[Federal Register Volume 88, Number 119 (Thursday, June 22, 2023)]
[Notices]
[Pages 40893-40912]
[FR Doc No: 2023-13221]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97739; File No. SR-NYSEAMER-2023-17]

Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt New
Exchange Rule 980NYP and Amend Exchange Rule 935NY

June 15, 2023.

I. Introduction

    On February 28, 2023, NYSE American LLC (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt Exchange
Rule 980NYP (Electronic Complex Order Trading) to reflect the
implementation of the Exchange's Pillar trading technology on its
options market and to make conforming amendments to Exchange Rule 935NY
(Order Exposure Requirements). The proposed rule change was published
for comment in the Federal Register on March 17, 2023.\3\ The
Commission received no comments regarding the proposal. On April 27,
2023, pursuant to section 19(b)(2) of the Exchange Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ On June 14, 2023, the Exchange filed Amendment No. 1 to the
proposed rule change (``Amendment No. 1''), which supersedes and
replaces the original

filing in its entirety.\6\ The Commission is publishing notice of
filing of Amendment No. 1 to solicit comment from interested persons,
and is approving the proposed rule change, as modified by Amendment No.
1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 97125 (March 13,
2023), 88 FR 16467.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 97394, 88 FR 27937
(April 5, 2023). The Commission designated June 15, 2023, as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
    \6\ Amendment No. 1 revises the proposal to eliminate the
proposed defined term ``Complex BBO,'' which is not used
subsequently in the rule text; corrects a cross-reference in the
proposed definition of Electronic Complex Order (``ECO''); clarifies
the proposed definition of Derived Best Bid or Best Offer
(``DBBO''); revise proposed Exchange Rule 980NYP(c)(4) to provide
that ECOs may be quoted and traded in $0.01 increments; revises
proposed Exchange Rule 980NYP(d)(3)(B)(iii) to clarify the
allocation of ECOs eligible to participate in an ECO opening or
reopening auction; revises proposed Exchange Rule 980NYP(f) to
eliminate a reference to the Complex CUBE Auction, clarify the
manner in which RFR Responses trade, and clarify how a Complex Order
Auction (``COA'') Order executes at the conclusion of a COA; revises
proposed Exchange Rule 980NYP; and revises proposed Exchange Rule
980NYP(g)(2)(iv) to indicate that Cross Orders, rather than QCC
Orders, will not be subject to the ECO Price Protection; to the
permissible Minimum Price Variation (``MPV'') for Electronic Complex
Orders (``ECOs''); to the priority of interest in the ECO Opening
Process and the allocation of orders submitted to the Complex Order
Auction (``COA Orders''), and removes reference to Complex Cube
Orders and the definition of Complex BBO, which term is not used in
proposed Rule 980NYP. In addition, Amendment No. 1 revises the
proposal to more clearly identify aspects of the proposal that are
identical to NYSE Arca Rule 6.91P-O or existing Exchange processes
and to provide additional information regarding the calculation of
the DBBO. Amendment No. 1 will be available on the Commission's
website.
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below in the form prepared by the Exchange, of the
most significant aspects of such statements.

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

    The Exchange proposes to adopt new Rule 980NYP to reflect how
Electronic Complex Orders will trade on Pillar. As described in detail
below, proposed Rule 980NYP includes functionality already in place on
the Exchange (i.e., per current Rule 980NY) or adopts new functionality
that has been approved and is in place on the Exchange's affiliated
options exchange NYSE Arca, Inc. (``NYSE Arca'' or ``Arca
Options'').\7\ Thus, proposed Rule 980NYP does not raise any new or
novel issues. The Exchange also proposes to modify Rule 980NY and Rule
935NY to reflect the adoption of proposed Rule 980NYP.
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    \7\ See Arca Options Rule 6.91P-O (Electronic Complex Order
Trading). See also Securities Exchange Act Release No. 92563 (August
4, 2021), 86 FR 43704 (August 10, 2021) (SR-NYSEArca-2021-68) (the
``Arca Options ECO Approval Order''). As described herein, proposed
Rule 980NYP is identical to Arca Options Rule 6.91P-O except as it
relates to order allocation pursuant to the Exchange's Customer
priority and pro rata allocation which differs from Arca Options
price time model. Compare proposed Rule 980NYP(f)(4)(A)(i) (as
discussed infra) with Rule 980NY(e)(7)(A) (regarding allocation of
COA Orders and COA-eligible orders, respectively).
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Background
    The Exchange plans to transition its options trading platform to
its Pillar technology platform. The Exchange's affiliated options
exchange, Arca Options is currently operating on Pillar, as are the
Exchange's national securities exchange affiliates' cash equity
markets.\8\ For this transition, the Exchange proposes to use the same
Pillar technology already in operation on Arca Options.\9\ In doing so,
the Exchange will be able to offer not only common specifications for
connecting to both of its equity and options markets, but also common
trading functions across the Exchange and its affiliated options
exchange, Arca Options. The Exchange plans to roll out the new
technology platform over a period of time based on a range of symbols
beginning on October 23, 2023.\10\
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    \8\ Together with NYSE American LLC, the Exchange's national
securities exchange affiliates' cash equity markets include: the New
York Stock Exchange LLC, NYSE Arca, Inc., NYSE National, Inc., and
NYSE Chicago, Inc.
    \9\ See Arca Options Rule 6.91P-O. See also Securities Exchange
Act Release No. 94072 (January 26, 2022), 87 FR 5592 (February 1,
2022) (SR-NYSEArca-2021-47) (approving, among other changes, new
Arca Options Rules 6.37AP-O (Market Maker Quotations), 6.40P-O (Pre-
Trade and Activity-Based Risk Controls), 6.41P-O (Price
Reasonability Checks--Orders and Quotes), 6.62P-O (Orders and
Modifiers), and 6.64P-O (Auction Process).
    \10\ See Trader Update, January 30, 2023 (announcing Pillar
Migration Launch date of October 23, 2023, for the Exchange),
available here, https://www.nyse.com/trader-update/history#110000530919. The Exchange would not begin to migrate
underlying symbols to the Pillar platform until all Pillar-related
rule filings (i.e., with a ``P'' modifier) are either approved or
operative, as applicable.
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    In this regard, the Exchange recently adopted new rules to reflect
the priority and allocation of options on the Exchange once Pillar is
implemented, including Rule 964NYP (``Pillar Rule 964NYP'').\11\ The
Exchange has filed to adopt new rules for the operation of order types,
Market Maker quotations, opening auctions, and risk controls on the
Pillar platform.\12\ The current proposal sets forth how Electronic
Complex Orders \13\ would trade on the Exchange once Pillar is
implemented. As noted in the American Pillar Priority Filing, as the
Exchange transitions to Pillar, certain rules would continue to be
applicable to symbols trading on the current trading platform but would
not be applicable to symbols that have transitioned to trading on
Pillar.\14\ Consistent with the American Pillar Priority Filing,
proposed Rule 980NYP would have the same number as the current
Electronic Complex Order Trading rule, but with the modifier ``P''
appended to the rule number.
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    \11\ See Rules 964NYP (Order Ranking, Display, and Allocation),
964.1NYP (Directed Orders and DOMM Quoting Obligations), and
964.2NYP (Participation Entitlement of Specialists, e-Specialists,
and Primary Specialist) (collectively, the ``American Pillar
Priority Rules''). See also Securities Exchange Act Release No.
97297 (April 13, 2023), 88 FR 24225 (April 19, 2023) (SR-NYSEAmer-
2023-16) (adopting the American Pillar Priority Rules on an
immediately effective basis, which rules utilize Pillar concepts and
incorporate the Exchange's current Customer priority and pro rata
allocation model) (referred to herein as the ``American Pillar
Priority Filing''). The American Pillar Priority Rules (like
proposed Rule 980NYP) will not be implemented until all other
Pillar-related rule filings are either effective or approved, as
applicable. See id. For avoidance of doubt, references to ``Pillar
Rule 964NYP'' refer to the Exchange's proposed new priority and
allocation rule for trading on Pillar, as described in the American
Pillar Priority Filing.
    \12\ See SR-NYSEAmer-2023-34 (proposing, on an immediately
effective basis, new Rules 900.3NYP (Orders and Modifiers), 925.1NYP
(Market Maker Quotations), 928NYP (Pre-Trade and Activity-Based Risk
Controls), 928.1NYP (Price Reasonability Checks--Orders and Quotes),
and 952NYP (Auction Process) (referred to herein as the ``American
Pillar Omnibus Filing'').
    \13\ The term ``Electronic Complex Order'' is currently defined
in the preamble to Rule 980NY to mean any Complex Order, as defined
in Rule 900.3NY(e) that is entered into the System.
    \14\ See the American Pillar Priority Filing (adopting, among
other rules, new Pillar Rule 964NYP, which would apply to trading on
Pillar instead of current Rule 964NY and providing that, once a
symbol is trading on the Pillar trading platform, a rule with the
same number as a rule with a ``P'' modifier would no longer be
operative for that symbol and the Exchange would announce by Trader
Update when symbols are trading on the Pillar trading platform); see
also supra note 5, Arca Options ECO Approval Order (same).
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    Current Rule 980NY, governing Electronic Complex Order Trading,
would remain unchanged and continue to apply to any trading in symbols
on the Exchange's current system. Proposed Rule 980NYP would govern
Electronic Complex Orders for trading in options symbols migrated to
the Pillar platform. Thus, when an option symbol begins trading on
Pillar, that symbol will be subject to Rule 980NYP and Rule 980NY will
no longer apply to that symbol. For example, when an

options symbol is migrated to Pillar, a Complex Order Auction (or COA)
will be allocated pursuant to proposed Rule 980NYP(f)(4)(A)(i) (as
discussed infra) and the corresponding provision regarding COA
allocation--existing Rule 980NY(e)(7)(A)--will not apply.
    Proposed Rule 980NYP would (1) use Pillar terminology; and (2)
introduce new functionality for Electronic Complex Order trading (e.g.,
adopting a DBBO and Away Market Deviation price check as well as
enhancing the opening process for ECOs as described below), each of
which proposed changes would align the Exchange with both the
terminology used, and the functionality described, in Arca Options Rule
6.91P-O.
    Finally, as discussed in the American Pillar Priority Filing, the
Exchange will announce by Trader Update when symbols are trading on the
Pillar trading platform. The Exchange intends to transition Electronic
Complex Order trading on Pillar at the same time that single-leg
trading is transitioned to Pillar. The Exchange will not implement the
proposed Rule 980NYP until all other Pillar-related rule filings (i.e.,
with a ``P'' modifier) are either approved or operative, as applicable,
and the Exchange announces the rollout of underlying symbols to Pillar
by Trader Update.
Proposed Rule 980NYP: Electronic Complex Order Trading
    Current Rule 980NY (Electronic Complex Order Trading) specifies how
the Exchange processes Electronic Complex Orders submitted to the
Exchange. The Exchange proposes new Rule 980NYP, which is identical to
Arca Options Rule 6.91P-O except as noted herein to establish how such
orders would be processed after the transition to Pillar.\15\
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    \15\ The proposed Rule will differ from Arca Options Rule 6.91P-
O insofar as Exchange members are referred to as ATP Holders,
whereas members of Arca Options are referred to as OTP Holders or
OTP Firms. In addition, because the rule numbering differs on each
options exchange, there will be differences between the proposed
Rule and Arca Options Rule 6.91P-O to the extent that the proposed
Rule includes a cross-reference to another Exchange rule. The
Exchange has not identified every such instance where these
specified differences occur as it believes the differences are
immaterial because they do not relate to the functionality proposed
herein.
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    To promote clarity and transparency, the Exchange proposes to add a
preamble to current Rule 980NY specifying that it would not be
applicable to trading on Pillar.\16\
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    \16\ See proposed Rule 980NY (preamble regarding the current
rule being inapplicable to trading on Pillar).
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    As discussed in greater detail below and unless otherwise specified
herein, the Exchange is not proposing fundamentally different
functionality regarding how Electronic Complex Orders would trade on
Pillar than is currently available on the Exchange. However, like Arca
Options Rule 6.91P-O, the Exchange would use Pillar terminology to
describe functionality that is not changing and would introduce certain
new or updated functionality for Electronic Complex Orders (e.g.,
enhancing the opening auction process, including introducing the ``ECO
Auction Collars'') that will also be available for outright options
trading on the Pillar platform.
    Definitions. Proposed Rule 980NYP(a) is identical to Arca Options
Rule 6.91P-O(a) except as specified below and would set forth the
definitions applicable to trading on Pillar under the new rule.
     Proposed Rule 980NYP(a)(1) is identical to Arca Options
Rule 6.91P-O(a)(1) and would define the term ``Away Market Deviation''
as the difference between the Exchange BB (BO) for a series and the ABB
(ABO) for that same series when the Exchange BB (BO) is lower (higher)
than the ABB (ABO).\17\ The maximum allowable Away Market Deviation is
the greater of $0.05 or 5% below (above) the ABB (ABO) (rounded down to
the nearest whole penny). As further proposed, no ECO on the Exchange
would execute at a price that would exceed the maximum allowable Away
Market Deviation on any component of the complex strategy. The maximum
allowable Away Market Deviation is designed to protect market
participants from having their complex strategies execute at prices
that are significantly outside of (and inferior to) the market for the
individual legs. The proposed functionality provides the Exchange with
flexibility in determining the acceptable execution range by allowing
that it be calculated using either a percentage amount or a dollar
amount. In addition to being identical to Arca Options Rule 6.91P-
O(a)(1), this proposed risk protection feature is also available on
other options exchanges and therefore is not new or novel.\18\
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    \17\ The ``Away Market BBO (`ABBO')'' refers to the best bid(s)
or offer(s) disseminated by Away Markets and calculated by the
Exchange based on market information the Exchange receives from OPRA
and the terms ``ABB'' and ``ABO'' refer to the best Away Market bid
and best Away Market offer, respectively. See Rule 900.2NY.
    \18\ See, e.g., BOX Options Exchange LLC (``BOX'') Rule
7240(b)(3)(iii)(A) (providing that each leg of a complex strategy
trade equal to or better than the ``Extended cNBBO,'' which has a
default setting (per Rule 7240(a)(5)) of 5% of the cNBB or cNBO (per
Rule 7240(a)(2) and (4), respectively) as applicable, or $0.05);
Nasdaq ISE, LLC (``Nasdaq ISE''), Options 3, Section 16 (a)
(providing that, in regard to ``Price limits for Complex Orders,
``[n]otwithstanding, the System will not permit any leg of a complex
strategy to trade through the NBBO for the series or any stock
component by a configurable amount calculated as the lesser of (i)
an absolute amount not to exceed $0.10, and (ii) a percentage of the
NBBO not to exceed 500%, as determined by the [ISE] Exchange on a
class, series or underlying basis'').
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    As discussed further below, like Arca Options Rule 6.91P-O(a)(5),
the Exchange proposes that its calculation of the DBBO (for each leg of
a complex strategy) as well as trading of ECOs with the leg markets
would be bound by the maximum allowable Away Market Deviation as an
additional protection against ECOs being executed on the Exchange at
prices too far away from the current market.
     Proposed Rule 980NYP(a)(2) is identical to Arca Options
Rule 6.91P-O(a)(2) and would define the term ``Complex NBBO'' to mean
the derived national best net bid and derived national best net offer
for a complex strategy calculated using the NBB and NBO for each
component leg of a complex strategy. In addition to being identical to
Arca Options Rule 6.91P-O(a)(2), this proposed definition is based on
current Rule 900.2NY, without any substantive differences.\19\
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    \19\ See Rule 900.2NY (defining Complex NBBO as referring to
``the NBBO for a given complex order strategy as derived from the
national best bid and national best offer for each individual
component series of a Complex Order'').
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     Proposed Rule 980NYP(a)(3) is identical to Arca Options
Rule 6.91P-O(a)(3) and would define ``Complex Order Auction'' or
``COA'' to mean an auction of an ECO as set forth in proposed Rule
980NYP(f) (discussed below). This definition is mirrors paragraph (e)
of current Rule 980NY, which sets forth the COA Process for ECOs
without any substantive differences. Proposed Rule 980NYP(a)(3) would
also state that the terms defined in paragraphs (a)(3)(A)-(D) would be
applicable to COAs on Pillar.
    Proposed Rule 980NYP(a)(3)(A) is identical to Arca Options Rule
6.91P-O(a)(3)(A) and would define a ``COA Order'' to mean an ECO that
is designated by the ATP Holder as eligible to initiate a COA. This
definition is based on the definition of a ``COA-eligible order'' as
set forth in current Rule 980NY(e)(1) and (e)(1)(i), with a difference
that the proposed definition would not require that an option class be
designated as COA-eligible because, on Pillar, all option classes would
be COA-eligible.
    Proposed Rule 980NYP(a)(3)(B) is identical to Arca Options Rule
6.91P-

