Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port Fees

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104488; File No. SR-ISE-2025-41]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend SQF Port Fees</SUBJECT> <DATE>December 22, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> 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. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> The Exchange proposes to amend its Specialized Quote Feed  <SU>3</SU> <FTREF/> or “SQF” Port pricing at Options 7, Section 7, C, “Ports and Other Services.”  <SU>4</SU> <FTREF/> <FTNT> <SU>3</SU>  “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 T="03">e.g.,</E> underlying and complex instruments); (2) system event messages ( <E T="03">e.g.,</E> start of trading hours messages and start of opening); (3) trading action messages ( <E T="03">e.g.,</E> 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. <E T="03">See</E> Options 3, Section 7(a)(i)(B). </FTNT> <FTNT> <SU>4</SU>  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. </FTNT> 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 <E T="03">https://listingcenter.nasdaq.com/rulebook/ise/rulefilings,</E> and at the principal office of the Exchange. <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> 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  <SU>5</SU> <FTREF/> to lower their SQF Port Fees. <FTNT> <SU>5</SU>  The term “Market Makers” refers to “Competitive Market Makers” and “Primary Market Makers” collectively. <E T="03">See</E> Options 1, Section 1(a)(22). Only Market Makers utilize SQF Ports for quoting purposes. </FTNT> 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). <GPOTABLE COLS="3" OPTS="L2,tp0,i1" CDEF="xs60,r100,26"> <TTITLE> </TTITLE> <CHED H="1">Tier</CHED> <CHED H="1">Percentage of total national volume</CHED> <CHED H="1">Percentage SQF port discount</CHED> <ROW> <ENT I="01">1</ENT> <ENT>less than 0.10</ENT> <ENT>0</ENT> </ROW> <ROW> <ENT I="01">2</ENT> <ENT>greater than or equal to 0.10% and less than 0.25%</ENT> <ENT>10</ENT> </ROW> <ROW> <ENT I="01">3</ENT> <ENT>greater than or equal to 0.25% and less than 0.40%</ENT> <ENT>30</ENT> </ROW> <ROW> <ENT I="01">4</ENT> <ENT>greater than or equal to 0.40%</ENT> <ENT>50</ENT> </ROW> </GPOTABLE> 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 × 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. <HD SOURCE="HD3">2. Statutory Basis</HD> The Exchange believes that its proposal is consistent with Section 6(b) of the Act, <SU>6</SU> <FTREF/> in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act, <SU>7</SU> <FTREF/> 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. <FTNT> <SU>6</SU>  15 U.S.C. 78f(b). </FTNT> <FTNT> <SU>7</SU>  15 U.S.C. 78f(b)(4) and (5). </FTNT> 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.”  <SU>8</SU> <FTREF/> <FTNT> <SU>8</SU>  Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (“Regulation NMS Adopting Release”). </FTNT> Likewise, in <E T="03">NetCoalition</E> v. <E T="03">Securities and Exchange Commission</E>   <SU>9</SU> <FTREF/> (“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. <SU>10</SU> <FTREF/> 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.”  <SU>11</SU> <FTREF/> <FTNT> <SU>9</SU>   <E T="03">NetCoalition</E> v. <E T="03">SEC,</E> 615 F.3d 525 (D.C. Cir. 2010). </FTNT> <FTNT> <SU>10</SU>   <E T="03">See NetCoalition,</E> at 534-535. </FTNT> <FTNT> <SU>11</SU>   <E T="03">Id.</E> at 537. </FTNT> 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 wh ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 23k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━