orders is 100% when the contra-side NBB or NBO is priced at or below
$1.00 and 50% when the contra-side NBB or NBO is priced above $1.00.
Current Rule 6.61-O(a)(1)(A) provides that unless otherwise
determined by the Exchange, the specified threshold for Market Maker
bids is $1.00 if the contra-side NBO is priced at or below $1.00 and
for Market Maker offers no limit if the NBB is priced at or below
$1.00. Current Rule 6.61-O(a)(1)(B) provides that unless otherwise
determined by the Exchange, the specified threshold for Market Maker
bids is 50% if the contra-side NBO (NBB) is priced above $1.00.
    \59\ See, e.g., Cboe Rule 5.6(c) (setting forth the ``reference
price'' applicable to orders for which Cboe delta-adjusts the
execution price after the market close). As discussed infra, the
Exchange likewise proposes to use the term Reference Price in
connection with Trading Collars (proposed Rule 6.62P-O(a)(4)) and
other risk checks (proposed Rule 6.41P-O).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(3)(A) would provide that each trading day,
a Limit Order or quote to buy (sell) would be rejected or cancelled (if
resting) if it is priced at a ``Specified Threshold,'' described below,
equal to or above (below) the Reference Price, rounded down to the
nearest price within the MPV for the Series (``Limit Order Price
Protection''). In other words, a Limit Order designated GTC would be
re-evaluated for Limit Order Price Protection on each day that it is
eligible to trade and would be cancelled if the limit price is through
the Specified Threshold. In addition, the proposed rounding down is
consistent with current functionality, is standard on Pillar for price
protection mechanisms, and is based on how Limit Order Price Protection
is calculated on the Exchange's cash equity market if it is not within
the MPV for the security, as described in the last sentence of Rule
7.31-E(a)(2)(B). The proposed text would therefore promote granularity
in Exchange rules. The proposed rule would further provide that Cross
Orders and Limit-on-Open (``LOO'') Orders (described below) as well as
orders represented in open outcry, would not be subject to Limit Order
Price Protection and that Limit Order Price Protection would not be
applied to a Limit Order or quote if there is no Reference Price, which
is consistent with current functionality.
     Proposed Rule 6.62P-O(a)(3)(A)(i) would provide that a
Limit Order or quote that arrives when a series is open would be
evaluated for Limit Order Price Protection on arrival.
     Proposed Rule 6.62P-O(a)(3)(A)(ii) would provide that a
Limit Order or quote received during a pre-open state would be
evaluated for Limit Order Price Protection after an Auction
concludes.\60\
---------------------------------------------------------------------------

    \60\ See discussion infra, regarding proposed Rule 6.64P-O(a)
and proposed definitions for the terms ``Auction,'' ``Auction
Price,'' Auction Collar,'' ``pre-open state,'' and ``Trading Halt
Auction.''
---------------------------------------------------------------------------

     Proposed Rule 6.62P-O(a)(3)(A)(iii) would provide that a
Limit Order or quote that was resting on the Consolidated Book before a
trading halt would be evaluated for Limit Order Price Protection again
after the Trading Halt Auction concludes.
    The Exchange believes that these proposed rules would add clarity
and transparency to when the Exchange would evaluate a Limit Order or
quote for Limit Order Price Protection.
    Proposed Rule 6.62P-O(a)(3)(B) would specify that the Reference
Price for calculating Limit Order Price Protection for an order or
quote to buy (sell) would be the NBO (NBB), provided that, immediately
following an Auction, the Reference Price would be the Auction Price,
or if none, the upper (lower) Auction Collar price, or, if none, the
NBO (NBB). The Exchange believes that adjusting the Reference Price for
Limit Order Price Protection immediately following an Auction would
ensure that the most up-to-date price would be used to assess whether
to cancel a Limit Order that was received during a pre-open state or
would be reevaluated after a Trading Halt Auction. The Exchange further
proposes that for purposes of calculating Limit Order Price Protection,
the Exchange would not use an adjusted NBBO, which use of an unadjusted
NBBO is consistent with how Limit Order Price Protection currently
functions on the Exchange's cash equity market, as described in Rule
7.31-E(a)(2)(B).\61\ The Exchange believes that using an unadjusted
NBBO for risk protection mechanisms is consistent with the goal of such
mechanisms to prevent erroneous executions by using a more conservative
view of the NBBO.
---------------------------------------------------------------------------

    \61\ References to the NBBO, NBB, and NBO in Rule 7.31-E refer
to using a determination of the national best bid and offer that has
not been adjusted.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(3)(C) would specify the Specified
Threshold and would provide that unless determined otherwise by the
Exchange and announced to OTP Holders and OTP Firms by Trader Update,
the Specified Threshold applicable to Limit Order Price Protection
would be:

------------------------------------------------------------------------
                                                               Specified
                       Reference price                         threshold
------------------------------------------------------------------------
$0.00 to $1.00..............................................       $0.30
$1.01 to $10.00.............................................         50%
$10.01 to $20.00............................................         40%
$20.01 to $50.00............................................         30%
$50.01 to $100.00...........................................         20%
$100.01 and higher..........................................         10%
------------------------------------------------------------------------

    The Exchange believes that it would provide a more reasonable and
deterministic trading outcome to use a fixed dollar amount (of $0.30)
rather than a percentage calculation when the Reference Price is $1.00
or less. The Exchange believes that the balance of the proposed
thresholds are more granular than those currently specified in Rules
6.60-O(b) (for orders) and 6.61-O(a)(1)(A) and (B) (for quotes) and
therefore determining whether to reject a Limit Order or quote will be
more tailored to the applicable Reference Price. In addition,
consistent with Rules 6.60-O(b) and 6.61-O(a)(1), the Exchange proposes
that these thresholds could change, subject to announcing the changes
by Trader Update. Providing flexibility in Exchange rules regarding how
the Specified Thresholds would be set is consistent with the rules of
other options exchanges.\62\
---------------------------------------------------------------------------

    \62\ See, e.g., Cboe Rule 5.34(a)(4) (describing the ``Drill-
Through Protection'' and that Cboe ``determines the buffer amount on
a class and premium basis''); and the Nasdaq Stock Market LLC
(``Nasdaq'') Options 3, Section 15(a)(1)(B) (specifying that ``Order
Price Protection'' can be a configurable dollar amount specified by
Nasdaq and announced via an Options Trader Alert).
---------------------------------------------------------------------------

    Trading Collar. Trading Collars on the OX system are currently
described in Rule 6.60-O(a). Under the current rules, incoming Market
Orders and marketable Limit Orders are limited in having an immediate
execution if they would trade at a price greater than one ``Trading
Collar.'' A collared order is displayed at that price and then can be
repriced to new collars as the NBBO updates. On Pillar, the Exchange
proposes Trading Collar functionality that would be new for Pillar and
is not currently available on the Exchange's cash equity platform.
    Unlike current options trading collar functionality, which permits
a collared order to be repriced, as proposed, a Market Order or Limit
Order would be assigned a single Trading Collar that

would be applicable to that order until it is fully executed or
cancelled (unless the series is halted). The new proposed Trading
Collar would function as a ceiling (for buy orders) or floor (for sell
orders) of the price at which such order could be traded, displayed, or
routed. The Exchange further proposes that when an order is working at
its assigned Trading Collar, it would cancel if not executed within a
specified time period.
    More specifically, proposed Rule 6.62P-O(a)(4) would provide that a
Market Order or Limit Order to buy (sell) would not trade or route to
an Away Market at a price above (below) the Trading Collar assigned to
that order. As further proposed, Auction-Only Orders, Limit Orders
designated IOC or FOK, Cross Orders, ISOs, and Market Maker quotes
would not be subject to Trading Collars, which interest is excluded
under current functionality.\63\ The proposed rule would explicitly add
reference to Cross Orders being excluded from Trading Collars, which
would add granularity to the proposed rule. In addition, Trading
Collars would not be applicable during Auctions but (as described
below) would be calculated after such Auction concludes.
---------------------------------------------------------------------------

    \63\ See Rule 6.60-O(a)(3) (``Trade Collar Protection does not
apply to quotes, IOC Orders, AON Orders, FOK Orders, and NOW
Orders.'').
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(4)(A) would provide that a Trading Collar
assigned to an order would be calculated once per trading day and would
be updated only if the series is halted. Accordingly, an order
designated GTC would receive a new Trading Collar each day, but that
Trading Collar would not be updated intraday unless the series is
halted. Proposed Rule 6.62P-O(a)(4)(A)(i) would provide that an order
that is received during continuous trading would be assigned a Trading
Collar before being processed for either trading, repricing, or routing
and that an order that is routed on arrival and returned unexecuted
would use the Trading Collar previously assigned to it. Proposed Rule
6.62P-O(a)(4)(A)(ii) would provide that an order received during a pre-
open state would be assigned a Trading Collar after an Auction
concludes. Finally, proposed Rule 6.62P-O(a)(4)(A)(iii) would provide
that the Trading Collar for an order resting on the Consolidated Book
before a trading halt would be calculated again after the Trading Halt
Auction concludes. The Exchange believes that because Trading Collars
are intended as a price protection mechanism, updating the Trading
Collar after a series has reopened would allow for the Trading Collar
assigned to an order to reflect more updated pricing.
    Proposed Rule 6.62P-O(a)(4)(B) would provide that the Reference
Price for calculating the Trading Collar for an order to buy (sell)
would be the NBO (NBB), which is consistent with how trading collars
are currently determined for Limit Orders, with differences to use this
Reference Price for all orders and for how the Reference Price would be
determined after an Auction.\64\ The Exchange proposes to use the
Pillar term ``Reference Price'' to describe what would be used for
Trading Collar calculations.\65\ The proposed rule would further
provide that for Auction-eligible orders to buy (sell) that were
received during a pre-open state or orders that were re-assigned a
Trading Collar after a trading halt, the Reference Price would be the
Auction Price or, if none, the upper (lower) Auction Collar price or,
if none, the NBO (NBB). For reasons similar to those described above,
the Exchange proposes to use a more conservative view of the NBBO for
purposes of risk protection mechanisms. Therefore, the Exchange
proposes that for purposes of calculating a Trading Collar, the
Exchange would not use an adjusted NBBO. Proposed Rule 6.62P-
O(a)(4)(B)(i) would further provide that a Trading Collar would not be
assigned to a Limit Order if there is no Reference Price at the time of
calculation, which is consistent with current functionality and the
proposed rule would add granularity to Exchange rules.
---------------------------------------------------------------------------

    \64\ Under current rules, trading collars are calculated based
off of the contra-side NBBO. See Rule 6.60-O(a)(1)(A)(ii).
    \65\ See discussion regarding Cboe Rule 5.34(a)(4) and Nasdaq
Options 3, Section 15(a)(1)(B), supra note 62.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(4)(C) would describe how the Trading
Collar would be calculated and would provide that the Trading Collar
for an order to buy (sell) would be a specified amount above (below)
the Reference Price, as follows: (1) For orders with a Reference Price
of $1.00 or lower, $0.25; or (2) for orders with a Reference Price
above $1.00, the lower of $2.50 or 25%. Trading Collars under the
current rule are based on a specified dollar amount (set forth in four
tranches).\66\ The Exchange believes the proposed functionality (set
forth in two tranches) would tailor the Trading Collar calculations
with either a specified dollar amount or percentage, depending on the
Reference Price of the order, while at the same time providing that the
thresholds would be within the current parameters for determining
whether a trade is an Obvious Error or Catastrophic Error.\67\ Proposed
Rule 6.62P-O(a)(4)(C)(i) would further provide that if the calculation
of a Trading Collar would not be in the MPV for the series, it would be
rounded down to the nearest price within the applicable MPV, which is
consistent with current functionality and based on how Trading Collars
are calculated on the Exchange's cash equity market, as described in
Rule 7.31-E(a)(1)(B). Proposed Rule 6.62P-O(a)(4)(C)(ii) would further
provide that for orders to sell, if subtracting the Trading Collar from
the Reference Price would result in a negative number, the Trading
Collar for Limit Orders would be the limit price and the Trading Collar
for Market Orders would be one MPV above zero, which would provide more
granularity in Exchange rules and would ensure that there will be a
Trading Collar calculated for low-priced orders to sell.
---------------------------------------------------------------------------

