[Federal Register Volume 82, Number 137 (Wednesday, July 19, 2017)]
[Notices]
[Pages 33170-33187]
[FR Doc No: 2017-15098]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34- 81137; File No. SR-BatsEDGX-2017-29]

Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice
of Filing of a Proposed Rule Change To Adopt New Rules That Describe
the Trading of Complex Orders on the Exchange for the Exchange's Equity
Options Platform

July 13, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 30, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 filed a proposal for the Exchange's equity options
platform (``EDGX Options'') to adopt new rules that describe the
trading of complex orders on the Exchange.
    The text of the proposed rule change is available at the Exchange's
Web site at www.bats.com, 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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.

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

1. Purpose
Overview
    The Exchange proposes to adopt new rules that describe the trading
of complex orders on the Exchange. Proposed new Rule 21.20, Complex
Orders, details the functionality of the System \3\ in the handling of
complex orders on the Exchange. The proposed rules are based
substantially on similar rules of other exchanges.\4\ The Exchange
believes that the similarity of its proposed complex order rules to
those of other exchanges will allow the Exchange's proposed complex
order functionality to fit seamlessly into the greater options
marketplace and benefit market participants who are already familiar
with similar functionality offered on other exchanges. The Exchange
notes that for simplicity it has omitted from its proposal certain
functionality that is offered by other options exchanges in connection
with their complex order platforms but that the Exchange does not
proposed to offer

initially, including stock-option orders and derived orders.
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    \3\ The term ``System'' means the automated trading system used
by EDGX Options for the trading of options contracts. See Exchange
Rule 16.1(a)(59).
    \4\ See, e.g., Chicago Board Options Exchange, Inc. (``CBOE'')
Rule 6.53C; C2 Options Exchange, Inc. (``C2'') Rule 6.13; Miami
International Securities Exchange (``MIAX'') Rule 518; International
Securities Exchange LLC (``ISE'') Rule 722; NYSE MKT LLC (``NYSE
MKT'') Rule 980NY; BOX Options Exchange LLC (``BOX'') Rule 7240;
NASDAQ OMX PHLX LLC (``PHLX'') Rule 1098; NYSE Arca, Inc.
(``NYSEArca'') Rule 6.91.
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    Additionally, the Exchange is proposing to amend Exchange Rule
21.1, Definitions, to add two new Times in Force to be added in
conjunction with the proposed change, ``Good Til Cancelled'' (or
``GTC'') and ``At the Open'' (or ``OPG''). The Exchange is also
proposing to amend: Exchange Rule 21.15, Data Dissemination, to add
references to data feeds to be added in conjunction with the proposed
change; and Rule 21.16, Risk Monitor Mechanism, to make clear that
complex orders are considered in connection with existing risk
protections offered by the Exchange.\5\
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    \5\ The Exchange represents that prior to operating the proposed
Complex Order Book it will separately file to propose amendments to
Exchange Rule 20.6, Nullification and Adjustment of Options
Transactions Including Obvious Errors, to establish the process for
handling complex order obvious errors based on the rules of other
exchanges that offer complex order functionality. See, e.g., CBOE
Rule 6.25, Interpretation and Policy .07.
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Definitions
    Proposed Rule 21.20(a) provides definitions of terms that apply to
the trading of complex orders, and such terms are used throughout this
proposed rule change. The Exchange proposes to specify that for
purposes of Rule 21.20, the included terms will have the meanings
specified in proposed paragraph (a). A term defined elsewhere in
Exchange Rules will have the same meaning with respect to Rule 21.20,
unless otherwise defined in paragraph (a). Below is a summary of the
proposed definitions.
    The term ``ABBO'' means the best bid(s) or offer(s) disseminated by
other Eligible Exchanges (as defined in Rule 27.1(a)(7)) \6\ and
calculated by the Exchange based on market information received by the
Exchange from OPRA.
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    \6\ ``Eligible Exchange'' means a national securities exchange
registered with the SEC in accordance with Section 6(a) of the Act
that: (a) Is a Participant Exchange in OCC (as that term is defined
in Section VII of the OCC by-laws); (b) is a party to the OPRA Plan
(as that term is described in Section I of the OPRA Plan); and (c)
if the national securities exchange chooses not to become a party to
the Options Order Protection and Locked/Crossed Markets Plan, is a
participant in another plan approved by the Commission providing for
comparable Trade-Through and Locked and Crossed Market protection.
See Exchange Rule 27.1(a)(7).
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    The term ``BBO'' means the best bid or offer on the Simple Book (as
defined below) on the Exchange.
    A ``Complex Order Auction'' or ``COA'' is an auction of a complex
order as set forth in proposed Rule 21.20(d), described below.
    A ``COA-eligible order'' is a complex order designated to be placed
into a Complex Order Auction upon receipt that meets the requirements
of Rule 21.20(d)(l), as described below.
    A ``complex order'' is any order involving the concurrent purchase
and/or sale of two or more different options in the same underlying
security (the ``legs'' or ``components'' of the complex order),\7\ for
the same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for the
purposes of executing a particular investment strategy. Only those
complex orders in the classes designated by the Exchange and
communicated to Members with no more than the applicable number of
legs, as determined by the Exchange on a class-by-class basis and
communicated to Members, are eligible for processing. The Exchange will
communicate this information to Members via specifications and/or a
Regulatory Circular.
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    \7\ The different options in the same underlying security that
comprise a particular complex order are referred to as the ``legs''
or ``components'' of the complex order throughout this proposal.
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    The ``Complex Order Book'' or ``COB'' is the Exchange's electronic
book of complex orders. All Members may submit orders to trade against
interest or rest in the COB pursuant to the proposed Rule.
    The term ``complex strategy'' means a particular combination of
components and their ratios to one another. New complex strategies can
be created as the result of the receipt of a complex instrument
creation request or complex order for a complex strategy that is not
currently in the System. The Exchange is thus proposing two methods to
create a new complex strategy, one of which is a message that a Member
can send to create the strategy and the other is a message a Member can
send that will generate the strategy and that is also an order for that
same strategy. These methods will be equally available to all Members
but [sic] anticipates that Market Makers and other liquidity providers
who anticipate providing larger amounts of trading activity in complex
strategies are the most likely to send in a complex instrument creation
request (i.e., to prepare for their trading in the complex strategy
throughout the day), whereas other participants are more likely to
simply send a complex order that simultaneously creates a new strategy.
The Exchange may limit the number of new complex strategies that may be
in the System at a particular time and will communicate any such
limitation to Members via specifications and/or Regulatory Circular.
    The term ``NBBO'' means the national best bid or offer as
calculated by the Exchange based on market information received by the
Exchange from the appropriate Securities Information Processor
(``SIP'').\8\
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    \8\ All U.S. exchanges and associations that quote and trade
exchange-listed securities must provide their data to a centralized
SIP for data consolidation and dissemination. See 15 U.S.C.
78c(22)(A).
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    The term ``regular trading'' means trading of complex orders that
occurs during a trading session other than: (i) At the opening or re-
opening of the COB for trading following a halt, or (ii) during the COA
process (as described below and in proposed Rule 21.20(d)).
    The ``Simple Book'' is the Exchange's regular electronic book of
orders.
    The ``Synthetic Best Bid or Offer'' (``SBBO'') is calculated using
the best displayed price for each component of a complex strategy from
the Simple Book.
    The ``Synthetic National Best Bid or Offer'' (``SNBBO'') is
calculated using the NBBO for each component of a complex strategy to
establish the best net bid and offer for a complex strategy.
Types of Complex Orders
    Proposed Rule 21.20(b), Availability of Types of Complex Orders,
describes the various types and specific times-in-force for complex
orders handled by the System.
    As an initial matter, proposed Rule 21.20(b) states that the
Exchange will determine and communicate to Members via specifications
and/or a Regulatory Circular listing which complex order types, among
the complex order types set forth in the proposed Rule, are available
for use on the Exchange. Additional information will be issued as
additional complex order types, among those complex order types set
forth in the proposed Rule, become available for use on the Exchange.
Additional information will also be issued when a complex order type
that had been in usage on the Exchange will no longer be available for
use. This is substantially similar to, and based upon, the manner in
which MIAX determines the available order types for its complex order
book.\9\ The purpose of this provision is to enable the Exchange to
modify the complex order types that are available on the Exchange as
market conditions change. The Exchange believes that this enhances its
ability to remain competitive as markets and market conditions evolve.
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    \9\ See MIAX Rule 518(b)(1).
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    Among the complex order types that may be submitted are limit
orders and market orders, and orders with a Time in Force of Good Til
Day (``GTD''),

Immediate or Cancel (``IOC''), DAY, GTC, or OPG, as such terms are
defined in Exchange Rule 21.1(f), as proposed to be amended.\10\ In
addition, the Exchange proposes to accept the following complex orders:
Complex Only orders, COA-eligible orders, do-not-COA orders, and orders
with Match Trade Prevention modifiers, as such terms are defined below.
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    \10\ For a complete description of these order types and Times
in Force, see Exchange Rule 21.1, as proposed to be amended. The
Exchange is proposing to offer similar order types and modifiers to
those offered by other options exchanges. See, e.g., CBOE Rule
6.53C(b); BOX Rule 7240(b)(4); MIAX Rule 518(b)(1).
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    The Exchange proposes to allow orders with a Time in Force of DAY
or IOC to only check against the COB (i.e., rather than the COB and the
Simple Book) (such orders [sic] ``Complex Only Orders''). Unless
designated as Complex Only, and for all other Times in Force, an order
will check against both the COB and the Simple Book. The Exchange notes
that the Complex Only Order option is analogous to functionality on the
MIAX complex order book, which includes certain types of orders and
quotes that do not leg into the simple marketplace but instead will
only execute against or post to the MIAX complex book.\11\ The Exchange
also believes the proposed functionality is analogous to other types of
functionality already offered by the Exchange that provides Members the
ability to direct the Exchange not to route their orders away from the
Exchange \12\ or not to remove liquidity from the Exchange.\13\ Similar
to such analogous features, the Exchange believes that Members may
utilize Complex Only Order functionality as part of their strategy to
maintain additional control over their executions, in connection with
their attempt to provide and not remove liquidity, or in connection
with applicable fees for executions.
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    \11\ See MIAX Rule 518 (c)(2)(iii) (stating that cAOC orders and
market maker quotes on the MIAX complex order book are not eligible
for legging to the MIAX simple order book).
    \12\ See EDGX Rule 21.1(d)(7), which describes ``Book Only
Orders'' as orders that do not route to away options exchanges.
    \13\ See EDGX Rule 21.1(d)(8), which describes ``Post Only
Orders'' as orders that do not route to away options exchanges or
remove liquidity from the Exchange.
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    As noted above, the Exchange proposes to define a COA-eligible
order as a complex order designated to be placed into a Complex Order
Auction upon receipt that meets the requirements of Rule 21.20(d)(l),
as described below. The Exchange proposes to allow all types of orders
to initiate a COA but proposes to have certain types of orders default
to initiating a COA upon arrival with the ability to opt-out of
initiating a COA and other types of orders default to not initiating a
COA upon arrival with the ability to opt-in to initiating a COA.\14\
Specifically, as proposed, complex orders that are marked as IOC will,
by default, not initiate a COA upon arrival, but a Member that submits
an order marked IOC may elect to opt-in to initiating a COA and any
quantity of the IOC order not executed will be cancelled at the end of
the COA. All other Times in Force will by default initiate a COA, but a
Member may elect to opt-out of initiating a COA. Orders with
instructions to (or which default to) initiate a COA are referred to as
COA-eligible orders, subject to the additional eligibility requirements
set forth in the proposed rule, while orders with instructions not to
(or which default not to) initiate a COA are referred to as do-not-COA
orders.
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    \14\ The Exchange believes that this gives market participants
extra flexibility to control the handling and execution of their
complex orders by the System by giving them the additional ability
to determine whether they wish to have their complex order initiate
a COA. Despite the fact that the Exchange is proposing certain
defaults that would be in effect, the Exchange believes its proposal
is similar to CBOE Rule 6.53C(d)(ii)(B), which allows a CBOE Trading
Permit Holders to affirmatively request, on an order-by-order basis,
that a COA-eligible order with two legs not be placed into a CBOE
Complex Order Auction (a ``do-not-COA'' request). The Exchange
further believes that the proposed default values are consistent
with the terms of the orders (e.g., IOC is intended as an immediate
execution or cancellation whereas COA is a process that includes a
short delay in order to broadcast and provide participants time to
respond).
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    The Exchange also proposes to allow the use of certain Match Trade
Prevention (``MTP'') Modifiers, which allow a Member to avoid trading
against the Member's own orders or orders of affiliates as specified on
an identifier established by the Member (``Unique Identifiers).\15\ As
proposed, the System will support, when trading against other complex
orders on the COB, complex orders with the following MTP Modifiers
defined in Rule 21.1(g): MTP Cancel Newest,\16\ MTP Cancel Oldest\17\
and MTP Cancel Both.\18\ When Legging (as defined below) into the
Simple Book, a complex order with any MTP Modifier will be cancelled if
it would execute against any leg on the Simple Book that includes an
order with an MTP Modifier and the same Unique Identifier as the
complex order.
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    \15\ See Rule 21.1(g).
    \16\ Pursuant to Rule 21.1(g)(1), an incoming order marked with
the MTP Cancel Newest (``MCN'') modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. The incoming order
marked with the MCN modifier will be cancelled back to the
originating User(s). The resting order marked with an MTP modifier
will remain on the EDGX Options Book.
    \17\ Pursuant to Rule 21.1(g)(2), an incoming order marked with
the MTP Cancel Oldest (``MCO'') modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. The resting order
marked with the MTP modifier will be cancelled back to the
originating User(s). The incoming order marked with the MCO modifier
will remain on the EDGX Options Book.
    \18\ Pursuant to Rule 21.1(g)(4), an incoming order marked with
the MTP Cancel Both (``MCB'') modifier will not execute against
opposite side resting interest marked with any MTP modifier
originating from the same Unique Identifier. The entire size of both
orders will be cancelled back to the originating User(s).
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Trading of Complex Orders
    Proposed Rule 21.20(c), Trading of Complex Orders, describes the
manner in which complex orders will be handled and traded on the
Exchange. The Exchange will determine and communicate to Members via
specifications and/or Regulatory Circular which complex order origin
codes (i.e., non-broker-dealer customers, broker-dealers that are not
Market Makers on an options exchange, and/or Market Makers on an
options exchange) are eligible for entry onto the COB.\19\ The proposed
rule also states that complex orders will be subject to all other
Exchange Rules that pertain to orders submitted to the Exchange
generally, unless otherwise provided in proposed Rule 21.20.
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    \19\ See Proposed Rule 21.20(c); see also CBOE Rule 6.53C(c)(i),
which states that CBOE will determine which classes and which
complex order origin types (i.e., non-broker-dealer public customer,
broker-dealers that are not Market-Makers or specialists on an
options exchange, and/or Market-Makers or specialists on an options
exchange) are eligible for entry into the Complex Order Book.
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    Proposed Rule 21.20(c)(1)(A) provides that bids and offers on
complex orders may be expressed in $0.01 increments, and the
component(s) of a complex order may be executed in $0.01 increments,
regardless of the minimum increments otherwise applicable to individual
components of the complex order,\20\ and that if any component of a
complex strategy would be executed at a price that is equal to a
Priority Customer \21\ bid or offer on the Simple