O(a)(3)(B) and would define the term ``Request for Response'' or
``RFR'' to refer to the message disseminated to the Exchange's
proprietary complex data feed announcing that the Exchange has received
a COA Order and that a COA has begun. As further proposed, the
definition would provide that each RFR message would identify the
component series, the price, the size and side of the market of the COA
Order. This definition is based on the description of RFR in current
Rule 980NY(e)(3) without any substantive differences. The Exchange
proposes a clarifying difference to make clear that RFR messages would
be sent over the Exchange's proprietary complex data feed, which is
based on current functionality.
    Proposed Rule 980NYP(a)(3)(C) is identical to Arca Options Rule
6.91P-O(a)(3)(C) and would define the term ``RFR Response'' to mean any
ECO received during the Response Time Interval (defined below) that is
in the same complex strategy, on the opposite side of the market of the
COA Order that initiated the COA, and marketable against the COA
Order.\20\ This definition is based in part on the existing description
of RFR Responses in Rule 980NY(e)(5). However, unlike the current
definition, an RFR Response would not have a time-in-force contingency
for the duration of the COA. Instead, the Exchange would consider any
ECOs received during the Response Time Interval (defined below) that
are marketable against the COA Order as an RFR Response. As described
below, the Exchange proposes to define separately the term ``COA GTX
Order,'' which would be more akin to the current definition of RFR
Response. In addition, the proposed definition omits the current rule
description that an RFR Response may be entered in $0.01 increments or
that such responses may be modified or cancelled because these features
are applicable to all ECOs and therefore is not necessary to separately
state in connection with RFR Responses.
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    \20\ The term ``marketable'' is defined in Rule 900.2NY as ``for
a Limit Order, the price matches or crosses the NBBO on the other
side of the market. Market Orders are always considered
marketable.''
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    Proposed Rule 980NYP(a)(3)(D) is identical to Arca Options Rule
6.91P-O(a)(3)(D) and would define the term ``Response Time Interval''
to mean the period of time during which RFR Responses for a COA may be
entered and would provide that the Exchange would determine and
announce by Trader Update the length of the Response Time Interval;
provided, however, that the duration of the Response Time Interval
would not be less than 100 milliseconds and would not exceed one (1)
second. This definition is based in part on the description of Response
Time Interval in current Rule 980NY(e)(4), with a difference that the
Exchange proposes to reduce the minimum time from 500 milliseconds to
100 milliseconds. In addition to being identical to Arca Options Rule
6.91P-O(a)(3)(D), the proposed minimum duration for a COA is the same
as the minimum duration for the Exchange's electronic-paired auctions
(i.e., the CUBE Auction) as well as for auctions on other markets.\21\
Given the fact that the Exchange has (for years) offered the CUBE
Auction with a Response Time Interval of at least 100 milliseconds and
the same time interval is applicable to COAs on Arca Options (per Rule
6.91P-O(a)(3)(D)), the Exchange believes that the proposed Response
Time Interval of at least this length would provide ATP Holders
adequate time to respond to a COA.\22\
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    \21\ See, e.g., Rules 971.1NY(c)(2)(B) (providing that for a
Customer Best Execution ``(CUBE'') Auction ``[t]he minimum/maximum
parameters for the Response Time Interval will be no less than 100
milliseconds and no more than one (1) second'') and 971.2NY(c)(1)(B)
(same); Cboe Exchange Inc. (``Cboe'') Rule 5.33(d)(3) (providing
that Cboe ``determines the duration of the Response Time Interval on
a class-by-class basis, which may not exceed 3000 milliseconds'').
The Exchange will file to adopt new rules for Single-Leg and Complex
CUBE Auctions on Pillar (e.g., Rules 971.1NYP and 971.2NYP) but
represents that the minimum duration for all CUBE Auctions will
remain unchanged (i.e., at least 100 milliseconds).
    \22\ See, e.g., Securities Exchange Act Release Nos. 82498
(January 12, 2018), 83 FR 2823 (January 19, 2018) (SR-NYSEAmer-2017-
26) (Notice of filing and immediate effectiveness of proposed rule
change to reduce the response time interval for a CUBE Auction to no
less than 100 milliseconds); 83384 (June 5, 2018), 83 FR 27061 (June
11, 2018) (SR-NYSEAmer-2018-05) (Order approving Complex CUBE
functionality, including Rule 971.2NY(c)(1)(B), providing that
``[t]he minimum/maximum parameters for the Response Time Interval
will be no less than 100 milliseconds and no more than one (1)
second'').
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     Proposed Rule 980NYP(a)(4) is identical to Arca Options
Rule 6.91P-O(a)(4) and would define the term ``Complex strategy'' to
mean a particular combination of leg components and their ratios to one
another. The proposed definition would further provide that new complex
strategies can be created when the Exchange receives either a request
to create a new complex strategy or an ECO with a new complex strategy.
Furthermore, this proposed definition is consistent with how this
concept is defined on other options exchanges and would promote clarity
and transparency.\23\
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    \23\ See, e.g., Cboe Rule 5.33(a) (defining ``complex strategy''
as ``a particular combination of components and their ratios to one
another'' and further providing that ``[n]ew complex strategies can
be created as the result of the receipt of a complex instrument
creation request or complex order for a complex strategy that is not
currently in the System''); MIAX Options Exchange (``MIAX'') Rule
518(a)(6) (same).
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     Proposed Rule 980NYP(a)(5) is identical to Arca Options
Rule 6.91P-O(a)(5) and would define the term ``DBBO'' to address
situations where it is necessary to derive a (theoretical) bid or offer
for a particular complex strategy. This proposed definition of the DBBO
is based, in part, on the current definition of Derived BBO as set
forth in Rule 900.2NY.\24\ As proposed, ``DBBO'' would mean the derived
best net bid (``DBB'') and derived best net offer (``DBO'') for a
complex strategy. The bid (offer) price used to calculate the DBBO on
each leg would be the Exchange BB (BO) \25\ (if available), bound by
the maximum allowable Away Market Deviation (as defined above). If a
leg of a complex strategy does not have an Exchange BB (BO), the bid
(offer) price used to calculate the DBBO would be the ABB (ABO) for
that leg. Thus, the ``bid (offer)'' prices used to calculate the DBBO
would be based on the Exchange BB (BO) for each leg when available,
and, absent an Exchange BB (BO) for a given leg, the ABB (ABO). The
proposed definition would also provide that the DBBO would be updated
as the Exchange BBO or ABBO, as applicable, is updated.
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    \24\ See Rule 900.2NY (defining Derived BBO as being
``calculated using the BBO from the Consolidated Book for each of
the options series comprising a given complex order strategy'').
    \25\ The term BBO when used with respect to options traded on
the Exchange means ``the best displayed bid or best displayed offer
on the Exchange.'' See Rule 900.2NY.
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    Proposed Rule 980NYP(a)(5)(A) would provide further detail about
how the DBBO would be derived when, for a leg, there is no Exchange BB
(BO) and no ABB (ABO). As proposed, in such circumstances, the bid
(offer) price used to calculate the DBBO would be the offer (bid) price
for that leg (i.e., Exchange BO (BB), bound by the maximum allowable
Away Market Deviation (or the ABO (ABB) for that leg if no Exchange BO
(BB) is available)), minus (plus) the collar amounts specified in
proposed Rule 900.3NYP(a)(4)(C) (the ``collar value''); \26\ or $0.01,
if the result of subtracting one collar value from the

offer would be equal to or less than zero.\27\ This proposed rule is
substantively identical to Arca Options Rule 6.91P-O(a)(5)(A), which
includes the numerical ''collar'' values used to generate a DBBO in the
absence of local or Away Market interest.\28\ However, since the
adoption of the Arca Options Rule, both Arca Options \29\ and the
Exchange \30\ have modified the collar values enumerated in the Arca
Options Rule.\31\ In its filing to modify the Trading Collar values,
Arca Options stated that such change was made in part to better align
collar values with the parameters for determining whether a trade is an
Obvious Error or Catastrophic Error.\32\ In light of the change to the
trading collar values since the adoption of the Arca Options Rule,
taken together with the Exchange's proposed ability to (continue) to
modify Trading Collar values by Trader Update, proposed Rule
980NYP(a)(5)(A) would include a cross-reference to proposed Rule
900.3NYP(a)(4)(C). The Exchange believes this proposed change would add
clarity, transparency, and internal consistency to Exchange rules.
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    \26\ Proposed Rule 900.3NYP(a)(4)(C) describes how Trading
Collars would be calculated on Pillar. See the American Pillar
Omnibus Filing. The Exchange represents that the Trading Collar
functionality would operate the same way it currently operates per
Arca Options Rule 6.62P-O(a)(4)(C) (providing that ``[u]nless
announced otherwise via Trader Update, the Trading Collar for an
order to buy (sell) will be a specified amount above (below) the
Reference Price, as follows''). See id.
    \27\ For avoidance of doubt, the ``offer (bid) price for a
leg,'' as referred to in proposed Rule 980NYP(a)(5)(A), is the value
that should be used for the ``Reference Price'' (per Rule
900.3NYP(a)(4)(C))--whether such price is the Exchange BO (BB),
bound by the maximum allowable Away Market Deviation (or the ABO
(ABB) for that leg if no Exchange BO (BB) is available). See
proposed Rule 980NYP(a)(5).
    \28\ See Arca Options Rule 6.91P-O(a)(5)(A) (providing, in
relevant part, that ``one collar value'' is ``(i) $0.25 where the
offer (bid) is priced $1.00 or lower, or the lesser of $2.50 or 25%
of the offer (bid) where the offer (bid) is priced above $1.00
(rounded down to the nearest whole penny)).''
    \29\ See Securities Exchange Act Release No. 95687 (September 7,
2022), 87 FR 56097 (September 13, 2022) (SR-NYSEArca-2022-57)
(amending on an immediately effective basis Arca Options Rule 6.62P-
O(a)(4)(C) to modify the values used to determine Trading Collars
and to afford Arca Options discretion to subsequently modify such
values by Trader Update) (the ``Arca Options Filing to Modify
Trading Collars'').
    \30\ See Rule 967NY(b)(2) (setting forth the applicable trading
collar values, which values may be modified by Trader Update).
    \31\ See Trader Update, September 9, 2022, NYSE Arca Options:
Changes to Trading Collars Effective September 21st, available here,
https://www.nyse.com/trader-update/history#110000475461.
    \32\ See Arca Options Filing to Modify Trading Collars, 87 FR at
56097-98, supra. See also Rules 975NY(c)(1) (thresholds for Obvious
Errors) and 975NY (d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------

