Notice2026-01118
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving 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
January 22, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 14 (Thursday, January 22, 2026)</title>
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[Federal Register Volume 91, Number 14 (Thursday, January 22, 2026)]
[Notices]
[Pages 2806-2811]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104624; File No. SR-ISE-2025-15]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the
Short Term Option Series Program To List Qualifying Securities
January 16, 2026.
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 (as defined below).
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superseded the original filing in its entirety.\5\ Amendment No. 1 was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\ On
August 7, 2025, the Commission instituted proceedings to determine
whether to approve or disapprove the proposed rule change, as modified
by Amendment No. 1.\7\ The Commission designated a longer period within
which to take action on the proposed rule change on November 3,
2025.\8\
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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 the Commission shall 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 (``Amendment No. 1'').
\7\ See Securities Exchange Act Release No. 103658, 90 FR 38832
(Aug. 12, 2025). 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\ See Securities Exchange Act Release No. 104173, 90 FR 51424
(Nov. 17, 2025). The Commission designated January 16, 2026, as the
date by which the Commission shall approve or disapprove the
proposed rule change, as modified by Amendment No. 1.
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This order approves the proposed rule change, as modified by
Amendment No. 1.
II. Description of the Proposal, 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
SPDR Gold Shares, iShares Silver Trust, and iShares 20+ Year
Treasury Bond ETF on Mondays and Wednesdays, as well as expirations
in United States Oil Fund, LP and United States Natural Gas Fund, LP
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
[[Page 2807]]
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\ See 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 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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III. Discussion and Commission Findings
The Commission finds that the Exchange's proposal, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\31\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
6(b)(5) of the Act.\32\ Section 6(b)(5) of the Act requires that the
rules of a national securities exchange be designed, among other
things, 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, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\31\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\32\ 15 U.S.C. 78f(b)(5).
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The Commission received comment letters addressing the proposed
rule change's consistency with the Act, specifically focusing on the
impact of the proposed additional expirations in Qualifying Securities
on certain market participants as well as the options market
generally.\33\ One of these commenters also expressed qualified support
for the proposal.\34\ The Commission addresses the issues raised by
commenters below.
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\33\ See Letters from Nathaniel Pomeroy, Principal, Wolverine
Execution Services, LLC, dated June 17, 2025 (``WEX Letter'');
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'').
\34\ See SIFMA Letter at 1, 2, 7.
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A. Investor Protection Considerations
Commenters raised concerns about the risk of harm to customers due
to post-close price movements on the day of expiration.\35\ One
commenter stated 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
[[Page 2808]]
closed out-of-the-money as of the 4 p.m. (ET) regular market closure.''
\36\
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\35\ See WEX Letter at 3; SIFMA Letter at 3-4.
\36\ WEX Letter at 3.
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In order to analyze the impact of its proposal, including potential
risks associated with post-close price movements, the Exchange
estimated the impact of the proposal on strike breaks \37\ occurring on
non-Earnings Announcement Mondays and non-Earnings Announcement
Wednesdays from 2022 through 2025, utilizing a sample of Qualifying
Securities (``Sample Qualifying Securities'') \38\ 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).\39\
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\37\ The Exchange explains that ``[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.'' Amendment No. 1, supra note 6, 90 FR at 31722,
n.31.
\38\ The Sample Qualifying Securities would meet the proposed
criteria to be a Qualifying Security based on January 2025 data. See
id. at 31720. The Sample Qualifying Securities are NVIDIA Corp.
(``NVDA''), Tesla Inc. (``TSLA''), Apple Inc., <a href="http://Amazon.com">Amazon.com</a> Inc.,
Broadcom Inc., Alphabet Inc., Microsoft Corp, Financial Select
Sector SPDR Fund, and Meta Platforms Inc. See id.
\39\ See id. at 31724.
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In addition, using SPY data from Wednesday, April 2, 2025,\40\ the
Exchange conducted an analysis of a customer's propensity to rationally
exercise or abandon outstanding options contracts by the tender of an
exercise notice.\41\ 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.\42\ 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.\43\ 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.\44\ According to the Exchange,
very few puts remained unexercised at the higher strikes.\45\ 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.\46\ The Exchange concluded that since the rational
abandonment and out-of-the-money exercise rates were so high, ``it is
clear that customers are largely aware of the exposure between 4:00 and
5:00 p.m. ET and therefore, the risk from the unliquidated position is
undertaken knowingly.'' \47\
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\40\ The Exchange states that this was a day on which there was
a significant drop in the price of SPY after the close. See id. at
31725.