Book, at least one other component of the complex strategy must trade
at a price that is better than the corresponding BBO.\22\
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    \20\ See Proposed Rule 21.20(c)(l); see also CBOE Rule 6.42(f)
and MIAX Rule 518(c)(1).
    \21\ The term ``Priority Customer'' means any person or entity
that is not: (A) A broker or dealer in securities; or (B) a
Professional. The term ``Priority Customer Order'' means an order
for the account of a Priority Customer. See Rule 16.1(a)(45). A
``Professional'' is any person or entity that: (A) Is not a broker
or dealer in securities; and (B) places more than 390 orders in
listed options per day on average during a calendar month for its
own beneficial account(s). All Professional orders shall be
appropriately marked by Options Members. See Rule 16.1(a)(46).
    \22\ See Proposed Rule 21.20(c)(l)(B); see also, ISE Rule
722(b)(2), which states that in this situation at least one leg must
trade at a price that is better by at least one minimum trading
increment, and PHLX Rule 1098(c)(iii), which states in this
situation that at least one option leg must trade at a better price
than the established bid or offer for that option contract and no
option leg is executed at a price outside of the established bid or
offer for that option contract.
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    Additionally, respecting execution pricing, proposed Rule
21.20(c)(1)(C) states generally that a complex order will not be
executed at a net price that would cause any component of the complex
strategy to be executed: (i) At a price of zero; or (ii) ahead of a
Priority Customer Order on the Simple Book without improving the BBO of
at least one component of the complex strategy. These restrictions are
designed to protect the priority of Priority Customer Orders that is
established in the Simple Book.
Execution of Complex Orders
    Proposed Rule 21.20(c)(2) describes: The process of accepting
orders prior to the opening of the COB for trading (and prior to re-
opening after a halt); the process by which the Exchange will open the
COB or re-open the COB following a halt (the ``Opening Process''); the
prices at which executions may occur on the Exchange for complex
strategies, including through the Opening Process; execution of complex
orders against the individual components or ``legs'' on the Simple
Book; and the process of evaluation that is conducted by the System on
an ongoing basis respecting complex orders.
    Proposed Rule 21.20(c)(2)(A) states that Members may submit orders
to the Exchange as set forth in Rule 21.6, which currently allows
orders to be entered into the System beginning at 7:30 a.m. Eastern
Time. The proposed Rule also states that any orders designated for the
Opening Process will be queued until 9:30 a.m. at which time they will
be eligible to be executed in the Opening Process. Any orders
designated for a re-opening following a halt will be queued until the
halt has ended, at which time they will be eligible to be executed in
the Opening Process. Finally, proposed Rule 21.20(c)(2)(A) states that
beginning at 7:30 a.m. and updated every five seconds thereafter,
indicative prices and order imbalance information associated with the
Opening Process will be disseminated by the Exchange while orders are
queued prior to 9:30 a.m. or, in the case of a halt, prior to re-
opening.\23\
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    \23\ See infra Market Data Feeds section.
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    Proposed Rule 21.20(c)(2)(B) states that complex orders do not
participate in the Opening Process for the individual option series
conducted pursuant to Rule 21.7.\24\ The proposed rule also states that
the Opening Process for the COB will operate both at the beginning of
each trading session and upon re-opening after a halt. The Opening
Process will commence when all legs of the complex strategy are open on
the Simple Book. If there are complex orders that have been queued but
none that can match, the System will open and transition such orders to
the COB.
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    \24\ This is similar to the opening of complex orders on other
exchanges. For instance, complex orders on CBOE and NYSE MKT do not
participate in the respective opening auction processes for
individual component option series legs. See CBOE Rule 6.53C,
Interpretation and Policy .11; NYSE MKT Rule 952NY.
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    Proposed Rule 21.20(c)(2)(C) describes the manner in which the
System determines the equilibrium price to be used for the purpose of
execution of complex orders in the Opening Process. If there are
complex orders that can match, the System will determine the
equilibrium price where the most complex orders can trade. If there are
multiple price levels that would result in the same number of
strategies executed, the System will choose the price that would result
in the smallest remaining imbalance. If there are multiple price levels
that would result in the same number of strategies executed and would
leave the same ``smallest'' imbalance, the System will choose the price
that is closest to the Volume Based Tie Breaker (``VBTB'') as the
opening price. For purposes of proposed subparagraph (C), the VBTB is
the midpoint of the SNBBO. If there is no valid VBTB available, the
System will use the midpoint of the highest and lowest potential
opening prices as the opening price. If the midpoint price would result
in an invalid increment, the System will round up to the nearest
permissible increment and use that as the opening price. If executing
at the equilibrium price would require printing at the same price as a
Priority Customer on any leg in the Simple Book, the System will adjust
the equilibrium price to a price that is better than the corresponding
bid or offer in the marketplace by at least a $0.01 increment.
    Pursuant to proposed paragraph Proposed Rule 21.20(c)(2)(D), when
an equilibrium price is established at or within the SNBBO, the
Exchange will execute matching complex orders in price/time priority at
the equilibrium price. Any remaining complex order or the remaining
portion thereof will be entered into the COB, subject to the Member's
instructions. If the System cannot match orders because it cannot
determine an equilibrium price (i.e., all queued orders are Market
Orders) or a permissible equilibrium price (i.e., within the SNBBO that
also satisfies proposed Rule 21.20(c)(1)(C), as described above), the
System will open and transition such orders to the COB after a
configurable time period established by the Exchange. The Exchange
believes this configurable time period is important because the opening
price protections are relatively restrictive (i.e., based on the SNBBO)
and the Exchange wants to have the ability to periodically optimize the
process in a manner that will allow sufficient opportunity to have
Opening Process executions without also waiting too long to transition
to regular trading.
    Next, with respect to the execution of orders on the COB, as
described in proposed paragraph (c)(2)(E), incoming complex orders will
be executed by the System in accordance with the provisions below, and
will not be executed at prices inferior to the SBBO or at a price that
is equal to the SBBO when there is a Priority Customer Order at the
best SBBO price. Complex orders will never be executed at a price that
is outside of the individual component prices on the Simple Book.
Furthermore, the net price of a complex order executed against another
complex order on the COB will never be inferior to the price that would
be available if the complex order legged into the Simple Book. The
purpose of this provision is to prevent a component of a complex order
from being executed at a price that is inferior to the best-priced
contra-side orders on the Simple Book (on which the SBBO is based) and
to prevent a component of a complex order from being executed at a
price that compromises the priority already established by a Priority
Customer on the Simple Book. The Exchange believes that such priority
should be protected and that such protection should be extended to the
execution of complex orders on the COB.\25\
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    \25\ The Exchange also notes that this provision is based on and
substantially similar to MIAX Rule 518(c)(2)(B) [sic]. Exchanges
other than MIAX also protect Priority and Public Customer priority.
ISE Priority Customer Orders on the Exchange shall have priority
over Professional Orders and market maker quotes at the same price
in the same options series. See ISE Rule 713(c); see also, CBOE Rule
6.45(a)(ii)(A), which states that CBOE Public Customer orders in the
electronic book have priority, and NYSE MKT Rule 964NY(b)(2)(A),
which provides that bids and offers in the Consolidated Book for
Customer accounts have first priority over other bids or offers at
the same price.

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    Incoming complex orders that could not be executed because the
executions would be priced (i) outside of the SBBO, or (ii) equal to
the SBBO due to a Priority Customer Order at the best SBBO price, will
be cancelled if such complex orders are not eligible to be placed on
the COB. Complex orders will be executed without consideration of any
prices for the complex strategy that might be available on other
exchanges trading the same complex strategy provided, however, that
such complex order price may be subject to the Drill-Through Price
Protection set forth in Interpretation and Policy .04(f) of proposed
Rule 21.20.\26\
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    \26\ The Drill-Through Price Protection feature is a price
protection mechanism under which, when in operation as requested by
the submitting Member or pursuant to the Exchange's default
settings, a buy (sell) order will not be executed at a price that is
higher (lower) than the SNBBO or the SNBBO at the time of order
entry plus (minus) a buffer amount (the ``Drill-Through Price'').
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    Proposed Rule 21.20(c)(2)(F) describes the Legging process through
which complex orders, under certain circumstances, are executed against
the individual components of a complex strategy on the Simple Book.
Complex orders up to a maximum number of legs (determined by the
Exchange on a class-by-class basis as either two, three, or four legs
and communicated to Members via specifications and/or Regulatory
Circular) may be automatically executed against bids and offers on the
Simple Book for the individual legs of the complex order (``Legging''),
provided the complex order can be executed in full or in a permissible
ratio by such bids and offers.\27\
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    \27\ See proposed Rule 21.20(c)(2)(F). This is similar to CBOE
Rule 6.53C(c)(ii)(l), which states that complex orders in the COB
will automatically execute against individual orders or quotes
residing in the EBook provided the complex order can be executed in
full (or in a permissible ratio) by the orders and quotes in EBook;
see also BOX Rule 7240(b)(3)(ii) providing that Complex Orders will
be automatically executed against bids and offers on the BOX Book
for the individual legs of the Complex Order to the extent that the
Complex Order can be executed in full or in a permissible ratio by
such bids and offers.
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    As proposed, all two leg COA-eligible Customer complex orders will
be allowed to leg into the Simple Book without restriction. The benefit
of Legging against the individual components of a complex order on the
Simple Book is that complex orders can access the full liquidity of the
Exchange's Simple Book, thus enhancing the possibility of executions at
the best available prices on the Exchange. The Exchange believes this
is particularly true for Customer complex orders and, thus, does not
propose to limit the ability of such orders to leg into the Simple Book
(when such orders are two leg orders).
    Notwithstanding the foregoing, the Exchange is proposing to
establish, in proposed Rule 21.20(c)(2)(F), that complex orders that
could otherwise be eligible for Legging will only be permitted to trade
against other complex orders in the COB in certain situations.
Specifically, proposed Rule 21.20(c)(2)(F) would provide that other
than two leg COA-eligible Customer complex orders, any other complex
orders (i.e., non-Customer orders or non-COA-eligible Customer orders)
with two option legs where both legs are buying or both legs are
selling and both legs are calls or both legs are puts may only trade
against other complex orders on the COB and will not be permitted to
leg into the Simple Book. Proposed Rule 21.20(c)(2)(F) would impose a
similar restriction by stating that complex orders with three or four
option legs where all legs are buying or all legs are selling may only
trade against other complex orders on the COB and will not leg into the
Simple Book (regardless of whether the option leg is a call or a
put).\28\
---------------------------------------------------------------------------

