Market Maker Order Rules Amendment Proposal

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1. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the

Proposed Rule Change

1. Purpose The Exchange proposes to amend Supplementary Material .01 and .03 to Options 3, Section 11 (Auction Mechanisms), Supplementary Material .06 to Options 3, Section 13 (Price Improvement Mechanism for Crossing Transactions), Options 3A, Section 12 (FLEX Price Improvement Mechanism ("FLEX PIM" or "FLEX PIM Auction")) and Supplementary Material .02 to Options 3A, Section 13 (FLEX Solicited Order Mechanism ("FLEX SOM" or "FLEX SOM Auction")) to permit orders by Members in a Facilitation Mechanism, a SOM, a PIM, a FLEX PIM or a FLEX SOM to trade against the Agency Orders for the accounts of Market 4 Makers assigned to the options class. Cboe Exchange, Inc. ("Cboe") recently received approval to amend its rules in an identical manner. The Exchange also proposes an amendment to 5 Options 5, Section 4 relating to the handling of Immediate-or-Cancel Orders. 6

Background PIM

A PIM Auction is an electronic auction intended to provide an Agency Order with the opportunity to receive price improvement (over the National Best Bid or Offer ("NBBO")). There is no specific size requirement for a PIM Auction. Upon submitting an Agency Order into a PIM, the initiating Electronic Access Member must also submit a contra-side paired order. The initiating order guarantees that the Agency Order will receive an execution at no worse than the

Agency Orders are orders entered by a Member that are represented as agent. 4 See Securities Exchange Act Release No. 105049 (March 19, 2026), 91 FR 14057 (March 24, 2026) (SR-5 Cboe-2025-090). Immediate-or-Cancel is an order entered with a TIF of "IOC" that is to be executed in whole or in part 6 upon receipt. Any portion not so executed is to be treated as cancelled. See Supplementary Material .02(d) to Options 3, Section 7.

SR-ISE-2026-18 Page 5 of 39 auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. At the conclusion of a PIM, the Agency Order will be executed 7 in full at the best prices available, taking into consideration orders and quotes in the Exchange market and Improvement Orders. ISE's PIM is very similar to Cboe's Automated Price 8 Improvement Mechanism or "AIM." Options 3A, Section 12 describes a FLEX PIM Auction. 9 ISE's FLEX PIM is consistent with non-FLEX PIM auction behavior. Additionally, ISE's 10 FLEX PIM is similar to Cboe Rule 5.73.

SOM

Options 3, Section 11(d) and Options 3A, Section 13 contain the requirements applicable to the execution of Agency Orders using SOM. A SOM Auction is an electronic auction intended to provide a larger-sized (orders of 500 or more contracts) Agency Order with the opportunity to receive price improvement over the NBBO. Options 3, Section 13 and Options 3A, Section 12 contain the requirements applicable to the execution of orders the Electronic Access Member represents as agent using PIM. A PIM Auction is an electronic auction intended

See Options 3, Section 13(c)(2). Responses in PIM are called Improvement Orders. See also Options 3A, 7 Section 13(c)(5). The Agency Order will receive executions at multiple price levels if there is insufficient size to execute the 8 entire order at the best price. See Options 3, Section 13(d). An AIM Auction is an electronic auction intended to provide an Agency Order with the opportunity to 9 receive price improvement (over the National Best Bid or Offer ("NBBO")). Upon submitting an Agency Order into an AIM Auction, the initiating Trading Permit Holder ("Initiating TPH") must also submit a contra-side second order ("Initiating Order") for the same size as the Agency Order. The Initiating Order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. See Cboe Rule 5.37(c)(5). At the conclusion of an AIM Auction, depending on the contra-side interest (including auction responses) available, the Initiating Order may be allocated a certain percentage (or more) of the Agency Order. See Cboe Rule 5.37(e).

auction behavior, including current PIM behavior.

SR-ISE-2026-18 Page 6 of 39 to provide an Agency Order with the opportunity to receive price improvement (over the National Best Bid or Offer ("NBBO")). Upon submitting an Agency Order into a SOM, the initiating Electronic Access Member must also submit a contra-side paired order. The initiating order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. At the conclusion of a SOM, execution will depend on whether 11 there is sufficient size to execute the entire Agency Order at an improved price (or prices) as 12 the SOM is designated as all-or-none. ISE's SOM is very similar to Cboe's Solicited Auction 13 Mechanism or "SAM." Options 3A, Section 13 describes a FLEX SOM Auction. ISE's FLEX 14

See Options 3, Section 11(b)(3) and (d)(2) and Section 13(c)(2). Responses in PIM are called 11 Improvement Orders. See also Options 3A, Section 12(c)(5) and Section 13(c)(5). If at the time of execution there is insufficient size to execute the entire Agency Order at an improved price 12 (or prices), the Agency Order will be executed against the solicited order at the proposed execution price so long as, at the time of execution: (i) the execution price is equal to or better than the best bid or offer on the Exchange, and (ii) there are no Priority Customer Orders or Priority Customer Responses on the Exchange that are priced equal to the proposed execution price. If there are Priority Customer Orders or Priority Customer Responses on the Exchange on the opposite side of the Agency Order at the proposed execution price and there is sufficient size to execute the entire size of the Agency Order, the Agency Order will be executed against the bid or offer, and the solicited order will be cancelled. See Options 3, Section 11(d)(3)(A). If at the time of execution there is sufficient size to execute the entire Agency Order at an improved price (or prices), the Agency Order will be executed at the improved price(s), provided the execution price is equal to or better than the best bid or offer on the Exchange, and the solicited order will be cancelled. See Options 3, Section 11(d)(3)(B). In each case the aggregate size of all orders, quotes and Responses at each price will be used to determine whether the entire agency order can be executed at an improved price (or prices). See Options 3, Section 11(d). 13 A SAM Auction is an electronic auction intended to provide a larger-sized Agency Order with the 14 opportunity to receive price improvement over the NBBO. Upon submitting an Agency Order into a SAM Auction, the initiating Trading Permit Holder ("Initiating TPH") must also submit a contra-side second order ("Initiating Order") for the same size as the Agency Order. The Initiating Order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an See Cboe Rule auction, market participants may submit responses to trade against the Agency Order. 5.39(c)(5). At the conclusion of a SAM Auction, depending on the contra-side interest (including auction responses) available, the Initiating Order may be allocated the entire Agency Order or none of the Agency Order. See Cboe Rule 5.39(e).

