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Federal Register / Vol. 86, No. 121 / Monday, June 28, 2021 / Notices
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Exchange likewise desires to remove this restriction on Market Makers which does not exist on Cboe or other Nasdaq affiliated markets.6 The proposed rule text is currently waived on ISE pursuant to Options 2, Section 4a2. The Exchange proposes to remove this rule text from Options 2, Section 4 as the Exchange does not desire to enforce this provision in the future. The Exchange believes that this market maker provision is no longer necessary. Today, ISE incentivizes Market Makers through pricing 7 and allocation 8 to quote tightly in their assigned options series. Primary Market Makers and Competitive Market Makers also have other obligations with respect to market making 9 in addition to other quoting obligations 10 that they must abide by when quoting on ISE.
Also, since the adoption of the rule, the Exchange has adopted the obvious error rule 11 which permits the Exchange to review a transaction as potentially erroneous based on a theoretical price.
Also, ISE orders are subject to tradethrough compliance, thereby limiting the prices at which orders may execute.12 Market Makers are relied upon to provide liquidity on ISE, which benefits other Members who have an opportunity to interact with the order flow. The Exchange believes that the obligation to refrain from purchasing a call option or a put option at a price more than $0.25 below parity places yet 6 See Nasdaq Phlx LLC, The Nasdaq Options Market LLC and Nasdaq BX, Inc. at Options 2, Section 4 Obligations of Market Makers.
7 See Options 7 Option Pricing. ISE offers lower fees and rebates to Market Makers based on the percentage of time spent on the National Best Bid or National Best Offer NBBO for certain qualifying series.
8 See Options 3, Section 10 Priority of Quotes and Orders. Primary Market Makers are offered an enhanced allocation provided the Primary Market Maker is quoting at same price as a non-Priority Customer Order or Market Maker quote.
9 See Options 2, Section 4. ISE Market Makers must for example: 1 Compete with other Market Makers to improve the market in all series of options classes to which the Market Maker is appointed; 2 make markets that, absent changed market conditions, will be honored for the number of contracts entered into the Exchanges System in all series of options classes to which the Market Maker is appointed; 3 update market quotations in response to changed market conditions in all series of options classes to which the Market Maker is appointed; and 4 price options contracts fairly by, among other things, bidding and offering so as to create differences of no more than $5 between the bid and offer following the opening rotation in an equity or index options contract. See Options 2, Section 4b.
10 See Options 2, Section 5 Electronic Market Maker Obligations and Quoting Requirements.
Further, Options 3, Section 8c3 requires Primary Market Makers to submit a Valid Width Quote during the Opening Process.
11 See Options 3, Section 20 Nullification and Adjustment of Options Transactions including Obvious Errors.
12 See Options 3, Section 4b6.

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another obligation on ISE Market Makers that is not required on Cboe or other Nasdaq markets. The Exchange believes that this additional obligation is not necessary to maintain fair and orderly markets and notes the Exchange has waived this obligation.
Bid/Ask Differentials The Exchange proposes to amend Options 2, Section 4b4 and Options 4A, Section 12bi to relocate text concerning bid/ask differentials for long-term option series. Currently, Options 4, Section 8a describes the bid/ask differentials for long-term options series for equity options and exchange-traded products and Options 4A, Section 12bi describes the bid/
ask differentials for long-term options series for indexes. Currently, the bid/ask differentials shall not apply to any options series until the time to expiration is less than nine 9 months for equity options and exchange-traded funds as provided for within Options 4, Section 8a. Currently, bid/ask differentials shall not apply to any options series until the time to expiration is less than twelve 12
months for index options as provided for within Options 4A, Section 12bi.
The Exchange proposes to centralize the bid/ask differentials within new Options 2, Section 4b4iii and add a sentence to both Options 4, Section 8a and Options 4A, Section 12bi that cites to Options 2, Section 4b4iii for information on bid/ask differentials for the various products. The Exchange believes that this relocation will provide Primary Market Makers and Competitive Market Makers with centralized information regarding their bid/ask differential requirements. The Exchange is not amending the bid/ask differentials; the rule text is simply being relocated.
Business Continuity and Disaster Recovery Plan The Exchange proposes to relocate Supplementary Material .02 to Options 2, Section 4, concerning business continuity and disaster recovery plans, to General 2, Section 12, which is currently reserved. The Exchange proposes to title General 2, Section 12
as Business Continuity and Disaster Recovery Plan Testing Requirements for Members Pursuant to Regulation SCI.
The rule text is being relocated without change. The Exchange proposes to relocate this rule text to harmonize ISEs rules with that of Nasdaq PHLX LLC
Phlx, Nasdaq BX, Inc. and The Nasdaq Stock Market LLC which all have business continuity and disaster recovery plans located within General 2,
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Section 12 of their respective rulebooks.13 The Exchange also proposes to reserve Sections 710 and 1322 within General 2.14 Harmonizing the rule locations of the rules of the Nasdaq affiliated markets will make it easier for market participants to review and compare the rules of each Nasdaq market.
Options 4, Section 3
The Exchange proposes to remove the following products from Options 4, Section 3h: The ETFS Silver Trust, the ETFS Palladium Trust, the ETFS
Platinum Trust or the Sprott Physical Gold Trust. The Exchange no longer lists these products and proposes to remove them the products from its listing rules. The Exchange will file a proposal with the Commission if it determines to list these products in the future.
The Exchange proposes to amend Options 4, Section 3h by removing the rule text at the end of the paragraph which provides, all of the following conditions are met. Paragraph h would simply end with provided that:
and direct market participants to subparagraphs 1 and 2. The Exchange also proposes to capitalize the at the beginning of Options 4, Section 3h1
and remove ; and at the end of the paragraph and instead at a period so that subparagraphs 1 and 2 are not linked, but rather read independently.
Today, Options 4, Section 3h1
applies to all Exchange-Traded Fund Shares. The Exchange proposes to clarify that Options 4, Section 3h2
applies to only international or global Exchange-Traded Fund Shares.
Specifically, the Exchange proposes to amend Options 4, Section 3h2 to provide, Exchange-Traded Fund Shares based on international or global indexes, or portfolios that include nonU.S. securities, shall meet the following criteria. Phlx Options 4, Section 3h currently has similar rule text.15
Proposed Options 4, Sections 3h generally concerns securities deemed appropriate for options trading. The proposed new rule text adds language stating that subparagraph h2 of Options 4, Section 3 applies to the extent the Exchange-Traded Fund Share is based on international or global indexes, or portfolios that include nonU.S. securities. This language is 13 Similar rule changes will also be made for Nasdaq GEMX, LLC and Nasdaq MRX, LLC.
14 General 2, Sections 5 and 6 are currently reserved. These sections are proposed to be deleted.
The proposed text would instead reflect General 2, Sections 510 are reserved.
15 Phlx will also file to conform its rule text to the proposed text within Options 4, Section 3h2.

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