Notice2026-03017
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 9, Section 14 To Exempt Box Spreads From Position Limits and To Amend Options 3, Sections 5, 7, and 14
Primary source
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Published
February 17, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 31 (Tuesday, February 17, 2026)</title>
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[Federal Register Volume 91, Number 31 (Tuesday, February 17, 2026)]
[Notices]
[Pages 7338-7341]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03017]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104817; File No. SR-ISE-2026-03]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 9,
Section 14 To Exempt Box Spreads From Position Limits and To Amend
Options 3, Sections 5, 7, and 14
February 11, 2026.
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 January 28, 2026, 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 and II below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 3, Section 5 (Entry and
Display of Single-Leg Orders); Options 3, Section 7 (Types of Orders
and Order and Quote Protocols); Options 3, Section 14 (Complex Orders);
and Options 9, Section 14 (Exemptions from Position Limits).
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 3, Section 5 (Entry and
Display of Single-Leg Orders); Options 3, Section 7 (Types of Orders
and Order and Quote Protocols); Options 3, Section 14 (Complex Orders);
and Options 9, Section 14 (Exemptions from Position Limits). Each rule
change will be described below.
Options 3, Section 5
The Exchange proposes to amend Options 3, Section 5, Entry and
Display of Single-Leg Orders, to align the rule text at Options 3,
Section 5(c) with Nasdaq Phlx LLC (``Phlx'') Options 3, Section 5(c).
Today, ISE Options 3, Section 5(c) states,
The System automatically executes eligible orders using the
Exchange's displayed best bid and offer (``BBO'') or the Exchange's
non-displayed order book (``internal BBO'') if the best bid and/or
offer on the Exchange has been re-priced pursuant to subsection (d)
below and Options 3, Section 4(b)(6) above.
At this time, the Exchange proposes to state,
[[Page 7339]]
The System automatically executes eligible orders using the
Exchange's displayed best bid and offer (``BBO'') or the Exchange's
non-displayed order book (``internal BBO'') if there are non-
displayed orders on the order book or the best bid and/or offer on
the Exchange has been re-priced pursuant to subsection (d) below and
Options 3, Section 4(b)(6) above.
The amendment is non-substantive because, today, a non-displayed
order on the order book will be executed at the best price on the
Exchange whether that best price is displayed or non-displayed.
Options 3, Section 7
The Exchange proposes to amend the language of ISE Supplementary
.03 to Options 3, Section 7 to align with Phlx Supplementary .03 to
Options 3, Section 7. Specifically, the Exchange proposes to amend the
``Financial Information eXchange'' or ``FIX'' at Supplementary .03(a)
to Options 3, Section 7 to align the rule text with Phlx Supplementary
.03(a) to Options 3, Section 7 and note that the interface allows
Members and their Sponsored Customers to connect, send, and receive
messages related to orders and auction orders and responses to and from
the Exchange. This amendment reflects current System operation.
Similarly, the Exchange proposes to amend the ``Ouch to Trade
Options'' or ``OTTO'' at Supplementary .03(b) to Options 3, Section 7
to align the rule text with Phlx Supplementary .03(b) to Options 3,
Section 7 and note that the interface allows Members and their
Sponsored Customers to connect, send, and receive messages related to
orders, auction orders, and auction responses to and from the Exchange.
This amendment reflects current System operation.
Finally, the Exchange proposes to amend the ``Specialized Quote
Feed'' or ``SQF'' at Supplementary .03(c) to Options 3, Section 7 to
align the rule text with Phlx Supplementary .03(c) to Options 3,
Section 7 and note that the interface allows Market Makers to connect,
send, and receive messages related to quotes, Immediate-or-Cancel
Orders, and auction responses to and from the Exchange. This amendment
reflects current System operation.
Options 3, Section 14
The Exchange proposes to amend Options 3, Section 14(b)(5) to
change ``Customer Cross Complex Order'' to ``Complex Customer Cross
Order'' so that the term conforms to the manner it is utilized in
Options 3, Section 12(b). Amending Options 3, Section 14(b)(5) to
change ``Customer Cross Complex Order'' to ``Complex Customer Cross
Order'' is a non-substantive amendment. The Exchange also proposes to
replace ``Options 3, Section 12'' with the word ``Rule'' in Options 3,
Section 14(b)(13) to align with Phlx Options 3, Section 14(b)(13). The
Exchange proposes to change ``n'' to ``in'' within Supplementary
Material .07 to Options 3, Section 14. These technical amendments are
all non-substantive.