SR-ISE-2026-18 Page 7 of 39 SOM is consistent with non-FLEX SOM auction behavior. Additionally, ISE's FLEX SOM is 15 similar to Cboe Rule 5.74.

Facilitation Mechanism

Options 3, Section 11(b) describes a Facilitation Mechanism which is an electronic auction intended to provide a larger-sized Agency Order with the opportunity to receive price improvement over the NBBO. Block-sized orders (fifty (50) contracts or more pursuant to Options 3, Section 11(a)) may be entered into a Facilitation Mechanism by a Member to facilitate a customer order it represents as agent. Members must be willing to execute the entire size of orders entered into the Facilitation Mechanism pursuant to Options 3, Section 11(b). Under this mechanism, a Member submits a Facilitation Order along with a matching contra-side order, and the System initiates an auction during which other participants may submit competing responses. At the conclusion of the auction, the facilitating Member is entitled to a guaranteed participation right at the final execution price, provided the Member's price matches or improves upon the best competing response. Pursuant to Options 3, Section 11(b)(4)(B), the facilitating Member may be allocated up to forty percent (40%) (or such lower percentage requested by the Member) of the original size of the facilitation order, but only after better-priced Responses, orders and quotes, as well as Primary Customer Orders and Primary Customer Responses at the facilitation price, are executed in full at such price point. The Exchange notes that Cboe does not have a Facilitation Mechanism. The ISE Facilitation Mechanism is similar to Cboe's SAM. The key differences are:

auction behavior, including current SOM behavior.

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• the ISE Facilitation Mechanism requires a minimum of 50 contracts pursuant to Options
  3, Section 11(b) while a Cboe SAM requires a minimum of 500 contracts pursuant to Cboe Rule 5.39(a)(3);

• Cboe's SAM has an all-or-none allocation at Cboe Rule 5.39(e) while the ISE

Facilitation Mechanism must be willing to execute the entire size at Options 3, Section 11(b); and

• Cboe Rule 5.39 requires that a Cboe Trading Permit Holder submit for execution an order it represents as agent ("Agency Order") against a solicited order(s) (which cannot have a Capacity F for the same EFID as the Agency Order into a SAM pursuant to Cboe Rule 5.39 wherein the Agency Order and Solicited Order cannot both be for the accounts of Priority Customers whereas the ISE Facilitation Mechanism does not have similar limitations. These aforementioned differences do not result in a different analysis as to the impact of permitting orders by Members in a Facilitation Mechanism to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange's analysis below applies to the Facilitation Mechanism as it applies to a SOM, PIM or FLEX SOM or FLEX PIM.

Proposal

Currently, Supplementary Material .01 and .03 to Options 3, Section 11, Supplementary Material .06 to Options 3, Section 13, Options 3A, Section 12, and Supplementary Material .02 to Options 3A, Section 13 prohibit orders by Members in a Facilitation Auction, SOM, PIM, FLEX PIM or FLEX SOM (collectively "Paired Auctions"), respectively, to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange notes Market Makers may not be solicited as the contra-side for complex Facilitation Auctions, SOMs and PIMs. Cboe does not similarly limit the contra-side for their complex AIM, complex SAM, complex FLEX AIM or complex FLEX SAM auctions. The Exchange's proposal would 16 therefore apply to both simple and complex orders.

SR-ISE-2026-18 Page 9 of 39 While market participants other than assigned Market Makers may contribute liquidity to these Paired Auctions as either a contra-side order or responses, assigned Market Makers, who are the primary source of liquidity on the Exchange in their assigned options, are limited in the manner in which they may provide liquidity to these Paired Auctions. Given that contra-side orders that comprise initiating orders may be allocated a percentage of the Agency Order at the conclusion of the auctions, the limited ability of assigned Market Makers to participate in a Paired Auction may reduce the execution opportunities for these liquidity providers, which execution opportunities are available to other market participants who may be solicited or submit responses. The Exchange believes that eliminating the prohibition against assigned Market Makers acting as contra in Paired Auctions would enhance price improvement opportunities in the Paired Auctions. This is particularly for retail and smaller Priority Customer orders in a PIM. Allowing assigned Market Makers registered with the Exchange to be facilitated or solicited as contras may result in exposure of more small Priority Customer orders to potential price improvement via auction processes in a PIM. The Exchange further notes that Options 3, Section 22(d) (Limitations on Order Entry) provides that, prior to or after submitting an order to ISE, a Member cannot inform another Member or any other third party of any of the terms of the order for purposes of violating this Rule. This protection will remain in place under the proposed rule change to address any potential information leakage concerns in the Paired Auctions as Options 3, Section 22 applies to the Paired Auctions. The Exchange believes that the restriction has become operationally outdated in current market structure. It is common practice that Agency Orders already involve the same Market Maker firm acting as both the contra-side (in an away Market Maker capacity) and auction

SR-ISE-2026-18 Page 10 of 39 respondent (as an assigned Market Maker registered on the Exchange). Eliminating this restriction would reduce an arbitrary and unnecessary burden and allow Market Makers to structure more efficient auction processes, which may ultimately promote greater competition among Market Makers and provide market participants with enhanced opportunities for price improvement. The Exchange is proposing to amend Supplementary Material .01 and .03 to Options 3, Section 11, Supplementary Material .06 to Options 3, Section 13, Options 3A, Section 12, and Supplementary Material .02 to Options 3A, Section 13 to permit orders for the accounts of Market Makers in an assigned options class to be solicited for the initiating order submitted for execution against an Agency Order in all options. The Exchange believes providing assigned Market Makers with an additional way to participate in Paired Auctions will expand available liquidity for these Paired Auctions, which may increase execution and price improvement opportunities, particularly for Priority Customer orders in a PIM. The Exchange notes that no similar restriction applies to crossing transactions in open outcry trading. Brokers seeking 17 liquidity to execute against customer orders on the trading floor regularly solicit assigned Floor Market Makers in the applicable class for this liquidity, as they are generally the primary source of liquidity in a class. Therefore, the Exchange believes the proposed rule change will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as contras in Paired Auctions across all options at all times.

