Notice2023-14912
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed New Rules 900.3NYP, 925.1NYP, 928NYP, 928.1NYP, and 952NYP and Amendments to Rules 900.3NY, 925NY, 925.1NY, 928NY, 952NY, 953.1NY, 967NY, 967.1NY, and 985NY
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 17, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 88, Number 135 (Monday, July 17, 2023)]
[Notices]
[Pages 45730-45772]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-14912]
[[Page 45729]]
Vol. 88
Monday,
No. 135
July 17, 2023
Part III
Securities and Exchange Commission
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Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and
Immediate Effectiveness of Proposed New Rules 900.3NYP, 925.1NYP,
928NYP, 928.1NYP, and 952NYP and Amendments to Rules 900.3NY, 925NY,
925.1NY, 928NY, 952NY, 953.1NY, 967NY, 967.1NY, and 985NY; Notice
Federal Register / Vol. 88 , No. 135 / Monday, July 17, 2023 /
Notices
[[Page 45730]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97869; File No. SR-NYSEAMER-2023-34]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed New Rules 900.3NYP,
925.1NYP, 928NYP, 928.1NYP, and 952NYP and Amendments to Rules 900.3NY,
925NY, 925.1NY, 928NY, 952NY, 953.1NY, 967NY, 967.1NY, and 985NY
July 10, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on, June 27, 2023, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to [sic] new Rules 900.3NYP (Orders and
Modifiers), 925.1NYP (Market Maker Quotations), 928NYP (Pre-Trade and
Activity-Based Risk Controls), 928.1NYP (Price Reasonability Checks--
Orders and Quotes), and 952NYP (Auction Process) and proposes
amendments to Rules 900.3NY (Orders Defined), 925NY (Obligations of
Market Makers), 925.1NY (Market Maker Quotes), 928NY (Risk Limitation
Mechanism), 952NY (Opening Process), 953.1NY (Limit-Up and Limit-Down
During Extraordinary Market Volatility), 967NY (Price Protection--
Orders), 967.1NY (Price Protection--Quotes), and 985NY (Qualified
Contingent Cross Trade) to reflect the implementation of the Exchange's
Pillar trading technology on its options market. The proposed rule
change is available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The Exchange plans to transition its options trading platform to
its Pillar technology platform. The Exchange's affiliated options
exchange, NYSE Arca, Inc. (``NYSE Arca'' or ``Arca Options'') is
currently operating on Pillar, as are the Exchange's cash equity market
and those of its national securities exchange affiliates' cash equity
markets.\4\ For this transition, the Exchange proposes to use the same
Pillar technology already in operation on Arca Options.\5\ In doing so,
the Exchange will be able to offer not only common specifications for
connecting to both of its equity and options markets, but also common
trading functions across the Exchange and its affiliated options
exchange, NYSE Arca Options. In this regard, the Exchange recently
adopted new rules to reflect the priority, ranking, and allocation of
single-leg interest on Pillar.\6\
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\4\ The Exchange's national securities exchange affiliates' cash
equity markets include: the New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca, Inc., NYSE National, Inc., and NYSE
Chicago, Inc.
\5\ See Securities Exchange Act Release No. 94072 (January 26,
2022), 87 FR 5592 (February 1, 2022) (SR-NYSEArca-2021-47) (the
``Arca Options Approval Order''). See also, e.g., Arca Options Rules
6.76P-O (Order Ranking and Display) and 6.76AP-O (Order Execution
and Routing) (together, the ``Arca Options Priority Rules''); Arca
Options Rules 6.37AP-O (Market Maker Quotations), 6.40P-O (Pre-Trade
and Activity-Based Risk Controls), 6.41P-O (Price Reasonability
Checks--Orders and Quotes), 6.62P-O (Orders and Modifiers), and
6.64P-O (Auction Process) (collectively, the ``Arca Options non-
Priority Rules''). See also NYSE Arca Rule 1.1 (Definitions) (which
includes definitions that describe terms applicable to options
trading on Pillar).
\6\ See Rules 964NYP (Order Ranking, Display, and Allocation),
964.1NYP (Directed Orders and DOMM Quoting Obligations) and 964.2NYP
(Participation Entitlement of Specialists and e-Specialists)
(collectively, the ``American Pillar Priority Rules''). See also
Securities Exchange Act Release No. 97297 (April 13, 2023), 88 FR
24225 (April 19, 2023) (SR-NYSEAmer-2023-16) (adopting new the
American Pillar Priority Rules on an immediately effective basis,
which rules utilize the Pillar concepts introduced in the Priority
Arca rules and incorporate the Exchange's current Customer priority
and pro rata allocation model) (the ``American Pillar Priority
Filing''). The American Pillar Priority Rules (like the rules
proposed herein) will not be implemented until all other Pillar-
related rule filings are either effective or approved, as
applicable. See id.
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The Exchange plans to roll out the new technology platform over a
period of time based on a range of underlying symbols beginning on
October 23, 2023.\7\ As was the case for Arca Options when it
transitioned to Pillar, the Exchange will announce by Trader Update \8\
when underlying symbols will be transitioning to the Pillar trading
platform. With this transition, certain rules would continue to be
applicable to options overlying symbols trading on the current trading
platform--the ``Exchange System,'' \9\ but would not be applicable to
options overlying symbols that have transitioned to trading on Pillar.
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\7\ See Trader Update, January 30, 2023 (announcing Pillar
Migration Launch date of October 23, 2023, for the Exchange),
available here: <a href="https://www.nyse.com/trader-update/history#110000530919">https://www.nyse.com/trader-update/history#110000530919</a>. The Exchange would not begin to migrate
underlying symbols to the Pillar platform until all Pillar-related
rule filings (i.e., proposed rules with a ``P'' modifier) are either
approved or operative, as applicable.
\8\ Trader Updates are available here: <a href="https://www.nyse.com/trader-update/history">https://www.nyse.com/trader-update/history</a>. Anyone can subscribe to email updates of
Trader Updates, available here: <a href="https://www.nyse.com/subscriptions">https://www.nyse.com/subscriptions</a>.
\9\ As noted in the American Pillar Priority Filing, on Pillar,
the Exchange will no longer use the terms ``Exchange System'' or
``System,'' which are defined in Rule 900.2NY as referring to the
Exchange's current ``electronic order delivery, execution, and
reporting system for designated option issues through which orders
and quotes of Users are consolidated for execution and/or display,''
and will file a subsequent proposed rule change to delete these
defined terms and any references thereto after the migration to
Pillar is completed.
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Instead, the Exchange proposes new rules to reflect how options
would trade on the Exchange once Pillar is implemented. These proposed
rule changes will (1) use Pillar terminology that is identical to
Pillar terminology governing options trading on NYSE Arca, except as
otherwise noted; and (2) provide for common functionality on both its
options markets.\10\
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\10\ The current proposal seeks to adopt rules based on the Arca
Options non-Priority Rules, as well as certain definitions that
describe terms applicable to options trading on Pillar set forth in
NYSE Arca Rule 1.1. See supra note 5.
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Proposed Use of ``P'' Modifier
As proposed, and consistent with the American Pillar Priority
Filing, new rules governing options trading on Pillar would have the
same numbering as
[[Page 45731]]
current rules that address the same functionality, but with the
modifier ``P'' appended to the rule number. All other current rules
that have not had a version added with a ``P'' modifier will be
applicable to how trading functions on both the Exchange System and
Pillar. Once options overlying all symbols have migrated to the Pillar
platform, the Exchange will file a separate rule proposal to delete
rules that are no longer operative because they apply only to trading
on the Exchange System.\11\ As further proposed, and consistent with
the handling of the transition to Pillar by Arca Options, if a symbol
(and the option overlying such symbol) is trading on the Pillar trading
platform, a rule with the same number as a rule with a ``P'' modifier
would no longer be operative for that symbol.\12\
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\11\ See American Pillar Priority Filing (adopting, among other
rules, new Rule 964NYP, which would be operative instead of current
Rule 964NY). See id.
\12\ The Exchange believes that this explanation regarding the
``P'' modifier in Exchange rules provides transparency regarding
which rules would be operative during the symbol migration to
Pillar. See id. NYSE Arca used the same ``P'' modifier when it
transitioned its options platform to Pillar. See Arca Options
Approval Order.
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The Exchange will not implement the ``P'' rules proposed herein
until all other Pillar-related rule filings (i.e., with a ``P''
modifier) are either approved or operative, as applicable, and the
Exchange announces the rollout of underlying symbols to Pillar by
Trader Update.
Summary of Proposed Rule Changes
In this filing, the Exchange proposes the following new Pillar
rules: Rules 900.3NYP (Orders and Modifiers), 925.1NYP (Market Maker
Quotations), 928NY (Pre-Trade and Activity-Based Risk Controls),
928.1NYP (Price Reasonability Checks--Orders and Quotes), and 952NYP
(Auction Process). Because certain proposed rules have definitions and
functions that carry forward to other proposed rules, the Exchange
proposes to describe the new rules in the following order (rather than
by rule number order): orders and modifiers, market maker quotations,
pre-trade and activity-based risk controls, price reasonability checks,
and auctions.
These proposed rules would describe the Exchange's options trading
model on Pillar and, among other things, would use existing Pillar
terminology and functionality currently in effect on Arca Options.
However, because the Exchange has (and will continue to have) a
priority and allocation scheme that differs from the price-time model
on Arca Options, certain of the proposed rules differ from Arca Options
insofar as they reflect the Exchange's existing (Customer priority and
pro rata allocation) model.\13\ As discussed in greater detail below,
except as noted herein, the Exchange is not proposing fundamentally
different functionality applicable to options trading on Pillar than on
the Exchange System. However, with Pillar, the Exchange would introduce
new terminology, and as applicable, new or updated functionality that
would be available for options trading on the Pillar platform, which
functionality is (unless otherwise specified) identical to--or nearly
identical to--functionality and rules already in place on Arca
Options.\14\
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\13\ See, e.g., Rule 964NYP. See also the American Pillar
Priority Filing.
\14\ The Exchange notes that certain differences between the two
options markets will permeate the proposed rules, including that
each exchange uses different terms to describes their permit
holders--the Exchange refers to American Trading Permit (``ATP'')
Holders, whereas Arca Options refers to Options Trading Permit
(``OTP'') Holders or OTP Firms. See, e.g., Rule 900.2NY and NYSE
Arca Rule 1.1, respectively. In addition, the Exchange utilizes
Market Makers that act as Specialists whereas Arca Options has
Market Makers that act as Lead Market Makers or LMMs. See, e.g.,
Rule 927NY and Arca Options Rule 6.37-O, respectively. Also, because
the rule numbering differs on each options exchange, there will be
differences in the Exchange's proposed rule as compared to its
analogous Arca Options Rule to the extent that a proposed Exchange
rule includes a cross-reference to another Exchange rule. The
Exchange has not identified every such instance where these
specified differences occur as it believes the differences are
immaterial because they do not relate to the functionality proposed
herein.
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To promote clarity and transparency, the Exchange further proposes
to add a preamble to the following current rules specifying that they
would not be applicable to trading on Pillar: 900.3NY (Orders Defined),
925.1NY (Market Maker Quotes), 928NY (Risk Limitation Mechanism), 952NY
(Opening Process), 967NY (Price Protection-Orders), 967.1NY (Price
Protection-Quotes), and 985NY (Qualified Contingent Crosses). In
addition, the Exchange also proposes conforming changes to current
Rules 925NY (Obligations of Market Makers), 953.1NY (Limit-Up and
Limit-Down During Extraordinary Market Volatility), and 994NY
(Broadcast Order Liquidity Delivery Mechanism) (the ``BOLD Mechanism'')
to add cross-references to certain of the new Pillar rules, including
those proposed in this filing.\15\
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\15\ The proposed conforming changes to Rule 994NY regarding the
BOLD mechanism would include adding cross-references to new Rule
964NYP (in addition to existing references to current Rule 964NY)
and to paragraph (k) of this Rule, which latter reference would
state, in relevant part, that ``[f]ollowing the exposure period,
consistent with Rule 964NYP(k), the Exchange will route the
remaining portion of the exposed order to other exchanges'' and that
``[a]ny portion of a routed order that returns unfilled will trade
against the Exchange's best bid/offer unless another exchange is
quoting at a better price in which case new orders will be generated
and routed to trade against such better prices, consistent with Rule
964NYP(k).''). See proposed Rule 994NY(c)(1) and (c)(4),
respectively.
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Proposed Rule Changes
Proposed Rule 900.3NYP: Orders and Modifiers
Current Rule 900.3NY (Orders Defined) defines the order types that
are currently available for options trading both on the Exchange System
and for open outcry trading on the Exchange. The Exchange proposes that
new Rule 900.3NYP would set forth the order types and modifiers that
would be available for options trading both on Pillar (i.e., electronic
order entry) and in open outcry trading. The Exchange proposes to
specify that Rule 900.3NY would not be applicable to trading on Pillar.
Because the Exchange would have the same orders and modifiers as
Arca Options, the Exchange proposes to structure proposed Rule 900.3NYP
to be identical to Arca Options Rule 6.62P-O and use the same
terminology. The Exchange also proposes to title proposed Rule 900.3NYP
as ``Orders and Modifiers,'' which title is identical to Arca Options
Rule 6.62P-O. In addition, as was done on Arca Options, the Exchange
proposes to include in the description of each order type the ``Pillar
Priority Category'' within which such order would be ranked for
priority, display, and allocation purposes. However, on the Exchange,
the Pillar Priority Categories assigned to each order type would be
handled in accordance with the Exchange's Customer priority/pro rata
allocation model, per Rule 964NYP.\16\
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\16\ See Rule 964NYP(e) (which provides that ``[a]t each price,
all orders and quotes are assigned a priority category, and, within
each priority category, Customer orders are ranked ahead of non-
Customer. If, at a price, there are no remaining orders or quotes in
a priority category, then same-priced interest in the next priority
category has priority.'').
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Primary Order Types. Proposed Rule 900.3NYP(a) is identical Arca
Options Rule 6.62P-O(a) and would specify the Exchange's primary order
types, which would be Market Orders and Limit Orders. Proposed Rule
900.3NYP(a) would also set forth the Exchange's proposed Limit Order
Price Protection functionality and Trading Collars, which proposed
functionality would likewise be identical to Arca Options Rule 6.62P-
O(a).
Market Orders. Proposed Rule 900.3NYP(a)(1) is identical to Arca
Options Rule 6.62P-O(a)(1) and would define a Market Order. As
proposed, a Market Order would be an unpriced
[[Page 45732]]
order message to buy or sell a stated number of option contracts at the
best price obtainable, subject to the Trading Collar assigned to the
order, and would further specify that unexecuted Market Orders may be
designated Day or GTC, which represents current functionality, and that
unexecuted Market Orders would be ranked Priority 1--Market Orders.\17\
Similarly, the Exchange proposes to reference that trading of a Market
Order would be subject to the Trading Collar assigned to the order,
which is similar to the third paragraph of the current definition of
Market Order in Rule 900.3NY(a). As described in greater detail below,
the Exchange proposes changes to its Trading Collar functionality on
Pillar.
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\17\ Market Orders are currently defined in Rule 900.3NY(a) as
follows: ``A Market Order is an order to buy or sell a stated number
of option contracts and is to be executed at the best price
obtainable when the order reaches the Exchange. Market Orders
entered before the opening of trading will be eligible for trading
during the Opening Auction Process. The system will reject a Market
Order entered during Core Trading Hours if at the time the order is
received there is not an NBB and an NBO (``collectively NBBO'') for
that series as disseminated by OPRA. If the Exchange receives a
Market Order to buy (sell) and there is an NBB (NBO) but no NBO
(NBB) as disseminated by OPRA at the time the order is received, the
order will be processed pursuant to Rule 967NY(a)-Trade Collar
Protection.''
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Proposed Rule 900.3NYP(a)(1) would further provide that for
purposes of processing Market Orders, the Exchange would not use an
adjusted NBBO.\18\ The Exchange proposes to not use an adjusted NBBO
when processing Market Orders, which processing is identical to Arca
Options Rule 6.62P-O(a)(1). The Exchange believes that because Market
Orders trade immediately on arrival, using an unadjusted NBBO would
provide a price protection mechanism by using a more conservative view
of the NBBO.
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\18\ See American Pillar Priority Filing (amplifying the
definition of ``NBBO'' per Rule 900.2NY to provide that when using
an unadjusted NBBO, the NBBO would not be adjusted based on
information about orders the Exchange sends to Away Markets,
execution reports received from those Away Markets, and certain
orders received by the Exchange). As noted in the American Pillar
Filing, the Exchange believes that the unadjusted NBBO is a more
conservative view of the NBBO because the Exchange waits for an
update from OPRA rather than updating it based on its view of the
NBBO, which is identical to NYSE Arca Rule 1.1, as relates to
options trading.
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Proposed Rule 900.3NYP(a)(1)(A) is identical to Arca Options Rule
6.62P-O(a)(1)(A) and would provide that a Market Order that arrives
during continuous trading would be rejected, or that was routed,
returns unexecuted, and has no resting quantity to join would be
cancelled if it fails the validations specified in proposed Rules
900.3NYP(a)(1)(A)(i)--(iv). This proposed rule is based in part on Rule
900.3NY(a), which specifies that a Market Order will be rejected during
Core Trading Hours if, when received, there is no NBBO for the
applicable option series as disseminated by OPRA, with differences to
use Pillar terminology and to expand the circumstances when a Market
Order would be rejected beyond the absence of an NBBO. As proposed, and
identical to Arca Options Rule 6.62P-O(a)(1)(A)(i)-(iv), a Market Order
would be rejected (or cancelled if routed first) if: \19\
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\19\ The Exchange will also reject a Market Order if it is
entered when the underlying NMS stock is either in a Limit State or
a Straddle State, which is current functionality. See Rule
953.1NY(a)(1). The Exchange proposes a non-substantive amendment to
Rule 953.1NY(a)(1) to add a cross reference to proposed Rule
900.3NYP(a). The Exchange also proposes to amend the second sentence
of Rule 953.1NY(a)(1) to remove references to trading collars, and
instead specify that the Exchange would cancel any resting Market
Orders if the underlying NMS stock enters a Limit State or a
Straddle State and would notify ATP Holders of the reason for such
cancellation. This proposed change is identical to Arca Options Rule
6.65A-O(a)(1) and would describe both how Market Orders function
today on the Exchange System and how they would be processed on
Pillar.
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<bullet> There is no NBO (proposed Rule 900.3NYP(a)(1)(A)(i)). This
criterion is similar to the current rule, which provides that a Market
Order will be rejected if there is no NBO and is identical to Arca
Options Rule 6.62P-O(a)(1)(A)(i). The Exchange believes that in the
absence of an NBO, Market Orders should not trade as there is no market
for the option.
<bullet> There is no NBB and the NBO is higher than $0.50 (for sell
Market Orders only). The Exchange further proposes that if there is no
NBB and the NBO is $0.50 or below, a Market Order to sell would not be
rejected and would have a working price and display price one MPV above
zero and would not be subject to a Trading Collar (proposed Rule
900.3NYP(a)(1)(A)(ii)).\20\ The Exchange believes that if there is no
NBB, but an NBO $0.50 or below, the Exchange would be able to price
that Market Order to sell at one MPV above zero. The functionality
described in this proposed rule is identical to Arca Options Rule
6.62P-O(a)(1)(A)(ii) and is designed to provide an opportunity for an
arriving sell Market Order to trade when the NBO is below $0.50. The
proposed rule would further provide that a Market Order to sell would
be cancelled if it was assigned a Trading Collar, routed, and when it
returns unexecuted, it has no resting portion to join and there is no
NBB, regardless of the price of the NBO. Accordingly, in this scenario,
if there is no NBB and there is an NBO that is $0.50 or below, the
returned, unexecuted Market Order would be cancelled rather than
displayed at one MPV above zero.
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\20\ See Rules 964NYP(a)(3) (defining ``working price'' as the
price at which an order or quote is eligible to trade at any given
time, which may be different from the limit price or display price
of the order) and (a)(1) (defining ``display price'' as the price at
which an order or quote ranked Priority 2-Display Orders or Market
Order is displayed, which may be different from the limit price or
working price of the order).
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<bullet> There are no contra-side Market Maker quotes on the
Exchange or contra-side ABBO, provided that a Market Order to sell
would be accepted as provided for in proposed Rule
900.3NYP(a)(1)(A)(ii) (proposed Rule 900.3NYP(a)(1)(A)(iii)). This
functionality is identical to Arca Options Rule 6.62P-O(a)(1)(A)(iii)
and is designed to prevent a Market Order from trading at prices that
may not be current for that series in the absence of Market Maker
quotations or an ABBO.