Options 9, Section 14
ISE proposes to amend Options 9, Section 14, Exemptions from
Position Limits, at subparagraph (a) which currently states,
Equity Hedge Exemption. The following qualified hedging
transactions and positions described in paragraphs (1) through (5)
and (7) below shall be exempt from established position limits as
prescribed under Options 9, Section 13(d) and Supplementary Material
.03 to Options 9, Section 13. Hedge transactions and positions
established pursuant to paragraphs six (6) and eight (8) below are
subject to a position limit equal to five (5) times the standard
limit established under Options 9, Section 13(d) and Supplementary
Material .03 to Options 9, Section 13. The equity hedge exemption is
in addition to the standard limit and other exemptions available
under Exchange Rules.\3\
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\3\ The current rule text of Options 9, Section 14(a) cites to
Supplementary Material .03 to Options 9, Section 13. This citation
is incorrect, it should be a citation to Supplementary Material .01
to Options 9, Section 13. The Exchange proposes to correct this
citation with this rule proposal.
The Exchange proposes to correct an error with respect to hedge
transactions to permit box spreads to be exempt from established
position limits as prescribed under Options 9, Section 13(d) and
Supplementary Material .01 to Options 9, Section 13.\4\
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\4\ See id.
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Currently, the rule text states that hedge transactions and
positions established pursuant to Options 9, Section 14(a)(6) and (8)
are subject to a position limit equal to five (5) times the standard
limit established under Options 9, Section 13(d) and Supplementary
Material .03 to Options 9, Section 13.\5\ Options 9, Section 14(a)(6)
references a box spread \6\ and paragraph (a)(8) references OTC options
positions.\7\
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\5\ See id.
\6\ Options 9, Section 14(a)(6) states that a long call position
accompanied by a short put position with the same strike price and a
short call position accompanied by a long put position with a
different strike price (``box spread'').
\7\ Options 9, Section 14(a)(8) states that a listed option
position hedged on a one-for-one basis with an over-the-counter
(``OTC'') option position on the same underlying security. The
strike price of the listed option position and corresponding OTC
option position must be within one strike of each other and no more
than one expiration month apart.
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SR-ISE-2017-20 amended this rule text to align with Nasdaq Phlx,
LLC (``Phlx'') and Cboe Exchange, Inc. (``Cboe'') \8\ Phlx filed a rule
proposal making clear that the five times standard was limited to OTC
options contracts,\9\ however Phlx inadvertently cited to Options 9,
Section 14(a)(6) when it relocated rules in a subsequent rule change
that copied SR-Cboe-2003-30.\10\ The five times standard should apply
only to OTC options contracts as evidenced by NYSE Arca, Inc. (``NYSE
Arca'') Commentary .07 to Rule 5.17-O, Commentary .09 to NYSE American
LLC (``NYSE American'') Rule 904, and FINRA Rule 2360(b)(3)(A)(ii).
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\8\ See Securities Exchange Act Release No. 80194 (March 9,
2017), 82 FR 13908 (March 15, 2017) (SR-ISE-2017-20) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Correct a Typographical Error in Section 413 of the Exchange's
Rules).
\9\ See Securities Exchange Act Release No. 45889 (May 9, 2002),
67 FR 34980 (May 16, 2002) (SR-Phlx-2002-33) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change by the Philadelphia
Stock Exchange, Inc. To Eliminate Position and Exercise Limits for
Certain Qualified Hedge Strategies).
\10\ See Securities Exchange Act Release No. 51322 (March 4,
2005), 70 FR 12260 (March 11, 2005) (SR-Phlx-2005-17) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change and
Amendment No. 1 Thereto Relating to Position Limits and Exercise
Limits).