See e.g., Nasdaq Phlx LLC ("Phlx") Options 8 Rules. 17

SR-ISE-2026-18 Page 11 of 39 In addition to Cboe, the Exchange notes the electronic price improvement auction of another options exchange currently permits orders for the accounts of appointed market-makers to be solicited as the contra orders for that auction. 18

The Exchange proposes to amend subparagraph (a) at Options 5, Section 4, Order Routing, which currently states, "Immediate-or-Cancel ("IOC") Orders will be cancelled immediately if not executed, and will not be routed." The Exchange proposes to instead state that, "Immediate-or-Cancel ("IOC") Orders will be rejected and will not be routed." While the current sentence reflects the operation of IOC Orders as provided in Supplementary Material .02(d) to Options 3, Section 7, within the context of routing, the sentence may be confusing. Options 5, Section 4 explains the manner in which various order types are handled differently for purposes of routing. An IOC Order will not rest on the order book by its definition and cannot route. The Exchange proposes to amend the language to be clear that IOC Orders are not subject to routing and therefore would be rejected. This proposed language is consistent with Supplementary Material .02(d) to Options 3, Section 7 and makes clear the treatment of IOC Orders for purposes of Options 5, Section 4.

Implementation

The Exchange proposes to implement these proposed changes on or before Q3 2026. The Exchange will issue an Options Trader Alert indicating the date the changes will be implemented.

See NYSE American, Inc. ("American") Rule 971.1NY and NYSE Pillar Options FIX Gateway Protocol 18 Specification, Section 5.2, New Cross Order. See also https://www.nyse.com/markets/american- options/cube-customer-best-execution.

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1. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act, in 19 general, and furthers the objectives of Section 6(b)(5) of the Act, in particular, in that it is 20 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 general to protect investors and the public interest. The Exchange believes the proposed rule change will promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market and a national market system because it will provide the primary liquidity providers on the Exchange with an additional way to participate in Paired Auctions. Additionally, by permitting brokers to solicit primary liquidity providers in a class for Paired Auctions, the Exchange believes brokers will be able to more efficiently locate liquidity to fill their customer orders, particularly during times of volatility. As a result, the Exchange believes the proposed rule change will likely expand available liquidity for these Paired Auctions, which may create additional execution and price improvement opportunities for market participants at all times, which ultimately benefits investors. The Exchange believes the proposed rule change is consistent with the Act because it will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as the contra-side in both types of auctions across all options. Currently, assigned Market Makers may be solicited with respect to crossing transactions on trading floors but may not be solicited with

15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(5). 20

SR-ISE-2026-18 Page 13 of 39 respect to Paired Auctions. The Exchange believes there is no reason to restrict a Market 21 Maker's ability to provide liquidity into Paired Auctions when they are able to similarly provide that liquidity in open outcry trading. As noted above, the electronic price improvement auction of another options exchange currently permits orders for the accounts of assigned market makers to be solicited as the contra-side orders for that auction. 22 In particular, the Exchange believes the proposed rule change will promote competition in Paired Auctions, including competition to initiate Paired Auctions, which will remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors. The Exchange believes the availability of this liquidity to Agency Orders will positively affect the experience for Agency Orders and overall quality of the auctions. Furthermore, the Exchange believes increasing the number of market participants available to be solicited may increase competition to provide initiating orders, which may lead to a Paired Auction being initiated at a better price. More market participants competing to provide initiating orders may lead to solicited parties providing more aggressive initial prices. The Exchange believes the ability of all market participants, including assigned Market Makers that did not submit an initiating order, to become the contra-side to a Paired Auction will continue to provide competition for executions against Agency Orders. The Exchange believes any risk that assigned Market Makers may misuse the nonpublic information of an upcoming Paired Auction is de minimis. Supplementary Material .03 to Options 3, Section 22 provides that the exposure requirement applicable to principal transactions

Phlx's trading floor does not have a similar restriction. See Phlx Options 8 Rules. 21 See supra notes 5 and 18. 22

SR-ISE-2026-18 Page 14 of 39 in Options 3, Section 22(b) applies to the entry of orders with knowledge that there is a pre- 23 existing unexecuted agency, proprietary, or solicited order on the Exchange. Members may demonstrate that orders were entered without knowledge by providing evidence that effective information barriers between the persons, business units, and/or systems entering the orders onto the Exchange were in existence at the time the orders were entered. Such information barriers must be fully documented and provided to the Exchange upon request. Further, the Exchange notes that Supplementary Material .01 to Options 3, Section 13 prohibits a pattern or practice of submitting orders or quotes or the purpose of disrupting or manipulating PIM Auctions, and Options 9, Section 9 requires Members to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by Members and their associated persons. Finally, Options 3, Section 22(d) (Limitations on Order Entry) provides that, prior to or after submitting an order to ISE, a Member cannot inform another Member or any other third party of any of the terms of the order for purposes of violating the Rule. The Exchange believes the proposed rule change is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because it will permit orders for accounts of assigned Market Makers to be solicited in the same manner as orders for the accounts of all other market participants. Currently, all market participants other than assigned

Electronic Access Members may not execute as principal orders they represent as agent unless (i) agency 23 orders are first exposed on the Exchange for at least one (1) second, (ii) the Electronic Access Member has been bidding or offering on the Exchange for at least one (1) second prior to receiving an agency order that is executable against such bid or offer, or (iii) the Member utilizes the Facilitation Mechanism pursuant to Options 3, Section 11(b) and (c); (iv) the Member utilizes the Price Improvement Mechanism for Crossing Transactions pursuant to Options 3, Section 13; (v) the Member utilizes Qualified Contingent Cross Orders pursuant to Options 3, Section 12(c) and (d); (vi) the Member utilizes a Customer Cross Order pursuant to Options 3, Sections 12(a) or (b); or (vii) the Member utilizes a Complex Order Exposure pursuant to Supplementary Material .01 to Options 3, Section 14. Electronic Access Members may not execute as principal orders they represent as agent within the Solicitation Mechanism pursuant to Options 3, Section 11(d) and (e). See Options 3, Section 22(b).

SR-ISE-2026-18 Page 15 of 39 Market Makers may be solicited as the contra-side and submit responses in Paired Auctions for all options. Given the additional costs and obligations associated with being an assigned Market Maker, the Exchange does not believe these Market Makers should have fewer execution opportunities with respect to volume submitted for execution through Paired Auctions and not for electronic execution against interest in the book. The Exchange believes the proposed rule change will provide all Market Makers on the Exchange with the same ability to participate in Paired Auctions in all options at all times, which may further increase execution and price improvement opportunities for market participants. Cboe does not have an auction equivalent to the Facilitation Mechanism, however the Exchange's Facilitation Mechanism is similar to Cboe's SAM. The key differences noted in the Purpose section do not differentiate the Facilitation Mechanism for purposes of permitting orders by Members in a Facilitation Mechanism to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange's aforementioned analysis applies to the Facilitation Mechanism as it applies to a SOM, PIM or FLEX SOM or FLEX PIM in the same manner as it applies to the Paired Auctions.