    In addition to being substantively the same as Arca Options Rule
6.91P-O(a)(5)(A) (except as immediately noted above), the proposed DBBO
definition is also consistent with how this concept is defined on other
options exchanges.\33\ The Exchange believes that providing an
alternative means of calculating the DBBO (i.e., by looking to the
contra-side best bid (offer) in the absence of same-side interest)
would benefit market participants as it should increase opportunities
for trading. For example, absent this proposed functionality, the
Exchange would not be able to trade complex strategies when, for at
least one leg of such strategy, the Exchange has no displayed interest
on one or both sides of such component leg. Allowing the Exchange to
look to the ABBO to calculate the DBBO in such circumstances would
increase trading opportunities for ECOs to the benefit of all market
participants. As noted above and herein, the Exchange believes that
binding the DBBO (when calculated using the Exchange BBO) to the
maximum allowable Away Market Deviation would help prevent ECOs from
executing on the Exchange at prices too far away from the current
market.
---------------------------------------------------------------------------

    \33\ See, e.g., Cboe Rule 5.33(a) (defining ``Synthetic Bed Bid
or Offer and SBBO'' for complex orders as ``the best bid and offer
on the Exchange for a complex strategy calculated using'' the ``BBO
for each component (or the NBBO for a component if the BBO for that
component is not available) of a complex strategy from the [Cboe]
Simple Book'').
---------------------------------------------------------------------------

    Proposed Rule 980NYP(a)(5)(B) is identical to Arca Options Rule
6.91P-O(a)(5)(B) and would provide that, if for a leg of a complex
strategy, there is neither an Exchange BBO nor an ABBO, the Exchange
would not allow the complex strategy to trade until, for that leg,
there is either an Exchange BB or BO, or an ABB or ABO, on at least one
side of the market. The Exchange believes that preventing a complex
strategy from trading when, for a leg, there is no reliable pricing
indication--either on the Exchange or in Away Markets, would benefit
market participants by preventing potentially erroneous executions.
Moreover, including this additional detail in the proposed rule about
when a complex strategy would not trade would benefit market
participants as it would promote clarity and transparency in Exchange
rules regarding ECO trading.
    Proposed Rule 980NYP(a)(5)(C) is identical to Arca Options Rule
6.91P-O(a)(5)(C) and would provide that if the best bid and offer
prices (when not based solely on the Exchange BBO) for a component leg
of a complex strategy are locked or crossed, the Exchange would not
allow an ECO for that strategy to execute against another ECO until the
condition resolves. The Exchange notes that, as described above, the
DBBO may be calculated using leg prices derived either exclusively
from, or a combination of, the Exchange BBO, the ABBO, or the Exchange
BBO as adjusted to be priced within the maximum allowable Away Market
Deviation. As such, if the best bid and offer prices (when not based
solely on an Exchange BBO) for a component leg of a complex strategy
are locked or crossed, a DBBO calculated when using those prices could
be erroneous.\34\ Accordingly, the Exchange believes that it is
appropriate to not permit an ECO to execute against another ECO under
these circumstances until the locked or crossed market resolves. The
Exchange believes preventing ECO-to-ECO trading in this circumstance
would benefit market participants by preventing potentially erroneous
ECO executions. Moreover, including this additional detail in the
proposed rule about when an ECO would be prevented from trading with
another ECO would benefit market participants as it would promote
clarity and transparency in Exchange rules regarding ECO trading.
---------------------------------------------------------------------------

    \34\ The reliability of the Exchange's calculated DBBO is
essential to ECO trading on the Exchange as this concept permeates
all aspects of complex trading, including to determine price
parameters at the opening of each series and in determining when,
and at what price, a COA Order may initiate a COA as well as market
events impacting the DBBO that would result in an early end to a
COA. See, e.g., proposed Rule 980NYP(d)(3) (relying on the DBBO to
determine ECO Auction Collars for the ECO Opening Auction Process)
and 980NYP(f)(2)(A) and (f)(3) (relying on the DBBO to both initiate
and price a COA Order as well as to terminate a COA early under
certain market conditions).
---------------------------------------------------------------------------

    Further, per proposed Rule 980NYP(a)(5)(C), like on Arca Options,
if an Away Market quote updates to lock or cross the current Exchange
BB (BO) or ABB (ABO) for a component leg of a complex strategy, the
Exchange would allow an ECO for that strategy to execute against leg
market interest on the Exchange. Allowing an eligible ECO to execute
against leg market interest in these circumstances is consistent with
the way single-leg orders trade. In this regard, the Exchange notes
that, to the extent that leg prices are locked or crossed as a result
of updates to the ABBO, such updates do not prevent resting leg market
interest from trading at its resting price with all eligible contra-
side interest, which includes incoming ECOs in the same complex
strategy.\35\ Moreover, to the extent that an ECO trades with leg
market interest in a complex strategy when interest in the leg markets
is crossed, such executions are not deemed as trade-

throughs.\36\ As such, the Exchange believes that allowing an ECO to
trade with leg market interest in this circumstance would maximize the
execution opportunities of such ECO while respecting the priority of
the leg markets.
---------------------------------------------------------------------------

    \35\ See Pillar Rule 964NYP(b)(2) (providing that ``[i]f an Away
Market locks or crosses the Exchange BBO, the Exchange will not
change the display price of any Limit Orders or quotes ranked
Priority 2--Display Orders and any such orders will be eligible to
be displayed as the Exchange's BBO''). See also Arca Options Rule
6.76P-O(b)(3) (same).
    \36\ See Rule 991NY(b)(3) (exempting from trade-through
liability transactions that occur ``when there was a Crossed
Market''). See also the Options Order Protection And Locked/Crossed
Market Plan, dated April 14, 2009, available here, https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf.
---------------------------------------------------------------------------

     Proposed Rule 980NYP(a)(6) is identical to Arca Options
Rule 6.91P-O(a)(6) and would define the term ``ECO Order Instruction''
to mean a request to cancel, cancel and replace, or modify an ECO.'' As
described further below, this concept relates to order processing when
a series opens or reopens for trading.
     Proposed Rule 980NYP(a)(7) is identical to Arca Options
Rule 6.91P-O(a)(7) and would define the term ``Electronic Complex
Order'' or ``ECO'' to mean a Complex Order as defined in Rule
900.3NYP(f) that would be submitted electronically to the Exchange.\37\
This proposed definition is based on the preamble to Rule 980NY, and
the Exchange proposes to replace reference to the ``System'' with the
term ``Exchange'' and to update the cross-reference to the proposed
definition of a Complex Order set forth in the American Pillar Omnibus
Filing.
---------------------------------------------------------------------------

    \37\ Proposed Rule 900.3NYP defines Complex Orders on Pillar,
which proposed definition is substantively the same as this order
type is defined in current Rule 900.3NY(e). See the American Pillar
Omnibus Filing. See also Arca Options Rule 6.62P-O(f) (describing
Complex Orders in substantively the same manner as current Rule
900.3NY and proposed Rule 900.3NYP).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(a)(8) is identical to Arca Options
Rule 6.91P-O(a)(8) and would define the term ``leg'' or ``leg market''
to mean each of the component option series that comprise an ECO. This
definition is consistent with the concept of leg markets as used in
current Rule 980NY(a), which defines legs as individual orders and
quotes in the Consolidated Book. The Exchange believes the proposed
definition would add clarity regarding how the terms ``leg'' and ``leg
market'' would be used in connection with ECO trading on Pillar.
     Proposed Rule 980NYP(a)(9) is identical to Arca Options
Rule 6.91P-O(a)(9) and would define ``Ratio'' or ``leg ratio'' to mean
the quantity of each leg of an ECO broken down to the least common
denominator such that the ``smallest leg ratio'' is the portion of the
ratio represented by the leg with the fewest contracts. The Exchange
believes the proposed definition would add clarity regarding how the
terms ``ratio'' and ``leg ratio'' would be used in connection with ECOs
trading on Pillar. In addition to being identical to Arca Options, this
proposed definition is also consistent with how this concept is
described on other options exchanges.\38\
---------------------------------------------------------------------------

    \38\ See, e.g., Cboe, US Options Complex Book Process, Complex
Order Basics, Section 2.1, Ratios, available here: https://cdn.batstrading.com/resources/membership/US-Options-Complex-Book-Process.pdf (providing that ``[t]he quantity of each leg of a
complex order broken down to the lowest terms will determine the
ratio of the complex order'').
---------------------------------------------------------------------------

    Types of ECOs. Proposed Rule 980NYP(b) would set forth the types of
ECOs that would trade on Pillar. Proposed Rule 980NYP(b)(1) is
identical to Arca Options Rule 6.91P-O(b)(1) and would provide that
ECOs may be entered as Limit Orders, Limit Orders designated as Complex
Only Orders, or as Complex QCCs.\39\ This proposed text is based on
current Rule 980NY(d)(1), with a difference to provide that the
Exchange would offer Complex Only Orders and Complex QCCs on Pillar.
Allowing ECOs to be designated as Complex QCCs \40\ is consistent with
current functionality not described in the rule, is identical to Arca
Options Rule 6.91P-O(b)(1), and the Exchange believes that this
additional specificity to the proposed rule would add clarity and
transparency.
---------------------------------------------------------------------------

    \39\ See the American Pillar Omnibus Filing (describing proposed
definitions of Limit Orders and Complex QCC Orders, set forth in
proposed Rules 900.3NYP(a)(2) and (g)(1)(A), (C) and (D),
respectively). The Exchange represents that these proposed order
types will function in a manner substantively the same as is
described per Arca Options Rule 6.62P-O(a)(2) and (g)(1)(A), (C) and
(D), (describing Limit Orders and Complex QCC Orders, respectively).
See id.
    \40\ See American Omnibus Filing (describing Complex QCC Orders
on Pillar, per proposed Rule 900.3NYP(g)(1)(A), (B), and (D),
respectively).
---------------------------------------------------------------------------

    Complex Only Orders (as described below) would be updated
functionality available on Pillar.\41\
---------------------------------------------------------------------------

    \41\ See, infra, for discussion of proposed Rule 980NYP(e)(1)(C)
(discussing Complex Only Order functionality).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(b)(2) is identical to Arca Options
Rule 6.91P-O(b)(2) and would set forth the time-in-force contingencies
available to ECOs, which would be Day, IOC, FOK, or GTC, as those terms
will be defined in the subsequent Pillar Order Type Filing in proposed
Rule 900.3NYP(b), and GTX (per proposed Rule 980NYP(b)(2)(C) as
described below).\42\ The proposed text is based on current Rules
980NY(d)(2) and (3), except that it adds GTX (as described below). The
proposed text also omits AON because the Exchange would not offer AONs
for ECO trading on Pillar.
---------------------------------------------------------------------------

    \42\ The proposed definitions of Day, IOC, FOK, and GTX as set
forth in proposed Rule 900.3NYP(b) will function in a manner
substantively the same as is described in current Rule 900.3NY. See
the American Pillar Omnibus Filing. See also Arca Options Rule
6.62P-O(b) (describing the Day, IOC, FOK, and GTX order modifiers in
an identical manner to proposed Rule 900.3NYP).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(b)(2)(A) is identical to Arca Options
Rule 6.91P-O(b)(2)(A) and would provide that an ECO designated as IOC
or FOK would be rejected if entered during a pre-open state,\43\ which
is consistent with the time-in-force of the order (because they could
not be traded when a complex strategy is not open for trading) as well
as with current functionality.
---------------------------------------------------------------------------

    \43\ The definition of the proposed term ``pre-open state'' is
set forth in proposed Rule 952NYP(a)(12) to mean ``the period before
a series is opened or reopened,'' which definition is identical to
how this concept is described in Arca Options Rule 6.64P-O(a)(12).
See the American Pillar Omnibus Filing.
---------------------------------------------------------------------------

     Proposed Rule 980NYP(b)(2)(B) is identical to Arca Options
Rule 6.91P-O(b)(2)(B) and would provide that an ECO designated as FOK
must also be designated as a Complex Only Order (per proposed Rule
980NYP(b)(1) and described further below). This proposed rule, which is
new under Pillar, would simplify the operation of electronic complex
order trading and would add clarity and transparency that ECOs
designated as FOK (i.e., that have conditional size-related
instructions) would not be eligible to trade with the leg markets.
     Proposed Rule 980NYP(b)(2)(C) would provide that an ECO
designated as GTX would be defined as a ``COA GTX Order,'' which
functions in a manner identical to an ``ECO GTX Order'' per Arca
Options Rule 6.91P-O(b)(2)(C), and would have the following features:
it would not be displayed; it may be entered only during the Response
Time Interval of a COA; it must be on the opposite side of the market
as the COA Order; and it must specify the price, size, and side of the
market.\44\ As further proposed, COA GTX Orders may be modified or
cancelled during the Response Time Interval and any remaining size that
does not trade with the COA Order would be cancelled at the end of the
COA. This term ``COA GTX Order'' is new but the definition is based on
the description of an RFR Response in current Rule 980NY(e)(5)(A)-(C),
which responses are likewise not displayed and expire at the end of the
COA.
---------------------------------------------------------------------------

    \44\ The Exchange believes that ``COA'' is a more descriptive
modifier (than ``ECO'') for the GTX Order and because this
difference from Arca Options does not impact functionality, the
Exchange believes this proposed distinction is immaterial.
---------------------------------------------------------------------------

    Priority and Pricing of ECOs. Proposed Rule 980NYP(c) would set

forth how ECOs would be prioritized and priced under Pillar. Unlike
Arca Options Rule 6.91P-O(c), which incorporates that exchange's price-
time priority model, proposed Rule 980NYP(c) would incorporate the
Exchange's Customer priority and pro rata allocation model as described
in Pillar Rule 964NYP. Aside from the divergent priority models, how
ECOs trade on each exchange is identical, as described below.\45\ The
Exchange's proposed priority scheme for ECOs under Pillar is consistent
with current functionality, with the differences and clarifications
noted below.
---------------------------------------------------------------------------

