working price equal to the NBO (NBB). If the Away Market NBO (NBB)
reprices higher (lower), the resting Non-Routable Limit Order to buy
(sell) would similarly be repriced higher (lower). If the NBO (NBB)
adjusts higher (lower) again, the resting Non-Routable Limit Order
would not be adjusted again.
    \35\ The working time of a Non-Routable Limit Order would be
adjusted as described in proposed Rule 6.76P-O(f)(2), which would be
applicable to any scenario when the working time of an order may
change, including a Non-Routable Limit Order. Similar to how the
Pillar rules function on the Exchange's cash equity market, the
Exchange does not propose to separately describe how the working
time of an order changes in proposed Rule 6.62P-O.
---------------------------------------------------------------------------

    The Exchange notes that this designation to cancel is separate from
the designation to cancel if it cannot be displayed at its limit price.
If a Non-Routable Limit Order is designated to cancel if it cannot be
displayed at its limit price, this second cancellation designation
would not be needed as the order would have already been cancelled.
Rather, this second cancellation designation is applicable only to a
resting Non-Routable Limit Order that has been designated to reprice on
arrival and was repriced before it was displayed on the Consolidated
Book, and provides OTP Holders and OTP Firms with an option to cancel a
resting order if market conditions were such that a resting order could
have been repriced again, e.g., the contra-side Away Market NBBO
changes. To assist Market Makers in maintaining quotes in their
assigned series, the Exchange proposes that this second cancellation
designation would not be available to Market Makers for their quotes.
    Proposed Rule 6.62P-O(e)(1)(B)(i) would provide that if the limit
price of the resting Non-Routable Limit Order to

buy (sell) that has been repriced no longer locks or crosses the Away
Market NBO (NBB), it would be assigned a working price and display
price equal to its limit price. This proposed rule text is based on
Rule 7.31-E(e)(1)(A)(iv).
    Proposed Rule 6.62P-O(e)(1)(B)(ii) would provide that the working
price of a resting Non-Routable Limit Order to buy (sell) that has been
repriced would be adjusted to be equal to its display price if the Away
Market NBO (NBB) is equal to or lower (higher) than its display price.
This proposed rule is based in part on how an RPNP reprices (as
described in Rule 6.62-O(p)(1)(A)(i)) and uses Pillar terminology. The
proposed rule would further provide that once the working price and
display price of a Non-Routable Limit Order to buy (sell) are the same,
the working price would be adjusted higher (lower) only if the display
price of the order is adjusted.\36\
---------------------------------------------------------------------------

    \36\ For example, if the Away Market NBO is 1.05 and the
Exchange receives a Non-Routable Limit Order to buy priced at 1.10,
it would be assigned a display price of 1.00 and a working price of
1.05. If the Away Market NBO adjusts to 1.00, the working price of
the Non-Routable Limit Order to buy would be adjusted to 1.00 to be
equal to its display price. However, if the Away Market NBO moves
back to 1.05, the Non-Routable Limit Order's working price would not
adjust again to 1.05 and would stay at 1.00.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(e)(1)(C) would provide that a Non-Routable
Limit Order may be designated with a Non-Display Remove Modifier and if
so designated, a Non-Routable Limit Order to buy (sell) with a working
price, but not display price, equal to the working price of an ALO
Order or Day ISO ALO to sell (buy) would trade as the liquidity taker
against such order. This functionality is based on the Non-Display
Remove Modifier available for cash equity trading, as described in Rule
7.31-E(e)(1)(C), and would be new for options trading on Pillar.
    Finally, proposed Rule 6.62P-O(e)(1)(D) would provide that the
designation to cancel a Non-Routable Limit Order would not be
applicable in an Auction and such order will participate in an Auction
at its limit price. This proposed rule text promotes clarity and
transparency that a Non-Routable Limit Order would be eligible to
participate in an Auction, but that it would be repriced to its limit
price for participation in such Auction.
    ALO Order. Proposed Rule 6.62P-O(e)(2) would define an ALO Order as
a Limit Order or quote that is a Non-Routable Limit Order that would
not remove liquidity from the Consolidated Book. This proposed order
type incorporates functionality similar to both the existing ALO and
RALO order types, as defined in Rule 6.62-O, and the existing MMALO
quotation type, as defined in Rule 6.37A-O(a)(3)(B). Unless otherwise
specified in proposed Rule 6.62P-O(e)(2), an ALO Order would function
as a Non-Routable Limit Order, including that it would participate in
an Auction at its limit price.
    Proposed Rule 6.62P-O(e)(2)(A) would provide that an ALO Order
would not be displayed at a price that would lock or cross an Away
Market NBBO, would lock or cross displayed interest in the Consolidated
Book, or would cross non-displayed interest in the Consolidated Book.
Because an ALO Order would never remove liquidity, this proposed rule
text ensures that such order would not be displayed at a price that
would lock or cross displayed interest either on the Exchange or an
Away Market, and would not be displayed at a price that crosses non-
displayed interest in the Consolidated Book.
    Proposed Rule 6.62P-O(e)(2)(A)(i) would provide that an ALO Order
can be designated to be cancelled if it would be displayed at a price
other than its limit price. An ALO Order with this designation to
cancel would function similarly to a Liquidity Adding Order as defined
in Rule 6.62-O(t) and uses Pillar terminology.
    Proposed Rule 6.62P-O(e)(2)(A)(ii) would provide that an ALO Order
to buy (sell) would be displayed at its limit price if it locks non-
displayed orders or quotes to sell (buy) on the Consolidated Book.
Because an ALO Order would not be repriced in this scenario, this
functionality would be the same regardless of whether the order
includes a designation to cancel.
    Proposed Rule 6.62P-O(e)(2)(A)(iii) would provide that an ALO Order
to buy (sell) would not consider an AON Order or an order with an MTS
Modifier to sell (buy) for purposes of determining whether it needs to
be repriced or cancelled. This proposed rule is designed to promote
transparency that a resting contra-side order with conditional
instructions, i.e., an AON Order or an order with an MTS Modifier,
would not have any bearing on whether an Aggressing ALO Order would
need to be repriced. Accordingly, an ALO Order would neither trade as
the liquidity taker with such orders (even if it could satisfy their
size condition) and could be displayed at a price that would lock or
cross the price of such orders. Once the ALO Order is resting on the
Consolidated Book, the Exchange would reevaluate the orders on the
Consolidated Book. For example, if the ALO Order could satisfy the size
condition of the resting AON Order, the resting AON Order would become
the Aggressing Order and would trade as the liquidity taker with such
resting ALO Order.
    Proposed Rule 6.62P-O(e)(2)(B) would describe how an ALO Order
would be processed if it is not designated to cancel, as follows:
     If the limit price of an ALO Order to buy (sell) would
lock or cross displayed orders or quotes to sell (buy) on the
Consolidated Book, it would be repriced to have a working price and
display price one MPV below (above) the lowest (highest) priced
displayed order or quote to sell (buy) on the Consolidated Book
(proposed Rule 6.62P-O(e)(2)(B)(i));
     If the limit price of an ALO Order to buy (sell) would
lock or cross an Away Market NBO (NBB), it would be repriced to have a
working price equal to the Away Market NBO (NBB) and a display price
one MPV below (above) the NBO (NBB) (proposed Rule 6.62P-
O(e)(2)(B)(ii)); or
     If the limit price of an ALO Order to buy (sell) would
cross non-displayed orders or quotes \37\ on the Consolidated Book, it
would be repriced to have a working price and display price equal to
the lowest (highest) priced non-displayed order or quote to sell (buy)
on the Consolidated Book (proposed Rule 6.62P-O(e)(2)(B)(iii).
---------------------------------------------------------------------------