The Exchange's proposal to amend Options 5, Section 4(a) is consistent with the Act because it will bring greater clarity to the current rule text by clearly explaining that IOC Orders will not route.

1. 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.

intramarket competition that is not necessary or appropriate in furtherance of the purposes of the

SR-ISE-2026-18 Page 16 of 39 Act because it provides the same execution opportunities in Paired Auctions to assigned Market Makers that are currently available to all other market participants. Additionally, the proposed rule change will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as a contra-side in auctions across all options.

intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates to orders submitted into Paired Auctions on the Exchange. Additionally, the Exchange notes that, in addition to Cboe, the rules of at least one other options exchange permits orders for the accounts of assigned market makers to be solicited as contra-side orders for that exchange's electronic price improvement auction. The Exchange believes the proposed 24 rule change may improve price competition within Paired Auctions, because the primary liquidity providers will be able to increase participation in Paired Auctions.

The Exchange's proposal to amend Options 5, Section 4(a) does not impose an undue burden on competition, rather the proposal clarifies the current rule text.

1. 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.

1. Extension of Time Period for Commission Action

Not Applicable.

See supra note 18. 24

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1. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for Accelerated Effectiveness Pursuant to Section 19(b)(2) The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of 25 the Act and Rule 19b-4(f)(6) thereunder in that it effects a change that: (i) does not 26 significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) by its terms, does not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange does not believe that its proposal significantly affects the protection of investors or the public interest because it will provide the primary liquidity providers on the Exchange with an additional way to participate in Paired Auctions. Additionally, by permitting brokers to solicit primary liquidity providers in a class for Paired Auctions, the Exchange believes brokers will be able to more efficiently locate liquidity to fill their customer orders, particularly during times of volatility. As a result, the Exchange believes the proposed rule change will likely expand available liquidity for these auctions, which may create additional execution and price improvement opportunities for customers at all times, which ultimately benefits investors. The Exchange's proposal to amend Options 5, Section 4(a) does not significantly affect the protection of investors or the public interest because IOC Orders do not route today and would be rejected. The proposal will make clear the current operation of these orders with respect to routing. Furthermore, the Exchange believes that the proposed rule change does not impose any significant burden on competition because it provides the same execution opportunities in Paired

15 U.S.C. 78s(b)(3)(A)(iii). 25 17 CFR 240.19b-4(f)(6). 26

SR-ISE-2026-18 Page 18 of 39 Auctions to assigned Market Makers that are currently available to all other market participants. Additionally, the proposed rule change will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as the contra-side in Paired Auctions across all options. The Exchange's proposal to amend Options 5, Section 4(a) does not impose any significant burden on competition because no Member may route an IOC Order. Furthermore, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to give the 27 Commission written notice of its intent to file a proposed rule change under that subsection at least five business days prior to the date of filing, or such shorter time as designated by the Commission. The Exchange has provided such notice. 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.

1. Proposed Rule Change Based on Rules of Another Self-Regulatory Organization or of the Commission Cboe recently received approval to amend its rules in an identical manner. While Cboe 28 does not have a Facilitation Mechanism, the Exchange's analysis applies to the Facilitation Mechanism as it applies to a SOM, PIM or FLEX SOM or FLEX PIM. The ISE Facilitation Mechanism at Options 3, Section 11(b) is similar to Cboe's SAM at Cboe Rule 5.39.

17 CFR 240.19b-4(f)(6)(iii). 27

SR-ISE-2026-18 Page 19 of 39 Cboe does not limit the contra-side for their complex AIM, complex SAM, complex FLEX AIM or complex FLEX SAM auctions. Currently, ISE Market Makers may not be 29 solicited as the contra-side for complex Facilitation Auctions, complex SOMs and complex PIMs. The Exchange's proposal would apply to both simple and complex orders.

1. Security-Based Swap Submissions Filed Pursuant to Section 3C of the Act

Not applicable.

1. Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and

Settlement Supervision Act Not applicable.

1. Exhibits
2. Notice of Proposed Rule Change for publication in the Federal Register.
3. Text of the proposed rule change.

See id. 29

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EXHIBIT 1

SECURITIES AND EXCHANGE COMMISSION [Release No. 34 ; File No. SR-ISE-2026-18] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Various Auction Mechanisms

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"), and Rule 1 19b-4 thereunder, notice is hereby given that on April 13, 2026, Nasdaq ISE, LLC ("ISE" or 2 "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.

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to permit orders for the accounts of Market Makers assigned to the options class to be solicited for the initiating order submitted for execution against an 3 agency order into a Facilitation Mechanism, the Solicited Order Mechanism ("SOM") or a Price Improvement Mechanism ("PIM") as well as a FLEX PIM or FLEX SOM. The text of the proposed rule change is available on the Exchange's Website at https://listingcenter.nasdaq.com/rulebook/ise/rulefilings, and at the principal office of the Exchange.

15 U.S.C. 78s(b)(1). 1 17 CFR 240.19b-4. 2 The "initiating order" is the order comprised of principal interest or a solicited order(s) submitted to trade 3 against the order the submitting Electronic Access Member represents as agent (the "Agency Order").

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1. 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.

2. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis
   for, the Proposed Rule Change

3. Purpose
   The Exchange proposes to amend Supplementary Material .01 and .03 to Options 3, Section 11 (Auction Mechanisms), Supplementary Material .06 to Options 3, Section 13 (Price Improvement Mechanism for Crossing Transactions), Options 3A, Section 12 (FLEX Price Improvement Mechanism ("FLEX PIM" or "FLEX PIM Auction")) and Supplementary Material .02 to Options 3A, Section 13 (FLEX Solicited Order Mechanism ("FLEX SOM" or "FLEX SOM Auction")) to permit orders by Members in a Facilitation Mechanism, a SOM, a PIM, a FLEX PIM or a FLEX SOM to trade against the Agency Orders for the accounts of Market 4 Makers assigned to the options class. Cboe Exchange, Inc. ("Cboe") recently received approval to amend its rules in an identical manner. The Exchange also proposes an amendment to 5 Options 5, Section 4 relating to the handling of Immediate-or-Cancel Orders. 6

Agency Orders are orders entered by a Member that are represented as agent. 4 See Securities Exchange Act Release No. 105049 (March 19, 2026), 91 FR 14057 (March 24, 2026) (SR-5 Cboe-2025-090). Immediate-or-Cancel is an order entered with a TIF of "IOC" that is to be executed in whole or in part 6 upon receipt. Any portion not so executed is to be treated as cancelled. See Supplementary Material .02(d) to Options 3, Section 7.