<bullet> The NBBO is not locked or crossed, and the spread is equal
to or greater than a minimum amount based on the midpoint of the NBBO
(proposed Rule 900.3NYP(a)(1)(A)(iv), which is identical to Arca
Options Rule 6.62P-O (a)(1)(A)(iv)). The proposed ``wide-spread''
parameter for purposes of determining whether to reject a Market Order
is similar to the wide-spread parameter applied when determining
whether a trade is a Catastrophic Error, as set forth in Rule
975NY(d)(3), with two differences. First, as shown below, the lowest
bucket would be $0.00 up to and including $2.00, instead of $0.00 to
$1.99, which means the $2.00 price point would be included in this
bucket. Second, the wide-spread calculation would be based off of the
midpoint of the NBBO, rather than off of the bid price, as follows:
------------------------------------------------------------------------
Spread
The midpoint of the NBBO parameter
------------------------------------------------------------------------
$0.00 to $2.00.......................................... $0.75
Above $2.00 to and including $5.00...................... 1.25
Above $5.00 to and including $10.00..................... 1.50
Above $10.00 to and including $20.00.................... 2.50
Above $20.00 to and including $50.00.................... 3.00
Above $50.00 to and including $100.00................... 4.50
Above $100.00........................................... 6.00
------------------------------------------------------------------------
The Exchange notes that this proposed protection for Market Orders
is identical to the protection afforded Market Orders per Arca Options
Rule 6.62P-O(a)(1)(A)(iv) and would provide a new risk control for
options trading on the Exchange that is designed to protect against
erroneous executions using the
[[Page 45733]]
midpoint of the NBBO as a basis for a price protection mechanism.\21\
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\21\ The Exchange notes that using the midpoint of the NBBO as a
basis for a price protection mechanism is also consistent with
similar functionality on other options markets. See, e.g., Cboe Rule
5.34(a)(2) (setting forth the ``Market Order NBBO Width Protection''
wherein Cboe cancels or rejects market orders submitted ``when the
NBBO width is greater than x% of the midpoint of the NBBO,'' subject
to minimum and maximum dollar values determined by Cboe).
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Proposed Rule 900.3NYP(a)(1)(B) is identical to Arca Options Rule
6.62P-O(a)(1)(B) and would provide that an Aggressing Market Order to
buy (sell) would trade with all orders or quotes to sell (buy) on the
Consolidated Book priced at or below (above) the Trading Collar before
routing to Away Market(s) at each price.\22\ Proposed Rule
900.3NYP(a)(1)(B) would further provide that after trading or routing,
or both, a Market Order would be displayed at the Trading Collar,
subject to proposed Rule 900.3NYP(a)(1)(C) (described immediately
below), which is consistent with current functionality that each Market
Order is displayed at a Trading Collar, per Rule 967NY(a)(5).
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\22\ See Rule 964NYP(a)(5) (adopting the definition of an
Aggressing Order). For purposes of this proposed rule, an Aggressing
Market Order is a Market Order that is an Aggressing Order.
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Proposed Rule 900.3NYP(a)(1)(C) is identical to Arca Options Rule
6.62P-O(a)(1)(C) and would provide that a Market Order would be
cancelled before being displayed if there are no remaining contra-side
Market Maker quotes on the Exchange or contra-side ABBO. Proposed Rule
900.3NYP(a)(1)(D) is identical to Arca Options Rule 6.62P-O(a)(1)(D)
and would provide that a Market Order would be cancelled after being
displayed at its Trading Collar if there ceases to be a contra-side
NBBO. These proposed cancellation events are similar to functionality
described in current Rule 967NY(a)(4)(E), which provides that ``[t]he
Exchange will cancel a Market Order, or the balance thereof, that has
been collared pursuant to paragraph (a)(1)(A) or (B) [of that Rule]
above, if after exhausting trading opportunities within the Collar
Range, the Exchange determines there are no quotes on the Exchange and/
or no interest on another market in the affected option series.'' As
proposed, in Pillar, the Exchange would cancel a Market Order in
similar circumstances, with proposed modifications that a Market Order
would be cancelled only if there are no remaining contra-side Market
Maker quotes on the Exchange or if there is no contra-side ABBO. The
Exchange believes that, as is the case on Arca Options, the proposal to
cancel a Market Order either before or after it is displayed in these
circumstances would help to prevent such order from being displayed
when there is no real market in a series.
Finally, proposed Rule 900.3NYP(a)(1)(E) is identical to Arca
Options Rule 6.62P-O(a)(1)(E) and would provide that a resting,
displayed Market Order that is locked or crossed by an Away Market
would be routed to that Away Market. Because Market Orders are intended
to trade at the best price obtainable, the Exchange proposes to route
displayed Market Orders if they are locked or crossed by an Away
Market.\23\ This proposed Rule is based on current functionality, which
is not described in the current rule. Therefore, the proposed rule is
designed to promote clarity and transparency in Exchange rules.
---------------------------------------------------------------------------
\23\ Per Rule 964NYP(b)(2), displayed interest other than
displayed Market Orders would stand their ground if locked or
crossed by an Away Market. The Exchange would provide an option for
Limit Orders to instead be routed, see discussion infra, regarding
proposed Rule 6.62P-O(i)(1) and the proposed Proactive if Locked/
Crossed Modifier.
---------------------------------------------------------------------------
Limit Orders. Proposed Rule 900.3NYP(a)(2) is identical to Arca
Options Rule 6.62P-O(a)(2) and would define a Limit Order as an order
message to buy or sell a stated number of option contracts at a
specified price or better, subject to Limit Order Price Protection and
the Trading Collar assigned to the order, and that a Limit Order may be
designated Day, IOC, or GTC. In addition, unless otherwise specified,
the working price and the display price of a Limit Order would be equal
to the limit price of the order, it is eligible to be routed, and it
would be ranked under the proposed category of ``Priority 2--Display
Orders.'' \24\ The ability for a Limit Order to be designated IOC, Day,
or GTC is also based on current Rules 900.3NY(k), (m) and (n),
respectively, and is consistent with current options trading
functionality. In addition, consistent with current options trading
functionality, Limit Orders would be subject to trading collars, and,
as described in more detail below, the Exchange proposes trading collar
functionality that will operate in the same manner as on Arca Options.
---------------------------------------------------------------------------
\24\ See Rule 964NYP(a)(2) (defining ``limit price'' as the
highest (lowest) specified price at which a Limit Order or quote to
buy (sell) is eligible to trade).
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(a)(2)(A) is identical to Arca Options Rule
6.62P-O(a)(2)(A) and would provide that a marketable Limit Order to buy
(sell) received by the Exchange would trade with all orders and quotes
to sell (buy) on the Consolidated Book priced at or below (above) the
NBO (NBB) before routing to the ABO (ABB) and may route to prices
higher (lower) than the NBO (NBB) only after trading with orders and
quotes to sell (buy) on the Consolidated Book at each price point, and
once no longer marketable, the Limit Order would be ranked and
displayed on the Consolidated Book. This proposed rule text is based on
Rule 900.3NY(b), which provides that a `` `marketable' limit order is a
Limit Order to buy (sell) at or above (below) the NBBO.''
Limit Order Price Protection. The Exchange proposes to describe its
proposed Limit Order Price Protection functionality in proposed Rule
900.3NYP(a)(3), which functionality would operate in a manner identical
to Arca Options Rule 6.62P-O(a)(3). On the Exchange System, the concept
of ``Limit Order Price Protection'' for orders is set forth in Rule
967NY(b). For quotes, price protection filters are described in Rule
967.1NY. The proposed ``Limit Order Price Protection'' on Pillar would
be applicable to both Limit Orders and quotes and, at a high level,
would work similarly to how the current price protection mechanisms
function on the Exchange System because a Limit Order or quote would be
rejected if it is priced at a specified threshold away from the contra-
side NBB or NBO.\25\ The Exchange proposes to enhance the functionality
for options trading on Pillar by using new thresholds and reference
prices (as discussed further below) that would be applicable to both
orders and quotes. The concept of a ``Reference Price'' as used in
connection with risk controls is identical to the same concept used in
Arca Options Rule 6.62P-O(a)(3)(B) and would be consistent how this
term is used on other options exchanges.\26\ Thus, this term is not new
or novel.
---------------------------------------------------------------------------
\25\ Current Rule 967NY(b) provides that unless otherwise
determined by the Exchange, the specified threshold percentage for
orders is 100% when the contra-side NBB or NBO is priced at or below
$1.00 and 50% when the contra-side NBB or NBO is priced above $1.00.
Current Rule 967.1NY(a)(1)(A) provides that unless otherwise
determined by the Exchange, the specified threshold for Market Maker
bids is $1.00 if the contra-side NBO is priced at or below $1.00 and
for Market Maker offers no limit if the NBB is priced at or below
$1.00. Current Rule 967.1NY(a)(1)(B) provides that unless otherwise
determined by the Exchange, the specified threshold for Market Maker
bids (offers) is 50% if the contra-side NBO (NBB) is priced above
$1.00.
\26\ See, e.g., Cboe Rule 5.6(c) (setting forth the ``reference
price'' applicable to orders for which Cboe delta-adjusts the
execution price after the market close). As discussed infra, the
Exchange likewise proposes to use the term Reference Price in
connection with Trading Collars (proposed Rule 900.3NYP(a)(4)).
---------------------------------------------------------------------------
[[Page 45734]]
Proposed Rule 900.3NYP(a)(3)(A) is identical to Arca Options Rule
6.62P-O(a)(3)(A) and would provide that each trading day, a Limit Order
or quote to buy (sell) would be rejected or cancelled (if resting) if
it is priced at a ``Specified Threshold'' (described below), equal to
or above (below) the Reference Price, rounded down to the nearest price
within the MPV for the Series (``Limit Order Price Protection''). In
other words, a Limit Order designated GTC would be re-evaluated for
Limit Order Price Protection on each day that it is eligible to trade
and would be cancelled if the limit price is through the Specified
Threshold. In addition, the proposed rounding down is standard on
Pillar for price protection mechanisms and is identical to how Limit
Order Price Protection is calculated on Arca Options if it is not
within the MPV for the security. The proposed text would therefore
promote granularity in Exchange rules. The proposed rule would further
provide that Cross Orders and Limit-on-Open (``LOO'') Orders (described
below), as well as orders represented in open outcry (except CTB
Orders), would not be subject to Limit Order Price Protection and that
Limit Order Price Protection would not be applied to a Limit Order or
quote if there is no Reference Price, which is consistent with current
functionality.
<bullet> Proposed Rule 900.3NYP(a)(3)(A)(i) is identical to Arca
Options Rule 6.62P-O(a)(3)(A)(i) and would provide that a Limit Order
or quote that arrives when a series is open would be evaluated for
Limit Order Price Protection on arrival.
<bullet> Proposed Rule 900.3NYP(a)(3)(A)(ii) is identical to Arca
Options Rule 6.62P-O(a)(3)(A)(ii) and would provide that a Limit Order
or quote received during a pre-open state would be evaluated for Limit
Order Price Protection after an Auction concludes.\27\
---------------------------------------------------------------------------
\27\ See discussion infra, regarding proposed Rule 952NYP(a) and
proposed definitions for the terms ``Auction,'' ``Auction Price,''
Auction Collar,'' ``pre-open state,'' and ``Trading Halt Auction.''
---------------------------------------------------------------------------
<bullet> Proposed Rule 900.3NYP(a)(3)(A)(iii) is identical to Arca
Options Rule 6.62P-O(a)(3)(A)(iii) would provide that a Limit Order or
quote that was resting on the Consolidated Book before a trading halt
would be evaluated for Limit Order Price Protection again after the
Trading Halt Auction concludes.
As noted above, these proposed rules are identical to Arca Options
Rules 6.62P-O(a)(3)(A)(i)-(iii), and the Exchange believes that these
proposed rules would add clarity and transparency to when the Exchange
would evaluate a Limit Order or quote for Limit Order Price Protection.
Proposed Rule 900.3NYP(a)(3)(B) is identical to Arca Options Rule
6.62P-O(a)(3)(B) and would specify that the Reference Price for
calculating Limit Order Price Protection for an order or quote to buy
(sell) would be the NBO (NBB), provided that, immediately following an
Auction, the Reference Price would be the Auction Price, or if none,
the upper (lower) Auction Collar price, or, if none, the NBO (NBB). The
Exchange believes that adjusting the Reference Price for Limit Order
Price Protection immediately following an Auction would ensure that the
most up-to-date price would be used to assess whether to cancel a Limit
Order that was received during a pre-open state or would be reevaluated
after a Trading Halt Auction. The Exchange further proposes that for
purposes of calculating Limit Order Price Protection, the Exchange
would not use an adjusted NBBO, which use of an unadjusted NBBO is
identical to how Limit Order Price Protection currently functions per
Arca Options Rule 6.62P-O(a)(3)(B).\28\ The Exchange believes that
using an unadjusted NBBO for risk protection mechanisms is consistent
with the goal of such mechanisms to prevent erroneous executions by
using a more conservative view of the NBBO.
---------------------------------------------------------------------------
\28\ References to the NBBO, NBB, and NBO in proposed Rule
900.3NYP (which are identical to Arca Options Rule 6.62P-O) refer to
using a determination of the national best bid and offer that has
not been adjusted.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(a)(3)(C) is identical to Arca Options Rule
6.62P-O(a)(3)(C) and would specify the Specified Threshold and would
provide that unless determined otherwise by the Exchange and announced
to American Trading Permit Holders or ``ATP Holders'' \29\ by Trader
Update, the Specified Threshold applicable to Limit Order Price
Protection would be:
---------------------------------------------------------------------------
\29\ An ATP Holder is a natural person, sole proprietorship,
partnership, corporation, limited liability company or other
organization, in good standing, which has been issued an ATP, and
references to ``member'', and ``member organization'' as those terms
are used in the Rules of the Exchange should be deemed to be
references to ATP Holders. See Rule 900.2NY. An ATP is an American
Trading Permit issued by the Exchange for effecting approved
securities transactions on the Exchange's Trading Facilities. See
id.
------------------------------------------------------------------------
Specified
Reference price threshold
------------------------------------------------------------------------
$0.00 to $1.00.......................................... $0.30
$1.01 to $10.00......................................... 50%
$10.01 to $20.00........................................ 40%
$20.01 to $50.00........................................ 30%
$50.01 to $100.00....................................... 20%
$100.01 and higher...................................... 10%
------------------------------------------------------------------------
The Exchange believes that it would provide a more reasonable and
deterministic trading outcome to use a fixed dollar amount (of $0.30)
rather than a percentage calculation when the Reference Price is $1.00
or less. The Exchange believes that the balance of the proposed
thresholds, which are percentages tied to the amount of the Reference
Price that decrease as that Price increases, are more granular than
those currently specified in Rules 967NY(b) (for orders) and
967.1NY(a)(1)(A) and (B) (for quotes) and therefore determining whether
to reject a Limit Order or quote will be more tailored to the
applicable Reference Price.\30\ In addition, consistent with Rules
967NY(b) and 967.1NY(a)(1), the Exchange proposes that these thresholds
could change, subject to announcing the changes by Trader Update.
Providing flexibility in Exchange rules regarding how the Specified
Thresholds would be set is not only identical to the flexibility
afforded per Arca Options Rule 6.62P-O(a)(3)(C) but is also consistent
with the rules of other options exchanges.\31\
---------------------------------------------------------------------------
\30\ On the Exchange System, the thresholds for price protection
on orders and quotes (per Rules 967NY(b) and 967.1NY(a)(1),
respectively), depend solely on whether the contra-side NBBO (i.e.,
the reference price) is more or less than $1.00. The Exchange
believes the additional Reference Price levels--and corresponding
Specified Thresholds--would make the application of the Limit Order
Price Protection more precise to the benefit of all market
participants.
\31\ See, e.g., Cboe Rule 5.34(a)(4) (describing the ``Drill-
Through Protection'' and that Cboe ``determines the buffer amount on
a class and premium basis'' without specifying the amount of such
buffers); and the Nasdaq Stock Market LLC (``Nasdaq'') Options 3,
Section 15(a)(1)(B) (specifying that ``Order Price Protection'' can
be a configurable dollar amount not to exceed $1.00 through such
contra-side Reference BBO as specified by Nasdaq and announced via
an Options Trader Alert).
---------------------------------------------------------------------------
Trading Collar. Trading Collars on the Exchange System are
currently described in Rule 967NY(a). Under the current rules, incoming
Market Orders and marketable Limit Orders are limited in having an
immediate execution if they would trade at a price greater than one
``Trading Collar.'' A collared order is displayed at that price and
then can be repriced to new collars as the NBBO updates. On Pillar, the
Exchange proposes Trading Collar functionality that would be identical
to Trading Collar functionality on Arca Options as described below.
As proposed, a Market Order or Limit Order would be assigned a
single Trading Collar that would be applicable to that order until it
is fully executed or cancelled (unless the series is halted). The new
proposed Trading Collar would function as a ceiling (for buy
[[Page 45735]]
orders) or floor (for sell orders) of the price at which such order
could be traded, displayed, or routed. The Exchange further proposes
that when an order is working at its assigned Trading Collar, it would
cancel if not executed within a specified time period.
More specifically, proposed Rule 900.3NYP(a)(4) is identical to
Arca Options Rule 6.62P-O(a)(4) and would provide that a Market Order
or Limit Order to buy (sell) would not trade or route to an Away Market
at a price above (below) the Trading Collar assigned to that order. As
further proposed, Auction-Only Orders, Limit Orders designated IOC or
FOK, Cross Orders, ISOs, and Market Maker quotes would not be subject
to Trading Collars, which interest is excluded under current
functionality.\32\ The proposed rule would also be the same as Arca
Options Rule 6.62P-O(a)(4) because it would explicitly add reference to
Auction-Only Orders, Cross Orders, ISOs, and Market Maker quotes being
excluded from Trading Collars, which new detail would add granularity
to the proposed rule and would also address that the proposed Day ISOs,
described below, would not be subject to Trading Collars. In addition,
Trading Collars would not be applicable during Auctions but (as
described below) would be calculated after such Auction concludes.
---------------------------------------------------------------------------
\32\ See Rule 967NY(a)(3) (``Trade Collar Protection does not
apply to quotes, IOC Orders, AON Orders, FOK Orders and NOW
Orders.'').
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(a)(4)(A) is identical to Arca Options Rule
6.62P-O(a)(4)(A) and would provide that a Trading Collar assigned to an
order would be calculated once per trading day and would be updated
only if the series is halted. Accordingly, an order designated GTC
would receive a new Trading Collar each day, but that Trading Collar
would not be updated intraday unless the series is halted. Proposed
Rule 900.3NYP(a)(4)(A)(i) is identical to Arca Options Rule 6.62P-
O(a)(4)(A)(i) and would provide that an order that is received during
continuous trading would be assigned a Trading Collar before being
processed for either trading, repricing, or routing and that an order
that is routed on arrival and returned unexecuted would use the Trading
Collar previously assigned to it. Proposed Rule 900.3NYP(a)(4)(A)(ii)
is identical to Arca Options Rule 6.62P-O(a)(4)(A)(ii) and would
provide that an order received during a pre-open state would be
assigned a Trading Collar after an Auction concludes. Finally, proposed
Rule 900.3NYP(a)(4)(A)(iii) is identical to Arca Options Rule 6.62P-
O(a)(4)(A)(iii) and would provide that the Trading Collar for an order
resting on the Consolidated Book before a trading halt would be
calculated again after the Trading Halt Auction concludes. The Exchange
believes that because Trading Collars are intended as a price
protection mechanism, updating the Trading Collar after a series has
reopened would allow for the Trading Collar assigned to an order to
reflect more updated pricing. As noted above, proposed Rules
900.3NYP(a)(4)(A)(i)-(iii) are identical to Arca Options Rules 6.62P-
O(a)(4)(A)(i)-(iii).
Proposed Rule 900.3NYP(a)(4)(B) is identical to Arca Options Rule
6.62P-O(a)(4)(B) and would provide that the Reference Price for
calculating the Trading Collar for an order to buy (sell) would be the
NBO (NBB), which is consistent with how trading collars are currently
determined for Limit Orders, with differences to use this Reference
Price for all orders and for how the Reference Price would be
determined after an Auction.\33\ As is the case per Arca Options Rule
6.62P-O(a)(4)(B), the Exchange likewise proposes to use the Pillar term
``Reference Price'' to describe what would be used for Trading Collar
calculations.\34\ The proposed rule, like the Arca Options Rule, would
further provide that for Auction-eligible orders to buy (sell) that
were received during a pre-open state or orders that were re-assigned a
Trading Collar after a trading halt, the Reference Price would be the
Auction Price or, if none, the upper (lower) Auction Collar price or,
if none, the NBO (NBB). For reasons similar to those described above,
the Exchange proposes to use a more conservative view of the NBBO for
purposes of risk protection mechanisms. Therefore, the Exchange
proposes that for purposes of calculating a Trading Collar, the
Exchange would not use an adjusted NBBO. Proposed Rule
900.3NYP(a)(4)(B)(i) is identical to Arca Options Rule 6.62P-
O(a)(4)(B)(i) and would further provide that a Trading Collar would not
be assigned to a Limit Order if there is no Reference Price at the time
of calculation, which is consistent with current functionality and the
proposed rule would add granularity to Exchange rules.
---------------------------------------------------------------------------
\33\ Under current rules, trading collars are calculated based
off of the contra-side NBBO. See Rule 967NY(a)(1)(A)(ii).
