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

    \74\ Commentary .02 to Rule 985NY provides: ``With respect to a
Qualified Contingent Cross Order that was routed to the System from
off of the Floor, ATP Holders must maintain books and records
demonstrating that each such order was routed to the system from off
of the Floor. This provision would not apply to a Qualified
Contingent Cross Order covered by Commentary .01 to this Rule 985NY
(i.e., a Qualified Contingent Cross Order routed to a Floor Broker
for entry into the System).'' The Exchange does not propose to
include the last sentence of this Commentary in the proposed Pillar
rule because the Exchange does not believe it is necessary to
specify that Floor Brokers that enter orders electronically are
subject to rules relating to electronic order entry as opposed to
rules governing open outcry.
---------------------------------------------------------------------------

    In connection with adding QCC to proposed Rule 900.3NYP, the
Exchange proposes to add the following preamble to Rule 985NY: ``This
Rule is not applicable to trading on Pillar.'' This proposed preamble
is designed to promote clarity and transparency in Exchange rules that
Rule 985NY would not be applicable to trading on Pillar.
    The Exchange plans to file a separate rule filing to adopt
``Customer-to-Customer Cross Orders.'' Because this would be a new
cross order that does not exist on Arca Options, the Exchange proposes
to simply adopt the name of this order type as proposed Rule
900.3NYP(g)(2) and to hold the description of how such order would
trade as ``Reserved.''
    The Exchange proposes to include CUBE Orders in the list of Cross
Orders. Proposed Rule 900.3NYP(g)(3) would add clarity to Exchange
rules that CUBE Orders are Cross Orders governed by separate Exchange
rules.\75\ Specifically, proposed Rule 900.3NYP(g)(3) would provide
that Single-Leg CUBE Orders submitted pursuant to proposed Rule
971.1NYP and Complex CUBE Orders submitted pursuant proposed Rule
971.2NYP would be considered Cross Orders.\76\
---------------------------------------------------------------------------

    \75\ See, e.g., Rules 971.1NY and 971.2NY describing Single-Leg
and Complex CUBE Auctions, respectively.
    \76\ The Exchange plans to submit separate rule filings to adopt
CUBE Auction functionality on Pillar, which will be set forth in
proposed Rules 971.1NYP (for the single-leg CUBE Auction) and
971.2NYP (for the Complex CUBE Auction), respectively. See, e.g.,
NYSEAMER-2023-21P (prefiling to adopt Rule 971.1NYP for single-leg
CUBE Auctions on Pillar).
---------------------------------------------------------------------------

    Orders Available Only in Open Outcry. The Exchange proposes Rule
900.3NYP(h) to describe orders that are available only in open outcry,
most of which are currently defined in Rule 900.3NY.
    First, proposed Rule 900.3NYP(h)(1) would codify an existing order
type, the Clear-the-Book (``CTB'') Order, which is currently described
only in a Regulatory Bulletin.\77\ This proposed rule is substantially
the same as Arca Options Rule 6.62P-O(h)(1), except that paragraph
(h)(1)(B) of the proposed rule accounts for the Exchange's Customer-
centric trading model as described below. Proposed Rule 900.3NYP(h)(1)
would describe the CTB Order in the same manner as it is described in
Arca Options Rule 6.62P-O(h)(1), which would be an order type available
in open outcry that would interface with the Consolidated Book, and
therefore with Pillar. As proposed, a CTB Order would be a Limit IOC
Order that may be entered only by a Floor Broker, contemporaneous with
executing an order in open outcry, that is approved by a Trading
Official (the ``TO Approval''). The CTB Order would be eligible to
trade only with contra-side orders and quotes that were resting in the
Consolidated Book prior to the TO Approval. In addition, proposed Rules
900.3NYP(h)(1)(A)-(C) would provide that:
---------------------------------------------------------------------------

    \77\ See NYSE Amex Options RB-16-02, dated February 19, 2016
(Rules of Priority and Order Protection in Open Outcry), available
here: https://www.nyse.com/publicdocs/nyse/markets/american-options/rule-interpretations/2016/NYSE%20Amex%20Options%2016-02.pdf.
---------------------------------------------------------------------------

     A CTB Order to buy (sell) would trade with contra-side
orders and quotes with a display price below (above) the limit price of
the CTB Order (proposed Rule 900.3NYP(h)(1)(A), which is identical to
Arca Options Rule 6.62P-O(h)(1)(A));
     A CTB Order to buy (sell) would trade with contra-side
orders and quotes that have a display price and working price equal to
the limit price of the CTB Order only if there is displayed Customer
sell (buy) interest at that price, in which case, the CTB Order to buy
(sell) would trade with the displayed Customer interest to sell (buy)
(proposed Rule 900.3NYP(h)(1)(B)); \78\ and
---------------------------------------------------------------------------

    \78\ This proposed rule differs from Arca Options Rule 6.62P-
O(h)(1)(B) because it does not provide for the CTB Order to trade
with ``any non-Customer interest to sell (buy) with a working time
earlier than the latest-arriving displayed Customer interest to sell
(buy),'' because Customer interest has priority of same-priced non-
Customer interest on the Exchange.
---------------------------------------------------------------------------

     Any unexecuted portion of the CTB Order would cancel after
trading with all better-priced interest and eligible same-priced
interest on the

Consolidated Book (proposed Rule 900.3NYP(h)(1)(C), which is identical
to Arca Options Rule 6.62P-O(h)(1)(C)).
    Currently, CTB Orders only trade with displayed Customer interest,
but do not trade with better-priced displayed non-Customer interest. In
Pillar, as described above, CTB Orders would trade with displayed
Customer interest at a price and would also trade with displayed non-
Customer interest priced better than displayed Customer interest (i.e.,
a CTB order buying with a $1.00 limit would now trade with displayed
interest offered at $0.99, whether on behalf of a Customer or a non-
Customer). In addition to being similar to Arca Options Rule 6.62P-
O(h)(1), the Exchange believes that codifying CTB Order functionality,
and thus automating priority would make it easier for Floor Brokers to
comply with their obligation to satisfy better-priced interest on the
Consolidated Book. In addition, the Exchange believes that this
proposed change would increase execution opportunities and achieve the
goal of a CTB Order, which is to clear priority on the Consolidated
Book at the time of the TO Approval.
    In addition, proposed Rule 900.3NYP(h)(1)(D) is identical to Arca
Options Rule 6.62P-O(h)(1)(D) and would codify existing regulatory
responsibilities of Floor Brokers utilizing CTB Orders to submit such
orders in a timely manner after receiving TO Approval and would also
provide that because CTB Orders are non-routable (and thus ineligible
to clear Protected Quotations), Floor Brokers would still be obligated
to route any other eligible orders (i.e., not the CTB Order) to better-
priced interest on Away Markets per Rule 992NY.\79\
---------------------------------------------------------------------------

    \79\ See id. at pp. 2-3 (describing regulatory responsibilities
related to CTB Orders, including that it is the Floor Broker's
responsibility to comply with the terms of the Options Order
Protection and Locked/Crossed Market Plan, including by sending ISOs
to trade with Protected Quotes).
---------------------------------------------------------------------------

    The Exchange also proposes to include in Rule 900.3NYP additional
open outcry order types that are currently defined in Rule 900.3NY:
     Proposed Rule 900.3NYP(h)(2) would define ``Facilitation
Order'' to be identical to the definition of Facilitation Order set
forth in Rule 900.3NY(j). The proposed definition is also identical to
Arca Options Rule 6.62P-O(h)(2).
     Proposed Rule 900.3NYP(h)(3) would be designated as
Reserved.\80\
---------------------------------------------------------------------------

    \80\ The Exchange proposes to hold Rule 900.3NYP(h)(3) as
``Reserved'' to keep the numbering of this rule consistent with Arca
Options Rule 6.62P-O(h), to account for the fact that the Exchange
does not propose to offer (nor does the Exchange currently offer)
Mid-Point Crossing Orders, which are described in Arca Options Rule
6.62P-O(h)(3).
---------------------------------------------------------------------------

     Proposed Rule 900.3NYP(h)(4) would define ``Not Held
Order'' to be identical to the definition of Not Held Order set forth
in Rule 900.3NY(f). The proposed definition is also identical to Arca
Options Rule 6.62P-O(h)(4).
     Proposed Rule 900.3NYP(h)(5) would define ``Single Stock
Future (``SSF'')/Option Order'' to be identical to the definition of
Single Stock Future (``SSF'')/Option Order set forth in Rule
900.3NY(i). The proposed definition is also identical to Arca Options
Rule 6.62P-O(h)(5).
     Proposed Rule 900.3NYP(h)(6)(A) would define a ``Stock/
Option Order'' to be identical to the definition of Stock/Option Order
set forth in Rule 900.3NY(h)(1). The proposed definition is also
identical to Arca Options Rule 6.62P-O(h)(6)(A).
     Proposed Rules 900.3NYP(h)(6)(B)(i)-(ii) would define a
``Stock/Complex Order'' to be identical to the definition of Stock/
Complex Order set forth in Rule 900.3NY(h)(2)(A)-(B). The proposed
definition is also identical to Arca Options Rule 6.62P-O(h)(6)(B)(i)-
(ii).
    The Exchange proposes that after the transition to Pillar, the One-
cancels-the-other (OCO) Order, which is currently described in Rule
900.3NY(g) but is not used by Floor Brokers, would not be added to
proposed Rule 900.3NYP governing orders and modifiers.
    Additional Order Instructions and Modifiers. The Exchange proposes
to specify the additional order instructions and modifiers that would
be available in Pillar in proposed Rule 900.3NYP(i), which are
identical to the order instructions and modifiers set forth in Arca
Options Rule 6.62P-O(i).
    Proactive if Locked/Crossed Modifier. Proposed Rule 900.3NYP(i)(1)
is identical to Arca Options Rule 6.62P-O(i)(1) and would provide that
a Limit Order that is displayed and eligible to route and designated
with a Proactive if Locked/Crossed Modifier would route to an Away
Market if the Away Market locks or crosses the display price of the
order and that if any quantity of the routed order is returned
unexecuted, the order would be displayed in the Consolidated Book. The
Exchange believes that offering this as an optional modifier for Limit
Orders would provide ATP Holders with additional flexibility to
designate a resting displayed order to route if it becomes locked or
crossed by an Away Market.
    Self-Trade Prevention (``STP'') Modifier. Self-Trade Prevention
(``STP'') Modifiers are currently defined in Commentary .02 to Rule
964NY and are available only for Market Maker orders and quotes. On
Pillar, and identical to STP functionality on Arca Options Rule 6.62P-
O(i)(2), the Exchange proposes to expand the availability of STP to all
orders and quotes to offer this protection to trading interest of all
ATP Holders, not just Market Makers. The Exchange believes this
expansion is appropriate because it would facilitate market
participants' compliance and risk management by assisting them in
avoiding unintentional wash-sale trading. Because STP Modifiers are an
instruction that can be added to an order or quote, the Exchange
proposes that for Pillar, STP Modifiers would be described in proposed
Rule 900.3NYP(i)(2) and would be available to all market participants.
    Proposed Rule 900.3NYP(i)(2) is identical to Arca Options Rule
6.62P-O(i)(2) and would provide that an Aggressing Order or Aggressing
Quote to buy (sell) designated with one of the STP modifiers in
proposed Rule 900.3NYP(i)(2) would be prevented from trading with a
resting order or quote to sell (buy) also designated with an STP
modifier and from the same Client ID; the same MPID, and, if specified,
any sub-identifier of that MPID; or an Affiliate (as defined in Rule
900.2NY) identifier, with any such identifier referred to as a ``Unique
Identifier.'' Proposed Rule 900.3NYP(i)(2) would also provide that the
STP modifier on the Aggressing Order or Aggressing Quote would control
the interaction between two orders and/or quotes marked with STP
modifiers. In addition, STP would not be applicable during an Auction
or to Cross Orders or when a Complex Order legs out. This proposed rule
text is based on Commentary .02 to Rule 964NY with non-substantive
differences to use Pillar terminology.
    Proposed Rule 900.3NYP(i)(2) would further provide that if the
condition for a Limit Order designated FOK, an AON Order, or an
arriving order with an MTS modifier designated under proposed Rule
900.3NYP(i)(3)(B)(i) (described below) cannot be met because of STP
modifiers, such order would either be cancelled or placed on the
Consolidated Book, as applicable. This functionality would be the same
as on Arca Options Pillar and reflects that for order types that must
trade a specified quantity (either in full or a specified minimum
quantity) and could trade with multiple contra-side orders to meet that
size requirement, such order types would not be compatible with
applying STP, which examines a one-on-one relationship between two
interacting orders. This proposed rule text provides clarity that if a
condition of an order cannot be met because of STP modifiers,

the order would either cancel (i.e., a Limit Order designated FOK or an
order with an MTS modifier), or be added to the Consolidated Book
(i.e., an AON Order), and then such resting orders would function as
described in Rule 900.3NYP.
    The proposed rule would further provide that Aggressing Orders or
Aggressing Quotes would be processed as follows:
     Proposed Rule 900.3NYP(i)(2)(A) is identical to Arca
Options Rule 6.62P-O(i)(2)(A) and would describe STP Cancel Newest
(``STPN'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPN modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier; that the Aggressing Order or Aggressing Quote marked
with the STPN modifier would be cancelled; and that the resting order
or quote marked with one of the STP modifiers would remain on the
Consolidated Book. This proposed rule is based on Commentary .02(a) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
     Proposed Rule 900.3NYP(i)(2)(B) is identical to Arca
Options Rule 6.62P-O(i)(2)(B) and would describe STP Cancel Oldest
(``STPO'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPO modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier; that the resting order or quote marked with the STP
modifier would be cancelled; and that the Aggressing Order or
Aggressing Quote marked with the STPO modifier would be placed on the
Consolidated Book. This proposed rule is based on Commentary .02(b) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
     Proposed Rule 900.3NYP(i)(2)(C) is identical to Arca
Options Rule 6.62P-O(i)(2)(C) and would describe STP Cancel Both
(``STPC'') and provide that an Aggressing Order or Aggressing Quote to
buy (sell) marked with the STPC modifier would not trade with resting
interest to sell (buy) marked with any STP modifier from the same
Unique Identifier and that the entire size of both orders and/or quotes
would be cancelled. This proposed rule is based on Commentary .02(c) to
Rule 964NY with differences to use Pillar terminology and to extend STP
functionality to orders with the same Unique Identifiers.
    Minimum Trade Size Modifier. The Exchange proposes to add the
Minimum Trade Size (``MTS'') Modifier, which is based on the same
functionality described in Arca Options Rule 6.62P-O(i)(3), except that
the MTS Modifier would only be available for Limit IOC Orders and, as
such, the Exchange would not include rule text describing how the MTS
Modifier would apply to resting orders.\81\ The Exchange proposes to
provide this modifier for options trading to provide ATP Holders with
more features with respect to order handling. The proposed MTS Modifier
is similar in concept to both FOK and AON, which are currently
available for options trading. With the MTS Modifier, an ATP Holder
would have greater flexibility to designate a size smaller than the
entire quantity (which is current FOK and AON functionality) as a
condition for execution. In addition to Arca Options, other options
exchanges also offer the use of an MTS Modifier.\82\
---------------------------------------------------------------------------