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Background PIM

A PIM Auction is an electronic auction intended to provide an Agency Order with the opportunity to receive price improvement (over the National Best Bid or Offer ("NBBO")). There is no specific size requirement for a PIM Auction. Upon submitting an Agency Order into a PIM, the initiating Electronic Access Member must also submit a contra-side paired order. The initiating order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. At the conclusion of a PIM, the Agency Order will be executed 7 in full at the best prices available, taking into consideration orders and quotes in the Exchange market and Improvement Orders. ISE's PIM is very similar to Cboe's Automated Price 8 Improvement Mechanism or "AIM." Options 3A, Section 12 describes a FLEX PIM Auction. 9 ISE's FLEX PIM is consistent with non-FLEX PIM auction behavior. Additionally, ISE's 10 FLEX PIM is similar to Cboe Rule 5.73.

See Options 3, Section 13(c)(2). Responses in PIM are called Improvement Orders. See also Options 3A, 7 Section 13(c)(5). The Agency Order will receive executions at multiple price levels if there is insufficient size to execute the 8 entire order at the best price. See Options 3, Section 13(d). An AIM Auction is an electronic auction intended to provide an Agency Order with the opportunity to 9 receive price improvement (over the National Best Bid or Offer ("NBBO")). Upon submitting an Agency Order into an AIM Auction, the initiating Trading Permit Holder ("Initiating TPH") must also submit a contra-side second order ("Initiating Order") for the same size as the Agency Order. The Initiating Order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. See Cboe Rule 5.37(c)(5). At the conclusion of an AIM Auction, depending on the contra-side interest (including auction responses) available, the Initiating Order may be allocated a certain percentage (or more) of the Agency Order. See Cboe Rule 5.37(e).

auction behavior, including current PIM behavior.

SR-ISE-2026-18 Page 23 of 39

SOM

Options 3, Section 11(d) and Options 3A, Section 13 contain the requirements applicable to the execution of Agency Orders using SOM. A SOM Auction is an electronic auction intended to provide a larger-sized (orders of 500 or more contracts) Agency Order with the opportunity to receive price improvement over the NBBO. Options 3, Section 13 and Options 3A, Section 12 contain the requirements applicable to the execution of orders the Electronic Access Member represents as agent using PIM. A PIM Auction is an electronic auction intended to provide an Agency Order with the opportunity to receive price improvement (over the National Best Bid or Offer ("NBBO")). Upon submitting an Agency Order into a SOM, the initiating Electronic Access Member must also submit a contra-side paired order. The initiating order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an auction, market participants may submit responses to trade against the Agency Order. At the conclusion of a SOM, execution will depend on whether 11 there is sufficient size to execute the entire Agency Order at an improved price (or prices) as 12 the SOM is designated as all-or-none. ISE's SOM is very similar to Cboe's Solicited Auction 13

See Options 3, Section 11(b)(3) and (d)(2) and Section 13(c)(2). Responses in PIM are called 11 Improvement Orders. See also Options 3A, Section 12(c)(5) and Section 13(c)(5). If at the time of execution there is insufficient size to execute the entire Agency Order at an improved price 12 (or prices), the Agency Order will be executed against the solicited order at the proposed execution price so long as, at the time of execution: (i) the execution price is equal to or better than the best bid or offer on the Exchange, and (ii) there are no Priority Customer Orders or Priority Customer Responses on the Exchange that are priced equal to the proposed execution price. If there are Priority Customer Orders or Priority Customer Responses on the Exchange on the opposite side of the Agency Order at the proposed execution price and there is sufficient size to execute the entire size of the Agency Order, the Agency Order will be executed against the bid or offer, and the solicited order will be cancelled. See Options 3, Section 11(d)(3)(A). If at the time of execution there is sufficient size to execute the entire Agency Order at an improved price (or prices), the Agency Order will be executed at the improved price(s), provided the execution price is equal to or better than the best bid or offer on the Exchange, and the solicited order will be cancelled. See Options 3, Section 11(d)(3)(B). In each case the aggregate size of all orders, quotes and Responses at each price will be used to determine whether the entire agency order can be executed at an improved price (or prices). See Options 3, Section 11(d). 13

SR-ISE-2026-18 Page 24 of 39 Mechanism or "SAM." Options 3A, Section 13 describes a FLEX SOM Auction. ISE's FLEX 14 SOM is consistent with non-FLEX SOM auction behavior. Additionally, ISE's FLEX SOM is 15 similar to Cboe Rule 5.74.

Facilitation Mechanism

Options 3, Section 11(b) describes a Facilitation Mechanism which is an electronic auction intended to provide a larger-sized Agency Order with the opportunity to receive price improvement over the NBBO. Block-sized orders (fifty (50) contracts or more pursuant to Options 3, Section 11(a)) may be entered into a Facilitation Mechanism by a Member to facilitate a customer order it represents as agent. Members must be willing to execute the entire size of orders entered into the Facilitation Mechanism pursuant to Options 3, Section 11(b). Under this mechanism, a Member submits a Facilitation Order along with a matching contra-side order, and the System initiates an auction during which other participants may submit competing responses. At the conclusion of the auction, the facilitating Member is entitled to a guaranteed participation right at the final execution price, provided the Member's price matches or improves upon the best competing response. Pursuant to Options 3, Section 11(b)(4)(B), the facilitating Member may be allocated up to forty percent (40%) (or such lower percentage requested by the

A SAM Auction is an electronic auction intended to provide a larger-sized Agency Order with the 14 opportunity to receive price improvement over the NBBO. Upon submitting an Agency Order into a SAM Auction, the initiating Trading Permit Holder ("Initiating TPH") must also submit a contra-side second order ("Initiating Order") for the same size as the Agency Order. The Initiating Order guarantees that the Agency Order will receive an execution at no worse than the auction price. Upon commencement of an See Cboe Rule auction, market participants may submit responses to trade against the Agency Order. 5.39(c)(5). At the conclusion of a SAM Auction, depending on the contra-side interest (including auction responses) available, the Initiating Order may be allocated the entire Agency Order or none of the Agency Order. See Cboe Rule 5.39(e).

auction behavior, including current SOM behavior.