    \66\ Under the current rule, the Trading Collar for buy (sell)
orders is as follows: $0.25 for each option contract for which the
NBB (NBO) is less than $2.00; $0.40 where the NBB (NBO) is between
$2.00-$5.00; $0.50 where the NBB (NBO) is between $5.01-$10.00;
$0.80 where the NBB (NBO) is between $10.01 but does not exceed--
$20.00; and $1.00 when the NBB (NBO) is $20.01 or more.
    \67\ See Rules 6.87-O(c)(1) (thresholds for Obvious Errors) and
6.87-O(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(4)(D) would describe how the Trading
Collar would be applied and would provide that if an order to buy
(sell) would trade or route above (below) the Trading Collar or would
have its working price repriced to a Trading Collar that is below
(above) its limit price, the order would be added to the Consolidated
Book at the Trading Collar for 500 milliseconds and if not traded
within that period, would be cancelled. In addition, once the 500-
millisecond timer begins for an order, the order would be cancelled at
the end of the timer even if it repriced or has been routed to an Away
Market during that period, in which case any portion of the order that
is returned unexecuted would be cancelled.
    The Exchange believes that the proposed Trading Collar
functionality is designed to provide a similar type of order protection
as is currently available (as described in Rule 6.60-O(a)) because it
would limit the price at which a marketable order could be traded,
routed, or displayed. The Exchange believes that the proposed
differences are designed to simplify the functionality by applying a
static ceiling price (for a buy order) or floor price (for a sell
order) at which such order could be traded or routed that would be
determined at the time of entry (or after

a series opens or reopens), and would be applicable to the order until
it is traded or cancelled. The Exchange believes that the proposed
functionality would provide greater determinism to an OTP Holder or OTP
Firm of the Trading Collar that would be applicable to a Market Order
or Limit Order and when such order may be cancelled if it reaches its
Trading Collar.
    Time in Force Modifiers. Proposed Rule 6.62P-O(b) would set forth
the time-in-force modifiers that would be available for options trading
on Pillar and uses Pillar terminology similar to that used in Rule
7.31-E(b), with differences to offer time-in-force modifiers currently
available for options trading that are not available for cash equity
trading. The Exchange proposes to offer the same time-in-force
modifiers that are currently available for options trading on the
Exchange and use Pillar terminology to describe the functionality. As
noted above, the Exchange proposes to describe the Time in Force
Modifiers in proposed Rule 6.62P-O(b), and then specify for each order
type which Time in Force Modifiers would be available for such orders
or quotes.
    Day Modifier. Proposed Rule 6.62P-O(b)(1) would provide that any
order or quote to buy or sell designated Day, if not traded, would
expire at the end of the trading day on which it was entered and that a
Day Modifier cannot be combined with any other Time in Force Modifier.
This proposed rule text uses Pillar terminology based on Rule 7.31-
E(b)(1) with one difference to reference ``quotes'' in addition to
orders. This proposed functionality would operate no differently than
how a ``Day Order,'' as described in Rule 6.62-O(m), currently
functions.
    Immediate-or-Cancel (``IOC'') Modifier. Proposed Rule 6.62P-O(b)(2)
would provide that a Limit Order may be designated IOC or Routable IOC,
as described in proposed Rules 6.62P-O(b)(2)(A) and (B) and that a
Limit Order designated IOC would not be eligible to participate in any
Auctions. This proposed rule text is based on the first and third
sentences of Rule 7.31-E(b)(2) without any differences and makes
explicit current (but not defined) functionality.\68\ The Exchange
proposes to use Pillar terminology based on Rule 7.31-E(b)(2) to
describe this functionality.
---------------------------------------------------------------------------

    \68\ The proposed rule does not include the second sentence of
Rule 7.31-E(b)(2), which provides that the ``IOC Modifier will
override any posting or routing instructions of orders that include
the IOC Modifier,'' as this functionality is not applicable to
options because an order that is not eligible to include an IOC
Modifier would be rejected on Pillar.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(b)(2)(A) would define a ``Limit IOC Order''
as a Limit Order designated IOC that would be traded in whole or in
part on the Exchange as soon as such order is received, and the
unexecuted quantity would be cancelled and that a Limit IOC Order does
not route. This proposed rule text uses Pillar terminology based on
Rule 7.31-E(b)(2)(A) without any substantive differences. The proposed
Pillar Limit IOC Order would function the same as an ``Immediate-or-
Cancel Order (IOC Order),'' as currently described in Rule 6.62-O(k),
without any differences.
    Proposed Rule 6.62P-O(b)(2)(B) would define a ``Limit Routable IOC
Order'' as a Limit Order designated Routable IOC that would be traded
in whole or in part on the Exchange as soon as such order is received,
and the unexecuted quantity routed to Away Market(s) and that any
quantity not immediately traded either on the Exchange or an Away
Market would be cancelled. This proposed rule text uses Pillar
terminology based on Rule 7.31-E(b)(2)(B) without any substantive
differences. The proposed Pillar Limit Routable IOC Order is also based
on the ``NOW Order,'' as currently described in Rule 6.62-O(o) and uses
Pillar terminology.
    Fill-or-Kill (``FOK'') Modifier: Proposed Rule 6.62P-O(b)(3) would
provide that a Limit Order designated FOK would be traded in whole on
the Exchange as soon as such order is received, and if not so traded is
to be cancelled and that a Limit Order designated FOK does not route
and does not participate in any Auctions. The Exchange does not offer
the FOK Modifier on its cash equity market, and this proposed rule uses
Pillar terminology to offer the same functionality that is currently
described in Rule 6.62-O(l) as the ``Fill-or-Kill Order (FOK Order)''
without any substantive differences.
    Good-'Til-Cancelled (``GTC'') Modifier. Proposed Rule 6.62P-O(b)(4)
would provide that a Limit or Market Order designated GTC remains in
force until the order is filled, cancelled, the MPV in the series
changes overnight, the option contract expires, or a corporate action
results in an adjustment to the terms of the option contract. The
Exchange does not offer the GTC Modifier on its cash equity market, and
this proposed rule uses Pillar terminology to offer the same
functionality that is currently described in Rule 6.62-O(n) as the
``Good-Till-Cancelled (GTC Order),'' with the substantive difference
that the proposed text makes clear (consistent with current
functionality) that such orders may be cancelled if the MPV changes
overnight. Otherwise, the proposed Rule describes the same
functionality that is currently described in Rule 6.62-O(n) as the
``Good-Till-Cancelled (GTC Order).''
    Auction-Only Orders. Proposed Rule 6.62P-O(c) would define an
``Auction-Only Order'' as a Limit Order or Market Order that is to be
traded only in an Auction pursuant to Rule 6.64P-O,\69\ which uses
Pillar terminology based on Rule 7.31-E(c) in lieu of the current
description of an ``Opening Only Order'' set forth in Rule 6.62-O(r),
without any functional differences to how such orders trade on
Pillar.\70\ The proposed rule would further provide that an Auction-
Only Order would not be accepted when a series is opened for trading
(i.e., would be accepted only during a pre-open state, which includes a
trading halt) and any portion of an Auction-Only Order that is not
traded in a Core Open Auction or Trading Halt Auction would be
cancelled. This represents current functionality.\71\ The proposed rule
is designed to provide clarity and uses Pillar terminology from both
the last sentence of Rule 7.31-E(c)(1) and the last sentence of Rule
7.31-E(c)(2) for options trading.
---------------------------------------------------------------------------

    \69\ See discussion infra, regarding proposed Rule 6.64P-O and
definitions relating to Auctions. As proposed, an ``Auction''
includes the opening or reopening of a series for trading either on
a trade or quote. See proposed Rule 6.64P-O(a)(5).
    \70\ Rule 6.62-O(r) defines an ``Opening Only Order'' as ``a
Market Order or Limit Order which is to be executed in whole or in
part during the opening auction of an options series or not at all.
Any portion not so executed is to be treated as cancelled.''
    \71\ See Rule 6.62-O(r) (providing that any portion of an
Opening Only Order ``not so executed is to be treated as
cancelled.'')
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(c)(1) would define a ``Limit-on-Open Order
(`LOO Order')'' as a Limit Order that is to be traded only in an
Auction. This proposed rule uses Pillar terminology based on Rule 7.31-
E(c)(1) to describe functionality that would be no different from
current functionality, as described in Rule 6.62-O(r).
    Proposed Rule 6.62P-O(c)(2) would define a ``Market-on-Open Order
(`MOO Order')'' as a Market Order that is to be traded only in an
Auction. This proposed rule uses Pillar terminology based on Rule 7.31-
E(c)(2) to describe functionality that would be no different from
current functionality, as described in Rule 6.62-O(r).
    Proposed Rule 6.62P-O(c)(3) would define an ``Imbalance Offset
Order (`IO Order').'' The Exchange currently offers an IO Order for
participation in Trading

Halt Auctions on its cash equity market but does not offer this order
type for options trading on the OX system. For cash equity trading, the
IO Order is a conditional order type that is eligible to participate in
a Trading Halt Auction only if it would offset the imbalance. To
provide OTP Holders and OTP Firms with greater flexibility for options
trading on Pillar, the Exchange proposes to offer more expansive
functionality than is currently available for cash equity trading and
to offer the IO Order for both Core Open Auctions and Trading Halt
Auctions.
    As proposed, the IO Order would function no differently than how an
IO Order currently functions on the Exchange's cash equity market
(except that it would be eligible to trade in all Auctions).
Accordingly, proposed Rule 6.62P-O(c)(3) would define an IO Order as a
Limit Order that is to be traded only in an Auction, which is based on
Rule 7.31-E(c)(5), with a difference that for options trading, it would
also be available for Core Open Auctions.
     Proposed Rule 6.62P-O(c)(3)(A) would provide that an IO
Order would participate in an Auction only if: (1) There is an
Imbalance in the series on the opposite side of the market from the IO
Order after taking into account all other orders and quotes eligible to
trade at the Indicative Match Price; and (2) the limit price of the IO
Order to buy (sell) would be at or above (below) the Indicative Match
Price. This proposed text is based on Rule 7.31-E(c)(5)(B) except that
it includes reference to quotes, which are unique to options trading,
and does not limit the order type to Trading Halt Auctions.
     Proposed Rule 6.62P-O(c)(3)(B) would provide that the
working price of an IO Order to buy (sell) would be adjusted to be
equal to the Indicative Match Price, provided that the working price of
an IO Order would not be higher (lower) than its limit price. This
proposed text is based on Rule 7.31-E(c)(5)(C) without any differences.
    Orders with a Conditional or Undisplayed Price and/or Size.
Proposed Rule 6.62P-O(d) would set forth the orders with a conditional
or undisplayed price and/or size that would be available for options
trading on Pillar. On Pillar, the Exchange proposes to offer the same
type of orders that are available in the OX system and that are
currently described in Rule 6.62-O(d) as a ``Contingency Order or
Working Order,'' with changes as described below.
    Reserve Order. Reserve Orders are currently defined in Rule 6.62-
O(d)(3). The Exchange proposes that for options traded on Pillar,
Reserve Orders would function similarly to how Reserve Orders function
on its cash equity market, as described in Rule 7.31-E(d)(1), with
differences described below. Accordingly, the Exchange proposes that
proposed Rule 6.62P-O(d)(1), which would define Reserve Orders for
options trading on Pillar, would use Pillar terminology based on Rule
7.31-E(d)(1), with differences to reflect differences in options and
cash equity trading. For example, options trading does not have a
concept of ``round lot'' or ``odd lot'' trading, and therefore the
proposed options trading version of the Rule would not include a
description of behavior that correlates to such functionality.
    Proposed Rule 6.62P-O(d)(1) would define a Reserve Order as a Limit
Order with a quantity of the size displayed and with a reserve quantity
of the size (``reserve interest'') that is not displayed and that the
displayed quantity of a Reserve Order is ranked under the proposed
category of ``Priority 2--Display Orders'' and the reserve interest is
ranked under the proposed category of ``Priority 3--Non-Display
Orders.'' This proposed rule text is based on Rule 7.31-E(d)(1) without
any differences. This proposed rule text is also consistent with Rule
6.76-O(a)(1)(B) and (a)(2), with orders ranked under the proposed
category of ``Priority 2--Display Orders'' functioning the same as
orders in the current ``Display Order Process'' and orders ranked under
the proposed category of ``Priority 3--Non-Displayed Orders''
functioning the same as orders in the current ``Working Order
Process.'' Proposed Rule 6.62P-O(d)(1) would further provide that both
the display quantity and the reserve interest of an arriving marketable
Reserve Order would be eligible to trade with resting interest in the
Consolidated Book or route to Away Markets, unless designated as a Non-
Routable Limit Order, which is based on the third sentence of Rule
7.31-E(d)(1) with a non-substantive difference to add reference to Non-
Routable Limit Order.
    Proposed Rule 6.62P-O(d)(1) would further provide that the working
price of the reserve interest of a resting Reserve Order to buy (sell)
would be adjusted in the same manner as a Non-Displayed Limit Order, as
provided for in paragraph (d)(2)(A) of this Rule, provided that it
would never be priced higher (lower) than the working price of the
display quantity of the Reserve Order. This proposed rule text is based
on the last sentence of Rule 7.31-E(d)(1) with one difference to
reference that the reserve interest could never have a working price
that is more aggressive than the working price of the display quantity
of the Reserve Order, which would be new functionality on Pillar for
options trading (and not currently available for cash equity trading)
designed to ensure that the reserve interest of a Reserve Order to buy
(sell) would never trade at a price higher (lower) than the working
price of the display quantity of the Reserve Order.\72\
---------------------------------------------------------------------------