\34\ See also discussion regarding Cboe Rule 5.34(a)(4) and
Nasdaq Options 3, Section 15(a)(1)(B), supra note 31.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(a)(4)(C) is identical to Arca Options Rule
6.62P-O(a)(4)(C) and would describe how the Trading Collar would be
calculated and would provide that the Trading Collar for an order to
buy (sell) would be a specified amount above (below) the Reference
Price, as follows: (1) for orders with a Reference Price of $1.00 or
lower, $0.20; or (2) for orders with a Reference Price above $1.00, the
lesser of an amount specified in the table in proposed Rule
900.3NYP(a)(4)(C) (ranging from $0.20 for orders with a Reference Price
of $1.01 to $2.00 to $1.90 for orders with a Reference Price of $100.01
and above) or 25% of the Reference Price. Trading Collars under the
current rule are based on a specified dollar amount (set forth in ten
tranches).\35\ As is the case with Trading Collars on Arca Options, the
proposed functionality would tailor the Trading Collar calculations
with either a specified dollar amount or percentage, depending on the
Reference Price, and would align the specified thresholds with the
current parameters for determining whether a trade is an Obvious Error
or Catastrophic Error.\36\ Proposed Rule 900.3NYP(a)(4)(C)(i) is
identical to Arca Options Rule 6.62P-O(a)(4)(C)(i) and would further
provide that if the calculation of a Trading Collar would not be in the
MPV for the series, it would be rounded down to the nearest price
within the applicable MPV. Proposed Rule 900.3NYP(a)(4)(C)(ii) is
identical to Arca Options Rule 6.62P-O(a)(4)(C)(ii) and would further
provide that for orders to sell, if subtracting the Trading Collar from
the Reference Price would result in a negative number, the Trading
Collar for Limit Orders would be the limit price and the Trading Collar
for Market Orders would be one MPV above zero, which would provide more
granularity in Exchange rules and would ensure that there will be a
Trading Collar calculated for low-priced orders to sell. As noted
above, this proposed rule is identical to Arca Options Rule 6.62P-
O(a)(4)(C) and its subparagraphs (i)-(ii).
---------------------------------------------------------------------------
\35\ Under current Rule 967NY(a)(2)(A)(i)-(v), the Trading
Collar for buy (sell) orders is as follows: $0.25 for each option
contract for which the NBB (NBO) is less than $2.00; $0.40 where the
NBB (NBO) is between $2.00-$5.00; $0.50 where the NBB (NBO) is
between $5.01-$10.00; $0.80 where the NBB (NBO) is more than $10.00
but does not exceed $20.00; and $1.00 when the NBB (NBO) is $20.01
or more.
\36\ See Rules 975NY(c)(1) (thresholds for Obvious Errors) and
975NY(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(a)(4)(D) is identical to Arca Options Rule
6.62P-O(a)(4)(D) and would describe how the Trading Collar would be
applied and would provide that if an order to buy (sell) would trade or
route above (below) the Trading Collar or would have its working price
repriced to a Trading Collar that is below (above) its limit
[[Page 45736]]
price, the order would be added to the Consolidated Book at the Trading
Collar for 500 milliseconds and if not traded within that period, would
be cancelled. In addition, once the 500-millisecond timer begins for an
order, the order would be cancelled at the end of the timer even if it
repriced or has been routed to an Away Market during that period, in
which case any portion of the order that is returned unexecuted would
be cancelled.
The Exchange believes that the proposed Trading Collar
functionality is designed to provide a similar type of order protection
as is currently available (as described in Rule 967NY(a)) because it
would limit the price at which a marketable order could be traded,
routed, or displayed. The proposed differences from the current rule,
which are identical to Arca Options Rule 6.62P-O(a)(4), would simplify
the functionality by applying a static ceiling price (for a buy order)
or floor price (for a sell order) at which such order could be traded
or routed, which price would be determined at the time of entry (or
after a series opens or reopens) and would be applicable to the order
until it is traded or cancelled. The Exchange believes that the
proposed functionality would provide greater determinism to an ATP
Holder of the Trading Collar that would be applicable to a Market Order
or Limit Order and when such order may be cancelled if it reaches its
Trading Collar.
Time in Force Modifiers. Proposed Rule 900.3NYP(b) is identical to
Arca Options Rule 6.62P-O(b) and would set forth the time-in-force
modifiers that would be available for options trading on Pillar. The
Exchange proposes to offer the same time-in-force modifiers that are
currently available for options trading on the Exchange and use Pillar
terminology to describe the functionality. As noted above, the Exchange
proposes to describe the Time in Force Modifiers in proposed Rule
900.3NYP(b), and then specify for each order type which Time in Force
Modifiers would be available for such orders or quotes, which mirrors
Arca Options Rule 6.62P-O(b).
Day Modifier. Proposed Rule 900.3NYP(b)(1) would be identical to
Arca Options Rule 6.62P-O(b)(1) and would provide that any order or
quote to buy or sell designated Day, if not traded, would expire at the
end of the trading day on which it was entered and that a Day Modifier
cannot be combined with any other Time in Force Modifier. This proposed
functionality would operate no differently than how a ``Day Order,'' as
described in Rule 900.3NY(m), currently functions.
Immediate-or-Cancel (``IOC'') Modifier. Proposed Rule
900.3NYP(b)(2) is identical to Arca Options Rule 6.62P-O(b)(2) and
would provide that a Limit Order may be designated IOC or Routable IOC,
as described in proposed Rules 900.3NYP(b)(2)(A) and (B) and that a
Limit Order designated IOC would not be eligible to participate in any
Auctions.
Proposed Rule 900.3NYP(b)(2)(A) is identical to Arca Options Rule
6.62P-O(b)(2)(A) and would define a ``Limit IOC Order'' as a Limit
Order designated IOC that would be traded in whole or in part on the
Exchange as soon as such order is received, and the unexecuted quantity
would be cancelled and that a Limit IOC Order does not route. The
proposed Pillar Limit IOC Order would function the same as an
``Immediate-or-Cancel Order (IOC Order),'' as currently described in
Rule 900.3NY(k), without any differences.
Proposed Rule 900.3NYP(b)(2)(B) is identical to Arca Options Rule
6.62P-O(b)(2)(B) and would define a ``Limit Routable IOC Order'' as a
Limit Order designated Routable IOC that would be traded in whole or in
part on the Exchange as soon as such order is received, and the
unexecuted quantity routed to Away Market(s) and that any quantity not
immediately traded either on the Exchange or an Away Market would be
cancelled. The proposed Pillar Limit Routable IOC Order is also based
on (and would replace) the ``NOW Order,'' as currently described in
Rule 900.3NY(o).
Fill-or-Kill (``FOK'') Modifier. Proposed Rule 900.3NYP(b)(3) is
identical to Arca Options Rule 6.62P-O(b)(3) and would provide that a
Limit Order designated FOK would be traded in whole on the Exchange as
soon as such order is received, and if not so traded is to be cancelled
and that a Limit Order designated FOK does not route and does not
participate in any Auctions. This proposed rule uses Pillar terminology
and would offer the same functionality that is currently described in
Rule 900.3NY(l) as the ``Fill-or-Kill Order (FOK Order)'' without any
substantive differences.
Good-`Til-Cancelled (``GTC'') Modifier. Proposed Rule
900.3NYP(b)(4) is identical to Arca Options Rule 6.62P-O(b)(4) and
would provide that a Limit Order or Market Order designated GTC remains
in force until the order is filled, cancelled, the MPV in the series
changes overnight, the option contract expires, or a corporate action
results in an adjustment to the terms of the option contract. This
proposed rule uses Pillar terminology and would offer the same
functionality that is currently described in 900.3NY(n) as the ``Good-
Till-Cancelled (GTC Order),'' with the substantive difference that the
proposed text makes clear (consistent with current functionality) that
such orders may be cancelled if the MPV changes overnight. Otherwise,
the proposed rule describes the same functionality that is currently
described in 900.3NY(n) as the ``Good-Till-Cancelled (GTC Order).''
Auction-Only Orders. Proposed Rule 900.3NYP(c) is identical to Arca
Options Rule 6.62P-O(c) and would define an ``Auction-Only Order'' as a
Limit Order or Market Order that is to be traded only in an Auction
pursuant to Rule 952NYP.\37\ This proposed rule which uses Pillar
terminology in lieu of the current description of an ``Opening Only
Order'' set forth in Rule 900.3NY(q), without any functional
differences to how such orders trade on Pillar.\38\ The proposed rule
would further provide that an Auction-Only Order would not be accepted
when a series is opened for trading (i.e., would be accepted only
during a pre-open state, which includes a trading halt) and any portion
of an Auction-Only Order that is not traded in a Core Open Auction or
Trading Halt Auction would be cancelled. This represents current
functionality, which is not described in the current rule, and would
provide clarity, transparency, and consistency to Exchange rules.
---------------------------------------------------------------------------
\37\ See discussion infra, regarding proposed Rule 952NYP and
definitions relating to Auctions. As proposed, an ``Auction''
includes the opening or reopening of a series for trading either
with or without a trade. See proposed Rule 952NYP(a)(1).
\38\ Rule 900.3NY(q) defines an ``Opening Only Order'' as ``a
Market Order or Limit Order which is to be executed in whole or in
part during the Opening Auction of an options series or not at
all.'' Per Rule 952NY(e), the Exchange utilizes the same process for
orders eligible to participate in the opening or reopening
(following a trading halt) of a series.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(c)(1) would be identical to Arca Options
Rule 6.62P-O(c)(1) and would define a ``Limit-on-Open Order (`LOO
Order')'' as a Limit Order that is to be traded only in an Auction.
This proposed rule describes functionality that would be no different
from current functionality, as described in Rule 900.3NY(q).
Proposed Rule 900.3NYP(c)(2) would be identical to Arca Options
Rule 6.62P-O(c)(2) and would define a ``Market-on-Open Order (`MOO
Order')'' as a Market Order that is to be traded only in an Auction.
This proposed rule describes functionality that would be no different
from current functionality, as described in Rule 900.3NY(q).
Proposed Rule 900.3NYP(c)(3) would be identical to Arca Options
Rule 6.62P-O(c)(3) and would define an
[[Page 45737]]
``Imbalance Offset Order (`IO Order')'' using Pillar terminology. To
provide ATP Holders with greater flexibility for options trading on
Pillar based on functionality offered on Arca Options, the Exchange
proposes to offer the IO Order for both Core Open Auctions and Trading
Halt Auctions.
As proposed, the IO Order functionality is identical to IO Order
functionality on Arca Options Rule 6.62P-O(c)(3). Accordingly, proposed
Rule 900.3NYP(c)(3) would define an IO Order as a Limit Order that is
to be traded only in an Auction.
<bullet> Proposed Rule 900.3NYP(c)(3)(A) is identical to Arca
Options Rule 6.62P-O(c)(3)(A) and would provide that an IO Order would
participate in an Auction only if: (1) there is an Imbalance in the
series on the opposite side of the market from the IO Order after
taking into account all other orders and quotes eligible to trade at
the Indicative Match Price; and (2) the limit price of the IO Order to
buy (sell) would be at or above (below) the Indicative Match Price.
<bullet> Proposed Rule 900.3NYP(c)(3)(B) is identical to Arca
Options Rule 6.62P-O(c)(3)(B) and would provide that the working price
of an IO Order to buy (sell) would be adjusted to be equal to the
Indicative Match Price, provided that the working price of an IO Order
would not be higher (lower) than its limit price.
Orders with a Conditional or Undisplayed Price and/or Size.
Proposed Rule 900.3NYP(d) is identical to Arca Options Rule 6.62P-O(d)
and would set forth the orders with a conditional or undisplayed price
and/or size that would be available for options trading on Pillar. On
Pillar, the Exchange proposes to offer the same type of orders that are
available in the Exchange System and that are currently described in
Rule 900.3NY(d) as a ``Contingency Order or Working Order,'' with
changes as described below.\39\
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\39\ See American Pillar Priority Filing (explaining that the
term ``Working Order File'' will not be used on Pillar and proposing
to include details about ranking of orders and quotes with
contingencies in this proposed Rule 900.3NYP(d) using the Pillar
priority scheme). Also, as discussed in the American Pillar Priority
Filing, the ranking and priority of quotes under Pillar is
consistent with handling on the Exchange System unless otherwise
noted therein. See id.
---------------------------------------------------------------------------
Reserve Order. The Exchange proposes to introduce Reserve Orders
for options traded on Pillar in proposed Rule 900.3NYP(d)(1). On the
Exchange, the proposed Reserve Order functionality would be identical
to the handling of Reserve Orders per Arca Options Rule 6.62P-O(d)(1).
As proposed, a Reserve Order would be defined as a Limit Order with a
quantity of the size displayed and with a reserve quantity of the size
(``reserve interest'') that is not displayed and that the displayed
quantity of a Reserve Order is ranked under the proposed category of
``Priority 2--Display Orders'' and the reserve interest is ranked under
the proposed category of ``Priority 3--Non-Display Orders.'' Proposed
Rule 900.3NYP(d)(1) would further provide that both the display
quantity and the reserve interest of an arriving marketable Reserve
Order would be eligible to trade with resting interest in the
Consolidated Book or route to Away Markets, unless designated as a Non-
Routable Limit Order. Finally, proposed Rule 900.3NYP(d)(1) would
further provide that the working price of the reserve interest of a
resting Reserve Order to buy (sell) would be adjusted to be the lower
(higher) of the limit price or the NBO (NBB), provided that it would
never be priced higher (lower) than the working price of the display
quantity of the Reserve Order, which text differs from Arca Options
Rule 6.62P-O(d)(1) insofar as it does not reference the working price
being adjusted in the same manner as a Non-Displayed Limit Order but
instead states precisely how such price would be adjusted.\40\ Other
than this nuance regarding the rule text used to describe how the
working price of a resting Reserve Order would be adjusted, the
operation of Reserve Orders on the Exchange would be identical to how
such orders are handled per Arca Options Rule 6.62P-O(d)(1).
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\40\ Per Arca Options Rule 6.62P-O(d)(1), ``[t]he working price
of the reserve interest of a resting Reserve Order to buy (sell)
will be adjusted in the same manner as a Non-Displayed Limit Order,
as provided for in paragraph (d)(2)(A) of this Rule.'' Per Arca
Options Rule 6.62P-O(d)(2)(A), ``[t]he working price of a Non-
Displayed Limit Order to buy (sell) will be the lower (higher) of
the limit price or the NBO (NBB).'' Because the Exchange is not
proposing to adopt the Non-Displayed Limit Order type, proposed Rule
900.3NYP(d)(1) simply restates the relevant text from Arca Options
Rule 6.62P-O(d)(2)(A) regarding how the working price of the reserve
interest of a resting Reserve Order would be adjusted. The Exchange
believes that this distinction is immaterial because the Reserve
Order functionality being proposed would be identical to Reserve
Order functionality on Arca Options.
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<bullet> Proposed Rule 900.3NYP(d)(1)(A) is identical to Arca
Options Rule 6.62P-O(d)(1)(A) and would provide that the displayed
portion of a Reserve Order would be replenished when the display
quantity is decremented to zero and that the replenish quantity would
be the minimum display size of the order or the remaining quantity of
the reserve interest if it is less than the minimum display quantity.
<bullet> Proposed Rule 900.3NYP(d)(1)(B) is identical to Arca
Options Rule 6.62P-O(d)(1)(B) and would provide that each time the
display quantity of a Reserve Order is replenished from reserve
interest, a new working time would be assigned to the replenished
quantity.
<bullet> Proposed Rule 900.3NYP(d)(1)(C) is identical to Arca
Options Rule 6.62P-O(d)(1)(C) and would provide that a Reserve Order
may be designated as a Non-Routable Limit Order and if so designated,
the reserve interest that replenishes the display quantity would be
assigned a display price and working price consistent with the
instructions for the order. The Exchange believes that the proposed
rule would promote transparency and granularity in Exchange rules.
<bullet> Proposed Rule 900.3NYP(d)(1)(D) is identical to Arca
Options Rule 6.62P-O(d)(1)(D) and would provide that a routable Reserve
Order would be evaluated for routing both on arrival and each time the
display quantity is replenished. Proposed Rule 900.3NYP(d)(1)(D)(i) is
identical to Arca Options Rule 6.62P-O(d)(1)(D)(i) and would provide
that if routing is required, the Exchange would route from reserve
interest before publishing the display quantity. And proposed Rule
900.3NYP(d)(1)(D)(ii) is identical to Arca Options Rule 6.62P-
O(d)(1)(D)(ii) and would provide that any quantity of a Reserve Order
that is returned unexecuted would join the working time of the reserve
interest and that if there is no reserve interest to join, the returned
quantity would be assigned a new working time. As noted above, proposed
Rules 900.3NYP(d)(1)(D)(i)-(ii) are identical to Arca Options Rule
6.62P-O(d)(1)(D)(i)-(ii) and would promote transparency and granularity
in Exchange rules.
<bullet> Proposed Rule 900.3NYP(d)(1)(E) is identical to Arca
Options Rule 6.62P-O(d)(1)(E) and would provide that a request to
reduce the size of a Reserve Order would cancel the reserve interest
before cancelling the display quantity. The Exchange believes that the
proposed rule would promote transparency and granularity in Exchange
rules.
<bullet> Proposed Rule 900.3NYP(d)(1)(F) is identical to Arca
Options Rule 6.62P-O(d)(1)(F) and would provide that a Reserve Order
may be designated Day or GTC, except that the proposed rule does not
reference ALO Orders, which order type is not offered by the Exchange
today nor will the order type be offered on Pillar. The Exchange
believes this difference is immaterial because the omitted text refers
to an order modifier (i.e., ALO) that the Exchange does not propose to
offer on Pillar and therefore has no bearing on the proposed
[[Page 45738]]
functionality. The Exchange believes that the proposed rule would
promote transparency and granularity in Exchange rules.
All-or-None (``AON'') Order. Proposed Rule 900.3NYP(d)(3) would be
identical to Arca Options Rule 6.62P-O(d)(3) and would describe the
handling of AON Orders on Pillar.\41\ AON Orders are currently defined
in Rule 900.3NY(d)(4) and, consistent with current functionality, AON
Orders on Pillar would only execute if such orders can be satisfied in
their entirety. However, unlike the Exchange System, where AON Orders
are not integrated in the Consolidated Book, on Pillar, the Exchange
proposes that AON Orders would be ranked in the Consolidated Book and
function as conditional orders that would trade only if their condition
could be met. In addition, on Pillar, the Exchange would not support
Market Orders designated as AON, which would be a change from current
functionality. The Exchange does not believe it needs to continue
offering AON Market Orders because such functionality was not used
often on the Exchange System, indicating a lack of market participant
interest in this functionality.
---------------------------------------------------------------------------
\41\ The Exchange proposes to hold Rule 900.3NYP(d)(2) as
``Reserved'' to keep the numbering of this rule consistent with Arca
Options Rule 6.62P-O(d), to account for the fact that the Exchange
does not propose to offer Non-Displayed Limit Orders, which are
described in Arca Options Rule 6.62P-O(d)(2). See id.
---------------------------------------------------------------------------
Specifically, proposed Rule 900.3NYP(d)(3) would provide that an
AON Order is a Limit Order that is to be traded in whole on the
Exchange at the same time or not at all, which represents current
functionality as described in the first sentence of Rule 900.3NY(d)(4).
Proposed Rule 900.3NYP(d)(3) uses Pillar terminology and would further
provide that an AON Order that does not trade on arrival would be
ranked under the proposed category of ``Priority 3--Non-Display
Orders'' and that an AON Order may be designated Day or GTC, does not
route, and would not participate in any Auctions. As noted above, this
proposed new functionality, including that AON Orders would be ranked
on the Consolidated Book, is identical to the handling of AON Order per
Arca Options Rule 6.62P-O(d)(3) and the subsections thereunder.
<bullet> Proposed Rule 900.3NYP(d)(3)(A) is identical to Arca
Options Rule 6.62P-O(d)(3)(A) and would provide that the working price
of an AON Order would be assigned on arrival and adjusted when resting
on the Consolidated Book and that the working price of an AON Order to
buy (sell) would be the lower (higher) of the limit price or NBO (NBB).
<bullet> Proposed Rule 900.3NYP(d)(3)(B) is identical to Arca
Options Rule 6.62P-O(d)(3)(B) and would provide that an Aggressing AON
Order to buy (sell) would trade with sell (buy) orders and quotes that
in the aggregate can satisfy the AON Order in its entirety. This
proposed rule would promote clarity in Exchange rules that an
Aggressing AON Order (whether on arrival or as a resting order that
becomes an Aggressing Order) would be eligible to trade with more than
one contra-side order or quote, provided that multiple orders and
quotes in the aggregate would satisfy the AON Order in its entirety.
<bullet> Proposed Rule 900.3NYP(d)(3)(C) is identical to Arca
Options Rule 6.62P-O(d)(3)(C) and would provide that a resting AON
Order to buy (sell) would trade with an Aggressing Order or Aggressing
Quote to sell (buy) that individually can satisfy the whole AON Order.
The Exchange believes this proposed change would provide an AON Order
with additional execution opportunities.
<bullet> Proposed Rule 900.3NYP(d)(3)(C)(i) is identical to Arca
Options Rule 6.62P-O(d)(3)(C)(i) and would provide that if an
Aggressing Order or Aggressing Quote to sell (buy) does not satisfy the
resting AON Order to buy (sell), that Aggressing Order or Aggressing
Quote would not trade with and may trade through such AON Order.