    \81\ On Arca Options, in addition to Limit IOC Orders, the MTS
Modifier can apply to Non-Displayed Limit Orders. See Arca Options
Rule 6.62P-O(i)(3). However, as discussed infra, the Exchange is not
adopting Non-Displayed Limit Orders and therefore has no reason to
discuss the application of MTS functionality to such order types.
Similarly, because the MTS Modifier may only be applied to IOC
Orders, the Exchange is not adopting rule text regarding how MTS
functionality is applied to orders not executed immediately as such
text would be inapplicable. See e.g., Arca Options Rules 6.62P-
O(i)(3)(C), (E) and (F). The Exchange believes this distinction is
immaterial because the MTS Modifier operates in the same manner on
both exchanges when applied to Limit IOC Orders.
    \82\ See, e.g., Nasdaq Options 3, Section 7(a)(3)(B) (describing
``Minimum Quantity Order'' as ``an order that requires that a
specified minimum quantity of contracts be obtained, or the order is
cancelled'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(i)(3)(A) is identical to Arca Options Rule
6.62P-O(3)(A) and would provide that the quantity of the MTS Modifier
may be less than the order quantity; however, an order would be
rejected if it has an MTS Modifier quantity that is larger than the
size of the order.
    Proposed Rule 900.3NYP(i)(3)(B) is identical to Arca Options Rule
6.62P-O(3)(B) and would provide that one of the following instructions
must be specified with respect to whether an order to buy (sell) with
an MTS Modifier would trade on arrival with: (i) orders or quotes to
sell (buy) in the Consolidated Book that in the aggregate meet such
order's MTS; or (ii) only individual order(s) or quote(s) to sell (buy)
in the Consolidated Book that each meets such order's MTS. As noted
above, this proposed rule is identical to Arca Options Rule 6.62P-
O(i)(3)(B) and sub-paragraphs (i) and (ii).
    Proposed Rule 900.3NYP(i)(3)(C) would provide that an order with an
MTS Modifier cannot be immediately executed would be cancelled. This
proposed rule is based on Arca Options Rule 6.62P-O(i)(3)(D).
    Finally, proposed Rule 900.3NYP(i)(4) would define a ``Directed
Orders'' to be the same as the Rule 900.3NY(s) definition of Directed
Order, except that the wording of the proposed definition is more
streamlined with regard to the requirement that a Directed Order be
submitted electronically.
    In connection with proposed Rule 900.3NYP, the Exchange proposes to
add the following preamble to Rule 900.3NY: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 900.3NY
would not be applicable to trading on Pillar.
Proposed Rule 925.1NYP: Market Maker Quotations
    Current Rule 925.1NY describes Market Maker quoting obligations,
including defining ``quotations,'' describing the treatment of such
quotations, and specifying Market Maker and Specialist quoting
obligations. Proposed Rule 925.1NYP is identical to Arca Options Rule
6.37AP-O and would set forth Market Maker quoting obligations under
Pillar.
    Current Rule 925.1NY(a)(1) provides that ``[t]he term `quote' or
`quotation' means a bid or offer entered by a Market Maker that updates
the Market Maker's previous bid or offer, if any.'' Pursuant to this
Rule, a Market Maker's same-side quote would be updated when a Market
Maker uses the same ATP for quote entry.\83\ Although not specified in
the current rule, the Exchange System utilizes a unique identifier for
each Specialist to send quotes, and, as a result, a Specialist cannot
have more than one same-side quote in an assigned series.\84\
Therefore, Specialist quotes are subject to the current Rule
925.1NY(a)(1) requirement that a new same-side quote sent by that
Specialist updates the previous bid or offer, if any.
---------------------------------------------------------------------------

    \83\ See NYSE American Options Fee Schedule, Section V.A. Port
Fees (setting forth fees for order/quote entry ports, which fees are
currently $450 per port per month for the first forty such ports and
$150 per port per month for each port in excess of forty (i.e., 41
and greater), available here: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \84\ On the Exchange System, Market Makers not acting as
Specialists may opt to utilize multiple ATPs to send more than one
same-side quote in the same assigned series.
---------------------------------------------------------------------------

    On Pillar, Specialists (like Market Markets not acting as
Specialists) would

be able to send multiple same-side quotes associated with its ATP by
utilizing different order/quote entry ports (i.e., in Pillar,
Specialist 1 can send a bid for 1.00 in XYZ over order/quote entry port
1 and another bid for 1.00 in XYZ over order/quote entry port 2 and the
bid sent via order/quote entry port 2 would not replace the quote sent
over order/quote entry port 1).\85\
---------------------------------------------------------------------------

    \85\ See, e.g., Rules 964NYP(h)(1)(A)(ii) and (h)(2)(B)
(providing for the handling of multiple same-side quotes in an
assigned series submitted by a Directed Order Market Makers or
Specialist, respectively). See also Arca Options Rule 6.37AP-
O(a)(1)(A) (providing for the handling of multiple same-side
quotations submitted via the same quote entry port).
---------------------------------------------------------------------------

    Consistent with current functionality, on Pillar, the Exchange
would provide Market Makers with the ability to designate bids and
offers as quotations. Currently, the Exchange offers designated
``quotation'' types to Market Makers, which are described in Rule
925.1NY(a)(3).\86\ On Pillar, as described above in connection with
proposed Rule 900.3NYP(e)(1), the Exchange is proposing to offer
quotation functionality for Market Makers that would be displayed,
traded, repriced, or cancelled in the same manner as Non-Routable Limit
Orders. As such, Market Makers may designate this ``order'' type as a
quotation and, if designated as a quotation, such bids and offers would
be displayed, traded, repriced, or cancelled as described in proposed
Rule 900.3NYP(e)(1), as discussed in detail above. In addition, such
quotations would be ranked and executed as described in Rule
964NYP.\87\ Moreover, if designated as a quotation, such bids or offers
would be identifiable to the Exchange as ``quotations,'' subject to the
Market Maker and Specialist requirements relating to quotations and the
Exchange would be able to monitor a Market Maker's compliance with
quoting obligations because its bids or offers would be designated as
quotations. If a Market Maker does not choose to designate a bid or
offer as a quotation, such bid or offer would be processed as an
``order'' and would not count towards a Market Maker's quoting
obligations.\88\
---------------------------------------------------------------------------

    \86\ As described in Rule 925.1NY(a)(3)(A) and (B),
respectively, a Market Maker may designate a quote as Market Maker-
Light Only Quotation (``MMLO'') or Market Maker--Repricing Quotation
(``MMRP'').
    \87\ See Rule 964NYP.
    \88\ For example, a Market Maker could choose to designate a
Non-Routable Limit Order as either a quote or as an order, which is
consistent with current Rule 925.2NY, which provides that a Market
Maker may enter all order types permitted to be entered by Users
under the Rules to buy or sell options in all classes of options
listed on the Exchange. Accordingly, the functionality set forth in
proposed Rule 925.1NYP(a)(2) herein is not materially different for
Market Makers because, under current functionality, they can choose
to send as Market Maker orders any order type described in current
Rule 900.3NY, including, for example, RPNP and PNP-Blind Order.
---------------------------------------------------------------------------

     Rule 925.1NYP(a) is identical to Arca Options Rule 6.37AP-
O(a) and would provide that a Market Maker may send quotations only in
the issues included in its appointment. This functionality is based on
current Rule 925.1NY(a) but differs in that the proposed rule would use
the term ``send'' rather than ``enter,'' which is a stylistic
preference that does not alter the functionality.
     Proposed Rule 925.1NYP(a)(1) is identical to Arca Options
Rule 6.37AP-O(a)(1) and would provide that the term ``quote'' or
``quotation'' means ``a bid or offer sent by a Market Maker that is not
sent as an order,'' and that ``[a] quotation sent by a Market Maker
will replace a previously displayed same-side quotation that was sent
from the same order/quote entry port of that Market Maker'' and ``[i]f
multiple same-side quotations are submitted via the same quote entry
port, the Exchange will display the Market Maker's most recent same-
side quotation.'' The proposed Rule reflects that, on Pillar and as
described above, Specialists would be able to send multiple same-side
quotes associated with its ATP by utilizing different order/quote entry
ports.\89\ Because Specialists would be Market Makers on Pillar, this
functionality would also be available to Specialists.\90\
---------------------------------------------------------------------------

    \89\ See supra note 85 (regarding Rules 964NYP(h)(1)(A)(ii) and
(h)(2)(B)).
    \90\ See Rule 920NY (Market Makers) (providing that for purposes
of Exchange rules, the term Market Maker includes Specialists,
unless the context otherwise indicates).
---------------------------------------------------------------------------

    The NYSE American Options Fee Schedule makes clear that Market
Makers can obtain upwards of forty ports for quote entry. Thus, the
Exchange believes that establishing when a Market Maker's previously
displayed same-side quotation would be replaced (i.e., when sent via
the same order/quote entry port) would add clarity and transparency to
Exchange rules. This proposed rule text is also designed to clarify the
Exchange's handling of successive Market Maker quotations (from the
same quote entry port in the same side and series) should a Market
Maker's quotations queue during a period of excessive message traffic.
No system, including Pillar, has unlimited capacity. Accordingly,
should the Exchange be in receipt of multiple same-side quotations in
the same series from the same Market Maker, the Exchange proposed that
it would display only the most recent quotation to ensure accurate
representation of that Market Maker's quoting interest. In addition,
because the Exchange proposes that a Market Maker may designate Non-
Routable Limit Orders as quotes, the Exchange proposes a difference
from the current Rule to provide that a quote is a bid or offer not
designated as an order.
     Proposed Rule 925.1NYP(a)(2) would provide that a Market
Maker may designate a Non-Routable Limit Order as a quote and such
quotes would be processed as described in proposed Rule
900.3NYP(e)(1).\91\ Proposed Rule 925.1NYP(a)(2) is the same as Arca
Options Rule 6.37AP-O(a)(2), except that the proposed rule does not
reference ALO Orders, which order type is not offered by the Exchange
today nor will the order type be offered on Pillar. The similarities
and differences between the proposed Non-Routable Limit Orders on
Pillar compared to the existing quote types (e.g., MMRP) are described
in more detail above.\92\ Because proposed Rule 900.3NYP(e)(1)),
described above, would set forth the treatment of a Non-Routable Limit
Order designated as a quote, the Exchange is not proposing to include a
(duplicative) section in proposed Rule 925.1NYP regarding the treatment
of such quotes.
---------------------------------------------------------------------------

    \91\ See discussion supra regarding proposed Rule
900.3NYP(e)(1), Non-Routable Limit Orders, being available as quote
types and how such orders compare to the existing MMRP quotation
functionality.
    \92\ The Exchange notes that it is not proposing the
functionality set forth in current Rule 925.1NY(a)(4)(D) that
provides for the cancellation of a Market Maker's quote on the
opposite side of the market whenever that Market Maker's same-side
quotation is cancelled because such quotation would lock or cross
another options exchange is not designated to reprice (e.g., as an
MMRP). This current functionality is based on a system limitation
that would not exist under Pillar.
---------------------------------------------------------------------------

     Proposed Rules 925.1NYP(b)-(e) would be substantively
identical to current Rules 925.1NY(b)-(e), with non-substantive
differences to change the term ``shall'' to ``will,'' which is a
stylistic preference that would add consistency to Exchange rules.
These proposed rules would also be the same as Arca Options Rules
6.37AP-O(b)-(e), except that Arca Options Rule 6.37AP-O(b) describes
quoting obligations for Lead Market Makers or LMMs, whereas proposed
Rule 925.1NYP(b) would describe quoting obligations for Specialists.
    Proposed Commentary .01 to Rule 925.1NYP is identical to Commentary
.01 to Arca Options Rule 6.37AP-O and would also be substantively
identical to Commentary .01 to Rule 925.1NY, with non-substantive
differences to streamline the rule text.