    \45\ Compare proposed Rules 980NYP(c)(1)-(4) with Arca Options
Rules 6.91P-O(c)(1)-(4).
---------------------------------------------------------------------------

    As proposed, an ECO received by the Exchange that is not
immediately executed (or cancelled), including an ECO that cannot trade
due to conditions described in paragraphs (a)(5)(B)-(C) (above) \46\
and (c)(1)-(2) of this proposed Rule (below) or does not initiate a COA
per paragraph (f)(1) (below), would be ranked in the Consolidated Book
based on total net price, per Pillar Rule 964NYP, with Customer orders
at a price ranked ahead of same-priced non-Customer orders. This
proposed rule adds cross-references, including to new Pillar Rule
964NYP, but is otherwise based on Rule 980NY(b) without any substantive
differences.\47\ The Exchange proposes a non-substantive difference to
refer simply to a ``net price'' rather than a ``net debit or credit
price,'' which streamlined terminology is consistent with the use of
the term ``net price'' on Arca Options and other options exchanges.\48\
The proposed rule also incorporates the first sentence of Rule
980NY(c)(iii)(A), regarding the ranking and priority of ECOs not
immediately executed, but adds the possibility that such ECOs may be
cancelled if not immediately executed, which adds clarity and
transparency to the proposed Rule.\49\
---------------------------------------------------------------------------

    \46\ Proposed Rules 980NYP(a)(5)(B)-(C) describe conditions
related to the leg markets when complex strategies will not trade.
See also Arca Options Rules 6.64P-O(a)(5)(B)-(C) (same).
    \47\ See Rule 980NY(b) (pricing that ECOs in the Consolidated
Book will ``be ranked according to price/time priority based on the
total or net debit or credit and the time of entry of the order,
provided that [ECOs] on behalf of Customers shall be ranked ahead of
same price [ECOs] for non-Customers.'').
    \48\ See, e.g., Arca Options Rule 6.91P-O(c); Cboe Rule
5.33(f)(2) (setting forth parameters for the ``net price'' of
complex orders traded on Cboe); Nasdaq ISE, Options 3, Section 14
(c) (providing, in relevant part, that ``[c]omplex strategies will
not be executed at prices inferior to the best net price achievable
from the best ISE bids and offers for the individual legs'').
    \49\ For example, an ECO designated as IOC that does not
immediately execute would cancel rather than be ranked on the
Consolidated Book, whereas an ECO designated as Day or GTC that does
not immediately execute would be ranked on the Consolidated Book.
---------------------------------------------------------------------------

    Proposed Rule 980NYP(c) is identical to Arca Options Rule 6.91P-
O(c) and would further provide that, unless otherwise specified in this
Rule, ECOs would be processed as follows:
     Proposed Rule 980NYP(c)(1) is identical to Arca Options
Rule 6.91P-O(c)(1) and would provide that when trading with the leg
markets, an ECO would trade at the price(s) of the leg markets provided
the leg markets are priced no more than the maximum allowable Away
Market Deviation (as defined herein). The proposed rule requiring that
when trading with the leg markets, the components of the ECO would
trade at the prices of the leg markets is consistent with current
functionality, per Rule 980NY(c)(ii); requiring that such prices be
bound by the Away Market Deviation for an ECO to trade with the leg
markets is new Pillar functionality that is identical to Arca Options
as described below.\50\
---------------------------------------------------------------------------

    \50\ See Rule 980NY(c)(ii) (providing that ``[i]f, at a price,
the leg markets can execute against an incoming [ECO] in full (or in
a permissible ratio), the leg markets (Customer and non-Customer
interest) will have first priority at that price and will trade with
the incoming [ECO] pursuant to Rule 964NY(b) before [ECO] resting in
the Consolidated Book can trade at that price'').
---------------------------------------------------------------------------

    For example, if there is sell interest in a leg market at $1.00,
and a leg of an ECO to buy could trade up to $1.05, the ECO would trade
with such leg market at $1.00. This would result in the ECO receiving
price improvement and is consistent with the ECO trading as the
Aggressing Order.\51\ The proposed functionality that an ECO would
trade with leg markets only if the prices of the leg markets are within
(and do not exceed the maximum allowable) Away Market Deviation would
be new under Pillar (and, as noted above, identical to Arca Options
Rule 6.91P-O(c)(1)) and is designed to operate as an additional
protection against ECOs being executed on the Exchange at prices too
far away from the current market.
---------------------------------------------------------------------------

    \51\ The term ``Aggressing Order'' means ``a buy (sell) order or
quote that is or becomes marketable against sell (buy) interest on
the Consolidated Book.'' See Pillar Rule 964NYP(a)(5). See also Arca
Options Rule 6.76P-O(a)(5) (same).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(c)(2) is identical to Arca Options
Rule 6.91P-O(c)(2) and would provide that when trading with another
ECO, each component leg of the ECO must trade at a price at or within
the Exchange BBO for that series, and no leg of the ECO may trade at a
price of zero.\52\ This provision is based in part on current Rule
980NY(c), which provides that no leg of an ECO will be executed outside
of the Exchange BBO.\53\ This proposed rule, which ensures that ECOs
would never trade through interest in the leg markets, is consistent
with current functionality and adds clarity and transparency to the
proposed Rule. In addition to being identical to Arca Options Rule
6.91P-O(c)(2), the proposed functionality is also consistent with how
ECOs are processed on other options exchanges.\54\
---------------------------------------------------------------------------

    \52\ See, infra, for discussion of proposed Rule 980NYP(e)(1)
(discussing ``Execution of ECOs During Core Trading Hours,''
including the treatment of ECOs that have executed, at a price, to
the extent possible with the leg markets and of ECOs designated as
Complex Only).
    \53\ As noted herein, no ECO on the Exchange would execute at a
price that would exceed the maximum allowable Away Market Deviation
on any component of the complex strategy. See proposed Rule
980NYP(a)(1) (defining Away Market Deviation). See also Arca Options
Rule 6.91P-O(a)(1) (same).
    \54\ See, e.g., BOX Rule 7240(b)(3)(ii). See also Securities
Exchange Act Release Nos. 69027 (March 4, 2013), 78 FR 15093, 15094
(March 8, 2013) (SR-BOX-2013-01) (providing that ``where two Complex
Orders trade against each other, the resulting execution prices will
be at a price equal to or better than NBBO and BOX best bid or offer
(``BBO'') for each of the component Legs,'' per BOX Rule
7240(b)(3)(ii)). See, e.g., Cboe Rule 5.33(f)(2) (providing that
complex orders may not execute at a net price that would cause any
component of the complex strategy to be executed at a price of
zero).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(c)(3) is identical to Arca Options
Rule 6.91P-O(c)(3) and would provide that an ECO may trade without
consideration of prices of the same complex strategy available on other
exchanges, which is based on the same text as contained in current Rule
980NY(c) without any substantive differences.
     Proposed Rule 980NYP(c)(4) is identical to Arca Options
Rule 6.91P-O(c)(4) and would provide that bids and offers for complex
strategies may be expressed in one cent ($0.01) increments, and the
leg(s) of complex strategies may trade in one cent ($0.01) increments
regardless of the MPV otherwise applicable to the individual leg(s) of
the ECO. This proposed provision is also based on current Rule 980NY,
Commentary .01 without any substantive differences.
    Execution of ECOs at the Open (or Reopening after a Trading Halt).
Current Rule 980NY(c)(i) sets forth how ECOs are executed upon opening
or reopening of trading. Proposed Rule 980NYP(d) is identical to Arca
Options Rule 6.91P-O(d) and would set forth details about how ECOs
would be executed at the open or reopen following a trading halt. With
the transition to Pillar, like on Arca Options, the Exchange proposes
new functionality regarding the ``ECO Opening Auction Process'' on the
Exchange, which would be applicable

both to openings and reopenings following a trading halt.
     Proposed Rule 980NYP(d)(1) is identical to Arca Options
Rule 6.91P-O(d)(1) and would set forth the conditions required for the
commencement of an ECO Opening Auction Process. Specifically, as
proposed, the Exchange would initiate an ECO Opening Auction Process
for a complex strategy only if all legs of the complex strategy have
opened or reopened for trading, which text is based on current Rule
980NY(c)(i)(A) without any substantive differences. Proposed Rules
980NYP(d)(1)(A)-(B) are identical to Arca Options Rule 6.91P-
O(d)(1)(A)-(B) and would set forth conditions that would prevent the
opening of a complex strategy, as follows:
    [cir] Any leg of the complex strategy has neither an Exchange BO
nor an ABO; or
    [cir] The complex strategy cannot trade per proposed Rule
980NYP(a)(5)(B)-(C).
    The proposal to detail these conditions for opening (and reopening)
are consistent with current functionality not set forth in the current
rule. The Exchange believes that this added detail would not only add
clarity and transparency to Exchange rules but would also protect
market participants from potentially erroneous executions when there is
a lack of reliable information regarding the price at which a complex
strategy should execute, thereby promoting a fair and orderly ECO
Opening Auction Process.
     Proposed Rule 980NYP(d)(2) is identical to Arca Options
Rule 6.91P-O(d)(2) and would provide that any ECOs in a complex
strategy with prices that lock or cross one another would be eligible
to trade in the ECO Opening Auction Process. This proposed rule is
based on current Rule 980NY(c)(i)(B), which provides than an opening
process will be used if there are ECOs that ``are marketable against
each other.'' The Exchange proposes a difference from current
functionality and would not require that such ECOs be ``priced within
the Complex NBBO'' because the proposed ECO Opening Auction Process
under Pillar would instead rely on the DBBO (as described below).\55\
As such, the Exchange may open a series based on the Exchange BBO,
bound by the Away Market Deviation (or, the ABBO if the Exchange BBO is
not available), which is consistent with ECO handling during Core
Trading (per proposed Rule 980NYP(e) described below). The Exchange
believes this proposed change would better align the permissible
opening price for a series with the permissible execution price during
Core Trading, which adds consistency to ECO order handling to the
benefit of investors.
---------------------------------------------------------------------------

    \55\ See Rule 980NY(c)(i)(B) (providing that ``[t]he CME will
use an opening auction process if there are Electronic Complex
Orders in the Consolidated Book that are marketable against each
other and priced within the Complex NBBO''). Per Rule 900.2NY (and
proposed Rule 980NYP(a)(2)), the ``Complex NBBO'' for each complex
strategy is derived from the national best bid and national best
offer for each leg.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(d)(2)(A) is identical to Arca Options
Rule 6.91P-O(d)(2)(A) and would provide that an ECO received during a
pre-open state would not participate in the Auction Process for the leg
markets pursuant to proposed Rule 952NYP, which is based on the same
text (in the second sentence) of current Rule 980NY(c)(i)(A) without
any substantive differences.\56\
---------------------------------------------------------------------------

    \56\ Proposed Rule 952NYP (Auction Process), sets forth the
opening and reopening auction process for single-leg option trading.
See the American Pillar Omnibus Filing.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(d)(2)(B) is identical to Arca Options
Rule 6.91P-O(d)(2)(B) and would provide that a complex strategy created
intra-day when all leg markets are open would not be subject to an ECO
Opening Auction Process and would instead trade pursuant to paragraph
(e) of the proposed Rule (discussed below) regarding the handling of
ECOs during Core Trading Hours.
    [cir] Proposed Rule 980NYP(d)(2)(C) is identical to Arca Options
Rule 6.91P-O(d)(2)(C) and would provide that the ECO Opening Auction
Process would be used to reopen trading in ECOs after a trading halt.
This proposed rule makes clear that the ECO Opening Auction Process
would be applicable to reopenings, which would add internal consistency
to Exchange rules and promote a fair and orderly ECO Opening Auction
Process following a trading halt.\57\
---------------------------------------------------------------------------

    \57\ This proposed functionality is also consistent with how the
Exchange proposes to handle (and currently handles) opening auctions
for single-leg trading. For example, proposed Rule 952NYP(a)(1)
provides that an ``Auction'' refers to the opening or reopening of
an option series for trading. See the American Pillar Omnibus
Filing. See also Rule 952NYP(e) (providing that ``[a] Trading
Auction will be conducted following the procedures described in
paragraphs (a) through (d) of this Rule to reopen an option class
after a trading halt.'').
---------------------------------------------------------------------------

     Proposed Rule 980NYP(d)(3) is identical to Arca Options
Rule 6.91P-O(d)(3), except as it relates priority and allocation as
described below and would describe each aspect of the ECO Opening
Auction Process.\58\
---------------------------------------------------------------------------

    \58\ See proposed Rule 980NYP(d)(3)(b)(iii), discussed below.
---------------------------------------------------------------------------