    \72\ For example, as described in more detail below, the
proposed Non-Routable Limit Order would be eligible to be repriced
only once after it is resting in the Consolidated Book (see proposed
Rule 6.62P-O(e)(1)). If the display quantity of a Non-Routable Limit
Order that is combined with a Reserve Order has already been
repriced and is no longer eligible to be repriced, and the Away
Market NBBO adjusts, the reserve quantity would not adjust to a
price that would be more aggressive than the working price of the
display quantity of the order. This functionality is not currently
available on the Exchange's cash equity market.
---------------------------------------------------------------------------

     Proposed Rule 6.62P-O(d)(1)(A) would provide that the
displayed portion of a Reserve Order would be replenished when the
display quantity is decremented to zero and that the replenish quantity
would be the minimum display size of the order or the remaining
quantity of the reserve interest if it is less than the minimum display
quantity. This proposed rule text is based on Rule 7.31-E(d)(1)(A) with
differences to reflect that options are not traded in ``round lots'' or
``odd lots.'' Accordingly, the Exchange would not replenish a Reserve
Order on the options trading platform until the display portion is
fully decremented, which is consistent with current functionality as
described in Rule 6.76-O(a)(1)(B).
     Proposed Rule 6.62P-O(d)(1)(B) would provide that each
time the display quantity of a Reserve Order is replenished from
reserve interest, a new working time would be assigned to the
replenished quantity, which is consistent with current Rule 6.76-
O(a)(1)(B)(ii), which provides that when refreshed, the new display
quantity will be ranked at the new time that the displayed portion of
the order was refreshed. This proposed rule text is based in part on
Rule 7.31-E(d)(1)(B) with differences to reflect that for options
traded on Pillar, there would never be more than one display quantity
of a Reserve Order, and therefore the Exchange would not have different
``child'' display quantities of a Reserve Order with different working
times, as could occur for a Reserve Order on the Exchange's cash equity
trading platform.
     Proposed Rule 6.62P-O(d)(1)(C) would provide that a
Reserve Order may be designated as a Non-Routable Limit Order and if so
designated, the reserve interest that replenishes the display quantity
would be assigned a display

price and working price consistent with the instructions for the order.
This proposed rule text is based on Rule 7.31-E(d)(1)(B)(ii) without
any substantive differences. The Exchange believes that the proposed
rule would promote transparency and granularity in Exchange rules.
     Proposed Rule 6.62P-O(d)(1)(D) would provide that a
routable Reserve Order would be evaluated for routing both on arrival
and each time the display quantity is replenished, which is consistent
with Rule 6.76A-O(c)(1)(B), which provides that a Reserve Order may be
routed serially as component orders. Proposed Rule 6.62P-O(d)(1)(D)(i)
would provide that if routing is required, the Exchange would route
from reserve interest before publishing the display quantity. And
proposed Rule 6.62P-O(d)(1)(D)(ii) would provide that any quantity of a
Reserve Order that is returned unexecuted would join the working time
of the reserve interest and that if there is no reserve interest to
join, the returned quantity would be assigned a new working time. This
proposed rule text is based on Rule 7.31-E(d)(1)(D) and subparagraphs
(i) and (ii) with differences to reflect that there is no concept of
round lots or multiple child display orders for options trading. The
Exchange believes that the proposed rule would promote transparency and
granularity in Exchange rules.
     Proposed Rule 6.62P-O(d)(1)(E) would provide that a
request to reduce the size of a Reserve Order would cancel the reserve
interest before cancelling the display quantity. This proposed rule
text is based on Rule 7.31-E(d)(1)(E) with differences only to reflect
that there would not be more than one child display order for options
trading of Reserve Orders on Pillar. The Exchange believes that the
proposed rule would promote transparency and granularity in Exchange
rules.
     Proposed Rule 6.62P-O(d)(1)(F) would provide that a
Reserve Order may be designated Day or GTC, but it may not be
designated as an ALO Order. This proposed rule text is based in part on
Rule 7.31-E(d)(1)(C), with differences to reflect that the GTC Modifier
would be available for Reserve Orders trading on the Pillar options
trading platform (consistent with current functionality) and that
Primary Pegged Orders would not be available for options traded on
Pillar (also consistent with current functionality). The Exchange
believes that the proposed rule would promote transparency and
granularity in Exchange rules.
    Non-Displayed Limit Order. The Exchange proposes to offer the Non-
Displayed Limit Order for options trading on Pillar, which would be new
for options trading and would provide OTP Holders and OTP Firms with a
non-displayed order type in lieu of non-displayed PNP Blind Orders,
which latter order type would not be available on Pillar.\73\ The
proposed order type would function similarly to the existing Non-
Displayed Limit Order as described in Rule 7.31-E(d)(2). Proposed Rule
6.62P-O(d)(2) would define a Non-Displayed Limit Order as a Limit Order
that is not displayed, does not route, and is ranked under the proposed
category of ``Priority 3--Non-Display Orders''; and that a Non-
Displayed Limit Order may be designated Day or GTC and would not
participate in any Auctions. This proposed rule text uses the same
Pillar terminology as used in Rule 7.31-E(d)(2) with differences to
reflect that the GTC Time-in-Force Modifier is available for options
trading on Pillar.
---------------------------------------------------------------------------

    \73\ The Exchange notes that a Non-Displayed Limit Order would
function similarly to a PNP Blind Order that locks or crosses the
contra-side NBBO. In such case, a PNP Blind Order is not displayed,
as described in Rule 6.62-O(u) (``if the PNP Blind Order would lock
or cross the NBBO, the price and size of the order will not be
disseminated'').
---------------------------------------------------------------------------

     Proposed Rule 6.62P-O(d)(2)(A) would provide that the
working price of a Non-Displayed Limit Order would be assigned on
arrival and adjusted when resting on the Consolidated Book and that the
working price of a Non-Displayed Limit Order to buy (sell) would be the
lower (higher) of the limit price or the NBO (NBB). This proposed rule
text is based on Rule 7.31-E(d)(2)(A) with non-substantive differences
to reference the Consolidated Book instead of the NYSE Arca Book and to
streamline the rule text without any substantive differences.
    All-or-None (``AON'') Order. AON Orders are currently defined in
Rule 6.62-O(d)(4). AON Orders are not available on the Exchange's cash
equity market, and for options trading on Pillar, would function
similarly to how AON Orders currently function because such orders
would only execute if they can be satisfied in their entirety. However,
unlike the OX system, where AON Orders are not integrated in the
Consolidated Book, on Pillar, the Exchange proposes that AON Orders
would be ranked in the Consolidated Book and function as conditional
orders that would trade only if their condition could be met, similar
to how orders with a Minimum Trade Size (``MTS'') Modifier function on
Pillar on the Exchange's cash equity market. In addition, on Pillar,
the Exchange would not support Market Orders designated as AON, which
would be a change from current functionality. The Exchange does not
believe it needs to continue offering AON Market Orders because such
functionality was not used often on the OX system, indicating a lack of
market participant interest in this functionality. Because of the new
functionality that would be available for AON Orders on Pillar, the
Exchange proposes to use Pillar terminology to describe this order
type.
    Proposed Rule 6.62P-O(d)(3) would provide that an AON Order is a
Limit Order that is to be traded in whole on the Exchange at the same
time or not at all, which represents current functionality as described
in the first sentence of Rule 6.62-O(d)(4). Proposed Rule 6.62P-O(d)(3)
would further provide that an AON Order that does not trade on arrival
would be ranked under the proposed category of ``Priority 3--Non-
Display Orders'' and that an AON Order may be designated Day or GTC,
does not route, and would not participate in any Auctions. This
proposed rule text uses Pillar terminology to describe the proposed new
functionality that such orders would be ranked on the Consolidated
Book.
     Proposed Rule 6.62P-O(d)(3)(A) would provide that the
working price of an AON Order would be assigned on arrival and adjusted
when resting on the Consolidated Book and that the working price of an
AON Order to buy (sell) would be the lower (higher) of the limit price
or NBO (NBB). Because an AON Order is non-displayed, the Exchange
proposes that its working price should be adjusted in the same manner
as the proposed Non-Displayed Limit Order.
     Proposed Rule 6.62P-O(d)(3)(B) would provide that an
Aggressing AON Order to buy (sell) would trade with sell (buy) orders
and quotes that in the aggregate can satisfy the AON Order in its
entirety. This proposed rule text is new and promotes clarity in
Exchange rules that an Aggressing AON Order (whether on arrival or as a
resting order that becomes an Aggressing Order) would be eligible to
trade with more than one contra-side order or quote, provided that
multiple orders and quotes in the aggregate would satisfy the AON Order
in its entirety.
     Proposed Rule 6.62P-O(d)(3)(C) would provide that a
resting AON Order to buy (sell) would trade with an Aggressing Order or
Aggressing Quote to sell (buy) that individually can satisfy the whole
AON Order. This is proposed new functionality, because currently, an
AON Order can trade only against resting interest in the Consolidated
Book. The Exchange believes this

proposed change would provide an AON Order with additional execution
opportunities.
     Proposed Rule 6.62P-O(d)(3)(C)(i) would provide that if an
Aggressing Order or Aggressing Quote to sell (buy) does not satisfy the
resting AON Order to buy (sell), that Aggressing Order or Aggressing
Quote would not trade with and may trade through such AON Order.
Proposed Rule 6.62P-O(d)(3)(C)(ii) would further provide that if a
resting non-displayed order to sell (buy) does not satisfy the quantity
of a same-priced resting AON Order to buy (sell), a subsequently
arriving order or quote to sell (buy) that satisfies the AON Order
would trade before such resting non-displayed order or quote to sell
(buy) at that price. Both of these proposed rules are similar to
current Rule 6.62-O(d)(4), which provides that a resting AON Order can
be ignored if its condition is not met. Similar to current
functionality, even though an AON would be ranked in the Consolidated
Book, it is still a conditional order type and therefore, by its terms,
can be skipped over for an execution. This proposed rule text is also
based on how the MTS Modifier functions on the cash equity market, as
described in Rule 7.31-E(i)(3)(E)(i) and (ii).
     Proposed Rule 6.62P-O(d)(3)(D) would provide that a
resting AON Order to buy (sell) would not be eligible to trade against
an Aggressing Order or Aggressing Quote to sell (buy): (i) At a price
equal to or above (below) any orders or quotes to sell (buy) that are
displayed at a price equal to or below (above) the working price of
such AON Order; or (ii) at a price above (below) any orders or quotes
to sell (buy) that are not displayed and that have a working price
below (above) the working price of such AON Order. This proposed rule
text is new functionality for AON Orders that is designed to protect
the priority of resting orders and quotes and is based on how the MTS
Modifier functions on the cash equity market, as described in Rule
7.31-E(i)(3)(C) and its subparagraphs (i) and (ii).
     Proposed Rule 6.62P-O(d)(3)(E) would provide that if a
resting AON Order to buy (sell) becomes an Aggressing Order it would
trade as provided in paragraph (d)(3)(B) of this Rule; however, other
resting orders or quotes to buy (sell) ranked Priority 3--Non-Display
Orders that become Aggressing Orders or Aggressing Quotes at the same
time as the resting AON Order would be processed before the AON Order.
This is proposed new functionality and is designed to promote clarity
in Exchange rules that if multiple orders ranked Priority 3--Non-
Display Orders, including AON and non-AON Orders, become Aggressing
Orders or Aggressing Quotes at the same time, the AON Order would not
be eligible trade until the other orders ranked Priority 3--Non-Display
Orders have been processed, even if they have later working times. The
Exchange believes that it would be consistent with the conditional
nature of AON Orders for other same-side non-displayed orders to have a
trading opportunity before the AON Order.
    Stop Order. Stop Orders are currently defined in Rule 6.62-O(d)(1).
The Exchange proposes to use Pillar terminology with more granularity
to describe Stop Orders in proposed Rule 6.62P-O(d)(4), with
differences described below.
    Proposed Rule 6.62P-O(d)(4) would provide that a Stop Order is an
order to buy (sell) a particular option contract that becomes a Market
Order (or is ``elected'') when the Exchange BB (BO) or the most recent
consolidated last sale price reported after the order was placed in the
Consolidated Book (the ``Consolidated Last Sale'') (either, the
``trigger'') is equal to or higher (lower) than the specified ``stop''
price. The proposed functionality is similar to existing functionality
and provides more granularity of the circumstances when a Stop Order
would be elected.\74\ Because a Stop Order becomes a Market Order when
it is elected, the Exchange proposes that when it is elected, it would
be cancelled if it does not meet the validations specified in proposed
Rule 6.62P-O(a)(1)(A) and if not cancelled, it would be assigned a
Trading Collar. This is similar to current functionality, which is not
described in the current rule describing Stop Orders, that once
converted to a Market Order, such order is subject to the checks
applicable in the current rule for Market Orders, i.e., cancelling such
order if there is no NBBO. The proposed rule references the checks that
would be applicable to a Market Order on Pillar and thus adds greater
granularity and transparency to Exchange rules.
---------------------------------------------------------------------------

