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 May 29, 2026, Nasdaq ISE, LLC (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to permit Complex Orders to trade in non-conforming and conforming ratios both on the Complex Order Book and in various auctions.

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.

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 permit Complex Orders to trade in non-conforming and conforming ratios ^[3] both on the Complex Order Book and in various auctions. This proposed rule change is substantially similar to SR-MIAX-2023-01.^[4]

Background

The Exchange currently permits only a Complex Options Strategy where the ratio between the sizes of the options ( printed page 35291) components of a Complex Order is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00).^[5] Additionally, today, the Exchange permits only a Stock-Option Strategy and Stock-Complex Strategy with a ratio no greater than eight-to-one (8.00) where the ratio represents the total number of units of the underlying stock or convertible security in the option leg(s) to the total number of units of the underlying stock or convertible security in the stock leg.^[6]

Proposal

At this time, the Exchange proposes to adopt a definition for “non-conforming ratio” in Options 1, Section 1, Definitions, that is identical to MIAX Rule 518(a)(16).^[7] Today, the Exchange defines “conforming ratio” at Options 1, Section 1(a)(13). Specifically, the Exchange proposes to state at Options 1, Section 1(a)(25),

The term “non-conforming ratio” is where the ratio between the sizes of the components of a complex order comprised solely of options is greater than three-to-one (3.00) or less than one-to-three (.333); where one component of the complex order is the underlying security (stock or ETF) or security convertible into the underlying stock (“convertible security”), the ratio between the option component(s) and the underlying security (stock or ETF) or convertible security is greater than eight-to-one (8.00).

As a result of this amendment, the Exchange also proposes to amend Options 1, Section 1(a)(13) which describes a conforming ratio, to remove the final sentence which states that only a Complex Order with a conforming ratio is accepted into the Exchange. Additionally, the Exchange proposes to amend various rules to update cross-references that will be amended with the addition of the definition of non-conforming ratio at Options 1, Section 1(b)(25). Specifically, the Exchange proposes to amend Options 3, Section 10(a)(1); Options 3, Section 20(a)(1); Options 4, Section 5 at Supplementary Material .03; and Options 7, Section 1(c).

With this proposal, the minimum increments for Complex Options Strategies, Stock-Option Strategies and Stock-Complex Strategies with non-conforming ratios will be identical to the minimum increments for Complex Options Strategies, Stock-Option Strategies and Stock-Complex Strategies with conforming ratios. Under the proposal, bids and offers for Complex Options Strategies in non-conforming ratios may be expressed in one cent ($0.01) increments, and the options leg of Complex Options Strategies may be executed in one cent ($0.01) increments, regardless of the minimum increments otherwise applicable to the individual options legs of the order. Further, under the proposal, bids and offers for Stock-Option Strategies and Stock-Complex Strategies with non-conforming ratios may be expressed in any decimal price determined by the Exchange, and the stock leg of a Stock-Option Strategy or Stock-Complex Strategy may be executed in any decimal price permitted in the equity market. Finally, the options leg of a Stock-Option Strategy or Stock-Complex Strategy with a non-conforming ratio may be executed in one cent ($0.01) increments, regardless of the minimum increments otherwise applicable to the individual options legs of the order.

The Exchange understands that there may be some concerns that if the ratios of Complex Orders, where each component leg is allowed to trade in one cent increments, are too greatly expanded, market participants will, for example, enter Complex Orders with non-conforming ratios designed primarily to trade orders in a class in pennies that cannot otherwise execute as single-leg orders in that class in pennies. The Exchange believes it is highly unlikely that market participants will submit non-bona-fide trading strategies with larger ratios just to trade in penny increments. Adding a single leg to a larger order just to obtain penny pricing may further reduce execution opportunities for such an order because it may be less likely that sufficient contracts in the appropriate ratio would be available and because it is unlikely that other market participants would be willing to execute against an order that is not a bona-fide trading strategy. Further, pursuant to Options 9, Section 1, no Member shall engage in acts or practices inconsistent with just and equitable principles of trade, and entering orders for non-bona-fide trading strategies may constitute acts or practices inconsistent with just and equitable principles of trade.