    \37\ For example, a contra-side Market Maker quote designated as
a Non-Routable Limit Order could have a non-displayed working price.
---------------------------------------------------------------------------

    Because an ALO would never be a liquidity-taking order, the above-
described repricing scenarios provide clarity and transparency
regarding how an ALO Order would be repriced to prevent either trading
with interest on the Consolidated Book or routing to an Away Market.
The proposed option to reprice is based in part on how a RALO currently
functions, as described in Rule 6.62-O(t)(1)(A).
    Proposed Rule 6.62P-O(e)(2)(C) would provide that the display price
of a resting ALO Order to buy (sell) that has been repriced would be
repriced higher (lower) only one additional time and that if, after
that repricing, the display price could be repriced higher (lower)
again, the order can be designated to either remain at its last working
price and display price or be cancelled, provided that a resting ALO
Order that is a quote cannot be designated to be cancelled. This
proposed functionality would be new to Pillar and is based on how the
proposed Non-Routable Limit Order would function, as described above.

    Proposed Rule 6.62P-O(e)(2)(C)(i) would provide that if the limit
price of an ALO Order to buy (sell) that has been repriced no longer
locks or crosses displayed orders or quotes in the Consolidated Book,
locks or crosses the Away Market NBBO, or crosses non-displayed orders
or quotes in the Consolidated Book, it would be assigned a working
price and display price equal to its limit price. This proposed rule
text is similar to proposed Rule 6.62P-O(e)(1)(B)(i) for Non-Routable
Limit Orders, with differences to reflect the additional circumstances
when an ALO Order would be repriced based off of contra-side displayed
or non-displayed interest in the Consolidated Book.
    Proposed Rule 6.62P-O(e)(2)(D) would provide that the working price
of a resting ALO Order to buy (sell) that has been repriced would be
adjusted to be equal to its display price (and would not be adjusted
again unless the display price of the order is adjusted) if:
     The Away Market NBO (NBB) re-prices to be equal to or
lower (higher) than the display price of the resting ALO Order to buy
(sell) (proposed Rule 6.62P-O(e)(2)(D)(i)); or
    an ALO Order or Day ISO ALO to sell (buy) is displayed on the
Consolidated Book at a price equal to the working price of the resting
ALO Order to buy (sell) (proposed Rule 6.62P-O(e)(2)(D)(ii)).
    This proposed rule text is similar to proposed Rule 6.62P-
O(e)(1)(C) for Non-Routable Limit Orders, with differences to reflect
the additional circumstances when an ALO Order would be repriced as a
result of contra-side interest on the Consolidated Book. Specifically,
the Exchange proposes that for an ALO Order that has been repriced and
has a non-displayed working price, if the Exchange receives a contra-
side ALO Order (or Day ISO ALO) with a limit price that is equal to or
crosses the working price of the resting ALO Order, the working price
of the resting ALO Order would be adjusted to be equal to its display
price. This proposed functionality would reduce the potential for two
contra-side ALO Orders to have working prices that are locked on the
Consolidated Book.
    Proposed Rule 6.62P-O(e)(2)(E) would provide that when the working
price and display price of an ALO Order to buy (sell) are the same, the
working price would be adjusted higher (lower) only if the display
price of the order is adjusted. This proposed functionality would be
new for Pillar.
    Proposed Rule 6.62P-O(e)(2)(F) would provide that the ALO
designation would be ignored for ALO Orders that participate in an
Auction. This proposed rule is based on Rule 7.31-E(e)(2)(A), which
similarly provides that an ALO Order can participate in an auction and
that its ALO designation would be ignored. This is also new
functionality for options because currently, the Exchange rejects ALOs
if entered outside of Core Trading Hours or during a trading halt and
if resting, are cancelled during a trading halt.
    Proposed Rule 6.62P-O(e)(2)(G) would provide that an ALO Order
cannot be designated with a Non-Display Remove Modifier. Because an ALO
Order is a type of Non-Routable Limit Order, this proposed rule
promotes clarity that the Non-Display Remove Modifier would not be
available for an ALO Order.
    Intermarket Sweep Order (``ISO''). ISOs are currently defined in
Rule 6.62-O as a Limit Order for an options series that instructs the
Exchange to execute the order up to the price of its limit, regardless
of the Away Market Protected Quotations \38\ and that ISOs may only be
entered with a time-in-force of IOC, and the entering OTP Holder must
comply with the provisions of 6.92-O(a)(8). Proposed Rule 6.62P-O(e)(3)
would similarly provide than an ISO is a Limit Order that does not
route and meets the requirements of Rule 6.92-O(a)(8).
---------------------------------------------------------------------------

    \38\ The terms ``Protected Bid,'' ``Protected Offer,'' and
``Quotation'' are defined in Rule 6.92-O(a)(15) and (16) and the
term ``Away Market'' is defined in Rule 1.1. Accordingly, Away
Market Protected Quotations refer to Protected Bids and Protected
Offers that are disseminated pursuant to the OPRA Plan and are the
Best Bid and Best Offer displayed by an Eligible Exchange, as those
terms are defined in Rule 6.92-O.
---------------------------------------------------------------------------