    The Exchange also proposes a non-substantive change to paragraph
(b) of Rule 953.1NY (Limit-Up and Limit-Down During Extraordinary
Market Volatility) to update the cross reference to Market Maker
quoting obligations as set forth in Rules 925.1NYP(b) and (c).
    In connection with proposed Rule 925.1NYP, the Exchange proposes to
add the following preamble to Rule 925.1NY: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 925.1NY
would not be applicable to trading on Pillar.
Proposed Rule 928NY: Pre-Trade and Activity-Based Risk Controls
    Current Rule 928NY sets forth the activity-based Risk Limitation
Mechanisms for orders and quotes, which are designed to help ATP
Holders effectively manage risk during periods of increased and
significant trading activity. With the transition to Pillar, the
Exchange proposes to incorporate new risk control functionality that is
based on the Exchange's existing activity-based risk controls and on
pre-trade risk controls that are available on Arca Options.
Specifically, proposed Rule 928NYP is identical to Arca Options Rule
6.40P-O and would describe the activity-based controls with updated
functionality under Pillar and would also describe new optional pre-
trade risk controls. The Exchange believes that adding pre-trade risk
controls (together with the enhanced activity-based controls), as
described below, would provide greater flexibility to ATP Holders in
establishing risk controls to align with their risk tolerance for both
orders and quotes.
    Proposed Rule 928NYP(a) is identical to Arca Options Rule 6.40P-
O(a) and would set forth the following definitions that would be used
for purposes of the Rule:
     The term ``Entering Firm'' would mean an ATP Holder
(including those acting as Market Makers) (proposed Rule 928NYP(a)(1),
which is identical to Arca Options Rule 6.40P-O(a)(1)). The Exchange
believes that the addition of this term would add clarity to the
proposed rule by using a single, defined term to describe which
entities, including Market Makers, could avail themselves of the
proposed pre-trade risk controls.
     The term ``Pre-Trade Risk Controls'' would refer to
optional limits that an Entering Firm may utilize with respect to its
trading activity on the Exchange (excluding interest represented in
open outcry except CTB Orders (proposed Rule 928NYP(a)(2), which is
identical to Arca Options Rule 6.40P-O(a)(2)). Proposed Rules
928NYP(a)(2)(A)(i)-(v) would define the available ``Single-Order Risk
Controls,'' which are identical to the checks offered per Arca Options
Rules 6.40P-O(a)(2)(A)(i)-(v), as follows:
    [cir] controls related to the maximum dollar amount for a single
order to be applied one time (``Single Order Maximum Notional Value
Risk Limit'') and the maximum number of contracts that may be included
in a single order before it can be traded (``Single Order Maximum
Quantity Risk Limit'') and providing that GTC Orders would be subject
to these checks only once (proposed Rule 928NYP(a)(2)(A)(i), which is
identical to Arca Options Rule 6.40P-O(a)(2)(A)(i)).
    [cir] controls related to the price of an order or quote (including
percentage-based and dollar-based controls) (proposed Rule
928NYP(a)(2)(A)(ii), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(ii));
    [cir] controls related to the order types or modifiers that can be
utilized (proposed Rule 928NYP(a)(2)(A)(iii), which is identical to
Arca Options Rule 6.40P-O(a)(2)(A)(iii));
    [cir] controls to restrict the options class transacted (proposed
Rule 928NYP(a)(2)(A)(iv), which is identical to Arca Options Rule
6.40P-O(a)(2)(A)(iv)); and
    [cir] controls to prohibit duplicative orders (proposed Rule
928NYP(a)(2)(A)(v), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(v)).
    Like on Arca Options, use of the pre-trade risk controls proposed
would be optional, but all orders and quotes on the Exchange would pass
through these risk checks.\93\ As such, an Entering Firm that does not
choose to set limits pursuant to the new proposed pre-trade risk
controls would not achieve any latency advantage with respect to its
trading activity on the Exchange.\94\ The Exchange understands that the
risk checks of other exchanges, on which the proposed functionality is
modeled, also apply symmetrically to all orders.\95\
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    \93\ The Exchange notes that there is nothing unique about this
approach as functionality on the Exchange is often applied uniformly
to all orders and quotes, regardless of whether a particular client
has opted to use that functionality for a particular order or quote.
For example, the Exchange's limit order price protection applies
generally to trading on the Exchange and orders or quotes with limit
prices are not processed more slowly than those without. Similarly,
the Exchange's trading systems check all orders and quotes for a
variety of details and modifiers (e.g., duplicative client order
check, order capacity check, and self-trade prevention). See, e.g.,
Securities Exchange Act Release Nos. 97147 (March 21, 2023), 88 FR
17072, at 17073-76 (March 15, 2023) (SR-NYSEArca-2023-24).
    \94\ See id., 88 FR, at 17073-76 (discussing, among other
things, that ``because all orders on the Exchange would pass through
the pre-trade risk controls, there would be no difference in the
latency experienced by [Arca Options] OTP Holders who have opted to
use the additional `Pre-Trade Risk Controls' versus those who have
not opted to use them.''). To the extent that any latency occurs in
connection with the proposed pre-trade risk controls, the Exchange
expects that (like on Arca Options) such latency would be
significantly less than one microsecond. See id., 88 FR, at 17073.
    \95\ See, e.g., MEMX Risk FAQ, dated October 13, 2020, available
at https://info.memxtrading.com/us-equities-faq/#Bookmark21 (``The
risk checks are applied in a consistent manner to all participant
orders in order to mitigate risk without incurring latency
disadvantage.''); MIAX Pearl Equities Exchange User Manual, updated
October 2022, available at https://www.miaxequities.com/sites/default/files/website_file-files/MIAX_Pearl_Equities_User_Manual_October_2022.pdf, at 29 (stating
that all but two of the exchange's 14 risk checks ``are latency
equalized i.e. there is no latency penalty for a member when opting
into and leveraging a risk protection available on the exchange when
entering an order as compared to a member not opting into the risk
protection when entering an order'').
---------------------------------------------------------------------------

     The term ``Activity-Based Risk Controls'' would refer to
three activity-based risk limits that an Entering Firm may apply to its
orders and quotes in an options class (excluding those represented in
open outcry except CTB Orders) based on specified thresholds measured
over the course of an Interval (to be defined below) (proposed Rule
928NYP(a)(3), which is identical to Arca Options Rule 6.40P-O(a)(3)).
The proposed Activity-Based Risk Controls are based on the
substantially identical risk controls set forth in current Rules
928NY(b)-(d), except that, on Pillar (and identical to Arca Options), a
Market Maker's orders and quotes would be aggregated and applied
towards each risk limit (as opposed to current functionality, where a
Market Maker's orders and quotes are counted separately). The Exchange
believes that aggregating a Market Maker's quotes and orders for
purposes of calculating activity-based risk controls, which mirrors the
application of such controls on Arca Options, would better reflect the
aggregate risk that a Market Maker has with respect to its quotes and
orders. The proposed rule would also add detail to make clear that
orders and quotes represented in open outcry, except CTB Orders, would
not be subject to these controls, which is consistent with current
functionality.
    [cir] The term ``Transaction-Based Risk Limit'' would refer to a
pre-established limit on the number of an Entering Firm's orders and
quotes executed in a specified class of options per Interval (proposed
Rule 928NYP(a)(3)(A), which is identical to Arca Options Rule 6.40P-
O(a)(3)(A)). This risk control is based on

the substantially identical risk control set forth in current Rule
928NY(b), with the difference described above that a Market Maker's
orders and quotes would be aggregated.
    [cir] The term ``Volume-Based Risk Limit'' would refer to a pre-
established limit on the number of contracts of an Entering Firm's
orders and quotes that could be executed in a specified class of
options per Interval (proposed Rule 928NYP(a)(3)(B), which is identical
to Arca Options Rule 6.40P-O(a)(3)(B)). This risk control is based on
the substantially identical risk control set forth in current Rule
928NY(c), with the difference described above that a Market Maker's
orders and quotes would be aggregated.
    [cir] The term ``Percentage-Based Risk Limit'' would refer to a
pre-established limit on the percentage of contracts executed in a
specified class of options as measured against the full size of such
Entering Firm's orders and quotes executed per Interval (proposed Rule
928NYP(a)(3)(C), which is identical to Arca Options Rule 6.40P-
O(a)(3)(C)). The proposed definition, like the Arca Options definition,
would also provide that to determine whether an Entering Firm has
breached the specified percentage limit, the Exchange would calculate
the percent of each order or quote in a specified class of option that
is executed during an Interval (each, a ``percentage''), and sum up
those percentages. As further proposed (and like on Arca Options), this
proposed definition would state that this risk limit would be breached
if the sum of the percentages exceeds the pre-established limit. This
risk control is based on the substantially identical risk control set
forth in current Rule 928NY(d), with the difference described above
that a Market Maker's orders and quotes would be aggregated.
     The term ``Global Risk Control'' would refer to a pre-
established limit on the number of times an Entering Firm may breach
its Activity-Based Risk Controls per Interval (proposed Rule
928NYP(a)(4), which is identical to Arca Options Rule 6.40P-O(a)(4)).
This proposed definition is also based on the substantially similar
functionality set forth in current Rule 928NY(f). The Exchange believes
this proposed definition would add clarity and transparency to Exchange
rules.
     The term ``Interval'' would refer to the configurable time
period during which the Exchange would determine if an Activity-Based
Risk Control or the Global Risk Control has been breached (proposed
Rule 928NYP(a)(5), which is identical to Arca Options Rule 6.40P-
O(a)(5)). This proposed definition is consistent with current Rule
928NY, which contains references throughout to a ``time period'' during
which the Exchange will determine whether a breach has occurred. The
Exchange believes this proposed definition would add clarity and
transparency to Exchange rules.
     The term ``Auction-Only Orders'' would refer to the order
types set for in proposed Rule 900.3NYP(c), as described in detail
above (proposed Rule 928NYP(a)(6), which is identical to Arca Options
Rule 6.40P-O(a)(6)).
    Proposed Rules 928NYP(b)(1)-(2) are identical to Arca Options Rules
6.40P-O(b)(1)-(2) and would set forth how the Pre-Trade, Activity-Based
and Global Risk Controls could be set or adjusted. Proposed Rule
928NYP(b)(1) would provide that these risk controls may be set before
the beginning of a trading day and may be adjusted during the trading
day. Proposed Rule 928NYP(b)(2) would provide that Entering Firms may
set these risk controls at the MPID level or at one or more sub-IDs
associated with that MPID, or both, and further provide that Pre-Trade
Risk Controls to restrict the options class(es) transacted must be set
per option class.
    Proposed Rule 928NYP(c) is identical to Arca Options Rule 6.40P-
O(c) and would set forth the Automated Breach Actions that the Exchange
would take if a designated risk limit is breached. Proposed Rules
928NYP(c)(1)(A)(i)-(iii) are identical to Arca Options Rules 6.40P-
O(c)(1)(A)(i)-(iii) and would set forth the automated breach actions
for the Pre-Trade Risk Controls as described below.
     Proposed Rule 928NYP(c)(1)(A)(i) would provide that a
Limit Order or quote that breaches any Single-Order Risk Control would
be rejected.
     Proposed Rule 928NYP(c)(1)(A)(ii) would provide that a
Market Order that arrives during a pre-open state will be cancelled if
the quantity remaining to trade after an Auction breaches the Single
Order Maximum Notional Value Risk Limit, and that at all other times, a
Market Order that triggers or breaches any Single-Order Risk Control
will be rejected.\96\
---------------------------------------------------------------------------

    \96\ The term ``Auction'' is defined in proposed Rule
952NYP(a)(1), described below in the discussion of proposed Rule
952NYP, to mean the opening or reopening of a series for trading
either on a trade or quote.
---------------------------------------------------------------------------

     Proposed Rule 928NYP(c)(1)(A)(iii) would provide that a
Limit Order or quote that would breach a price control under paragraph
(a)(2)(A)(ii) above would be rejected or cancelled as specified in Rule
900.3NYP(a)(3)(A) (Limit Order Price Protection).
    Consistent with Arca Options, the Exchange likewise proposes to
process Market Orders differently from Limit Orders because, until a
series is opened, the Exchange is not able to calculate the Single
Order Notional Value Risk Limit for a Market Order.\97\ Accordingly, as
is the case on Arca Options, this proposed risk limit would be applied
only after a series opens, at which point, a Market Order would be
cancelled if it fails the risk limit.
---------------------------------------------------------------------------

    \97\ Compare Arca Options Rules 6.40P-O(c)(1)(A)(ii) and (iii)
with proposed Rules 928NYP(c)(1)(A)(ii) and (iii).
---------------------------------------------------------------------------

    Proposed Rule 928NYP(c)(2) is identical to Arca Options Rule 6.40P-
O(c)(2) and would set forth the automated breach actions for the
Activity-Based Risk Controls.
     Proposed Rule 928NYP(c)(2)(A) is identical to Arca Options
Rule 6.40P-O(c)(2)(A) and would first specify that an Entering Firm
acting as a Market Maker would be required to apply one of the
Activity-Based Risk Controls to all of its orders and quotes; whereas
an Entering Firm that is not acting as a Market Maker would have the
option, but would not be required, to apply one of the Activity-Based
Risk Controls to its orders. The requirement that Market Makers utilize
Activity-Based Risk Controls for all quotes mirrors the requirements
set forth in Rule 928NY, Commentary .04(a); however, the proposed rule
differs in that it likewise requires Market Makers to apply one of the
Activity-Based Risk Controls to all of its orders. The Exchange
believes that requiring that both Market Maker quotes and Market Maker
orders be subject to one of the Activity-Based Controls would enhance
Market Makers' ability to assess their total risk exposure on the
Exchange. The proposed optionality of the Activity-Based Risk controls
for orders sent by an Entering Firm not acting as a Market Maker
mirrors current Rule 928NY, Commentary .04(b).
     Proposed Rule 928NYP(c)(2)(B) is identical to Arca Options
Rule 6.40P-O(c)(2)(B) and would provide that to determine when an
Activity-Based Risk Control has been breached, the Exchange would
maintain Trade Counters that would be incremented every time an order
or quote trades, including any leg of a Complex Order, and would
aggregate the number of contracts traded during each such execution. As
further proposed, an Entering Firm may opt to exclude any orders
designated IOC or FOK from being considered by a Trade Counter. This is
consistent with existing functionality set forth in Rule 928NY(a)

and Commentary .07, with a proposed difference to allow an Entering
Firm to also exclude orders designated FOK, which, like orders
designated IOC, cancel if not executed on arrival and is based on
current functionality.\98\ The Exchange believes that specifying that
orders designated FOK could be excluded from being considered for a
Trade Counter would mirror handling of such orders on Arca Options and
would add granularity and clarity to Exchange rules. In addition, as
noted above, a Market Maker's quotes and orders in a given option class
would be aggregated and therefore the Exchange proposes that there
would not be separate Trade Counters for a Market Maker's quotes and
orders.
---------------------------------------------------------------------------