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At this time, the Exchange proposes to remove the citation to
Options 9, Section 14(a)(6) with respect to a position limit equal to
five (5) times the standard limit. The Exchange proposes to add
paragraph (a)(6) to the list of exempt transactions in the first
sentence of Options 9, Section 14(a) to properly reflect that box
spreads are exempt from the position limits prescribed under Options 9,
Section 13(d) and Supplementary Material .01 to Options 9, Section
13.\11\ At this time, the Exchange has been applying a stricter
standard. With this change, a Member would not have a position limit
for a box spread and, therefore, would not have to unwind any position
as a result of this amendment.
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\11\ A similar change is being proposed to Nasdaq Phlx LLC's
rules at Options 9, Section 13.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\13\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in
[[Page 7340]]
general to protect investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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Options 3, Section 5
The Exchange's proposal to note that the System automatically
executes eligible orders using the Exchange's displayed best bid and
offer (``BBO'') or the Exchange's non-displayed order book (``internal
BBO'') if there are non-displayed orders on the order book or the best
bid and/or offer on the Exchange has been re-priced pursuant to
subsection (d) below and Options 3, Section 4(b)(6) is consistent with
the Act because, today, a non-displayed order on the order book will be
executed at the best price on the Exchange whether that best price is
displayed or non-displayed. This rule text aligns ISE Options 3,
Section 5(c) with Phlx Options 3, Section 5(c).
Options 3, Section 7
The Exchange's proposal to amend FIX at Supplementary .03(a) to
Options 3, Section 7 to align the rule text with Phlx Supplementary
.03(a) to Options 3, Section 7 and note that the interface allows
Members and their Sponsored Customers to connect, send, and receive
messages related to orders and auction orders and responses to and from
the Exchange is consistent with the Act as the interface is designed
for Members to communicate to the Exchange with responses and receive
messages from the Exchange. This rule text aligns with Phlx
Supplementary .03(a) to Options 3, Section 7. Similar changes are
proposed for OTTO at Supplementary .03(b) to Options 3, Section 7 and
SQF at Supplementary .03(c) and those changes align with Phlx
Supplementary .03(b) and (c) to Options 3, Section 7. The amendments
reflects current System operation.
Options 3, Section 14
The Exchange's proposal to amend Options 3, Section 14(b)(5) to
change ``Customer Cross Complex Order'' to ``Complex Customer Cross
Order'' so that the term conforms to the manner it is utilized in
Options 3, Section 12(b) is non-substantive. Replacing ``Options 3,
Section 12'' with the word ``Rule'' in Options 3, Section 14(b)(13) and
amending ``n'' to ``in'' within Supplementary Material .07 to Options
3, Section 14 are technical non-substantive amendments.
Options 9, Section 14
ISE's proposal to amend Options 9, Section 14(a) to correct an
error with respect to hedge transactions to permit box spreads to be
exempt from established position limits as prescribed under Options 9,
Section 13(d) and Supplementary Material .01 to Options 9, Section 13
is consistent with the Act. Current Options 9, Section 14(a)(6)
references a box spread \14\ and current Options 9, Section 14(a)(8)
references OTC options positions.\15\ SR-ISE-2017-20 amended this rule
text to align with Phlx and Cboe.\16\ Phlx filed a rule proposal making
clear that the five times standard was limited to OTC options
contracts,\17\ however Phlx inadvertently cited to Options 9, Section
14(a)(6) when it relocated rules in a subsequent rule change that
copied SR-Phlx-2003-30.\18\ Removing the citation to Options 9, Section
14(a)(6) with respect to a position limit equal to five (5) times the
standard limit and adding paragraph (a)(6) to the list of exempt
transactions in the first sentence of Options 9, Section 14(a) would
properly reflect that box spreads are exempt from the position limits
prescribed under Options 9, Section 13(d) and Supplementary Material
.01 to Options 9, Section 13. At this time, the Exchange has been
applying a stricter standard.\19\
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\14\ Options 9, Section 14(a)(6) states that a long call
position accompanied by a short put position with the same strike
price and a short call position accompanied by a long put position
with a different strike price (``box spread'').
\15\ Options 9, Section 14(a)(8) states that a listed option
position hedged on a one-for-one basis with an over-the-counter
(``OTC'') option position on the same underlying security. The
strike price of the listed option position and corresponding OTC
option position must be within one strike of each other and no more
than one expiration month apart.