    On Pillar, the Exchange will continue to offer the same type of ISO
functionality, and proposes to add the ability for an OTP Holder or OTP
Firm to designate an ISO with a Day time-in-force designation and
designate a Day ISO as ALO, which functionality is available on the
Exchange's cash equity market as described in Rule 7.31-E(e)(3). The
Exchange proposes to describe the functionality for each type of ISO
separately.
     IOC ISO. Proposed Rule 6.62P-O(e)(3)(A) would define an
IOC ISO as an ISO designated IOC to buy (sell) that would be
immediately traded with orders and quotes to sell (buy) in the
Consolidated Book up to its full size and limit price and may trade
through Away Market Protected Quotations and any untraded quantity of
an IOC ISO will be immediately and automatically cancelled. This
proposed rule is based on Rule 7.31-E(e)(3)(B) and uses Pillar
terminology to describe functions that are currently available for
options trading.
     Day ISO. Proposed Rule 6.62-O(e)(3)(B) would define a Day
ISO as an ISO designated Day to buy (sell) that, if marketable on
arrival, would be immediately traded with orders and quotes to sell
(buy) in the Consolidated Book up to its full size and limit price and
may trade through Away Market Protected Quotations and that any
untraded quantity of a Day ISO would be displayed at its limit price
and may lock or cross Away Market Protected Quotations at the time the
Day ISO is received by the Exchange. This proposed functionality would
be new on the Exchange for options trading and is based on the Day ISO
functionality available on the Exchange's cash equity market, as
described in Rule 7.31-E(e)(3)(C). However, the availability of the Day
time-in-force designation for ISOs would not be new for options
trading, as such orders are currently available on other options
exchanges.\39\ The proposed Day ISO is also consistent with current
Rule 6.95-O(b)(3), which describes an exception to the prohibition on
locking or crossing a Protected Quotation if the Member simultaneously
routed an ISO to execute against the full displayed size of any locked
or crossed Protected Bid or Protected Offer.\40\ Although the Exchange
has not previously availed itself of this exception, this exception to
locking and crossing Protected Bids and Protected Offers would only be
needed if an ISO is designated as Day and therefore would be displayed
at a price that would lock or cross a Protected

Quotation; an IOC ISO would never be displayed and therefore this
existing exception would not be applicable to such orders.
---------------------------------------------------------------------------

    \39\ See Nasdaq Options 3, Section 7(a)(7) (``ISOs may have any
time-in-force designation. . . .'') and CBOE Rules 5.30(a)(2) and
(3). See also Cboe US Options Fix Specifications, dated June 15,
2021, Section 4.4.7, available here: http://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf, which references how a
Day ISO would be processed under specified circumstances.
    \40\ The Commission has previously stated that the requirements
in the Options Linkage Plan relating to Locked and Crossed Markets
are ``virtually identical to those applicable to market centers for
NMS stock under Regulation NMS.'' See also Securities Exchange Act
Release No. 60405 (July 30, 2009), 74 FR 39362, 39368 (August 6,
2009) (Order approving Options Linkage Plan). Accordingly, guidance
relating to the ISO exception for locked and crossed markets for NMS
stocks that specifically contemplate use of Day ISOs is also
applicable to options trading. See Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of Regulation NMS, FAQ
5.02 (``The ISO exception to the SRO lock/cross rules, in contrast,
requires that ISOs be routed to execute against all protected
quotations with a price that is equal to the display price (i.e.,
those protected quotations that would be locked by the displayed
quotation), as well as all protected quotations with prices that are
better than the display price (i.e., those protected quotations that
would be crossed by the displayed quotation).'' Consistent with this
guidance, the Exchange implemented Rule 6.95-O(b)(3). See also Cboe
Rule 5.67(b)(3), and Nasdaq Options 5, Section 3(b)(3).
---------------------------------------------------------------------------

     Day ISO ALO. Proposed Rule 6.62P-O(e)(3)(C) would define a
Day ISO ALO as a Day ISO with an ALO modifier. This proposed order type
is based in part on the Day ISO ALO currently available on the
Exchange's cash equity market, as described in Rule 7.31-E(e)(3)(D),
but with differences to reflect how the order type would function on
the Exchange's options market, as described above. As proposed, on
arrival, a Day ISO ALO to buy (sell) may lock or cross Away Market
Protected Quotations at the time of arrival of the Day ISO ALO but
would not remove liquidity from the Consolidated Book. A Day ISO ALO to
buy (sell) can be designated to be cancelled if it would be displayed
at a price other than its limit price. Proposed Rule 6.62P-
O(e)(3)(C)(i) would provide that if not designated to cancel, a Day ISO
ALO that would lock or cross orders and quotes on the Consolidated Book
would be repriced as specified in proposed Rule 6.62P-O(e)(2)(B).
Proposed Rule 6.62P-O(e)(3)(C)(ii) would provide that once resting, a
DAY ISO ALO would be processed as an ALO Order as specified in proposed
Rule 6.62P-O(e)(2)(C)-(G).
    Complex Orders. Complex Orders are defined in Rule 6.62-O(e). The
Exchange proposes to define Complex Orders for Pillar in proposed Rule
6.62P-O(f) based on Rule 6.62-O(e) and its sub-paragraphs (1) and (2)
without any substantive differences. The Exchange proposes to add
clarifying text that the different options series in a Complex Order
are also referred to as the ``legs'' or ``components'' of the Complex
Order. The Exchange also proposes that proposed Rule 6.62P-O(f) would
provide that a Complex Order would be any order involving the
simultaneous purchase and/or sale of ``two or more options series in
the same underlying security,'' and not use the modifier ``different''
before the phrase ``more option series.'' The Exchange believes that
the word ``different'' is redundant and unnecessary in this context. In
addition, proposed Rule 6.62P-O(f)(1) and (2) would not reference mini-
options contracts, which no longer trade on the Exchange.
    Cross Orders. Currently, the only electronically-entered cross
orders available on the Exchange are Qualified Contingent Cross Orders,
which are defined in Rule 6.62-O(bb) and Commentary .02 to Rule 6.62-O.
In addition, Rule 6.90-O describes how Qualified Contingent Cross
Orders are processed. The Exchange proposes to define the term ``Cross
Orders'' on Pillar in proposed Rule 6.62P-O(g). At this time, the only
Cross Orders that would be available on Pillar for electronic entry
would be Qualified Contingent Cross (``QCC'') Orders. As proposed, QCC
Orders on Pillar would function identically to how Qualified Contingent
Cross Orders function on the OX system, and for purposes of the rules
governing trading on Pillar, the Exchange proposes to merge language
from two rules relating to QCC Orders into a single rule, proposed Rule
6.62P-O(g), using Pillar terminology. Proposed Rule 6.62P-O(g) and
(g)(1) would describe rules generally applicable to electronically-
entered Cross Orders, including QCC Orders, and proposed Rule 6.62P-
O(g)(2) would address requirements specific to QCC Cross Orders.
    Proposed Rule 6.62P-O(g) would provide that ``Cross Orders'' would
be two-sided order messages with instructions to match the identified
buy-side with the identified sell-side at a specified price, which
could either be designated as a limit price or at the market (``cross
price'').\41\ The proposed rule would further provide that a Cross
Order that is not rejected per proposed Rule 6.62P-O(g)(1) would
immediately trade in full at its cross price, would not route, and may
be entered with an MPV of $0.01 regardless of the MPV of the options
series and that Cross Orders may be entered by Floor Brokers from the
Trading Floor or routed to the Exchange from off-Floor.
---------------------------------------------------------------------------