    \98\ See Securities Exchange Act Release No. 81716 (September
25, 2017), 82 FR 45653 (September 29, 2017) (SR-NYSEAMER-2017-10)
(immediately effective filing to exclude IOC Orders from risk
settings because such exclusion, among other things, would result in
risk settings that may be better calibrated to suit the needs of
certain market participants (i.e., those that routinely utilize IOC
orders to access liquidity on the Exchange)).
---------------------------------------------------------------------------

     Proposed Rule 928NYP(c)(2)(C) is identical to Arca Options
Rule 6.40P-O(c)(2)(C) and would provide that each Entering Firm must
select one of three Automated Breach Actions for the Exchange to take
should the Entering Firm breach an Activity-Based Risk Control.
    [cir] ``Notification Only.'' As set forth in proposed Rule
928NYP(c)(2)(C)(i) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, the Exchange would continue
to accept new order and quote messages and related instructions and
would not cancel any unexecuted orders or quotes in the Consolidated
Book. With the ``Notification Only'' action, the Exchange would provide
such notifications, but would not take any other automated actions with
respect to new or unexecuted orders. The Exchange believes that making
this Automated Breach Action available to Activity-Based Risk Controls,
which are unique to options trading, would provide Entering Firms more
control and flexibility over setting risk tolerance and, as such, over
how Activity-Based Risk Controls are implemented.
    [cir] ``Block Only.'' As set forth in proposed Rule
928NYP(c)(2)(C)(ii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(ii)), if this option is selected, the Exchange would reject
new order and quote messages and related instructions, provided that
the Exchange would continue to process instructions from the Entering
Firm to cancel one or more orders or quotes (including Auction-Only
Orders) in full. The proposed rule would also provide that the Exchange
would follow any instructions specified in paragraph (e) of the
proposed Rule (and described below). The Exchange believes that making
this Automated Breach Action available to Activity-Based Risk Controls,
which are unique to options trading, would provide Entering Firms more
control and flexibility over setting risk tolerance and, as such, over
how Activity-Based Risk Controls are implemented.
    [cir] ``Cancel and Block.'' As set forth in proposed Rule
928NYP(c)(2)(C)(iii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, in addition to the Block
Only actions described above, the Exchange would also cancel all
unexecuted orders and quotes in the Consolidated Book other than
Auction-Only Orders and orders designated GTC. This proposed Cancel and
Block functionality is substantially similar to the automated breach
action taken by the Exchange per current Rule 928NY(e) and Commentaries
.01 and .02 thereto, except that under the current rules, this is
default (not optional) functionality. The Exchange believes that making
this Automated Breach Action available to respond to a breach of
Activity-Based Risk Controls, which are unique to options trading,
would provide Entering Firms more control and flexibility over setting
risk tolerance and, as such, over how Activity-Based Risk Controls are
implemented.
     Finally, proposed Rule 928NYP(c)(2)(D) is identical to
Arca Options Rules 6.40P-O(c)(2)(D) and would provide that if an
Entering Firm breaches an Activity-Based Risk Control, the Automated
Breach Action selected would be applied to its orders and quotes in the
affected class of options. This proposed action is consistent with
current Rule 928NY(e) and Commentaries .01 and .02 thereto, which
provide that, upon a breach, the Exchange will cancel existing and
suspend new orders and quotes trading in the affected class.
    Proposed Rule 928NYP(c)(2)(E) is identical to Arca Options Rule
6.40P-O(c)(2)(E) and would provide that the Exchange would specify by
Trader Update any applicable minimum, maximum and/or default settings
for the Activity-Based Risk Controls, subject to the following:
     For the Transaction-Based Risk Limit, the minimum setting
would not be less than one and the maximum setting would not be more
than 2,000 (proposed Rule 928NYP(c)(2)(E)(i)), which settings are
identical to the Exchange-determined settings provided under current
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(i).
     For the Volume-Based Risk Limit, the minimum setting would
not be less than one and the maximum setting would not be more than
500,000 (proposed Rule 928NYP(c)(2)(E)(ii)), which settings are
identical to the Exchange-determined settings provided under current
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(ii).
     For the Percentage-Based Risk Limit, the minimum setting
would not be less than 50 and the maximum setting would not be more
than 200,000 (proposed Rule 928NYP(c)(2)(E)(iii)), which maximum
setting is the same as the minimum Exchange-determined setting set
forth in current Rule 928NY, Commentary .03 and identical to Arca
Options Rule 6.40P-O(c)(2)(E)(iii). The Exchange proposes to increase
the minimum setting from less than one (in current rule) to not be less
than 50 to better reflect actual practice, because under current Rules,
there are no ATP Holders that have set their Percentage-Based Risk
Limits below 50.
    Proposed Rule 928NYP(c)(2)(F) is identical to Arca Options Rule
6.40P-O(c)(2)(F) and would provide that the Exchange would specify by
Trader Update the Interval for the Activity-Based Risk Controls,
subject to the following:
     The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time (proposed Rule
928NYP(c)(2)(F)(i)), which minimum setting is identical to the
Exchange-determined minimum set forth in current Rule 928NY, Commentary
.03 and identical to Arca Options Rule 6.40P-O(c)(2)(F)(i). Although
the Exchange's current rule does not include a maximum time period, the
Exchange proposes to include a maximum allowable Interval to promote
clarity in Exchange rules of the longest time an Interval could be.
     For transactions occurring in the Core Open Auction, per
proposed Rule 952NYP, the applicable time period would be the lesser of
(i) the time between the Core Open Auction of a series and the initial
transaction or (ii) the Interval (proposed Rule 928NYP(c)(2)(F)(ii)),
which proposed time period is identical to the timing provided under
current Rule 928NY, Commentary .03 and also identical to Arca Options
Rule 6.40P-O(c)(2)(F)(ii).
    Proposed Rule 928NYP(c)(3) is identical to Arca Options Rule 6.40P-
O(c)(3) and would set forth the

automated breach actions for the Global Risk Controls set by an
Entering Firm.
     Proposed Rule 928NYP(c)(3)(A) is identical to Arca Options
Rule 6.40P-O(c)(3)(A) and would provide that if the Global Risk Control
limit is breached, the Exchange would Cancel and Block, per proposed
Rule 928NYP(c)(2)(C)(iii), which proposed functionality is
substantively the same as the functionality provided under current Rule
928NY, Commentaries .01 (regarding cancellation of existing orders) and
.02 (regarding block/rejection of new orders).
     Proposed Rule 928NYP(c)(3)(B) is identical to Arca Options
Rule 6.40P-O(c)(3)(B) and would provide that if an Entering Firm
breaches the Global Risk Control, the Automated Breach Action would be
applied to all orders and quotes of the Entering Firm in all classes of
options regardless of which class(es) of options caused the underlying
breach of Activity-Based Risk Controls, which proposed functionality is
substantively the same as the functionality provided (in the last
sentence) of current Rule 928NY, Commentary .02 in the event of a
breach of current Rule 928NY(f) (i.e., breach of global risk setting).
     Proposed Rule 928NYP(c)(3)(C) is identical to Arca Options
Rule 6.40P-O(c)(3)(C) and would provide that the Exchange would specify
by Trader Update any applicable minimum, maximum and/or default
settings for the Global Risk Controls, provided that the minimum
setting would not be less than 25 and the maximum setting would not be
more than 100. These proposed settings are based on the Exchange-
determined setting provided under current Rule 928NY, Commentary .03,
except that the current rule allows for a minimum setting of one (1)
whereas the proposed rule (like Arca Options) is increasing that
minimum to twenty-five (25), which the Exchange believes would better
reflect actual practice, because under current Rules, there are no ATP
Holders that have set their Global Risk Controls below 25.
     Proposed Rules 928NYP(c)(3)(D)(i)-(ii) are identical to
Arca Options Rules 6.40P-O(c)(3)(D)(i)-(ii) and would provide that the
Exchange would specify by Trader Update the Interval for the Global
Risk Controls, subject to the following:
    [cir] The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time, per proposed
Rule 928NYP(c)(3)(D)(i), which minimum setting is identical to the
Exchange-determined minimum set forth in current Rule 928NY, Commentary
.03. Although the Exchange's current rule does not include a maximum
time period, the Exchange proposes to mimic Arca Options Rule 6.40P-
O(c)(3)(D)(i) by including a maximum allowable Interval to allow an
outside parameter by which the counters would be reset, which would
promote transparency in Exchange rules regarding the maximum allowable
Interval.
    [cir] For transactions occurring in the Core Open Auction, per
proposed Rule 952NYP, the applicable time period is the lesser of (i)
the time between the Core Open Auction of a series and the initial
transaction or (ii) the Interval, per proposed Rule
928NYP(c)(3)(D)(ii), which proposed time period is identical to the
timing provided under current Rule 928NY, Commentary .03 and is also
identical to Arca Options Rule 6.40P-O(c)(3)(D)(ii).
    Proposed Rule 928NYP(d) is identical to Arca Options Rules 6.40P-
O(d) and would describe how an Entering Firm's ability to enter orders,
quotes, and related instructions would be reinstated after a ``Block
Only'' or ``Cancel and Block'' Automated Breach Action has been
triggered. In such case, proposed Rule 928NYP(d) provides that the
Exchange would not reinstate the Entering Firm's ability to enter
orders and quotes and related instructions on the Exchange (other than
instructions to cancel one or more orders or quotes in full (including
Auction-Only Orders, and orders designated GTC)) without the consent of
the Entering Firm, which may be provided via automated contact if it
was a breach of an Activity-Based Risk Control. As further proposed, an
Entering Firm that breaches the Global Risk Control would not be
reinstated unless the Entering Firm provides consent via non-automated
contact with the Exchange. This proposed functionality is consistent
with current Rule 928NY, Commentary .02 regarding the need for an
Entering Firm to make automated or non-automated contact with the
Exchange, as applicable, prior to being reinstated.
    Proposed Rule 928NYP(e) is identical to Arca Options Rules 6.40P-
O(e) and would set forth new ``Kill Switch Action'' functionality,
which would allow an Entering Firm to direct the Exchange to take
certain bulk cancel or block actions with respect to orders and quotes.
In contrast to the Automated Breach Actions described above, which the
Exchange would take automatically after the breach of a risk limit, the
Exchange would not take any of the Kill Switch Actions without express
direction from an Entering Firm. The Exchange believes that the
proposed Kill Switch Action functionality would also provide ATP
Holders with greater flexibility to provide bulk instructions to the
Exchange with respect to cancelling existing orders and quotes and
blocking new orders and quotes.
    In particular, proposed Rule 928NYP(e) would specify that an
Entering Firm could direct the Exchange to take one or more of the
following actions with respect to orders and quotes (excluding those
represented in open outcry except CTB Orders), at either an MPID, or if
designated, sub-ID Level: (1) Cancel all Auction-Only Orders; (2)
Cancel all orders designated GTC; (3) Cancel all unexecuted orders and
quotes in the Consolidated Book other than Auction-Only Orders and
orders designated GTC; or (4) Block the entry of any new order and
quote messages and related instructions, provided that the Exchange
would continue to accept instructions from Entering Firms to cancel one
or more orders or quotes (including Auction-Only Orders, and orders
designated GTC) in full, and later, reverse that block. The proposed
post-trade Kill Switch Actions are not only identical to Arca Options
Rule 6.40P-O(e) but are also consistent with the rules of other options
exchanges.\99\ The Exchange believes that offering this functionality
for options trading under Pillar would give Entering Firms more
flexibility in setting risk controls for options trading (as noted
above).
---------------------------------------------------------------------------

    \99\ See, e.g., Cboe Rule 5.34(c)(6) (describing the optional
``Kill Switch'' functionality, which allows a Cboe participant to
instruct Cboe to simultaneously cancel or reject all orders or
quotes (or a subset thereof) as well as to instruct Cboe to block
all orders or quotes (or a subset thereof), which block instructions
will remain in effect until such participant contacts Cboe's trade
desk to remove the block).
---------------------------------------------------------------------------

    Proposed Commentary .01 to Rule 928NYP is identical to Commentary
.01 to Arca Options Rule 6.40P-O and would provide that the Pre-Trade,
Activity-Based, and Global Risk Controls described in the proposed Rule
98NYP are meant to supplement, and not replace, the ATP Holder's own
internal systems, monitoring, and procedures related to risk management
and are not designed for compliance with Rule 15c3-5 under the Exchange
Act.\100\ Responsibility for compliance with all Exchange and SEC rules
remains with the ATP Holder. The Exchange does not guarantee that these
controls will be sufficiently comprehensive to meet all of an ATP
Holder's needs, the controls are not designed to be the sole means of
risk management, and using these controls

will not necessarily meet an ATP Holder's obligations required by the
Exchange or federal rules including, without limitation, the Rule 15c3-
5. Use of the Exchange's proposed Pre-Trade Risk Controls will not
automatically constitute compliance with Exchange or federal rules, and
responsibility for compliance with all Exchange and SEC rules remains
with the ATP Holder. The proposed rule, which is new text, makes clear
that (like on Arca Options) use of the proposed controls alone does not
constitute compliance with Exchange rules or the Exchange Act.
---------------------------------------------------------------------------