The Complex Order priority rules will continue to protect Priority Customer interest on the single-leg order book. Pursuant to Options 3, Section 14(c)(2), Complex strategies will continue to not execute at prices inferior to the best net price achievable from the best ISE bids and offers for the individual legs. At this time, the Exchange proposes to amend Options 3, Section 14(c)(2)(i) which currently states,

Complex Options Strategies may be executed at a total credit or debit price with one other Member without giving priority to bids or offers established on the Exchange that are no better than the bids or offers in the individual options series comprising such total credit or debit; provided, however, if any of the bids or offers established on the Exchange consist of a Priority Customer Order, the price of at least one leg of the complex strategy must trade at a price that is better than the corresponding bid or offer on the Exchange by at least one minimum trading increment for the series as defined in Options 3, Section 3.

The proposed amendment revises Options 3, Section 14(c)(2)(i) to indicate that complex strategies may be executed at a total credit or debit price with one other Member without giving priority to bids or offers established on the Exchange that are no better than the bids or offers in the individual options series comprising such total credit or debit; provided, however, that for a ( printed page 35292) Complex Order with a conforming ratio, if any of the bids or offers established on the Exchange consist of a Priority Customer Order, the price of at least one leg of the complex strategy must trade at a price that is better than the corresponding bid or offer on the Exchange by at least one minimum trading increment for the series as defined in Options 3, Section 3. The Exchange notes that a Complex Order with a non-conforming ratio would be executed in accordance with Options 3, Section 14(d)(4) as proposed herein. As discussed above, the Complex Order priority rules will continue to protect Priority Customer interest on the single-leg order book.

The Exchange proposes to add “with conforming ratios” to Options 3, Section 14(c)(2)(i) to make clear that the Complex Order priority provisions in that rule will continue to apply only to Complex Orders with conforming ratios. In addition, the Exchange proposes to amend Options 3, Section 14(c)(2)(i) to state that a Complex Order with a non-conforming ratio will be executed in accordance with proposed Options 3, Section 14(d)(4). Options 3, Section 14(c)(2)(i) as amended will state,

Complex Options Strategies may be executed at a total credit or debit price with one other Member without giving priority to bids or offers established on the Exchange that are no better than the bids or offers in the individual options series comprising such total credit or debit; provided, however, that for a Complex Order with a conforming ratio, if any of the bids or offers established on the Exchange consist of a Priority Customer Order, the price of at least one leg of the complex strategy must trade at a price that is better than the corresponding bid or offer on the Exchange by at least one minimum trading increment for the series as defined in Options 3, Section 3. A Complex Order with a non-conforming ratio will be executed in accordance with (d)(4) below.

The Exchange's proposal does not extend the Complex Order priority in Options 3, Section 14(c)(2)(i) afforded to Complex Orders with ratios equal to or greater than one-to-three and less than or equal to three-to-one to these larger-ratio Complex Orders. Rather, the Exchange proposes to adopt new Options 3, Section 14(d)(4) which will state that Complex Orders with a non-conforming ratio will not be executed at a net price that would cause any option component of the complex strategy to be executed: (A) ahead of a Priority Customer order at the BBO on the single-leg order book; or (B) at a price that is through the NBBO.^[8] Therefore, a Complex Order with any ratio less than one-to-three or greater than three-to-one may be executed at a net price only if each leg of the Complex Order betters the corresponding bid (offer) of a Priority Customer Order(s) on the single-leg order book, and is not at a price that is through the NBBO. These requirements are consistent with the rules of other option exchanges that process Complex Orders in the same ratios.^[9]