    \41\ The Exchange does not currently offer Cross Orders on its
cash equity market. This proposed rule text uses Pillar terminology
that is based in part on NYSE Chicago Rule 7.31(g).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(g)(1) would provide that a Cross Order would
be rejected if received when the NBBO is crossed or if it would be
traded at a cross price that (i) is at the same price as a displayed
Customer order on the Consolidated Book and (ii) is not at or between
the NBBO. This proposed rule is based on Rule 6.90-O without any
differences.
    Proposed Rule 6.62P-O(g)(1) would further set forth how a Cross
Order designated to trade at the market would be priced. As proposed, a
Cross Order with a cross price at the market would execute at the
midpoint of the NBBO; provided that:
     If there is no NBB, a zero bid would be used (proposed
Rule 6.62P-O(g)(1)(A));
     if there is displayed Customer interest priced equal to
the NBB, NBO or both, the midpoint would be based on the BBO improved
by $0.01 for the side(s) containing displayed Customer interest
(proposed Rule 6.62P-O(g)(1)(B));
     if there is no NBO, such order would be rejected (proposed
Rule 6.62P-O(g)(1)(C)); or
     if the midpoint of the NBBO is in sub-pennies, the order
would trade at the midpoint of the NBBO rounded down to the MPV for the
series (proposed Rule 6.62P-O(g)(1)(D)).
    This proposed rule text is designed to promote clarity and
transparency in Exchange rules regarding how a Cross Order ``at the
market'' would execute in circumstances when there is no NBB or NBO or
there is displayed Customer interest equal to the NBBO.
    Proposed Rule 6.62P-O(g)(2) would define QCC Orders, which would be
the only Cross Orders available on Pillar at this time. As proposed, a
QCC Order must be comprised of an originating order to buy or sell at
least 1,000 contracts that is identified as being part of a qualified
contingent trade coupled with a contra-side order or orders totaling an
equal number of contracts. This proposed rule text is based on Rule
6.62-O(bb) with a non-substantive difference that the Pillar rule would
not reference mini-options contracts, which no longer trade on the
Exchange.
    Proposed Rule 6.62P-O(g)(2)(A) and subparagraphs (i)-(vi) would
define a ``qualified contingent trade'' and is based on Commentary .02
and sub-paragraphs (a)-(f) to Rule 6.62-O without any substantive
differences.
    Proposed Rule 6.62P-O(g)(2)(B) would specify rules governing QCC
Orders entered from the Trading Floor, which can be entered only by
Floor Brokers, and is based on Commentary .01 to Rule 6.90-O. The
proposed rule would provide that while on the Trading Floor, only Floor
Brokers can enter QCC Orders and that Floor Brokers may not enter QCC
Orders for their own account, the account of an associated person, or
an account with respect to which it or an associated person thereof
exercises investment discretion (each a ``prohibited account''). As
further proposed, when executing such orders, Floor Brokers would not
be subject to Rule 6.47-O regarding ``Crossing'' orders. Floor Brokers
must maintain books and records demonstrating that each QCC Order
entered from the Floor was not entered for a prohibited account. Any
QCC Order entered from the Floor that does not have a corresponding
record required by this paragraph will be deemed to have been entered
for a prohibited account in violation of this Rule.

    Proposed Rule 6.62P-O(g)(2)(C) would specify rules governing QCC
Orders entered off-Floor and that OTP Holders must maintain books and
records demonstrating that each such order was so routed. This proposed
rule is based on Commentary .02 to Rule 6.90-O without any substantive
differences.
    To promote clarity, the Exchange proposes to amend Rule 6.90-O to
specify that the rule would not be applicable to trading on Pillar.
    Orders Available Only in Open Outcry. The Exchange proposes to add
to Rule 6.62P-O(h) orders that are available only in open outcry, most
of which are currently defined in Rule 6.62-O.
    First, proposed Rule 6.62P-O(h)(1) would codify an existing order
type, the Clear-the-Book (``CTB'') Order, which is currently only
described in a Regulatory Bulletin.\42\ The proposed definition would
describe the CTB Order, which would be an order type available in open
outcry that would interface with the Consolidated Book, and therefore
with Pillar. As proposed, a CTB Order would be a Limit IOC Order that
may be entered only by a Floor Broker, subsequent to executing an order
in open outcry, that is approved by a Trading Official (the ``TO
Approval''). The CTB Order would be eligible to trade only with contra-
side orders and quotes that were resting in the Consolidated Book prior
to the TO Approval. In addition, proposed Rule 6.62P-O(h)(1)(A)-(C)
would provide that:
---------------------------------------------------------------------------

    \42\ See NYSE Arca Options RB-16-04, dated February 19, 2016
(Rules of Priority and Order Protection in Open Outcry), available
here: https://www.nyse.com/publicdocs/nyse/markets/arca-options/rule-interpretations/2016/NYSE%20Arca%20Options%20RB%2016-04.pdf.
---------------------------------------------------------------------------

     A CTB Order to buy (sell) would trade with contra-side
orders and quotes with a display price below (above) the limit price of
the CTB Order (proposed Rule 6.62P-O(h)(1)(A));
     A CTB Order to buy (sell) would trade with contra-side
orders and quotes that have a display price and working price equal to
the limit price of the CTB Order only if there is displayed Customer
sell (buy) interest at that price, in which case, the CTB Order to buy
(sell) would trade with the displayed Customer interest to sell (buy)
and any non-Customer interest to sell (buy) with a working time earlier
than the latest-arriving displayed Customer interest to sell (buy)
(proposed Rule 6.62P-O(h)(1)(B)); and
     Any unexecuted portion of the CTB Order would cancel after
trading with all better-priced interest and eligible same-priced
interest on the Consolidated Book (proposed Rule 6.62P-O(h)(1)(C)).
    Currently, CTB Orders only trade with displayed Customer interest
and any same-priced displayed non-Customer interest ranked ahead of
such interest in time priority, but do not trade with better-priced
displayed non-Customer interest. In Pillar, per Rule 6.62P-O(h)(1)(B),
CTB Orders would trade with displayed non-Customer interest priced
better than the latest-arriving displayed Customer interest (i.e., a
CTB order buying with a $1.00 limit would now trade with any displayed
interest offered at $0.99). The Exchange believes that this proposed
change would increase execution opportunities and achieve the goal of a
CTB Order, which is to clear priority on the Consolidated Book at the
time of the TO Approval.
    In addition, proposed Rule 6.62P-O(h)(1)(D) would codify existing
regulatory responsibilities of Floor Brokers utilizing CTB Orders to
submit such orders in a timely manner after receiving TO Approval and
would also provide that because CTB Orders are non-routable, Floor
Brokers would be obligated to route orders to better-priced interest to
Away Markets per Rule 6.94-O.\43\
---------------------------------------------------------------------------