    First, proposed Rule 980NYP(d)(3)(A) is identical to Arca Options
Rule 6.91P-O(d)(3)(A) and would describe the ``ECO Auction Collars.''
As proposed, the upper (lower) price of an ECO Auction Collar for a
complex strategy would be the DBO (DBB); provided, however, that if the
DBO (DBB) is calculated using the Exchange BBO for all legs of the
complex strategy and all such Exchange BBOs have displayed Customer
interest, the upper (lower) price of an ECO Auction Collar would be one
penny ($0.01) times the smallest leg ratio inside the DBO (DBB). This
proposed functionality on Pillar, which is identical to Arca Options,
would ensure that if there is displayed Customer interest on the
Exchange on all legs of the strategy, the opening price for the complex
strategy would price improve the DBBO, which the Exchange believes is
consistent with fair and orderly markets and investor protection.
     Next, proposed Rule 980NYP(d)(3)(B) is identical to Arca
Options Rule 6.91P-O(d)(3)(B) and would describe the ``ECO Auction
Price'' and how such price is determined. As proposed, the ECO Auction
Price would be the price at which the maximum volume of ECOs can be
traded in an ECO Opening Auction, subject to the proposed ECO Auction
Collar. As further proposed, if there is more than one price at which
the maximum volume of ECOs can be traded within the ECO Auction Collar,
the ECO Auction Price would be the price closest to the midpoint of the
ECO Auction Collar, or, if the midpoint falls within such prices, the
ECO Auction Price would be the midpoint, provided that the ECO Auction
Price would not be lower (higher) than the highest (lowest) price of an
ECO to buy (sell) that is eligible to trade in the ECO Opening (or
Reopening) Auction Process. The concept of an ECO Auction Price is
consistent with the concept of ``single market clearing price'' set
forth in current Rule 980NY(c)(i)(B).
    Finally, like on Arca Options, if the ECO Auction Price would be a
sub-penny price, it would be rounded to the nearest whole penny. This
proposed text is based on current Rule 980NY(c)(i)(B), with a
difference that the current rule refers to the midpoint of the Complex
NBBO (which could be a sub-penny price and if so, is rounded down to
the nearest penny) as opposed to referring to the Pillar term ``ECO
Auction Price,'' which price, if in sub-pennies, would be rounded (up
or down) to the nearest MPV.
    Proposed Rule 980NYP(d)(3)(B)(i) is identical to Arca Options Rule
6.91P-O(d)(3)(B)(i) insofar as it would provide that an ECO to buy
(sell) with a limit price at or above (below) the upper (lower) ECO
Auction Collar would be

included in the ECO Auction Price calculation at the price of the upper
(lower) ECO Auction Collar, but differs from Arca Options in that it
does not address the ranking and allocation of auction interest, which
is described below in proposed Rule 980NYP(d)(3)(B)(ii). This proposed
text is based in part on current Rule 980NY(c)(i)(B).
    Proposed Rule 980NYP(d)(3)(B)(ii) is identical to Arca Options Rule
6.91P-O(d)(3)(B)(ii) and would provide that locking and crossing ECOs
in a complex strategy would trade at the ECO Auction Price. As further
proposed, if there are no locking or crossing ECOs in a complex
strategy at or within the ECO Auction Collars, the Exchange would open
the complex strategy without a trade.
    Proposed Rule 980NYP(d)(3)(B)(iii), entitled ``Auction
Allocation,'' would describe how auction interest is ranked and
allocated on Pillar. As proposed, ECOs that are eligible to participate
in the ECO Opening (or Reopening) Auction Process (i.e., are executable
against the ECO Auction Price) would be ranked as provided in Rule
964NYP(c)-(g) and would trade with ECOs priced better than the ECO
Auction Price based on ranking and would trade with ECOs priced at the
ECO Auction Price per Rule 964NYP(j).\59\ This proposed text is based
in part on current Rule 980NY(c)(i)(B).\60\
---------------------------------------------------------------------------

    \59\ See Rule 980NY(c)(i)(B) (providing in relevant part that,
``[i]n determining order priority, the CME gives first priority to
[ECOs] whose net debit/credit price is better than the market
clearing price, and then to [ECOs] priced at the market clearing
price.'').
    \60\ See proposed Rule 980NYP(d)(3)(B)(iii)(a)-(b),
respectively.
---------------------------------------------------------------------------

     Proposed Rule 980NYP(d)(4) is identical to Arca Options
Rule 6.91P-O(d)(4) and would describe the ``ECO Order Processing during
ECO Opening Auction Process.'' As proposed, new ECOs and ECO Order
Instructions (as defined in proposed Rule 980NYP(a)(6) described above)
that are received when the Exchange is conducting the ECO Opening
Auction Process for the complex strategy would be accepted but would
not be processed until after the conclusion of this process. As further
proposed, and identical to Arca Options Rule 6.91P-O(d)(4)(A)-(B), when
the Exchange is conducting the ECO Opening Auction Process, ECO Order
Instructions would be processed as follows:
    [cir] Proposed Rule 980NYP(d)(4)(A) is identical to Arca Options
Rule 6.91P-O(d)(4)(A) and would provide that an ECO Order Instruction
received during the ECO Opening Auction Process would not be processed
until after this process concludes if it relates to an ECO that was
received before the process begins and that any subsequent ECO Order
Instruction(s) relating to such ECO would be rejected if received
during the ECO Opening Auction Process when a prior ECO Order
Instruction is pending.
    [cir] Proposed Rule 980NYP(d)(4)(B) is identical to Arca Options
Rule 6.91P-O(d)(4)(B) and would provide that an ECO Order Instruction
received during the ECO Opening Auction Process would be processed on
arrival if it relates to an order that was received during this
process.
    Proposed Rule 980NYP(d)(4), like Arca Options Rule 6.91P-O(d)(4),
would provide transparency regarding how ECO Order Instructions that
arrived during the ECO Opening Auction Process would be processed.
    Proposed Rule 980NYP(d)(5) is identical to Arca Options Rule 6.91P-
O(d)(5) and would describe the ``Transition to continuous trading''
after the ECO Opening Auction Process. As proposed, after the ECO
Opening Auction, ECOs would be subject to ECO Price Protection, per
proposed Rule 980NYP(g)(2) (as described below) and, if eligible to
trade, would trade as follows:
    [cir] Proposed Rule 980NYP(d)(5)(A) is identical to Arca Options
Rule 6.91P-O(d)(5)(A) and would provide that ECOs received before the
complex strategy was opened that did not trade in whole in the ECO
Opening Auction Process and that lock or cross other ECOs or leg
markets in the Consolidated Book would trade pursuant to proposed Rule
980NYP(e) (discussed below) regarding the handling of ECOs during Core
Trading Hours; otherwise, such ECOs would be added to the Consolidated
Book. This provision is based on the (last sentence) of current Rule
980NY(c)(i)(B) and (C), with non-substantive differences to use Pillar
terminology.
    [cir] Proposed Rule 980NYP(d)(5)(B) is identical to Arca Options
Rule 6.91P-O(d)(5)(B) and would provide that ECOs received during the
ECO Opening Auction Process would be processed in time sequence
relative to one another based on original entry time. This proposed
rule is consistent with functionality not described in the current
rule.
    Execution of ECOs During Core Trading Hours. Proposed Rule
980NYP(e) would describe how ECOs would be processed during Core
Trading Hours. Proposed Rule 980NYP(e)(1) is identical to Arca Options
Rule 6.91P-O(e)(1) and would provide that once a complex strategy is
open for trading, an ECO would trade with the best-priced contra-side
interest as follows:
     Proposed Rule 980NYP(e)(1)(A) is identical to Arca Options
Rule 6.91P-O(e)(1)(A), except that it cross-references American Pillar
Priority Rule 964NYP, and relates to the priority of the leg markets
over ECOs at a price. As proposed, if, at a price, the leg markets can
trade with an eligible ECO,\61\ in full or in a permissible ratio, the
leg markets would trade first at that price, pursuant to Pillar Rule
964NYP,\62\ until the quantities on the leg markets are insufficient to
trade with the ECO. Once the leg market interest, at a price, is
exhausted, such ECO would trade with same-priced contra-side ECOs
resting in the Consolidated Book, pursuant to Rule 964NYP. This
functionality is based on Rule 980NY(c)(ii), with the difference that
the leg markets always have priority at a price.\63\ In addition to
being identical to Arca Options, this proposed functionality of
affording leg markets priority at a price is consistent with
functionality available on other options exchanges.\64\
---------------------------------------------------------------------------

    \61\ See proposed Rule 980NYP(e)(1)(C) and (D) (for a
description of ECOs that are not eligible to trade with the leg
markets).
    \62\ See Pillar Rule 964NYP, Order Ranking, Display, and
Allocation, which sets forth priority and allocation of trading
interest on Pillar and will replace current Rule 964NY).
    \63\ See Rule 980NY(c)(ii) (providing that if, at a price, the
leg markets can execute against an incoming ECO in full (or in a
permissible ratio), and each leg includes Customer interest, the leg
markets will have first priority at that price ahead of same-priced
ECOs resting in the Consolidated Book. In contrast to current Rule
980NY(c)(ii), Pillar will afford the leg markets priority without
requiring that ``each leg'' of an incoming ECO contain Customer
interest. See, infra, proposed Rule 980NYP(c) (regarding Priority
and Pricing of ECOs).
    \64\ See Arca Options Rule 6.91P-O(e)(1)(A). See also supra note
5, Arca Options ECO Approval Order, 86 FR 43704, at 43709
(discussing substantively the same functionality available on BOX
Options Exchange wherein certain Complex Orders trade at the same
price as the best-priced interest in the BOX Book after such
eligible leg interest has been exhausted and providing a trading
example of allocation per Rule 6.91P-O(e)(1)(A)).
---------------------------------------------------------------------------

    Like on Arca Options, the Exchange believes that proposed Rule
980NYP(e)(1)(A) would benefit market participants because it is
designed to protect the priority of orders on the leg markets by
requiring an ECO to execute first against interest on the leg markets
at the best price to the extent possible, i.e., in full or in a
permissible ratio, and only then permitting an ECO to execute against
another ECO at that price. Thus, following the executions against the
best-priced interest on the leg markets, an ECO would no longer be
executable against interest on the leg markets at the best price
because the leg markets

would lack sufficient quantity to fill the ECO in a permissible ratio
at that price. Absent this provision in proposed Rule 980NYP(e)(1)(A),
the Exchange believes that otherwise executable ECOs at the leg market
price would lose execution opportunities without any benefit to
interest on the leg markets, which is unable to trade with the ECO at
that price. Because orders are executable against each other only when
both the price and the quantity of the orders match, the Exchange
believes it is appropriate (and does not deny leg markets priority) to
allow ECOs to trade with other ECOs at the leg market price when such
eligible leg market interest at that price has been exhausted.
     Proposed Rule 980NYP(e)(1)(B) is identical to Arca Options
Rule 6.91P-O(e)(1)(B) and would provide that an ECO would not trade
with orders in the leg markets designated as AON, FOK, or with an MTS
modifier. This proposed text would be new and is based in part on
existing functionality (for AON and FOK) and reflects the Exchange's
proposed treatment under Pillar of its new MTS modifier for orders in
the leg markets.\65\ Consistent with current functionality, orders with
an AON, FOK, or (new) MTS modifier are conditional and, by design, will
miss certain execution opportunities. The Exchange believes that this
proposed rule would simplify the operation of electronic complex order
trading and would add clarity and transparency that ECOs would not
trade with orders that have conditional size-related instructions.
---------------------------------------------------------------------------

    \65\ The Exchange proposes to adopt the Minimum Trade Size or
MTS Modifier in proposed Rule 900.3NYP(i)(3). See the American
Pillar Omnibus Filing. The Exchange represents that these proposed
order types will function in a manner substantively the same as is
described in current Arca Options Rule 6.62P-O(i)(3). See id.
---------------------------------------------------------------------------

     Proposed Rule 980NYP(e)(1)(C) is identical to Arca Options
Rule 6.91P-O(e)(1)(C) and would provide that an ECO designated as
Complex Only would be eligible to trade solely with another ECO and
would not trade with the leg markets. In addition to Arca Options,
other options exchanges likewise offer Complex Orders that trade only
with Complex Orders.\66\
---------------------------------------------------------------------------

    \66\ See proposed Rule 980NYP(e)(1)(C). See, e.g., Cboe Rule
5.33(a) (defining ``Complex Only'' order as an ECO ``that a [Cboe]
Market-Maker may designate to execute only against complex orders in
the COB and not Leg into the Simple Book''). The proposed Complex
Only Order (like its predecessor PNP Plus Order) would be available
to all market participants.
---------------------------------------------------------------------------

    As further proposed, an ECO designated as Complex Only must trade
at a price at or within the DBBO; provided that, if the DBB (DBO) is
calculated using the Exchange BBO for all legs of the complex strategy
and all such Exchange BBOs have displayed Customer interest, the
Complex Only Order would not trade below (above) one penny ($0.01)
times the smallest leg ratio inside the DBB (DBO), regardless of
whether there is sufficient quantity on such leg markets to satisfy the
ECO.\67\ This proposed requirement is designed to ensure that, if there
is displayed Customer interest on all legs of the strategy on the
Exchange, a Complex Only Order would price improve at least some
portion of such interest making up the DBBO. Thus, like on Arca
Options, a Complex Only Order does not get the benefit of the priority
treatment set out in proposed Rule 980NYP(e)(1)(A). If a Complex Only
Order is unable to trade within the aforementioned price parameters, it
would remain on the Consolidated Book until it can trade with another
ECO per the requirements of proposed Rule 980NYP(e)(1)(C). The Exchange
believes that allowing Complex Only Orders to trade up to the DBBO
unless there is displayed Customer interest on all legs of the strategy
on the Exchange at the DBBO (as described above), provides market
participants additional trading opportunities while still protecting
displayed Customer interest on the Exchange.
---------------------------------------------------------------------------

    \67\ See proposed Rule 980NYP(e)(1)(C). Because Complex Only
Orders would never trade with the leg markets, whether there is
sufficient quantity at the displayed Customer price is irrelevant to
the operation of this order type.
---------------------------------------------------------------------------

    The proposed operation of the Complex Only Order, insofar as it
protects displayed Customer interest in the leg markets when an ECO
trades with another ECO, is consistent with current functionality.\68\
The proposed order type is identical to and would operate in the exact
same manner as Complex Only Orders available per Arca Options Rule
6.91P-O(e)(1)(C) and is therefore not new or novel.
---------------------------------------------------------------------------