    \28\ This is substantially similar to ISE Rules 722(b)(3)(ii)(A)
and (B), which state that complex orders with 2 option legs where
both legs are buying or both legs are selling and both legs are
calls or both legs are puts may only trade against other complex
orders in the complex order book. The trading system will not
generate legging orders for these complex orders, and complex orders
with 3 or 4 option legs where all legs are buying or all legs are
selling may only trade against other complex orders in the complex
order book. See also Securities Exchange Act Release No. 73023
(September 9, 2014), 79 FR 55033 (September 15, 2014) (SR-ISE-2014-
10).
---------------------------------------------------------------------------

    Currently, liquidity providers (typically Market Makers, though
such functionality is not currently limited to registered Market
Makers) in the Simple Book are protected by way of the Risk Monitor
Mechanism (``Risk Monitor'')\29\ by limiting the number of contracts
they execute in an option class on the Exchange within a specified time
period (a ``specified time period'') or on an absolute basis for the
trading day (``absolute limits'').\30\ The Risk Monitor automatically
cancels and removes the liquidity provider's orders from the Exchange's
disseminated quotation in all series of a particular option class when
it has determined that a participant has traded a number of contracts
equal to or above a percentage of their quotations (the ``percentage
trigger'') during the specified time period or on an absolute basis.
The purpose of the Risk Monitor is to allow Market Makers and other
liquidity providers to provide liquidity across potentially hundreds of
options series without executing the full cumulative size of all such
quotes before being given adequate opportunity to adjust the price and/
or size of their quotes.
---------------------------------------------------------------------------

    \29\ See Exchange Rule 21.16.
    \30\ As described later in this proposal, the Exchange proposes
to amend the Rule governing the Risk Monitor, Rule 21.16, with
respect to complex orders.
---------------------------------------------------------------------------

    All of a participant's quotes in each option class are considered
firm until such time as the Risk Monitor's threshold has been equaled
or exceeded and the participant's quotes are removed by the Risk
Monitor in all series of that option class.\31\ Thus the Legging of
complex orders presents higher risk to Market Makers and other
liquidity providers as compared to simple orders being entered in
multiple series of an options class in the simple market, as it can
result in such participants exceeding their established risk thresholds
by a greater number of contracts. Although Market Makers and other
liquidity providers can limit their risk through the use of the Risk
Monitor, the participant's quotes are not removed until after a trade
is executed. As a result, because of the way complex orders leg into
the regular market as a single transaction, Market Makers and other
liquidity providers may end up trading more than the cumulative risk
thresholds they have established, and are therefore exposed to greater
risk. The Exchange believes that Market Makers and other liquidity
providers may be compelled to change their quoting and trading behavior
to account for this additional risk by widening their quotes and
reducing the size associated with their quotes, which would diminish
the Exchange's quality of markets and the quality of the markets in
general.
---------------------------------------------------------------------------

    \31\ See Exchange Rule 612(c) [sic].
---------------------------------------------------------------------------

    Based on the foregoing, the Exchange has proposed to modify the
Risk Monitor as described in greater detail further below and has also
proposed limitations to Rule 21.20(c)(2)(F). The purpose of the
limitations in proposed Rule 21.20(c)(2)(F) is to minimize the impact
of Legging on single leg Market Makers and other liquidity providers by
limiting a potential source of unintended risk when certain types of
complex orders leg into the Simple Book. The Exchange believes that the
proposed limitation on the availability of Legging to (i) complex
orders with two option legs where both legs are buying or both legs are
selling and both legs are calls or both legs are puts, and

(ii) complex orders with three or four option legs where all legs are
buying or all legs are selling regardless of whether the option leg is
a call or a put, should serve to reduce the risk of Market Makers and
other liquidity providers trading above their risk tolerance levels.
However, as noted above, the Exchange believes it is appropriate not to
apply this limitation to two-leg COA-eligible Customer orders in order
to afford such orders the execution benefit that comes from Legging.
    Proposed Rule 21.20(c)(2)(G) sets forth the process for evaluation
of complex orders, and the COB, on a regular basis and for various
conditions and events that result in the System's particular handling
and execution of complex orders in response to such regular evaluation,
conditions and events. The System will evaluate complex orders
initially once all components of the complex strategy are open as set
forth in proposed Rule 21.20(c)(2)(B)-(D) as described above, upon
receipt as set forth in proposed Rule 21.20(c)(5)(A) as described
below, and continually as set forth in proposed Rule 21.20(c)(5)(B) as
described below.\32\
---------------------------------------------------------------------------

    \32\ MIAX performs similar evaluations in the operation of its
complex order book. See MIAX Rule 518(c)(2)(v).
---------------------------------------------------------------------------

    The purpose of the evaluation process for complex orders is to
determine (i) their eligibility to initiate, or to participate in, a
COA as described in proposed Rule 21.20(d)(1); (ii) their eligibility
to participate in the managed interest process as described in proposed
Rule 21.20(c)(4); (iii) their eligibility for full or partial execution
against a complex order resting on the COB or through Legging into the
Simple Book (as described in proposed Rule 21.20(c)(2)(F)); (iv)
whether the complex order should be cancelled; and (v) whether the
complex order or any remaining portion thereof should be placed or
remain on the COB.
    The continual and event-triggered evaluation process ensures that
the System is monitoring and assessing the COB for incoming complex
orders, and changes in market conditions or events that cause complex
orders to re-price and/or execute, and conditions or events that result
in the cancellation of complex orders on the COB. This ensures the
integrity of the Exchange's System in handling complex orders and
results in a fair and orderly market for complex orders on the
Exchange.
Complex Order Priority
    Proposed Rule 21.20(c)(3) describes how the System will establish
priority for complex orders. As described below, the proposed priority
structure for the COB differs from the priority structure applicable to
the Simple Book as established in Exchange Rule 21.8.\33\ A complex
order may be executed at a net credit or debit price against another
complex order without giving priority to bids or offers established in
the marketplace that are no better than the bids or offers comprising
such net credit or debit; provided, however, that if any of the bids or
offers established in the marketplace consist of a Priority Customer
Order, at least one component of the complex strategy must trade at a
price that is better than the corresponding BBO by at least a $0.01
increment.\34\
---------------------------------------------------------------------------

    \33\ Exchange Rule 21.8, Priority of Quotes and Orders,
describes among other things the various execution priority, trade
allocation and participation guarantees generally applicable to the
Simple Book. Some sections of Exchange Rule 21.8 are cross-
referenced herein and will apply as noted to complex orders, as the
context requires.
    \34\ See Proposed Rule 21.20(c)(3)(A); see also MIAX Rule
518(c)(3), which states that at least one leg must trade at a price
that is better than the corresponding bid or offer in the
marketplace by at least a $0.01 increment; ISE Rule 722(b)(2), which
states that in this situation at least one leg must trade at a price
that is better by at least one minimum trading increment; and PHLX
Rule 1098(c)(iii), requiring in this situation that at least one
option leg is executed at a better price than the established bid or
offer for that option contract and no option leg is executed at a
price outside of the established bid or offer for that option
contract.
---------------------------------------------------------------------------

    Regarding execution and allocation of complex orders, proposed Rule
21.20(c)(3)(B) establishes that complex orders will be automatically
executed against bids and offers on the COB in price priority. Bids and
offers at the same price on the COB will be executed in time priority.
Complex orders that leg into the Simple Book will be executed in
accordance with Rule 21.8, which includes Priority Customer priority as
well as pro rata executions. The Exchange notes that although it has
proposed a different priority model for its COB (price-time) than its
Simple Book (pro rata), the Exchange has proposed to operate the COB to
respect Priority Customer priority on the Simple Book and will also
continue to execute orders that leg into the Simple Book based on its
existing priority model. The Exchange believes that operating the COB
with price-time priority and without providing allocation benefits to
particular types of Members will allow the Exchange to launch complex
order functionality with relatively straightforward features and
results. The Exchange also notes that this same priority model (COB as
price-time and Simple Book as pro rata) is used by at least one other
options exchange.\35\
---------------------------------------------------------------------------

    \35\ See ISE Rule 713, which sets forth a pro rata priority
model for ISE's simple book and ISE Rule 722(b)(3), which provides
ISE flexibility to vary the application from class to class but
includes price-time priority on the ISE COB as an option.
---------------------------------------------------------------------------

Managed Interest Process for Complex Orders
    In order to ensure that complex orders (which are non-routable)
receive the best executions on the Exchange, proposed Rule 21.20(c)(4)
sets forth the price(s) at which complex orders will be placed on the
COB. More specifically, the managed interest process is used to manage
the prices at which a complex order that is not immediately executed
upon entry is handled by the System, including how such an order is
priced and re-priced on the COB. The managed interest process is
initiated when a complex order that is eligible to be placed on the COB
cannot be executed against either the COB or the Simple Book (with the
individual legs) at the complex order's net price, and is intended to
ensure that a complex order to be managed does not result in a locked
or crossed market on the Exchange. Once initiated, the managed interest
process for complex orders will be based upon the SBBO.\36\
---------------------------------------------------------------------------

    \36\ A complex order for which the Drill-Through Price
Protection is engaged will be managed to the Drill-Through Price as
described below and in proposed Rule 21.20, Interpretations and
Policy .04(f).
---------------------------------------------------------------------------

    Under the managed interest process, a complex order that is resting
on the COB and is either a complex market order as described in
proposed Rule 21.20(c)(6) and discussed below, or has a limit price
that locks or crosses the current opposite side SBBO when the SBBO is
the best price, may be subject to the managed interest process for
complex orders as discussed herein. If the order is not a COA-eligible
order as defined in proposed Rules 21.20(a)(4) described above and
21.20(d)(1) described below, the System will first determine if the
inbound complex order can be matched against other complex orders
resting on the COB at a price that is at or inside the SBBO (provided
there are no Priority Customer Orders on the Simple Book at that
price). Second, the System will determine if the inbound complex order
can be executed by Legging against individual orders resting on the
Simple Book at the SBBO. A complex order subject to the managed
interest process will never be executed at a price that is through the
individual component prices on the Simple Book. Furthermore, the net
price of a complex order subject to the managed interest process that
is executed against another

complex order on the COB will never be inferior to the price that would
be available if the complex order legged into the Simple Book. When the
opposite side SBBO includes a Priority Customer Order, the System will
book and display such booked complex order on the COB at a price (the
``book and display price'') that is $0.01 away from the current
opposite side SBBO. When the opposite side SBBO does not include a
Priority Customer Order and is not available for execution in the ratio
of such complex order, or cannot be executed through Legging with the
Simple Book, the System will place such complex order on the COB and
display such booked complex order at a book and display price that will
lock the current opposite side SBBO (i.e., because it is a price at
which another complex order can trade).
    Example--Complex order managed interest when Priority Customer
Interest at the SBBO is Present

EDGX Market Maker A quote Mar 50 Call 6.00-6.50 (10x10)
EDGX Market Maker B quote Mar 55 Call 2.00-2.30 (10x10)
EDGX Priority Customer Order Mar 55 Call 2.10 bid (1)

     The Exchange receives an initiating Priority Customer
complex order to buy 1 Mar 50 Call and sell 2 Mar 55 Calls for a 2.30
debit, 100 times.
     Assume the do-not-COA instruction is present on this
order, so the order will not initiate a COA auction upon arrival
regardless of any other factor.
     The SBBO is 1.40 debit bid at 2.30 credit offer.
     Since the Mar 55 call is 2.10 bid for only one contract
(the Priority Customer Order), the complex order cannot be legged
against the Simple Book at a 2.30 debit as a 2.30 debit would require
selling two March 55 Calls at 2.10 while buying one March 50 Call at
6.50. Since there is Priority Customer interest on one leg of the
complex order on the Simple Book, the inbound complex order cannot
trade at this price by matching with other complex liquidity.
     Thus, the order is managed for display purposes at a price
one penny inside of the opposite side SBBO, 2.29 and is available to
trade with other complex liquidity at 2.29. The combination of the
Simple Book and the COB will be a one penny wide market of 2.29 debit
bid at 2.30 credit offer.
     If additional interest were to arrive on the Mar 55 Call
2.10 bid, the inbound complex order would be re-evaluated and would in
this example become eligible to leg with the Priority Customer interest
on the Simple Book at the 2.30 credit offer.
    Example--Complex order managed interest when the ratio to allow
Legging does not exist, and there is no Priority Customer Interest.