    \43\ See id. at p. 2-3 (describing regulatory responsibilities
related to CTB Orders).
---------------------------------------------------------------------------

    The Exchange also proposes to include in Rule 6.62P-O additional
open outcry order types that are currently defined in Rule 6.62-O:
     Proposed Rule 6.62P-O(h)(2) would define ``Facilitation
Order'' and is based on the Rule 6.62-O(j) definition of Facilitation
Order without any differences.
     Proposed Rule 6.62P-O(h)(3) would define ``Mid-Point
Crossing Order'' and is based on the Rule 6.62-O(q) definition of Mid-
Point Crossing Order without any differences.
     Proposed Rule 6.62P-O(h)(4) would define ``Not Held
Order'' and is based on the Rule 6.62-O(f) definition of Not Held Order
without any differences.
     Proposed Rule 6.62P-O(h)(5) would define ``Single Stock
Future (``SSF'')/Option Order'' and is based on the Rule 6.62-O(i)
definition of Single Stock Future (``SSF'')/Option Order without any
differences.
     Proposed Rule 6.62P-O(h)(6)(A) would define a ``Stock/
Option Order'' and is based on the Rule 6.62-O(h)(1) definition of
Stock/Option Order without any differences.
     Proposed Rule 6.62P-O(h)(6)(B) and subparagraphs (i) and
(ii) would define a ``Stock/Complex Order'' and is based on the Rule
6.62-O(h)(2) definition of Stock/Complex Order with its sub-paragraphs
without any differences.
    The Exchange proposes that after the transition to Pillar, the
following open outcry order types, which are currently described in
Rule 6.62-O but are not used by Floor Brokers, would not be added to
proposed Rule 6.62P-O governing orders and modifiers: One cancels the
other (OCO) Order and Stock Contingency Order.
    Additional Order Instructions and Modifiers. The Exchange proposes
to specify the additional order instructions and modifiers that would
be available in Pillar in proposed Rule 6.62P-O(i).
    Proactive if Locked/Crossed Modifier. Proposed Rule 6.62P-O(i)(1)
would provide that a Limit Order that is displayed and eligible to
route and designated with a Proactive if Locked/Crossed Modifier would
route to an Away Market if the Away Market locks or crosses the display
price of the order and that if any quantity of the routed order is
returned unexecuted, the order would be displayed in the Consolidated
Book. This would be new functionality for options trading on the
Exchange and is based on the Proactive if Locked/Crossed Modifier
available on the Exchange's cash equity platform, as described in Rule
7.31-E(i)(1) without any differences.
    Self-Trade Prevention (``STP'') Modifier. Self-Trade Prevention
(``STP'') Modifiers are currently defined in Commentary .01 to Rule
6.76A-O and are available only for Market Maker orders and quotes. On
Pillar, the Exchange proposes to expand the availability of STP to all
orders and quotes. Because STP Modifiers are an instruction that can be
added to an order or quote, the Exchange proposes that for Pillar, STP
Modifiers would be described in proposed Rule 6.62P-O(i)(2). This is
based on the structure of the Exchange's cash equity rules, which also
describe the STP Modifier in Rule 7.31-E(i).
    Proposed Rule 6.62P-O(i)(2) would provide that an Aggressing Order
or Aggressing Quote to buy (sell) designated with one of the STP
modifiers in proposed Rule 6.62P-O(i)(2) would be prevented from
trading with a resting order or quote to sell (buy) also designated
with an STP modifier from the same MPID, and, if specified, any sub-
identifier of that MPID and that the STP modifier on the Aggressing
Order or Aggressing Quote would control the interaction between two
orders and/or quotes marked with STP modifiers. In addition, STP would
not be applicable during an auction or to Cross Orders or when a
Complex Order legs out. This proposed rule text

is based on Commentary .01 to Rule 6.76A with non-substantive
differences to use Pillar terminology.
    Proposed Rule 6.62P-O(i)(2) would further provide that if the
condition for a Limit Order designated FOK, an AON Order, or an order
with an MTS modifier cannot be met because of STP modifiers, such order
would either be cancelled or placed on the Consolidated Book, as
applicable. This proposed rule text provides clarity that if a
condition of an order cannot be met because of STP modifiers, the order
would either cancel (i.e., a Limit Order designated FOK), or be added
to the Consolidated Book (i.e., an AON Order or an order with an MTS
modifier), and then such resting orders would function as described in
Rule 6.62P-O.
    The proposed rule would further provide that Aggressing Orders or
Aggressing Quotes would be processed as follows:
     Proposed Rule 6.62P-O(i)(2)(A) would describe STP Cancel
Newest (``STPN'') and provide that an Aggressing Order or Aggressing
Quote to buy (sell) marked with the STPN modifier would not trade with
resting interest to sell (buy) marked with any STP modifier from the
same MPID; that the Aggressing Order or Aggressing Quote marked with
the STPN modifier would be cancelled; and that the resting order or
quote marked with one of the STP modifiers will remain on the
Consolidated Book. This proposed rule is based on Commentary .01(a) to
Rule 6.76A-O with non-substantive differences to use Pillar
terminology.
     Proposed Rule 6.62P-O(i)(2)(B) would describe STP Cancel
Oldest (``STPO'') and provide that an Aggressing Order or Aggressing
Quote to buy (sell) marked with the STPO modifier would not trade with
resting interest to sell (buy) marked with any STP modifier from the
same MPID; that the resting order or quote marked with the STP modifier
would be cancelled; and that the Aggressing Order or Aggressing Quote
marked with the STPO modifier would be placed on the Consolidated Book.
This proposed rule is based on Commentary .01(b) to Rule 6.76A-O with
non-substantive differences to use Pillar terminology.
     Proposed Rule 6.62P-O(i)(2)(C) would describe STP Cancel
Both (``STPC'') and provide that an Aggressing Order or Aggressing
Quote to buy (sell) marked with the STPC modifier would not trade with
resting interest to sell (buy) marked with any STP modifier from the
same MPID and that the entire size of both orders and/or quotes would
be cancelled. This proposed rule is based on Commentary .01(c) to Rule
6.76A-O with non-substantive differences to use Pillar terminology.
    Minimum Trade Size Modifier. The Exchange proposes to add the
Minimum Trade Size (``MTS'') Modifier, which would be new functionality
for options trading on Pillar that is based on the same functionality
currently available for cash equity securities trading on Pillar, as
described in Rule 7.31-E(i)(3). As with the MTS Modifier for cash
equity trading, the proposed MTS Modifier for options traded on Pillar
would be available only for non-displayed orders. Accordingly, proposed
Rule 6.62P-O(i)(3) would provide that a Limit IOC Order or Non-
Displayed Limit Order may be designated with an MTS Modifier.\44\
---------------------------------------------------------------------------