Further, the Exchange proposes to not permit the option leg or stock leg of a Complex Order with a non-conforming ratio to trade outside of the NBBO. The Exchange proposes to state at the end of Options 3, Section 14(d)(4), “The stock leg of a Stock-Option Strategy or a Stock-Complex Strategy with a non-conforming ratio may not trade through the NBBO.” The Exchange would continue to permit a Complex Order with a non-conforming ratio to trade provided the options legs (and stock legs) are at or within the NBBO. This proposal does not prevent Complex Orders with a conforming ratio from trading outside the NBBO provided the trade complies with Exchange rules and, where applicable, the Qualified Contingent Trade Exemption from Rule 611 of Regulation NMS.^[10]

The Exchange also proposes to amend its Complex Price Improvement Mechanism (“PIM”) to adopt rule text that describes new scenarios that arise as a result of the Exchange processing Complex Orders with non-conforming ratios, which would cause a PIM Auction to early terminate prior to the end of the time period designated by the Exchange pursuant to Options 3, Section 13(e)(4)(i). Currently, pursuant to Options 3, Section 13(e)(4)(iv),

The exposure period will automatically terminate (A) at the end of the time period designated by the Exchange pursuant to subparagraph (4)(i) above, (B) upon the receipt of a Complex Order in the same complex strategy on either side of the market that is marketable against the Complex Order Book or bids and offers for the individual legs, (C) upon the receipt of a non-marketable Complex Order in the same complex strategy on the same side of the market as the Agency Complex Order that would cause the execution of the Agency Complex Order to be outside of the best bid or offer on the Complex Order Book; (D) when a resting Complex Order in the same complex strategy on either side of the market becomes marketable against the Complex Order Book or bids and offers for the individual legs; or (E) if a trading halt is initiated after the order is entered into the Complex Price Improvement Mechanism, such auction will be automatically terminated without an execution.

The Exchange proposes to provide additional language in light of the addition of non-conforming ratios to note that the exposure period will automatically terminate if [sic] upon receipt of a Priority Customer Order, eligible to rest on the single-leg order book, that would lock or cross any component of a non-conforming ratio Agency Complex Order. Further, the exposure period will automatically terminate if the NBBO for any option component of a non-conforming ratio Agency Complex Order updates to a price that would cause that component of the Agency Complex Order to be executed at a price through the NBBO for that series. These provisions ensure that an Agency Complex Order will always receive the best price on the Exchange while simultaneously preserving the integrity of the single-leg ( printed page 35293) market by preventing a component of an order with a non-conforming ratio from trading ahead of Priority Customer interest or trading through the NBBO.

The Exchange proposes to add rule text to Supplementary Material .11 to Options 3, Section 11 to make clear that a Complex Strategy entered into a Complex PIM may be in a conforming ratio as defined in Options 1, Section 1(a)(13) or a non-conforming ratio as defined in Options 1, Section 1(a)(25).^[11] The Exchange also proposes to add rule text to Options 3, Section 12(b) and (d) to make clear that a Complex Customer Cross Order and a Complex Qualified Contingent Cross may be entered into the System in a conforming ratio as defined in Options 1, Section 1(a)(13) or a non-conforming ratio as defined in Options 1, Section 1(a)(25).^[12]

In contrast, a Complex Strategy entered into a Complex Facilitation Mechanism or Complex Solicited Order Mechanism must be in a conforming ratio as defined in Options 1, Section 1(a)(13). The Exchange proposes rule text at Supplementary Material .02 to Options 3, Section 11 to make this restriction for these Complex Order auctions clear to Members. At this time, the Exchange is not permitting non-conforming ratios in every auction. The Exchange is offering non-conforming ratios in the limited auctions noted above. The Exchange notes that it will evaluate the market demand from Members with respect to non-conforming ratios and determine at a later date whether to permit non-conforming ratios in additional auctions.

The Exchange proposes to amend Options 3, Section 16(b) to provide that the Strategy Protections in Options 3, Section 16(b) ^[13] would not apply to a complex strategy with a non-conforming ratio. Options 3, Section 16(b) includes a Vertical Spread Protection, a Calendar Spread Protection, a Butterfly Spread Protection and a Box Spread Protection. These strategies require a Member to execute these strategies in certain ratios that would not be achieved with non-conforming ratios.^[14] Other risk protections remain available for complex strategies with non-conforming ratios.