    \100\ 17 CFR 240.15c3-5.
---------------------------------------------------------------------------

    Proposed Commentary .02 to Rule 928NYP is identical to Commentary
.02 to Arca Options Rule 6.40P-O and would provide that an Entering
Firm may set price controls under proposed Rule 928NYP(a)(2)(A)(ii)
(described above) that are equal to or more restrictive than the price
level provided per the Exchange's Limit Order Price Protection feature,
as set forth in proposed Rule 900.3NYP(a)(3)(A). This proposed
commentary is intended to clarify the interplay between the Exchange's
Limit Order Price Protection functionality and the price controls that
may be set by an Entering Firm pursuant to proposed Rule
928NYP(a)(2)(A)(ii).
    In connection with proposed Rule 928NYP, the Exchange proposes to
add the following preamble to Rule 928NY: ``This Rule is not applicable
to trading on Pillar.'' This proposed preamble is designed to promote
clarity and transparency in Exchange rules that Rule 928NY would not be
applicable to trading on Pillar.
Proposed Rule 928.1NYP: Price Reasonability Checks--Orders and Quotes
    The Exchange proposes to describe its Price Reasonability Checks
for orders and quotes in proposed Rule 928.1NYP. For the Exchange
System, the concept of ``Price Reasonability Checks'' for Limit Orders
is described in Rule 967NY(c) and the concept of price protection
filters for quotes are described in Rule 967.1NY. The proposed ``Price
Reasonability Checks'' on Pillar are identical to those set forth in
Arca Options Rule 6.41P-O. As is the case on Arca Options, the proposed
``Price Reasonability Checks'' would be applicable to both orders and
quotes and are designed to provide similar price protections as the
current price checks for Limit Orders and price protection filters for
quotes on the Exchange System, with differences from the current rule
described in detail below. The Exchange believes that applying the same
Price Reasonability Checks to both orders and quotes and describing
them in a single rule would make the Exchange's rules easier to
navigate, while continuing to provide price protection features for
both orders and quotes. The Exchange proposes to locate the rule text
for the proposed Price Reasonability Checks in proposed Rule 928.1NYP
to immediately follow proposed Rule 928NYP regarding the Pre-Trade and
Activity-Based Controls, as this placement would group the risk
controls together and make Exchange rules easier to navigate.
    Proposed Rules 928.1NYP(a)(1)-(3) are identical to Arca Options
Rules 6.41P-O(a)(1)-(3) and would set forth the circumstances under
which the proposed Price Reasonability Checks would apply. Proposed
Rule 928.1NY(a) would provide that the Exchange would apply the Price
Reasonability Checks, as defined in proposed paragraphs (b) and (c), to
all Limit Orders and quotes (excluding those represented in open
outcry, except CTB Orders), during continuous trading on each trading
day, subject to the following:
     Proposed Rule 928.1NYP(a)(1) is identical to Arca Options
Rule 6.41P-O(a)(1) and would provide that a Limit Order or quote
received during a pre-open state would be subject to the proposed Price
Reasonability Checks after an Auction concludes; that a Limit Order or
quote that was resting on the Consolidated Book before a trading halt
would be subject to the proposed Price Reasonability Checks again after
the Trading Halt Auction; and that a put option message to buy would be
subject to the Arbitrage Check regardless of when it arrives. This
proposed rule is based on current Rule 967NY(c), which provides that
the Price Reasonability Checks (for orders) are applied when a series
opens or reopens for trading and is similar to Rule 967.1NY(a)(1),
which provides that Market Maker quote protection will be applied when
an NBBO is available. NBBO protection is available when a series is
opened for trading. Proposed Rule 928.1NYP(a)(1) includes additional
detail and granularity regarding when the proposed Price Reasonability
Checks would be applied under Pillar. The proposed Rule also adds new
functionality that a put option message to buy would be subject to the
Arbitrage Check even if a series is not open for trading. The Exchange
believes that it is appropriate to apply this check to put option
messages to buy at any time because the check is not dependent on an
external reference price.
     Proposed Rule 928.1NYP(a)(2) is identical to Arca Options
Rule 6.41P-O(a)(2) and would provide that if the calculation of the
Price Reasonability Check is not consistent with the MPV for the
series, it would be rounded down to the nearest price within the
applicable MPV, which is consistent with current functionality. The
Exchange believes this proposed rule would promote clarity and
transparency in Exchange rules regarding how the Price Reasonability
Check would be calculated.
     Proposed Rule 928.1NYP(a)(3) is identical to Arca Options
Rule 6.41P-O(a)(3) and would provide that the proposed Price
Reasonability Checks would not apply to (i) any options series for
which the underlying security has a non-standard cash or stock
deliverable as part of a corporate action; (ii) any options series for
which the underlying security is identified as over-the-counter
(``OTC''); (iii) any option series on an index; and (iv) any option
series for which the Exchange determines it is necessary to exclude
underlying securities in the interests of maintaining a fair and
orderly market, which the Exchange would announce by Trader Update.
Proposed Rule 928.1NYP(a)(3) is based on current Commentary .01 to
Rules 967NY (orders) and 967.1NY (quotes), with a non-substantive
difference that the proposed rule no longer references Binary Return
Derivatives (``ByRDs'') because ByRDs are no longer traded on the
Exchange.
    Proposed Rule 928.1NYP(b) is identical to Arca Options Rule 6.41P-
O(b) and would set forth the ``Arbitrage Checks'' for buy orders or
quotes, which subset of Price Reasonability Checks are based on the
principle that an option order or quote is in error and should be
rejected (or canceled) when the same result can be achieved on the
market for the underlying equity security at a lesser cost.
     Proposed Rule 928.1NYP(b)(1) is identical to Arca Options
Rule 6.41P-O(b)(1) and relates to ``puts'' and would provide that order
or quote messages to buy for put options would be rejected if the price
of the order or quote is equal to or greater than the strike price of
the option, which is substantively identical to current Rules
967NY(c)(1)(A) (for orders) and 967.1NY(a)(3) (for quotes).
     Proposed Rule 928.1NYP(b)(2) is identical to Arca Options
Rule 6.41P-O(b)(2) and relates to ``calls'' and would provide that
order or quote messages to buy for call options would be rejected or
canceled (if resting) if the price of the order or quote is equal to or
greater than the price of the last trade (of any size) of the
underlying security on the Primary Market, plus a specified threshold
to be determined by the Exchange and announced by Trader Update. This
proposed rule is

substantially similar to current Rules 967NY(c)(1)(B) (for orders) and
967.1NY(a)(2)(B) (for quotes), with several differences.
    First, because the Exchange is monitoring last sales from the
Primary Market, the Exchange proposes that the Exchange-specified
threshold for the Checks would be based on the price of the last trade
(of any size) on the Primary Market rather than on the Consolidated
Last Sale.\101\ The Exchange believes that the last trade on the
Primary Market would be indicative of the price of the underlying
security and that by using the last trade of the Primary Market rather
than the Consolidated Last Sale, the Pillar system would need to ingest
and process less data, thereby improving efficiency and performance of
the system. The Exchange also believes that applying the Checks to
trades in underlying securities of any size, i.e., both round lots and
odd lots, would enhance the efficacy of the Checks as this proposed
functionality would provide a better representation of the trade prices
occurring in the underlying market.\102\
---------------------------------------------------------------------------

    \101\ Per Rule 900.2NY, the term ``Primary Market'' with respect
to options traded on the Exchange means the principal market in
which the underlying security is traded. The Exchange also notes a
difference in that proposed Rule 928.1NYP(b)(2) refers to a
``specified threshold,'' whereas current Rule 967NY(c)(1)(B) refers
to a ``specified dollar amount,'' which difference is designed to
give the Exchange more flexibility in applying the Arbitrage Checks
to use a percentage-based threshold.
    \102\ The Exchange notes that trades in higher-priced underlying
securities tend to be odd lots, which highlights the importance of
capturing such trades in the Checks.
---------------------------------------------------------------------------

    Second, current Rules 967.1NY(a)(2)(A) and (C) specify which price
would be used for Market Maker bids made before the underlying security
is open or during a trading halt, pause, or suspension of the
underlying security. Because on Pillar the proposed Arbitrage Checks
for calls (for orders and quotes) would be applied only once a series
has opened or reopened for trading, the Exchange no longer needs to
specify prices other than the last trade (of any size) on the Primary
Market for purposes of calculating the Arbitrage Checks for calls. The
Exchange believes the difference in proposed Rule 928.1NYP(b)(2) from
current functionality (which is identical to Arca Options Rule 6.41P-
O(b)(2)) would not compromise the price protection feature of the
proposed Arbitrage Checks.
    Proposed Rule 928.1NYP(c) is identical to Arca Options Rule 6.41P-
O(c) and would set forth the ``Intrinsic Value Checks'' for orders or
quotes to sell, which are designed to protect sellers of calls and puts
from presumptively erroneous executions based on the ``Intrinsic
Value'' of an option.
     Proposed Rules 928.1NYP(c)(1)-(2) are identical to Arca
Options Rules 6.41P-O(c)(1)-(2) and would set forth how the Intrinsic
Value of an option would be determined. Proposed Rule 928.1NYP(c)(1)
would provide that the Intrinsic Value for a put option is equal to the
strike price minus the price of the last trade (of any size) of the
underlying security on the Primary Market. Proposed Rule 928.1NYP(c)(2)
would provide that the Intrinsic Value for a call option is equal to
the price of the last trade (of any size) of the underlying security on
the Primary Market minus the strike price. Proposed Rules
928.1NYP(c)(1)-(2) are based on how the intrinsic value is calculated
in current Rule 967NY(c)(2) for orders, with two differences. First,
the proposed ``Intrinsic Value Checks'' would also apply to quotes,
which would be new on Pillar (but would mimic Arca Options Rules 6.41P-
O(c)(1)-(2)) and would provide Market Makers with additional protection
for quotes to sell. Second, the Intrinsic Value of an option would be
based on the price of the last trade (of any size) on the Primary
Market rather than on the Consolidated Last Sale for the same reasons
discussed above, that it would enhance performance without compromising
the price protection feature of the Intrinsic Value Checks.
     Proposed Rule 928.1NYP(c)(3) is identical to Arca Options
Rule 6.41P-O(c)(3) and would provide that ISOs to sell would not be
subject to the Intrinsic Value Check, which carve out is substantively
identical to current Rule 967NY(c)(2).
     Proposed Rule 928.1NYP(c)(4) is identical to Arca Options
Rule 6.41P-O(c)(4) and would describe the application of the Intrinsic
Value Checks to puts and calls to sell.
    [cir] Proposed Rule 928.1NYP(c)(4)(A) is identical to Arca Options
Rule 6.41P-O(c)(4)(A) and would provide that orders or quotes to sell
for both puts and calls would be rejected or canceled (if resting) if
the price of the order or quote is equal to or lower than its Intrinsic
Value, minus a specified threshold to be determined by the Exchange and
announced by Trader Update.
    [cir] Proposed Rule 928.1NYP(c)(4)(B) is identical to Arca Options
Rule 6.41P-O(c)(4)(B) and would provide that the Exchange-determined
threshold percentage (per proposed paragraph (c)(4)(A)) would be based
on the NBB, provided that, immediately following an Auction, it would
be based on the Auction Price, or, if none, the lower Auction Collar
price, or, if none, the NBB.\103\ This proposed threshold percentage is
similar to how the Reference Price would be determined for Trading
Collars, as described above pursuant to proposed Rule 900.3NYP(a)(4).
As further proposed, Rule 928.1NYP(c)(4)(B) would provide that for
purposes of determining the Intrinsic Value, the Exchange would not use
an adjusted NBBO. The Exchange further proposes that the Intrinsic
Value Check for sell orders and quotes would not be applied if the
Intrinsic Value cannot be calculated.
---------------------------------------------------------------------------

    \103\ See discussion infra, regarding proposed Rule 952NYP(a)
and proposed definitions for the terms ``Auction,'' ``Auction
Price,'' Auction Collar,'' ``pre-open state,'' and ``Trading Halt
Auction.''
---------------------------------------------------------------------------

    Proposed Rules 928.1NYP(c)(4)(A)-(B) are substantially similar to
current Rule 967NY(a)(2)(A), which describes the application of the
Intrinsic Value check for orders, with the following differences:
     The proposed rule would extend this price protection to
quotes, providing Market Makers with additional protection mechanisms;
     The proposed rule would provide additional detail
regarding how the specified threshold percentage would be determined
immediately following an Auction;
     The proposed rule would establish that an unadjusted NBBO
(as opposed to an adjusted NBBO) would be used to calculate the
Intrinsic Value; and
     The proposed rule includes text providing that if the
Intrinsic Value cannot be calculated, the Check would not be applied.
    The Exchange believes that these additions, which mirror Arca
Options Rules 6.41P-O(c)(4)(A)-(B), would both add granularity to the
rule and enhance the functionality for calculating and applying the
Intrinsic Value. For the same reasons described above in connection
with Limit Order Price Protection and Trading Collars, the Exchange
believes that using an unadjusted NBBO (as opposed to using an adjusted
NBBO) would serve price protection purposes by using a more
conservative view of the NBBO.
    Proposed Rule 928.1NYP(d) is identical to Arca Options Rule 6.41P-
O(d) and would provide the Automated Breach Action to be applied when a
Market Maker's order or quote fails one of the Price Reasonability
Checks. As proposed, if a Market Maker's order or quote message is
rejected or cancelled (if resting) pursuant to proposed paragraph (b)
(Arbitrage Checks) or (c) (Intrinsic Value Checks) of proposed

