The International Securities Exchange (ISE) operates the third largest options exchange in the US. Founded in 2000 and based in New York, ISE has become a leading options trading platform, providing investors with cutting-edge products and services. This article will explore the history, offerings, market model, membership, technology, and impact of the ISE.


The ISE opened its doors on May 26, 2000 as the first fully electronic options exchange in the US. This revolutionary approach to options trading aimed to increase market transparency and reduce costs for investors.

In its early days, ISE focused on listing options on technology companies that were fueling the dot-com boom. However, after the tech bubble burst in the early 2000s, ISE diversified its product mix. Today, the exchange offers options on over 2,000 underlying securities including equities, ETFs, indexes and FX currency pairs.

With its innovative market model and electronic trading platform, ISE has become a driving force in the evolution of the US options market. The exchange combines the liquidity and transparency of an exchange with the flexibility and anonymity of an over-the-counter (OTC) market.

This article will explore key aspects of ISE’s operations and services including:

History and Milestones

Market Model and Offerings

Membership and Market Makers

Trading Platform and Systems

Rules and Regulations

Market Performance and Statistics

Acquisitions and Organization

Impact on Options Trading

Gaining insight into ISE can help traders better understand the forces shaping today’s dynamic options marketplace.

History and Milestones

ISE opened for trading on May 26, 2000 after receiving SEC approval as a national securities exchange in March 2000. The founders aimed to increase competition and reduce trading costs in the options market which was dominated by the traditional floor-based exchanges of Chicago Board Options Exchange (CBOE) and American Stock Exchange (AMEX, now NYSE American).

Some key milestones in ISE’s history include:

  • 2000 – ISE founded by William Porter and Gary Katz, opens for trading with 13 employee-owners
  • 2002 – Surpasses 1 million contracts traded in a single day
  • 2005 – Releases first fully electronic FX options product
  • 2006 – Acquires International Securities Exchange LLC, expands to become ISE Stock Exchange
  • 2007 – Acquired by Eurex, becomes first trans-Atlantic options exchange
  • 2008 – Launches Mini Options contract on S&P 500 Index
  • 2009 – Volume tops 1 billion contracts, second largest options exchange
  • 2012 – Launches ISE Gemini for trading equity options
  • 2013 – ISE and ISE Gemini combine for 3 billion contracts, capture 30% market share
  • 2016 – Acquired by Nasdaq Inc. for $1.1 billion

ISE achieved rapid growth in its early years by embracing electronic trading and attracting liquidity with maker-taker pricing. Its milestone of 1 billion contracts in 2009 demonstrated its emergence as a major US options exchange. Today, ISE continues to innovate and expand its offerings for traders under Nasdaq ownership.

Market Model and Offerings

ISE operates a hybrid market model that combines electronic matching of buy and sell orders with Market Maker quoting. This hybrid system aims to provide both liquidity and price discovery like a traditional exchange along with the anonymity and speed of an OTC market.

The exchange offers trading in four core product lines:

  • Equity Options – Options on over 2,000 individual stocks, ETFs and trusts including leaders like Apple, Tesla, SPY and QQQ.
  • Index Options – Options on key indexes including S&P 500, NASDAQ 100, Russell 2000 and MSCI EAFE. Also exclusively lists options on proprietary indexes like ISE Cloud Computing Index.
  • FX Options – Currency options on over 60 currency pairs and crosses including majors, minors and emerging markets.
  • Proprietary Products – Specialized options like Short Term Options Series (STOS), End of Day (EOD) options, and Flex Options that provide greater flexibility.

This wide range of products provides investors with trading opportunities across markets and geographies using diverse options strategies. The exchange is also known for bringing innovative options products to the marketplace.

Membership and Market Makers

The ISE options exchange operates as a centralized auction market. Buyers and sellers come together and trading occurs through a process of price discovery and continuous matching of orders.

There are two types of members on ISE that facilitate liquidity and trading:

1. Competitive Market Makers – Over 50 registered competitive market making firms that are obliged to continuously quote two-sided markets in assigned options classes. This provides tight spreads and ample liquidity.

2. Electronic Access Members – Over 200 broker-dealers and proprietary trading firms that represent customer order flow and trade electronically on ISE for their own accounts.

Market makers compete aggressively for order flow by quoting tight bid and ask spreads. They are regulated by ISE policies that govern everything from maximum quote widths to minimum quoting obligations.

ISE also utilizes payment-for-order-flow and maker-taker pricing to incentivize tight spreads and liquidity provision. These programs reward competitive quotes and pass savings to end investors.