The proposal will provide an additional venue for executing non-conforming Complex Orders electronically. The Exchange believes this increased efficiency would increase execution opportunities for Complex Orders with investment strategies that do not fit within the three-to-one ratio requirement.

Implementation

The Exchange proposes to implement this rule proposal on or before December 20, 2027. The Exchange will issue an Options Trader Alert to all Members with the exact date of implementation.

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,^[15] in general, and furthers the objectives of Section 6(b)(5) of the Act,^[16] in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Exchange believes the proposed changes will increase opportunities for execution of non-conforming ratio Complex Orders by providing another exchange to trade non-conforming Complex Orders electronically, which will benefit all investors. The Exchange also believes that the proposed rule change is designed to not permit unfair discrimination among market participants, as all market participants will be able to trade non-conforming ratio Complex Orders, and the priority rules will apply to non-conforming ratio Complex Orders of all market participants.

The Exchange currently permits only a Complex Options Strategy where the ratio between the sizes of the options components of a Complex Order is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00).^[17] Additionally, today, the Exchange permits only a Stock-Option Strategy and Stock-Complex Strategy with a ratio no greater than eight-to-one (8.00) where the ratio represents the total number of units of the underlying stock or convertible security in the option leg to the total number of units of the underlying stock or convertible security in the stock leg.^[18]

In particular, the Exchange believes the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and benefit investors, because it will allow market participants to execute Complex Strategies with option components in ratios greater than three-to-one or less than one-to-three (“non-conforming ratios” as proposed herein) on the Exchange. In addition, as proposed, Stock-Option Orders with non-conforming ratios will also be permitted. The proposed rule change will further remove impediments to and perfect the mechanism of a free and open market and a national market system, as other options exchanges permit the trading of Complex Orders, including Stock-Options Orders, with any ratio.^[19]

The proposed rule change will continue to protect Priority Customer Order interest on the single-leg order book in the same manner as it does today, as all Complex Orders with a conforming ratio will continue to be executed on the Exchange without change. The proposed rule change has no impact on the priority of Complex Orders with a conforming ratio, as ( printed page 35294) Complex Orders with a conforming ratio will continue to be required to improve the price of a leg of the Complex Order for which a Priority Customer Order is resting at the BBO in the single-leg order book,^[20] and thus will continue to protect Priority Customer Orders in the single-leg order book. Additionally, the Exchange will not allow any component of a Complex Order with a non-conforming ratio to execute ahead of a Priority Customer resting at the BBO in the single-leg order book.^[21]

Additionally, the Exchange believes the proposed amendment to Options 3, Section 14(c)(2)(i) indicating that Options 3, Section 14(c)(2)(i) applies solely to conforming ratio complex strategies, will make clear that this provision does not apply to non-conforming ratio Complex Orders. Further, a Complex Order with a non-conforming ratio would be executed in accordance with Options 3, Section 14(d)(4), as proposed herein. The requirements in proposed Options 3, Section 14(c)(2)(i) and Options 3, Section 14(d)(4) are consistent with the Complex Order priority rules of another options exchange.^[22]

The Exchange's proposal to not permit the option leg or stock leg of a Complex Order with a non-conforming ratio to trade outside of the NBBO is consistent with the Act because the Exchange would continue to permit a Complex Order with a non-conforming ratio to trade provided the options legs (and stock legs) are within the NBBO. This proposal does not prevent Complex Orders with a conforming ratio from trading outside the NBBO provided the trade complies with Exchange rules and, where applicable, the Qualified Contingent Trade Exemption from Rule 611 of Regulation NMS.^[23]