EDGX Market Maker A quote Mar 50 call 6.00-6.50 (10x10)
EDGX Market Maker B Mar 55 call 2.00-2.30 (10x10)
EDGX Broker-Dealer A order Mar 55 Call 2.10 bid (1)

     The Exchange receives an initiating Priority Customer
complex order to buy 1 Mar 50 call and sell 2 Mar 55 calls for a 2.30
debit, 100 times.
     The SBBO is 1.40 debit bid at 2.30 credit offer.
     Assume the do-not-COA instruction is present on this
order, so the order will not initiate a COA auction upon arrival
regardless of any other factor.
     Since the Mar 55 call is 2.10 bid for only one contract
(the Broker Dealer order), the complex order cannot be legged against
the Simple Book at a 2.30 debit, as a 2.30 debit would require selling
two March 55 Calls at 2.10 while buying one March 50 Call at 6.50.
Although the inbound complex order cannot trade at this time because
there is insufficient interest to buy the March 55 Call, there is no
Priority Customer interest on either side of the 2.30 credit offer and
therefore the order will be able to trade at that price when sufficient
interest exists. Thus, the order is managed for display purposes at a
price locking the opposite side SBBO 2.30 and is available to trade
against other complex interest at 2.30. The combination of the Simple
Book and the COB will be a locked market of 2.30 debit bid at 2.30
credit offer.
    Should the SBBO change, the complex order's book and display price
will continuously re-price to the new SBBO until: (i) The complex order
has been executed in its entirety; (ii) if not executed, the complex
order's book and display price has reached its limit price or, in the
case of a complex market order, the new SBBO, subject to any applicable
price protections; (iii) the complex order has been partially executed
and the remainder of the order's book and display price has reached its
limit price or, in the case of a complex market order, the new SBBO,
subject to any applicable price protections; or (iv) the complex order
or any remaining portion of the complex order is cancelled. If the
Exchange receives a new complex order for the complex strategy on the
opposite side of the market from the managed complex order that can be
executed, the System will immediately execute the remaining contracts
from the managed complex order to the extent possible at the complex
order's current book and display price. If unexecuted contracts remain
from the complex order on the COB, the complex order's size will be
revised and disseminated to reflect the complex order's remaining
contracts at its current managed book and display price.
    The purpose of using the calculated SBBO is to enable the System to
determine a valid trading price range for complex strategies and to
protect orders resting on the Simple Book by ensuring that they are
executed when entitled. Additionally, the managed interest process is
designed to ensure that the System will not execute any component of a
complex order at a price that would trade through an order on the
Simple Book or that would disrupt the established priority of Priority
Customer interest resting on the Simple Book.\37\ The Exchange believes
that this is reasonable because it prevents the components of a complex
order from trading at a price that is inferior to a price at which the
individual components may be traded on the Exchange and it maintains
the priority for Priority Customers resting on the Simple Book.
---------------------------------------------------------------------------

    \37\ For a complete description of priority in the Simple Book,
see Exchange Rule 21.8.
---------------------------------------------------------------------------

Evaluation Process
    Proposed Rule 21.20(c)(5) describes how and when the System
determines to execute or otherwise handle complex orders in the System.
As stated above, the System will evaluate complex orders and the COB on
a regular basis and will respond to the existence of various conditions
and/or events that trigger an evaluation. Evaluation results in the
various manners of handling and executing complex orders as described
herein. The System will evaluate complex orders initially once all
components of the complex strategy are open as set forth in proposed
Rule 21.20(c)(2)(B)-(D), upon receipt as set forth in proposed Rule
21.20(c)(5)(A), and continually as set forth in proposed Rule
21.20(c)(5)(B), each of which as described herein.
    Proposed Rule 21.20(c)(5)(A) describes the evaluation process that
occurs upon receipt of complex orders once a complex strategy is open
for trading. After a complex strategy is open for trading, all new
complex orders that are received for the complex strategy are evaluated
upon arrival. The System will determine if such complex orders are COA-
eligible orders using the process and criteria described in proposed
Rule 21.20(d). The System will also evaluate: (i) Whether such complex
orders are

eligible for full or partial execution against a complex order resting
on the COB; (ii) whether such complex orders are eligible for full or
partial execution through Legging with the Simple Book (as described in
proposed Rule 21.20(c)(2)(F) and discussed above); (iii) whether all or
any remaining portion of a complex order should be placed on the COB;
(iv) the eligibility of such complex orders (as applicable) to
participate in the managed interest process as described above; \38\
and (v) whether such complex orders should be cancelled.\39\
---------------------------------------------------------------------------

    \38\ See proposed Rule 21.20(c)(4).
    \39\ For example, an order might be cancelled based on
applicable price protections or MTP Modifiers, as described above.
---------------------------------------------------------------------------

    Proposed Rule 21.20(c)(5)(B) describes the System's ongoing regular
evaluation of the COB. The System will continue, on a regular basis, to
evaluate the factors listed in (i)-(v) described above with respect to
evaluation performed on receipt.
    The System will also continue to evaluate whether there is a halt
affecting any component of a complex strategy, and, if so, the System
will handle complex orders in the manner set forth in proposed
Interpretation and Policy .05, as described below.
    Proposed Rule 21.20(c)(5)(C) states that if the System determines
that a complex order is a COA-eligible order (described below), such
complex order will be submitted into the COA process as described in
proposed Rule 21.20(d) and discussed below.
    Proposed Rule 21.20(c)(5)(D) describes the handling of orders that
are determined not to be COA-eligible. If the System determines that a
complex order is not a COA-eligible order, such complex order may be,
as applicable: (i) Immediately matched and executed against a complex
order resting on the COB; (ii) executed against the individual
components of the complex order on the Simple Book through Legging (as
described in proposed Rule 21.20(c)(2)(F) above); placed on the COB and
managed pursuant to the managed interest process as described in
proposed Rule 21.20(c)(4) and discussed above; or cancelled by the
System if the time-in-force (e.g., IOC) of the complex order does not
allow it to rest on the COB.
    Proposed Rule 21.20(c)(6) states that complex orders may be
submitted as market orders and may be designated as COA-eligible. The
proposed rule then distinguishes between complex market orders
designated as COA-eligible and those that are not so designated.
Proposed Rule 21.20(c)(6)(A) states that complex market orders
designated as COA-eligible may initiate a COA upon arrival. The COA
process is set forth in proposed Rule 21.20(d) and discussed below.
Proposed Rule 21.20(c)(6)(B) states that complex market orders not
designated as COA-eligible will trade immediately with any contra-side
complex orders, or against the individual legs, up to and including the
SBBO, and if not fully executed due to applicable price protections,
may be posted to the COB subject to the managed interest process, and
the Evaluation Process, each as described above.
Complex Order Auction Process
    Proposed Rule 21.20(d), COA Process, describes the process for
determining if a complex order is eligible to begin a COA. All option
classes will be eligible to participate in a COA.
    Proposed Rule 21.20(d)(l) defines and describes the handling of a
COA eligible order. A ``COA-eligible order'' means a complex order
that, as determined by the Exchange, is eligible to initiate a COA
based upon the Member's instructions, the order's marketability (i.e.,
if the price of such order is equal to or better than the current SBBO,
subject to applicable restrictions when a Priority Customer Order
comprises a portion of the SBBO) as determined by the Exchange, number
of components, and complex order origin codes (i.e., non-broker-dealer
customers, broker-dealers that are not market makers on an options
exchange, and/or market makers on an options exchange as determined by
the Exchange). Determinations by the Exchange with respect to COA
eligibility will be communicated to Members via specifications and/or
Regulatory Circular).\40\ Other exchanges also have limited auction
eligibility for complex orders based on order origin code.\41\
---------------------------------------------------------------------------

    \40\ See MIAX Rule 518(d)(1); see also CBOE Rule 6.53C(d)(i) and
NYSE MKT Rule 980NY(e)(l), which list Customers, broker-dealers that
are not Market-Makers or specialists on an options exchange, and/or
Market-Makers or specialists on an options exchange.
    \41\ See id. See also, e.g., CBOE Regulatory Circular RG14-143
(October 14, 2014), limiting Complex Order Auction (``COA'')
eligibility to non-broker-dealer public customer orders and
professional customer orders.
---------------------------------------------------------------------------

    In order to initiate a COA upon receipt, a COA-eligible order must
be designated as such (either affirmatively or by default) and must
meet the criteria described in proposed Rule 21.20, Interpretation and
Policy .02, as described below.
    Complex orders processed through a COA may be executed without
consideration to prices of the same complex interest that might be
available on other exchanges. A COA will be allowed to occur at the
same time as other COAs for the same complex strategy. The Exchange has
not proposed to limit the frequency of COAs for a complex strategy and
could have multiple COAs occurring concurrently with respect to a
particular complex strategy.\42\ The Exchange represents that it has
systems capacity to process multiple overlapping COAs consistent with
the proposal, including systems necessary to conduct surveillance of
activity occurring in such auctions.\43\
---------------------------------------------------------------------------

    \42\ The Exchange notes that ISE historically has permitted
multiple complex auctions in the same strategy to run concurrently,
though this functionality is currently dormant in connection with
the transition to Nasdaq INET Technology. See Securities Exchange
Act Release No. 80524 (April 25, 2017), 82 FR 20405 (May 1, 2017)
(SR-ISE-2017-33).
    \43\ See also proposed Interpretation and Policy .02 to Rule
21.20, as described below in the COA Eligibility section.
---------------------------------------------------------------------------

    Proposed Rule 21.20(d)(2) describes the circumstances under which a
COA is begun. Upon receipt of a COA-eligible order, the Exchange will
begin the COA process by sending a COA auction message to all
subscribers to the Exchange's data feeds that deliver COA auction
messages.\44\ The COA auction message will identify the COA auction ID,
instrument ID (i.e., complex strategy), origin code, quantity, and side
of the market of the COA-eligible order. The Exchange may also
determine to include the price in COA auction messages and if it does
so it will announce such determination in published specifications and/
or a Regulatory Circular to Members. The price included in the COA
auction message will be the limit order price, unless the COA is
initiated by a complex market order, in which case such price will be
the SBBO, subject to any applicable price protections.
---------------------------------------------------------------------------

    \44\ See infra Market Data Feeds section.
---------------------------------------------------------------------------

    Proposed Rule 21.20(d)(3) defines the amount of time within which
participants may respond to a COA auction message. The term ``Response
Time Interval'' means the period of time during which responses to the
RFR may be entered. The Exchange will determine the duration of the
Response Time Interval, which shall not exceed 500 milliseconds, and
will communicate it to Members via specifications and/or Regulatory
Circular.\45\
---------------------------------------------------------------------------

    \45\ The Exchange has based its Response Time Interval on MIAX
Rule 518(d)(3), which similarly does not have a minimum Response
Time Interval and has a maximum of 500 milliseconds. The Exchange
believes that 500 milliseconds is a reasonable amount of time within
which participants can respond to a COA auction message.