\16\ See Securities Exchange Act Release No. 80194 (March 9,
2017), 82 FR 13908 (March 15, 2017) (SR-ISE-2017-20) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Correct a Typographical Error in Section 413 of the Exchange's
Rules).
\17\ See Securities Exchange Act Release No. 45889 (May 9,
2002), 67 FR 34980 (May 16, 2002) (SR-Phlx-2002-33) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc. To Eliminate Position and Exercise
Limits for Certain Qualified Hedge Strategies).
\18\ See Securities Exchange Act Release No. 51322 (March 4,
2005), 70 FR 12260 (March 11, 2005) (SR-Phlx-2005-17) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change and
Amendment No. 1 Thereto Relating to Position Limits and Exercise
Limits).
\19\ A similar change is being proposed to Phlx's rules.
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Today, NYSE Arca Commentary .07 to Rule 5.17-O, Commentary .09 to
NYSE American Rule 904 and FINRA Rule 2360(b)(3)(A)(ii) apply the five
times standard only to OTC options contracts and exempt box spreads
from their position limit rules. At this time, the Exchange has been
applying a stricter standard. With this change, a Member would not have
a position limit for a box spread and, therefore, would not have to
unwind any position as a result of this amendment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Options 3, Section 5
Amending Options 3, Section 5(c) does not impose an undue burden on
intra-market competition because the Exchange will automatically
execute each transaction at the best price available on the Exchange.
Amending Options 3, Section 5(c) does not impose an undue burden on
inter-market competition because all options Exchange execute at the
best price available on that market regardless of the displayed price.
Options 3, Section 7
Amending the protocols at Supplementary .03 to Options 3, Section 7
to specify the protocols permit communications to and from the
Exchange, including responses, does not impose an undue burden on
intra-market competition because this is true for all Members.
Amending the protocols at Supplementary .03 to Options 3, Section 7
to specify the protocols permit communications to and from the
Exchange, including responses, does not impose an undue burden on
inter-market competition because other options exchange such as Phlx
have identical protocols.
Options 3, Section 14
The Exchange's proposal to amend Options 3, Section 14(b)(5) to
change ``Customer Cross Complex Order'' to ``Complex Customer Cross
Order'' is non-substantive. Also, replacing ``Options 3, Section 12''
with the word ``Rule'' in Options 3, Section 13(b)(13) and amending
``n'' to ``in'' within Supplementary Material .07 to Options 3, Section
14 are technical non-substantive amendments.
Options 9, Section 14
The Exchange's proposal to amend Options 9, Section 14(a) to remove
a reference to box spreads at paragraph (a)(6) so that they are exempt
from position limits as prescribed under Options 9, Section 13(d) and
Supplementary Material .01 to Options 9, Section 13 does not impose an
undue burden on intra-market competition because all Members who
transact box spreads would be exempt from position limits as prescribed
under Options 9,
[[Page 7341]]
Section 13(d) and Supplementary Material .01 to Options 9, Section
13.\20\
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\20\ A similar change is being proposed to Phlx's rules.
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The Exchange's proposal to amend Options 9, Section 14(a) to remove
a reference to box spreads at paragraph (a)(6) and note that box
spreads are exempt from position limits as prescribed under Options 9,
Section 13(d) and Supplementary Material .01 to Options 9, Section 13
does not impose an undue burden on inter-market competition as other
options exchanges \21\ have similar position limit rules that exempt
box spreads from position limits.
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\21\ See NYSE Arca Commentary .07 to Rule 5.17-O, Commentary .09
to NYSE American Rule 904 and FINRA Rule 2360(b)(3)(A)(ii).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \22\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A)(iii).
\23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\25\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that the
proposed rule change may become operative immediately upon filing. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest as
the proposal raises no new or novel issues. Accordingly, the Commission
waives the 30-day operative delay and designates the proposed rule
change to be operative upon filing.\26\
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\24\ 17 CFR 240.19b-4(f)(6).
\25\ 17 CFR 240.19b-4(f)(6)(iii).
\26\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="057770696028666a6868606b7176457660662b626a73">[email protected]</span></a>. Please include
file number SR-ISE-2026-03 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-2026-03. 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-2026-03 and should be submitted on
or before March 10, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-03017 Filed 2-13-26; 8:45 am]
BILLING CODE 8011-01-P
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