    \74\ The current rule states that a Stop Order to buy (sell)
will be triggered (i.e., elected) if ``trades at a price equal to or
greater (less) than the specified `stop' price on the Exchange or
another Market Center.'' See Rule 6.62-O(d)(1).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(d)(4)(A) would provide that a Stop Order
would be assigned a working time when it is received but would not be
ranked or displayed in the Consolidated Book until it is elected and
that once converted to a Market Order, the order would be assigned a
new working time and be ranked Priority 1--Market Orders. The original
working time assigned to a Stop Order would be used to rank multiple
Stop Orders elected at the same time. This is consistent with the
current rule, which provides that a Stop Order is not displayed and has
no standing in any Order Process in the Consolidated Book, unless or
until it is triggered. The proposed rule is designed to provide greater
granularity and clarity.
    Proposed Rule 6.62P-O(d)(4)(B) would specify additional events that
are designed to limit when a Stop Order may be elected so that a Market
Order does not trade during a period of pricing uncertainty:
     Proposed Rule 6.62P-O(d)(4)(B)(i) would provide that if
not elected on arrival, a Stop Order that is resting would not be
eligible to be elected based on a Consolidated Last Sale unless the
Consolidated Last Sale is equal to or in between the NBBO. This
proposed rule text provides additional transparency of when a resting
Stop Order would be eligible to be elected.
     Proposed Rule 6.62P-O(d)(4)(B)(ii) would provide that a
Stop Order would not be elected if the NBBO is crossed.
     Proposed Rule 6.62P-O(d)(4)(B)(iii) would provide that
after a Limit State or Straddle State is lifted, the trigger to elect a
Stop Order would be either the Consolidated Last Sale received after
such state was lifted or the Exchange BB (BO).\75\
---------------------------------------------------------------------------

    \75\ Rule 6.65A-O(a)(2) currently provides that the Exchange
will not elect Stop Orders when the underlying NMS stock is either
in a Limit State or a Straddle State, which would continue to be
applicable on Pillar. The Exchange proposes a non-substantive
amendment to Rule 6.65A-O(a)(2) to add a cross-reference to proposed
Rule 6.62P-O(d)(4).
---------------------------------------------------------------------------

    Stop Limit Order. Stop Limit Orders are currently defined in Rule
6.62-O(d)(2). The Exchange proposes to use Pillar terminology with more
granularity to describe Stop Limit Orders in proposed Rule 6.62P-
O(d)(5), with differences described below.
    Proposed Rule 6.62P-O(d)(5) would provide that a Stop Limit Order
is an order to buy (sell) a particular option contract that becomes a
Limit Order (or is ``elected'') when the Exchange BB (BO) or the
Consolidated Last Sale (either, the ``trigger'') is equal to or higher
(lower) than the specified ``stop'' price.\76\ The proposed
functionality is similar to existing functionality and provides more
granularity of when a Stop Limit Order would be elected than the
current Rule 6.62-O(d)(2) definition of Stop Limit Order. As further

proposed, a Stop Limit Order to buy (sell) would be rejected if the
stop price is higher (lower) than its limit price. Because a Stop Limit
Order becomes a Limit Order when it is elected, the Exchange proposes
that when it is elected, it would be cancelled if it fails Limit Order
Price Protection or a Price Reasonability Check and if not cancelled,
it would be assigned a Trading Collar.\77\ This functionality is
similar to current functionality, though it is not explicitly stated in
the current rule describing Stop Limit Orders. Specifically, both in
the current OX System and as proposed on Pillar, once converted to a
Limit Order, such order is subject to the checks applicable in the
current rule for Limit Orders, i.e., Limit Order Filter on the OX
System. The proposed rule references the checks that would be
applicable to a Limit Order on Pillar and thus adds greater granularity
and transparency to Exchange rules.
---------------------------------------------------------------------------

    \76\ The term ``Consolidated Last Sale'' is defined in proposed
Rule 6.62P-O(d)(4).
    \77\ See discussion infra, regarding proposed Rule 6.41P-O and
Price Reasonability Checks.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(d)(5)(A) would provide that a Stop Limit
Order would be assigned a working time when it is received but would
not be ranked or displayed in the Consolidated Book until it is elected
and that once converted to a Limit Order, the order would be assigned a
new working time and be ranked under the proposed category of
``Priority 2--Display Orders.'' This functionality is consistent with
the current rule, which provides that a Stop Limit Order is not
displayed and has no standing in any Order Process in the Consolidated
Book, unless or until it is triggered. The proposed rule is designed to
provide greater granularity and clarity.
    Proposed Rule 6.62P-O(d)(5)(B) would specify additional events that
are designed to limit when a Stop Limit Order may be elected so that a
Limit Order would not have a possibility of trading or being added to
the Consolidated Book during a period of pricing uncertainty.
     Proposed Rule 6.62P-O(d)(5)(B)(i) would provide that if
not elected on arrival, a Stop Limit Order that is resting would not be
eligible to be elected based on a Consolidated Last Sale unless the
Consolidated Last Sale is equal to or in between the NBBO.
     Proposed Rule 6.62P-O(d)(5)(B)(ii) would provide that a
Stop Limit Order would not be elected if the NBBO is crossed.
    Orders with Instructions Not to Route. Currently, the Exchange
defines non-routable orders in Rule 6.62-O as a PNP Order (which
includes a Repricing PNP Order (``RPNP'')) (current Rule 6.62-O(p)), a
Liquidity Adding Order (``ALO'') (which includes a Repricing ALO
(``RALO'') (current Rule 6.62-O(t)); a PNP-Blind Order (current Rule
6.62-O(u)); and a PNP-Light Order (Rule 6.62-O(v)). The Exchange also
defines Intermarket Sweep Orders (current Rule 6.62-O(aa)), which are
also non-routable.
    The Exchange separately defines non-routable quotes in Rule 6.37A-O
as a Market Maker--Light Only Quotation (``MMLO'') (current Rule 6.37A-
O(a)(3)(A)); a Market Maker--Add Liquidity Only Quotation (``MMALO'')
(current Rule 6.37A-O(a)(3)(B)); and a Market Maker--Repricing
Quotation (``MMRP'') (current Rule 6.37A-O(a)(3)(C)).
    On Pillar, the Exchange proposes to streamline the non-routable
order types and quotes that would be available for options trading, use
terminology that is similar to how non-routable orders are described
for cash equity trading as described in Rule 7.31-E(e), and describe
the functionality that would be applicable to both orders and quotes in
proposed Rule 6.62P-O(e). As described in greater detail below,
proposed Rule 6.37AP-O governing Market Maker Quotations would no
longer define how quotations would function. Instead, that rule would
specify that a Market Maker may designate either a Non-Routable Limit
Order or ALO Order as a Market Maker quote. Because the way in which
non-routable orders and quotes would function on Pillar would be
virtually identical (with differences described below), and because
Market Makers could enter a Non-Routable Limit Order or an ALO Order
and then choose to designate it either as a quote or an order, the
Exchange believes that it would promote transparency in Exchange rules
to consolidate the description of the functionality in a single rule
and eliminate duplication in Exchange rules. As described below,
proposed Rule 6.37A-O would cross reference proposed Rule 6.62P-(O)(e).
    On Pillar, the Exchange would no longer offer functionality based
on the PNP-Blind Order, PNP-Light Order, or MMLO because it believes
that the proposed orders/quotes with instructions not to route on
Pillar would provide OTP Firms and OTP Holders with the core
functionality associated with these existing order types, including
that the proposed rules would provide for non-routable functionality
and the ability to either reprice or cancel such orders/quotes. In
addition, as discussed above, the Exchange believes that the proposed
Non-Displayed Limit Order would provide functionality similar to what
is currently available with the PNP-Blind Order.
    Non-Routable Limit Order. Proposed Rule 6.62P-O(e)(1) would define
the Non-Routable Limit Order. As explained further below, this proposed
order type incorporates functionality currently available in both the
existing PNP and RPNP order types, as defined in Rule 6.62-O, and the
existing MMRP quotation type, as defined in Rule 6.37A-O(a)(3)(C),\78\
and uses Pillar terminology. As described below, a Market Maker can
designate a Non-Routable Limit Order as either a quote or an order.
Accordingly, references to the capitalized term ``Non-Routable Limit
Order'' describes functionality for either a quote or an order, unless
otherwise specified.
---------------------------------------------------------------------------

    \78\ Both RPNPs and MMRPs function similarly. Compare current
Rule 6.37A-O(a)(4)(B) and subparagraphs (i) and (ii) with current
Rule 6.62-O(p)(1)(A) and subparagraphs (i) and (ii). They are
defined in separate rules only because the former is for quotes and
the latter for orders.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(1) would provide that a Non-Routable Limit
Order is a Limit Order or quote that does not route and may be
designated Day or GTC and would further provide that a Non-Routable
Limit Order with a working price different from the display price would
be ranked under the proposed category of ``Priority 3--Non-Display
Orders'' and a Non-Routable Limit Order with a working price equal to
the display price would be ranked under the proposed category of
``Priority 2--Display Orders.'' This proposed rule uses Pillar
terminology and describes functionality similar to the way in which a
Non-Routable Limit Order is described for the Exchange's cash equity
market in Rules 7.31-E(e)(1) and 7.31-E(e)(1)(B), including references
to the Pillar concepts of ``working'' and ``display'' price as well to
Priority rankings as proposed in Rule 6.76P-O(e)(2), (3). This proposed
rule describes functionality similar to that described in the first
clause of current Rule 6.62-O(p) relating to a PNP Order, which states
that the portion of such order not executed on arrival is ranked in the
Consolidated Book without routing any portion of the order to another
Market Center.
    Proposed Rule 6.62P-O(e)(1)(A) would provide that a Non-Routable
Limit Order would not be displayed at a price that would lock or cross
an Away Market NBBO and that a Non-Routable Limit Order to buy (sell)
would trade with orders or quotes to sell (buy) in the Consolidated
Book priced at or below (above) the Away Market NBO (NBB). This
proposed text is designed to provide granularity that a Non-Routable

Limit Order would never be displayed at a price that would lock or
cross an Away Market NBBO, which is consistent with current PNP and
RPNP functionality described in Rules 6.62-O(p) and (p)(1). The
Exchange proposes to use the term ``Away Market NBBO'' to provide more
granularity in Exchange rules.
    Proposed Rule 6.62P-O(e)(1)(A)(i) would provide that a Non-Routable
Limit Order can be designated to be cancelled if it would be displayed
at a price other than its limit price. This would be an optional
designation and would provide OTP Holders and OTP Firms with
functionality similar to how a PNP Order currently functions, which
cancels if it locks or crosses the NBBO.\79\ The Exchange proposes a
substantive difference from the current PNP Order functionality such
that if an OTP Holder or OTP Firm opts to cancel instead of reprice a
Non-Routable Limit Order, such order would be cancelled only if it
could not be displayed at its limit price--which could be because the
order would be repriced to display at a price that would not lock or
cross an Away Market NBBO or because it would be repriced due to
Trading Collars.\80\ Stated otherwise, if a Non-Routable Limit Order
with a designation to cancel could be displayed at its original limit
price and not lock or cross an Away Market NBBO, such order would not
be cancelled. The Exchange believes that the proposed rule provides
more granularity of the circumstances when a Non-Routable Limit Order
could be cancelled, if so designated. This proposed functionality would
be new on Pillar and is not currently available for cash equity
trading.
---------------------------------------------------------------------------

    \79\ A PNP Order cannot route and any unexecuted portion is
ranked in the Consolidated Book except that such order is canceled
if it would lock or cross the NBBO. See Rule 6.62-O(p).
    \80\ Current Rule 6.62-O(p)(1)(B) provides than an incoming RPNP
order would cancel if its limit price is more than a configurable
number of MPVs outside its initial display price (on arrival). Under
Pillar, because Trading Collars would be applicable to Non-Routable
Limit Orders (and such orders may be repriced or ``collared'' on
arrival), the Exchange does not propose to cancel an incoming Non-
Routable Limit Order if its limit price is more than a configurable
number of MPVs outside its initial display price. As such, this
aspect of RPNP functionality is not incorporated in the proposed
Pillar rules and the Exchange instead proposes to incorporate
Trading Collar functionality into the Non-Routable Limit Order.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(1)(A)(ii) would provide that if not
designated to cancel, if the limit price of a Non-Routable Limit Order
to buy (sell) would lock or cross an Away Market NBO (NBB), it would be
repriced to have a working price equal to the Away Market NBO (NBB) and
a display price one MPV below (above) that NBO (NBB). Accordingly, the
proposed Non-Routable Limit Order, if not designated to cancel, would
reprice in the same manner as an RPNP order or MMRP quotation reprices
on arrival per Rules 6.62-O(p)(1)(A) and 6.37A-O(a)(4)(A), which both
offer similar functionality.
    The Exchange proposes new functionality on Pillar for the Non-
Routable Limit Order as compared to either the RPNP Order on OX or the
Non-Routable Limit Order on the Exchange's cash equity market.
Specifically, proposed Rule 6.62P-O(e)(1)(B) would provide that the
display price of a resting Non-Routable Limit Order to buy (sell) that
has been repriced would be repriced higher (lower) only one additional
time.\81\ If after that repricing, the display price could be repriced
higher (lower) again, the order can be designated to either remain at
its last working price and display price or be cancelled, provided that
a resting Non-Routable Limit Order that is designated as a quote cannot
be designated to be cancelled.\82\
---------------------------------------------------------------------------