Additionally, the Exchange believes that including additional scenarios that will early terminate a Complex PIM Auction promotes just and equitable principles of trade and removes impediments to a free and open market by providing greater transparency concerning the operation of Exchange functionality. These provisions ensure that a non-conforming ratio Agency Complex Order will always receive the best price on the Exchange while simultaneously preserving the integrity of the single-leg market and preventing any component leg of a non-conforming ratio Complex Order from trading ahead of a Priority Customer Order or through the NBBO.^[24]

The Exchange's proposal to amend Options 3, Section 16(b) to state that the Strategy Protections in Options 3, Section 16(b) will not apply to complex strategies with non-conforming ratios is consistent with the Act because the Vertical Spread Protection, Calendar Spread Protection, Butterfly Spread Protection, and Box Spread Protection each apply to strategies that have ratios less than three-to-one ( i.e., they are strategies with a conforming ratio).^[25] Accordingly, the proposed change to Options 3, Section 16(b) will provide clarity to the Exchange's rules. Other risk protections remain available for complex strategies with non-conforming ratios.

The Exchange believes that its proposal is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by enhancing its System and providing investors with an additional venue to trade non-conforming ratios on Complex Orders electronically. The Exchange's proposal should provide market participants with trading opportunities more closely aligned with their investment or risk management strategies.

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 not necessary or appropriate in furtherance of the purposes of the Act.

The Exchange does not believe that its proposed rule change will impose any burden on intra-market competition as the proposed amendments would apply equally to all Members of the Exchange. Further, any Member of the Exchange may submit a Complex Order with a non-conforming ratio.

The Exchange does not believe that its proposed rule change will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act, rather the Exchange believes that its proposal will promote inter-market competition. Other options exchanges provide for the electronic trading of Complex Orders comprised solely of option components with ratios that are less than one-to-three or greater than three-to-one, and allow these orders to be priced and executed in one cent increments.^[26] In addition, other options exchanges permit the trading of Stock-Option Orders with non-conforming ratios.^[27] As such, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.

The Exchange does not believe the proposed amendment to indicate that the priority provision to Options 3, Section 14(c)(2)(i) applies solely to conforming ratios to Complex Orders imposes any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because Complex Orders for all Members will be treated in the same manner. The Exchange will not allow any component of a Complex Order with a non-conforming ratio to execute ahead of a Priority Customer resting at the BBO in the single-leg order book.^[28] Further, no Member would be able to utilize the QCT Exemption for a Stock-Options Order or a Stock-Complex Strategy that has a non-conforming ratio.

Complex Orders submitted by Members with conforming ratios will continue to be handled by the System without change. The non-conforming ratio Complex Orders of all Members will be handled uniformly by the System as described in this proposal. The Exchange does not believe that this proposed change imposes any burden on inter-market competition because other options exchange currently trade non-conforming ratio Complex Orders including Stock-Option Orders with non-conforming ratios.^[29]

Additionally, the Exchange does not believe that its new proposed scenarios to terminate a Complex PIM Auction imposes any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act, as the proposed changes are designed to add additional ( printed page 35295) detail to the rules to further clarify the operation of Exchange functionality and to minimize the potential for confusion. These provisions will apply to the Complex Orders of all Members. The Exchange does not believe that this proposed change imposes any burden on inter-market competition because other options exchanges would be free to adopt similar rules for early terminating their auctions.

The Exchange's proposal to not offer the Strategy Protections in Options 3, Section 16(b) to a complex strategy with a non-conforming ratio does not impose an undue burden on intra-market competition because these risk protections will not be available for any Member.

The Exchange's proposal to not offer the Strategy Protections in Options 3, Section 16(b) to a complex strategy with a non-conforming ratio does not impose an undue burden on inter-market competition because other options markets may similarly elect to offer or not offer certain risk protections to certain types of options orders.

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 ^[30] and Rule 19b-4(f)(6) thereunder.^[31]

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.

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

• Use the Commission's internet comment form (https://www.sec.gov/​rules/​sro.shtml); or
• Send an email torule-comments@sec.gov. Please include file number

SR-ISE-2026-31 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-2026-31. 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-2026-31 and should be submitted on or before July 1, 2026.