    \68\ See Rule 980NY, Commentary .02(i) (providing that, when
executing an ECO, if each leg of the contra-side Derived BBO for the
components of the ECO includes Customer interest, the price of at
least one leg of the order must trade at a price that is at least
one cent ($0.01) better than the corresponding price of all customer
bids or offers in the Consolidated Book for the same series).
---------------------------------------------------------------------------

     Proposed Rules 980NYP(e)(1)(D)(i)-(iii) are identical to
Arca Options Rules 6.91P-O(e)(1)(D)(i)-(iii) and would provide that
ECOs with any one of the following complex strategies would be
ineligible to trade with the leg markets and would be processed as a
Complex Only Order:
    [cir] a complex strategy with more than five legs;
    [cir] a complex strategy with two legs and both legs are buying or
both legs are selling, and both legs are calls or both legs are puts;
or
    [cir] a complex strategy with three or more legs and all legs are
buying or all legs are selling.
    The proposal to restrict ECOs with more than five legs from trading
with the leg markets (and being treated as Complex Only Orders), per
proposed Rule 980NYP(e)(1)(D)(i), would be new functionality under
Pillar and, like on Arca Options, is designed to help Market Makers
manage risk. Because the execution of a multi-legged ECO is a single
transaction, comprised of discrete legs that must all trade
simultaneously, allowing ECOs with more than five legs to trade with
the leg markets may allow a multi-legged transaction to occur before a
Market Maker's risk settings would be triggered. This proposed
limitation is designed to prevent such multi-legged transactions, which
would help ensure that Market Makers continue to provide liquidity and
do not trade above their established risk tolerance levels. In addition
to Arca Options, this restriction is also consistent with similar
limits established on other options exchanges.\69\
---------------------------------------------------------------------------

    \69\ See, e.g., Cboe Rule 5.33(g) (providing that ECOs may be
restricted from trading with the leg markets if such ECO has more
than a maximum number of legs, which maximum the Exchange determines
on a class-by-class basis and may be two, three, or four).
---------------------------------------------------------------------------

    Proposed Rules 980NYP(e)(1)(D)(ii)-(iii), which treat ECOs with
certain complex strategies as Complex Only Orders, is based in part on
current Rule 980NY(d)(4)(i)-(ii), with a difference that currently,
such so-called ``directional strategies'' are rejected. The proposed
handling under Pillar, which is the same as on Arca Options, would be
less restrictive than the current rule because such strategies would
not be rejected and is consistent with the treatment of such complex
strategies on other options exchanges.\70\ As with the proposal to
restrict ECOs with more than five legs trading with the leg markets,
this proposed restriction is also designed to ensure that Market Maker
risk settings would not be bypassed. Because ECOs with directional
strategies are typically geared towards an aggressive directional
capture of volatility, such ECOs can represent significantly more risk
than trading any one of the legs in isolation. As such, because Market
Maker risk settings are

only triggered after the entire ECO package has traded, the Exchange
believes this proposed rule change would help ensure fair and orderly
markets by preventing such orders from trading with the leg markets,
which would minimize risk to Market Makers.
---------------------------------------------------------------------------

    \70\ See, e.g., Nasdaq ISE Options 3, Section 14 (d)(3)(A)-(B)
(providing that ECOs with these complex strategies may trade only
with other ECOs).
---------------------------------------------------------------------------

    Proposed Rule 980NYP(e)(2) is identical to Arca Options Rule 6.91P-
O(e)(2) and would provide that the Exchange would evaluate trading
opportunities for a resting ECO when the leg markets comprising a
complex strategy update, provided that during periods of high message
volumes, such evaluation may be done less frequently. The Exchange
believes that this proposed rule promotes transparency of the frequency
with which the Exchange would be evaluating the leg markets for
updates.
    The Exchange believes the proposed handling of ECOs during Core
Trading, which handling is identical to Arca Options, is reasonably
designed to facilitate increased interaction between orders on the leg
markets and ECOs, and to do so in such a manner as to ensure a dynamic,
real-time trading mechanism that maximizes the opportunity for trade
executions for both ECOs and orders on single option series.
    Execution of ECOs During a COA. Proposed Rule 980NYP(f) would
describe how ECOs would trade during a COA. The COA Process is
currently described in Rule 980NY(e). Under Pillar, the Exchange
proposes to modify the COA process, including by relying on the DBBO
(as described above) for pricing, allowing a COA Order to initiate a
COA only on arrival, and streamlining the rule text describing the
circumstances that would cause an early end to a COA. The proposed COA
Process is the same as is set forth in Arca Options Rule 6.91P-O(f),
except (as noted below) regarding the allocation of a COA Order, which
follows the Exchange's Customer priority/pro rata scheme (i.e., per
Pillar Rule 964NYP).\71\
---------------------------------------------------------------------------

    \71\ In particular, proposed Rules 980NYP(f), (f)(1)-(3), and
(f)(4)(B)-(C) are identical to Arca Options Rules 6.91P-O(f),
(f)(1)(3), and (f)(4)(B)-(C); whereas proposed Rule 980NYP(f)(4)(A)
and (f)(A)(i), which sets forth the Allocation of COA Orders,
differs from Arca Options Rules 6.91P-O(f)(4)(A) given the distinct
priority and allocation models of each options exchange.
---------------------------------------------------------------------------

    Proposed Rule 980NYP(f) is identical to Arca Options Rule 6.91P-
O(f) and would provide that a COA Order received when a complex
strategy is open for trading and that satisfies the requirements of
paragraph (f)(1) of the proposed Rule would initiate a COA only on
arrival after trading with eligible interest per proposed Rule
980NYP(f)(2)(A) (described below). As further proposed, and like on
Arca Options, a COA Order would be rejected if entered during a pre-
open state or if entered during Core Trading Hours with a time-in-force
of FOK or GTX. This proposed order handling is based in part on current
Rule 980NY(e)(1)(ii), which requires that COA Orders be submitted
during Core Trading Hours. The proposed rejection of such orders during
a pre-open state is identical to handling on Arca Options and is
consistent with the Exchange's proposed functionality that a COA Order
would initiate a COA only on arrival. In addition, the proposal would
clarify that COA Orders designated as FOK or GTX would be rejected,
even if submitted during Core Trading Hours, is based on current
functionality and this addition would add further detail and
clarification to the rule text. Finally, as further proposed and like
on Arca Options, only one COA may be conducted at a time in a complex
strategy, which is identical to text in current Rule 980NY(e)(3).
     Proposed Rule 980NYP(f)(1), which is identical to Arca
Options Rule 6.91P-O(f)(1), would describe the conditions required for
the ``Initiation of a COA.'' As proposed, to initiate a COA, the limit
price of the COA Order to buy (sell) must be higher (lower) than the
best-priced, same-side ECOs resting on the Consolidated Book and equal
to or higher (lower) than the midpoint of the DBBO, which is designed
to encourage aggressively-priced COA Orders and, in turn, to attract a
meaningful number of RFR Responses to potentially provide price
improvement of the COA Order's limit price. This proposed text is based
in part on current Rule 980NY(e)(3)(i), with a difference to add a new
``midpoint of the DBBO'' requirement to reflect this new concept under
Pillar. As further proposed, and like on Arca Options, a COA Order that
does not satisfy these pricing parameters would not initiate a COA and,
unless it is cancelled (i.e., if an IOC), such order would be ranked in
Consolidated Book and processed as an ECO, per proposed Rule 980NYP(e)
(described above). This would be new under Pillar, as current Rule
980NY(e)(3) allows an order designated for COA to reside on the
Consolidated Book unless or until such order meets the requisite
pricing conditions to initiate a COA. The Exchange believes this
proposed change, which mirrors Arca Options, would simplify the COA
process and promote the orderly initiation of COAs, which is essential
to maintaining a fair and orderly market for ECOs.
    Finally, as proposed and like on Arca Options, once a COA is
initiated, the Exchange would disseminate a Request for Response
message, the Response Time Interval would begin and, during such
interval, the Exchange would accept RFR Responses, including COA GTX
Orders. This proposed text is based on current functionality set forth
in Rule 980NY(e), with non-substantive differences to use Pillar
terminology, including using the new Pillar term for COA GTX Orders.
     Proposed Rule 980NYP(f)(2), which is identical to Arca
Options Rule 6.91P-O(f)(2), would describe the ``Pricing of a COA.'' As
proposed, a COA Order to buy (sell) would initiate a COA at its limit
price, unless its limit price locks or crosses the DBO (DBB), in which
case it would initiate a COA at a price equal to one penny ($0.01)
times the smallest leg ratio inside the DBO (DBB) (the ``COA initiation
price''). This proposed functionality, which utilizes the new concept
of a DBBO, is consistent with current functionality (that relies on the
substantively similar concept of Complex BBO (per Rule 900.2NY) and
ensures that (consistent with current functionality) interest on the
leg markets maintain priority.
    [cir] Proposed Rule 980NYP(f)(2)(A) is identical to Arca Options
Rule 6.91P-O(f)(2)(A) and would provide that prior to initiating a COA,
a COA Order to buy (sell) would trade with any ECO to sell (buy)
resting in the Consolidated Book that is priced equal to or lower
(higher) than the DBO (DBB), unless the DBO (DBB) is calculated using
the Exchange BBO for all legs of the complex strategy and all such
Exchange BBOs have displayed Customer interest, in which case the COA
Order would trade up (down) to one penny ($0.01) times the smallest leg
ratio inside the DBO (DBB) (i.e., priced better than the leg markets)
and any unexecuted portion of such COA Order would initiate a COA. This
proposed rule is based on current Rule 980NY(e)(2) with a difference to
use the Pillar concept of DBBO rather than refer to the contra-side
Complex BBO and to specify that the COA Order must price improve the
DBBO when there is displayed Customer interest on the Exchange leg
markets, as noted above.
    [cir] Proposed Rule 980NYP(f)(2)(B) is identical to Arca Options
Rule 6.91P-O(f)(2)(B) and would provide that a COA Order would not be
eligible to trade with the leg markets until after the COA ends, which
added detail, while not explicitly stated in the current rule, is
consistent with current functionality described in Rules 980NY(e)(7)(A)
and (B) that only RFR Responses (i.e., GTX orders) and ECOs will be
allocated in a

COA and that the COA Order would not trade with the leg markets until
after the COA allocations.
     Proposed Rule 980NYP(f)(3) is identical to Arca Options
Rule 6.91P-O(f)(3) and would set forth the conditions that would result
in the ``Early End to a COA'' (i.e., a COA ending prior to the
expiration of the Response Time Interval), which conditions are
consistent with current Rule 980NY(e)(6) as described below. Currently,
as described in Rule 980NY(e)(3), the Exchange takes a snapshot of the
Derived BBO at the start of a COA and uses that snapshot as the basis
for determining whether to end a COA early.
    Under Pillar and like on Arca Options, the Exchange would no longer
use a snapshot of the Derived BBO as the basis for determining whether
to end a COA early but would instead rely on the DBBO (calculated per
proposed Rule 980NYP(a)(5)), which is updated as market conditions
change (including during the Response Time Interval).\72\ The Exchange
believes relying on the DBBO is appropriate and would benefit investors
as it would provide real-time trading information that includes an
additional layer of price protection for ECO trading as the DBBO is
based on Exchange BBOs, when available, or the ABBO. The Exchange
proposes a COA would end early under the following conditions:
---------------------------------------------------------------------------

    \72\ As discussed infra regarding proposed Rule 980NYP(a)(5) and
the definition of the Derived BBO, ``the DBBO will be updated as the
Exchange BBO or ABBO, as applicable, is updated''.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(f)(3)(A) is identical to Arca Options
Rule 6.91P-O(f)(3)(A) and would provide that a COA would end early if
the Exchange receives an incoming ECO or COA Order to buy (sell) in the
same complex strategy that is priced higher (lower) than the initiating
COA Order to buy (sell), which proposed text is based on current Rule
980NY(e)(6)(B)(i) without any substantive differences.
    [cir] Proposed Rule 980NYP(f)(3)(B) is identical to Arca Options
Rule 6.91P-O(f)(3)(B) and would provide that a COA would end early if
the Exchange receives an RFR Response that locks or crosses the DBBO on
the same-side as the COA Order, which proposed text is based on current
Rule 980NY(e)(6)(A)(i), except (as noted above) it refers to the DBBO
rather than the ``initial Derived BBO.''
    [cir] Proposed Rule 980NYP(f)(3)(C) is identical to Arca Options
Rule 6.91P-O(f)(3)(C) and would provide that a COA would end early if
the leg markets update causing the DBBO on the same-side as the COA
Order to lock or cross (i) any RFR Response(s) or (ii) if no RFR
Responses have been received, the best-priced, contra-side ECOs. This
proposed rule is based in part on current Rule 980NY(e)(6)(C)(i), with
differences to use Pillar terminology, including reference to the DBBO.
    [cir] Proposed Rule 980NYP(f)(3)(D) is identical to Arca Options
Rule 6.91P-O(f)(3)(D) and would provide that a COA would end early if
the leg markets update causing the contra-side DBBO to lock or cross
the COA initiation price. This proposed rule is based in part on
current Rule 980NY(e)(6)(C)(ii), except that it would refer to the DBBO
and the COA initiation price, which would be new concepts under Pillar.
    Because the DBBO may be calculated using the ABBO for a given leg,
the Exchange notes that it would be new under Pillar to have a COA end
early based on (locking or crossing) market conditions outside of the
Exchange. The Exchange believes this proposed functionality would
benefit market participants by preventing COA Orders from executing at
prices too far away from the prevailing market for that complex
strategy. In addition, the Exchange believes this proposed
functionality would promote internal consistency and benefit market
participants because, as proposed, the execution of ECOs on the
Exchange, including whether such ECO may initiate a COA as a COA Order,
is based on the DBBO. As such, the Exchange believes it is appropriate
and to the benefit of market participants that the early termination of
a COA likewise be based on the DBBO--regardless of whether the prices
used to calculate such DBBO include (or consist entirely of) ABBO
prices.
     Proposed Rule 980NYP(f)(4) would set forth the
``Allocation of COA Orders'' after a COA either ends early or after the
expiration of the Response Time Interval. Current Rule 980NY(e)(7)(A)
sets forth that the COA-eligible orders are allocated against RFR
Responses, beginning with the best-priced RFR Responses on a ``size pro
rata basis,'' as that concept is defined in Rule 964NY(b)(3), based on
the ``Derived BBO''.\73\ On Pillar, however, for internal consistency,
the DBBO (per proposed Rule 980NYP(a)(5)) establishes the parameters
within which a COA Order may trade and RFR Responses would trade with
the COA Order in according with Pillar Rule 964NYP--such that, at a
price, Customer RFR Responses would trade in time and non-Customer RFR
Responses would (continue to) trade size pro rata as described
below.\74\
---------------------------------------------------------------------------