---------------------------------------------------------------------------

    Proposed Rule 21.20(d)(4) states that Members may submit a response
to the COA auction message (a ``COA Response'') during the Response
Time Interval. COA Responses can be submitted by a Member with any
origin code, including Priority Customer. COA Responses may be
submitted in $0.01 increments and must specify the price, size, side of
the market (i.e., a response to a buy COA as a sell or a response to a
sell COA as a buy) and COA auction ID for the COA to which the response
is targeted. Multiple COA Responses from the same Member may be
submitted during the Response Time Interval. COA Responses represent
non-firm interest that can be modified or withdrawn at any time prior
to the end of the Response Time Interval, though any modification to a
COA Response other than a decrease of size will result in a new
timestamp and a loss of priority. COA Responses will not be displayed
by the Exchange. At the end of the Response Time Interval, COA
Responses are firm (i.e., guaranteed at their price and size). Any COA
Responses not executed in full will expire at the end of the COA.\46\
Any COA Responses not executable based on the price of the COA will be
cancelled immediately.
---------------------------------------------------------------------------

    \46\ This differs slightly from, but has the same effect as, the
language in CBOE Rule 6.53C(d)(vii), which states that any COA
Responses not accepted in whole or in a permissible ratio will
expire at the end of the Response Time Interval.
---------------------------------------------------------------------------

    Proposed Rule 21.20(d)(5) describes how COA-eligible orders are
handled following the Response Time Interval. At the end of the
Response Time Interval, COA-eligible orders may be executed in whole or
in part. COA-eligible orders will be executed against the best priced
contra side interest, and any unexecuted portion of a COA-eligible
order remaining at the end of the Response Time Interval will be placed
on the COB and ranked pursuant to proposed Rule 21.20(c)(3) as
discussed above or cancelled, if IOC.
    The COA will terminate: (i) Upon receipt of a new non-COA-eligible
order on the same side as the COA but with a better price, in which
case the COA will be processed and the new order will be posted to the
COB; (ii) if an order is received that would improve the SBBO on the
same side as the COA in progress to a price better than the auction
price, in which case the COA will be processed, the new order will be
posted to the Simple Book and the SBBO will be updated; or (iii) if a
Priority Customer Order is received that would join or improve the SBBO
on the same side as the COA in progress to a price equal to or better
than the auction price, in which case the COA will be processed, the
new order will be posted to the Simple Book and the SBBO will be
updated. Additionally, a COA will terminate immediately without trading
if any individual component or underlying security of a complex
strategy in the COA process is subject to a halt as described in
proposed Rule 21.20, Interpretation and Policy .05.
COA Pricing
    Proposed Rule 21.20(d)(6) describes the manner in which the System
prices and executes complex orders at the conclusion of the Response
Time Interval.
    The proposed Rule initially states the broader pricing policy and
functionality of all trading of complex orders in the System (whether a
trade is executed in the COA process or in regular trading).
Specifically, a complex strategy will not be executed at a net price
that would cause any component of the complex strategy to be executed:
(A) At a price of zero; or (B) ahead of a Priority Customer Order on
the Simple Book without improving the BBO on at least one component of
the complex strategy by at least $.01. At the conclusion of the
Response Time Interval, COA-eligible orders will be allocated pursuant
to proposed Rule 21.20(d)(7).
    Example--COA takes place $.01 inside of the SBBO to avoid a
situation where nothing can trade and the incoming order cannot be
satisfied at the COA price.

EDGX Market Maker (``MM'')-A Mar 50 Call 0.99-1.05 (10x10)
EDGX MM-B Mar 55 Call 0.80-0.95 (10x10)
EDGX Priority Customer Order to buy a Mar 50 Call for 1.00 (2)

     The Exchange receives an initiating Priority Customer
complex order to sell 3 Mar 50 calls and buy 2 Mar 55 calls at a 1.10
credit, 100 times. The COA-eligible instruction is present on this
complex order, so the complex order will initiate a COA upon arrival if
it equals or improves the SBBO.
     The SBBO is 1.10 debit bid at 1.55 credit offer.
     Since the initiating Priority Customer Order price would
equal or improve the SBBO upon arrival, the COA meets the eligibility
requirements and a COA auction message is broadcast showing the COA
auction ID, instrument ID, origin code, quantity, side of the market,
and price, and a 500 millisecond Response Time Interval is started.
     The System starts the COA at the initiating Priority
Customer price offering to sell 100 strategies at 1.10 (but will be
restricted to executing at 1.11 or better). The following responses are
received:

[cir] @50 milliseconds MM-C COA Response to buy 100 @1.10 debit arrives
[cir] @150 milliseconds MM-D COA Response to buy 50 @1.11 debit arrives
     @500 milliseconds the Response Time Interval expires, the
COA ends and the trade is allocated against initiating Priority
Customer in the following manner:

[cir] 50 trade vs. MM-D @1.11
[cir] Nothing can trade at 1.10 due to the presence of Priority
Customer interest in the March 50 Call on the Simple Book at 1.00 in
insufficient quantity to meet the ratio required by the Priority
Customer Order. Therefore, the 1.10 COA Response by MM-C expires
untraded at the end of the COA and the balance of the initiating
Priority Customer complex order to sell is placed on the COB at a
managed and displayed price of 1.11.
Trade Allocation Following the COA
    Proposed Rule 21.20(d)(7) describes the allocation of complex
orders that are executed in a COA. Once the COA is complete (at the end
of the Response Time Interval), such orders will be allocated first in
price priority based on their original limit price, and thereafter as
stated herein.
    Priority Customer Orders resting on the Simple Book have first
priority. COA Responses and all other interest on the COB will have
second priority and will be allocated in time priority (i.e., Priority
Customer complex orders do not receive a priority advantage over other
orders). Remaining individual orders in the Simple Book (i.e., non-
Priority Customer orders) will have third and final priority and will
allocated pursuant to the Simple Book's priority algorithm, as
described in Exchange Rule 21.8.
    The following examples illustrate the manner in which complex
orders are allocated at the conclusion of the COA as well as the
Exchange's initiation of a second COA process in the event a same-side
COA-eligible order is received while a COA is already underway (in
contrast to such order ``joining'' the COA that had already begun).
    Example--Priority Customer Response does not have priority over
other responding participants.

EDGX MM-A Mar 50 Call 6.00-6.50 (10x10)
EDGX MM-B Mar 55 Call 3.00-3.30 (10x10)

     The Exchange receives an initiating Priority Customer
complex order to buy 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20
debit, 1000 times.
     The COA-eligible instruction is present on this complex
order, so the complex order will initiate a COA upon arrival if it
equals or improves the SBBO.
     The SBBO is 2.70 debit bid at 3.50 credit offer.
     Since the initiating Priority Customer Order price would
improve the SBBO upon arrival, the COA meets the eligibility
requirements and a COA auction message is broadcast showing the COA
auction ID, instrument ID, origin code, quantity, side of the market,
and price, and a 500 millisecond Response Time Interval is started.
     The System starts the auction at the initiating Priority
Customer price bidding 3.20 to buy 1000 contracts. The following
responses are received:

[cir] @50 milliseconds MM-A COA Response @3.10 credit sell of 250
arrives
[cir] @150 milliseconds MM-C COA Response @3.00 credit sell of 500
arrives
[cir] @200 milliseconds MM-D COA Response @3.20 credit sell of 500
arrives
[cir] @250 milliseconds Priority Customer 2 COA Response @3.10 credit
sell of 250 arrives

     @500 milliseconds the Response Time Interval ends, the COA
ends and the trade is allocated against the initiating Priority
Customer using the single best price at which the greatest quantity can
trade in the following manner:

[cir] 500 trade vs. MM-C @3.00 (MM-C achieved price priority by
offering at 3.00)
[cir] 250 trade vs. MM-A @3.10 (other interest allocated in time
priority, including Priority Customer)
[cir] 250 trade vs. Priority Customer 2 response @3.10 (other interest
allocated in time priority, including Priority Customer)

    Example--Arrival of unrelated marketable complex order on the same
side.
EDGX MM-A Mar 50 Call 6.00-6.50 (10x10)
EDGX MM-B Mar 55 Call 3.00-3.30 (10x10)

     The Exchange receives an initiating Priority Customer
complex order to buy 1 Mar 50 call and Sell l Mar 55 call for a 3.20
debit, 1000 times.
     The COA-eligible order instruction is present on this
order, so the order will initiate an auction upon arrival if it equals
or improves the SBBO.
     The SBBO is 2.70 debit bid at 3.50 credit offer.
     Since the initiating Priority Customer Order price would
improve the SBBO upon arrival, the COA meets the eligibility
requirements and a COA auction message is broadcast showing the COA
auction ID, instrument ID, origin code, quantity, side of the market,
and price, and a 500 millisecond Response Time Interval is started.
     The System starts the auction (``COA #1'') at the
initiating Priority Customer price bidding 3.20 to buy 1000 contracts.
The following responses are received:

[cir] @50 milliseconds BD1 COA Response @3.10 credit sell of 250
arrives
[cir] @150 milliseconds MM-A COA Response @3.00 credit sell of 500
arrives
[cir] @200 milliseconds MM-B COA Response @3.20 credit sell of 500
arrives
[cir] @250 milliseconds MM-C COA Response @3.10 credit sell of 250
arrives
[cir] @350 milliseconds BD2 submits an unrelated complex order @3.20
debit buy of 200

     The System starts the auction at the initiating Broker-
Dealer (BD2) price bidding 3.20 to buy 200 contracts. The following
responses are received:

[cir] @50 milliseconds BD1 COA Response @3.10 credit sell of 250
arrives
[cir] @100 milliseconds MM-A COA Response @3.00 credit sell of 100
arrives
[cir] @200 milliseconds MM-B COA Response @3.20 credit sell of 500
arrives

     @500 milliseconds the Response Time Interval for COA #1
ends, COA #1 ends and the trade is allocated against the initiating
Priority Customer in the following manner:

[cir] Initiating Priority Customer buys 500 vs. MM-A @3.00 (the
Priority Customer initiating order has origin code priority over BD2.
MM-A achieved price priority over other responses by offering at 3.00)
[cir] Initiating Priority Customer buys 250 vs. BD1 @3.10 (BD 1
achieved price priority over MM-B and BD2 and time priority over MM-C)
[cir] Initiating Priority Customer buys 250 vs. MM-C @3.10 (MM-C
achieved price priority over MM-B and BD2 by offering at 3.10)
[cir] Initiating Priority Customer's order is fulfilled and all COA
Responses and portions thereof are cancelled.

     @500 milliseconds the Response Time Interval for COA #2
ends, COA #2 ends and the trade is allocated against the initiating
Broker-Dealer in the following manner:

[cir] Initiating Broker-Dealer buys 100 vs. MM-A @3.00 (MM-A achieved
price priority over other responses by offering at 3.00)
[cir] Initiating Broker-Dealer buys 100 vs. BD1 @3.10 (BD1 achieved
price priority over MM-B)
[cir] Initiating Broker-Dealer's order is fulfilled and all remaining
COA Responses and portions thereof are cancelled.