Rule 928.1NYP, the Exchange would Cancel and Block orders and quotes in
the affected class of options as described in Rule 928NYP(c)(2)(C)(iii)
(as described above in section ``Proposed Rule 928NYP'').
    Proposed Rule 928.1NYP(d)(1) is identical to Arca Options Rule
6.41P-O(d)(1) and would provide that a breach of proposed Rule
928.1NYP(d) would count towards a Market Maker's Global Risk Control
limit per proposed Rule 928NYP(a)(4) (as described above in section
``Proposed Rule 928NYP'').
    Proposed Rule 928.1NYP(d)(2) is identical to Arca Options Rule
6.41P-O(d)(2) and concerns how a Market Maker would be reinstated
following an automated breach action. As proposed, the Exchange would
not reinstate the Market Maker's ability to enter orders and quotes and
related instructions on the Exchange in that class of options (other
than instructions to cancel one or more orders/quotes (including
Auction-Only Orders and orders designated GTC) in full) without the
consent of the Market Maker, which may be provided via automated
contact.
    Rule 928.1NYP(d) is substantially similar to current Rule
967.1NY(b), except that the proposed rule applies to both the orders
and quotes of a Market Maker (not just quotes) and provides the
additional functionality that a breach of the Price Reasonability
Checks would count towards a Market Maker's Global Risk Control limit
under proposed Rule 928NYP(c)(3), which functionality would be new
under Pillar. The Exchange believes that the proposed new
functionality, which mirrors Arca Options Rule 6.41P-O(d), would
provide ATP Holders greater control and flexibility over setting risk
tolerance and exposure for both orders and quotes. In connection with
proposed Rule 928.1NYP, the Exchange proposes to add the following
preamble to Rules 967NY and 967.1NY: ``This Rule is not applicable to
trading on Pillar.'' This proposed preamble is designed to promote
clarity and transparency in Exchange rules that Rules 967NY and 967.1NY
would not be applicable to trading on Pillar.
Proposed Rule 952NYP: Auction Process
    Current Rule 952NY sets forth the opening process currently used on
the Exchange System for opening trading in a series each day and
reopening trading in a series following a trading halt. Current Rule
952NY(a) defines the term ``Trading Auction'' as the process by which
trading is initiated in a specified options class that may be employed
at the opening of the Exchange each business day or to re-open trading
after a trading halt, and that Trading Auctions will be conducted
automatically by the Exchange System. Current Rules 952NY(b) and (c)
describe the manner for the automated Trading Auctions and provide
that, once the primary market for the underlying security disseminates
a quote and a trade that is at or within the quote, the Exchange System
then conducts an Auction Process (``current Auction Process'') whereby
the Exchange System determines a single price at which a series may be
opened by looking to the price at which the greatest number of
contracts can trade at or between the NBBO disseminated by OPRA.\104\
---------------------------------------------------------------------------

    \104\ If the same number of contracts can trade at multiple
prices, the opening price is the price at which the greatest number
of contracts can trade that is at or nearest to the midpoint of the
NBBO disseminated by OPRA; unless one such price is equal to the
price of any resting Limit Order(s) in which case the opening price
is the same price as the Limit Order(s) with the greatest size and,
if the same size, the highest price and if there is a tie between
price levels and no Limit Orders exist at either of the prices, the
Exchange uses the higher price. See Rule 952NY(c).
---------------------------------------------------------------------------

    As described in Rule 952NY(b)(D), the Exchange will not conduct the
current Auction Process to open a series if the bid-ask differential
for that series is not within an acceptable range, i.e., is not within
the bid-ask differential guidelines established in Rule
925NY(b)(4).\105\ If a series does not open for trading, Market and
Limit Orders entered in advance of the current Auction Process remain
in the Consolidated Book and will not be routed, even if another
exchange opens that series for trading and such resting orders become
Marketable against the ABBO.\106\
---------------------------------------------------------------------------

    \105\ Because Rule 952NY(b)(D) cross-references the bid-ask
differential requirement of Rule 925NY(b)(4), which relates to the
obligations of Market Makers in appointed classes, the Exchange will
not open a series for trading if the NBBO disseminated by OPRA in a
series is not within such bid-ask differentials.
    \106\ The term ``Marketable'' is defined in Rule 900.2NY to
mean, for a Limit Order, an order that can be immediately executed
or routed and Market Orders are always considered marketable.
---------------------------------------------------------------------------

    The Exchange proposes that new Rule 952NYP which is identical to
Arca Options Rule 6.64P-O would set forth the automated process for
both opening and reopening trading in a series on the Exchange on
Pillar. The Exchange proposes to specify that current Rule 952NY would
not be applicable to trading on Pillar. With the transition to Pillar,
the fundamental process of how an option series would be opened (or
reopened) on the Exchange would not materially change because the
Exchange would continue to assess whether a series can be opened based
on whether the bid-ask differential for a series is within a specified
range. However, with the availability of Pillar technology, the
Exchange proposes differences to the proposed auction process that
mirror Arca Options Rule 6.64P-O and are designed to provide additional
opportunities for an options series to open or reopen for trading even
if the bid-ask differential is wider than the specified guidelines. The
Exchange notes that other options exchanges also provide additional
opportunities for a series to open after a specified period of time in
a wide market.\107\ In addition, the Exchange proposes to specify
minimum time periods to allow a Market Maker(s) to quote in an assigned
series before the series is opened or reopened. With the proposed
Auction Process, described further below, the Exchange endeavors to
attract the highest quality quote for each series at the open to
attract order flow for the auction. While the Exchange does not require
Market Makers assigned to a series to quote before a series can be
opened (or reopened), the Exchange believes that providing time for
such Market Makers to do so would provide both better and more
consistent prices on executions to ATP Holders in an Auction and a
smoother transition to continuous trading. In addition, the Exchange
believes that the proposed changes would enhance the opening/reopening
process on the Exchange by providing a transparent and deterministic
process for the Exchange to open additional series for trading.
---------------------------------------------------------------------------

    \107\ For example, in 2021, Cboe amended its opening process set
forth in Cboe Rule 5.31 to provide for a ``forced opening'' process
that is used if an option class is unable to open because it does
not meet the applicable bid-ask differential. In such case, if the
``Composite Market'' is not crossed and there is no non-zero offer,
within a specified time period, Cboe will open the series without a
trade. See Securities Exchange Act Release No. 90967 (January 22,
2021), 86 FR 7249 (January 28, 2021) (SR-Cboe-2021-005) (Notice of
filing and immediate effectiveness of proposed rule change to amend
Cboe's opening process for simple orders).
---------------------------------------------------------------------------

    Further, the Exchange proposes additional enhancements (and details
them in the rule) that mirror Arca Options Rule 6.64P-O relating to how
orders and quotes would be processed if they arrive during the period
when the Exchange is processing an Auction and how the Exchange would
process orders and quotes when it transitions to continuous trading
following an Auction. Accordingly, the structure of proposed Rule
952NYP is identical to Arca Options Rule 6.64P-O and includes a
description of how the Exchange would process orders and quotes during
a trading halt, which

would provide granularity and transparency in Exchange rules.
    Definitions. Proposed Rule 952NYP(a) contains proposed definitions
for options trading on Pillar that are identical to those set forth in
Arca Options Rule 6.64P-O(a) and would provide that the proposed Rule
would be applicable to all series that trade on the Exchange other than
Flex Options.\108\
---------------------------------------------------------------------------

    \108\ With the transition to Pillar, the Exchange is not making
any changes to how Flex Options trade. Rule 901G provides that Flex
Options transactions may be effected during normal Exchange options
trading hours on any business day and Rule 902G provides that there
will be no trading rotations in Flex Options. Rule 904G sets forth
the procedures for trading Flex Options. The opening process for
Electronic Complex Orders is set forth in Rule 980NY. The opening
process for Electronic Complex Orders is set forth in Rule 980NY. In
connection with the transition to Pillar, the Exchange has adopted
new Rule 980NYP regarding complex trading on Pillar. See the Pillar
Complex Approval Order, supra note 66.
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(1) is identical to Arca Options
Rule 6.64P-O(a)(1) and would define the term ``Auction'' to mean the
opening or reopening of a series for trading either with or without a
trade. This proposed definition is based in part on current Rule
952NY(a), which defines the term ``Trading Auction'' to be a process by
which trading is initiated in a specified options class that may be
employed at the opening of the Exchange each business day or to re-open
trading after a trading halt.\109\ On Pillar, the Exchange proposes
that the term ``Auction'' would refer to the point in the process where
the Exchange determines that a series can be opened or reopened either
with or without a trade. After an Auction concludes, the series then
transitions to continuous trading. Proposed Rules 952NYP(a)(1)(A)-(B)
are identical to Arca Options Rule 6.64P-O(a)(1)(A)-(B). Proposed Rule
952NYP(a)(1)(A) would provide that a ``Core Open Auction'' means the
Auction that opens trading after the beginning of Core Trading Hours
and proposed Rule 952NYP(a)(1)(B) would provide that a ``Trading Halt
Auction'' means the Auction that reopens trading following a trading
halt. These are Pillar terms that would be new to options trading on
the Exchange.
---------------------------------------------------------------------------

    \109\ See also Rule 952NY(e) (providing that a Trading Auction
to reopen an option class after a trading halt is conducted in the
same manner as a Trading Auction to open each option class at the
start of each trading day, i.e., as described in Rule 952NY(a)-(d)).
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(2) is identical to Arca Options
Rule 6.64P-O(a)(2) and would define the term ``Auction Collar'' to mean
the price collar thresholds for the Indicative Match Price (defined
below) for an Auction. As further proposed, the upper Auction Collar
would be the offer of the Legal Width Quote (defined below) and the
lower Auction Collar would be the bid of the Legal Width Quote,
provided that if the bid of the Legal Width Quote is zero, the lower
Auction Collar would be one MPV above zero for the series (per proposed
Rule 952NYP(a)(2)(A), which is identical to Arca Options Rule 6.62P-
O(a)(2)(A)). In addition, as proposed, if there is no Legal Width
Quote, the Auction Collars would be published in the Auction Imbalance
Information (defined below) as zero (per proposed Rule 952NYP(a)(2)(B),
which is identical to Arca Options Rule 6.62P-O(a)(2)(B)).
    As proposed, the Auction Collars would be set at the Legal Width
Quote (described below) and would prevent an Auction trade from
occurring at a price outside of the Legal Width Quote. The Exchange
believes that the concept of Auction Collars is similar to the current
requirement that the Exchange will not open a series if the bid-ask
differential is not within the bid-ask differential guidelines
established under Rule 925NY(b)(4).\110\ Thus, the proposed Auction
Collars (based on a Legal Width Quote) would use Pillar terminology to
prevent an Auction that results in a trade from being priced outside
the bid-ask differential applicable to Auctions on Pillar.\111\
---------------------------------------------------------------------------

    \110\ See Rule 952NY(b)(D) and (E). The Exchange notes that in
common parlance bid-ask differentials are known as ``legal-width
quotes.''
    \111\ See also Cboe Rule 5.31(a) (defining the ``Opening
Collar'' as the price range that establishes limits at or inside of
which Cboe determines the opening trade price for a series).
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(3) is identical to Arca Options Rule 6.64P-
O(a)(3) and would define the term ``Auction Imbalance Information'' to
mean the information that the Exchange disseminates about an Auction
via its proprietary data feeds and includes the Auction Collars,
Auction Indicator, Book Clearing Price, Far Clearing Price, Indicative
Match Price, Matched Volume, Market Imbalance, and Total Imbalance.
With Pillar, the Exchange proposes to disseminate Auction Imbalance
Information in the same manner that such information is disseminated on
Arca Options. The Exchange currently makes certain auction imbalance
information available on its proprietary data feed and the Exchange
believes that enhancing this information by disseminating the proposed
Auction Collars, Auction Indicator, Book Clearing Price, and Far
Clearing Price, which would be new for the Exchange, would promote
transparency. In addition, the Exchange proposes that the Auction
Imbalance Information would reflect the quotes and orders eligible to
participate in an Auction, which contribute to price discovery. As
such, proposed Rule 952NYP(a)(3) (like Arca Options Rule 6.64P-O(a)(3))
would further provide that Auction Imbalance Information would be based
on all quotes and orders (including the non-displayed quantity of
Reserve Orders) eligible to participate in an Auction, excluding IO
Orders. The Exchange believes that specifying that the non-displayed
quantity of Reserve Orders would be included in the Auction Imbalance
Information is consistent with current functionality that the full
quantity of Reserve Orders are eligible to participate in the current
Auction Process.
    Proposed Rule 952NYP(a)(3)(A) is identical to Arca Options Rule
6.64P-O(a)(3)(A) and would define the term ``Auction Indicator'' to
mean the indicator that provides a status update of whether an Auction
cannot be conducted because either (i) there is no Legal Width Quote,
or (ii) a Market Maker quote has not been received during the
parameters of the Opening MMQ Timer(s) (defined below). This proposed
definition would be new for the Exchange and would provide transparency
of when an Auction could not be conducted.\112\
---------------------------------------------------------------------------