    \73\ See Rule 980NY(e)(7)(A) (providing that the COA-Eligible
Order will execute against ``RFR Responses and [ECOs] to buy (sell)
that are priced higher (lower) than the initial Derived BBO will be
eligible to trade first with the COA-eligible order, beginning with
the highest (lowest), at each price point, on a Size Pro Rata basis
pursuant to Rule 964NY(b)(3), provided that [ECOs] on behalf of
Customers will have priority over same priced [ECOs] for non-
Customers.''). See Rule 900.2NY (defining Derived BBO as being
``calculated using the BBO from the Consolidated Book for each of
the options series comprising a given complex order strategy'').
    \74\ See, e.g., Pillar Rule 964NYP(i) and (j) (setting for the
size pro rata formula and describing how resting orders and quotes
are allocated on Pillar, respectively).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(f)(4)(A) would provide that RFR
Responses to sell (buy) that are priced equal to or lower (higher) than
a COA Order to buy (sell) would trade with the COA Order down (up) to
the DBB (DBO); provided, however, that if all legs of the DBB (DBO) are
calculated using Exchange BBOs and all such Exchange BBOs have
displayed Customer interest, RFR Responses to sell (buy) would not
trade below (above) one penny ($0.01) times the smallest leg ratio
inside the DBB (DBO). This proposed rule would ensure that the COA
Order would not trade at a worse price than the leg markets and would
price improve the DBBO where there is displayed Customer interest on
all legs of the complex strategy on the Exchange, which is consistent
with current Commentary .02(ii) to Rule 980NY.\75\
---------------------------------------------------------------------------

    \75\ See Rule 980NY, Commentary .02(ii) (providing that, when
executing an ECO in a class that has been designated as eligible for
a COA, if each leg of the contra-side Derived BBO--calculated using
the BBO from the Consolidated Book for each of the options series
comprising a given complex order strategy per Rule 900.2NY-- for the
components of the ECO includes Customer interest, the price of at
least one leg of the order must ``trade at a price that is better
than the corresponding price of all customer bids or offers in the
Consolidated Book for the same series, by at least one standard
trading increment as defined in Rule 960NY,'' which minimum trading
increment is one cent ($0.01). See Rule 960NY(b).
---------------------------------------------------------------------------

    [ssquf] Proposed Rule 980NYP(f)(4)(A)(i) would specify that ``[t]he
COA Order will trade with the best priced contra-side interest and,
within each priority category, will trade first with Customer RFR
Responses in time priority, followed by non-Customer RFR Responses on a
size pro rata basis pursuant to Rule 964NYP(i)'' and that ``Non-
Customer RFR Responses will be capped at the remaining size of the COA
Order for purposes of size pro rata allocation.'' \76\ The proposed
text is based in part on current Rule

980NY(e)(7)(A) insofar as it ensures that the COA Order would trade
with the best-priced RFR Responses received in the COA, beginning with
Customer interest at a price followed by same-priced non-Customer
interest. The proposed text would also include the additional detail
that the COA Order will trade with the best-priced interest within each
Pillar priority category per Pillar Rule 964NYP and that non-Customer
RFR Responses are capped at the remaining size of the COA Order for
purposes of pro rata allocation, which is consistent with current
functionality as relates to non-Customer RFR Responses.\77\ The
Exchange therefore believes this proposed allocation would promote
clarity, transparency, and internal consistency to Exchange rules.
---------------------------------------------------------------------------

    \76\ See Pillar Rule 964NYP(i) (which sets forth the size pro
rata allocation formula applicable to trading on Pillar, which
formula is identical to the formula set forth in current Rule
964NY(b)(3)).
    \77\ The Exchange notes that the proposal to trade Customer RFR
Responses based on time and non-Customer RFR Responses on a size pro
rata basis is also consistent with the Exchange's current (pre-
Pillar) handling of resting interest that is not traded in a COA.
See Rules 964NY(b)(2)(A) (regarding priority of displayed Customer
interest based on time) and (b)(2)(D) (providing that non-Customer
interest is subjected to pro rata allocation). As noted herein, the
proposed handling of Customer and non-Customer RFR Responses is also
consistent with Pillar Rule 964NYP(h)(3) (regarding non-Customers in
``size pro rata pool'') and (j) (regarding allocation of Customer
and non-Customer interest).
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(f)(4)(B) is identical to Arca Options
Rule 6.91P-O(f)(4)(B) and would provide that after COA allocations
pursuant to paragraph (f)(4)(A) of this proposed Rule, any unexecuted
balance of a COA Order (including COA Orders designated as IOC) would
be eligible to trade with any contra-side interest, including the leg
markets unless the COA Order is designated or treated as a Complex Only
Order. This proposed text is based on existing functionality and makes
explicit that a COA Order would trade solely with complex interest (and
not the leg markets) during a COA. This proposed rule is designed to
provide clarity and transparency that the remaining balance of a COA
Order would be eligible to trade with the leg markets after the COA
ends.
    [cir] Proposed Rule 980NYP(f)(4)(C) is identical to Arca Options
Rule 6.91P-O(f)(4)(C) and would provide that after a COA Order trades
pursuant to proposed Rule 980NYP(f)(4)(B), any unexecuted balance of a
COA Order that is not cancelled (i.e., if an IOC) would be ranked in
the Consolidated Book and processed as an ECO pursuant to paragraph (e)
of this Rule. The proposed text is based on current Rule 980NY(e)(7)(B)
without any substantive differences.
     Proposed Rule 980NYP(f)(5) is identical to Arca Options
Rule 6.91P-O(f)(5) and would set forth ``Prohibited Conduct related to
COAs,'' and is based on the first sentence of current Commentary .04 to
Rule 980NY with one substantive differences: to add reference to
quotes, and would provide that a pattern or practice of submitting
``unrelated quotes or orders that cause a COA to conclude early would
be deemed conduct inconsistent with just and equitable principles of
trade,'' \78\ which addition would broaden the scope of ``Prohibited
Conduct'' to the benefit of market participants and would also add
clarity and transparency to Exchange rules.
---------------------------------------------------------------------------

    \78\ See proposed Rule 980NYP(f)(5) (emphasis added). In
addition, rather than copy into proposed Rule 980NYP the second
sentence of current Rule 980NY, Commentary .04, which provides that
dissemination of information related to COA Orders to third parties
would also be deemed as conduct inconsistent with just and equitable
principles of trade, the Exchange proposes to add more expansive
language regarding this prohibited conduct to the order exposure
rule. See infra for discussion of proposed change to Rule 935NY.
---------------------------------------------------------------------------

    ECO Risk Checks. Proposed Rule 980NYP(g) would describe the ``ECO
Risk Checks,'' which are designed to help ATP Holders to effectively
manage risk when trading ECOs. Current Commentaries .03, .05, and .06
of Rule 980NY set forth the existing risk checks for ECOs. The proposed
ECO Risk Checks set forth in Rule 980NYP(g)(1)-(3) are identical to and
would operate in the same manner as set forth in Arca Options Rule
6.91P-O(g)(1)-(3).
    With the transition to Pillar and like on Arca Options, the
Exchange proposes to modify and enhance its existing risk checks for
ECOs, as follows:
     Proposed Rule 980NYP(g)(1) is identical to Arca Options
Rule 6.91P-O(g)(1) and would set forth the ``Complex Strategy Limit.''
As proposed, the Exchange would establish a limit on the maximum number
of new complex strategies that may be requested to be created per
Market Participant Identifier or MPID, which limit would be announced
by Trader Update.\79\ As further proposed, when an MPID reaches the
limit on the maximum number of new complex strategies, the Exchange
would reject all requests to create new complex strategies from that
MPID for the rest of the trading day. In addition, and notwithstanding
the established Complex Strategy Limit, the Exchange proposes that it
may reject a request to create a new complex strategy from any MPID
whenever the Exchange determines it is necessary in the interests of a
fair and orderly market.
---------------------------------------------------------------------------

    \79\ Per Rule 900.2NY, an MPID refers to ``the identifier
assigned to the orders and quotes of a single ATP Holder for the
execution and clearing of trades on the Exchange by that permit
holder.'' An ATP Holder may obtain multiple MPIDs and each such MPID
may be associated with one or more sub-identifiers of that MPID.''
See id.
---------------------------------------------------------------------------

    This is proposed functionality is conceptually the same as the
Complex Order Table Cap (the ``Cap''), set forth in Commentary .03 to
Rule 980NY, which Cap (like the Complex Strategy Limit), would help
maintain a fair and orderly market because it would operate as a system
protection tool that enables the Exchange to prevent any single MPID
from creating more than a limited number of complex strategies during
the trading day. This proposed Cap is identical to Arca Options Rule
6.91P-O(g)(1). In addition to being identical to the Complex Strategy
Limit on Arca Options, the Exchange also notes that other options
exchanges likewise impose a limit on new complex order strategies.\80\
---------------------------------------------------------------------------

    \80\ See, e.g., Cboe Rule 5.33(a) (providing, in its definition
of ``complex strategy'' that Cboe ``may limit the number of new
complex strategies that may be in the [Cboe] System at a particular
time'') and MIAX Rule 518(a)(6) (providing, in its definition of
``complex strategy'' that MIAX ``may limit the number of new complex
strategies that may be in the System at a particular time and will
communicate this limitation to Members via Regulatory Circular'').
---------------------------------------------------------------------------

     Proposed Rule 980NYP(g)(2) is identical to Arca Options
Rule 6.91P-O(g)(2) and would set forth the ECO Price Protection. The
existing ECO ``Price Protection Filter'' is set forth in Commentary .05
to current Rule 980NY (the ``ECO Filter''). The proposed ``ECO Price
Protection'' on Pillar would work similarly to how the current ECO
price protection mechanism functions on the Exchange because an ECO
would be rejected if it is priced a specified percentage away from the
contra-side Complex NBB or NBO.\81\ However, on Pillar, the Exchange
proposes to use new thresholds and reference prices, which would
simplify the existing price check, but because this functionality is
identical to Arca Options Rule 6.91P-O(g)(2), this change would also
add uniformity to Exchange options platforms. Although the mechanics of
the ECO Price Protection would vary slightly from the existing Price
Protection Filter, the goal of this feature would remain the same: to
prevent the execution of ECOs that are priced too far away from the
prevailing market for the same strategy and therefore potentially
erroneous. Whereas the Away Market Deviation (vis a vis a DBBO based on
an Exchange BBO) is designed to make sure that ECOs do not trade too
far away from the prevailing market, the ECO

Order Protection as proposed (and as is the case today) is to prevent
the execution of ECOs that were potentially (inadvertently) entered at
prices too far away from the prevailing market and, as such, this
mechanism protects the order sender from itself.
---------------------------------------------------------------------------

    \81\ As noted above, the Exchange proposes to define the Complex
NBBO 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. See proposed Rule
980NYP(a)(2).
---------------------------------------------------------------------------

    Proposed Rule 980NYP(g)(2)(A) is identical to Arca Options Rule
6.91P-O(g)(2)(A) and would provide that each trading day, an ECO to buy
(sell) would be rejected or cancelled (if resting) if it is priced a
Specified Threshold amount or more above (below) the Reference Price
(as described below), subject to proposed paragraphs (g)(2)(A)(i)-(v)
of the Rule as described below. Because ECO Price Protection would be
applied each trading day, an ECO designated GTC would be re-evaluated
for ECO Price Protection on each day that it is eligible to trade and
would be cancelled if the limit price is equal to or through the
Specified Threshold.\82\
---------------------------------------------------------------------------

    \82\ As noted here, the Exchange proposes to offer GTC Orders on
Pillar, which order type would operate in the same manner as per
current Rule 900.3NY. See the American Pillar Omnibus Filing.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(g)(2)(A)(i) is identical to Arca Options
Rule 6.91P-O(g)(2)(A)(i) and would provide that an ECO that arrives
when a complex strategy is open for trading would be evaluated for ECO
Price Protection on arrival.
    Proposed Rule 980NYP(g)(2)(A)(ii) is identical to Arca Options Rule
6.91P-O(g)(2)(A)(ii) and would provide that an ECO received during a
pre-open state would be evaluated for ECO Price Protection after the
ECO Opening Auction Process concludes.\83\
---------------------------------------------------------------------------

