non-Penny
Symbols. Overall, the proposed discounts should encourage Market Makers
to transact additional order flow on ISE with which other market
participants may interact, for an opportunity to lower SQF Port Fees.
The Exchange proposes to exclude index options as index options are
generally not multiply listed.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \8\
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\8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Likewise, in NetCoalition v. Securities and Exchange Commission \9\
(``NetCoalition'') the D.C. Circuit upheld the Commission's use of a
market-based approach in evaluating the fairness of market data fees
against a challenge claiming that Congress mandated a cost-based
approach.\10\ As the court emphasized, the Commission ``intended in
Regulation NMS that `market forces, rather than regulatory
requirements' play a role in determining the market data . . . to be
made available to investors and at what cost.'' \11\
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\9\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\10\ See NetCoalition, at 534-535.
\11\ Id. at 537.
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Further, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . ..'' \12\ Although the court and the
SEC were discussing the cash equities markets, the Exchange believes
that these views apply with equal force to the options markets.
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\12\ Id. at 539 (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008)
(SR-NYSEArca-2006-21)).
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The proposed fee discounts for ISE SQF Ports are reasonable because
they will attract a greater amount of order flow to ISE with which
other market participants may interact while also lowering costs for
certain Market Makers that are able to transact greater than 0.10% of
Total National Volume in the prior month. The Exchange believes it is
reasonable to lower costs for certain Market Makers that transact
greater than 0.10% of Total National Volume on ISE because those Market
Makers are affording other ISE Members an opportunity to interact with
that order flow. The proposal provides an
[[Page 61196]]
incremental incentive for Market Makers that transact at least 0.10% of
Total National Volume, which provides a higher benefit for satisfying
increasingly more stringent criteria. The Exchange believes that the
value of the proposed discounts is commensurate with the difficulty to
achieve the corresponding threshold. Additionally, the discounts may
incentivize and attract more volume and liquidity to the Exchange,
which will benefit all Exchange participants through increased
opportunities to trade as well as enhancing price discovery. The
Exchange's proposed discounts are substantially similar to Cboe
Exchange, Inc.'s (``Cboe'') credit for their BOE Bulk Port Fees.\13\
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\13\ Cboe currently offers its market makers credits on their
monthly BOE Bulk Port Fees. Specifically, if a Cboe market maker
affiliate (``affiliate'' defined as having at least 75% common
ownership between the two entities as reflected on each entity's
Form BD, Schedule A) or Cboe Appointed OFP receives a credit under
the Exchange's Volume Incentive Program (``VIP''), the Cboe market
maker will receive an access credit on their BOE Bulk Ports
corresponding to the VIP tier reached. The credit is based on the
Performance Tier earned by a market maker under Cboe's Liquidity
Provider Sliding Scale Adjustment Table. Tiers 4 and 5 earn a 40%
credit on monthly Cboe Bulk Port Fees. Cboe assesses BOE Bulk
Logical Ports a fee of $1,500 for 1 to 5 ports, a fee of $2,500 for
6 to 30 ports and a fee of $3,000 for over 30 ports. Additionally,
each BOE Bulk Logical Port will incur the logical port fee indicated
when used to enter up to 30,000,000 orders per trading day per
logical port as measured on average in a single month. Each
incremental usage of up to 30,000,000 orders per day per BOE Bulk
Logical Port will incur an additional logical port fee of $3,000 per
month. Incremental usage will be determined on a monthly basis based
on the average orders per day entered in a single month across all
subscribed BOE Bulk Logical Ports.
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ISE believes it is reasonable to offer fee discounts to those
Market Makers that primarily provide and post liquidity to the
Exchange, as it should encourage Market Makers to continue to
participate on the Exchange and add liquidity. Greater liquidity
benefits all market participants by providing more trading
opportunities and tighter spreads. The proposal would also mitigate the
costs incurred by Market Makers on ISE.
Calculating Market Maker Non-Penny Symbol volume at five times the
weight as compared to Penny Symbol volume is reasonable, equitable and
not unfairly discriminatory as Non-Penny Symbols tend to have lower
volumes and this incentive should encourage a greater amount of volume
in Market Maker Non-Penny Symbols.\14\ The Exchange proposes to
calculate the Market Maker Non-Penny Symbol volume in an uniform manner
for all Members. The Exchange proposes to exclude index options as
index options are generally not multiply listed. Index Options would be
uniformly excluded.
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\14\ Penny Symbols typically are more liquid symbols.