    \81\ For example, on arrival, a Non-Routable Limit Order to buy
(sell) with a limit price higher (lower) than the NBO (NBB), would
have a display price one MPV below (above) the NBO (NBB) and a
working price equal to the NBO (NBB). If the Away Market NBO (NBB)
reprices higher (lower), the resting Non-Routable Limit Order to buy
(sell) would similarly be repriced higher (lower). If the NBO (NBB)
adjusts higher (lower) again, the resting Non-Routable Limit Order
would not be adjusted again.
    \82\ The working time of a Non-Routable Limit Order would be
adjusted as described in proposed Rule 6.76P-O(f)(2), which would be
applicable to any scenario when the working time of an order may
change, including a Non-Routable Limit Order. Similar to how the
Pillar rules function on the Exchange's cash equity market, the
Exchange does not propose to separately describe how the working
time of an order changes in proposed Rule 6.62P-O.
---------------------------------------------------------------------------

    The Exchange notes that this designation to cancel is separate from
the designation to cancel if it cannot be displayed at its limit price.
If a Non-Routable Limit Order is designated to cancel if it cannot be
displayed at its limit price, this second cancellation designation
would not be needed as the order would have already been cancelled.
Rather, this second cancellation designation is applicable only to a
resting Non-Routable Limit Order that has been designated to reprice on
arrival and was repriced before it was displayed on the Consolidated
Book, and provides OTP Holders and OTP Firms with an option to cancel a
resting order if market conditions were such that a resting order could
have been repriced again, e.g., the contra-side Away Market NBBO
changes. To assist Market Makers in maintaining quotes in their
assigned series, the Exchange proposes that this second cancellation
designation would not be available to Market Makers for Non-Routable
Orders designated as a Market Maker quote.\83\
---------------------------------------------------------------------------

    \83\ Proposed Rules 6.37AP-O(b) and (c) set forth the continuous
quoting obligations of Lead Market Makers and Market Makers,
respectively.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(1)(B)(i) would provide that if the limit
price of the resting Non-Routable Limit Order to buy (sell) that has
been repriced no longer locks or crosses the Away Market NBO (NBB), it
would be assigned a working price and display price equal to its limit
price. This proposed rule text is based on the way in which Non-
Routable Limit Orders function on the Exchange's cash equity market, as
described in Rule 7.31-E(e)(1)(A)(iv), with a difference that the
proposed rule does not include text describing that, in such
circumstances, the order ``will not be assigned a new working price or
display price based on changes to the PBO (PBB).'' The Exchange does
not propose to include this text because it is redundant of proposed
Rule 6.76P-O(b)(3), which describes that once an order is displayed, it
can stand its ground if it is locked or crossed by the Away Market
PBBO.\84\
---------------------------------------------------------------------------

    \84\ See discussion supra regarding proposed Rule 6.76P-O(b)(3),
which describes how the Exchange would not change the display price
of any Limit Orders or quotes ranked under the proposed category of
``Priority 2--Display Orders.''
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(1)(B)(ii) would provide that the working
price of a resting Non-Routable Limit Order to buy (sell) that has been
repriced would be adjusted to be equal to its display price if the Away
Market NBO (NBB) is equal to or lower (higher) than its display price.
This proposed rule is based in part on how an RPNP reprices when the
NBO (NBB) updates to lock or cross its display price (as described in
Rule 6.62-O(p)(1)(A)(i)) and uses Pillar terminology (i.e., Away Market
NBBO and concepts of working price and display price).\85\ The proposed
rule would further provide that once the working price and display
price of a Non-Routable Limit Order to buy (sell) are the same, the
working price would be adjusted higher (lower) only if the display
price of the order is adjusted.\86\
---------------------------------------------------------------------------

    \85\ Rule 6.62-O(p)(1)(A)(i) provides that ``if the NBO (NBB)
updates to lock or cross the RPNP's display price, such RPNP will
trade at its display price in time priority behind other eligible
interest already displayed at that price.'' On Pillar, if the NBO
(NBB) updates to lock or cross the display price of a Non-Routable
Order, and the working price is adjusted to be equal to the display
price, the order will not receive a new working time. See discussion
supra regarding proposed Rule 6.76P-O(f)(2)(B).
    \86\ For example, if the Away Market NBO is 1.05 and the
Exchange receives a Non-Routable Limit Order to buy priced at 1.10,
it would be assigned a display price of 1.00 and a working price of
1.05. If the Away Market NBO adjusts to 1.00, the working price of
the Non-Routable Limit Order to buy would be adjusted to 1.00 to be
equal to its display price. However, if the Away Market NBO moves
back to 1.05, the Non-Routable Limit Order's working price would not
adjust again to 1.05 and would stay at 1.00.

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

    Finally, proposed Rule 6.62P-O(e)(1)(C) would provide that the
designation to cancel a Non-Routable Limit Order would not be
applicable in an Auction and such order would participate in an Auction
at its limit price. This proposed rule text promotes clarity and
transparency that a Non-Routable Limit Order would be eligible to
participate in an Auction, but that it would be repriced to its limit
price for participation in such Auction, which is consistent with
current RPNP functionality, as described in the last sentence of Rule
6.62-O(p) and providing that an RPNP would be processed as a Limit
Order and would not be repriced for purposes of participating in an
opening or reopening auction.
    ALO Order. Proposed Rule 6.62P-O(e)(2) would define an ALO Order as
a Limit Order or quote that is a Non-Routable Limit Order that would
not remove liquidity from the Consolidated Book. This proposed order
type incorporates functionality currently available in the existing ALO
and RALO order types, as defined in Rule 6.62-O(t), and the existing
MMALO quotation type, as defined in Rule 6.37A-O(a)(3)(B), with
differences described below, including an option to cancel or reprice
an ALO Order if such non-routable interest would trade as a liquidity
taker. Unless otherwise specified in proposed Rule 6.62P-O(e)(2), an
ALO Order would function the same as a Non-Routable Limit Order,
including that it would participate in an Auction at its limit price.
As described below, per proposed Rule 6.37AP-O, a Market Maker can
designate an ALO Order as either a quote or an order. Accordingly,
references to the capitalized term ``ALO Order'' describe functionality
for both quotes and orders.
    Proposed Rule 6.62P-O(e)(2)(A) would provide that an ALO Order
would not be displayed at a price that would lock or cross an Away
Market NBBO, would lock or cross displayed interest in the Consolidated
Book, or would cross non-displayed interest in the Consolidated Book.
Because an ALO Order would never remove liquidity, this proposed rule
text ensures that such order would not be displayed at a price that
would lock or cross displayed interest either on the Exchange or an
Away Market, and would not be displayed at a price that crosses non-
displayed interest in the Consolidated Book. This proposed rule text is
consistent with current functionality, as described for MMALO in Rule
6.37-O(a)(3)(B) and for ALO in Rule 6.62-O(t), that such quotes or
orders would not trade as takers.
    Proposed Rule 6.62P-O(e)(2)(A)(i) would provide that an ALO Order
can be designated to be cancelled if it would be displayed at a price
other than its limit price. This proposed designation to cancel would
be optional and an ALO Order so designated would function similarly to
a Liquidity Adding Order, as defined in Rule 6.62-O(t), which is
rejected if it would be marketable against the NBBO.
    Proposed Rule 6.62P-O(e)(2)(A)(ii) would provide that an ALO Order
to buy (sell) would be displayed at its limit price if it locks non-
displayed orders or quotes to sell (buy) on the Consolidated Book. This
proposed functionality would be new for options trading on Pillar.\87\
Allowing a conditional order to lock interest in the Consolidated Book
is consistent with current functionality for other non-displayed
orders. For example, an AON is a non-displayed conditional order type
that could be priced to trade at a price that locks contra-side
interest, but the interest would not interact if the AON condition
could not be satisfied, in which case, two orders with locking prices,
one that is non-displayed, would both be accepted by the Exchange. The
proposed ALO Order is also a conditional order type because it can
never be a liquidity taker. The Exchange believes that allowing an ALO
Order to lock non-displayed interest would reduce potential repricing
or cancellation events for an incoming ALO Order and would likewise
reduce potential information leakage about non-displayed interest in
the Consolidated Book. This behavior is also consistent with how ALO
Orders function on the Exchange's cash equity platform.\88\ Because an
ALO Order would not be repriced in this scenario, this functionality
would be the same regardless of whether the ALO Order includes the
optional designation to cancel.
---------------------------------------------------------------------------

    \87\ Currently, an order designated as a RALO to buy (sell) that
would trade with any undisplayed sell (buy) interest will be
displayed at a price one MPV below (above) that undisplayed sell
interest. See Rule 6.62-O(t)(1)(A). See also Rule 6.37A-
O(a)(4)(A)(i) (describing similar functionality for a quote
designated as a MMALO).
    \88\ See, e.g., Rule 7.31-E(e)(2)(B)(iv).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(2)(A)(iii) would provide that an ALO Order
to buy (sell) would not consider an AON Order or an order with an MTS
Modifier to sell (buy) for purposes of determining whether it needs to
be repriced or cancelled. This proposed rule would be new functionality
and is designed to promote transparency that a resting contra-side
order with conditional instructions, i.e., an AON Order or an order
with an MTS Modifier, would not have any bearing on whether an
Aggressing ALO Order would need to be repriced. Accordingly, an ALO
Order would not trade as the liquidity taker with such orders (even if
it could satisfy their size condition) and could be displayed at a
price that would lock or cross the price of such orders. Once the ALO
Order is resting on the Consolidated Book, the Exchange would
reevaluate the orders on the Consolidated Book. For example, if the ALO
Order could satisfy the size condition of the resting AON Order, the
resting AON Order would become the Aggressing Order and would trade as
the liquidity taker with such resting ALO Order.
    Proposed Rule 6.62P-O(e)(2)(B) would describe how an ALO Order
would be processed if it is not designated to cancel, as follows:
     If the limit price of an ALO Order to buy (sell) would
lock or cross displayed orders or quotes to sell (buy) on the
Consolidated Book, it would be repriced to have a working price and
display price one MPV below (above) the lowest (highest) priced
displayed order or quote to sell (buy) on the Consolidated Book
(proposed Rule 6.62P-O(e)(2)(B)(i)). This proposed rule is consistent
with how both RALO and MMALO reprice under current rules.\89\
---------------------------------------------------------------------------

    \89\ Current Rule 6.62-O(t)(1) provides that a RALO will be
repriced instead of rejected if it would trade as a liquidity taker
or display at a price that locks or crosses any interest on the
Exchange or the NBBO. Current Rule 6.62-O(t)(1)(A) further provides
that if an RALO would trade with any displayed or undisplayed
contra-side interest on the Consolidated Book, it would be displayed
at a price one MPV inside such interest. See also Rule 6.37-
O(a)(4)(A)(i).
---------------------------------------------------------------------------

     If the limit price of an ALO Order to buy (sell) would
lock or cross an Away Market NBO (NBB), it would be repriced to have a
working price equal to the Away Market NBO (NBB) and a display price
one MPV below (above) the NBO (NBB) (proposed Rule 6.62P-
O(e)(2)(B)(ii)). This proposed functionality is consistent with how
both RALO and MMALO reprice under current rules.\90\
---------------------------------------------------------------------------

    \90\ See Rules 6.62-O(t)(1)(A) and 6.37A-O(a)(4)(A)(i).
---------------------------------------------------------------------------

     If the limit price of an ALO Order to buy (sell) would
cross non-displayed

orders or quotes \91\ on the Consolidated Book, it would be repriced to
have a working price and display price equal to the lowest (highest)
priced non-displayed order or quote to sell (buy) on the Consolidated
Book (proposed Rule 6.62P-O(e)(2)(B)(iii). This functionality would be
new on Pillar for options trading and would provide that an ALO Order
would never take liquidity thereby eliminating the potential for an ALO
to cross non-displayed interest in the Consolidated Book. This proposed
functionality is therefore different not only from how RALOs and MMALOs
currently function, but is also different from how ALO Orders currently
function on the Exchange's cash equity market.\92\ For the reasons
discussed above, the Exchange believes that displaying ALO Orders at a
price that locks the best-priced non-displayed interest would reduce
potential information leakage about the non-displayed orders on the
Consolidated Book.
---------------------------------------------------------------------------

