Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Market-Wide Speed Bump and Kill Switch

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<title>Federal Register, Volume 91 Issue 199 (Friday, October 16, 2026)</title>
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[Federal Register Volume 91, Number 199 (Friday, October 16, 2026)]
[Notices]
[Pages 65831-65833]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21130]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106651; File No. SR-ISE-2026-54]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Market-
Wide Speed Bump and Kill Switch

October 13, 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 October 1, 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, 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 the Market-Wide Speed Bump and the 
Kill Switch.
    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 the Market-Wide Speed Bump at 
Options 3, Section 15(a)(3)(B)(vii) and the Kill Switch at Options 3, 
Section 17 to eliminate the existing cross-market functionality between 
ISE and its affiliate, Nasdaq GEMX, LLC (``GEMX'').
Background
    The Market-Wide Speed Bump (``MWSB'') is a Market Maker risk 
protection under Options 3, Section 15(a)(3)(B)(vii). This protection 
provides Market Makers a market wide parameter by which the Exchange 
will automatically remove the Market Maker's quotes in all classes 
when, during a time period established by the Market Maker, the total 
number of quote removal events specified in Options 3, Section 
15(a)(3)(B)(i)(a)-(d) and (B)(2) exceeds the market wide parameter 
provided by the Market Maker to the Exchange.
    The Kill Switch, set forth in Options 3, Section 17, enables 
Members to initiate a message to the System to promptly cancel all 
existing orders and restrict entry of additional orders across

[[Page 65832]]

their FIX,\3\ OTTO \4\ and Precise \5\ order entry protocols. Members 
may submit a Kill Switch request to the System for certain 
identifier(s) on a user level, and the System will send an automated 
message to the Member when a Kill Switch request has been processed by 
the Exchange's System.
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    \3\ ``Financial Information eXchange'' or ``FIX'' is an 
interface that 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. Features include the 
following: (1) execution messages; (2) order messages; (3) risk 
protection triggers and cancel notifications; and (4) post trade 
allocation messages. See Supplementary Material .03(a) to Options 3, 
Section 7.
    \4\ ``Ouch to Trade Options'' or ``OTTO'' is an interface that 
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. 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) order 
messages; (6) risk protection triggers and cancel notifications; (7) 
auction notifications; (8) auction responses; and (9) post trade 
allocation messages. See Supplementary Material .03(b) to Options 3, 
Section 7.
    \5\ ``Nasdaq Precise'' or ``Precise'' is a front-end interface 
that allows Electronic Access Members and their Sponsored Customers 
to send orders to the Exchange and perform other related functions. 
Features include the following: (1) order and execution management: 
enter, modify, and cancel orders on the Exchange, and manage 
executions (e.g., parent/child orders, inactive orders, and post-
trade allocations); (2) market data: access to real-time market data 
(e.g., NBBO and Exchange BBO); (3) risk management: set customizable 
risk parameters (e.g., kill switch); and (4) book keeping and 
reporting: comprehensive audit trail of orders and trades (e.g., 
order history and done away trade reports). See Supplementary 
Material .03(b) to Options 3, Section 7.
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    Currently, the MWSB permits Market Makers to request the Exchange 
to set the market wide parameter for the MWSB to apply either to just 
ISE or across both ISE and GEMX. Similarly, the Kill Switch currently 
permits Members to elect to have the Kill Switch cancel and restrict 
their order activity either on ISE or across both ISE and GEMX. Where a 
Market Maker or Member elects to apply the protection across both 
markets, a breach of the market wide parameter under the MWSB, or a 
Kill Switch request, results in the corresponding action being taken on 
both ISE and GEMX.
    Of the Nasdaq affiliated options exchanges,\6\ only ISE and GEMX 
currently offer MWSB and Kill Switch functionality that may be applied 
on a cross-market basis; MRX \7\ offers MWSB on a per-exchange basis 
only and MRX, Phlx, NTX Options, and NOM offer a Kill Switch protection 
on a per-exchange basis only.
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    \6\ ISE has five affiliated options exchanges, GEMX; Nasdaq MRX, 
LLC (``MRX''); Nasdaq PHLX LLC (``Phlx''); Nasdaq Texas, LLC (``NTX 
Options''); and The Nasdaq Options Market, LLC (``NOM'').
    \7\ Phlx, NTX Options and NOM do not offer MWSB.
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Proposal
    The Exchange has determined to harmonize the MWSB and Kill Switch 
functionality across the Nasdaq affiliated options exchanges, where 
applicable. Because the comparable protections, as applicable, on MRX, 
Phlx, NTX Options, and NOM operate on a per-exchange basis only, 
harmonization supports removing the cross-market functionality 
currently available between ISE \8\ and GEMX.\9\ The Exchange 
accordingly proposes to amend the MWSB at Options 3, Section 
15(a)(3)(B)(vii) to delete the sentence that presently permits Market 
Makers to request the Exchange to set the market wide parameter to 
apply across ISE and GEMX, and to amend the Kill Switch at Options 3, 
Section 17(a) and (a)(1) to delete the references that presently permit 
Members to elect cross-market application of the Kill Switch. Nasdaq 
GEMX will file a companion rule change to make conforming amendments to 
its MWSB and Kill Switch.
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    \8\ See Securities Exchange Act Release No. 87412 (October 29, 
2019), 84 FR 59423 (November 4, 2019) (SR-ISE-2019-29) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Options 3, Section 17, the Exchange's Kill Switch Risk Protection). 
See also Securities Exchange Act Release No. 73147 (September 19, 
2014), 79 FR 57639 September 25, 2014) (SR-ISE-2014-09) (Order 
Approving Proposed Rule Change Related to Market Maker Risk 
Parameters).
    \9\ See Securities Exchange Act Release No. 87413 (October 29, 
2019), 84 FR 59428 (November 4, 2019) (SR-GEMX-2019-15) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Options 3, Section 17, the Exchange's Kill Switch Risk Protection). 
See also Securities Exchange Act Release No. 77488 (March 31, 2016), 
81 FR 20021 (April 6, 2016) (SR-ISE-2014-09) (Notice of Filing of 
Proposed Rule Change Related to Market Wide Risk Protection).
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    Following the proposed amendments, all Market Makers will apply 
MWSB parameters on a per-exchange basis on ISE, and all Members will 
apply Kill Switch requests on a per-exchange basis on ISE. GEMX 
separately offers a MWSB rule at GEMX Options 3, Section 
15(a)(3)(B)(vii) and a Kill Switch rule at GEMX Options 3, Section 17, 
in each case on a per-exchange basis. Market Makers and Members will 
retain the ability to configure separate risk parameters and to submit 
separate Kill Switch requests for each Nasdaq affiliated options 
exchange on which they are authorized to trade.
Implementation
    The Exchange will announce the operative date of the proposed rule 
change in an Options Trader Alert. The Exchange will implement the 
change on or before Q2 2027.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
(6)(b)(5) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that harmonizing the MWSB and Kill Switch 
functionality across the Nasdaq affiliated options exchanges, as 
applicable, will remove impediments to and perfect the mechanism of a 
free and open market and a national market system by promoting 
consistent, transparent, and predictable risk-management functionality 
for Market Makers and Members that access more than one Nasdaq 
affiliated options exchange. Today, Market Makers and Members that 
trade across the Nasdaq affiliated options exchanges must understand 
and administer two different models for these protections: (i) a per-
exchange model on MRX for MWCB and Kill Switch and a per-exchange model 
on MRX, Phlx, NTX Options, and NOM for Kill Switch, and (ii) a hybrid 
model on ISE and GEMX that permits, but does not require, cross-market 
election for these two risk protections. The Exchange believes that 
this differential treatment is a source of operational complexity that 
does not correspond to any material difference in the underlying risk 
protection provided. Aligning ISE with the per-exchange model reduces 
the risk of Market Maker or Member confusion or inadvertent 
misconfiguration when establishing MWSB parameters or submitting Kill 
Switch requests across markets.
    The Exchange further believes that the proposed rule change will 
protect investors and the public interest by