Proposed Rule 900.3NYP(d)(3)(C)(ii) is identical to Arca Options Rule
6.62P-O(d)(3)(C)(ii) and would further provide that if a resting non-
displayed order to sell (buy) does not satisfy the quantity of a same-
priced resting AON Order to buy (sell), a subsequently arriving order
or quote to sell (buy) that satisfies the AON Order would trade before
such resting non-displayed order or quote to sell (buy) at that price.
Both of these proposed rules are similar to current Rule 900.3NY(d)(4),
which provides that a resting AON Order can be ignored if its condition
is not met. Similar to current functionality, even though an AON would
be ranked in the Consolidated Book, it is still a conditional order
type and therefore, by its terms, can be skipped over for an execution.
As noted above, this proposed rule text is identical to Arca Options
Rules 6.62P-O(d)(3)(C)(i) and (ii).
<bullet> Proposed Rule 900.3NYP(d)(3)(D) is identical to Arca
Options Rule 6.62P-O(d)(3)(D) and would provide that a resting AON
Order to buy (sell) would not be eligible to trade against an
Aggressing Order or Aggressing Quote to sell (buy): (i) at a price
equal to or above (below) any orders or quotes to sell (buy) that are
displayed at a price equal to or below (above) the working price of
such AON Order; or (ii) at a price above (below) any orders or quotes
to sell (buy) that are not displayed and that have a working price
below (above) the working price of such AON Order.
<bullet> Proposed Rule 900.3NYP(d)(3)(E) is identical to Arca
Options Rule 6.62P-O(d)(3)(E) and would provide that if a resting AON
Order to buy (sell) becomes an Aggressing Order it would trade as
provided in paragraph (d)(3)(B) of this proposed Rule (described
above); however, other resting orders or quotes to buy (sell) ranked
Priority 3--Non-Display Orders that become Aggressing Orders or
Aggressing Quotes at the same time as the resting AON Order would be
processed before the AON Order. This proposed rule text is designed to
promote clarity in Exchange rules that if multiple orders ranked
Priority 3--Non-Display Orders, including AON and non-AON Orders,
become Aggressing Orders or Aggressing Quotes at the same time, the AON
Order would not be eligible to trade until the other orders ranked
Priority 3- Non-Display Orders have been processed, even if they have
later working times. The Exchange believes that it would be consistent
with the conditional nature of AON Orders for other same-side non-
displayed orders to have a trading opportunity before the AON Order.
Stop Order. Stop Orders are currently defined in Rule
900.3NY(d)(1). The Exchange proposes to use Pillar terminology with
more granularity to describe Stop Orders in proposed Rule
900.3NYP(d)(4), as specified below and identical to Arca Options Rule
6.62P-O(d)(4). Proposed Rule 900.3NYP(d)(4) would provide that a Stop
Order is an order to buy (sell) a particular option contract that
becomes a Market Order (or is ``elected'') when the Exchange BB (BO) or
the most recent consolidated last sale price reported after the order
was placed in the Consolidated Book (the ``Consolidated Last Sale'')
(either, the ``trigger'') is equal to or higher (lower) than the
specified ``stop'' price. The proposed functionality is consistent with
existing functionality and provides more granularity of the
circumstances when a Stop Order would be elected.\42\ Because a Stop
Order becomes a Market Order when it is elected, the Exchange proposes
that when it is elected, it would be cancelled if it does not meet the
validations specified in proposed
[[Page 45739]]
Rule 900.3NYP(a)(1)(A)(above) and if not cancelled, it would be
assigned a Trading Collar. This is consistent with current
functionality, which is not described in the current rule describing
Stop Orders, that once converted to a Market Order, such order is
subject to the checks applicable in the current rule for Market Orders,
i.e., cancelling such order if there is no NBBO. The proposed rule,
which as noted above is identical to Arca Options Rule 6.62P-O(d)(4),
references the checks that would be applicable to a Market Order on
Pillar and thus adds greater granularity and transparency to Exchange
rules.
---------------------------------------------------------------------------
\42\ The current rule states that a Stop Order to buy (sell)
will be triggered (i.e., elected) when the option contract ``trades
at a price equal to or greater (less) than the specified `stop'
price on the Exchange or another Market Center.'' See Rule
900.3NY(d)(1).
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(d)(4)(A) is identical to Arca Options Rule
6.62P-O(d)(4)(A) and would provide that a Stop Order would be assigned
a working time when it is received but would not be ranked or displayed
in the Consolidated Book until it is elected and that once converted to
a Market Order, the order would be assigned a new working time and be
ranked Priority 1--Market Orders. The original working time assigned to
a Stop Order would be used to rank multiple Stop Orders elected at the
same time. This is consistent with the current rule, which provides
that a Stop Order is not displayed and has no standing in any Order
Process in the Consolidated Book, unless or until it is triggered. The
proposed rule is identical to Arca Options Rule 6.62P-O(d)(4)(A) and is
designed to provide greater granularity and clarity regarding the
treatment of Stop Orders, both when received and when elected.
Proposed Rule 900.3NYP(d)(4)(B) is identical to Arca Options Rule
6.62P-O(d)(4)(B) and would specify additional events that are designed
to limit when a Stop Order may be elected so that a Market Order does
not trade during a period of pricing uncertainty:
<bullet> Proposed Rule 900.3NYP(d)(4)(B)(i) is identical to Arca
Options Rule 6.62P-O(d)(4)(B)(i) and would provide that if not elected
on arrival, a Stop Order that is resting would not be eligible to be
elected based on a Consolidated Last Sale unless the Consolidated Last
Sale is equal to or in between the NBBO. This proposed rule text
provides additional transparency of when a resting Stop Order would be
eligible to be elected.
<bullet> Proposed Rule 900.3NYP(d)(4)(B)(ii) is identical to Arca
Options Rule 6.62P-O(d)(4)(B)(ii) and would provide that a Stop Order
would not be elected if the NBBO is crossed.
<bullet> Proposed Rule 900.3NYP(d)(4)(B)(iii) is identical to Arca
Options Rule 6.62P-O(d)(4)(B)(iii) and would provide that after a Limit
State or Straddle State is lifted, the trigger to elect a Stop Order
would be either the Consolidated Last Sale received after such state
was lifted or the Exchange BB (BO).\43\
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\43\ Rule 953.1NY(a)(2) currently provides that the Exchange
will not elect Stop Orders when the underlying NMS stock is either
in a Limit State or a Straddle State, which would continue to be
applicable on Pillar. The Exchange proposes a non-substantive
amendment to Rule 953.1NY(a)(2) to add a cross-reference to proposed
Rule 900.3NYP(d)(4). The proposed rule is also identical to how Stop
Orders are handled if the underlying NMS stock enters a Limit State
or a Straddle State per Arca Options Rule 6.65A-O(a)(2).
---------------------------------------------------------------------------
Stop Limit Order. Stop Limit Orders are currently defined in Rule
900.3NY(d)(2).\44\ The Exchange proposes to use Pillar terminology with
more granularity to describe Stop Limit Orders in proposed Rule
900.3NYP(d)(5), as specified below and identical to Arca Options Rule
6.62P-O(d)(5).
---------------------------------------------------------------------------
\44\ The current rule states that a Stop Limit Order to buy
(sell) will be triggered (i.e., elected) when the option contract
``trades at a price equal to or greater (less) than the specified
`stop' price on the Exchange or another Market Center.'' See Rule
900.3NY(d)(2). Given the contingent nature of Stop Limit Orders, as
is the case today, Stop Limit Orders submitted as IOC would be
rejected on Pillar.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(d)(5) would provide that a Stop Limit Order
is an order to buy (sell) a particular option contract that becomes a
Limit Order (or is ``elected'') when the Exchange BB (BO) or the
Consolidated Last Sale (either, the ``trigger'') is equal to or higher
(lower) than the specified ``stop'' price.\45\ The proposed
functionality is consistent with existing functionality and provides
more granularity of when a Stop Limit Order would be elected than the
current Rule 900.3NY(d)(2) definition of Stop Limit Order. As further
proposed, a Stop Limit Order to buy (sell) would be rejected if the
stop price is higher (lower) than its limit price, which rejection
mirrors Arca Options Rule 6.62P-O(d)(5) and would prevent the Exchange
from accepting potentially erroneously-priced orders. Because a Stop
Limit Order becomes a Limit Order when it is elected, the Exchange
proposes that when it is elected, it would be cancelled if it fails
Limit Order Price Protection or a Price Reasonability Check and if not
cancelled, it would be assigned a Trading Collar.\46\ This
functionality is consistent with current functionality, though it is
not explicitly stated in the current rule describing Stop Limit Orders.
Specifically, both in the current Exchange System and as proposed on
Pillar, once converted to a Limit Order, such order is subject to the
checks applicable in the current rule for Limit Orders, i.e., Limit
Order Filter on the Exchange System. The proposed rule, which as noted
above is identical to Arca Options Rule 6.62P-O(d)(5), references the
checks that would be applicable to a Limit Order on Pillar and thus
adds greater granularity and transparency to Exchange rules.
---------------------------------------------------------------------------
\45\ The term ``Consolidated Last Sale'' is defined in proposed
Rule 900.3NYP(d)(4).
\46\ See discussion infra, regarding proposed Rule 928.1NYP and
Price Reasonability Checks.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(d)(5)(A) is identical to Arca Options Rule
6.62P-O(d)(5)(A) and would provide that a Stop Limit Order would be
assigned a working time when it is received but would not be ranked or
displayed in the Consolidated Book until it is elected and that once
converted to a Limit Order, the order would be assigned a new working
time and be ranked under the proposed category of ``Priority 2--Display
Orders.'' This functionality is consistent with the current rule, which
provides that a Stop Limit Order is not displayed and has no standing
in any Order Process in the Consolidated Book, unless or until it is
triggered. The proposed rule is designed to provide greater granularity
and clarity.
Proposed Rule 900.3NYP(d)(5)(B) is identical to Arca Options Rule
6.62P-O(d)(5)(B) and would specify additional events that are designed
to limit when a Stop Limit Order may be elected so that a Limit Order
would not have a possibility of trading or being added to the
Consolidated Book during a period of pricing uncertainty.
<bullet> Proposed Rule 900.3NYP(d)(5)(B)(i) is identical to Arca
Options Rule 6.62P-O(d)(5)(B)(i) and would provide that if not elected
on arrival, a Stop Limit Order that is resting would not be eligible to
be elected based on a Consolidated Last Sale unless the Consolidated
Last Sale is equal to or in between the NBBO.
<bullet> Proposed Rule 900.3NYP(d)(5)(B)(ii) is identical to Arca
Options Rule 6.62P-O(d)(5)(B)(ii) and would provide that a Stop Limit
Order would not be elected if the NBBO is crossed.
Orders with Instructions Not to Route. Currently, the Exchange
defines non-routable orders in Rule 900.3NY as a PNP Order (which
includes a Repricing PNP Order (``RPNP'')) (current Rule 900.3NY(p)) or
a PNP-Blind Order (current Rule 900.3NY(x)). The Exchange also defines
Intermarket Sweep Orders (current Rule 900.3NY(u)), which are also non-
routable.
The Exchange separately defines quotes--all of which are non-
[[Page 45740]]
routable \47\--in Rule 925.1NY and such quotes may be designated as a
Market Maker--Light Only Quotation (``MMLO'') (current Rule
925.1NY(a)(3)(A)) and a Market Maker--Repricing Quotation (``MMRP'')
(current Rule 925.1NY(a)(3)(B)). On the Exchange System, Market Maker
quotes not designated as MMRP will cancel (rather than reprice) if they
would lock or cross the NBBO, per Rule 925.1NY(a)(4)(C)(i).
---------------------------------------------------------------------------
\47\ See Rule 925.1NY(a)(2) (providing that ``[a] quotation will
not route'').
---------------------------------------------------------------------------
On Pillar, proposed Rule 900.3NYP(e) is identical to Arca Options
Rule 6.62P-O(e) and would streamline the non-routable order types and
quotes that would be available on the Exchange.\48\ As described in
greater detail below, proposed Rule 925.1NYP governing Market Maker
Quotations would no longer define how quotations would function.
Instead, that rule would specify that a Market Maker may designate a
Non-Routable Limit Order as a Market Maker quote. Because the way in
which non-routable orders and quotes would function on Pillar would be
virtually identical (with differences described below), and because
Market Makers could enter a Non-Routable Limit Order and then choose to
designate it either as a quote or an order, the Exchange believes that
it would promote transparency in Exchange rules to consolidate the
description of the functionality in a single rule and eliminate
duplication in Exchange rules. As described below, proposed Rule
925.1NYP would cross reference proposed Rule 900.3NYP(e).
---------------------------------------------------------------------------
\48\ The Exchange proposes to include details about ranking of
orders and quotes with contingencies in this proposed Rule
900.3NYP(e) using the Pillar priority scheme. See, e.g., Rule
964NY(g) (providing that ``[t]he Exchange will apply ranking
restrictions applicable to specific order, quote, or modifier
instructions as provided for in [proposed] Rule 900.3NYP.''). Also,
as discussed infra, see, e.g., note 39, the ranking and priority of
quotes under Pillar is consistent with handling on the Exchange
System unless otherwise noted herein.
---------------------------------------------------------------------------
On Pillar, like Arca Options, the Exchange would no longer offer
functionality based on the PNP-Blind Order or MMLO because it believes
that the proposed orders/quotes with instructions not to route on
Pillar (described below) would continue to provide ATP Holders with the
core functionality associated with these existing order and quotation
types, including that the proposed rules would provide for non-routable
functionality and the ability to either reprice or cancel such orders/
quotes.
Non-Routable Limit Order. Proposed Rule 900.3NYP(e)(1) is identical
to the Arca Options Rule 6.62P-O(e)(1) and would define the Non-
Routable Limit Order. As explained further below, this proposed order
type incorporates functionality currently available in both the
existing PNP and RPNP order types, as defined in Rule 900.3NY, and the
existing MMRP quotation type, as defined in Rule 925.1NYP(a)(3)(C).\49\
As described below, a Market Maker can designate a Non-Routable Limit
Order as either a quote or an order and such interest so designated
would be handled the same except as specified below. Accordingly,
references to the capitalized term ``Non-Routable Limit Order''
describe functionality for either a quote or an order, unless otherwise
specified.
---------------------------------------------------------------------------
\49\ Both MMRPs and RPNPs function similarly. Compare current
Rule 925.1NY(a)(4)(B) and subparagraphs (i) and (ii) with current
Rule 900.3NY(p)(1)(A) and subparagraphs (i) and (ii). They are
currently defined in separate rules only because the former rule
addresses quotes and the latter rule addresses orders.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(e)(1) (like Arca Options Rule 6.62P-O(e)(1)
would provide that a Non-Routable Limit Order is a Limit Order or quote
that does not route and may be designated Day or GTC and would further
provide that a Non-Routable Limit Order with a working price different
from the display price would be ranked under the proposed category of
``Priority 3--Non-Display Orders'' and a Non-Routable Limit Order with
a working price equal to the display price would be ranked under the
proposed category of ``Priority 2--Display Orders.'' This proposed
rule, which as noted above is identical to the Arca Options Rule 6.62P-
O(e)(1), and uses Pillar terminology, including references to the
Pillar concepts of ``working'' and ``display'' price as well to
Priority rankings as proposed in Rules 964NYP(e)(2) and (3).\50\ This
proposed rule also describes functionality similar to that described in
the first clause of current Rule 900.3NY(p) relating to a PNP Order,
which states that the portion of such order not executed on arrival is
ranked in the Consolidated Book without routing any portion of the
order to another Market Center (although the current rule does not
include Pillar concepts of ``working'' and ``display'' price or Pillar
Priority rankings).
---------------------------------------------------------------------------
\50\ See supra note 20 (regarding definitions of ``display
price'' and ``working price,'' set forth in Rules 964NYP(a)(1) and
(a)(4), respectively.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(e)(1)(A) is identical to the Arca Options
Rule 6.62P-O(e)(1)(A) and would provide that a Non-Routable Limit Order
would not be displayed at a price that would lock or cross the ABBO and
that a Non-Routable Limit Order to buy (sell) would trade with orders
or quotes to sell (buy) in the Consolidated Book priced at or below
(above) the ABO (ABB). This proposed text is designed to provide
granularity that a Non-Routable Limit Order would never be displayed at
a price that would lock or cross the ABBO, which is consistent with
current PNP and RPNP Order functionality and with current Market Maker
quoting functionality, as described in Rules 900.3NY(p), (p)(1), and
925.1NY(a)(3)-(4), respectively. The Exchange proposes to use the new
term ``ABBO'' (as proposed herein) to provide more granularity in
Exchange rules.
Proposed Rule 900.3NYP(e)(1)(A)(i) is identical to the Arca Options
Rule 6.62P-O(e)(1)(A)(i) and would provide that a Non-Routable Limit
Order can be designated to be cancelled if it would be displayed at a
price other than its limit price. This would be an optional designation
and would provide ATP Holders with functionality similar to how a PNP
Order or a Market Maker quote not designated as MMRP currently
functions, which cancels if such order or quote locks or crosses the
NBBO.\51\ The Exchange proposes a substantive difference from the
current PNP Order functionality such that if an ATP Holder opts to
cancel instead of reprice a Non-Routable Limit Order, such order would
be cancelled only if it could not be displayed at its limit price--
which could be because the order would be repriced to display at a
price that would not lock or cross the ABBO or because it would be
repriced due to Trading Collars.\52\ Stated otherwise, if a Non-
Routable Limit Order with a designation to cancel could be displayed at
its original limit price and not lock or cross the ABBO, such order or
quote would not be cancelled. The Exchange believes that the proposed
rule provides granularity of the operation of a Non-Routable Limit
Order and when such order or quote
[[Page 45741]]
would be cancelled, if so designated, including specifying
circumstances when such order could be repriced, such as to avoid
locking or crossing the ABBO or because of Trading collars.
---------------------------------------------------------------------------
\51\ A PNP Order cannot route, and any unexecuted portion is
ranked in the Consolidated Book except that such order is canceled
if it would lock or cross the NBBO. See Rule 900.3NY(p). A Market
Maker quote not designated as MMLO or MMRP will cancel (rather than
reprice) if such quote would lock or cross the NBBO. See Rule
925.1NY(a)(4)(C).
\52\ Current Rule 900.3NY(p)(1)(B) provides than an incoming
RPNP order would cancel if its limit price is more than a
configurable number of MPVs outside its initial display price (on
arrival). Under Pillar, because Trading Collars would be applicable
to Non-Routable Limit Orders (and such orders may be repriced or
``collared'' on arrival), the Exchange (like Arca Options) does not
propose to cancel an incoming Non-Routable Limit Order if its limit
price is more than a configurable number of MPVs outside its initial
display price. As such, this aspect of RPNP functionality is not
incorporated in the proposed Pillar rules and the Exchange instead
proposes to incorporate Trading Collar functionality into the Non-
Routable Limit Order.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(e)(1)(A)(ii) is identical to Arca Options
Rule 6.62P-O(e)(1)(A)(ii) and would provide that if not designated to
cancel, if the limit price of a Non-Routable Limit Order to buy (sell)
would lock or cross the ABO (ABB), it would be repriced to have a
working price equal to the ABO (ABB) and a display price one MPV below
(above) that ABO (ABB). Accordingly, the proposed Non-Routable Limit
Order, if not designated to cancel, would reprice in the same manner as
an RPNP order or MMRP quotation reprices on arrival per Rules
900.3NY(p)(1)(A) and 925.1NY(a)(4)(B), which both offer similar
functionality.
The Exchange also proposes functionality on Pillar for the Non-
Routable Limit Order that is consistent with but different in
application to the RPNP Order or MMRP on the Exchange System.
Specifically, proposed Rule 900.3NYP(e)(1)(B), which is identical to
Arca Options Rule 6.62P-O(e)(1)(B), would provide that the display
price of a resting Non-Routable Limit Order to buy (sell) that has been
repriced would be repriced higher (lower) only one additional time.\53\
If after that second repricing, the display price could be repriced
higher (lower) again, the order can be designated to either remain at
its last working price and display price or be cancelled, provided that
a resting Non-Routable Limit Order that is designated as a quote cannot
be designated to be cancelled.\54\ As compared to the proposal on
Pillar to limit the number of times that Non-Routable Limit Orders may
be repriced, the Exchange System restricts repricing of RPNPs and MMRPs
based on the limit price of the interest being a configurable number of
MPVs away from its initial display price.\55\ The Exchange therefore
believes that the proposed functionality is consistent with current
functionality because in either case, there will be limited repricing
of resting interest, and would increase determinism in order execution
based on the explicit restriction on the number of times resting
interest may be repriced.
---------------------------------------------------------------------------
\53\ For example, on arrival, a Non-Routable Limit Order to buy
(sell) with a limit price higher (lower) than the ABO (ABB), would
have a display price one MPV below (above) the ABO (ABB) and a
working price equal to the ABO (ABB). If the ABO (ABB) reprices
higher (lower), the resting Non-Routable Limit Order to buy (sell)
would similarly be repriced higher (lower). If the ABO (ABB) adjusts
higher (lower) again, the resting Non-Routable Limit Order would not
be adjusted again.