\41\ See id. at 31725-27.
\42\ See id. at 31726.
\43\ See id.
\44\ See id. at 31727.
\45\ See id.
\46\ See id.
\47\ Id.
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A commenter, in response to the Exchange's analysis of customer
propensity to rationally exercise or abandon options contracts by the
tender of an exercise notice (using SPY options on April 2, 2025),\48\
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.'' \49\ This commenter further stated that ``there were
still measurable impacts on investors, broker-dealers, 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.'' \50\
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\48\ See supra notes 40-47 and accompanying text.
\49\ SIFMA Letter at 4.
\50\ Id.
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In response to the commenter, the Exchange stated that options
holders are already subject to price moves in the underlying between
4:00 p.m. and 5:30 p.m. ET in every option,\51\ and broker-dealers that
are subject to know-your-customer and suitability requirements under
FINRA Rules 2090 (Know Your Customer) and 2111 (Suitability) \52\
should have risk management procedures and controls addressing changes
to the price of the underlying after the market close.\53\ Further, the
Exchange stated that the Options Disclosure Document, which broker-
dealers must provide their clients, discloses the risks of options
trading, ``including the right to submit a contrary exercise notice.''
\54\ The Exchange also provided examples of currently traded products
that experience price movements after hours, such as options on
exchange-traded products (``ETPs'') with expirations occurring from
several days a week to every business day of the week, and stated that
``non-Friday expiries in various ETPs currently have instances of
strike breaks on Mondays and Wednesdays.'' \55\
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\51\ See Letter from Angela Dunn, Principal Associate General
Counsel, Nasdaq ISE, LLC, dated September 22, 2025 (``Exchange
Response Letter II''), at 1.
\52\ See id. at 1-2. The Exchange stated that ``[s]uitability
rules are intended to distinguish the trading of customers with
those of professional traders who are likely to have distinct risk/
reward profiles, risk tolerance and capital.'' Id. at 2, n.4.
\53\ See id. at 1-2.
\54\ Id. at 1.
\55\ Id. at 2.
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The Commission acknowledges commenters' concerns, but believes the
proposal is consistent with the protection of investors. Although there
are risks associated with post-close price movements, these risks exist
with other expiring options, and the Exchange's data may indicate that
customers are generally aware of the exposure risk between 4:00 and
5:30 p.m. ET.\56\ In this proposal, the Exchange has considered this
risk and, crucially, will not list an expiry on a day when there will
be an Earnings Announcement after market close, which should limit a
potential source of post-close price volatility that could result in
increased assignment risk. The proposal responds to investor demand for
shorter-dated options \57\ by offering a limited expansion of shorter-
dated options, which may provide the investing public and other market
participants more flexibility to closely tailor their investment and
hedging decisions in these options, while limiting a potential source
of post-close price volatility.
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\56\ See Amendment No. 1, supra note 6, 90 FR at 31727.
\57\ See Letter from Angela Dunn, Principal Associate General
Counsel, Nasdaq, ISE, LLC, dated July 9, 2025 (``Exchange Response
Letter I''), at 3, n.12 (citing to Table 11 in Amendment No. 1).
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In addition, there are existing rules and standards of conduct for
broker-dealers that would apply to options on Qualifying Securities.
For example, the Exchange's rules require its members, in approving a
customer's account for options transactions, to ``exercise due
diligence to learn the essential facts as to the customer and his
investment objectives and financial situation.'' \58\ In fulfilling
this obligation, the member must consider, among other things, a
customer's investment objectives; employment status; estimated annual
income; estimated net worth; and investment experience and
knowledge.\59\ Further, FINRA's heightened suitability requirements for
options trading accounts require that a person recommending an opening
position in any option contract have ``a reasonable basis for
believing, at the
[[Page 2809]]
time of making the recommendation, that the customer has such knowledge
and experience in financial matters that he may reasonably be expected
to be capable of evaluating the risks of the recommended transaction,
and is financially able to bear the risks of the recommended position
in the option contract.'' \60\
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\58\ See ISE Options 10, Section 6(b).