Trading Platform and Systems

As one of the first fully electronic options exchanges, ISE offers an advanced high performance trading platform:

  • ISE T7 – ISE migrated to the Nasdaq T7 system in 2017 which can process over 1 million messages per second. This delivers high throughput, low latency, and scalability.
  • Workstations – ISE Certified Workstations (ICW) provide connectivity and low-latency order entry into ISE for members. Over 950 workstations are deployed worldwide.
  • Network – ISE utilizes a redundant 40 Gbps fiber optic network that connects major data centers across the eastern United States and Europe.
  • Disaster Recovery – ISE maintains a disaster recovery data center in Chicago with goal of 99.99% uptime and ability to resume trading within minutes.
  • Protocols – Fix, binary, and other protocols are supported for integration with trading algorithms, smart order routers, and order management systems.
  • Market Data – Top of Book, Deep Book, and EOD market data feeds available over ISE HD, ISE Mercury, and other protocols.

This high-performance infrastructure allows ISE to reliably support over 500 thousand trade messages per second at peak volumes with robust disaster recovery capabilities.

Rules and Regulations

As a self-regulatory organization (SRO), ISE creates its own rules and policies that govern trading under SEC oversight. Some key regulations include:

  • Membership Rules – Requirements for becoming an ISE member and maintaining membership.
  • Listing Standards – Criteria for underlying securities to be optioned on ISE.
  • Trading Rules – Policies for order types, matching, market maker obligations, and more.
  • Disciplinary Rules – Procedures for investigating complaints against members and imposing sanctions.
  • Regulatory Oversight – Real-time surveillance systems to monitor trading and ensure compliance.
  • Financial Requirements – Rules for capital, margin, clearing fund contributions and other financial obligations.

Adherence to ISE rules ensures responsible trading practices and market integrity. Violations can result in fines, trading suspensions or loss of membership. ISE rules evolve along with new regulations and best practices.

Market Performance and Statistics

ISE has become one of the largest and most liquid options exchanges in the world measured by contracts traded:

  • 2009 – Volume tops 1 billion contracts making ISE #2 options exchange
  • 2013 – 3 billion contracts traded across ISE and ISE Gemini
  • 2022 – 4.47 billion total options contracts traded
  • 2022 – 16.6% market share of US equity options volume
  • 2022 – #1 exchange for trading FX Options, #2 for Index Options, #3 for Equity Options

On an average trading day in 2022, ISE facilitated around 17.8 million options contracts with notional value over $450 billion. The greatest volume is seen in equity options, however ISE also leads in exotic FX options trading.

Other figures demonstrating ISE’s strength include:

  • Over 2,000 underlying securities optioned
  • Quotes for 3.2 million options series
  • Average spread on active options under 4 cents
  • Quote sizes of up to 10,000 contracts per side
  • Over 50,000 contract trades handled flawlessly

ISE’s market statistics confirm its position as a top innovator driving growth and liquidity in the global options market.

Acquisitions and Organization

ISE has been at the center of a number of major exchange acquisitions and mergers over the past 15 years. These deals have shaped today’s competitive options marketplace:

  • 2007 – Acquired by Eurex for $2.8 billion, creating first trans-Atlantic derivatives exchange
  • 2008 – ISE and Eurex merge into Deutsche Boerse AG, parent of Frankfurt Stock Exchange
  • 2016 – Nasdaq Inc. acquires ISE from Deutsche Boerse for $1.1 billion
  • 2017 – ISE options integrated into Nasdaq’s Options Market (NOM)
  • 2018 – Nasdaq merges NOM, ISE, GEMX and MRX markets under Nasdaq Options banner

Today, ISE operates as part of the Nasdaq Inc. corporate group which also includes Nasdaq, OMX, CXC and other marketplaces. Within Nasdaq, ISE forms part of the Nasdaq Options segment.

Key executives leading ISE and Nasdaq Options include:

  • Tal Cohen – EVP, North American Market Services
  • James Emmi – EVP, CBOE Markets
  • Jennifer Nayar – SVP, Head of Americas Options

Impact on Options Trading

ISE fundamentally transformed options trading in the 21st century by pioneering the fully electronic exchange model. This innovative approach disrupted the traditional floor trading model and delivered tangible benefits to investors:

  • Lower costs – Reduced exchange, clearing and data fees saving investors over $3 billion per year
  • Tighter spreads – Sub-penny pricing and maker-taker model drove spreads down to just a few cents
  • Greater liquidity – Electronic matching and competing market makers increased depth of book
  • New products – Innovative options like FX, ETFs, and flexible index options
  • Enhanced transparency – Real-time data on orders, trades, Greeks, and implied volatility
  • Improved accessibility – Allowed more firms and traders to directly access the options market

Today, ISE continues this tradition of enhancing options trading through new contracts, pricing models and technology upgrades. It’s focus on liquidity, transparency and innovation has improved the trading experience for investors using options across markets.


ISE transformed options trading by bringing electronic trading to the exchange floor. Its innovative matching engine, competitive market makers, diverse products and robust technology serve over 200 million investor orders annually.

After two decades, ISE continues to enhance liquidity, reduce costs and expand product offerings as an influential force in the options market. Understanding ISE’s business model, services and impact provides useful perspective for active options traders.