SR-ISE-2026-18 Page 25 of 39 Member) of the original size of the facilitation order, but only after better-priced Responses, orders and quotes, as well as Primary Customer Orders and Primary Customer Responses at the facilitation price, are executed in full at such price point. The Exchange notes that Cboe does not have a Facilitation Mechanism. The ISE Facilitation Mechanism is similar to Cboe's SAM. The key differences are:

• the ISE Facilitation Mechanism requires a minimum of 50 contracts pursuant to Options
  3, Section 11(b) while a Cboe SAM requires a minimum of 500 contracts pursuant to Cboe Rule 5.39(a)(3);

• Cboe's SAM has an all-or-none allocation at Cboe Rule 5.39(e) while the ISE

Facilitation Mechanism must be willing to execute the entire size at Options 3, Section 11(b); and

• Cboe Rule 5.39 requires that a Cboe Trading Permit Holder submit for execution an order it represents as agent ("Agency Order") against a solicited order(s) (which cannot have a Capacity F for the same EFID as the Agency Order into a SAM pursuant to Cboe Rule 5.39 wherein the Agency Order and Solicited Order cannot both be for the accounts of Priority Customers whereas the ISE Facilitation Mechanism does not have similar limitations. These aforementioned differences do not result in a different analysis as to the impact of permitting orders by Members in a Facilitation Mechanism to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange's analysis below applies to the Facilitation Mechanism as it applies to a SOM, PIM or FLEX SOM or FLEX PIM.

Proposal

Currently, Supplementary Material .01 and .03 to Options 3, Section 11, Supplementary Material .06 to Options 3, Section 13, Options 3A, Section 12, and Supplementary Material .02 to Options 3A, Section 13 prohibit orders by Members in a Facilitation Auction, SOM, PIM, FLEX PIM or FLEX SOM (collectively "Paired Auctions"), respectively, to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange notes Market Makers may not be solicited as the contra-side for complex Facilitation Auctions,

SR-ISE-2026-18 Page 26 of 39 SOMs and PIMs. Cboe does not similarly limit the contra-side for their complex AIM, complex SAM, complex FLEX AIM or complex FLEX SAM auctions. The Exchange's proposal would 16 therefore apply to both simple and complex orders. While market participants other than assigned Market Makers may contribute liquidity to these Paired Auctions as either a contra-side order or responses, assigned Market Makers, who are the primary source of liquidity on the Exchange in their assigned options, are limited in the manner in which they may provide liquidity to these Paired Auctions. Given that contra-side orders that comprise initiating orders may be allocated a percentage of the Agency Order at the conclusion of the auctions, the limited ability of assigned Market Makers to participate in a Paired Auction may reduce the execution opportunities for these liquidity providers, which execution opportunities are available to other market participants who may be solicited or submit responses. The Exchange believes that eliminating the prohibition against assigned Market Makers acting as contra in Paired Auctions would enhance price improvement opportunities in the Paired Auctions. This is particularly for retail and smaller Priority Customer orders in a PIM. Allowing assigned Market Makers registered with the Exchange to be facilitated or solicited as contras may result in exposure of more small Priority Customer orders to potential price improvement via auction processes in a PIM. The Exchange further notes that Options 3, Section 22(d) (Limitations on Order Entry) provides that, prior to or after submitting an order to ISE, a Member cannot inform another Member or any other third party of any of the terms of the order for purposes of violating this Rule. This protection will remain in place under the proposed rule

SR-ISE-2026-18 Page 27 of 39 change to address any potential information leakage concerns in the Paired Auctions as Options 3, Section 22 applies to the Paired Auctions. The Exchange believes that the restriction has become operationally outdated in current market structure. It is common practice that Agency Orders already involve the same Market Maker firm acting as both the contra-side (in an away Market Maker capacity) and auction respondent (as an assigned Market Maker registered on the Exchange). Eliminating this restriction would reduce an arbitrary and unnecessary burden and allow Market Makers to structure more efficient auction processes, which may ultimately promote greater competition among Market Makers and provide market participants with enhanced opportunities for price improvement. The Exchange is proposing to amend Supplementary Material .01 and .03 to Options 3, Section 11, Supplementary Material .06 to Options 3, Section 13, Options 3A, Section 12, and Supplementary Material .02 to Options 3A, Section 13 to permit orders for the accounts of Market Makers in an assigned options class to be solicited for the initiating order submitted for execution against an Agency Order in all options. The Exchange believes providing assigned Market Makers with an additional way to participate in Paired Auctions will expand available liquidity for these Paired Auctions, which may increase execution and price improvement opportunities, particularly for Priority Customer orders in a PIM. The Exchange notes that no similar restriction applies to crossing transactions in open outcry trading. Brokers seeking 17 liquidity to execute against customer orders on the trading floor regularly solicit assigned Floor Market Makers in the applicable class for this liquidity, as they are generally the primary source of liquidity in a class. Therefore, the Exchange believes the proposed rule change will further

See e.g., Nasdaq Phlx LLC ("Phlx") Options 8 Rules. 17

SR-ISE-2026-18 Page 28 of 39 align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as contras in Paired Auctions across all options at all times. In addition to Cboe, the Exchange notes the electronic price improvement auction of another options exchange currently permits orders for the accounts of appointed market-makers to be solicited as the contra orders for that auction. 18

The Exchange proposes to amend subparagraph (a) at Options 5, Section 4, Order Routing, which currently states, "Immediate-or-Cancel ("IOC") Orders will be cancelled immediately if not executed, and will not be routed." The Exchange proposes to instead state that, "Immediate-or-Cancel ("IOC") Orders will be rejected and will not be routed." While the current sentence reflects the operation of IOC Orders as provided in Supplementary Material .02(d) to Options 3, Section 7, within the context of routing, the sentence may be confusing. Options 5, Section 4 explains the manner in which various order types are handled differently for purposes of routing. An IOC Order will not rest on the order book by its definition and cannot route. The Exchange proposes to amend the language to be clear that IOC Orders are not subject to routing and therefore would be rejected. This proposed language is consistent with Supplementary Material .02(d) to Options 3, Section 7 and makes clear the treatment of IOC Orders for purposes of Options 5, Section 4.

See NYSE American, Inc. ("American") Rule 971.1NY and NYSE Pillar Options FIX Gateway Protocol 18 Specification, Section 5.2, New Cross Order. See also https://www.nyse.com/markets/american- options/cube-customer-best-execution.

SR-ISE-2026-18 Page 29 of 39

Implementation

The Exchange proposes to implement these proposed changes on or before Q3 2026. The Exchange will issue an Options Trader Alert indicating the date the changes will be implemented.

1. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act, in 19 general, and furthers the objectives of Section 6(b)(5) of the Act, in particular, in that it is 20 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 general to protect investors and the public interest. The Exchange believes the proposed rule change will promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market and a national market system because it will provide the primary liquidity providers on the Exchange with an additional way to participate in Paired Auctions. Additionally, by permitting brokers to solicit primary liquidity providers in a class for Paired Auctions, the Exchange believes brokers will be able to more efficiently locate liquidity to fill their customer orders, particularly during times of volatility. As a result, the Exchange believes the proposed rule change will likely expand available liquidity for these Paired Auctions, which may create additional execution and price improvement opportunities for market participants at all times, which ultimately benefits investors.

15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(5). 20

SR-ISE-2026-18 Page 30 of 39 The Exchange believes the proposed rule change is consistent with the Act because it will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as the contra-side in both types of auctions across all options. Currently, assigned Market Makers may be solicited with respect to crossing transactions on trading floors but may not be solicited with respect to Paired Auctions. The Exchange believes there is no reason to restrict a Market 21 Maker's ability to provide liquidity into Paired Auctions when they are able to similarly provide that liquidity in open outcry trading. As noted above, the electronic price improvement auction of another options exchange currently permits orders for the accounts of assigned market makers to be solicited as the contra-side orders for that auction. 22 In particular, the Exchange believes the proposed rule change will promote competition in Paired Auctions, including competition to initiate Paired Auctions, which will remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors. The Exchange believes the availability of this liquidity to Agency Orders will positively affect the experience for Agency Orders and overall quality of the auctions. Furthermore, the Exchange believes increasing the number of market participants available to be solicited may increase competition to provide initiating orders, which may lead to a Paired Auction being initiated at a better price. More market participants competing to provide initiating orders may lead to solicited parties providing more aggressive initial prices. The Exchange believes the ability of all market participants, including assigned

Phlx's trading floor does not have a similar restriction. See Phlx Options 8 Rules. 21 See supra notes 5 and 18. 22

SR-ISE-2026-18 Page 31 of 39 Market Makers that did not submit an initiating order, to become the contra-side to a Paired Auction will continue to provide competition for executions against Agency Orders. The Exchange believes any risk that assigned Market Makers may misuse the nonpublic information of an upcoming Paired Auction is de minimis. Supplementary Material .03 to Options 3, Section 22 provides that the exposure requirement applicable to principal transactions in Options 3, Section 22(b) applies to the entry of orders with knowledge that there is a pre- 23 existing unexecuted agency, proprietary, or solicited order on the Exchange. Members may demonstrate that orders were entered without knowledge by providing evidence that effective information barriers between the persons, business units, and/or systems entering the orders onto the Exchange were in existence at the time the orders were entered. Such information barriers must be fully documented and provided to the Exchange upon request. Further, the Exchange notes that Supplementary Material .01 to Options 3, Section 13 prohibits a pattern or practice of submitting orders or quotes or the purpose of disrupting or manipulating PIM Auctions, and Options 9, Section 9 requires Members to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by Members and their associated persons. Finally, Options 3, Section 22(d) (Limitations on Order Entry) provides that, prior to or after submitting an order to ISE, a Member cannot inform

Electronic Access Members may not execute as principal orders they represent as agent unless (i) agency 23 orders are first exposed on the Exchange for at least one (1) second, (ii) the Electronic Access Member has been bidding or offering on the Exchange for at least one (1) second prior to receiving an agency order that is executable against such bid or offer, or (iii) the Member utilizes the Facilitation Mechanism pursuant to Options 3, Section 11(b) and (c); (iv) the Member utilizes the Price Improvement Mechanism for Crossing Transactions pursuant to Options 3, Section 13; (v) the Member utilizes Qualified Contingent Cross Orders pursuant to Options 3, Section 12(c) and (d); (vi) the Member utilizes a Customer Cross Order pursuant to Options 3, Sections 12(a) or (b); or (vii) the Member utilizes a Complex Order Exposure pursuant to Supplementary Material .01 to Options 3, Section 14. Electronic Access Members may not execute as principal orders they represent as agent within the Solicitation Mechanism pursuant to Options 3, Section 11(d) and (e). See Options 3, Section 22(b).

SR-ISE-2026-18 Page 32 of 39 another Member or any other third party of any of the terms of the order for purposes of violating the Rule. The Exchange believes the proposed rule change is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because it will permit orders for accounts of assigned Market Makers to be solicited in the same manner as orders for the accounts of all other market participants. Currently, all market participants other than assigned Market Makers may be solicited as the contra-side and submit responses in Paired Auctions for all options. Given the additional costs and obligations associated with being an assigned Market Maker, the Exchange does not believe these Market Makers should have fewer execution opportunities with respect to volume submitted for execution through Paired Auctions and not for electronic execution against interest in the book. The Exchange believes the proposed rule change will provide all Market Makers on the Exchange with the same ability to participate in Paired Auctions in all options at all times, which may further increase execution and price improvement opportunities for market participants. Cboe does not have an auction equivalent to the Facilitation Mechanism, however the Exchange's Facilitation Mechanism is similar to Cboe's SAM. The key differences noted in the Purpose section do not differentiate the Facilitation Mechanism for purposes of permitting orders by Members in a Facilitation Mechanism to trade against the Agency Orders for the accounts of Market Makers assigned to the options class. The Exchange's aforementioned analysis applies to the Facilitation Mechanism as it applies to a SOM, PIM or FLEX SOM or FLEX PIM in the same manner as it applies to the Paired Auctions.

SR-ISE-2026-18 Page 33 of 39

The Exchange's proposal to amend Options 5, Section 4(a) is consistent with the Act because it will bring greater clarity to the current rule text by clearly explaining that IOC Orders will not route.

1. 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.

intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it provides the same execution opportunities in Paired Auctions to assigned Market Makers that are currently available to all other market participants. Additionally, the proposed rule change will further align open outcry and Paired Auctions and the execution and price improvement opportunities available in both auctions by permitting the same participants to be solicited as a contra-side in auctions across all options.

intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates to orders submitted into Paired Auctions on the Exchange. Additionally, the Exchange notes that, in addition to Cboe, the rules of at least one other options exchange permits orders for the accounts of assigned market makers to be solicited as contra-side orders for that exchange's electronic price improvement auction. The Exchange believes the proposed 24 rule change may improve price competition within Paired Auctions, because the primary liquidity providers will be able to increase participation in Paired Auctions.

See supra note 18. 24

SR-ISE-2026-18 Page 34 of 39

The Exchange's proposal to amend Options 5, Section 4(a) does not impose an undue burden on competition, rather the proposal clarifies the current rule text.