    \91\ For example, a contra-side Market Maker quote designated as
a Non-Routable Limit Order could have a non-displayed working price.
    \92\ See Rule 7.31-E(e)(2)(B)(ii).
---------------------------------------------------------------------------

    Because an ALO would never be a liquidity-taking order, the above-
described repricing scenarios provide clarity and transparency
regarding how an ALO Order would be repriced (or cancelled, if this
optional designation is selected) to prevent either trading with
interest on the Consolidated Book or routing to an Away Market.
Accordingly, with the exception of how an ALO Order that locks or
crosses non-displayed interest would be processed, the proposed ALO
Order would be consistent with the current functionality available for
RALO, as described in Rule 6.62-O(t)(1)(A) and for MMALO, as described
in Rule 6.37-O(a)(4)(A).
    Proposed Rule 6.62P-O(e)(2)(C) would provide that the display price
of a resting ALO Order to buy (sell) that has been repriced would be
repriced higher (lower) only one additional time and that if, after
that repricing, the display price could be repriced higher (lower)
again, the order can be designated to either remain at its last working
price and display price or be cancelled, provided that a resting ALO
Order that is a quote cannot be designated to be cancelled. This
proposed functionality would be new to Pillar and is based on how the
proposed Non-Routable Limit Order would function, as described
above.\93\
---------------------------------------------------------------------------

    \93\ This proposed feature to limit the number of times an ALO
may be repriced differs from the treatment of RALOs, which may be
continuously repriced (both the displayed and undisplayed price) as
interest in the Consolidated Book or NBBO moves. See Rule 6.62-
O(t)(1)(A).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(2)(C)(i) would provide that if the limit
price of an ALO Order to buy (sell) that has been repriced no longer
locks or crosses displayed orders or quotes in the Consolidated Book,
locks or crosses the Away Market NBBO, or crosses non-displayed orders
or quotes in the Consolidated Book, it would be assigned a working
price and display price equal to its limit price. This proposed rule
text is similar to proposed Rule 6.62P-O(e)(1)(B)(i) for Non-Routable
Limit Orders, with differences to reflect the additional circumstances
when an ALO Order would be repriced based off of contra-side displayed
or non-displayed interest in the Consolidated Book because, unlike a
Non-Routable Limit Order, an ALO Order would not trade as a liquidity
taker. The proposed rule is designed to provide granularity and clarity
regarding when a resting ALO Order would be assigned a working price
and display price equal to its limit price.\94\
---------------------------------------------------------------------------

    \94\ The proposed rule is similar to RALO functionality
currently described in Rule 6.62-O(t)(1)(A)(ii) (if the NBO (NBB)
updates to lock or cross the RALO's display price, such RALO will
trade at its display price''). See also Rule 6.37A-O(a)(4)(A)(i)(b)
(describing similar functionality for MMALO).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(2)(D) would provide that the working price
of a resting ALO Order to buy (sell) that has been repriced would be
adjusted to be equal to its display price (and would not be adjusted
again unless the display price of the order is adjusted) if:
     The Away Market NBO (NBB) re-prices to be equal to or
lower (higher) than the display price of the resting ALO Order to buy
(sell) (proposed Rule 6.62P-O(e)(2)(D)(i)); or
     an ALO Order or Day ISO ALO to sell (buy) is displayed on
the Consolidated Book at a price equal to the working price of the
resting ALO Order to buy (sell) (proposed Rule 6.62P-O(e)(2)(D)(ii)).
    This proposed rule text is similar to proposed Rule 6.62P-
O(e)(1)(C) for Non-Routable Limit Orders, with differences to reflect
the additional circumstances when an ALO Order would be repriced as a
result of contra-side interest on the Consolidated Book so that the ALO
Order would not be a liquidity taker. Specifically, the Exchange
proposes that for an ALO Order that has been repriced and has a non-
displayed working price, if the Exchange receives a contra-side ALO
Order (or Day ISO ALO) with a limit price that is equal to or crosses
the working price of the resting ALO Order, the working price of the
resting ALO Order would be adjusted to be equal to its display price.
This proposed functionality would reduce the potential for two contra-
side ALO Orders to have working prices that are locked on the
Consolidated Book. The proposed rule text is designed to provide more
granularity than the current Rule regarding circumstances when an ALO
Order would be repriced.
    Proposed Rule 6.62P-O(e)(2)(E) would provide that when the working
price and display price of an ALO Order to buy (sell) are the same, the
working price would be adjusted higher (lower) only if the display
price of the order is adjusted. This proposed functionality would be
new for Pillar and is not currently available on the Exchange's cash
equity platform.
    Proposed Rule 6.62P-O(e)(2)(F) would provide that the ALO
designation would be ignored for ALO Orders that participate in an
Auction. This proposed rule is based on Rule 7.31-E(e)(2)(A), which
similarly provides that an ALO Order can participate in an auction and
that its ALO designation would be ignored. This is also new
functionality for options because currently, the Exchange rejects ALOs
if entered outside of Core Trading Hours or during a trading halt and
if resting, are cancelled during a trading halt. The Exchange proposes
this new functionality to provide such ALO Orders with an execution
opportunity in an Auction.
    Intermarket Sweep Order (``ISO''). ISOs are currently defined in
Rule 6.62-O as a Limit Order for an options series that instructs the
Exchange to execute the order up to the price of its limit, regardless
of the Away Market Protected Quotations \95\ and that ISOs may only be
entered with a time-in-force of IOC, and the entering OTP Holder must
comply with the provisions of Rule 6.92-O(a)(8). The Exchange proposes
to offer identical functionality on Pillar and to describe such
functionality in proposed Rule 6.62P-O(e)(3) using Pillar terminology,
including that an ISO is a Limit Order that does not route and meets
the requirements of Rule 6.92-O(a)(8).
---------------------------------------------------------------------------

    \95\ The terms ``Protected Bid,'' ``Protected Offer,'' and
``Quotation'' are defined in Rule 6.92-O(a)(15) and (16) and the
term ``Away Market'' is defined in Rule 1.1. Accordingly, Away
Market Protected Quotations refer to Protected Bids and Protected
Offers that are disseminated pursuant to the OPRA Plan and are the
Best Bid and Best Offer displayed by an Eligible Exchange, as those
terms are defined in Rule 6.92-O.
---------------------------------------------------------------------------

    Currently, an ISO must be entered with a time-in-force of IOC. On
Pillar, the Exchange proposes to add the ability for an OTP Holder or
OTP Firm to

designate an ISO either as IOC, which is current functionality, or with
a Day time-in-force designation, which would be new for options
trading. The Exchange also proposes to offer new functionality for
options trading to designate a Day ISO as ALO. Both the proposed Day
ISO and Day ISO ALO functionality are available on the Exchange's cash
equity market as described in Rule 7.31-E(e)(3). The Exchange proposes
to describe the functionality for each type of ISO separately, as
follows:
     IOC ISO. Proposed Rule 6.62P-O(e)(3)(A) would define an
IOC ISO as an ISO designated IOC to buy (sell) that would be
immediately traded with orders and quotes to sell (buy) in the
Consolidated Book up to its full size and limit price and may trade
through Away Market Protected Quotations and any untraded quantity of
an IOC ISO would be immediately and automatically cancelled. This
proposed rule uses the same Pillar terminology as used in Rule 7.31-
E(e)(3)(B) to describe functionality that would be offered on Pillar
without any differences from how ISOs currently function. The Exchange
proposes a non-substantive difference in the proposed Pillar options
rule to reference that an IOC ISO may trade through Away Market
Protected Quotations, which is consistent with both current options and
cash equity platform functionality.
     Day ISO. Proposed Rule 6.62-O(e)(3)(B) would define a Day
ISO as an ISO designated Day to buy (sell) that, if marketable on
arrival, would be immediately traded with orders and quotes to sell
(buy) in the Consolidated Book up to its full size and limit price and
may trade through Away Market Protected Quotations and that any
untraded quantity of a Day ISO would be displayed at its limit price
and may lock or cross Away Market Protected Quotations at the time the
Day ISO is received by the Exchange. As noted above, this proposed
functionality (allowing Day designation for ISOs) would be new on the
Exchange for options trading and would offer market participants
additional control over their trading interest. The proposed rule is
substantively identical to the Day ISO functionality available on the
Exchange's cash equity market, as described in Rule 7.31-E(e)(3)(C),
with a non-substantive difference to use the phrase ``may lock or cross
Away Market Protected Quotations at the time the Day ISO is received by
the Exchange'' instead of ``may lock or cross a protected quotation
that was displayed at the time of arrival of the Day ISO.'' These
proposed textual differences are designed to promote clarity and
transparency without any substantive differences. The availability of
the Day time-in-force designation for ISOs would not be new for options
trading, however, as such orders are currently available on other
options exchanges.\96\ The proposed Day ISO is also consistent with
current Rule 6.95-O(b)(3), which describes an exception to the
prohibition on locking or crossing a Protected Quotation if the Member
simultaneously routed an ISO to execute against the full displayed size
of any locked or crossed Protected Bid or Protected Offer.\97\ Although
the Exchange has not previously availed itself of this exception, this
exception to locking and crossing Protected Bids and Protected Offers
would only be needed if an ISO is designated as Day and therefore would
be displayed at a price that would lock or cross a Protected Quotation;
an IOC ISO would never be displayed and therefore this existing
exception would not be applicable to such orders.
---------------------------------------------------------------------------

    \96\ See Nasdaq Options 3, Section 7(a)(7) (``ISOs may have any
time-in-force designation . . . .'') and Cboe Rules 5.30(a)(2) and
(3). See also Cboe US Options Fix Specifications, dated June 15,
2021, Section 4.4.7, available here: http://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf, which references how a
Day ISO would be processed under specified circumstances.
    \97\ The Commission has previously stated that the requirements
in the Options Linkage Plan relating to Locked and Crossed Markets
are ``virtually identical to those applicable to market centers for
NMS stock under Regulation NMS.'' See also Securities Exchange Act
Release No. 60405 (July 30, 2009), 74 FR 39362, 39368 (August 6,
2009) (Order approving Options Linkage Plan). Accordingly, guidance
relating to the ISO exception for locked and crossed markets for NMS
stocks that specifically contemplate use of Day ISOs is also
applicable to options trading. See Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of Regulation NMS, FAQ
5.02 (``The ISO exception to the SRO lock/cross rules, in contrast,
requires that ISOs be routed to execute against all protected
quotations with a price that is equal to the display price (i.e.,
those protected quotations that would be locked by the displayed
quotation), as well as all protected quotations with prices that are
better than the display price (i.e., those protected quotations that
would be crossed by the displayed quotation).'' Consistent with this
guidance, the Exchange implemented Rule 6.95-O(b)(3). See also Cboe
Rule 5.67(b)(3), and Nasdaq Options 5, Section 3(b)(3).
---------------------------------------------------------------------------

     Day ISO ALO. Proposed Rule 6.62P-O(e)(3)(C) would define a
Day ISO ALO as a Day ISO with an ALO modifier. This proposed order type
would be new for options trading and is based on the Day ISO ALO
currently available on the Exchange's cash equity market, as described
in Rule 7.31-E(e)(3)(D), with differences to reflect how the order type
would function on the Exchange's options market. Specifically, similar
to the differences between the proposed ALO Order for options trading
on Pillar, as compared to the cash equity version of the ALO Order, for
options trading, a Day ISO with an ALO designation would not trade as
liquidity taker.
    As proposed, on arrival, a Day ISO ALO to buy (sell) may lock or
cross Away Market Protected Quotations, but would not remove liquidity
from the Consolidated Book, which is how the Exchange proposes that ALO
Orders would function on Pillar and consistent with current options
functionality for RALO as described herein.\98\ A Day ISO ALO to buy
(sell) can be designated to be cancelled if it would be displayed at a
price other than its limit price, which is similar to the proposed
cancellation instruction for ALO Orders for options trading on Pillar,
described above. Proposed Rule 6.62P-O(e)(3)(C)(i) would provide that
if not designated to cancel, a Day ISO ALO that would lock or cross
orders and quotes on the Consolidated Book would be repriced as
specified in proposed Rule 6.62P-O(e)(2)(B). This proposed rule
therefore incorporates the proposed repricing functionality for ALO
Orders for options trading on Pillar with the proposed Day ISO ALO.
Proposed Rule 6.62P-O(e)(3)(C)(ii) would provide that, once resting, a
DAY ISO ALO would be processed as an ALO Order as specified in proposed
Rule 6.62P-O(e)(2)(C)-(G).
---------------------------------------------------------------------------