\59\ See id.
\60\ See FINRA Rule 2360(b)(19)(B).
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B. Cost, Operational Risk, and Market Risk Considerations
Commenters also stated that the additional expirations would
increase costs and operational risks for broker-dealers.\61\ One
commenter noted the risks broker-dealers would face in handling the
additional expirations and contrary exercise advices for customers and
stated that additional resources (e.g., back- and middle-office
personnel) would need to be allocated to sufficiently address the
operational risk and challenges on both a firm and industry level due
to the increased number and frequency of options expirations.\62\ This
commenter asserted that the lack of ``marginal utility'' provided by
listing additional expiries in Qualifying Securities is ``significantly
outweighed'' by the ``operational risk and complexity'' that the
proposal would add to the options markets and its participants.\63\ The
commenter further stated that the additional staff and technology
needed to support the proposed expirations would impose ``substantial
costs'' on broker-dealers,\64\ and that the proposal overall would
impose an ``undue burden on small broker-dealers.'' \65\ In addition,
one commenter stated that the additional daily expirations could
increase the chances of ``OCC clearing members experiencing operational
issues (and losses) on expiration days.'' \66\
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\61\ See WEX Letter at 2; SIFMA Letter at 4-5. The commenters
also stated that the proposal would ``substantially increase
Consolidated Audit Trail (`CAT') costs related to options market
activity'' without identifying a unique impact from the proposal.
See WEX Letter at 2; SIFMA Letter at 6, n.18.
\62\ See WEX Letter at 2, 3.
\63\ See id. at 4.
\64\ Id. at 3.
\65\ Id. at 4.
\66\ SIFMA Letter at 6. The commenter also raised general
concerns related to the proposal's impact on requirements for
``enhanced margin and/or capital holdings'' under OCC's ``new
intraday margin add-on charge,'' which ``may result in market
participants having less capital to deploy in providing liquidity.''
Id.
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One commenter stated that broker-dealers may 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.'' \67\ Because these daily single stock options would
require physical delivery, the commenter stated that 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.\68\ This
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.'' \69\ 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.\70\
Accordingly, the commenter recommended that the Exchange list Monday
and Wednesday Qualifying Securities Expirations in one or two
individual securities at first, analyze 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 analysis.\71\ The commenter stated that
limiting the number of individual securities would allow broker-dealers
time to implement any necessary changes to their risk management
processes.\72\
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\67\ Id. at 5.
\68\ 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. This commenter also stated that
enhancements to broker-dealer and other market participant risk
management processes would potentially be needed to accommodate
increased expiration day options trading. See id. at 2.
\69\ Id. at 4.
\70\ See id. at 5, n.15.
\71\ See id. at 1-2, 5. The commenter recommended starting with
TSLA or NVDA, based on their frequent price moves due to news not
based on an earnings announcement, and studying the impact of Monday
and Wednesday expirations on these stocks. See id. at 5.
\72\ See id.
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Finally, while one of the commenters acknowledged that many of its
concerns with the proposal already exist with Friday weekly
expirations, the commenter stated that the risks to the options market
would be ``exacerbated,'' ``particularly for high-volume, news-
sensitive names, where market-impacting events often occur between
Monday and Thursday.'' \73\ This commenter stated that the proposal
would increase operational risk and complexity, pointing to the example
of how ``[u]nexpected earnings releases or correlated macroeconomic
news events may lead to broken spreads, out-of-the-money (`OTM')
assignments, and potential account deficits.'' \74\ Furthermore, the
commenter stated that, among other things, the proposal would
``introduce greater uncertainty in the extended trading session.'' \75\
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\73\ WEX Letter at 1.
\74\ Id. at 2.
\75\ Id.