    Proposed Rule 21.20(d)(8) states that, consistent with Exchange
Rule 21.1(d)(5), the System will reject a complex market order received
when the underlying security is subject to a ``Limit State'' or
``Straddle State'' as defined in the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act
(the ``Limit Up-Limit Down Plan''). If the underlying security of a
COA-eligible order that is a market order enters a Limit State or
Straddle State, the COA will end early without trading and all COA
Responses will be cancelled.
    Proposed Rule 21.20(d)(9), states that if, during a COA, the
underlying security and/or any component of a COA-eligible order is
subject to a trading halt, the COA will be handled as set forth in
proposed Rule 21.20, Interpretation and Policy .05 as described in
detail below.
    The Exchange believes that the provisions regarding the COA provide
a framework that will enable the efficient trading of complex orders in
a manner that is similar to other options exchanges as stated above.
Further, this clarity in the operation of the COA and its consistency
with other exchanges will help promote a fair and orderly options
market. As described above, the COA is designed to work in concert with
the COB and with a simple priority of allocation that continues to
respect the priority of allocations on the Simple Book (via the
Exchange's pro rata allocation methodology).
Interpretations and Policies
    The Exchange also proposes several Interpretations and Policies to
proposed Rule 21.20.
Market Maker Quoting
    The Exchange has not proposed different standards for participation
by Market Makers on the COB (e.g., no specific benefits or
obligations). Proposed Rule 21.20, Interpretation and Policy .01 makes
clear that Market Makers are not required to quote on the COB. Thus,
unlike the continuous

quoting requirements in the simple order market, there are no
continuous quoting requirements respecting complex orders.\47\ Complex
strategies are not subject to any requirements that are applicable to
Market Makers in the simple market for individual options series or
classes. Volume executed in complex strategies is not taken into
consideration when determining whether Market Makers are meeting
quoting obligations applicable to Market Makers in the simple market
for individual options.\48\
---------------------------------------------------------------------------

    \47\ This is similar to ISE, where market makers are not
required to enter quotes on the complex order book. Quotes for
complex orders are not subject to any quotation requirements that
are applicable to market maker quotes in the regular market for
individual options series or classes. See ISE Rule 722,
Supplementary Material .03.
    \48\ See Proposed Rule 21.20, Interpretation and Policy .01.
This is substantially similar to complex quoting functionality
currently operative on both MIAX and ISE, where market makers may
enter quotes for complex order strategies on the complex order book
in their appointed options classes. Just as with the proposed rules,
neither MIAX market makers nor ISE market makers are required to
enter quotes on the complex order book. Quotes for complex orders
are not subject to any quotation requirements that are applicable to
MIAX market maker or ISE Market Maker quotes in the regular market
for individual options series or classes, nor is any volume executed
in complex orders taken into consideration when determining whether
MIAX or ISE market makers are meeting quoting obligations applicable
to market maker quotes in the regular market for individual options
series. See MIAX Rule 518, Interpretation and Policy .02; ISE Rule
722, Supplementary Material .03.
---------------------------------------------------------------------------

COA Eligibility
    Proposed Rule 21.20, Interpretation and Policy .02 establishes the
method by which the Exchange will determine whether complex order
interest is qualified to initiate a COA and also describes the
operation of the proposed functionality with respect to the fact
multiple COAs would be allowed to operate concurrently. If a COA-
eligible order is priced equal to, or improves, the SBBO and is also
priced to improve other complex orders resting at the top of the COB,
the complex order will be eligible to initiate a COA, provided that if
any of the bids or offers on the Simple Book that comprise the SBBO
consists of a Priority Customer Order, the COA will only be initiated
if it will trade at a price that is better than the corresponding bid
or offer by at least a $0.01 increment.
    Pursuant to the proposed Rule, a COA will be allowed to commence
even to the extent a COA for the same complex strategy is already
underway. The Exchange notes at the outset that based on how Exchange
Systems operate (and computer processes generally), it is impossible
for COAs to occur ``simultaneously'', meaning that they would commence
and conclude at exactly the same time. Thus, although it is possible as
proposed for one or more COAs to overlap, each COA will be started in a
sequence and with a time that will determine its processing. The
Exchange proposes to codify in Interpretation and Policy .02 that to
the extent there is more than one COA for a specific complex strategy
underway at a time, each COA will conclude sequentially based on the
exact time each COA commenced, unless terminated early pursuant to
proposed paragraph (d)(5)(C) of the Rule.\49\ At the time each COA
concludes, such COA will be allocated pursuant to the proposed Rule and
will take into account all COA Responses and unrelated complex orders
on the COB at the exact time of conclusion.
---------------------------------------------------------------------------

    \49\ In the event there are multiple COAs underway that are each
terminated early pursuant to proposed Rule 21.20(d)(5)(C), the COAs
will be processed sequentially based on the order in which they
commenced.
---------------------------------------------------------------------------

    Thus, even if there are two COAs that commence and conclude at
nearly the same time each COA will have a distinct conclusion at which
time the COA will be allocated. In turn, when the first COA concludes,
orders on the Simple Book and unrelated complex orders that then exist
will be considered for participation in the COA. If unrelated orders
are fully executed in such COA, then there will be no unrelated orders
for consideration when the subsequent COA is processed (unless new
unrelated order interest has arrived). If instead there is remaining
unrelated order interest after the first COA has been allocated, then
such unrelated order interest will be considered for allocation when
the subsequent COA is processed. As another example, each COA Response
is required to specifically identify the COA for which it is targeted
\50\ and if not fully executed will be cancelled back at the conclusion
of the COA.\51\ Thus, COA Responses will only be considered in the
specified COA.
---------------------------------------------------------------------------

    \50\ See proposed Rule 21.20(d)(4).
    \51\ See id.
---------------------------------------------------------------------------

Dissemination of Information
    Proposed Rule 21.20, Interpretation and Policy .03 is a regulatory
provision that prohibits the dissemination of information related to
COA-eligible orders by the submitting Member to third parties. Such
conduct will be deemed conduct inconsistent with just and equitable
principles of trade as described in Exchange Rule 3.1.
Price and Other Protections
    Proposed Interpretation and Policy .04 establishes Price Protection
standards that are intended to ensure that certain types of complex
strategies will not be executed outside of a preset standard minimum
and/or maximum price limit. These Rules are based on and similar to
portions of Interpretation and Policy .08 to CBOE Rule 6.53C.
    First, in paragraph (a) of Proposed Rule 21.20, Interpretation and
Policy .04, the Exchange proposed to define various terms necessary for
such Interpretation,\52\ as follows:
---------------------------------------------------------------------------

    \52\ See paragraph (a) to Proposed Rule 21.20, Interpretation
and Policy .04; see also CBOE Rule 6.53C, Interpretation and Policy
.08.
---------------------------------------------------------------------------

     A ``vertical'' spread is a two-legged complex order with
one leg to buy a number of calls (puts) and one leg to sell the same
number of calls (puts) with the same expiration date but different
exercise prices.
     A ``butterfly'' spread is a three-legged complex order
with two legs to buy (sell) the same number of calls (puts) and one leg
to sell (buy) twice as many calls (puts), all with the same expiration
date but different exercise prices, and the exercise price of the
middle leg is between the exercise prices of the other legs. If the
exercise price of the middle leg is halfway between the exercise prices
of the other legs, it is a ``true'' butterfly; otherwise, it is a
``skewed'' butterfly.
     A ``box'' spread is a four-legged complex order with one
leg to buy calls and one leg to sell puts with one strike price, and
one leg to sell calls and one leg to buy puts with another strike
price, all of which have the same expiration date and are for the same
number of contracts.
    Second, in paragraph (b), the Exchange has proposed to specify
credit-to-debit parameters that would prevent execution of, and instead
cancel, market orders that would be executed at a net debit price after
receiving a partial execution at a net credit price.\53\
---------------------------------------------------------------------------

    \53\ See paragraph (b) to Proposed Rule 21.20, Interpretation
and Policy .04; see also CBOE Rule 6.53C, Interpretation and Policy
.08(b).
---------------------------------------------------------------------------

    Next, in paragraph (c), the Exchange proposes to set forth various
Debit/Credit Price Reasonability Checks, as follows. To the extent a
price check parameter is applicable, the Exchange will not accept a
complex order that is a limit order for a debit strategy with a net
credit price that exceeds a pre-set buffer, a limit order for a credit
strategy with a net debit price that exceeds a pre-set buffer, or a
market order for a credit strategy that would be executed at a net

debit price that exceeds a pre-set buffer.\54\ The Exchange will
determine these pre-set buffer amounts and communicate them to Members
via specifications and/or Regulatory Circular.\55\
---------------------------------------------------------------------------

    \54\ As proposed, the System would not apply this check to an
order for which the System cannot define whether it is a debit or
credit. This would primarily be prior to the opening of trading as
orders are being queued because prices may not be available in order
to make such determination.
    \55\ The Exchange notes that ISE also employs variable ``pre-set
values'' in connection with analogous price protections offered by
ISE with respect to its complex order book. See Supplementary
Material .07(c) to ISE Rule 722.
---------------------------------------------------------------------------

    As proposed in paragraph (c)(2), the System would define a complex
order as a debit or credit as follows: (A) A call butterfly spread for
which the middle leg is to sell (buy) and twice the exercise price of
that leg is greater than or equal to the sum of the exercise prices of
the buy (sell) legs is a debit (credit); (B) a put butterfly spread for
which the middle leg is to sell (buy) and twice the exercise price of
that leg is less than or equal to the sum of the exercise prices of the
buy (sell) legs is a debit (credit); and (C) an order for which all
pairs and loners are debits (credits) is a debit (credit).\56\
---------------------------------------------------------------------------

    \56\ See paragraph (c) to Proposed Rule 21.20, Interpretation
and Policy .04; see also CBOE Rule 6.53C, Interpretation and Policy
.08(c).
---------------------------------------------------------------------------

    For purposes of Debit/Credit Price Reasonability Checks, a ``pair''
is a pair of legs in an order for which both legs are calls or both
legs are puts, one leg is a buy and one leg is a sell, and both legs
have the same expiration date but different exercise prices or, for all
options except European-style index options, the same exercise price
but different expiration dates. A ``loner'' is any leg in an order that
the System cannot pair with another leg in the order (including legs in
orders for European-style index options that have the same exercise
price but different expiration dates). The proposed rule would further
specify: that the System first pairs legs to the extent possible within
each expiration date, pairing one leg with the leg that has the next
highest exercise price; and that the System then, for all options
except European-style index options, pairs legs to the extent possible
with the same exercise prices across expiration dates, pairing one leg
with the leg that has the next nearest expiration date.\57\
---------------------------------------------------------------------------

    \57\ See id.
---------------------------------------------------------------------------

    A pair of calls is a credit (debit) if the exercise price of the
buy (sell) leg is higher than the exercise price of the sell (buy) leg
(if the pair has the same expiration date) or if the expiration date of
the sell (buy) leg is farther than the expiration date of the buy
(sell) leg (if the pair has the same exercise price). A pair of puts is
a credit (debit) if the exercise price of the sell (buy) leg is higher
than the exercise price of the buy (sell) leg (if the pair has the same
expiration date) or if the expiration date of the sell (buy) leg is
farther than the expiration date of the buy (sell) leg (if the pair has
the same exercise price). A loner to buy is a debit, and a loner to
sell is a credit.\58\
---------------------------------------------------------------------------

    \58\ See id.
---------------------------------------------------------------------------

    In addition to the definitions and parameters described above,
proposed paragraph (c)(3) would also state that the System rejects or
cancels back to the Member any limit order or any market order (or any
remaining size after partial execution of the order), that does not
satisfy this check. Also, proposed paragraph (c)(4) would make clear
that the check applies to auction responses in the same manner as it
does to orders.
    In addition to the proposed Debit/Credit Price Reasonability Checks
described above, the Exchange proposes to adopt specific Buy Strategy
Parameters that would be set forth in paragraph (d) to Interpretation
and Policy .04. As proposed, the System will reject a limit order where
all the components of the strategy are to buy and the order is priced
at zero, any net credit price that exceeds a pre-set buffer, or a net
debit price that is less than the number of individual option series
legs in the strategy (or applicable ratio) multiplied by the applicable
minimum net price increment for the complex order.\59\
---------------------------------------------------------------------------

    \59\ See paragraph (d) to Proposed Rule 21.20, Interpretation
and Policy .04; see also CBOE Rule 6.53C, Interpretation and Policy
.08(d).
---------------------------------------------------------------------------

    Proposed paragraph (e) to Interpretation and Policy .04 would set
forth a Maximum Value Acceptable Price Range as an additional price
check for vertical, true butterfly or box spreads as well as certain
limit and market orders.\60\ Specifically, the System will reject an
order if the order is a vertical, true butterfly or box spread, or a
limit order or market order if it would execute at a price that is
outside of an acceptable price range. The acceptable price range is set
by the minimum and maximum possible value of the spread, subject to an
additional buffer amount determined by the Exchange and communicated to
Members via specifications and/or a Regulatory Circular. The maximum
possible value of a vertical, true butterfly and box spread is the
difference between the exercise prices of (A) the two legs; (B) the
middle leg and the legs on either side; and (C) each pair of legs,
respectively. The minimum possible value of the spread is zero.
---------------------------------------------------------------------------

    \60\ See paragraph (e) to Proposed Rule 21.20, Interpretation
and Policy .04; see also CBOE Rule 6.53C, Interpretation and Policy
.08(g).
---------------------------------------------------------------------------

    The last paragraph of proposed Interpretation and Policy .04,
paragraph (f), would set forth the Exchange's Drill-Through Price
Protection. The Drill-Through Price Protection feature is a price
protection mechanism applicable to all complex orders under which a buy
(sell) order will not be executed at a price that is higher (lower)
than the SNBBO or the SNBBO at the time of order entry plus (minus) a
buffer amount (the ``Drill-Through Price'').\61\ The Exchange will
adopt a default buffer amount for the Drill-Through Price Protection
and will publish this amount in publicly available specifications and/
or a Regulatory Circular. A Member may modify the buffer amount
applicable to Drill-Through Price Protections to either a larger or
smaller amount than the Exchange default. If a buy (sell) order would
execute or post to the COB at a price higher (lower) than the Drill-
Through Price, the System will instead post the order to the COB at the
Drill-Through Price, unless the terms of the order instruct otherwise.
Any order (or unexecuted portion thereof) will rest in the COB (based
on the time at which it enters the book for priority purposes) for a
time period in milliseconds that may not exceed three seconds (which
the Exchange will determine and communicate to Members via
specifications and/or Regulatory Circular) with a price equal to the
Drill-Through Price. If the order (or unexecuted portion thereof) does
not execute during that time period, the System will cancel it.
---------------------------------------------------------------------------

    \61\ The Exchange notes that ISE also applies configurable
values in connection with an analogous price protection offered by
ISE with respect to its complex order book. See Supplementary
Material .07(a) to ISE Rule 722.
---------------------------------------------------------------------------

    Example--Application of Drill-Through Protection.