\54\ As described in the American Pillar Priority Filing, the
working time of a Non-Routable Limit Order would be adjusted as
described in Rule 964NYP(f)(2), which would be applicable to any
scenario when the working time of an order may change, including a
Non-Routable Limit Order. Similar to how the Pillar rules function
on Arca Options, the Exchange does not propose to separately
describe how the working time of an order changes in proposed Rule
900.3NYP. See also Arca Options Rule 6.76P-O(f)(2) (describing when
the working time of an order or quote may change and not repeating
this information in Rule 6.62P-O).
\55\ See, e.g., Rule 900.3NY(p)(1)(B) (providing that ``[a]n
incoming RPNP will be cancelled if its limit price to buy (sell) is
more than a configurable number of MPVs above (below) the initial
display price (on arrival), after first trading with eligible
interest, if any,'' which configurable number of MPVs will be
determined by the Exchange and be announced by Trader Update) and
Rule 925.1NY(a)(4)(C) (providing that, an MMRP to buy (sell) will be
canceled after trading with marketable interest in the Consolidated
Book up (down) to the NBO (NBB), if its limit price is more than a
configurable number of MPVs above (below) the initial display price
(on arrival)).
---------------------------------------------------------------------------
The Exchange notes that, as is the case per Arca Options Rule
6.62P-O(e)(1)(B), a designation to cancel after an order has been
repriced once is separate from the designation to cancel if a Non-
Routable Limit Order cannot be displayed at its limit price. When a
Non-Routable Limit Order is designated to cancel if it cannot be
displayed at its limit price, there is no repricing and therefore the
option of a second cancellation designation is moot. Rather, this
second cancellation designation is applicable only to a resting Non-
Routable Limit Order that has been designated to reprice on arrival and
was repriced before it was displayed on the Consolidated Book. This
functionality provides ATP Holders with an option to cancel a resting
order if market conditions are such that a resting order could be
repriced again, e.g., the contra-side ABBO changes. The Exchange
proposes that this second cancellation option would not be available
for any Non-Routable Limit Orders designated by a Market Maker as a
quote. The Exchange believes that this proposed difference would assist
Market Makers in maintaining quotes in their assigned series by
reducing the potential to interfere with a Market Maker's ability to
maintain their continuous quoting obligations.\56\ As noted above, this
proposed functionality is identical to Arca Options Rule 6.62P-
O(e)(1)(B).
---------------------------------------------------------------------------
\56\ Proposed Rules 925.1NYP(b) and (c) set forth the continuous
quoting obligations of Specialists and Market Makers, respectively.
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(e)(1)(B)(i) is identical to Arca Options
Rule 6.62P-O(e)(1)(B)(i) and would provide that if the limit price of
the resting Non-Routable Limit Order to buy (sell) that has been
repriced no longer locks or crosses the ABO (ABB), it would be assigned
a working price and display price equal to its limit price.\57\
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\57\ See American Pillar Priority Filing (regarding Rule
964NYP(b)(2), which describes when the Exchange would not change the
display price of any Limit Orders or quotes ranked under the
proposed category of ``Priority 2--Display Orders'').
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(e)(1)(B)(ii) is identical to Arca Options
Rule 6.62P-O(e)(1)(B)(ii) and would provide that the working price of a
resting Non-Routable Limit Order to buy (sell) that has been repriced
would be adjusted to be equal to its display price if the ABO (ABB) is
equal to or lower (higher) than its display price. This proposed rule
is based in part on how an RPNP or MMRP reprices when the NBO (NBB)
updates to lock or cross its display price (as described in Rules
900.3NY(p)(1)(A)(i) and 925.1NY(a)(4)(B)(i)) and uses Pillar
terminology (i.e., ABBO and concepts of working price and display
price).\58\ The proposed rule would further provide that once the
working price and display price of a Non-Routable Limit Order to buy
(sell) are the same, the working price would be adjusted higher (lower)
only if the display price of the order is adjusted.\59\
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\58\ Rule 900.3NY(p)(1)(A)(i) provides that ``if the NBO (NBB)
updates to lock or cross the RPNP's display price, such RPNP will
trade at its display price.'' Rule 925.1NY(a)(4)(B)(i) provides that
``if the NBO (NBB) updates to lock or cross the MMRP's display
price, such MMRP will trade at its display price.'' On Pillar, if
the NBO (NBB) updates to lock or cross the display price of a Non-
Routable Order, and the working price is adjusted to be equal to the
display price, the order will not receive a new working time. See
Rule 964NYP(f)(2)(B).
\59\ For example, if the ABO is 1.05 and the Exchange receives a
Non-Routable Limit Order to buy priced at 1.10, it would be assigned
a display price of 1.00 and a working price of 1.05. If the ABO
adjusts to 1.00, the working price of the Non-Routable Limit Order
to buy would be adjusted to 1.00 to be equal to its display price.
However, if the Away Market BO moves back to 1.05, the Non-Routable
Limit Order's working price would not adjust again to 1.05 and would
stay at 1.00.
---------------------------------------------------------------------------
Finally, proposed Rule 900.3NYP(e)(1)(C) is identical to Arca
Options Rule 6.62P-O(e)(1)(C) and would provide that the designation to
cancel a Non-Routable Limit Order (including those designated as
quotations) \60\ would not be applicable in an Auction and, per
proposed Rule 952NYP(g)(2) (described below) such order would
participate in an Auction at its limit price. This proposed rule text
promotes clarity and transparency that a
[[Page 45742]]
Non-Routable Limit Order would be eligible to participate in an
Auction, but that it would be repriced to its limit price for
participation in such Auction, which is consistent with current RPNP
functionality, as described in the last sentence of Rule 900.3NY(p) and
providing that an RPNP would be processed as a Limit Order and would
not be repriced for purposes of participating in an opening or
reopening auction. This proposal is also consistent with Rule
925.1NY(a)(5), which provides that MMRPs received when a series is not
open for trading will be eligible to participate in the opening auction
and re-opening auction (as applicable) at the limit price of the MMRP.
---------------------------------------------------------------------------
\60\ See discussion, infra, regarding proposed Rule
952NYP(g)(1), which provides that ``all resting Market Maker
quotations''--including Non-Routable Limit Orders designated as
quotations--will be canceled in the event of a Trading Halt, which
functionality is consistent with current Rule 925.1NY(a)(5), which
likewise provides that ``[a]ll resting quotations will be cancelled
in the event of a trading halt'').
---------------------------------------------------------------------------
Intermarket Sweep Order (``ISO''). ISOs are currently defined in
Rule 900.3NY(u) as a Limit Order for an options series that instructs
the Exchange to execute the order up to the price of its limit,
regardless of the Away Market Protected Quotations.\61\ The Exchange
proposes to offer identical functionality on Pillar, including that an
ISO is a Limit Order that does not route and meets the requirements of
Rule 990NY(8), in proposed Rule 900.3NYP(e)(3), which is identical to
Arca Options Rule 6.62P-O(e)(3).\62\
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\61\ The terms ``Protected Bid,'' ``Protected Offer,'' and
``Quotation'' are defined in Rules 990NY(15) and (16) and the term
``Away Market'' is defined in Rule 900.2NY. Accordingly, Away Market
Protected Quotations refer to Protected Bids and Protected Offers
that are disseminated pursuant to the OPRA Plan and are the Best Bid
and Best Offer displayed by an Eligible Exchange, as those terms are
defined in Rule 990NY.
\62\ The Exchange proposes to hold Rule 900.3NYP(e)(2) as
``Reserved'' to keep the numbering of this rule consistent with Arca
Options Rule 6.62P-O(e), to account for the fact that the Exchange
does not propose to offer ALO Orders, which are described in Arca
Options Rule 6.62P-O(e)(2). For avoidance of doubt (and if not
otherwise specifically noted herein), the Exchange believes that the
omission of reference to ALO Orders (or DAY ISO ALOs) in any
proposed rule that is said to be ``identical'' to the analogous Arca
Options rule (that does include such reference(s)), is an immaterial
difference as it relates to an order type/modifier not being offered
on the Exchange. As such, the omission(s) has no bearing on the
proposed Pillar functionality.
---------------------------------------------------------------------------
On Pillar, the Exchange proposes to add the ability for an ATP
Holder to designate an ISO either as IOC or with a Day time-in-force
designation. The Exchange proposes to describe the functionality for
each type of ISO separately, as follows:
<bullet> IOC ISO. Proposed Rule 900.3NYP(e)(3)(A) is identical to
Arca Options Rule 6.62P-O(e)(3)(A) and would define an IOC ISO as an
ISO designated IOC to buy (sell) that would be immediately traded with
orders and quotes to sell (buy) in the Consolidated Book up to its full
size and limit price and may trade through Away Market Protected
Quotations and any untraded quantity of an IOC ISO would be immediately
and automatically cancelled. This proposed rule describes Pillar
functionality that would be no different from how ISOs currently
function on the Exchange.
<bullet> Day ISO. Proposed Rule 900.3NYP(e)(3)(B) is identical to
Arca Options Rule 6.62P-O(e)(3)(B) and would define a Day ISO as an ISO
designated Day to buy (sell) that, if marketable on arrival, would be
immediately traded with orders and quotes to sell (buy) in the
Consolidated Book up to its full size and limit price and may trade
through Away Market Protected Quotations and that any untraded quantity
of a Day ISO would be displayed at its limit price and may lock or
cross Away Market Protected Quotations at the time the Day ISO is
received by the Exchange. As noted above, this proposed functionality
(allowing Day designation for ISOs) would be consistent with
functionality offered on Arca Options and would offer ATP Holders
additional control over their trading interest.\63\ In addition to the
proposed functionality being identical to Arca Options Rule 6.62P-
O(e)(3)(B), this functionality is also available on other options
exchanges.\64\ The proposed Day ISO is also consistent with current
Rule 992NY(b)(3), which describes an exception to the prohibition on
locking or crossing a Protected Quotation if the Member simultaneously
routed an ISO to execute against the full displayed size of any locked
or crossed Protected Bid or Protected Offer.\65\ Although the Exchange
has not previously availed itself of this exception, this exception to
locking and crossing Protected Bids and Protected Offers would only be
needed if an ISO is designated as Day and therefore would be displayed
at a price that would lock or cross a Protected Quotation; an IOC ISO
would never be displayed and therefore this existing exception would
not be applicable to such orders.
---------------------------------------------------------------------------
\63\ Unlike on Arca Options, the Exchange will not allow a DAY
ISO to be designated with an ALO Modifier (as is available per Arca
Options Rule 6.62P-O(e)(3)(C)) because, as noted above, the Exchange
does not propose to offer ALO Orders on Pillar. The Exchanges
believes that this textual difference is immaterial as it does not
impact the proposed Pillar functionality.
\64\ See Nasdaq Options 3, Section 7(a)(7) (``ISOs may have any
time-in-force designation . . . .'') and Cboe Rules 5.30(a)(2) and
(3). See also Cboe US Options Fix Specifications, dated March 29,
2023, Section 4.4.7, available here: <a href="http://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf">http://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf</a>, which references how a
Day ISO would be processed under specified circumstances.
\65\ The Commission has previously stated that the requirements
in the Options Linkage Plan relating to Locked and Crossed Markets
are ``virtually identical to those applicable to market centers for
NMS stock under Regulation NMS.'' See also Securities Exchange Act
Release No. 60405 (July 30, 2009), 74 FR 39362, 39368 (August 6,
2009) (Order approving Options Linkage Plan). Accordingly, guidance
relating to the ISO exception for locked and crossed markets for NMS
stocks that specifically contemplate use of Day ISOs is also
applicable to options trading. See Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of Regulation NMS, FAQ
5.02 (``The ISO exception to the SRO lock/cross rules, in contrast,
requires that ISOs be routed to execute against all protected
quotations with a price that is equal to the display price (i.e.,
those protected quotations that would be locked by the displayed
quotation), as well as all protected quotations with prices that are
better than the display price (i.e., those protected quotations that
would be crossed by the displayed quotation).'' Consistent with this
guidance, the Exchange implemented Rule 992NY(b)(3). See also Cboe
Rule 5.67(b)(3) and Nasdaq Options 5, Section 3(b)(3).
---------------------------------------------------------------------------
Complex Orders. Complex Orders are defined in Rule 900.3NY(e). The
Exchange proposes to define Complex Orders for Pillar in proposed Rule
900.3NYP(f), which is identical to Arca Options Rule 6.62P-O(f). The
proposed rule is based on current Rule 900.3NY(e)(1)-(2) without any
substantive differences. However, like Arca Options Rule 6.62P-O(f),
the proposed definition would add clarifying text that the different
options series in a Complex Order are also referred to as the ``legs''
or ``components'' of the Complex Order and would provide that a Complex
Order would be any order involving the simultaneous purchase and/or
sale of ``two or more options series in the same underlying security,''
without including the superfluous and redundant modifier ``different''
before the phrase ``more option series.'' In addition, proposed Rule
900.3NYP(f) (like Arca Options Rule 6.62P-O(f)) would not reference
mini-options contracts, which no longer trade on the Exchange.
Cross Orders. The Exchange proposes to describe the Cross Orders
available on the Exchange in proposed Rule 900.3NYP(g). Proposed Rule
900.3NYP(g)(1) would describe Qualified Contingent Cross Orders, which
are defined in Rule 900.3NY(y) and Commentary .01 to Rule 900.3NY. In
addition, current Rule 985NY (Qualified Contingent Cross Trade)
describes how Qualified Contingent Cross Orders are processed. As
proposed, QCC Orders on Pillar would function identically to how
Qualified Contingent Cross Orders function on the Exchange System, and
for purposes of the rules governing trading on Pillar, the Exchange
proposes to merge language from two rules relating to QCC Orders
[[Page 45743]]
into a single rule, proposed Rule 900.3NYP(g)(1). Proposed Rule
900.3NYP(g)(1) is identical to Arca Options Rule 6.62P-O(g)(1) and
would describe rules applicable to electronically-entered QCC Orders
and Complex QCC Orders. In addition, the Exchange proposes to adopt new
Rule 900.3NYP(g)(1)(D) to provide for the trading of Complex QCC Orders
(described below).\66\ In addition, the Exchange proposes to add, as a
placeholder, Rule 900.3NYP(g)(2) to describe the new Customer-to-
Customer Cross Order type that will be available on Pillar and
described in a separate rule filing. Further, for the sake of clarity,
the Exchange proposes to adopt Rule 900.3NYP(g)(3) to include orders
submitted to the Customer Best Execution (``CUBE'') Auction in the
proposed definition of ``Cross Orders'' as describe below.
---------------------------------------------------------------------------
\66\ See also Securities Exchange Act Release No. 97739 (June
15, 2023), 88 FR 40893 (June 22, 2023) (SR-NYSEAMER-2023-17) (order
approving new Rule 980NYP (Complex Order Trading)) (the ``Pillar
Complex Approval Order'').
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(g)(1)(A) is identical to Arca Options Rule
6.62P-O(g)(1)(A) and would provide that a QCC Order must be comprised
of an originating order to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent trade coupled with a
contra-side order or orders totaling an equal number of contracts. This
proposed rule text is based on Rule 900.3NY(y) with a non-substantive
difference that the Pillar rule (like Arca Options Rule 6.62P-
O(g)(1)(A)) would not reference mini-options contracts, which no longer
trade on the Exchange. Proposed Rule 900.3NYP(g)(1)(A) would also
specify that if a QCC has more than one option leg (a ``Complex QCC
Order''), each option leg must have at least 1,000 contracts, which is
consistent with existing functionality that is not described in the
current rule. Complex QCCs, which are described below, and function in
the same manner as on Arca Options, are not novel.\67\ The proposed
rule would further provide that a QCC Order that is not rejected per
proposed Rules 900.3NYP(g)(1)(C) or (D) would immediately trade in full
at its price, would not route, and may be entered with an MPV of $0.01
regardless of the MPV of the options series \68\ and that QCC Orders
may be entered by Floor Brokers from the Trading Floor or routed to the
Exchange from off-Floor. This proposed rule is consistent with current
Rule 985NY, which provides that QCC Orders are automatically executed
upon entry provided that they meet specified criteria. On Pillar, the
Exchange proposes to specify those criteria in proposed Rule
900.3NYP(g)(1)(C), described below. In addition, the proposed Rule
would provide that Rule 935NY (related to exposure of orders on the
Exchange) does not apply to Cross Orders, which text is substantively
identical to Commentary .03 to current Rule 935NY.\69\
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\67\ In addition to trading on Arca Options, other options
exchanges also offer Complex QCCs. See, e.g., Cboe Rule 5.6(c)
(setting forth operation of Complex QCC Orders) and MIAX Rule
515(h)(4) (same).
\68\ Allowing QCC Orders to trade in pennies under Pillar is
consistent with current functionality. See Rule 985NY(2) (providing
that QCC Orders may only be entered in the regular trading
increments applicable to the options class under Rule 960NY(b)).
Rule 960NY(b) provides that minimum trading increment for option
contracts traded on the Exchange will be one cent ($0.01) for all
series.
\69\ Commentary .03 to Rule 985NY provides that ``Rule 935NY
does not apply to Qualified Contingent Cross Orders.''
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(g)(1)(B) and subparagraphs (i)-(vi) is
identical to Arca Options Rule 6.62P-O(g)(1)(B)(i)-(vi) and would
define a ``qualified contingent trade'' as a transaction consisting of
two or more component orders, executed as agent or principal, where
specified requirements are also met and uses the same text as currently
set forth in Commentary .01 and its sub-paragraphs (a)-(f) to Rule
900.3NY without any differences.
Proposed Rule 900.3NYP(g)(1)(C) is identical to Arca Options Rule
6.62P-O(g)(1)(C) would describe general rules relating to execution of
QCC Orders and would provide that a QCC Order with one option leg would
be rejected if received when the NBBO is crossed or if it would be
traded at a price that (i) is at the same price as a displayed Customer
order on the Consolidated Book and (ii) is not at or between the NBBO
and would provide that the QCC Order would never trade at a price worse
than the Exchange BBO. This proposed rule is based on Rule 985NY
without any substantive differences but adds detail about pricing of a
QCC Order vis a vis the Exchange BBO. The Exchange believes that
specifying that a QCC Order would be rejected when the NBBO is crossed,
which is new text, provides greater granularity than current 985NY(1),
which provides that ``Qualified Contingent Cross Orders will be
automatically cancelled if they cannot be executed.'' The other two
proposed conditions are identical to the current functionality, as
specified in Rule 985NY: that Qualified Contingent Cross Orders are
automatically executed ``provided that the execution (i) is not at the
same price as a Customer Order in the Consolidated Book and (ii) is at
or between the NBBO.''
Proposed Rule 900.3NYP(g)(1)(D) is identical to Arca Options Rule
6.62P-O(g)(1)(D) would describe how Complex QCC Orders would be
executed on the Exchange. As proposed, as is the case per Arca Options
Rules 6.62P-O(g)(1)(D)(i)-(iv) (and described below), a Complex QCC
Order must include a limit price, no option leg would trade at a price
worse than the Exchange BBO, and would be rejected if:
<bullet> any option leg cannot execute in compliance with proposed
paragraph (g)(1)(C) of this Rule as described above (proposed Rule
900.3NYP(g)(1)(D)(i)), which mirrors Complex QCC handling on Arca
Options and is consistent with other options exchanges; \70\
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\70\ See, e.g., MIAX Rule 515(h)(4) (which provides that each
Complex QCC or ``cQCC'' is ``automatically executed upon entry
provided that, with respect to each option leg of the cQCC Order,
the execution (i) is not at the same price as a Priority Customer
Order on the Exchange's Book; and (ii) is at or between the NBBO'').
---------------------------------------------------------------------------
<bullet> the best-priced Complex Order(s) on the Exchange
contain(s) displayed Customer interest and the Complex QCC Order price
does not improve such displayed Customer interest by $0.01 (proposed
Rule 900.3NYP(g)(1)(D)(ii)), which mirrors Complex QCC handling on Arca
Options and is consistent with other options exchanges; \71\
---------------------------------------------------------------------------
\71\ See, e.g., Cboe Rule 5.6(c) (Order Instructions, QCC Orders
(requiring for the ``Execution of QCC Orders'' that the ``execution
price is better than the price of any complex order resting in the
[Cboe Complex Order Book], unless the Complex QCC Order is a
Priority Customer Order and the resting complex order is a non-
Priority Customer Order, in which case the execution price may be
the same as or better than the price of the resting complex
order'').
---------------------------------------------------------------------------
<bullet> the price of the QCC Order is worse than the best-priced
Complex Orders in the Consolidated Book or the prices of the best-
priced Complex Orders in the Consolidated Book are crossed (proposed
Rule 900.3NYP(g)(1)(D)(iii)), which mirrors Complex QCC handling on
Arca Options, provides additional protections against potentially
erroneous executions, and adds transparency and granularity to the
proposed rule; or
<bullet> there is no NBO for a given leg (proposed Rule
900.3NYP(g)(1)(D)(iv)), which mirrors Complex QCC handling on Arca
Options, provides additional protections against potentially erroneous
executions, and adds transparency and granularity to the proposed rule.
As noted above, this proposed rule text is identical to Arca
Options Rules 6.62P-O(g)(1)(D)(i)-(iv) and is designed to promote
clarity and transparency in Exchange rules regarding the price
[[Page 45744]]
requirements for a Complex QCC Order, which requirements to protect
priority of resting interest are consistent with the rules of other
options exchanges, as described above, and to provide additional
safeguards against potentially erroneous executions of Complex QCCs.