    \112\ Consistent with the proposed rule, Rule 952NY(b)(D)
provides that the Exchange will not conduct the current Auction
Process if the bid-ask differential for a series is not within an
acceptable range.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(3)(B) is identical to Arca Options Rule
6.64P-O(a)(3)(B) and would define the term ``Book Clearing Price'' to
mean the price at which all contracts could be traded in an Auction if
not subject to the Auction Collar and states that the Book Clearing
Price would be zero if a sell (buy) Imbalance cannot be filled by any
buy (sell) interest. The Exchange proposes that the manner that the
Book Clearing Price would be calculated would be identical to how it is
calculated per Arca Options Rule 6.64P-O(a)(3)(B).
    Proposed Rule 952NYP(a)(3)(C) is identical to Arca Options Rule
6.64P-O(a)(3)(C) and would define the term ``Far Clearing Price'' to
mean the price at which Auction-Only Orders could be traded in an
Auction within the Auction Collar. The Exchange proposes that the
manner that the Far Clearing Price would be calculated would be
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(C).
    Proposed Rule 952NYP(a)(3)(D) is identical to Arca Options Rule
6.64P-O(a)(3)(D) and would define the term

``Imbalance'' to mean the number of buy (sell) contracts that cannot be
matched with sell (buy) contracts at the Indicative Match Price at any
given time. The Exchange proposes to calculate the Imbalance in a
manner identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D).
    Proposed Rule 952NYP(a)(3)(D)(i) is identical to Arca Options Rule
6.64P-O(a)(3)(D)(i) and would define the term ``Total Imbalance'' to
mean the Imbalance of all buy (sell) contracts at the Indicative Match
Price for all orders and quotes eligible to trade in an Auction. The
Exchange proposes to calculate the Total Imbalance in a manner
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D)(i). Proposed Rule 952NYP(a)(3)(D)(ii) is identical to Arca
Options Rule 6.64P-O(a)(3)(D)(ii) and would define the term ``Market
Imbalance'' to mean the Imbalance of any remaining buy (sell) Market
Orders and MOO Orders that are not matched for trading in the Auction.
The Exchange proposes to calculate the Market Imbalance in a manner
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D)(ii).
     Proposed Rule 952NYP(a)(4) is identical to Arca Options
Rule 6.64P-O(a)(4) and would define the term ``Auction Price'' to mean
the price at which an Auction that results in a trade is conducted.
This proposed definition is designed to add clarity and transparency to
Exchange rules as this term would be used as a reference price in
proposed Rules 900.3NYP(a)(3)(B), 900.3NYP(a)(4)(B), and
928.1NYP(c)(4)(B).\113\
---------------------------------------------------------------------------

    \113\ See also Cboe Rule 5.31(a) (defining the ``Opening Trade
Price'' as the price at which Cboe executes opening trades in a
series). The Exchange notes that the term ``Auction Price'' is
distinguished from the proposed term of ``Indicative Match Price,''
as the latter term is the content included in the Auction Imbalance
Information in advance of an Auction, and the Auction Price is the
price of an Auction that results in a trade.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(5) is identical to Arca Options Rule 6.64P-
O(a)(5) and would define the term ``Auction Process'' to mean the
process that begins when the Exchange receives an Auction Trigger
(defined below) for a series and ends when the Auction is conducted.
This proposed term is designed to add clarity and transparency to
Exchange rules and address all steps in the process that culminates in
an Auction, as described in proposed Rule 952NYP(d).
    [cir] Proposed Rule 952NYP(a)(5)(i) is identical to Arca Options
Rule 6.64P-O(a)(5)(i) and would define the term ``initial Auction
Process time period'' as an Exchange-determined time period after the
commencement of the Auction Process as specified by Trader Update. This
term describes the period after which the Exchange may transition an
option series to continuous trading pursuant to proposed Rule
952NYP(d)(4), as discussed below.
     Proposed Rule 952NYP(a)(6) is identical to Arca Options
Rule 6.64P-O(a)(6) and would define the term ``Auction Processing
Period'' to mean the period during which the Auction is being
processed. The Auction Processing Period is at the end of the Auction
Process and is the period when the actual Auction is conducted and the
Exchange transitions from a pre-open state (described below) to
continuous trading. The end of the Auction Processing Period is the end
of the Auction and, depending on the orders and quotes in the
Consolidated Book, it concludes either with or without a trade.
     Proposed Rule 952NYP(a)(7) is identical to Arca Options
Rule 6.64P-O(a)(7) and would define the term ``Auction Trigger'' to
mean the information disseminated by the Primary Market in the
underlying security that triggers the Auction Process for a series to
begin. For a Core Open Auction, the proposed Auction Trigger would be
when the Primary Market first disseminates at or after 9:30 a.m.
Eastern Time both a two-sided quote and a trade of any size that is at
or within the quote per proposed Rule 952NYP(a)(7)(A), which is
identical to Arca Options Rule 6.64P-O(a)(7)(A). For a Trading Halt
Auction, the proposed Auction Trigger would be when the Primary Market
disseminates at the end of a trading halt or pause a resume message, a
two-sided quote, and a trade of any size that is at or within the
quote, per proposed Rule 952NYP(a)(7)(B), which is identical to Arca
Options Rule 6.64P-O(a)(7)(B).
    This proposed term is also based on how the Exchange currently
opens or reopens a series for trading, as set forth in the last
sentence of current Rule 952NY(b).\114\ The proposed rule adds detail
not found in the current rule by referring to a ``two-sided quote''
rather than a ``quote,'' without any changes to functionality. The
Exchange also proposes a difference that an opening trade on the
Primary Market may be ``of any size,'' which would make clear that an
odd-lot transaction on the Primary Market could be used as an Auction
Trigger, which would be new on Pillar. The Exchange believes that
because it requires both a quote and a trade from the Primary Market
before it can open/reopen trading in the overlying option, and because
a Primary Market that has disseminated a quote for an underlying
security is open for trading, allowing odd-lot sized trades to be
included in the trigger would increase the opportunities to open/reopen
trading options that overlay low-volume securities that have opened for
trading on the Primary Market and would reduce the circumstances needed
to manually trigger an Auction for a series.
---------------------------------------------------------------------------

    \114\ Rule 952NY(b) provides, in relevant part, that the related
option series will be opened automatically ``once the primary market
for the underlying security disseminates a quote and a trade that is
at or within the quote.''
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(8) is identical to Arca Options
Rule 6.64P-O(a)(8) and would define the term ``Calculated NBBO'' to
mean the highest bid and lowest offer among all Market Maker quotes and
the ABBO during the Auction Process. The Exchange proposes to use the
term ``Calculated NBBO'' to specify which bids and offers the Exchange
would consider for purposes of determining whether to proceed with an
Auction on Pillar, as described in greater detail below. The Exchange
believes the proposed term provides more clarity than referencing an
``NBBO disseminated by OPRA'' and is consistent with the proposed
definition of ABBO, which by its terms is disseminated by OPRA.\115\
---------------------------------------------------------------------------

    \115\ The Exchange notes that the information used to calculate
the proposed Calculated NBBO is consistent with the information that
the Exchange receives from OPRA in advance of the Exchange opening
or reopening trading (i.e., Market Maker rotational quotes from the
Exchange and ABBO) and is similar to Cboe's definition of
``Composite Market,'' as described in Cboe Rule 5.31(a), which
includes Cboe Market Maker quotes and BBOs of other options
exchanges.
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(9) is identical to Arca Options
Rule 6.64P-O(a)(9) and would define the term ``Indicative Match Price''
to mean the price at which the maximum number of contracts can be
traded in an Auction, including the non-displayed quantity of Reserve
Orders, and excluding IO Orders, subject to the Auction Collars. This
functionality is consistent with the current process for establishing a
single opening price, as described in Rule 952NY(b)(A), but the
proposed rule adds more granularity and uses Pillar terminology.\116\
In addition, the term ``Indicative Match Price'' refers to the same
functionality as the Exchange System's reference to the term
``reference price'' in its imbalance information. Proposed Rule
952NYP(a)(9) (like Arca Options Rule 6.64P-O(a)(9)) would further
provide that if there is no Legal Width Quote,

the Indicative Match Price included in the Auction Imbalance
Information would be calculated without Auction Collars. This would be
a new feature applicable to options trading on the Exchange and an
Indicative Match Price without Auction Collars would be accompanied
with an Auction Indicator that the Auction cannot be conducted because
there is no Legal Width Quote.\117\
---------------------------------------------------------------------------

    \116\ See Rules 952NY(b)(A) and (c) (describing process for
determining single opening price).
    \117\ Currently, if there is no legal width NBBO, the Exchange
does not disseminate imbalance information and does not calculate an
indicative match price.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(9)(A) is identical to Arca Options Rule
6.64P-O(a)(9)(A) and would provide that if there is more than one price
level at which the maximum number of contracts can be traded within the
Auction Collars, the Indicative Match Price would be the price closest
to the midpoint of the Legal Width Quote, rounded to the nearest MPV
for the series, provided that the Indicative Match Price would not be
lower (higher) than the highest (lowest) price of a Limit Order to buy
(sell) ranked Priority 2--Display Orders that is eligible to
participate in the Auction. This functionality is similar to the
current process for establishing a single opening price, as described
in Rule 952NY(c), which provides that when the same number of contracts
can trade at multiple prices, the opening price is the price at which
the greatest number of contracts can trade that is at or nearest to the
midpoint of the NBBO disseminated by OPRA. The proposed rule text
provides more granularity, such as describing that the Exchange would
round to the nearest MPV in the series, which is consistent with
current functionality.
    Proposed Rule 952NYP(a)(9)(B) is identical to Arca Options Rule
6.64P-O(a)(9)(B) and would provide that an Indicative Match Price that
is higher (lower) than the upper (lower) Auction Collar would be
adjusted to the upper (lower) Auction Collar and orders eligible to
participate in the Auction would trade at the collared Indicative Match
Price. Proposed Rule 952NYP(a)(9)(B)(i) is identical to Arca Options
Rule 6.64P-O(a)(9)(B)(i) and would provide that Limit Orders to buy
(sell) with a limit price above (below) the upper (lower) Auction
Collar would be included in the Auction Imbalance Information at the
collared Indicative Match Price and would be eligible to trade at the
Indicative Match Price. This proposed rule text provides granularity
that, consistent with current functionality, orders willing to buy
(sell) at a higher (lower) price than the Auction Price would
participate in an Auction trade, which, by definition, would be
required to be at or between the Auction Collars. Proposed Rule
952NYP(a)(9)(B)(ii) is identical to Arca Options Rule 6.64P-
O(a)(9)(B)(ii) and would provide that Limit Orders and quotes to buy
(sell) with a limit price below (above) the lower (upper) Auction
Collar would not be included in the Auction Imbalance Information and
would not participate in an Auction. This proposed rule text provides
granularity that is consistent with current functionality.
    Proposed Rule 952NYP(a)(9)(C) is identical to Arca Options Rule
6.64P-O(a)(9)(C) and would provide that if the Matched Volume (defined
below) for an Auction consists of only buy and sell Market Orders, the
Indicative Match Price would be the midpoint of the Legal Width Quote,
rounded to the MPV for the series, or, if, the Legal Width Quote is
locked, then the locked price. This proposed rule text is designed to
provide granularity of how the Indicative Match Price would be
calculated if there are only Market Orders.
    Proposed Rule 952NYP(a)(9)(D) is identical to Arca Options Rule
6.64P-O(a)(9)(D) and would provide that if there is no Matched Volume,
including if there are Market Orders on only one side of the Market,
the Indicative Match Price and Total Imbalance for the Auction
Imbalance Information would be zero. This proposed rule text is
designed to provide granularity regarding how the Indicative Match
Price and Total Imbalance for the Auction Imbalance Information would
be calculated if there is no Matched Volume.
     Proposed Rule 952NYP(a)(10) is identical to Arca Options
Rule 6.64P-O(a)(10) and would define a ``Legal Width Quote'' as a
Calculated NBBO that: (A) may be locked, but not crossed; (B) does not
contain a zero offer; and (C) has a spread between the Calculated NBBO
for each option contract that does not exceed a maximum differential
that is determined by the Exchange on a class basis, which amount may
be modified during the Auction Process, and such maximum differentials
(and modifications thereto) would be announced by Trader Update (as
discussed further below, provided that a Trading Official may establish
differences other than the above for one or more series or classes of
options).\118\ Requiring that the Legal Width Quote not be crossed is
consistent with current Rule 952NY(b)(E) (and identical to Arca Options
Rule 6.64P-O(a)(10)), both of which require an uncrossed NBBO
disseminated by OPRA before a series can be opened (or reopened).\119\
The Exchange believes that the additional detail in proposed Rules
952NYP(a)(10)(A) and (B) regarding how to determine a Legal Width Quote
provides clarity and granularity as to when a Calculated NBBO would be
eligible to be considered a Legal Width Quote. In addition, requiring
that the Calculated NBBO must not exceed a maximum differential before
an Auction can proceed is based on the current Exchange System Opening
Process, which requires the bid-ask differential for a series to be in
an acceptable range.\120\ However, rather than specify maximum bid-ask
differentials in proposed Rule 952NYP, the Exchange believes it is
appropriate to instead retain flexibility to set the maximum
differentials so that the Exchange may consider the different market
models and characteristics of different classes, as well as modify
amounts in response to then-current market conditions.\121\ The
proposed Rule would allow the Exchange to modify these bid-ask
differentials at any time as it deems necessary and appropriate, which
discretion the Exchange has today on the Exchange System.\122\ In
addition,

allowing the Exchange to announce the maximum differentials by Trader
Update (as opposed to by Rule) is identical to Options Rule 6.64P-
O(a)(10), and consistent with the rules of several options exchanges
that likewise may change the amounts of valid opening widths by notice
or circular rather than by Rule change.\123\
---------------------------------------------------------------------------