EDGX--quote Mar 50 Call 6.00-6.50 (10x10)
EDGX--quote Mar 55 Call 2.00-2.30 (10x10)
CBOE--Mar 50 Call 6.00-6.50 (10x10)
CBOE--Mar 55 Call 2.00-2.10 (10x10)
ISE--Mar 50 Call 6.00-6.50 (10x10)
ISE--Mar 55 Call 2.10-2.30 (10x10)

     The Exchange receives an initiating Priority Customer
Order to buy 1 Mar 50 call and sell 2 Mar 55 calls for a 2.50 debit x
100.
     Assume the Exchange has established two seconds as the
amount of time an order will rest in the COB with a price equal to the
Drill-Through Price before cancellation.

     The SBBO is 1.40 debit bid at 2.50 credit offer.
     The SNBBO is 1.80 debit bid (CBOE) at 2.30 credit offer
(ISE).
     Assume the do-not-COA instruction is present on this
order, so the order will not initiate a COA auction upon arrival
regardless of any other factor.
     Further assume the Member has set its Drill-Through Price
Protection with zero tolerance to execute through the SNBBO, so the
Exchange will protect the order to the best bid for the strategy or
best offer for the strategy available from any single exchange's
protected quotation in the Simple Order Market, including the Exchange.
     Due to the Drill-Through Price Protection, the inbound
order cannot be legged against the Simple Book for a 2.50 debit (the
strategy is offered at 2.30 on ISE). In order to display the order at
its maximum tradable price, the inbound order is managed on the COB and
displayed at its protected limit of 2.30 debit bid. While the (EDGX)
SBBO remains 1.40 debit bid at 2.50 credit offer, the combination of
the Simple Book and the COB becomes 2.30 debit bid at 2.50 credit
offer.
     If the order managed and displayed at its protected limit
of 2.30 debit bid is not executed within 2 seconds it will be
cancelled.
Trading Halts
    The Exchange is proposing to establish in proposed Rule 21.20,
Interpretation and Policy .05, the details regarding the Exchange's
handling of complex orders in the context of a trading halt.
    Proposed Interpretation and Policy .05, paragraph (a) would govern
halts during regular trading and would state that if a trading halt
exists for the underlying security or a component of a complex
strategy, trading in the complex strategy will be suspended. The COB
will remain available for Members to enter and manage complex orders.
Incoming complex orders that could otherwise execute or initiate a COA
in the absence of a halt will be placed on the COB. This is similar to
functionality that is currently operative on other exchanges.\62\
Incoming complex orders with a time in force of IOC will be cancelled.
---------------------------------------------------------------------------

    \62\ The proposed rule is based on and similar to the MIAX
process for trading halts, except that MIAX reopens through
potential complex auctions whereas the Exchange has proposed
reopening through its standard Opening Process. See MIAX Rule 518,
Interpretation and Policy .05(e)(3); see also PHLX Rule
1098(c)(ii)(C), which states that complex orders will not trade on
the PHLX system during a trading halt for any options component of
the Complex Order.
---------------------------------------------------------------------------

    Proposed in Interpretation and Policy .05, paragraph (b) would
govern halts during a COA and would state that if, during a COA, any
component(s) and/or the underlying security of a COA-eligible order is
halted, the COA will end early without trading and all COA Responses
will be cancelled. Remaining complex orders will be placed on the COB
if eligible, or cancelled. When trading in the halted component(s) and/
or underlying security of the complex order resumes, the System will
evaluate and re-open the COB pursuant to subparagraph (c)(2)(B)-(D)
described above.
    Other investor protections proposed by the Exchange are described
in Interpretation and Policy .06. Specifically, the Exchange proposes
an additional price protection referred to as Fat Finger Price
Protection as well as a complex order size protection. Both of these
protections will be will be [sic] available for complex orders as
determined by the Exchange and communicated to Members via
specifications and/or Regulatory Circular.
    Pursuant to the Fat Finger Price Protection, the Exchange will
define a price range outside of which a complex limit order will not be
accepted by the System.\63\ The price range will be a number defined by
the Exchange and communicated to Members via specifications and/or
Regulatory Circular.\64\ A Member may also establish a more aggressive
or restrictive value than the Exchange default. The default price range
for Fat Finger Price Protection will be greater than or equal to a
price through the SNBBO for the complex strategy to be determined by
the Exchange and communicated to Members via specifications and/or
Regulatory Circular. A complex limit order to sell will not be accepted
at a price that is lower than the SNBBO bid, and a complex limit order
to buy will not be accepted at a price that is higher than the SNBBO
offer, by more than the Exchange defined or Member established price
range. A complex limit order that is priced through this range will be
rejected.
---------------------------------------------------------------------------

    \63\ See paragraph (a) of proposed Interpretation and Policy .06
to Rule 21.20.
    \64\ The Exchange notes that ISE also applies configurable
values in connection with an analogous price protection offered by
ISE with respect to its complex order book. See Supplementary
Material .07(d) to ISE Rule 722.
---------------------------------------------------------------------------

    With respect to the proposed order size protection, the System will
prevent certain complex orders from executing or being placed on the
COB if the size of the complex order exceeds the complex order size
protection designated by the Member.\65\ If the maximum size of complex
orders is not designated by the Member, the Exchange will set a maximum
size of complex orders on behalf of the Member by default. Members may
designate the complex order size protection on a firm wide basis. The
default maximum size for complex orders will be determined by the
Exchange and communicated to Members via specifications and/or
Regulatory Circular.\66\
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    \65\ See paragraph (b) of proposed Interpretation and Policy .06
to Rule 21.20.
    \66\ The Exchange notes that ISE also applies configurable
values in connection with an analogous size protection offered by
ISE with respect to its complex order book. See Supplementary
Material .07(e) to ISE Rule 722.
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Additional Times in Force
    As noted above, the Exchange proposes to adopt two new Times in
Force not currently available on the Exchange in connection with the
proposal, GTC and OPG. The Exchange notes that as proposed, both of
these Times in Force will ultimately be available on both the Simple
Book and the COB. The Exchange proposes to include GTC and OPG within
Rule 21.1(f), which currently lists all Times in Force available for
use on EDGX Options. As proposed, ``Good Til Cancelled or ``GTC'' shall
mean, for an order so designated, that if after entry into the System,
the order is not fully executed, the order (or the unexecuted portion
thereof) shall remain available for potential display and/or execution
unless cancelled by the entering party, or until the option expires,
whichever comes first. ``At the Open'' or ``OPG'' shall mean, for an
order so designated, an order that shall only participate in the
opening process on the Exchange. An OPG order not executed in the
opening process will be cancelled.
Market Data Feeds
    The Exchange currently offers various data feeds that contain
information regarding activity on EDGX Options, including auctions
conducted by EDGX Options. The Exchange proposes to amend Rule 21.15 to
specify the data feeds the Exchange proposes to adopt in connection
with this proposal. As set forth in current Rule 21.15, all data
products are free of charge, except as otherwise noted in the Fee
Schedule; thus, if the Exchange proposes to adopt fees in connection
with any of these data feeds, it will file a separate fee filing and
will add such fees to the Fee Schedule. The proposed data feeds and
related changes are described below.
    First, the Exchange currently offers a Multicast PITCH data feed,
which is an

uncompressed data feed that offers depth of book quotations and
execution information based on options orders entered into the System.
The Exchange proposes to adopt a similar, but separate, Multicast PITCH
data feed for the COB.
    Second, although it offers a ``top of book'' feed for its equities
trading platform, EDGX Options does not currently offer such a feed. In
connection with this proposal, the Exchange proposes to offer a
Multicast TOP data feed. As proposed, Multicast TOP would be an
uncompressed data feed that offers top of book quotations and execution
information based on options orders entered into the System. The
Exchange proposes to offer separate Multicast TOP data feeds for the
Exchange's Simple Book and the COB.
    Third, the Exchange currently offers an Auction Feed, which is an
uncompressed data product that provides information regarding the
current status of price and size information related to auctions
conducted by the Exchange. The Exchange proposes to adopt a similar,
but separate, Auction data feed for the COB.
    Fourth, pursuant to current Rule 21.15(c)(2), the Exchange
identifies Priority Customer Orders and trades as such on messages
disseminated by the Exchange through its Multicast PITCH and Auction
data feeds. The Exchange proposes to also disseminate this information
on its Multicast TOP data feed.
    Finally, the Exchange proposes to re-number the provisions for the
DROP and Historical Data products, but does not propose any changes
with respect to such products.
Risk Monitor Mechanism
    The Exchange proposes to adopt Interpretation and Policy .01 to
Rule 21.16 to state that complex orders will participate in the
Exchange's existing risk functionality, the Risk Monitor. As noted
above, the Risk Monitor functions by counting Member activity both
within a specified time period and also on an absolute basis for the
trading day and then rejecting or cancelling orders that exceed Member-
designated volume, notional, count or percentage triggers. The Exchange
proposes to make clear in this Interpretation that for purposes of
counting within a specified time period and for purposes of calculating
absolute limits, the Exchange will count individual trades executed as
part of a complex order when determining whether a volume trigger,
notional trigger or count trigger has been reached. Further, the
Exchange proposes to make clear that for purposes of counting within a
specified time period and for purposes of calculating absolute limits,
the Exchange will count the percentage executed of a complex order when
determining whether the percentage trigger has been reached.
Implementation Date
    If the proposed changes are approved by the Commission, the
Exchange proposes to implement the System changes described herein on
October 23, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of the Act,\67\ in general, and with Section
6(b)(5) of the Act,\68\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest; and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78a et seq.
    \68\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes in particular that its proposal regarding
executions of complex orders against the Simple Book is consistent with
the Act and furthers the objectives of Section 6(b)(5) of the Act \69\
because it provides greater liquidity to the marketplace as a whole by
fostering the interaction between the components of complex orders on
the COB and the Simple Book. This should enhance the opportunity for
executions of both complex orders and simple orders.
---------------------------------------------------------------------------

    \69\ Id.
---------------------------------------------------------------------------