    \98\ By contrast, the Rule 7.31-E(e)(3)(D) description of Day
ISO ALO for cash equity trading incorporates cash equity
functionality that an order with an ALO would trade if it crosses
the working price of any displayed or non-displayed orders.
---------------------------------------------------------------------------

    Complex Orders. Complex Orders are defined in Rule 6.62-O(e). The
Exchange proposes to define Complex Orders for Pillar in proposed Rule
6.62P-O(f) based on Rule 6.62-O(e) and its sub-paragraphs (1) and (2)
without any substantive differences. The Exchange proposes to add
clarifying text that the different options series in a Complex Order
are also referred to as the ``legs'' or ``components'' of the Complex
Order. The Exchange also proposes that proposed Rule 6.62P-O(f) would
provide that a Complex Order would be any order involving the
simultaneous purchase and/or sale of ``two or more options series in
the same underlying security,'' and not use the modifier ``different''
before the phrase ``more option series.'' The Exchange believes that
the word ``different'' is redundant and unnecessary in this context. In
addition, proposed Rule 6.62P-O(f)(1) and (2) would not reference mini-
options contracts, which no longer trade on the Exchange.
    Cross Orders. Currently, the only electronically-entered cross
orders available on the Exchange are Qualified Contingent Cross Orders,
which are

defined in Rule 6.62-O(bb) and Commentary .02 to Rule 6.62-O. In
addition, Rule 6.90-O describes how Qualified Contingent Cross Orders
are processed. The Exchange proposes to define the term ``Cross
Orders'' on Pillar in proposed Rule 6.62P-O(g). At this time, the only
Cross Orders that would be available on Pillar for electronic entry
would be Qualified Contingent Cross (``QCC'') Orders. As proposed, QCC
Orders on Pillar would function identically to how Qualified Contingent
Cross Orders function on the OX system, and for purposes of the rules
governing trading on Pillar, the Exchange proposes to merge language
from two rules relating to QCC Orders into a single rule, proposed Rule
6.62P-O(g), using Pillar terminology and functionality as described
below. Proposed Rule 6.62P-O(g), (g)(1), and (g)(2) would describe
rules generally applicable to electronically-entered Cross Orders and
Complex Cross Orders and followed by more specific rules applicable to
QCC, and Complex QCC, Orders in proposed Rule 6.62P-O(g)(3).
    Proposed Rule 6.62P-O(g) would provide that ``Cross Orders'' would
be two-sided order messages with instructions to match the identified
buy-side with the identified sell-side at a specified price, which
could either be designated as a limit price or at the market (``cross
price'').\99\ The proposed rule would further provide that a Cross
Order that is not rejected per proposed Rule 6.62P-O(g)(1) or (2) would
immediately trade in full at its cross price, would not route, and may
be entered with an MPV of $0.01 regardless of the MPV of the options
series and that Cross Orders may be entered by Floor Brokers from the
Trading Floor or routed to the Exchange from off-Floor. This proposed
rule is consistent with current Rule 6.90-O, which provides that
Qualified Contingent Cross Orders are automatically executed upon entry
provided that they meet specified criteria. On Pillar, the Exchange
proposes to specify those criteria in proposed Rule 6.62P-O(g)(1),
described below. Finally, the proposed Rule would provide that Rule
6.47A-O (related to exposure of orders on the Exchange) does not apply
to Cross Orders, which text is substantively identical to Commentary
.03 to current Rule 6.90-O.\100\
---------------------------------------------------------------------------

    \99\ The Exchange does not currently offer Cross Orders on its
cash equity market. This proposed rule text uses Pillar terminology
that is based in part on NYSE Chicago Rule 7.31(g), which likewise
describes ``cross orders'' as ``[t]wo-sided orders with instructions
to match the identified buy-side with the identified sell-side at a
specified price (the `cross price')'', and goes on to describe
functionality applicable to Cross Orders generally and then specify
specific types of Cross Orders available on that exchange.
    \100\ Commentary .03 to Rule 6.90-O provides that ``NYSE Arca
Rule 6.47A-O does not apply to Qualified Contingent Cross Orders.''
As noted above, at this time, the Exchange would only be offering
QCC Cross Orders and therefore the proposed rule is substantively
the same as this current Commentary.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(g)(1) would describe general rules relating
to execution of Single-Leg Cross Orders (which would all be QCC Orders,
described below) and would provide that a Cross Order with one option
leg would be rejected if received when the NBBO is crossed or if it
would be traded at a cross price that (i) is at the same price as a
displayed Customer order on the Consolidated Book and (ii) is not at or
between the NBBO. This proposed rule is based on Rule 6.90-O without
any substantive differences. The Exchange believes that specifying that
a Cross Order would be rejected when the NBBO is crossed, which is new
text, provides greater granularity than current Rule 6.90-O(1), which
provides that ``Qualified Contingent Cross Orders will be automatically
cancelled if they cannot be executed.'' The other two proposed
conditions are identical to the current functionality, as specified in
Rule 6.90-O: That Qualified Contingent Cross Orders are automatically
executed ``provided that the execution (i) is not at the same price as
a Customer Order in the Consolidated Book and (ii) is at or between the
NBBO.''
    Proposed Rule 6.62P-O(g)(1) would further set forth how a Cross
Order designated to trade at the market would be priced. As proposed, a
Cross Order with a cross price at the market would execute at the
midpoint of the NBBO; provided that:
     If there is no NBB, a $0.01 bid would be used (proposed
Rule 6.62P-O(g)(1)(A));
     if there is displayed Customer interest priced equal to
the NBB, NBO or both, the midpoint would be based on the BBO improved
by $0.01 for the side(s) containing displayed Customer interest
(proposed Rule 6.62P-O(g)(1)(B));
     if there is no NBO, such order would be rejected (proposed
Rule 6.62P-O(g)(1)(C)); or
     if the midpoint of the NBBO is in sub-pennies, the order
would trade at the midpoint of the NBBO rounded to the nearest MPV for
the series (proposed Rule 6.62P-O(g)(1)(D)).
    This proposed rule text is designed to promote clarity and
transparency in Exchange rules regarding how a Cross Order ``at the
market'' would be processed, including in circumstances when there is
no NBB or NBO or there is displayed Customer interest equal to the
NBBO.
    Proposed Rule 6.62P-O(g)(2) would describe how Complex Cross Orders
would be executed on the Exchange. At this time, the only Complex Cross
Orders available for options trading on Pillar would be QCC.
Accordingly, this proposed rule would describe how a Complex Cross
Order that is QCC would trade. As proposed, a Complex Cross Order must
include a limit price and would be rejected if:
     It is not priced within the Complex NBBO for the complex
strategy.\101\ If there is displayed Customer interest on a given leg,
the Complex NBB (NBO) for that leg would be calculated by increasing
(decreasing) the NBB (NBO) by one penny ($0.01) and then multiplying by
the leg ratio. If there is no NBB for a given leg, a $0.01 bid will be
used to calculate the Complex NBB for that leg (proposed Rule 6.62P-
O(g)(2)(A)). These proposed additional calculations for a Complex NBBO
would be applicable only when calculating the Complex NBBO for a
Complex Cross Order. The Exchange believes that the proposed additional
calculations would address circumstances in which there is no NBB for a
given leg or if there is displayed Customer interest on a given leg;
---------------------------------------------------------------------------

    \101\ As described in the Complex Pillar Notice, supra, note 13,
the Exchange has proposed to define the term ``Complex NBBO'' in
proposed Rule 6.91P-O(a)(4) as ``the derived national best bid and
derived national best offer for a complex strategy calculated using
the NBB and NBO for each component leg of a complex strategy.''
---------------------------------------------------------------------------

     either the Complex NBBO or the best-priced Complex Orders
in the Consolidated Book is crossed (proposed Rule 6.62P-O(g)(2)(B));
     there is displayed Customer interest priced equal to the
best-priced Complex Order(s) on either side of the market or both (the
``best-priced complex interest'') and the Complex Cross Order price
does not improve the best-priced complex interest by $0.01 for the
side(s) containing displayed Customer interest (proposed Rule 6.62P-
O(g)(2)(C)); or
     there is no NBO for a given leg (proposed Rule 6.62P-
O(g)(2)(D)).
    This proposed rule text is designed to promote clarity and
transparency in Exchange rules regarding the price requirements for a
Complex Cross Order, including when there is no NBB or NBO on a given
leg or there is displayed Customer interest equal to the best-priced
complex interest and is designed to ensure that a Complex Cross Order
would not trade ahead of displayed Customer interest.

    Proposed Rule 6.62P-O(g)(3) would define QCC Orders, which would be
the only electronic Cross Orders available on Pillar at this time. As
proposed, a QCC Order must be comprised of an originating order to buy
or sell at least 1,000 contracts that is identified as being part of a
qualified contingent trade coupled with a contra-side order or orders
totaling an equal number of contracts. This proposed rule text is based
on Rule 6.62-O(bb) with a non-substantive difference that the Pillar
rule would not reference mini-options contracts, which no longer trade
on the Exchange. Proposed Rule 6.62P-O(g)(3) would also specify that if
a QCC has more than one option leg (a ``Complex QCC Order''), each
option leg must have at least 1,000 contracts, which is consistent with
existing functionality. As described above, a Complex QCC Order must
meet the requirements of proposed Rule 6.62P-O(g)(2) before it can be
executed. In addition, Complex Cross Orders, including Complex QCCs,
are available for options trading on other options exchanges, and
therefore are not novel.\102\
---------------------------------------------------------------------------

    \102\ See, e.g., Cboe Rule 5.6(c) (setting forth operation of
Complex QCC Orders) and Nasdaq ISE, LLC (``ISE'') Section 12(d)
(same).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(g)(3)(A) and subparagraphs (i)-(vi) would
define a ``qualified contingent trade'' as a transaction consisting of
two or more component orders, executed as agent or principal, where
specified requirements are also met and uses the same text as currently
set forth in Commentary .02 and sub-paragraphs (a)-(f) to Rule 6.62-O
without any differences.
    Proposed Rule 6.62P-O(g)(3)(B) would specify rules governing QCC
Orders entered from the Trading Floor, which can be entered only by
Floor Brokers,\103\ and is based on Commentary .01 to Rule 6.90-O
without any substantive differences.\104\ The Exchange proposes textual
changes as compared to the current Rule that are not designed to change
the substance of the Rule, but to instead promote clarity and
transparency. The proposed rule would provide that while on the Trading
Floor, only Floor Brokers can enter QCC Orders and that Floor Brokers
may not enter QCC Orders for their own account, the account of an
associated person, or an account with respect to which it or an
associated person thereof exercises investment discretion (each a
``prohibited account''). As further proposed, when executing such
orders, Floor Brokers would not be subject to Rule 6.47-O regarding
``Crossing'' orders. Floor Brokers must maintain books and records
demonstrating that each QCC Order entered from the Floor was not
entered for a prohibited account. Any QCC Order entered from the Floor
that does not have a corresponding record required by this paragraph
would be deemed to have been entered for a prohibited account in
violation of this Rule.
---------------------------------------------------------------------------

    \103\ An options Floor Broker is ``an individual (either an OTP
Holder or OTP Firm or a nominee of an OTP Holder or OTP Firm) who is
registered with the Exchange for the purpose, while on the Exchange
Floor, of accepting and executing option orders.'' See Rule 6.43-
O(a).
    \104\ Commentary .01 to Rule 6.90-O provides: ``Qualified
Contingent Cross Orders can be entered into the NYSE Arca System
from on the Floor of the Exchange only by Floor Brokers. Floor
Brokers shall not enter such orders for their own account, the
account of an associated person, or an account with respect to which
it or an associated person thereof exercises investment discretion
(each a `prohibited account'). When executing such orders, Floor
Brokers shall not be subject to NYSE Arca Rule 6.47-O. Floor Brokers
must maintain books and records demonstrating that each Qualified
Contingent Cross Order entered from the Floor was not entered for a
prohibited account. Any Qualified Contingent Cross Order entered
from the Floor that does not have a corresponding record required by
this Commentary .01 shall be deemed to have been entered for a
prohibited account in violation of this Rule.''
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(g)(3)(C) would specify rules governing QCC
Orders entered off-Floor and that OTP Holders must maintain books and
records demonstrating that each such order was so routed. This proposed
rule is based on Commentary .02 to Rule 6.90-O without any substantive
differences.\105\ The Exchange proposes textual differences as compared
to the current Rule that are not designed to change the substance of
the Rule, but instead promote clarity and transparency.
---------------------------------------------------------------------------