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In response to commenter concerns related to increased costs and
added operational risk and complexity for market participants, the
Exchange stated that these concerns exist today for broker-dealers in
managing the risks attendant to Friday expirations in every options
series and the potential costs associated with a new listing program
are not unique to the proposal.\76\ The Exchange also asserted that the
small number of options symbols that would currently be considered
Qualifying Securities does not pose such an operational risk that they
would require additional resources on a firm and industry level.\77\
Moreover, the Exchange stated that ``broker-dealers that may require
enhancements to their risk protocols most likely require such upgrades
in light of current non-Friday expiries and not necessarily because of
the [p]roposal. Other broker dealers, with more robust risk management
tools, may have already enhanced their protocols when non-Friday
expiries were introduced.'' \78\ The Exchange further stated that its
proposal will not list an expiry on a Qualifying Security
[[Page 2810]]
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.\79\ The Exchange also stated that it believes the
proposal will 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.\80\
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\76\ See Exchange Response Letter I at 2-3. The Exchange also
stated that ``[a]ny new listing program may have the potential to
increase costs, but each offering is optional.'' Id. at 3.
\77\ See id.
\78\ Exchange Response Letter II at 2. The Exchange disputed the
relevance of one commenter's statement that OCC's margin add-on
charge for clearing members will result in less capital to provide
liquidity to the listed options market, stating that ``[w]hile the
intraday margin restrictions may impact less liquid options, the
concerns are misplaced with respect to the list of Qualifying
Securities'' because ``the Qualifying Securities are the most liquid
options traded.'' Id. at 3. See also supra note 66. The Exchange
also acknowledged that OCC clearing firms will need to consider both
margin and capital holdings requirements in light of the proposal,
but asserted that clearing firms are already ``equipped with
protocols to examine such risk on a daily basis as to any new expiry
or product offering,'' and can ``conduct such an analysis in their
normal course and adjust accordingly.'' Exchange Response Letter II
at 3.
\79\ See Exchange Response Letter I at 3.
\80\ See id. at 1, 4. The Exchange also stated that there is
demand for shorter-dated options as demonstrated in Amendment No. 1.
See id. at 3, n.12 (citing to Table 11 in Amendment No. 1).
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The Exchange stated that one commenter's suggestion to initially
limit the proposal to expirations on one or two individual securities
and allow further study ``does not achieve any effective goal.'' \81\
The Exchange stated that starting out with two symbols would not
provide enough data to analyze the proposal, and that there are daily
news events in the two securities suggested by the commenter (TSLA and
NVDA), not just on Mondays and Wednesdays, so price moves in those
stocks due to news events would not be limited to the proposal.\82\ The
Exchange also stated that if certain broker-dealers need to improve
their risk management controls as a result of the proposal, they will
need to do so regardless of whether the Exchange begins with one
Qualifying Security or if it begins with the potential eight Qualifying
Securities.\83\ In addition, the Exchange stated that there would not
be any benefit to starting out with just two symbols as ``the criteria
for the [p]roposal targets the most liquid individual stocks and ETFs''
and ``the total number of Qualifying Securities is extremely limited,
representing a de minimis number of listed options.'' \84\
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\81\ Exchange Response Letter II at 2.
\82\ See id.
\83\ See id.
\84\ Id.
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In response to the commenter that stated that the proposal would
exacerbate risks in the options market and increase operational risk
and complexity, the Exchange stated that all broad-based index options
currently have daily expirations and that the options industry has
progressively added options on ETPs with non-Friday expiries since 2016
(e.g., SPY, QQQ, and IWM) without experiencing ``increased costs or
complexity resulting from their addition.'' \85\ While the Exchange
acknowledged that the proposed additional expiries will permit trading
on certain days when news events are occurring, the Exchange also noted
that the liquidity provision requirements in the Qualifying Securities
Criteria would exceed the liquidity available in some ETPs that
currently have additional expiries.\86\ The Exchange stated that ``the
data does not demonstrate the `exacerbated risks''' shared by the
commenter.\87\ In addition, the Exchange examined data comparing the
Sample Qualifying Securities to broad-based Exchange-Traded Fund Shares
like SPY, QQQ, and IWM, to estimate the impact of the proposal on the
options market.\88\ Based on its analysis of this data, the Exchange
estimates that the proposal would add approximately 16% more strikes to
the total number of strikes for eight of the nine Sample Qualifying
Securities.\89\ 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%\90\
and that the Sample Qualifying Securities are more volatile than SPY,
QQQ, and IWM.\91\
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\85\ Exchange Response Letter I at 1-2.
\86\ See id. at 2.
\87\ Id.
\88\ See Amendment No. 1, supra note 6, 90 FR at 31719-30.
\89\ See id. The Exchange only conducted this analysis for those
eight securities.