    \83\ See discussion infra regarding proposed Rule 980NYP(d),
which describes the ECO Opening Auction Process (or Reopening after
a Trading Halt) as well as the concepts of ECO Auction Collars and
ECO Auction Price.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(g)(2)(A)(iii) is identical to Arca
Options Rule 6.91P-O(g)(2)(A)(iii) and would provide that an ECO
resting on the Consolidated Book before a trading halt would be
reevaluated for ECO Price Protection after the ECO Opening Auction
Process concludes.
    Proposed Rule 980NYP(g)(2)(A)(iv) would provide that Cross Orders
(per proposed Rule 900.3NYP(g)(1)) \84\ would not be subject to ECO
Price Protection, as the Exchange subjects such paired orders to
distinct price validations. This proposed handling is substantively
identical to Arca Options Rule 6.91P-O(g)(2)(A)(iv), which excludes QCC
Orders from the ECO Price Protection, except that the proposed Rule is
broader in application because (unlike on Arca Options) the Exchange's
proposed definition of Cross Orders is not limited solely to QCC
Orders.\85\
---------------------------------------------------------------------------

    \84\ See the American Pillar Omnibus Filing (describing
available Pillar Cross Orders in Rule 900.3NYP(g)).
    \85\ Compare proposed Rule 900.3NYP(g)(1) (describing Cross
Orders on the Exchange as including Customer to-Customer Cross
Orders and Single-Leg and Complex CUBE Orders) with Arca Options
Rule 6.62P-O(g)(1) (describing Cross Orders on Arca Options as
including solely QCC Orders). See, e.g., Rules 971.1NY and 971.2NY
(regarding price requirements to initiate a Single-Leg and Complex
CUBE Auction, respectively). As noted herein, the Exchange proposes
to submit separate rule filings to adopt CUBE Auction functionality
on Pillar, which would be set forth in proposed new Rules 971.1NYP
and 971.2NYP.
---------------------------------------------------------------------------

    [cir] Proposed Rule 980NYP(g)(2)(A)(v) is identical to Arca Options
Rule 6.91P-O(g)(2)(A)(v) and would provide that ECO Price Protection
would not be applied if there is no Reference Price for an ECO.
    Proposed Rule 980NYP(g)(2)(B) is identical to Arca Options Rule
6.91P-O(g)(2)(B) and would specify the ``Reference Price'' used in
connection with the ECO Price Protection. As proposed, the Reference
Price for calculating ECO Price Protection for an ECO to buy (sell)
would be the Complex NBO (NBB), provided that, immediately following an
ECO Opening Auction Process, the Reference Price would be the ECO
Auction Price or, if none, the Complex NBO (NBB). The Exchange believes
that adjusting the Reference Price for ECO Price Protection immediately
following an ECO Opening Auction would ensure that the most up-to-date
price would be used to assess whether to cancel an ECO that was
received during a pre-open state, including during a Trading Halt.
    As further proposed and like on Arca Options, there would be no
Reference Price for an ECO if there is no NBBO for any leg of such ECO
(i.e., the Exchange would not calculate a Complex NBB (NBO)), which
text is based on current Rule 980NY, Commentary .05(c), except that the
proposed rule would not reference OPRA because, as further proposed,
for purposes of determining a Reference Price, the Exchange would not
use an adjusted NBBO (i.e., such NBBO is implicitly reliant on
information from OPRA).\86\
---------------------------------------------------------------------------

    \86\ See Rule 900.2NY (describing that the ``NBBO'' refers to
the national best bid or offer and that ``[u]nless otherwise
specified, the Exchange may adjust its calculation of the NBBO based
on information about orders it sends to Away Markets, execution
reports received from those Away Markets, and certain orders
received by the Exchange'').
---------------------------------------------------------------------------

    Proposed Rule 980NYP(g)(2)(C) is identical to Arca Options Rule
6.91P-O(g)(2)(C) and would set forth the ``Specified Threshold'' used
in connection with the ECO Price Protection. As proposed, the Specified
Threshold for calculating ECO Price Protection would be $1.00, unless
determined otherwise by the Exchange and announced to ATP Holders by
Trader Update.
    The Exchange believes that the proposed Specified Threshold of
$1.00 simplifies how the Reference Price would be calculated as
compared to the calculations currently specified in Commentary .05 to
Rule 980NY. In addition, consistent with Commentary .05(d), the
Exchange proposes that the Specified Threshold could change, subject to
announcing the changes by Trader Update. Providing flexibility in
Exchange rules regarding how the Specified Threshold would be set is
identical functionality available per Arca Options Rule 6.62P-
O(a)(3)(C) and is also consistent with the rules of other options
exchanges as well as the functionality for the single-leg Limit Order
Price Protection feature.\87\
---------------------------------------------------------------------------

    \87\ See, e.g., Cboe Rule 5.34(b)(6) (describing the ``Drill-
Through Protection'' and that Cboe ``determines default buffer
amount on a class-by-class basis). See also the American Pillar
Omnibus Filing (describing use of a Trader Update to modify
Specified Thresholds in proposed Rule 900.3NYP(a)(3)(C)).
---------------------------------------------------------------------------

     Proposed Rule 980NYP(g)(3) is identical to Arca Options
Rule 6.91P-O(g)(3) and would set forth the ``Complex Strategy
Protections.'' The proposed protections are based on current Rule
980NY, Commentary .06, which are referred to as the ``Debit/Credit
Reasonability Checks.'' The Exchange believes this name change is
appropriate because it more accurately conveys that the check applies
solely to certain complex strategies and because (as discussed above),
the Exchange proposes to refer simply to a ``net price'' as opposed to
the ``total net debit or credit price.'' The proposed Pillar Complex
Strategy Protections would function similarly to the current Debit/
Credit Reasonability Checks because potentially erroneously priced
incoming ECOs would be rejected. However, rather than to refer to
specified debit or credit amounts as a way to determine whether a given
strategy is erroneously priced, the proposed rule would instead focus
on the expectation of the order sender and what would result if the ECO
were not rejected. Consistent with current functionality, the proposed
Complex Strategy Protections are designed to prevent the execution of
ECOs at prices that are inconsistent with/not aligned with their
strategies.
    As proposed and like on Arca Options, to protect an ATP Holder that
sends an ECO (each an ``ECO sender'') with the expectation that it
would receive (or pay) a net premium but has priced the ECO such that
the ECO

sender would instead pay (or receive) a net premium, the Exchange would
reject any ECO that is comprised of the erroneously-priced complex
strategies as set forth in proposed Rule 980NYP(g)(3)(A)-(C) and
described below.
    [cir] Proposed Rule 980NYP(g)(3)(A) is identical to Arca Options
Rule 6.91P-O(g)(3)(A) and would provide that `` `all buy' or `all sell'
strategies'' would be rejected as erroneously-priced if it is an ECO
for a complex strategy where all legs are to buy (sell) and it is
entered at a price less than one penny ($0.01) times the sum of the
number of options in the ratio of each leg of such strategy (e.g., a
complex strategy to buy (sell) 2 calls and buy (sell) 1 put with a
price less than $0.03). The proposed text is based on Rule 980NY,
Commentary .06(a)(1), with no substantive differences, except that the
Exchange has streamlined the text and set forth the minimum price
(i.e., $0.03) for any ``all buy'' or ``all sell'' strategies.
    [cir] Proposed Rule 980NYP(g)(3)(B) is identical to Arca Options
Rule 6.91P-O(g)(3)(B) and would provide for the rejection of
erroneously-priced ``Vertical spreads,'' which are defined as complex
strategies that consists of a leg to sell a call (put) option and a leg
to buy a call (put) option in the same option class with the same
expiration but at different strike prices. As proposed, the Exchange
would reject as erroneously-priced: (i) an ECO for a vertical spread to
buy a lower (higher) strike call and sell a higher (lower) strike call
and the ECO sender would receive (pay) a net premium (proposed Rule
980NYP(g)(3)(B)(i)); and (ii) an ECO for a vertical spread to buy a
higher (lower) strike put and sell a lower (higher) strike put and the
ECO sender would receive (pay) a net premium (proposed Rule
980NYP(g)(3)(B)(ii)). The proposed strategy protections for vertical
spreads are based on current Rule 980NY, Commentary .06(a)(2), except
that, as noted above, the proposed Rule is written from the standpoint
of the expectation of the ECO sender as opposed to reviewing total net
debit or credit price of the strategy.
    [cir] Proposed Rule 980NYP(g)(3)(C) is identical to Arca Options
Rule 6.91P-O(g)(3)(C) and would provide for the rejection of
erroneously-priced ``Calendar spreads,'' which are defined as
consisting of a leg to sell a call (put) option and a leg to buy a call
(put) option in the same option class at the same strike price but with
different expirations. As proposed, the Exchange would reject as
erroneously-priced: (i) an ECO for a calendar spread to buy a call leg
with a shorter (longer) expiration while selling a call leg with a
longer (shorter) expiration and the ECO sender would pay (receive) a
net premium (proposed Rule 980NYP(g)(3)(C)(i)); and (ii) an ECO for a
calendar spread to buy a put leg with a shorter (longer) expiration
while selling a put leg with a longer (shorter) expiration and the ECO
sender would pay (receive) a net premium (proposed Rule
980NYP(g)(3)(C)(ii)). The proposed strategy protections for calendar
spreads are based on current Rule 980NY, Commentary .06(a)(3), except
that, as noted above, the proposed Rule is written from the standpoint
of the expectation of the ECO sender as opposed to reviewing the total
net debit or credit price of the strategy. The Exchange has also not
retained discretion to disable the strategy protections for calendar
spreads (as contained in Commentary .06(a)(3)(i) of the current Rule)
because since adopting this provision in 2017, the Exchange has never
exercised this discretion and therefore has determined that such
discretion is no longer needed.
    [cir] Proposed Rule 980NYP(g)(3)(D) is identical to Arca Options
Rule 6.91P-O(g)(3)(D) and would provide that any ECO that is not
rejected by the complex strategy protections would still be subject to
the ECO Price Protection, per paragraph (g)(2) of this Rule, which
proposed text is based on Rule 980NY, Commentary .06(b) without any
substantive difference.
Rule 935NY: Order Exposure Requirements
    The Exchange also proposes conforming, non-substantive amendments
to Rule 935NY, regarding order exposure, to add a cross-reference to
new Pillar Rule 980NYP. Current Rule 935NY (iv) exempts orders
submitted to the COA Process, (per current Rule 980NY) from its one-
second order exposure requirements. This proposed amendment would
extend the exemption from the order exposure requirements to orders
submitted to a COA on Pillar.\88\ The Exchange also proposes to modify
the reference to ``Complex Order Auction Process (`COA')'' to simply
``Complex Order Auction (`COA')'' (i.e., removing the word Process)
consistent with how this concept is defined in proposed Rule
980NYP(a)(3). As previously stated, the Exchange believes that the
proposed Response Time Interval for a COA (with a duration of no less
than 100 milliseconds) is of sufficient length to allow ATP Holders
time to respond to a COA. As such, the proposal is designed to promote
timely execution of the COA Order, while ensuring adequate exposure of
such orders. Accordingly, the Exchange proposes to amend Rule 935NY
(iv) to extend the exemption from the one-second exposure requirement
to COA Orders under Pillar, which exemption is substantively identical
to NYSE Arca Rule 6.47A-O. Consistent with Rule 935NY, Commentary .01,
ATP Holders would only utilize the COA where there is a genuine
intention to execute a bona fide transaction.\89\
---------------------------------------------------------------------------

    \88\ See proposed Rule 935NY(iv). The Exchange also proposes to
replace reference to ``System'' with ``the Exchange.'' See id.
(preamble). See Arca Options Rule 6.47A (``With respect to orders
routed to the Exchange, Users may not execute as principal orders
they represent as agent'' unless, among other requirements, ``the
User utilizes the Complex Order Auction (``COA'') pursuant to Rule
6.91-O(c) or 6.91P-O(f).'').
    \89\ See Rule 935NY, Commentary .01 (``Rule 935NY prevents a
User from executing agency orders to increase its economic gain from
trading against the order without first giving other trading
interest on the Exchange an opportunity to either trade with the
agency order or to trade at the execution price when the User was
already bidding or offering on the book'').
---------------------------------------------------------------------------

* * * * *
    As discussed above, because of the technology changes associated
with the migration to the Pillar trading platform, subject to approval
of this proposed rule change, the Exchange will announce by Trader
Update when rules with a ``P'' modifier will become operative and for
which symbols. The Exchange believes that keeping existing rules on the
rulebook pending the full migration of Pillar will reduce confusion
because it will ensure that the rules governing trading on the
Exchange's current system will continue to be available pending the
full migration to Pillar.
Implementation
    As noted immediately above, the Exchange will not implement
proposed Rule 980NYP until all other Pillar-related rule filings (i.e.,
with a ``P'' modifier) are approved or operative, as applicable, and
the Exchange announces the migration of underlying symbols to Pillar by
Trader Update.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange operates in a
competitive market and regularly competes with other options exchanges
for order flow. The Exchange believes that the transition to Pillar for
trading of ECOs on its options trading platform would

promote competition among options exchanges by offering a low-latency
platform that offers more deterministic outcomes for trading interest,
which, in turn, facilities ECO trading on a continuous and real-time
basis on the Exchange.
    The proposed rule changes would support that inter-market
competition by allowing the Exchange to offer additional functionality
to its ATP Holders, thereby potentially attracting additional order
flow to the Exchange. Otherwise, the proposed changes are not designed
to address any competitive issues, but rather to amend the Exchange's
rules relating to trading of ECOs to support the transition to Pillar.
As discussed in detail above, with this rule filing, the Exchange is
not proposing to change its core functionality regarding the treatment
of ECOs. Rather, the Exchange believes that the proposed rule changes
would promote consistent use of terminology to support options trading
on the Exchange (and to promote uniformity with its affiliated exchange
Arca Options), making the Exchange's rules easier to navigate. The
Exchange does not believe that the proposed rule changes would raise
any intra-market competition as the proposed rule changes would be
applicable to all ATP Holders, and reflects the Exchange's existing