1. 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.

1. 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 and subparagraph (f)(6) of Rule 19b-4 thereunder. 25 26 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.

15 U.S.C. 78s(b)(3)(A)(iii). 25 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the 26 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.

SR-ISE-2026-18 Page 35 of 39

1. 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:

• Use the Commission's internet comment form
  (https://www.sec.gov/rules/sro.shtml); or

• Send an email to rule-comments@sec.gov. Please include file number

SR-ISE-2026-18 on the subject line. Paper Comments:

• 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-2026-18. 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 (https://www.sec.gov/rules/sro.shtml). 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-2026-18 and should be submitted on or before [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL

REGISTER].

SR-ISE-2026-18 Page 36 of 39 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 27

Sherry R. Haywood, Assistant Secretary.

17 CFR 200.30-3(a)(12). 27

SR-ISE-2026-18 Page 37 of 39

EXHIBIT 5 New text is underlined; deleted text is in brackets. NASDAQ ISE, LLC Rules

• ---

  Options Rules

• ---

  Options 3 Options Trading Rules

• ---

  Section 11. Auction Mechanisms

• ---

  Supplementary Material to Options 3, Section 11

.01 It will be a violation of a Member's duty of best execution to its customer if it were to cancel a facilitation order to avoid execution of the order at a better price. The availability of the Facilitation Mechanism does not alter a Member's best execution duty to get the best price for its customer. Accordingly, while facilitation orders can be canceled during the time period given for the entry of Responses, if a Member were to cancel a facilitation order when there was a superior price available on the Exchange and subsequently re-enter the facilitation order at the same facilitation price after the better price was no longer available without attempting to obtain that better price for its customer, there would be a presumption that the Member did so to avoid execution of its customer order in whole or in part by other brokers at the better price. [Additionally, any solicited contra orders entered by Members into the Facilitation Mechanism to trade against Agency Orders may not be for the account of a Nasdaq ISE Market Maker that is assigned to the options class.] .02 Reserved. .03 Under paragraph (d) above, Members may enter contra orders that are solicited. The Solicited Order Mechanism provides a facility for Members that locate liquidity for their customer orders. Members may not use the Solicited Order Mechanism to circumvent Exchange Options 3, Section 22(b) limiting principal transactions. This may include, but is not limited to, Members entering contra orders that are solicited from (1) affiliated broker-dealers, or (2) broker-dealers with which the Member has an arrangement that allows the Member to realize similar economic benefits from the solicited transaction as it would achieve by executing the customer order in whole or in part as principal. [Additionally, any solicited contra orders entered by Members to trade against Agency Orders may not be for the account of a Nasdaq ISE Market Maker that is assigned to the options class.]

• *** * * ***

SR-ISE-2026-18 Page 38 of 39

Section 13. Price Improvement Mechanism for Crossing Transactions

• ---

  Supplementary Material to Options 3, Section 13

• ---

  .06 Reserved.[Any solicited Counter-Side Orders submitted by an Electronic Access Member to trade against Agency Orders may not be for the account of a Nasdaq ISE Market Maker assigned to the options class.]

• ---

  Options 3A FLEX Options Trading Rules

• ---

  Section 12. FLEX Price Improvement Mechanism ("FLEX PIM" or "FLEX PIM Auction")

A Member (the "Initiating Member") may electronically submit for execution an order (which may be a simple or complex order) it represents as agent ("Agency Order") against principal interest or a solicited order(s) (except, if the Agency Order is a simple order, for an order for the account of any FLEX Market Maker with an appointment in the applicable FLEX Option class on the Exchange) , provided it submits the Agency Order for electronic execution into a FLEX PIM Auction pursuant to this Rule.

• ---

  Section 13. FLEX Solicited Order Mechanism ("FLEX SOM" or "FLEX SOM Auction")

• ---

  Supplementary Material to Options 3A, Section 13

• ---

  .02 Under this Rule, Initiating Members may enter contra-side orders that are solicited. FLEX SOM provides a facility for Members that locate liquidity for their customer orders. Members may not use the FLEX SOM Auction to circumvent Options 3, Section 22(b) limiting principal transactions. This may include, but is not limited to, Members entering contra-side orders that are solicited from (1) affiliated broker-dealers, or (2) broker-dealers with which the Member has an arrangement that allows the Member to realize similar economic benefits from the solicited transaction as it would achieve by executing the customer order in whole or in part as principal. [Additionally, any solicited contra-side orders entered by Members to trade against Agency Orders may not be for the account of an Exchange Market Maker that is assigned to the options class.]

• ---

  Options 5 Order Protection and Locked and Crossed Markets

SR-ISE-2026-18 Page 39 of 39

• *** * * *** Section 4. Order Routing

(a) The Exchange offers two routing strategies, FIND and SRCH. Each of these routing strategies will be explained in more detail below. An order may in the alternative be marked Do Not Route or "DNR". The Exchange notes that for purposes of this Rule the System will route FIND and SRCH Orders with no other contingencies. Immediate-or-Cancel ("IOC") Orders will be rejected [cancelled immediately if not executed, ]and will not be routed. The System checks the order book for available contracts for potential execution against the FIND or SRCH Orders. After the System checks the order book for available contracts, orders are sent to other available market centers for potential execution. When checking the order book, the System will seek to execute at the price at which it would send the order to an away market. For purposes of this Rule, a Route Timer shall not exceed one second and shall begin at the time orders are accepted into the System, and the System will consider whether an order can be routed at the conclusion of each Route Timer. Finally, for purposes of this Rule, "exposure" or "exposing" an order shall mean a notification sent to Members with the price, size, and side of interest that is available for execution. Exposure notifications will be sent to Members in accordance with the routing procedures described in Options 5, Section 4(a)(iii) below except if an incoming order is joining an already established BBO price when the ABBO is locked or crossed with the BBO, in which case such order will join the established BBO price and no exposure notification will be sent. An order exposure will be sent if the order size is modified. For purposes of this Rule, the Exchange's opening process is governed by Options 3, Section 8 and includes an opening after a trading halt ("Opening Process"). Routing options may be combined with all available order types and times-in-force, with the exception of order types and times-in-force whose terms are inconsistent with the terms of a particular routing option. The order routing process shall be available to Members from 9:30 a.m. Eastern Time until market close and shall route orders as described below. Members can designate orders as either available for routing or not available for routing. All routing of orders shall comply with Options 5, Options Order Protection and Locked and Crossed Market Rules.

• *** * * ***