    \44\ For cash equity trading, the MTS Modifier is also available
for an MPL Order or Tracking Order, which are non-displayed order
types available on the Exchange's cash equity trading platform that
would not be available for options trading on Pillar. See Rule 7.31-
E(i)(3).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(i)(3)(A) would provide that the quantity of
the MTS Modifier may be less than the order quantity; however, an order
would be rejected if it has an MTS Modifier quantity that is larger
than the size of the order. This proposed rule is based on Rule 7.31-
E(i)(3)(A) with differences only to reflect that the concept of a round
lot is not applicable for options trading.
    Proposed Rule 6.62P-O(i)(3)(B) would provide that one of the
following instructions must be specified with respect to whether an
order to buy (sell) with an MTS Modifier would trade on arrival with:
(i) Orders or quotes to sell (buy) in the Consolidated Book that in the
aggregate meet such order's MTS; or (ii) only individual order(s) or
quote(s) to sell (buy) in the Consolidated Book that each meets such
order's MTS. This proposed rule is based on Rule 7.31-E(i)(3)(B) and
sub-paragraphs (i) and (ii) with only non-substantive differences to
use options trading terminology (e.g., Consolidated Book instead of
NYSE Arca Book and reference to quotes). Otherwise, the functionality
would be identical on both the options and cash equity trading
platforms.
    Proposed Rule 6.62P-O(i)(3)(C) would provide that an order with an
MTS Modifier that is designated Day or GTC that cannot be executed
immediately on arrival would not trade and would be ranked in the
Consolidated Book. In such case, the order to buy (sell) with an MTS
Modifier to buy (sell) that is ranked in the Consolidated Book would
not be eligible to trade: (i) At a price equal to or above (below) any
orders or quotes to sell (buy) that are displayed at a price equal to
or below (above) the working price of such order with an MTS Modifier;
or (ii) at a price above (below) any orders or quotes to sell (buy)
that are not displayed and that have a working price below (above) the
working price of such order with an MTS Modifier. This proposed rule is
based on Rule 7.31-E(i)(3)(C) and sub-paragraphs (i) and (ii) with only
non-substantive differences to use options trading terminology and to
reflect the availability of the GTC time-in-force modifier for Non-
Displayed Limit Orders. Otherwise, the functionality would be identical
on both the options and cash equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(D) would provide that an order with an
MTS Modifier that is designated IOC and cannot be immediately executed
would be cancelled. This proposed rule is based on Rule 7.31-E(i)(3)(D)
without any differences and the functionality would be identical on
both the options and cash equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(E) would provide that a resting order
to buy (sell) with an MTS Modifier would trade with individual orders
and quotes to sell (buy) that each meet the MTS and that (i) if an
Aggressing Order or Aggressing Quote to sell (buy) does not meet the
MTS of the resting order to buy (sell) with an MTS Modifier, that
Aggressing Order or Aggressing Quote would not trade with, and may
trade, through such resting order with an MTS Modifier; and (ii) if a
resting non-displayed order or quote to sell (buy) did not meet the MTS
of a same-priced resting order or quote to buy (sell) with an MTS
Modifier, a subsequently arriving order or quote to sell (buy) that
meets the MTS would trade before such resting non-displayed order or
quote to sell (buy) at that price. This proposed rule is based on Rule
7.31-E(i)(3)(E) and sub-paragraphs (i) and (ii) with only non-
substantive differences to use options trading terminology. Otherwise,
the functionality would be identical on both the options and cash
equity trading platforms.
    Proposed Rule 6.62P-O(i)(3)(F) would provide that a resting order
with an MTS Modifier would be cancelled if it is traded in part or
reduced in size and the remaining quantity is less than such order's
MTS. This proposed rule is based on Rule 7.31-E(i)(3)(F) without any
differences and the functionality would be identical on both the
options and cash equity trading platforms.
    In connection with proposed Rule 6.62P-O, the Exchange proposes to
add the following preamble to Rule 6.62-O: ``This Rule will not be
applicable to trading on Pillar.'' This proposed