Proposed Rule 900.3NYP(g)(1)(E) is identical to Arca Options Rule
6.62P-O(g)(1)(E) and would specify rules governing QCC Orders entered
from the Trading Floor, which can be entered only by Floor Brokers,\72\
and is based on Commentary .01 to Rule 985NY without any substantive
differences.\73\ The Exchange proposes textual changes as compared to
the current Rule that are not designed to change the substance of the
Rule, but to instead promote clarity and transparency. The proposed
rule would provide that while on the Trading Floor, only Floor Brokers
can enter QCC Orders, and that Floor Brokers may not enter QCC Orders
for their own account, the account of an associated person, or an
account with respect to which it or an associated person thereof
exercises investment discretion (each a ``prohibited account''). As
further proposed, when executing such orders, Floor Brokers would not
be subject to Rules 934NY, 934.1NY, 934.2NY, and 934.3NY regarding
``Crossing'' orders. Floor Brokers must maintain books and records
demonstrating that each QCC Order entered from the Floor was not
entered for a prohibited account. Any QCC Order entered from the Floor
that does not have a corresponding record required by this paragraph
would be deemed to have been entered for a prohibited account in
violation of this Rule.
---------------------------------------------------------------------------
\72\ An options Floor Broker is ``a sole proprietor ATP Holder
or a representative of an ATP Holder who is registered with the
Exchange for the purpose, while on the Exchange Floor, of accepting
and executing option orders.'' See Rule 930NY(a).
\73\ Commentary .01 to Rule 985NY provides: ``Qualified
Contingent Cross Orders can be entered into the System from on the
Floor of the Exchange only by Floor Brokers. Floor Brokers shall not
enter such orders for their own account, the account of an
associated person, or an account with respect to which it or an
associated person thereof exercises investment discretion (each a
`prohibited account'). When executing such orders, Floor Brokers
shall not be subject to Rules 934NY, 934.1NY, 934.2NY, and 934.3NY.
Floor Brokers must maintain books and records demonstrating that
each Qualified Contingent Cross Order entered from the Floor was not
entered for a prohibited account. Any Qualified Contingent Cross
Order entered from the Floor that does not have a corresponding
record required by this Commentary .01 shall be deemed to have been
entered for a prohibited account in violation of this Rule.''
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(g)(1)(F) is identical to Arca Options Rule
6.62P-O(g)(1)(F) and would specify rules governing QCC Orders entered
off-Floor and that ATP Holders must maintain books and records
demonstrating that each such order was so routed. This proposed rule is
based on Commentary .02 to Rule 985NY without any substantive
differences.\74\ The Exchange proposes textual differences as compared
to the current Rule that are not designed to change the substance of
the Rule, but instead promote clarity and transparency.
---------------------------------------------------------------------------
\74\ Commentary .02 to Rule 985NY provides: ``With respect to a
Qualified Contingent Cross Order that was routed to the System from
off of the Floor, ATP Holders must maintain books and records
demonstrating that each such order was routed to the system from off
of the Floor. This provision would not apply to a Qualified
Contingent Cross Order covered by Commentary .01 to this Rule 985NY
(i.e., a Qualified Contingent Cross Order routed to a Floor Broker
for entry into the System).'' The Exchange does not propose to
include the last sentence of this Commentary in the proposed Pillar
rule because the Exchange does not believe it is necessary to
specify that Floor Brokers that enter orders electronically are
subject to rules relating to electronic order entry as opposed to
rules governing open outcry.
---------------------------------------------------------------------------
In connection with adding QCC to proposed Rule 900.3NYP, the
Exchange proposes to add the following preamble to Rule 985NY: ``This
Rule is not applicable to trading on Pillar.'' This proposed preamble
is designed to promote clarity and transparency in Exchange rules that
Rule 985NY would not be applicable to trading on Pillar.
The Exchange plans to file a separate rule filing to adopt
``Customer-to-Customer Cross Orders.'' Because this would be a new
cross order that does not exist on Arca Options, the Exchange proposes
to simply adopt the name of this order type as proposed Rule
900.3NYP(g)(2) and to hold the description of how such order would
trade as ``Reserved.''
The Exchange proposes to include CUBE Orders in the list of Cross
Orders. Proposed Rule 900.3NYP(g)(3) would add clarity to Exchange
rules that CUBE Orders are Cross Orders governed by separate Exchange
rules.\75\ Specifically, proposed Rule 900.3NYP(g)(3) would provide
that Single-Leg CUBE Orders submitted pursuant to proposed Rule
971.1NYP and Complex CUBE Orders submitted pursuant proposed Rule
971.2NYP would be considered Cross Orders.\76\
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\75\ See, e.g., Rules 971.1NY and 971.2NY describing Single-Leg
and Complex CUBE Auctions, respectively.
\76\ The Exchange plans to submit separate rule filings to adopt
CUBE Auction functionality on Pillar, which will be set forth in
proposed Rules 971.1NYP (for the single-leg CUBE Auction) and
971.2NYP (for the Complex CUBE Auction), respectively. See, e.g.,
NYSEAMER-2023-21P (prefiling to adopt Rule 971.1NYP for single-leg
CUBE Auctions on Pillar).
---------------------------------------------------------------------------
Orders Available Only in Open Outcry. The Exchange proposes Rule
900.3NYP(h) to describe orders that are available only in open outcry,
most of which are currently defined in Rule 900.3NY.
First, proposed Rule 900.3NYP(h)(1) would codify an existing order
type, the Clear-the-Book (``CTB'') Order, which is currently described
only in a Regulatory Bulletin.\77\ This proposed rule is substantially
the same as Arca Options Rule 6.62P-O(h)(1), except that paragraph
(h)(1)(B) of the proposed rule accounts for the Exchange's Customer-
centric trading model as described below. Proposed Rule 900.3NYP(h)(1)
would describe the CTB Order in the same manner as it is described in
Arca Options Rule 6.62P-O(h)(1), which would be an order type available
in open outcry that would interface with the Consolidated Book, and
therefore with Pillar. As proposed, a CTB Order would be a Limit IOC
Order that may be entered only by a Floor Broker, contemporaneous with
executing an order in open outcry, that is approved by a Trading
Official (the ``TO Approval''). The CTB Order would be eligible to
trade only with contra-side orders and quotes that were resting in the
Consolidated Book prior to the TO Approval. In addition, proposed Rules
900.3NYP(h)(1)(A)-(C) would provide that:
---------------------------------------------------------------------------
\77\ See NYSE Amex Options RB-16-02, dated February 19, 2016
(Rules of Priority and Order Protection in Open Outcry), available
here: <a href="https://www.nyse.com/publicdocs/nyse/markets/american-options/rule-interpretations/2016/NYSE%20Amex%20Options%2016-02.pdf">https://www.nyse.com/publicdocs/nyse/markets/american-options/rule-interpretations/2016/NYSE%20Amex%20Options%2016-02.pdf</a>.
---------------------------------------------------------------------------
<bullet> A CTB Order to buy (sell) would trade with contra-side
orders and quotes with a display price below (above) the limit price of
the CTB Order (proposed Rule 900.3NYP(h)(1)(A), which is identical to
Arca Options Rule 6.62P-O(h)(1)(A));
<bullet> A CTB Order to buy (sell) would trade with contra-side
orders and quotes that have a display price and working price equal to
the limit price of the CTB Order only if there is displayed Customer
sell (buy) interest at that price, in which case, the CTB Order to buy
(sell) would trade with the displayed Customer interest to sell (buy)
(proposed Rule 900.3NYP(h)(1)(B)); \78\ and
---------------------------------------------------------------------------
\78\ This proposed rule differs from Arca Options Rule 6.62P-
O(h)(1)(B) because it does not provide for the CTB Order to trade
with ``any non-Customer interest to sell (buy) with a working time
earlier than the latest-arriving displayed Customer interest to sell
(buy),'' because Customer interest has priority of same-priced non-
Customer interest on the Exchange.
---------------------------------------------------------------------------
<bullet> Any unexecuted portion of the CTB Order would cancel after
trading with all better-priced interest and eligible same-priced
interest on the
[[Page 45745]]
Consolidated Book (proposed Rule 900.3NYP(h)(1)(C), which is identical
to Arca Options Rule 6.62P-O(h)(1)(C)).
Currently, CTB Orders only trade with displayed Customer interest,
but do not trade with better-priced displayed non-Customer interest. In
Pillar, as described above, CTB Orders would trade with displayed
Customer interest at a price and would also trade with displayed non-
Customer interest priced better than displayed Customer interest (i.e.,
a CTB order buying with a $1.00 limit would now trade with displayed
interest offered at $0.99, whether on behalf of a Customer or a non-
Customer). In addition to being similar to Arca Options Rule 6.62P-
O(h)(1), the Exchange believes that codifying CTB Order functionality,
and thus automating priority would make it easier for Floor Brokers to
comply with their obligation to satisfy better-priced interest on the
Consolidated Book. In addition, the Exchange believes that this
proposed change would increase execution opportunities and achieve the
goal of a CTB Order, which is to clear priority on the Consolidated
Book at the time of the TO Approval.
In addition, proposed Rule 900.3NYP(h)(1)(D) is identical to Arca
Options Rule 6.62P-O(h)(1)(D) and would codify existing regulatory
responsibilities of Floor Brokers utilizing CTB Orders to submit such
orders in a timely manner after receiving TO Approval and would also
provide that because CTB Orders are non-routable (and thus ineligible
to clear Protected Quotations), Floor Brokers would still be obligated
to route any other eligible orders (i.e., not the CTB Order) to better-
priced interest on Away Markets per Rule 992NY.\79\
---------------------------------------------------------------------------
\79\ See id. at pp. 2-3 (describing regulatory responsibilities
related to CTB Orders, including that it is the Floor Broker's
responsibility to comply with the terms of the Options Order
Protection and Locked/Crossed Market Plan, including by sending ISOs
to trade with Protected Quotes).
---------------------------------------------------------------------------
The Exchange also proposes to include in Rule 900.3NYP additional
open outcry order types that are currently defined in Rule 900.3NY:
<bullet> Proposed Rule 900.3NYP(h)(2) would define ``Facilitation
Order'' to be identical to the definition of Facilitation Order set
forth in Rule 900.3NY(j). The proposed definition is also identical to
Arca Options Rule 6.62P-O(h)(2).
<bullet> Proposed Rule 900.3NYP(h)(3) would be designated as
Reserved.\80\
---------------------------------------------------------------------------
\80\ The Exchange proposes to hold Rule 900.3NYP(h)(3) as
``Reserved'' to keep the numbering of this rule consistent with Arca
Options Rule 6.62P-O(h), to account for the fact that the Exchange
does not propose to offer (nor does the Exchange currently offer)
Mid-Point Crossing Orders, which are described in Arca Options Rule
6.62P-O(h)(3).
---------------------------------------------------------------------------
<bullet> Proposed Rule 900.3NYP(h)(4) would define ``Not Held
Order'' to be identical to the definition of Not Held Order set forth
in Rule 900.3NY(f). The proposed definition is also identical to Arca
Options Rule 6.62P-O(h)(4).
<bullet> Proposed Rule 900.3NYP(h)(5) would define ``Single Stock
Future (``SSF'')/Option Order'' to be identical to the definition of
Single Stock Future (``SSF'')/Option Order set forth in Rule
900.3NY(i). The proposed definition is also identical to Arca Options
Rule 6.62P-O(h)(5).
<bullet> Proposed Rule 900.3NYP(h)(6)(A) would define a ``Stock/
Option Order'' to be identical to the definition of Stock/Option Order
set forth in Rule 900.3NY(h)(1). The proposed definition is also
identical to Arca Options Rule 6.62P-O(h)(6)(A).
<bullet> Proposed Rules 900.3NYP(h)(6)(B)(i)-(ii) would define a
``Stock/Complex Order'' to be identical to the definition of Stock/
Complex Order set forth in Rule 900.3NY(h)(2)(A)-(B). The proposed
definition is also identical to Arca Options Rule 6.62P-O(h)(6)(B)(i)-
(ii).
The Exchange proposes that after the transition to Pillar, the One-
cancels-the-other (OCO) Order, which is currently described in Rule
900.3NY(g) but is not used by Floor Brokers, would not be added to
proposed Rule 900.3NYP governing orders and modifiers.
Additional Order Instructions and Modifiers. The Exchange proposes
to specify the additional order instructions and modifiers that would
be available in Pillar in proposed Rule 900.3NYP(i), which are
identical to the order instructions and modifiers set forth in Arca
Options Rule 6.62P-O(i).
Proactive if Locked/Crossed Modifier. Proposed Rule 900.3NYP(i)(1)
is identical to Arca Options Rule 6.62P-O(i)(1) and would provide that
a Limit Order that is displayed and eligible to route and designated
with a Proactive if Locked/Crossed Modifier would route to an Away
Market if the Away Market locks or crosses the display price of the
order and that if any quantity of the routed order is returned
unexecuted, the order would be displayed in the Consolidated Book. The
Exchange believes that offering this as an optional modifier for Limit
Orders would provide ATP Holders with additional flexibility to
designate a resting displayed order to route if it becomes locked or
crossed by an Away Market.
Self-Trade Prevention (``STP'') Modifier. Self-Trade Prevention
(``STP'') Modifiers are currently defined in Commentary .02 to Rule
964NY and are available only for Market Maker orders and quotes. On
Pillar, and identical to STP functionality on Arca Options Rule 6.62P-
O(i)(2), the Exchange proposes to expand the availability of STP to all
orders and quotes to offer this protection to trading interest of all
ATP Holders, not just Market Makers. The Exchange believes this
expansion is appropriate because it would facilitate market
participants' compliance and risk management by assisting them in
avoiding unintentional wash-sale trading. Because STP Modifiers are an
instruction that can be added to an order or quote, the Exchange
proposes that for Pillar, STP Modifiers would be described in proposed
Rule 900.3NYP(i)(2) and would be available to all market participants.
Proposed Rule 900.3NYP(i)(2) is identical to Arca Options Rule
6.62P-O(i)(2) and would provide that an Aggressing Order or Aggressing
Quote to buy (sell) designated with one of the STP modifiers in
proposed Rule 900.3NYP(i)(2) would be prevented from trading with a
resting order or quote to sell (buy) also designated with an STP
modifier and from the same Client ID; the same MPID, and, if specified,
any sub-identifier of that MPID; or an Affiliate (as defined in Rule
900.2NY) identifier, with any such identifier referred to as a ``Unique
Identifier.'' Proposed Rule 900.3NYP(i)(2) would also provide that the
STP modifier on the Aggressing Order or Aggressing Quote would control
the interaction between two orders and/or quotes marked with STP
modifiers. In addition, STP would not be applicable during an Auction
or to Cross Orders or when a Complex Order legs out. This proposed rule
text is based on Commentary .02 to Rule 964NY with non-substantive
differences to use Pillar terminology.
Proposed Rule 900.3NYP(i)(2) would further provide that if the
condition for a Limit Order designated FOK, an AON Order, or an
arriving order with an MTS modifier designated under proposed Rule
900.3NYP(i)(3)(B)(i) (described below) cannot be met because of STP
modifiers, such order would either be cancelled or placed on the
Consolidated Book, as applicable. This functionality would be the same
as on Arca Options Pillar and reflects that for order types that must
trade a specified quantity (either in full or a specified minimum
quantity) and could trade with multiple contra-side orders to meet that
size requirement, such order types would not be compatible with
applying STP, which examines a one-on-one relationship between two
interacting orders. This proposed rule text provides clarity that if a
condition of an order cannot be met because of STP modifiers,
[[Page 45746]]
the order would either cancel (i.e., a Limit Order designated FOK or an
order with an MTS modifier), or be added to the Consolidated Book
(i.e., an AON Order), and then such resting orders would function as
described in Rule 900.3NYP.
The proposed rule would further provide that Aggressing Orders or
Aggressing Quotes would be processed as follows:
<bullet> Proposed Rule 900.3NYP(i)(2)(A) is identical to Arca
Options Rule 6.62P-O(i)(2)(A) and would describe STP Cancel Newest
(``STPN'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPN modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier; that the Aggressing Order or Aggressing Quote marked
with the STPN modifier would be cancelled; and that the resting order
or quote marked with one of the STP modifiers would remain on the
Consolidated Book. This proposed rule is based on Commentary .02(a) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
<bullet> Proposed Rule 900.3NYP(i)(2)(B) is identical to Arca
Options Rule 6.62P-O(i)(2)(B) and would describe STP Cancel Oldest
(``STPO'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPO modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier; that the resting order or quote marked with the STP
modifier would be cancelled; and that the Aggressing Order or
Aggressing Quote marked with the STPO modifier would be placed on the
Consolidated Book. This proposed rule is based on Commentary .02(b) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
<bullet> Proposed Rule 900.3NYP(i)(2)(C) is identical to Arca
Options Rule 6.62P-O(i)(2)(C) and would describe STP Cancel Both
(``STPC'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPC modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier and that the entire size of both orders and/or quotes
would be cancelled. This proposed rule is based on Commentary .02(c) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
Minimum Trade Size Modifier. The Exchange proposes to add the
Minimum Trade Size (``MTS'') Modifier, which is based on the same
functionality described in Arca Options Rule 6.62P-O(i)(3), except that
the MTS Modifier would only be available for Limit IOC Orders and, as
such, the Exchange would not include rule text describing how the MTS
Modifier would apply to resting orders.\81\ The Exchange proposes to
provide this modifier for options trading to provide ATP Holders with
more features with respect to order handling. The proposed MTS Modifier
is similar in concept to both FOK and AON, which are currently
available for options trading. With the MTS Modifier, an ATP Holder
would have greater flexibility to designate a size smaller than the
entire quantity (which is current FOK and AON functionality) as a
condition for execution. In addition to Arca Options, other options
exchanges also offer the use of an MTS Modifier.\82\
---------------------------------------------------------------------------
\81\ On Arca Options, in addition to Limit IOC Orders, the MTS
Modifier can apply to Non-Displayed Limit Orders. See Arca Options
Rule 6.62P-O(i)(3). However, as discussed infra, the Exchange is not
adopting Non-Displayed Limit Orders and therefore has no reason to
discuss the application of MTS functionality to such order types.
Similarly, because the MTS Modifier may only be applied to IOC
Orders, the Exchange is not adopting rule text regarding how MTS
functionality is applied to orders not executed immediately as such
text would be inapplicable. See e.g., Arca Options Rules 6.62P-
O(i)(3)(C), (E) and (F). The Exchange believes this distinction is
immaterial because the MTS Modifier operates in the same manner on
both exchanges when applied to Limit IOC Orders.
\82\ See, e.g., Nasdaq Options 3, Section 7(a)(3)(B) (describing
``Minimum Quantity Order'' as ``an order that requires that a
specified minimum quantity of contracts be obtained, or the order is
cancelled'').
---------------------------------------------------------------------------
Proposed Rule 900.3NYP(i)(3)(A) is identical to Arca Options Rule
6.62P-O(3)(A) and would provide that the quantity of the MTS Modifier
may be less than the order quantity; however, an order would be
rejected if it has an MTS Modifier quantity that is larger than the
size of the order.
Proposed Rule 900.3NYP(i)(3)(B) is identical to Arca Options Rule
6.62P-O(3)(B) and would provide that one of the following instructions
must be specified with respect to whether an order to buy (sell) with
an MTS Modifier would trade on arrival with: (i) orders or quotes to
sell (buy) in the Consolidated Book that in the aggregate meet such
order's MTS; or (ii) only individual order(s) or quote(s) to sell (buy)
in the Consolidated Book that each meets such order's MTS. As noted
above, this proposed rule is identical to Arca Options Rule 6.62P-
O(i)(3)(B) and sub-paragraphs (i) and (ii).
Proposed Rule 900.3NYP(i)(3)(C) would provide that an order with an
MTS Modifier cannot be immediately executed would be cancelled. This
proposed rule is based on Arca Options Rule 6.62P-O(i)(3)(D).
Finally, proposed Rule 900.3NYP(i)(4) would define a ``Directed
Orders'' to be the same as the Rule 900.3NY(s) definition of Directed
Order, except that the wording of the proposed definition is more
streamlined with regard to the requirement that a Directed Order be
submitted electronically.
In connection with proposed Rule 900.3NYP, the Exchange proposes to
add the following preamble to Rule 900.3NY: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 900.3NY
would not be applicable to trading on Pillar.
Proposed Rule 925.1NYP: Market Maker Quotations
Current Rule 925.1NY describes Market Maker quoting obligations,
including defining ``quotations,'' describing the treatment of such
quotations, and specifying Market Maker and Specialist quoting
obligations. Proposed Rule 925.1NYP is identical to Arca Options Rule
6.37AP-O and would set forth Market Maker quoting obligations under
Pillar.