    \105\ Commentary .02 to Rule 6.90-O provides: ``With respect to
a Qualified Contingent Cross Order that was routed to the NYSE Arca
System from off of the Floor, OTP 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 NYSE Arca
Rule 6.90-O (i.e., a Qualified Contingent Cross Order routed to a
Floor Broker for entry into the NYSE Arca 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 6.62P-O, the
Exchange proposes to add the following preamble to Rule 6.90-O: ``This
Rule is not applicable to trading on Pillar.'' This proposed preamble
is designed to promote clarity and transparency in Exchange rules that
Rule 6.90-O would not be applicable to trading on Pillar.
    Orders Available Only in Open Outcry. The Exchange proposes to add
to Rule 6.62P-O(h) orders that are available only in open outcry, most
of which are currently defined in Rule 6.62-O.
    First, proposed Rule 6.62P-O(h)(1) would codify an existing order
type, the Clear-the-Book (``CTB'') Order, which is currently described
only in a Regulatory Bulletin.\106\ The proposed definition would
describe the CTB Order, 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 Rule 6.62P-
O(h)(1)(A)-(C) would provide that:
---------------------------------------------------------------------------

    \106\ See NYSE Arca Options RB-16-04, dated February 19, 2016
(Rules of Priority and Order Protection in Open Outcry), available
here: https://www.nyse.com/publicdocs/nyse/markets/arca-options/rule-interpretations/2016/NYSE%20Arca%20Options%20RB%2016-04.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 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)
and any non-Customer interest to sell (buy) with a working time earlier
than the latest-arriving displayed Customer interest to sell (buy)
(proposed Rule 6.62P-O(h)(1)(B)); and
     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 6.62P-O(h)(1)(C)).
    Currently, CTB Orders only trade with displayed Customer interest
and any same-priced displayed non-Customer interest ranked ahead of
such interest in time priority, but do not trade with better-priced
displayed non-Customer interest. In Pillar, per Rule 6.62P-O(h)(1)(B),
CTB Orders would trade with displayed non-Customer interest priced
better than the latest-arriving displayed Customer interest (i.e., a
CTB order buying with a $1.00 limit would

now trade with any displayed interest offered at $0.99). Because Floor
Brokers have an obligation to satisfy better-priced interest on the
Consolidated Book, the Exchange believes this proposed change to
automate such priority would make it easier for Floor Brokers to comply
with Exchange priority rules. 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 6.62P-O(h)(1)(D) 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 eligible orders to better-priced interest on Away
Markets per Rule 6.94-O.\107\
---------------------------------------------------------------------------

    \107\ See id. at p. 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 6.62P-O additional
open outcry order types that are currently defined in Rule 6.62-O:
     Proposed Rule 6.62P-O(h)(2) would define ``Facilitation
Order'' and is based on the Rule 6.62-O(j) definition of Facilitation
Order without any differences.
     Proposed Rule 6.62P-O(h)(3) would define ``Mid-Point
Crossing Order'' and is based on the Rule 6.62-O(q) definition of Mid-
Point Crossing Order without any differences.
     Proposed Rule 6.62P-O(h)(4) would define ``Not Held
Order'' and is based on the Rule 6.62-O(f) definition of Not Held Order
without any differences.
     Proposed Rule 6.62P-O(h)(5) would define ``Single Stock
Future (``SSF'')/Option Order'' and is based on the Rule 6.62-O(i)
definition of Single Stock Future (``SSF'')/Option Order without any
differences.
     Proposed Rule 6.62P-O(h)(6)(A) would define a ``Stock/
Option Order'' and is based on the Rule 6.62-O(h)(1) definition of
Stock/Option Order without any differences.
     Proposed Rule 6.62P-O(h)(6)(B) and subparagraphs (i) and
(ii) would define a ``Stock/Complex Order'' and is based on the Rule
6.62-O(h)(2) definition of Stock/Complex Order with its sub-paragraphs
without any differences.
    The Exchange proposes that after the transition to Pillar, the
following open outcry order types, which are currently described in
Rule 6.62-O but are not used by Floor Brokers, would not be added to
proposed Rule 6.62P-O governing orders and modifiers: One cancels the
other (OCO) Order and Stock Contingency Order.
    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 6.62P-O(i).
    Proactive if Locked/Crossed Modifier. Proposed Rule 6.62P-O(i)(1)
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. This would be new functionality for options trading on the
Exchange and is based on the Proactive if Locked/Crossed Modifier
available on the Exchange's cash equity platform, as described in Rule
7.31-E(i)(1) without any differences. The Exchange believes that
offering this as an optional modifier for Limit Orders would provide
OTP Holders and OTP Firms 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 .01 to Rule
6.76A-O and are available only for Market Maker orders and quotes. On
Pillar, the Exchange proposes to expand the availability of STP to all
orders and quotes to offer this protection to trading interest of all
OTP Holders and OTP Firms, 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 6.62P-O(i)(2). This is based on the structure of the Exchange's
cash equity rules, which also describe the STP Modifier in Rule 7.31-
E(i), which is available to all market participants.
    Proposed Rule 6.62P-O(i)(2) would provide that an Aggressing Order
or Aggressing Quote to buy (sell) designated with one of the STP
modifiers in proposed Rule 6.62P-O(i)(2) would be prevented from
trading with a resting order or quote to sell (buy) also designated
with an STP modifier from the same MPID, and, if specified, any sub-
identifier of that MPID and 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
.01 to Rule 6.76A with non-substantive differences to use Pillar
terminology.
    Proposed Rule 6.62P-O(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
6.62P-O(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 new on
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 be added to the Consolidated
Book (i.e., an AON Order or an order with an MTS modifier), and then
such resting orders would function as described in Rule 6.62P-O.
    The proposed rule would further provide that Aggressing Orders or
Aggressing Quotes would be processed as follows:
     Proposed Rule 6.62P-O(i)(2)(A) 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 MPID; 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 .01(a) to
Rule 6.76A-O with non-substantive differences to use Pillar
terminology.
     Proposed Rule 6.62P-O(i)(2)(B) 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 MPID; 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 .01(b) to Rule 6.76A-O with non-substantive differences
to use Pillar terminology.
     Proposed Rule 6.62P-O(i)(2)(C) 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 MPID and that the entire size of both orders and/or quotes would
be cancelled. This proposed rule is based on Commentary .01(c) to Rule
6.76A-O with non-substantive differences to use Pillar terminology.
    Minimum Trade Size Modifier. The Exchange proposes to add the
Minimum Trade Size (``MTS'') Modifier, which would be new functionality
for options trading on Pillar that is based on the same functionality
currently available for cash equity securities trading on Pillar, as
described in Rule 7.31-E(i)(3). The Exchange proposes to provide this
modifier for options trading to provide OTP Firms and OTP 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 OTP Holder or
OTP Firm 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. The Exchange notes that the use of an MTS
Modifier is not new or novel to options trading.\108\ As with the MTS
Modifier for cash equity trading, the proposed MTS Modifier for options
traded on Pillar would be available only for non-displayed orders.
Accordingly, proposed Rule 6.62P-O(i)(3) would provide that a Limit IOC
Order or Non-Displayed Limit Order may be designated with an MTS
Modifier.\109\
---------------------------------------------------------------------------

    \108\ 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'').
    \109\ For cash equity trading, the MTS Modifier is also
available for an MPL Order or Tracking Order, which are non-
displayed order types available on the Exchange's cash equity
trading platform that would not be available for options trading on
Pillar. See Rule 7.31-E(i)(3).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(i)(3)(A) 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. This proposed rule is based on Rule 7.31-
E(i)(3)(A) with differences only to reflect that the concept of a round
lot is not applicable for options trading.
    Proposed Rule 6.62P-O(i)(3)(B) 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. This proposed rule is based on Rule 7.31-E(i)(3)(B) and
sub-paragraphs (i) and (ii) with only non-substantive differences to
use options trading terminology (e.g., Consolidated Book instead of
NYSE Arca Book and reference to quotes). Otherwise, the functionality
would be identical on both the options and cash equity trading
platforms.
    Proposed Rule 6.62P-O(i)(3)(C) would provide that an order with an
MTS Modifier that is designated Day or GTC that cannot be executed
immediately on arrival would not trade and would be ranked in the
Consolidated Book. In such case, the order to buy (sell) with an MTS
Modifier to buy (sell) that is ranked in the Consolidated Book would
not be eligible to trade: (i) At a price equal to or above (below) any
orders or quotes to sell (buy) that are displayed at a price equal to
or below (above) the working price of such order with an MTS Modifier;
or (ii) at a price above (below) any orders or quotes to sell (buy)
that are not displayed and that have a working price below (above) the
working price of such order with an MTS Modifier. This proposed rule is
based on Rule 7.31-E(i)(3)(C) and sub-paragraphs (i) and (ii) with only
non-substantive differences to use options trading terminology and to
reflect the availability of the GTC time-in-force modifier for Non-
Displayed Limit Orders. Otherwise, the functionality would be identical
on both the options and cash equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(D) would provide that an order with an
MTS Modifier that is designated IOC and cannot be immediately executed
would be cancelled. This proposed rule is based on Rule 7.31-E(i)(3)(D)
without any differences and the functionality would be identical on
both the options and cash equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(E) would provide that a resting order
to buy (sell) with an MTS Modifier would trade with individual orders
and quotes to sell (buy) that each meet the MTS and that (i) if an
Aggressing Order or Aggressing Quote to sell (buy) does not meet the
MTS of the resting order to buy (sell) with an MTS Modifier, that
Aggressing Order or Aggressing Quote would not trade with, and may
trade, through such resting order with an MTS Modifier; and (ii) if a
resting non-displayed order or quote to sell (buy) did not meet the MTS
of a same-priced resting order or quote to buy (sell) with an MTS
Modifier, a subsequently arriving order or quote to sell (buy) that
meets the MTS would trade before such resting non-displayed order or
quote to sell (buy) at that price. This proposed rule is based on Rule
7.31-E(i)(3)(E) and sub-paragraphs (i) and (ii) with only non-
substantive differences to use options trading terminology (i.e.,
refers to an order trading with contra-side quotes). Otherwise, the
proposed functionality would be identical on both the options and cash
equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(F) would provide that a resting order
with an MTS Modifier would be cancelled if it is traded in part or
reduced in size and the remaining quantity is less than such order's
MTS. This proposed rule is based on Rule 7.31-E(i)(3)(F) without any
differences and the functionality would be identical on both the
options and cash equity trading platforms.
    In connection with proposed Rule 6.62P-O, the Exchange proposes to
add the following preamble to Rule 6.62-O: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.62-O
would not be applicable to trading on Pillar.
Proposed Rule 6.37AP-O: Market Maker Quotations
    Current Rule 6.37A-O describes Market Maker quoting obligations,
including defining ``quotations,'' describing the treatment of such
quotations, and specifying Market Maker and LMM quoting obligations.
Proposed Rule 6.37AP-O would set forth Market Maker quoting obligations
under Pillar.
    As with current functionality, on Pillar, the Exchange would
provide Market Makers with the ability to designate bids and offers as
quotations, which is unique to options trading and not applicable to
cash equity trading.

Currently, the Exchange offers designated ``quotation'' types to Market
Makers, which are described in Rule 6.37A-O(a)(3).\110\ With Pillar,
the Exchange is proposing to modify how a Market Maker would be able to
send bids and offers as quotations and would no longer need to offer
distinct ``quotation'' types to identify Market Marker quotations.
Instead, and as discussed in more detail below, with Pillar, the
Exchange proposes that Market Makers would be able to designate
specified ``order'' types as quotations. If designated as a quotation,
such bids and offers would be displayed, traded, repriced, or cancelled
as described in proposed Rule 6.62P-O(e), discussed above. In addition,
if designated as a quotation, such bids or offers would be identifiable
to the Exchange as ``quotations,'' subject to the Market Maker and LMM
requirements relating to 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'' rather than as a ``quote.'' \111\
---------------------------------------------------------------------------

    \110\ As described in Rule 6.37A-O(a)(3)(A)-(C), a Market Maker
may designate a quote as Market Maker-Light Only Quotation
(``MMLO''), Market Maker--Add Liquidity Only Quotation (``MMALO''),
and Market Maker--Repricing Quotation (``MMRP'').
    \111\ 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 6.37B-O, 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 proposed Rule is not
materially different for Market Makers because they currently can
choose to send as Market Maker orders the order types described in
current Rule 6.62-O, including, for example, RPNP, RALO, PNP-Blind
Order, and PNP Light Order.
---------------------------------------------------------------------------

     Rule 6.37AP-O(a) would be based on current Rule 6.37A-O(a)
and would provide that a Market Maker may send quotations only in the
issues included in its appointment. This functionality would not be new
and the Exchange proposes one difference from the current Rule to use
the term ``send'' rather than ``enter.''
     Proposed Rule 6.37AP-O(a)(1) 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 ``[o]nce received by the
Exchange, a subsequent quotation sent by a Market Maker replaces that
Market Maker's previously displayed same-side quotation.'' This
proposed Rule is similar to current Rule 6.37A-O(a)(1), which 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