preamble is designed to promote clarity and transparency in Exchange
rules that Rule 6.62-O would not be applicable to trading on Pillar.
Proposed Rule 6.37AP-O: Market Maker Quotations
    Current Rule 6.37A-O describes Market Maker quoting obligations,
including defining ``quotations'' and describing the treatment to such
quotations. Proposed Rule 6.37AP-O would set forth Market Maker quoting
obligations under Pillar.
     First, Rule 6.37AP-O(a) would be based on the current rule
and would provide that a Market Maker may enter quotations only in the
issues included in its appointment. Proposed Rule 6.37AP-O(a)(1) would
provide that the term ``quote'' or ``quotation'' means ``a bid or offer
sent by a Market Maker that is not sent as an order'' and that ``[o]nce
received by the Exchange, a subsequent quotation sent by a Market Maker
replaces that Market Maker's previously displayed same-side
quotation.'' This proposed text adds clarity to the existing definition
that a Market Maker quote is distinct from a Market Maker order and
that a subsequent quote will cancel an existing quote.
     Proposed Rule 6.37AP-O(a)(2) would provide that a Market
Maker may designate a quote it sends as either a Non-Routable Limit
Order or an ALO Order and such quotes would be processed in the same
way as those orders are processed under proposed Rule 6.62P-O. The
Exchange notes that these two quote types replace the existing quote
types (i.e., MMLO, MMALO and MMRP), which will no longer be offered
under Pillar. Because proposed Rule 6.62P-O(e)(1) and (2) would
describe the treatment of a quote designated as Non-Routable Limit
Order or an ALO Order, the Exchange will not include a section in
proposed Rule 6.37AP-O regarding the treatment of such quotes.
     Proposed Rule 6.37AP-O(b)--(e) would be substantively
identical to current Rule 6.37A-O(b)--(e) with non-substantive
differences to change the term ``shall'' to ``will.'' Proposed
Commentary .01 to Rule 6.37AP-O would be substantively identical to
Commentary .01 to Rule 6.37A-O, with non-substantive differences to
streamline the rule text.
    The Exchange also proposes a non-substantive change to paragraph
(b) of Rule 6.65A-O (Limit-Up and Limit-Down During Extraordinary
Market Volatility) to correct a cross reference to Market Maker quoting
obligations as set forth in Rule 6.37AP-O(b) and (c). Current Rule
6.65A(b) erroneously cross-references Rule 6.37B-O(b) and (c).
    In connection with proposed Rule 6.37AP-O, the Exchange proposes to
add the following preamble to Rule 6.37A-O: ``This Rule will not be
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.37A-O
would not be applicable to trading on Pillar.
Proposed Rule 6.40P-O: Pre-Trade and Activity-Based Risk Controls
    For the OX system, current Rule 6.40-O sets forth the activity-
based Risk Limitation Mechanisms for orders and quotes, which are
designed to help OTP Holders and OTP Firms effectively manage risk
during periods of increased and significant trading activity. With the
transition to Pillar, the Exchange proposes to incorporate new risk
control functionality that is based on both existing activity-based
risk controls for options and pre-trade risk controls that are
available on the Exchange's cash equity platform. Proposed Rule 6.40P-O
would describe the activity-based controls with updated functionality
under Pillar and would also describe new optional pre-trade risk
controls that are based on pre-trade risk controls available on the
Exchange's cash equity platform, as described in Rule 7.19-E, with
proposed differences to reference quotes and proposed new Pillar
functionality.
    Proposed Rule 6.40P-O(a) would set forth the following definitions
that would be used for purposes of the Rule:
     The term ``Entering Firm'' would mean an OTP Holder or OTP
Firm (including those acting as Market Makers) (proposed Rule 6.40P-
O(a)(1)). This proposed definition is based in part on the definition
of ``Entering Firm'' in Rule 7.19-E(a)(1) and the Exchange believes
that the addition of this term would add clarity to the proposed rule.
     The term ``Pre-Trade Risk Controls'' would refer to two
optional limits that an Entering Firm may utilize with respect to its
trading activity on the Exchange (proposed Rule 6.40P-O(a)(2)). These
controls would be the ``Single Order Maximum Notional Value Risk
Limit'' and the ``Single Order Maximum Quantity Risk Limit.'' The
proposed Pre-Trade Controls are based on the substantially identical
risk controls available on the Exchange's cash equity market, as
described in Rules 7.19-E(a)(3) and (4), respectively, but differ in
that the proposed rule would also apply to quotes and specifies the
treatment of orders designated GTC.
    [cir] The term ``Single Order Maximum Notional Value Risk Limit''
would refer to a pre-established maximum dollar amount for a single
order or quote to be applied one time (proposed Rule 6.40P-O(a)(2)(A)).
This definition would also provide that orders designated GTC would be
subject to this pre-trade risk control only once.
    [cir] The term ``Single Order Maximum Quantity Risk Limit'' would
refer to a pre-established maximum number of contracts that may be
included in a single order or quote before it can be traded (proposed
Rule 6.40P-O(a)(2)(B)). This definition would also provide that orders
designated GTC would be subject to this pre-trade risk control only
once.
     The term ``Activity-Based Risk Controls'' would refer to
three activity-based risk limits that an Entering Firm may apply to its
orders and quotes in an options class based on specified thresholds
measured over the course of an Interval (to be defined below) (proposed
Rule 6.40P-O(a)(3)). The proposed Activity-Based Risk Controls are
based on the substantially identical risk controls set forth in current
Rule 6.40-O(b)-(d), except that on Pillar, a Market Maker's orders and
quotes would be aggregated and applied towards each risk limit (as
opposed to current functionality, where a Market Maker's orders and
quotes are counted separately).
    [cir] The term ``Transaction-Based Risk Limit'' would refer to a
pre-established limit on the number of an Entering Firm's orders and
quotes executed in a specified class of options per Interval (proposed
Rule 6.40P-O(a)(3)(A)). This risk control is based on the substantially
identical risk control set forth in current Rule 6.40-O(b), except as
noted above.
    [cir] The term ``Volume-Based Risk Limit'' would refer to a pre-
established limit on the number of contracts of an Entering Firm's
orders and quotes that could be executed in a specified class of
options per Interval (proposed Rule 6.40P-O(a)(3)(B)). This risk
control is based on the substantially identical risk control set forth
in current Rule 6.40-O(c), except as noted above.
    [cir] The term ``Percentage-Based Risk Limit'' would refer to a
pre-established limit on the percentage of contracts executed in a
specified class of options as measured against the full size of such
Entering Firm's orders and quotes executed per Interval (proposed Rule
6.40P-O(a)(3)(C)). The proposed definition would also provide that to
determine whether an Entering Firm has breached the specified
percentage limit, the Exchange would calculate the percent of each
order or quote in a