Current Rule 925.1NY(a)(1) provides that ``[t]he term `quote' or
`quotation' means a bid or offer entered by a Market Maker that updates
the Market Maker's previous bid or offer, if any.'' Pursuant to this
Rule, a Market Maker's same-side quote would be updated when a Market
Maker uses the same ATP for quote entry.\83\ Although not specified in
the current rule, the Exchange System utilizes a unique identifier for
each Specialist to send quotes, and, as a result, a Specialist cannot
have more than one same-side quote in an assigned series.\84\
Therefore, Specialist quotes are subject to the current Rule
925.1NY(a)(1) requirement that a new same-side quote sent by that
Specialist updates the previous bid or offer, if any.
---------------------------------------------------------------------------
\83\ See NYSE American Options Fee Schedule, Section V.A. Port
Fees (setting forth fees for order/quote entry ports, which fees are
currently $450 per port per month for the first forty such ports and
$150 per port per month for each port in excess of forty (i.e., 41
and greater), available here: <a href="https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf</a>.
\84\ On the Exchange System, Market Makers not acting as
Specialists may opt to utilize multiple ATPs to send more than one
same-side quote in the same assigned series.
---------------------------------------------------------------------------
On Pillar, Specialists (like Market Markets not acting as
Specialists) would
[[Page 45747]]
be able to send multiple same-side quotes associated with its ATP by
utilizing different order/quote entry ports (i.e., in Pillar,
Specialist 1 can send a bid for 1.00 in XYZ over order/quote entry port
1 and another bid for 1.00 in XYZ over order/quote entry port 2 and the
bid sent via order/quote entry port 2 would not replace the quote sent
over order/quote entry port 1).\85\
---------------------------------------------------------------------------
\85\ See, e.g., Rules 964NYP(h)(1)(A)(ii) and (h)(2)(B)
(providing for the handling of multiple same-side quotes in an
assigned series submitted by a Directed Order Market Makers or
Specialist, respectively). See also Arca Options Rule 6.37AP-
O(a)(1)(A) (providing for the handling of multiple same-side
quotations submitted via the same quote entry port).
---------------------------------------------------------------------------
Consistent with current functionality, on Pillar, the Exchange
would provide Market Makers with the ability to designate bids and
offers as quotations. Currently, the Exchange offers designated
``quotation'' types to Market Makers, which are described in Rule
925.1NY(a)(3).\86\ On Pillar, as described above in connection with
proposed Rule 900.3NYP(e)(1), the Exchange is proposing to offer
quotation functionality for Market Makers that would be displayed,
traded, repriced, or cancelled in the same manner as Non-Routable Limit
Orders. As such, Market Makers may designate this ``order'' type as a
quotation and, if designated as a quotation, such bids and offers would
be displayed, traded, repriced, or cancelled as described in proposed
Rule 900.3NYP(e)(1), as discussed in detail above. In addition, such
quotations would be ranked and executed as described in Rule
964NYP.\87\ Moreover, if designated as a quotation, such bids or offers
would be identifiable to the Exchange as ``quotations,'' subject to the
Market Maker and Specialist requirements relating to quotations and the
Exchange would be able to monitor a Market Maker's compliance with
quoting obligations because its bids or offers would be designated as
quotations. If a Market Maker does not choose to designate a bid or
offer as a quotation, such bid or offer would be processed as an
``order'' and would not count towards a Market Maker's quoting
obligations.\88\
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\86\ As described in Rule 925.1NY(a)(3)(A) and (B),
respectively, a Market Maker may designate a quote as Market Maker-
Light Only Quotation (``MMLO'') or Market Maker--Repricing Quotation
(``MMRP'').
\87\ See Rule 964NYP.
\88\ For example, a Market Maker could choose to designate a
Non-Routable Limit Order as either a quote or as an order, which is
consistent with current Rule 925.2NY, which provides that a Market
Maker may enter all order types permitted to be entered by Users
under the Rules to buy or sell options in all classes of options
listed on the Exchange. Accordingly, the functionality set forth in
proposed Rule 925.1NYP(a)(2) herein is not materially different for
Market Makers because, under current functionality, they can choose
to send as Market Maker orders any order type described in current
Rule 900.3NY, including, for example, RPNP and PNP-Blind Order.
---------------------------------------------------------------------------
<bullet> Rule 925.1NYP(a) is identical to Arca Options Rule 6.37AP-
O(a) and would provide that a Market Maker may send quotations only in
the issues included in its appointment. This functionality is based on
current Rule 925.1NY(a) but differs in that the proposed rule would use
the term ``send'' rather than ``enter,'' which is a stylistic
preference that does not alter the functionality.
<bullet> Proposed Rule 925.1NYP(a)(1) is identical to Arca Options
Rule 6.37AP-O(a)(1) and would provide that the term ``quote'' or
``quotation'' means ``a bid or offer sent by a Market Maker that is not
sent as an order,'' and that ``[a] quotation sent by a Market Maker
will replace a previously displayed same-side quotation that was sent
from the same order/quote entry port of that Market Maker'' and ``[i]f
multiple same-side quotations are submitted via the same quote entry
port, the Exchange will display the Market Maker's most recent same-
side quotation.'' The proposed Rule reflects that, on Pillar and as
described above, Specialists would be able to send multiple same-side
quotes associated with its ATP by utilizing different order/quote entry
ports.\89\ Because Specialists would be Market Makers on Pillar, this
functionality would also be available to Specialists.\90\
---------------------------------------------------------------------------
\89\ See supra note 85 (regarding Rules 964NYP(h)(1)(A)(ii) and
(h)(2)(B)).
\90\ See Rule 920NY (Market Makers) (providing that for purposes
of Exchange rules, the term Market Maker includes Specialists,
unless the context otherwise indicates).
---------------------------------------------------------------------------
The NYSE American Options Fee Schedule makes clear that Market
Makers can obtain upwards of forty ports for quote entry. Thus, the
Exchange believes that establishing when a Market Maker's previously
displayed same-side quotation would be replaced (i.e., when sent via
the same order/quote entry port) would add clarity and transparency to
Exchange rules. This proposed rule text is also designed to clarify the
Exchange's handling of successive Market Maker quotations (from the
same quote entry port in the same side and series) should a Market
Maker's quotations queue during a period of excessive message traffic.
No system, including Pillar, has unlimited capacity. Accordingly,
should the Exchange be in receipt of multiple same-side quotations in
the same series from the same Market Maker, the Exchange proposed that
it would display only the most recent quotation to ensure accurate
representation of that Market Maker's quoting interest. In addition,
because the Exchange proposes that a Market Maker may designate Non-
Routable Limit Orders as quotes, the Exchange proposes a difference
from the current Rule to provide that a quote is a bid or offer not
designated as an order.
<bullet> Proposed Rule 925.1NYP(a)(2) would provide that a Market
Maker may designate a Non-Routable Limit Order as a quote and such
quotes would be processed as described in proposed Rule
900.3NYP(e)(1).\91\ Proposed Rule 925.1NYP(a)(2) is the same as Arca
Options Rule 6.37AP-O(a)(2), except that the proposed rule does not
reference ALO Orders, which order type is not offered by the Exchange
today nor will the order type be offered on Pillar. The similarities
and differences between the proposed Non-Routable Limit Orders on
Pillar compared to the existing quote types (e.g., MMRP) are described
in more detail above.\92\ Because proposed Rule 900.3NYP(e)(1)),
described above, would set forth the treatment of a Non-Routable Limit
Order designated as a quote, the Exchange is not proposing to include a
(duplicative) section in proposed Rule 925.1NYP regarding the treatment
of such quotes.
---------------------------------------------------------------------------
\91\ See discussion supra regarding proposed Rule
900.3NYP(e)(1), Non-Routable Limit Orders, being available as quote
types and how such orders compare to the existing MMRP quotation
functionality.
\92\ The Exchange notes that it is not proposing the
functionality set forth in current Rule 925.1NY(a)(4)(D) that
provides for the cancellation of a Market Maker's quote on the
opposite side of the market whenever that Market Maker's same-side
quotation is cancelled because such quotation would lock or cross
another options exchange is not designated to reprice (e.g., as an
MMRP). This current functionality is based on a system limitation
that would not exist under Pillar.
---------------------------------------------------------------------------
<bullet> Proposed Rules 925.1NYP(b)-(e) would be substantively
identical to current Rules 925.1NY(b)-(e), with non-substantive
differences to change the term ``shall'' to ``will,'' which is a
stylistic preference that would add consistency to Exchange rules.
These proposed rules would also be the same as Arca Options Rules
6.37AP-O(b)-(e), except that Arca Options Rule 6.37AP-O(b) describes
quoting obligations for Lead Market Makers or LMMs, whereas proposed
Rule 925.1NYP(b) would describe quoting obligations for Specialists.
Proposed Commentary .01 to Rule 925.1NYP is identical to Commentary
.01 to Arca Options Rule 6.37AP-O and would also be substantively
identical to Commentary .01 to Rule 925.1NY, with non-substantive
differences to streamline the rule text.
[[Page 45748]]
The Exchange also proposes a non-substantive change to paragraph
(b) of Rule 953.1NY (Limit-Up and Limit-Down During Extraordinary
Market Volatility) to update the cross reference to Market Maker
quoting obligations as set forth in Rules 925.1NYP(b) and (c).
In connection with proposed Rule 925.1NYP, the Exchange proposes to
add the following preamble to Rule 925.1NY: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 925.1NY
would not be applicable to trading on Pillar.
Proposed Rule 928NY: Pre-Trade and Activity-Based Risk Controls
Current Rule 928NY sets forth the activity-based Risk Limitation
Mechanisms for orders and quotes, which are designed to help ATP
Holders effectively manage risk during periods of increased and
significant trading activity. With the transition to Pillar, the
Exchange proposes to incorporate new risk control functionality that is
based on the Exchange's existing activity-based risk controls and on
pre-trade risk controls that are available on Arca Options.
Specifically, proposed Rule 928NYP is identical to Arca Options Rule
6.40P-O and would describe the activity-based controls with updated
functionality under Pillar and would also describe new optional pre-
trade risk controls. The Exchange believes that adding pre-trade risk
controls (together with the enhanced activity-based controls), as
described below, would provide greater flexibility to ATP Holders in
establishing risk controls to align with their risk tolerance for both
orders and quotes.
Proposed Rule 928NYP(a) is identical to Arca Options Rule 6.40P-
O(a) and would set forth the following definitions that would be used
for purposes of the Rule:
<bullet> The term ``Entering Firm'' would mean an ATP Holder
(including those acting as Market Makers) (proposed Rule 928NYP(a)(1),
which is identical to Arca Options Rule 6.40P-O(a)(1)). The Exchange
believes that the addition of this term would add clarity to the
proposed rule by using a single, defined term to describe which
entities, including Market Makers, could avail themselves of the
proposed pre-trade risk controls.
<bullet> The term ``Pre-Trade Risk Controls'' would refer to
optional limits that an Entering Firm may utilize with respect to its
trading activity on the Exchange (excluding interest represented in
open outcry except CTB Orders (proposed Rule 928NYP(a)(2), which is
identical to Arca Options Rule 6.40P-O(a)(2)). Proposed Rules
928NYP(a)(2)(A)(i)-(v) would define the available ``Single-Order Risk
Controls,'' which are identical to the checks offered per Arca Options
Rules 6.40P-O(a)(2)(A)(i)-(v), as follows:
[cir] controls related to the maximum dollar amount for a single
order to be applied one time (``Single Order Maximum Notional Value
Risk Limit'') and the maximum number of contracts that may be included
in a single order before it can be traded (``Single Order Maximum
Quantity Risk Limit'') and providing that GTC Orders would be subject
to these checks only once (proposed Rule 928NYP(a)(2)(A)(i), which is
identical to Arca Options Rule 6.40P-O(a)(2)(A)(i)).
[cir] controls related to the price of an order or quote (including
percentage-based and dollar-based controls) (proposed Rule
928NYP(a)(2)(A)(ii), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(ii));
[cir] controls related to the order types or modifiers that can be
utilized (proposed Rule 928NYP(a)(2)(A)(iii), which is identical to
Arca Options Rule 6.40P-O(a)(2)(A)(iii));
[cir] controls to restrict the options class transacted (proposed
Rule 928NYP(a)(2)(A)(iv), which is identical to Arca Options Rule
6.40P-O(a)(2)(A)(iv)); and
[cir] controls to prohibit duplicative orders (proposed Rule
928NYP(a)(2)(A)(v), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(v)).
Like on Arca Options, use of the pre-trade risk controls proposed
would be optional, but all orders and quotes on the Exchange would pass
through these risk checks.\93\ As such, an Entering Firm that does not
choose to set limits pursuant to the new proposed pre-trade risk
controls would not achieve any latency advantage with respect to its
trading activity on the Exchange.\94\ The Exchange understands that the
risk checks of other exchanges, on which the proposed functionality is
modeled, also apply symmetrically to all orders.\95\
---------------------------------------------------------------------------
\93\ The Exchange notes that there is nothing unique about this
approach as functionality on the Exchange is often applied uniformly
to all orders and quotes, regardless of whether a particular client
has opted to use that functionality for a particular order or quote.
For example, the Exchange's limit order price protection applies
generally to trading on the Exchange and orders or quotes with limit
prices are not processed more slowly than those without. Similarly,
the Exchange's trading systems check all orders and quotes for a
variety of details and modifiers (e.g., duplicative client order
check, order capacity check, and self-trade prevention). See, e.g.,
Securities Exchange Act Release Nos. 97147 (March 21, 2023), 88 FR
17072, at 17073-76 (March 15, 2023) (SR-NYSEArca-2023-24).
\94\ See id., 88 FR, at 17073-76 (discussing, among other
things, that ``because all orders on the Exchange would pass through
the pre-trade risk controls, there would be no difference in the
latency experienced by [Arca Options] OTP Holders who have opted to
use the additional `Pre-Trade Risk Controls' versus those who have
not opted to use them.''). To the extent that any latency occurs in
connection with the proposed pre-trade risk controls, the Exchange
expects that (like on Arca Options) such latency would be
significantly less than one microsecond. See id., 88 FR, at 17073.
\95\ See, e.g., MEMX Risk FAQ, dated October 13, 2020, available
at <a href="https://info.memxtrading.com/us-equities-faq/#Bookmark21">https://info.memxtrading.com/us-equities-faq/#Bookmark21</a> (``The
risk checks are applied in a consistent manner to all participant
orders in order to mitigate risk without incurring latency
disadvantage.''); MIAX Pearl Equities Exchange User Manual, updated
October 2022, available at <a href="https://www.miaxequities.com/sites/default/files/website_file-files/MIAX_Pearl_Equities_User_Manual_October_2022.pdf">https://www.miaxequities.com/sites/default/files/website_file-files/MIAX_Pearl_Equities_User_Manual_October_2022.pdf</a>, at 29 (stating
that all but two of the exchange's 14 risk checks ``are latency
equalized i.e. there is no latency penalty for a member when opting
into and leveraging a risk protection available on the exchange when
entering an order as compared to a member not opting into the risk
protection when entering an order'').
---------------------------------------------------------------------------
<bullet> The term ``Activity-Based Risk Controls'' would refer to
three activity-based risk limits that an Entering Firm may apply to its
orders and quotes in an options class (excluding those represented in
open outcry except CTB Orders) based on specified thresholds measured
over the course of an Interval (to be defined below) (proposed Rule
928NYP(a)(3), which is identical to Arca Options Rule 6.40P-O(a)(3)).
The proposed Activity-Based Risk Controls are based on the
substantially identical risk controls set forth in current Rules
928NY(b)-(d), except that, on Pillar (and identical to Arca Options), a
Market Maker's orders and quotes would be aggregated and applied
towards each risk limit (as opposed to current functionality, where a
Market Maker's orders and quotes are counted separately). The Exchange
believes that aggregating a Market Maker's quotes and orders for
purposes of calculating activity-based risk controls, which mirrors the
application of such controls on Arca Options, would better reflect the
aggregate risk that a Market Maker has with respect to its quotes and
orders. The proposed rule would also add detail to make clear that
orders and quotes represented in open outcry, except CTB Orders, would
not be subject to these controls, which is consistent with current
functionality.
[cir] The term ``Transaction-Based Risk Limit'' would refer to a
pre-established limit on the number of an Entering Firm's orders and
quotes executed in a specified class of options per Interval (proposed
Rule 928NYP(a)(3)(A), which is identical to Arca Options Rule 6.40P-
O(a)(3)(A)). This risk control is based on
[[Page 45749]]
the substantially identical risk control set forth in current Rule
928NY(b), with the difference described above that a Market Maker's
orders and quotes would be aggregated.
[cir] The term ``Volume-Based Risk Limit'' would refer to a pre-
established limit on the number of contracts of an Entering Firm's
orders and quotes that could be executed in a specified class of
options per Interval (proposed Rule 928NYP(a)(3)(B), which is identical
to Arca Options Rule 6.40P-O(a)(3)(B)). This risk control is based on
the substantially identical risk control set forth in current Rule
928NY(c), with the difference described above that a Market Maker's
orders and quotes would be aggregated.
[cir] The term ``Percentage-Based Risk Limit'' would refer to a
pre-established limit on the percentage of contracts executed in a
specified class of options as measured against the full size of such
Entering Firm's orders and quotes executed per Interval (proposed Rule
928NYP(a)(3)(C), which is identical to Arca Options Rule 6.40P-
O(a)(3)(C)). The proposed definition, like the Arca Options definition,
would also provide that to determine whether an Entering Firm has
breached the specified percentage limit, the Exchange would calculate
the percent of each order or quote in a specified class of option that
is executed during an Interval (each, a ``percentage''), and sum up
those percentages. As further proposed (and like on Arca Options), this
proposed definition would state that this risk limit would be breached
if the sum of the percentages exceeds the pre-established limit. This
risk control is based on the substantially identical risk control set
forth in current Rule 928NY(d), with the difference described above
that a Market Maker's orders and quotes would be aggregated.
<bullet> The term ``Global Risk Control'' would refer to a pre-
established limit on the number of times an Entering Firm may breach
its Activity-Based Risk Controls per Interval (proposed Rule
928NYP(a)(4), which is identical to Arca Options Rule 6.40P-O(a)(4)).
This proposed definition is also based on the substantially similar
functionality set forth in current Rule 928NY(f). The Exchange believes
this proposed definition would add clarity and transparency to Exchange
rules.
<bullet> The term ``Interval'' would refer to the configurable time
period during which the Exchange would determine if an Activity-Based
Risk Control or the Global Risk Control has been breached (proposed
Rule 928NYP(a)(5), which is identical to Arca Options Rule 6.40P-
O(a)(5)). This proposed definition is consistent with current Rule
928NY, which contains references throughout to a ``time period'' during
which the Exchange will determine whether a breach has occurred. The
Exchange believes this proposed definition would add clarity and
transparency to Exchange rules.
<bullet> The term ``Auction-Only Orders'' would refer to the order
types set for in proposed Rule 900.3NYP(c), as described in detail
above (proposed Rule 928NYP(a)(6), which is identical to Arca Options
Rule 6.40P-O(a)(6)).
Proposed Rules 928NYP(b)(1)-(2) are identical to Arca Options Rules
6.40P-O(b)(1)-(2) and would set forth how the Pre-Trade, Activity-Based
and Global Risk Controls could be set or adjusted. Proposed Rule
928NYP(b)(1) would provide that these risk controls may be set before
the beginning of a trading day and may be adjusted during the trading
day. Proposed Rule 928NYP(b)(2) would provide that Entering Firms may
set these risk controls at the MPID level or at one or more sub-IDs
associated with that MPID, or both, and further provide that Pre-Trade
Risk Controls to restrict the options class(es) transacted must be set
per option class.
Proposed Rule 928NYP(c) is identical to Arca Options Rule 6.40P-
O(c) and would set forth the Automated Breach Actions that the Exchange
would take if a designated risk limit is breached. Proposed Rules
928NYP(c)(1)(A)(i)-(iii) are identical to Arca Options Rules 6.40P-
O(c)(1)(A)(i)-(iii) and would set forth the automated breach actions
for the Pre-Trade Risk Controls as described below.
<bullet> Proposed Rule 928NYP(c)(1)(A)(i) would provide that a
Limit Order or quote that breaches any Single-Order Risk Control would
be rejected.
<bullet> Proposed Rule 928NYP(c)(1)(A)(ii) would provide that a
Market Order that arrives during a pre-open state will be cancelled if
the quantity remaining to trade after an Auction breaches the Single
Order Maximum Notional Value Risk Limit, and that at all other times, a
Market Order that triggers or breaches any Single-Order Risk Control
will be rejected.\96\
---------------------------------------------------------------------------
\96\ The term ``Auction'' is defined in proposed Rule
952NYP(a)(1), described below in the discussion of proposed Rule
952NYP, to mean the opening or reopening of a series for trading
either on a trade or quote.
---------------------------------------------------------------------------
<bullet> Proposed Rule 928NYP(c)(1)(A)(iii) would provide that a
Limit Order or quote that would breach a price control under paragraph
(a)(2)(A)(ii) above would be rejected or cancelled as specified in Rule
900.3NYP(a)(3)(A) (Limit Order Price Protection).
Consistent with Arca Options, the Exchange likewise proposes to
process Market Orders differently from Limit Orders because, until a
series is opened, the Exchange is not able to calculate the Single
Order Notional Value Risk Limit for a Market Order.\97\ Accordingly, as
is the case on Arca Options, this proposed risk limit would be applied
only after a series opens, at which point, a Market Order would be
cancelled if it fails the risk limit.