\90\ See id. at 31721.
\91\ 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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In further support of its proposal, the Exchange stated that it
does not believe that any market disruptions will be encountered with
the introduction of Monday and Wednesday Qualifying Securities
Expirations.\92\ The Exchange stated that it currently trades p.m.-
settled Short Term Option Series that expire Monday, Tuesday,
Wednesday, and Thursday on several symbols,\93\ and stated that it has
not experienced any market disruptions nor issues with capacity.\94\ In
addition, the Exchange stated that it has surveillance programs 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.\95\ The Exchange represented 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.\96\ The Exchange also
stated that its proposal would add a small overall number of weekly
expiration dates because the Exchange will limit the number of Short
Term Option Daily Expirations for the Qualifying Securities to two
Monday expirations and two Wednesday expirations beyond the current
week.\97\
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\92\ See Amendment No. 1, supra note 6, 90 FR at 31719.
\93\ See id.
\94\ See id.
\95\ See id. at 31730.
\96\ See id. at 31719.
\97\ See id. at 31729.
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The Commission considered whether the proposal would add undue
operational risk, complexity, or uncertainty for broker-dealers and the
options market as a whole, including whether it would unduly burden
small broker-dealers. As the Exchange stated, there are already daily
expirations on broad-based index options, as well as non-Friday
expirations on certain ETPs. Broker-dealers, including small broker-
dealers, OCC clearing members, and other market participants in the
options market should already have familiarity with these expirations
and likely have already adjusted their systems and trading practices as
a result of the additional expirations.\98\ To help provide
predictability for broker-dealers in managing operational risk, the
Exchange has represented that it will make the list of all Qualifying
Securities available by the close of business on the first trading day
of the quarter.\99\ Furthermore, the Qualifying Securities Criteria
will limit the number of eligible Qualifying Securities, and the
associated Qualifying Securities Expirations, so that any potential
impact on the options market will accordingly be limited. However, the
Commission expects the Exchange to monitor the trading of the options
listed as a result of the proposal to evaluate whether any issues
develop.
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\98\ The Monday and Wednesday Qualifying Securities Expirations
will be treated similarly to the existing SPY, QQQ, and IWM Monday
and Wednesday expirations.
\99\ See Amendment No. 1, supra note 6, 90 FR at 31718.
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The proposal is reasonably designed as a limited expansion of
Monday and Wednesday expirations. The proposal will overall add just a
small number of Monday and Wednesday Qualifying Securities Expirations
by limiting the additional expirations to two weeks beyond the current
week, and only for securities that have received approval to list
additional expiries and meet the Qualifying Securities Criteria. As
discussed above, the Qualifying Securities Criteria applicable to
individual stocks and Exchange-Traded Fund Shares are: (1) an
underlying security must have: (A) a market capitalization of greater
than $700
[[Page 2811]]
billion for an individual stock based on the closing price, or (B) AUM
greater than $50 billion for an Exchange-Traded Fund Share based on
NAV; (2) monthly options volume greater than 10 million options; (3) a
position limit of at least 250,000 contracts; and (4) participation in
the Penny Interval Program.\100\ The Qualifying Securities Criteria
should help to ensure that the underlying securities, as well as the
options on such securities, are highly liquid and actively traded. If
the Exchange chooses to modify the Qualifying Securities Criteria or
any other aspect of the proposal, it will be required to file a
proposed rule change with the Commission, which will subject the
proposed rule change to the notice and comment process.
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\100\ See supra notes 11-14 and accompanying text.
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The proposal also reasonably balances the Exchange's desire to
accommodate investor demand by offering a wider array of investment
opportunities with the need to avoid unnecessary proliferation of
options series. Additionally, and as noted above, this limited
expansion of Monday and Wednesday Qualifying Securities Expirations may
provide the investing public and other market participants more
flexibility to closely tailor their investment and hedging decisions in
these options, thus allowing them to better manage their risk exposure.
For these reasons, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with Section
6(b)(5) of the Act \101\ and the rules and regulations thereunder
applicable to a national securities exchange.
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\101\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\102\ that the proposed rule change (SR-ISE-2025-15), as modified
by Amendment No. 1, be, and hereby is, approved.
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\102\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\103\
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\103\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-01118 Filed 1-21-26; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on January 22, 2026.
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