    \118\ See Rule 925NY(c) (Unusual Conditions--Opening Auction)
(providing that ``[i[f the interest of maintaining a fair and
orderly market so requires, a Trading Official may declare that
unusual market conditions exist in a particular issue and allow
Market Makers in that issue to make auction bids and offers with
spread differentials of up to two times, or in exceptional
circumstances, up to three times, the legal limits permitted under
Rule 925NY'').
    \119\ The proposed calculation of a Legal Width Quote is also
similar to how Cboe determines whether to perform a ``Forced
Opening,'' because Cboe requires a Composite Market that is not
crossed with a non-zero offer. See Cboe Rule 5.31(e)(4).
    \120\ See Rule 952NY(b)(D) (providing that ``[t]he System will
not conduct an Auction Process if the bid-ask differential for that
series is not within an acceptable range,'' which ``acceptable range
shall mean within the bid-ask differential guidelines established
pursuant to Rule 952NY(b)(4)'').
    \121\ See also Cboe Rule 5.31(a) (regarding the definition of
``Maximum Composite Width'' (i.e., the amount that the ``Composite
Width'' of a series may generally not be greater than for the series
to open), which term is used similarly to how the Exchange proposes
to use the term ``Legal Width Quote,'' which provides that Cboe may
determine such amounts ``on a class and Composite bid basis, which
amount [Cboe] may modify during the opening auction process'' and
disseminate ``to all subscribers of [Cboe's] data feeds that deliver
opening auction updates''). See id.
    \122\ See supra note 118 (regarding authority conferred on
Trading Officials, per Rule 925NY(c), to make auction bids and
offers with spread differentials of up to two times, or in
exceptional circumstances, up to three times, the legal limits,
``[i[f the interest of maintaining a fair and orderly market so
requires'').
    \123\ See, e.g., Cboe Rule 5.31(a) (definition of Maximum
Composite Width); Cboe EDGX Options Exchange, Inc. (``EDGX'') Rule
21.7(a) (same); BZX Rule 21.7(a) (same)); Cboe C2 Exchange Inc.
(``C2'') Rule 6.11(a) (same); see also Nasdaq Options Market
(``NOM'') Options 3, Section 8(a)(6) (defining ``Valid Width NBBO''
as ``the combination of all away market quotes and any combination
of NOM-registered Market Maker orders and quotes received over the
QUO or SQF Protocols within a specified bid/ask differential as
established and published by the Exchange'' and allowing the Valid
Width NBBO to be ``configurable by underlying, and tables with valid
width differentials will be posted by Nasdaq on its website'') and
MIAX Rule 503(f)(2) (which permits MIAX to determine by circular an
acceptable range in which openings are permissible if there is no
valid width national best bid or offer (``NBBO'')).
---------------------------------------------------------------------------

    The Exchange believes that the proposed definition relating to
``Legal Width Quote'' would promote clarity and transparency in
Exchange rules regarding which quotes--both Market Maker quotes on the
Exchange and the ABBO, i.e., the Calculated NBBO--that the Exchange
would use to determine if there is a Legal Width Quote and provide
direction that to be a Legal Width Quote, a Calculated NBBO may not
exceed a maximum differential.
    The Exchange also proposes to make a conforming change to Rule
925NY(c) to update the title from ``Unusual Conditions--Opening
Auction'' to be ``Unusual Conditions--Auctions,'' which would align
with the proposed definition of ``Auctions'' in proposed Rule
952NYP(a), which includes both opening and reopening auctions, which
change mirrors Arca Options Rule 6.37-O(c). This proposed change also
promotes clarity, consistent with current functionality that Rule
925NY(c) is also applicable to reopenings. In addition, the Exchange
proposes to amend Rule 925NY(c), which authorizes a Trading Official to
widen the bid-ask differentials in the event of unusual conditions, to
add a cross-reference to extend such authority to proposed Rule
952NYP(a)(10) (regarding the Legal Width Quote spreads). This proposed
amendment would ensure that the existing procedures for auctions in the
event of unusual conditions, as specified in Rule 925NY(c), would
continue to be available for option symbols that have transitioned to
Pillar (and subject to new Rule 952NYP(a)(10)).
     Proposed Rule 952NYP(a)(11) is identical to Arca Options
Rule 6.64P-O(a)(11) and would define the term ``Matched Volume'' to
mean the number of buy and sell contracts that can be matched at the
Indicative Match Price, excluding IO Orders. The Exchange believes this
proposed definition promotes granularity in Exchange rules.
     Proposed Rule 952NYP(a)(12) is identical to Arca Options
Rule 6.64P-O(a)(12) and would define the term ``pre-open state'' to
mean the period before a series is opened or reopened for trading and
would provide that during the pre-open state, the Exchange would accept
Auction-Only Orders, quotes, and orders designated Day or GTC,
including orders ranked under the proposed category of ``Priority 3--
Non-Display Orders'' that are not eligible to participate in an
Auction.\124\ This proposed text is consistent with current Rule
952NY(b), which provides that the Exchange will accept market and limit
orders for inclusion in the opening auction process and would add
further granularity regarding which interest would be accepted by the
Exchange (even if not eligible for an Auction) prior to the opening or
reopening of each option series and during which time period.
---------------------------------------------------------------------------

    \124\ The Exchange notes that Cboe refers to a similar period as
the ``Queuing Period.'' See Cboe Rule 5.31(b). Similar to Cboe's
Queuing Period, the proposed term of ``pre-open state'' means the
period when the Exchange accepts orders and quotes but has not yet
opened/reopened a series for continuous trading. The proposed
``Auction Process,'' defined above, is part of the pre-open state,
but does not begin until the Exchange receives an Auction Trigger,
as defined above.
---------------------------------------------------------------------------

    [cir] The proposed rule would further provide that the pre-open
state for the Core Open Auction would begin at 6:00 a.m. Eastern Time
and would end when the Auction Processing Period begins, which is
similar to current functionality, which allows order and quote entry to
begin at 5:30 a.m. Eastern Time (per proposed Rule 952NYP(a)(12)(A),
which is identical to Arca Options Rule 6.64P-O(a)(12)(A)). The
Exchange believes that moving the start time to 6:00 a.m. Eastern Time
would not materially impact the ability of ATP Holders to enter orders
or quotes during the pre-open state. As further proposed (and identical
to Arca Options), at the beginning of the pre-open state before the
Core Open Auction, orders designated GTC that remain from the prior
trading day would be included in the Consolidated Book, which is
consistent with current functionality.
    [cir] The proposed rule would also provide that the pre-open state
for a Trading Halt Auction would begin at the beginning of the trading
halt and would end when the Auction Processing Period begins (per
proposed Rule 952NYP(a)(12)(B), which is identical to Arca Options Rule
6.64P-O(a)(12)(B)).
    This proposed definition of a pre-open state is identical to Arca
Options Rule 6.64P-O(a)(12) and is designed to distinguish the pre-open
state (for a Core Open Auction or a Trading Halt Auction) from both the
Auction Processing Period and the period when a given series opens for
trading, thus adding granularity to Exchange rules. As noted above,
this proposed definition of pre-open state would also be used in
proposed Rules 928NYP, 928.1NYP, and 900.3NYP, which use is identical
to how this term is used in the analogous Arca Options Rules 6.40P-O,
6.41P-O, and 6.62P-O.
     Proposed Rule 952NYP(a)(13) is identical to Arca Options
Rule 6.64P-O(a)(13) and would define the term ``Rotational Quote'' to
mean the highest Market Maker bid and lowest Market Maker offer on the
Exchange when the Auction Process begins and would provide that during
the Auction Process, the Exchange would update the price and size of
the Rotational Quote and that such Rotational Quote can be locked or
crossed. The Exchange further proposes that, if there are no Market
Maker quotes, the Rotational Quote would be published with a zero price
and size. The Exchange notes that, although not specified in the
current rule, it currently disseminates a ``rotational quote'' to OPRA
when it is in the process of opening or reopening a series, i.e., a
quote that is comprised only of Market Maker quotes and does not
include orders. The Exchange proposes a difference on Pillar because
currently, if the Market Maker quotes are crossed, the Exchange flips
the bid and offer prices. In Pillar, the Exchange would publish a
Rotational Quote with the actual bid and offer prices, even if crossed,
which would provide ATP Holders with a more accurate view of whether a
Rotational Quote is crossed. This proposed definition adds granularity
to Exchange rules by codifying existing (albeit slightly modified)
functionality.
    Auction Ranking and Allocation. Proposed Rule 952NYP(b) is
identical to Arca Options Rule 6.64P-O(b) insofar as it would provide
that orders and quotes on the side of the Imbalance are not guaranteed
to participate in the Auction but would differ in that it would address
allocation (discussed below) and would provide that orders and quotes
would be ranked pursuant to Rule 964NYP(c)-(g). Further, with regard to
ranking (and identical to Arca

Options Rule 6.64P-O(b)), proposed Rule 952NYP(b) would provide that:
(1) Limit Orders, quotes, and LOO Orders would be ranked based on their
limit price and not the price at which they would participate in the
Auction; (2) MOO Orders would be ranked under the proposed category of
``Priority 1--Market Orders''; (3) LOO Orders would be ranked under the
proposed category of ``Priority 2--Display Orders''; and (4) IO Orders
would be ranked based on time among IO Orders, subject to eligibility
to participate at the Indicative Match Price based on their limit
price.\125\
---------------------------------------------------------------------------

    \125\ See Rule 964NYP(e) (which provides that ``[a]t each price,
all orders and quotes are assigned a priority category, and, within
each priority category, Customer orders are ranked ahead of non-
Customer. If, at a price, there are no remaining orders or quotes in
a priority category, then same-priced interest in the next priority
category has priority.'').
---------------------------------------------------------------------------

    In addition, proposed Rules 952NYP(b)(5)(A)-(B), would specify how
eligible orders and quotes would trade in the Auction, which would be
based on whether such orders and quotes are priced better than, or
equal to, the Auction Price.\126\ As proposed, orders and quotes priced
better than the Auction Price would trade based on their ranking \127\
and orders and quotes priced at the Auction Price would trade in
accordance with Rule 964NYP(j),\128\ provided that the participation
entitlement to a Directed Order Market Maker (``DOMM'') or Specialist
per Rule 964NYP(j)(4) is not available during the Auction.\129\ The
distinction between how better-priced and at-priced interest trades is
relevant to non-Customer interest because ``at-priced'' non-Customer
interest would trade on a size pro rata basis, whereas ``better-
priced'' non-Customer interest would not be subject to a pro rata
allocation. The Exchange proposes to make clear that participation
entitlements that may be available to a DOMM or a Specialist when the
execution price is the NBBO would not be available during the Auction
(i.e., before an option series is open for trading on the Exchange)
even though the execution price could be at the NBBO because such NBBO
would not include quotes from the Exchange.\130\ The Exchange believes
this proposed rule change would add clarity and transparency to
Exchange rules and would not interfere with the purpose of
participation entitlements--which is to encourage Market Makers to
quote at the NBBO during continuous trading.
---------------------------------------------------------------------------

    \126\ For an Auction that results in a trade, the Auction Price
is the price at which such Auction is conducted. See proposed Rule
952NYP(a)(4).
    \127\ See proposed Rule 952NYP(b)(5)(A). See also Rule 964NYP(c)
(providing that ``orders and quotes are ranked and maintained in the
Consolidated Book according to price-time priority,'' with the best-
priced interest ranked first). See also Rule 964NY(b)(1)(Price
Priority) (providing that ``[t]he highest bid has priority over all
other bids; and the lowest offer has priority over all other
offers.'').
    \128\ This proposed allocation of orders and quotes during the
Auction Process is consistent with the recently approved allocation
of Electronic Complex Orders (``ECOs'') during the ECO Opening (or
Reopening) Auction Process on Pillar, which occurs after each leg of
a complex strategy has opened for trading. Specifically, eligible
ECOs are ranked per Rule 964NYP(c)-(g) and ECOs priced better than
the ECO Auction Price trade based on ranking and ECOs priced at the
ECO Auction Price trade per Rule 964NYP(j)). See Rule
980NYP(d)(3)(B)((iii).
    \129\ See proposed Rule 952NYP(b)(5)(B). See also Rules
964NYP(j) (Order Execution) (providing how orders and quotes, at
each price, will be allocated against contra-side interest for
option series that are open for trading) and (j)(4) (providing for
fourth priority ``to interest ranked Priority 2--Display Limit
Orders that is eligible for the DOMM Guarantee or the Specialist
Pool Guarantee, as applicable, pursuant to paragraph (h) of this
Rule, provided that the execution price is the NBBO.'').
    \130\ Rules 964NYP(h)(1) and (h)(2) describe participation
entitlements available to a DOMM or a Specialist when the execution
price is the NBBO.
---------------------------------------------------------------------------

    This proposed rule is based in part on current Rule 952NY(b)(B),
which provides that ``[o]rders and quotes in the system will be matched
up with one another based on price-time priority, provided, however,
that orders will have priority over Market Maker quotes at the same
price.'' The Exchange proposes a difference in Pillar (identical to
Arca Options Rule 6.64P-O(b)), that orders in the same priority
category as quotes would not have priority over Market Maker quotes at
the same price, which distinction is an artifact of the Exchange's
existing system limitation. Instead, the Exchange proposes that orders
and Market Maker quotes in the same priority category would be ranked
pursuant to Rule 964NYP, which rule is described in the American
Priority Filing). In addition to mirroring the equal ranking of orders
and quotes by Arca Options, this handling is also consistent with how
other options markets handle orders and quotes during the opening
process.\131\
---------------------------------------------------------------------------

    \131\ See Cboe Rule 5.31(e)(3)(i) (providing that Cboe
``prioritizes orders and quotes in the following order: market
orders, limit orders and quotes with prices better than the Opening
Trade Price, and orders and quotes at the Opening Trade Price'').
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    Auction Imbalance Information. Proposed Rule 952NYP(c) is identical
to Arca Options Rule 6.64P-O(c) and would provide that, unless
otherwise specified by Trader Update, Auction Imbalance Information