---------------------------------------------------------------------------
\97\ Compare Arca Options Rules 6.40P-O(c)(1)(A)(ii) and (iii)
with proposed Rules 928NYP(c)(1)(A)(ii) and (iii).
---------------------------------------------------------------------------
Proposed Rule 928NYP(c)(2) is identical to Arca Options Rule 6.40P-
O(c)(2) and would set forth the automated breach actions for the
Activity-Based Risk Controls.
<bullet> Proposed Rule 928NYP(c)(2)(A) is identical to Arca Options
Rule 6.40P-O(c)(2)(A) and would first specify that an Entering Firm
acting as a Market Maker would be required to apply one of the
Activity-Based Risk Controls to all of its orders and quotes; whereas
an Entering Firm that is not acting as a Market Maker would have the
option, but would not be required, to apply one of the Activity-Based
Risk Controls to its orders. The requirement that Market Makers utilize
Activity-Based Risk Controls for all quotes mirrors the requirements
set forth in Rule 928NY, Commentary .04(a); however, the proposed rule
differs in that it likewise requires Market Makers to apply one of the
Activity-Based Risk Controls to all of its orders. The Exchange
believes that requiring that both Market Maker quotes and Market Maker
orders be subject to one of the Activity-Based Controls would enhance
Market Makers' ability to assess their total risk exposure on the
Exchange. The proposed optionality of the Activity-Based Risk controls
for orders sent by an Entering Firm not acting as a Market Maker
mirrors current Rule 928NY, Commentary .04(b).
<bullet> Proposed Rule 928NYP(c)(2)(B) is identical to Arca Options
Rule 6.40P-O(c)(2)(B) and would provide that to determine when an
Activity-Based Risk Control has been breached, the Exchange would
maintain Trade Counters that would be incremented every time an order
or quote trades, including any leg of a Complex Order, and would
aggregate the number of contracts traded during each such execution. As
further proposed, an Entering Firm may opt to exclude any orders
designated IOC or FOK from being considered by a Trade Counter. This is
consistent with existing functionality set forth in Rule 928NY(a)
[[Page 45750]]
and Commentary .07, with a proposed difference to allow an Entering
Firm to also exclude orders designated FOK, which, like orders
designated IOC, cancel if not executed on arrival and is based on
current functionality.\98\ The Exchange believes that specifying that
orders designated FOK could be excluded from being considered for a
Trade Counter would mirror handling of such orders on Arca Options and
would add granularity and clarity to Exchange rules. In addition, as
noted above, a Market Maker's quotes and orders in a given option class
would be aggregated and therefore the Exchange proposes that there
would not be separate Trade Counters for a Market Maker's quotes and
orders.
---------------------------------------------------------------------------
\98\ See Securities Exchange Act Release No. 81716 (September
25, 2017), 82 FR 45653 (September 29, 2017) (SR-NYSEAMER-2017-10)
(immediately effective filing to exclude IOC Orders from risk
settings because such exclusion, among other things, would result in
risk settings that may be better calibrated to suit the needs of
certain market participants (i.e., those that routinely utilize IOC
orders to access liquidity on the Exchange)).
---------------------------------------------------------------------------
<bullet> Proposed Rule 928NYP(c)(2)(C) is identical to Arca Options
Rule 6.40P-O(c)(2)(C) and would provide that each Entering Firm must
select one of three Automated Breach Actions for the Exchange to take
should the Entering Firm breach an Activity-Based Risk Control.
[cir] ``Notification Only.'' As set forth in proposed Rule
928NYP(c)(2)(C)(i) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, the Exchange would continue
to accept new order and quote messages and related instructions and
would not cancel any unexecuted orders or quotes in the Consolidated
Book. With the ``Notification Only'' action, the Exchange would provide
such notifications, but would not take any other automated actions with
respect to new or unexecuted orders. The Exchange believes that making
this Automated Breach Action available to Activity-Based Risk Controls,
which are unique to options trading, would provide Entering Firms more
control and flexibility over setting risk tolerance and, as such, over
how Activity-Based Risk Controls are implemented.
[cir] ``Block Only.'' As set forth in proposed Rule
928NYP(c)(2)(C)(ii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(ii)), if this option is selected, the Exchange would reject
new order and quote messages and related instructions, provided that
the Exchange would continue to process instructions from the Entering
Firm to cancel one or more orders or quotes (including Auction-Only
Orders) in full. The proposed rule would also provide that the Exchange
would follow any instructions specified in paragraph (e) of the
proposed Rule (and described below). The Exchange believes that making
this Automated Breach Action available to Activity-Based Risk Controls,
which are unique to options trading, would provide Entering Firms more
control and flexibility over setting risk tolerance and, as such, over
how Activity-Based Risk Controls are implemented.
[cir] ``Cancel and Block.'' As set forth in proposed Rule
928NYP(c)(2)(C)(iii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, in addition to the Block
Only actions described above, the Exchange would also cancel all
unexecuted orders and quotes in the Consolidated Book other than
Auction-Only Orders and orders designated GTC. This proposed Cancel and
Block functionality is substantially similar to the automated breach
action taken by the Exchange per current Rule 928NY(e) and Commentaries
.01 and .02 thereto, except that under the current rules, this is
default (not optional) functionality. The Exchange believes that making
this Automated Breach Action available to respond to a breach of
Activity-Based Risk Controls, which are unique to options trading,
would provide Entering Firms more control and flexibility over setting
risk tolerance and, as such, over how Activity-Based Risk Controls are
implemented.
<bullet> Finally, proposed Rule 928NYP(c)(2)(D) is identical to
Arca Options Rules 6.40P-O(c)(2)(D) and would provide that if an
Entering Firm breaches an Activity-Based Risk Control, the Automated
Breach Action selected would be applied to its orders and quotes in the
affected class of options. This proposed action is consistent with
current Rule 928NY(e) and Commentaries .01 and .02 thereto, which
provide that, upon a breach, the Exchange will cancel existing and
suspend new orders and quotes trading in the affected class.
Proposed Rule 928NYP(c)(2)(E) is identical to Arca Options Rule
6.40P-O(c)(2)(E) and would provide that the Exchange would specify by
Trader Update any applicable minimum, maximum and/or default settings
for the Activity-Based Risk Controls, subject to the following:
<bullet> For the Transaction-Based Risk Limit, the minimum setting
would not be less than one and the maximum setting would not be more
than 2,000 (proposed Rule 928NYP(c)(2)(E)(i)), which settings are
identical to the Exchange-determined settings provided under current
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(i).
<bullet> For the Volume-Based Risk Limit, the minimum setting would
not be less than one and the maximum setting would not be more than
500,000 (proposed Rule 928NYP(c)(2)(E)(ii)), which settings are
identical to the Exchange-determined settings provided under current
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(ii).
<bullet> For the Percentage-Based Risk Limit, the minimum setting
would not be less than 50 and the maximum setting would not be more
than 200,000 (proposed Rule 928NYP(c)(2)(E)(iii)), which maximum
setting is the same as the minimum Exchange-determined setting set
forth in current Rule 928NY, Commentary .03 and identical to Arca
Options Rule 6.40P-O(c)(2)(E)(iii). The Exchange proposes to increase
the minimum setting from less than one (in current rule) to not be less
than 50 to better reflect actual practice, because under current Rules,
there are no ATP Holders that have set their Percentage-Based Risk
Limits below 50.
Proposed Rule 928NYP(c)(2)(F) is identical to Arca Options Rule
6.40P-O(c)(2)(F) and would provide that the Exchange would specify by
Trader Update the Interval for the Activity-Based Risk Controls,
subject to the following:
<bullet> The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time (proposed Rule
928NYP(c)(2)(F)(i)), which minimum setting is identical to the
Exchange-determined minimum set forth in current Rule 928NY, Commentary
.03 and identical to Arca Options Rule 6.40P-O(c)(2)(F)(i). Although
the Exchange's current rule does not include a maximum time period, the
Exchange proposes to include a maximum allowable Interval to promote
clarity in Exchange rules of the longest time an Interval could be.
<bullet> For transactions occurring in the Core Open Auction, per
proposed Rule 952NYP, the applicable time period would be the lesser of
(i) the time between the Core Open Auction of a series and the initial
transaction or (ii) the Interval (proposed Rule 928NYP(c)(2)(F)(ii)),
which proposed time period is identical to the timing provided under
current Rule 928NY, Commentary .03 and also identical to Arca Options
Rule 6.40P-O(c)(2)(F)(ii).
Proposed Rule 928NYP(c)(3) is identical to Arca Options Rule 6.40P-
O(c)(3) and would set forth the
[[Page 45751]]
automated breach actions for the Global Risk Controls set by an
Entering Firm.
<bullet> Proposed Rule 928NYP(c)(3)(A) is identical to Arca Options
Rule 6.40P-O(c)(3)(A) and would provide that if the Global Risk Control
limit is breached, the Exchange would Cancel and Block, per proposed
Rule 928NYP(c)(2)(C)(iii), which proposed functionality is
substantively the same as the functionality provided under current Rule
928NY, Commentaries .01 (regarding cancellation of existing orders) and
.02 (regarding block/rejection of new orders).
<bullet> Proposed Rule 928NYP(c)(3)(B) is identical to Arca Options
Rule 6.40P-O(c)(3)(B) and would provide that if an Entering Firm
breaches the Global Risk Control, the Automated Breach Action would be
applied to all orders and quotes of the Entering Firm in all classes of
options regardless of which class(es) of options caused the underlying
breach of Activity-Based Risk Controls, which proposed functionality is
substantively the same as the functionality provided (in the last
sentence) of current Rule 928NY, Commentary .02 in the event of a
breach of current Rule 928NY(f) (i.e., breach of global risk setting).
<bullet> Proposed Rule 928NYP(c)(3)(C) is identical to Arca Options
Rule 6.40P-O(c)(3)(C) and would provide that the Exchange would specify
by Trader Update any applicable minimum, maximum and/or default
settings for the Global Risk Controls, provided that the minimum
setting would not be less than 25 and the maximum setting would not be
more than 100. These proposed settings are based on the Exchange-
determined setting provided under current Rule 928NY, Commentary .03,
except that the current rule allows for a minimum setting of one (1)
whereas the proposed rule (like Arca Options) is increasing that
minimum to twenty-five (25), which the Exchange believes would better
reflect actual practice, because under current Rules, there are no ATP
Holders that have set their Global Risk Controls below 25.
<bullet> Proposed Rules 928NYP(c)(3)(D)(i)-(ii) are identical to
Arca Options Rules 6.40P-O(c)(3)(D)(i)-(ii) and would provide that the
Exchange would specify by Trader Update the Interval for the Global
Risk Controls, subject to the following:
[cir] The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time, per proposed
Rule 928NYP(c)(3)(D)(i), which minimum setting is identical to the
Exchange-determined minimum set forth in current Rule 928NY, Commentary
.03. Although the Exchange's current rule does not include a maximum
time period, the Exchange proposes to mimic Arca Options Rule 6.40P-
O(c)(3)(D)(i) by including a maximum allowable Interval to allow an
outside parameter by which the counters would be reset, which would
promote transparency in Exchange rules regarding the maximum allowable
Interval.
[cir] For transactions occurring in the Core Open Auction, per
proposed Rule 952NYP, the applicable time period is the lesser of (i)
the time between the Core Open Auction of a series and the initial
transaction or (ii) the Interval, per proposed Rule
928NYP(c)(3)(D)(ii), which proposed time period is identical to the
timing provided under current Rule 928NY, Commentary .03 and is also
identical to Arca Options Rule 6.40P-O(c)(3)(D)(ii).
Proposed Rule 928NYP(d) is identical to Arca Options Rules 6.40P-
O(d) and would describe how an Entering Firm's ability to enter orders,
quotes, and related instructions would be reinstated after a ``Block
Only'' or ``Cancel and Block'' Automated Breach Action has been
triggered. In such case, proposed Rule 928NYP(d) provides that the
Exchange would not reinstate the Entering Firm's ability to enter
orders and quotes and related instructions on the Exchange (other than
instructions to cancel one or more orders or quotes in full (including
Auction-Only Orders, and orders designated GTC)) without the consent of
the Entering Firm, which may be provided via automated contact if it
was a breach of an Activity-Based Risk Control. As further proposed, an
Entering Firm that breaches the Global Risk Control would not be
reinstated unless the Entering Firm provides consent via non-automated
contact with the Exchange. This proposed functionality is consistent
with current Rule 928NY, Commentary .02 regarding the need for an
Entering Firm to make automated or non-automated contact with the
Exchange, as applicable, prior to being reinstated.
Proposed Rule 928NYP(e) is identical to Arca Options Rules 6.40P-
O(e) and would set forth new ``Kill Switch Action'' functionality,
which would allow an Entering Firm to direct the Exchange to take
certain bulk cancel or block actions with respect to orders and quotes.
In contrast to the Automated Breach Actions described above, which the
Exchange would take automatically after the breach of a risk limit, the
Exchange would not take any of the Kill Switch Actions without express
direction from an Entering Firm. The Exchange believes that the
proposed Kill Switch Action functionality would also provide ATP
Holders with greater flexibility to provide bulk instructions to the
Exchange with respect to cancelling existing orders and quotes and
blocking new orders and quotes.
In particular, proposed Rule 928NYP(e) would specify that an
Entering Firm could direct the Exchange to take one or more of the
following actions with respect to orders and quotes (excluding those
represented in open outcry except CTB Orders), at either an MPID, or if
designated, sub-ID Level: (1) Cancel all Auction-Only Orders; (2)
Cancel all orders designated GTC; (3) Cancel all unexecuted orders and
quotes in the Consolidated Book other than Auction-Only Orders and
orders designated GTC; or (4) Block the entry of any new order and
quote messages and related instructions, provided that the Exchange
would continue to accept instructions from Entering Firms to cancel one
or more orders or quotes (including Auction-Only Orders, and orders
designated GTC) in full, and later, reverse that block. The proposed
post-trade Kill Switch Actions are not only identical to Arca Options
Rule 6.40P-O(e) but are also consistent with the rules of other options
exchanges.\99\ The Exchange believes that offering this functionality
for options trading under Pillar would give Entering Firms more
flexibility in setting risk controls for options trading (as noted
above).
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\99\ See, e.g., Cboe Rule 5.34(c)(6) (describing the optional
``Kill Switch'' functionality, which allows a Cboe participant to
instruct Cboe to simultaneously cancel or reject all orders or
quotes (or a subset thereof) as well as to instruct Cboe to block
all orders or quotes (or a subset thereof), which block instructions
will remain in effect until such participant contacts Cboe's trade
desk to remove the block).
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Proposed Commentary .01 to Rule 928NYP is identical to Commentary
.01 to Arca Options Rule 6.40P-O and would provide that the Pre-Trade,
Activity-Based, and Global Risk Controls described in the proposed Rule
98NYP are meant to supplement, and not replace, the ATP Holder's own
internal systems, monitoring, and procedures related to risk management
and are not designed for compliance with Rule 15c3-5 under the Exchange
Act.\100\ Responsibility for compliance with all Exchange and SEC rules
remains with the ATP Holder. The Exchange does not guarantee that these
controls will be sufficiently comprehensive to meet all of an ATP
Holder's needs, the controls are not designed to be the sole means of
risk management, and using these controls
[[Page 45752]]
will not necessarily meet an ATP Holder's obligations required by the
Exchange or federal rules including, without limitation, the Rule 15c3-
5. Use of the Exchange's proposed Pre-Trade Risk Controls will not
automatically constitute compliance with Exchange or federal rules, and
responsibility for compliance with all Exchange and SEC rules remains
with the ATP Holder. The proposed rule, which is new text, makes clear
that (like on Arca Options) use of the proposed controls alone does not
constitute compliance with Exchange rules or the Exchange Act.
---------------------------------------------------------------------------
\100\ 17 CFR 240.15c3-5.
---------------------------------------------------------------------------
Proposed Commentary .02 to Rule 928NYP is identical to Commentary
.02 to Arca Options Rule 6.40P-O and would provide that an Entering
Firm may set price controls under proposed Rule 928NYP(a)(2)(A)(ii)
(described above) that are equal to or more restrictive than the price
level provided per the Exchange's Limit Order Price Protection feature,
as set forth in proposed Rule 900.3NYP(a)(3)(A). This proposed
commentary is intended to clarify the interplay between the Exchange's
Limit Order Price Protection functionality and the price controls that
may be set by an Entering Firm pursuant to proposed Rule
928NYP(a)(2)(A)(ii).
In connection with proposed Rule 928NYP, the Exchange proposes to
add the following preamble to Rule 928NY: ``This Rule is not applicable
to trading on Pillar.'' This proposed preamble is designed to promote
clarity and transparency in Exchange rules that Rule 928NY would not be
applicable to trading on Pillar.
Proposed Rule 928.1NYP: Price Reasonability Checks--Orders and Quotes
The Exchange proposes to describe its Price Reasonability Checks
for orders and quotes in proposed Rule 928.1NYP. For the Exchange
System, the concept of ``Price Reasonability Checks'' for Limit Orders
is described in Rule 967NY(c) and the concept of price protection
filters for quotes are described in Rule 967.1NY. The proposed ``Price
Reasonability Checks'' on Pillar are identical to those set forth in
Arca Options Rule 6.41P-O. As is the case on Arca Options, the proposed
``Price Reasonability Checks'' would be applicable to both orders and
quotes and are designed to provide similar price protections as the
current price checks for Limit Orders and price protection filters for
quotes on the Exchange System, with differences from the current rule
described in detail below. The Exchange believes that applying the same
Price Reasonability Checks to both orders and quotes and describing
them in a single rule would make the Exchange's rules easier to
navigate, while continuing to provide price protection features for
both orders and quotes. The Exchange proposes to locate the rule text
for the proposed Price Reasonability Checks in proposed Rule 928.1NYP
to immediately follow proposed Rule 928NYP regarding the Pre-Trade and
Activity-Based Controls, as this placement would group the risk
controls together and make Exchange rules easier to navigate.
Proposed Rules 928.1NYP(a)(1)-(3) are identical to Arca Options
Rules 6.41P-O(a)(1)-(3) and would set forth the circumstances under
which the proposed Price Reasonability Checks would apply. Proposed
Rule 928.1NY(a) would provide that the Exchange would apply the Price
Reasonability Checks, as defined in proposed paragraphs (b) and (c), to
all Limit Orders and quotes (excluding those represented in open
outcry, except CTB Orders), during continuous trading on each trading
day, subject to the following:
<bullet> Proposed Rule 928.1NYP(a)(1) is identical to Arca Options
Rule 6.41P-O(a)(1) and would provide that a Limit Order or quote
received during a pre-open state would be subject to the proposed Price
Reasonability Checks after an Auction concludes; that a Limit Order or
quote that was resting on the Consolidated Book before a trading halt
would be subject to the proposed Price Reasonability Checks again after
the Trading Halt Auction; and that a put option message to buy would be
subject to the Arbitrage Check regardless of when it arrives. This
proposed rule is based on current Rule 967NY(c), which provides that
the Price Reasonability Checks (for orders) are applied when a series
opens or reopens for trading and is similar to Rule 967.1NY(a)(1),
which provides that Market Maker quote protection will be applied when
an NBBO is available. NBBO protection is available when a series is
opened for trading. Proposed Rule 928.1NYP(a)(1) includes additional
detail and granularity regarding when the proposed Price Reasonability
Checks would be applied under Pillar. The proposed Rule also adds new
functionality that a put option message to buy would be subject to the
Arbitrage Check even if a series is not open for trading. The Exchange
believes that it is appropriate to apply this check to put option
messages to buy at any time because the check is not dependent on an
external reference price.
<bullet> Proposed Rule 928.1NYP(a)(2) is identical to Arca Options
Rule 6.41P-O(a)(2) and would provide that if the calculation of the
Price Reasonability Check is not consistent with the MPV for the
series, it would be rounded down to the nearest price within the
applicable MPV, which is consistent with current functionality. The
Exchange believes this proposed rule would promote clarity and
transparency in Exchange rules regarding how the Price Reasonability
Check would be calculated.
<bullet> Proposed Rule 928.1NYP(a)(3) is identical to Arca Options
Rule 6.41P-O(a)(3) and would provide that the proposed Price
Reasonability Checks would not apply to (i) any options series for
which the underlying security has a non-standard cash or stock
deliverable as part of a corporate action; (ii) any options series for
which the underlying security is identified as over-the-counter
(``OTC''); (iii) any option series on an index; and (iv) any option
series for which the Exchange determines it is necessary to exclude
underlying securities in the interests of maintaining a fair and
orderly market, which the Exchange would announce by Trader Update.
Proposed Rule 928.1NYP(a)(3) is based on current Commentary .01 to
Rules 967NY (orders) and 967.1NY (quotes), with a non-substantive
difference that the proposed rule no longer references Binary Return
Derivatives (``ByRDs'') because ByRDs are no longer traded on the
Exchange.
Proposed Rule 928.1NYP(b) is identical to Arca Options Rule 6.41P-
O(b) and would set forth the ``Arbitrage Checks'' for buy orders or
quotes, which subset of Price Reasonability Checks are based on the
principle that an option order or quot
[…truncated; see source link]Indexed from Federal Register on July 17, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.