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An ISE Market Maker requires only one SQF Port to submit quotes in
its assigned options series into ISE. An ISE Market Maker may submit
all quotes through one SQF Port. While an ISE Market Maker may elect to
obtain multiple SQF Ports to organize its business,\15\ only one SQF
Port is necessary for an ISE Market Maker to fulfill its regulatory
quoting obligations.\16\
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\15\ For example, an ISE Market Maker may desire to utilize
multiple SQF Ports for accounting purposes, to measure performance,
for regulatory reasons or other determinations that are specific to
that Member.
\16\ ISE Market Makers have various regulatory requirements as
provided for in Options 2, Section 4. Additionally, ISE Market
Makers have certain quoting requirements with respect to their
assigned options series as provided in Options 2, Section 5. SQF
Ports are the only quoting protocol available on ISE and only Market
Makers may utilize SQF Ports.
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The proposed fee discounts for ISE SQF Ports are equitable and not
unfairly discriminatory as they would apply uniformly to each ISE
Market Maker. The Exchange would uniformly calculate the Market Maker's
percentage each month. Although only Market Makers may receive the
proposed discounts, the Exchange notes that Market Makers are valuable
market participants that provide liquidity in the marketplace and incur
costs that other market participants do not incur. Unlike other market
participants, Market Makers are required to provide continuous two-
sided quotes on a daily basis,\17\ and are subject to various
obligations associated with providing liquidity.\18\ While the Exchange
is not offering a discount to those Market Makers that transact less
than 0.10% of Total National Volume, the Exchange notes that these
Market Makers transact a much lower amount of contracts on ISE as
compared to other Market Makers who qualify for a discount. In some
cases, these Market Makers are not executing the requisite amount of
Penny Symbols or Non-Penny Symbols to obtain the discount. Market
Makers are required to compete with other Market Makers to improve the
market in all series of options classes to which the Market Maker is
appointed and to update market quotations in response to changed market
conditions in all series of options classes to which the Market Maker
is appointed.\19\ The Exchange believes that all Market Makers are
capable of quoting tighter or in a greater amount of options classes to
obtain the requisite volume to achieve a discount.
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\17\ See ISE Options 2, Section 5.
\18\ See ISE Options 2, Section 4.
\19\ See ISE Options 2, Section 4(b).
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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.
In terms of intra-market competition, the proposed fee discounts
for ISE SQF Ports do not impose a burden on competition because they
would apply uniformly to each ISE Market Maker and the Exchange would
uniformly calculate the Market Maker's percentage each month. Although
only Market Makers may receive the proposed discounts, the Exchange
notes that Market Makers are valuable market participants that provide
liquidity in the marketplace and incur costs that other market
participants do not incur. Unlike other market participants, Market
Makers are required to provide continuous two-sided quotes on a daily
basis,\20\ and are subject to various obligations associated with
providing liquidity.\21\ Further, while the Exchange is not offering a
discount to those Market Makers that transact less than 0.10% of Total
National Volume, the Exchange notes that these Market Makers transact a
much lower amount of contracts on ISE as compared to other Market
Makers that qualify for the discount and/or these Market Makers are not
executing the requisite amount of Penny Symbols or Non-Penny Symbols to
obtain the discount. The Exchange's proposal does not impose an undue
burden on competition because Market Makers are required to compete
with other Market Makers to improve the market in all series of options
classes to which the Market Maker is appointed and to update market
quotations in response to changed market conditions in all series of
options classes to which the Market Maker is appointed.\22\ The
Exchange believes that all Market Makers are capable of quoting tighter
or in a greater amount of options classes to obtain the requisite
volume to achieve a discount.
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\20\ See ISE Options 2, Section 5.
\21\ See ISE Options 2, Section 4.
\22\ See ISE Options 2, Section 4(b).
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In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its
[[Page 61197]]
fees to remain competitive with other options exchanges. In addition to
the Exchange, market participants have alternative options exchanges
that they may participate on and direct their order flow. In sum, if
the changes proposed herein are unattractive to market participants, it
is likely that the Exchange will lose market share as a result.
Accordingly, the Exchange does not believe that the proposed changes
will impair the ability of members or competing options exchanges to
maintain their competitive standing in the financial markets.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\23\ 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: (i) necessary or appropriate in the public
interest; (ii) for the protection of investors; or (iii) 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.
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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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
<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#d2a0a7beb7ffb1bdbfbfb7bca6a192a1b7b1fcb5bda4"><span class="__cf_email__" data-cfemail="b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce">[email protected]</span></a>. Please include
file number SR-ISE-2025-41 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-2025-41. 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-2025-41 and
should be submitted on or before January 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23934 Filed 12-29-25; 8:45 am]
BILLING CODE 8011-01-P
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