    The Exchange also believes the interaction of orders will benefit
investors by increasing the opportunity for complex orders to receive
execution, while also enhancing execution quality for orders on the
Simple Book. Generally, the options industry rules for the execution of
complex orders provide that two complex orders may execute against one
another if the execution prices of the component legs result in a net
price that is better than the best customer limit order available for
the individual component legs. This permits an exchange, when executing
two complex orders against one another, to execute each component leg
on the market's best bid or offer so long as the execution does not
trade ahead of customer interest.
    The Exchange believes it is reasonable to permit complex orders
that are the subject of this rule change to leg into the Simple Book.
The proposed rule concerning Legging will facilitate the execution of
more complex orders, and will thus benefit investors and the general
public because complex orders will have a greater chance of execution
when they are allowed to leg into the simple market. This will increase
the execution rate for these orders, thus providing market participants
with an increased opportunity to execute these orders on the Exchange.
The prohibition (though inapplicable to two-leg COA-eligible Customer
complex orders) against the Legging of complex orders with two option
legs where both legs are buying or both legs are selling and both legs
are calls or both legs are puts, and on complex orders with three or
four option legs where all legs are buying or all legs are selling
regardless of whether the option leg is a call or a put, protects
investors and the public interest by ensuring that Market Makers
providing liquidity do not trade above their established risk tolerance
levels, as described above.
    Despite the enhanced execution opportunities provided by legging,
as described above, the Exchange believes it is reasonable and
consistent with the Act to permit Members to submit orders designated
as Complex Only Orders that will not leg into the Simple Book. As
described above, the Exchange notes that the Complex Only Order option
is analogous to functionality on the MIAX complex order book, which
includes certain types of orders and quotes that do not leg into the
simple marketplace but instead will only execute against or post to the
MIAX complex book.\70\ The Exchange also believes the proposed
functionality is analogous to other types of functionality already
offered by the Exchange that provides Members the ability to direct the
Exchange not to route their orders away from the Exchange \71\ or not
to remove liquidity from the Exchange.\72\ Similar to such analogous
features, the Exchange believes that Members may utilize Complex Only
Order functionality as part of their strategy to maintain additional
control over their executions, in connection with their attempt to
provide and not remove liquidity, or in connection with applicable fees
for executions. Based on the foregoing, the Exchange does not believe
that Complex

Only Order functionality raises any new or novel concepts under the
Act, and instead is consistent with the goals of the Act to remove
impediments to and to perfect the mechanism of a free and open market
and a national market system, and to protect investors and the public
interest.
---------------------------------------------------------------------------

    \70\ See supra note 11.
    \71\ See supra note 12.
    \72\ See supra note 13.
---------------------------------------------------------------------------

    The Exchange also believes it is reasonable to limit other types of
complex orders that are eligible to leg into the Simple Book. The
Exchange believes that the vast majority of complex orders sent to the
Exchange will be unaffected by this proposed rule, including two leg
COA-eligible Customer complex orders, which will still be allowed to
leg into the Simple Book without restriction. Moreover, the Exchange
believes that the potential risk of offering Legging functionality for
complex orders such as those impacted by the proposed rule could limit
the amount of liquidity that Market Makers are willing to provide in
the Simple Book. In particular, Market Makers, without the proposed
limitation, are at risk of executing the cumulative size of their
quotations across multiple options series without an opportunity to
adjust their quotes. Market Makers may be compelled to change their
quoting and trading behavior to account for this additional risk by
widening their quotes and reducing the size associated with their
quotes, which would diminish the Exchange's quality of markets and the
quality of the markets in general. The limitations in proposed Rule
21.20(c)(2)(F) substantially diminish a potential source of unintended
Market Maker risk when certain types of complex orders leg into the
Simple Book, thereby removing impediments to and perfecting the
mechanisms of a free and open market and a national market system and,
in general, protecting investors and the public interest by adding
confidence and stability in the Exchange's marketplace. This benefit to
investors far exceeds the small amount of potential liquidity provided
by the few complex orders to which this aspect of the proposal applies.
    Additionally, investors will have greater opportunities to manage
risk with the new availability of trading in complex orders. The
proposed adoption of rules governing complex order auctions will
facilitate the execution of complex orders while providing
opportunities to access additional liquidity and fostering price
improvement. The Exchange believes the proposed rules are appropriate
in that complex orders are widely recognized by market participants as
invaluable, both as an investment, and a risk management strategy. The
proposed rules will provide an efficient mechanism for carrying out
these strategies. In addition, the proposed complex order rules promote
equal access by providing Members that subscribe to the Exchange's data
feeds that include auction notifications with the opportunity to
interact with orders in the COA. In this regard, any Member can
subscribe to the options data provided through the Exchange's data
feeds that include auction notifications.
    The Exchange believes that the general provisions regarding the
trading of complex orders provide a clear framework for trading of
complex orders in a manner consistent with other options exchanges.
This consistency should promote a fair and orderly national options
market system. The Exchange believes that the proposed rules will
result in efficient trading and reduce the risk for investors that
complex orders could fail to execute by providing additional
opportunities to fill complex orders.
    The proposed execution and priority rules will allow complex orders
to interact with interest in the Simple Book and, conversely, interest
on the Simple Book to interact with complex orders in an efficient and
orderly manner. Consistent with other exchanges and with well-
established principles of customer protection, the proposed rules state
that a complex order may be executed at a net credit or debit price
against another complex order without giving priority to bids or offers
established in the marketplace that are no better than the bids or
offers comprising such net credit or debit; provided, however, that if
any of the bids or offers established in the marketplace consist of a
Priority Customer Order, at least one component of the complex strategy
must trade at a price that is better than the corresponding BBO.\73\
Additionally, before executing against another complex order, a complex
order on the Exchange will execute first against orders on the Simple
Book (except in the limited circumstance described in proposed Rule
21.20(c)(2)(F)) if any of the bids or offers established in the simple
marketplace consist of a Priority Customer Order. Further, although it
would not leg into the Simple Book, a Complex Only Order will similarly
be constrained by the pricing provisions of the Rule to the extent a
Priority Customer Order is resting on the Simple Book.
---------------------------------------------------------------------------

    \73\ See proposed Rule 21.20(c)(3)(A).
---------------------------------------------------------------------------

    For the reasons set forth above, the Exchange believes the proposed
rule change regarding complex order execution is consistent with the
goals of the Act to remove impediments to and to perfect the mechanism
of a free and open market and a national market system, and to protect
investors and the public interest.
Types of Complex Orders
    The Exchange proposes that complex orders may be submitted as limit
orders and market orders, and orders with a Time in Force of GTD, IOC,
DAY, GTC, or OPG, as each such term is defined in Exchange Rule 21.1,
or as a Complex Only order, COA-eligible or do-not-COA order.\74\ In
particular, the Exchange believes that limit orders, GTD, IOC, DAY,
GTC, and OPG orders all provide valuable limitations on execution price
and time that help to protect Exchange participants and investors in
both the Simple Book and in the proposed COB. In addition, the Exchange
believes that offering participants the ability to utilize MTP
Modifiers for complex orders in a similar way to the way they are used
on the Simple Book provides such participants with the ability to
protect themselves from inadvertently matching against their own
interest. The Exchange believes that permitting complex orders to be
entered with these varying order types and modifiers will give the
Exchange participants greater control and flexibility over the manner
and circumstances in which their orders may be executed, modified, or
cancelled, and thus will provide for the protection of investors and
contribute to market efficiency. In particular, the Exchange notes that
while both the Complex Only Order and the do-not-COA instruction may
reduce execution opportunities for the entering Member, the Exchange
believes that similar features are already offered by other options
exchanges in connection with complex order functionality \75\ and that
they are reasonable limitations a Member may wish to include on their
order in order to participate on the COB.
---------------------------------------------------------------------------

    \74\ See proposed Rule 21.20(b).
    \75\ See, e.g., CBOE Rule 6.53C(d)(ii)(B) (describing do-not-COA
functionality on CBOE); MIAX Rule 518(b)(2)(i) and (c)(2)(iii)
(describing cAOC orders, which, in addition to market maker quotes
on the MIAX complex order book, are not eligible for legging to the
MIAX simple order book).
---------------------------------------------------------------------------

    Further, the Exchange believes it is reasonable and appropriate to
add GTC and OPG modifiers as new Times in Force that will be generally
available for use on the Simple Book or the COB. The Exchange notes
that GTC orders are offered by other exchanges \76\ as are times in
force that, similar to OPG, limit

an order to participating in an exchange's opening process.\77\
---------------------------------------------------------------------------

    \76\ See, e.g., C2 Rule 6.10(e)(2); ISE Rule 715(r).
    \77\ See, e.g., C2 Rule 6.10(c)(7); ISE Rule 715(o).
---------------------------------------------------------------------------

Evaluation
    The Exchange believes that the regular and event-driven evaluation
of the COB for the eligibility of complex orders to initiate a COA, and
to determine their eligibility to participate in the managed interest
process, their eligibility for full or partial execution against a
complex order resting on the COB or through Legging with the Simple
Book, whether the complex order should be cancelled, and whether the
complex order or any remaining portion thereof should be placed on the
COB are consistent with the principles of the Act to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system and, in general, to protect
investors and the public interest.
    Evaluation of the executability of complex orders and for the
determination as to whether a complex order is COA-eligible is central
to the removal of impediments to, and the perfection of, the mechanisms
of a free and open market and a national market system and, in general,
the protection of investors and the public interest. The evaluation
process ensures that the System will capture and act upon complex
orders that are due for execution or placed in a COA. The regular and
event-driven evaluation process removes potential impediments to the
mechanisms of the free and open market and the national market system
by ensuring that complex orders are given the best possible chance at
execution at the best price, evaluating the availability of complex
orders to be handled in a number of ways as described in this proposal.
Any potential impediments to the order handling and execution process
respecting complex orders are substantially removed due to their
continual and event-driven evaluation for subsequent action to be taken
by the System. This protects investors and the public interest by
ensuring that complex orders in the System are continually monitored
and evaluated for potential action(s) to be taken on behalf of
investors that submit their complex orders to the Exchange.
COA Process
    The COA process is also designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
    Following evaluation, a COA-eligible order may begin a new COA. The
COA process promotes just and equitable principles of trade, fosters
cooperation and coordination with persons engaged in facilitating
transactions in securities, removes impediments to and perfects the
mechanisms of a free and open market and a national market system and,
in general, protects investors and the public interest by ensuring that
eligible complex orders are given every opportunity to be executed at
the best prices against an increased level of contra-side liquidity
responding to the COA auction message. This mechanism of a free and
open market is designed to enhance liquidity and the potential for
better execution prices during the Response Time Interval, all to the
benefit of investors on the Exchange, and thereby consistent with the
Act.
    The Exchange believes that the determination to initiate a COA
removes impediments to, and perfects the mechanisms of, a free and open
market and a national market system and, in general, protects investors
and the public interest, by ensuring that a COA is conducted for a
complex order only when there is a reasonable and realistic chance for
price improvement through a COA. As described above, the Exchange has
proposed to initiate a COA if a COA-eligible order is priced equal to,
or improves, the SBBO and is also priced to improve other complex
orders resting at the top of the COB, provided that if any of the bids
or offers on the Simple Book that comprise the SBBO consists of a
Priority Customer Order, the COA will only be initiated if it will
trade at a price that is better than the corresponding bid or offer by
at least a $0.01 increment. The purpose of this provision is to ensure
that a complex order will not initiate a COA if it is priced through
the bid or offer at a point where it is not reasonable to anticipate
that it would generate a meaningful number of COA Responses such that
there would be price improvement of the complex order's limit price.
Promoting the orderly initiation of a COA is essential to maintaining a
fair and orderly market for complex orders; otherwise, the initiation
of COAs that are unlikely to result in price improvement might result
in unnecessary activity in the marketplace when there is no meaningful
opportunity for price improvement.
    If a complex order is not priced equal to, or better than, the SBBO
or is not priced to improve other complex orders resting at the top of
the COB, the Exchange does not believe that it is reasonable to
anticipate that it would generate a meaningful number of COA Responses
such that there would be price improvement of the complex order's limit
price. Promoting the orderly initiation of COAs is essential to
maintaining a fair and orderly market for complex orders; otherwise,
the initiation of COAs that are unlikely to result in price improvement
could affect the orderliness of the marketplace in general. The
Exchange believes that this removes impediments to and perfects the
mechanisms of a free and open market and a national market system by
promoting the orderly initiation of COAs, and by limiting the
likelihood of unnecessary COAs that are not expected to result in price
improvement.
    The Exchange believes the proposed maximum 500 millisecond Response
Time Interval promotes just and equitable principles of trade and
removes impediments to a free and open market because it allows
sufficient time for Members participating in a COA to submit COA
Responses and would encourage competition among participants, thereby
enhancing the potential for price improvement for complex orders in the
COA to the benefit of investors and public interest. The Exchange
believes the proposed rule change is not unfairly discriminatory
because it establishes a Response Time Interval applicable to all
Exchange participants participating in a COA.
    The Exchange again notes that it has not proposed to limit the
frequency of COAs for a complex strategy and could have multiple COAs
occurring concurrently with respect to a particular complex strategy.