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preserving the substantive risk protection provided by the MWSB and the 
Kill Switch on ISE. All Market Makers will remain subject to the 
mandatory MWSB requirement on ISE, and all Members will retain the 
ability to submit Kill Switch requests on ISE. Market Makers will 
continue to have discretion to establish their own parameters, subject 
to Exchange-established minimum and maximum time periods and default 
values. Members will continue to be able to submit Kill Switch requests 
for certain Identifier(s) on a user level and will continue to receive 
an automated message from the System when a Kill Switch request has 
been processed. The only substantive change is that a Market Maker's 
MWSB parameters on ISE will only apply to that Market Maker's activity 
on ISE, and a Member's Kill Switch request submitted on ISE will only 
apply to that Member's activity on ISE, in each case without 
aggregation with activity on GEMX. Market Makers and Members that wish 
to apply the corresponding protections to their activity on GEMX will 
continue to do so pursuant to GEMX Options 3, Section 15(a)(3)(B)(vii) 
(MWSB) and GEMX Options 3, Section 17 (Kill Switch).
    Removing these elections in the interest of harmonization is 
likewise consistent with the Act. Cross-market application of the MWSB 
and Kill Switch on ISE and GEMX is an available feature that Market 
Makers and Members elect (or decline) to use; withdrawing the election 
does not diminish the mandatory MWSB that applies to every ISE Market 
Maker or the Kill Switch functionality that remains available to every 
ISE Member.

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.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition because no Market Maker 
or Member will be disadvantaged relative to any other Market Maker or 
Member as a result of the proposed change. Further, Market Makers and 
Members that wish to obtain aggregated risk protection across multiple 
exchanges may continue to configure their own risk-management systems 
to that effect.
    The Exchange does not believe that the proposed rule change will 
impose any burden on inter-market competition. Rather, removing the 
cross-market election will bring ISE into greater alignment with the 
risk-protection framework generally available in the U.S. listed 
options markets and will harmonize the Exchange's MWSB and Kill Switch 
with those of the other Nasdaq affiliated options exchanges, as 
applicable.

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 \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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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    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#3042455c551d535f5d5d555e4443704355531e575f46"><span class="__cf_email__" data-cfemail="1260677e773f717d7f7f777c6661526177713c757d64">[email&#160;protected]</span></a>. Please include 
file number SR-ISE-2026-54 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-2026-54. 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-2026-54 and 
should be submitted on or before November 6, 2026.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-21130 Filed 10-15-26; 8:45 am]
BILLING CODE 8011-01-P


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