specified class of option that is executed during an Interval (each, a
``percentage''), and sum up those percentages. As further proposed this
definition would state that this risk limit would be breached if the
sum of the percentages exceeds the pre-established limit. This risk
control is based on the substantially identical risk control set forth
in current Rule 6.40-O(d), except as noted above.
     The term ``Global Risk Control'' would refer to a pre-
established limit on the number of times an Entering Firm may breach
its Activity-Based Risk Controls per Interval (proposed Rule 6.40P-
O(a)(4)). This proposed definition is based on the substantially
identical functionality set forth in current Rule 6.40-O(f).
     The term ``Interval'' would refer to the configurable time
period during which the Exchange would determine if an Activity-Based
Risk Control or the Global Risk Control has been breached (proposed
Rule 6.40P-O(a)(5)). This proposed definition is consistent with
current Rule 6.40-O, which contains references throughout to a ``time
period'' during which the Exchange will determine whether a breach has
occurred. The Exchange believes this proposed definition would add
clarity and transparency to Exchange rules.
    Proposed Rule 6.40P-O(b) would set forth how the Pre-Trade,
Activity-Based and Global Risk Controls could be set or adjusted.
Proposed Rule 6.40P-O(b)(1) would provide that these risk controls may
be set before the beginning of a trading day and may be adjusted during
the trading day. Proposed Rule 6.40P-O(b)(2) would provide that
Entering Firms may set these risk controls at the MPID level or at one
or more sub-IDs associated with that MPID, or both. Proposed Rule
6.40P-O(b) is based on Rule 7.19-E(b)(3)(A)-(B) but differs in that the
proposed rule includes Activity-Based and Global Risk Controls in
addition to Pre-Trade Risk Controls.
    Proposed Rule 6.40P-O(c) would set forth the Automated Breach
Actions that the Exchange would take if a designated risk limit is
breached. Proposed Rule 6.40P-O(c)(1)(A)(i)-(ii) would set forth the
automated breach actions for the Pre-Trade Risk Controls.
     Proposed Rule 6.40P-O(c)(1)(A)(i) would provide that a
Limit Order or quote that breaches the designated limit of either a
Single Order Maximum Notional Value Risk Limit or Single Order Maximum
Quantity Risk Limit would be rejected.
     Proposed Rule 6.40P-O(c)(1)(A)(ii) would provide that a
Market Order that breaches the designated limit of a Single Order
Maximum Quantity Risk Limit would be rejected. The proposed rule would
also provide that a Market Order that breaches the designated limit of
a Single Order Notional Value Risk Limit would be rejected if the order
arrived during continuous trading or canceled if the order was received
during a pre-open state and the quantity remaining to trade after an
Auction concludes breaches the designated limit.
    Proposed Rule 6.40P-O(c)(1)(A)(i)-(ii) is based on Rule 7.19-
E(c)(2) but differs in that it specifies the treatment of Limit Orders
and Market Orders (the latter having different treatment based on when
such orders arrive at the Exchange) and expands application of the
check to include quotes.
    Proposed Rule 6.40P-O(c)(2) would set forth the automated breach
actions for the Activity-Based Risk Controls.
     Proposed Rule 6.40P-O(c)(2)(A) would first specify that an
Entering Firm acting as a Market Maker would be required to apply one
of the Activity-Based Risk Controls to all of its orders and quotes;
whereas an Entering Firm that is not acting as a Market Maker would
have the option, but would not be required, to apply one of the
Activity-Based Risk Controls to its orders. The requirement that Market
Makers utilize Activity-Based Risk Controls for all quotes mirrors the
requirements set forth in Rule 6.40-O, Commentary .04(a); however, the
proposed rule differs in that it likewise requires Market Makers to
apply one of the Activity-Based Risk Controls to all of its orders. The
proposed optionality of the Activity-Based Risk controls for orders
sent by Entering Firms not acting as Marker Maker mirrors current Rule
6.40-O, Commentary .04(b)).
     Proposed Rule 6.40P-O(c)(2)(B) would provide that to
determine when an Activity-Based Risk Control has been breached, the
Exchange would maintain Trade Counters that would be incremented every
time an order or quote trades, including any leg of a Complex Order,
and would aggregate the number of contracts traded during each such
execution. As further proposed, an Entering Firm may opt to exclude any
orders designated IOC or FOK from being considered by a Trade Counter.
This is consistent with existing functionality set forth in Rule 6.40-
O(a) and Commentary .07, except, as noted above, there would not be
separate Trade Counters for a Market Maker's quotes and orders.
Instead, a Market Maker's quotes and orders in a given option class
would be aggregated (i.e., counted together).
     Proposed Rule 6.40P-O(c)(2)(C) would provide that each
Entering Firm must select one of three Automated Breach Actions for the
Exchange to take should the Entering Firm breach an Activity-Based Risk
Control.
    [cir] ``Notification Only.'' As set forth in proposed Rule 6.40P-
O(c)(2)(C)(i), if this option is selected, the Exchange would continue
to accept new order and quote messages and related instructions and
would not cancel any unexecuted orders or quotes in the Consolidated
Book. With the ``Notification Only'' action, the Exchange would provide
such notifications, but would not take any other automated actions with
respect to new or unexecuted orders. This proposed functionality is not
currently available in the event of a breach of current Rule 6.40-O,
but is substantially identical to the Notification Only option set
forth in Rule 7.19-E(c)(3)(A)(i) for breach of the Gross Credit Risk
Limit on the Exchange's cash equity platform. The Exchange believes
this proposed option would provide Entering Firms more control over how
Activity-Based Risk Controls are implemented and would add consistency
to the risk controls already offered under Pillar on the Exchange's
cash equity platform.
    [cir] ``Block Only.'' As set forth in proposed Rule 6.40P-
O(c)(2)(C)(ii), if this option is selected, the Exchange would reject
new order and quote messages and related instructions, provided that
the Exchange would continue to process instructions from the Entering
Firm to cancel one or more orders or quotes (including Auction-Only
Orders) in full. The proposed rule would also provide that the Exchange
would follow any instructions specified in paragraph (e) of the
proposed Rule (and described below). This proposed functionality is not
currently available under current Rule 6.40-O, but is substantially
identical to the Block Only option set forth in Rule 7.19-
E(c)(3)(A)(ii) for breach of the Gross Credit Risk Limit on the
Exchange's cash equity platform. The Exchange believes this proposed
option would provide Entering Firms more control over how Activity-
Based Risk Controls are implemented and would add consistency to the
risk controls already offered under Pillar on the Exchange's cash
equity platform.
    [cir] ``Cancel and Block.'' As set forth in proposed Rule 6.40P-
O(c)(2)(C)(iii), if this option is selected, in addition to the Block
actions described above, the Exchange would also cancel all unexecuted
orders and quotes in the Consolidated Book other than Auction-Only
Orders and orders designated GTC. This proposed Cancel and Block
functionality is substantially similar to the automated breach action
taken by

the Exchange per current Rule 6.40-O(e) and Commentaries .01 and .02
thereto, except that under the current rules, this is default (not
optional) functionality. Additionally, this proposed rule is
substantially identical to the Cancel and Block option set forth in
Rule 7.19-E(c)(3)(A)(iii) for breach of the Gross Credit Risk Limit on
the Exchange's cash equity platform. The Exchange believes this
proposed option would provide Entering Firms more control over how
Activity-Based Risk Controls are implemented and would add consistency
to the risk controls already offered under Pillar on the Exchange's
cash equity platform.
     Finally, proposed Rule 6.40P-O(c)(2)(D) would provide that
if an Entering Firm breaches an Activity-Based Risk Control, the
Automated Breach Action selected would be applied to its orders and
quotes in the affected class of options. This proposed action is
consistent with current Rule 6.40-O(e) and Commentaries .01 and .02
thereto which provide that, upon a breach, the Exchange will cancel
existing and suspend new orders and quotes trading in the affected
class.
    Proposed Rule 6.40P-O(c)(2)(E) would provide that the Exchange
would specify by Trader Update any applicable minimum, maximum and/or
default settings for the Activity-Based Risk Controls, subject to the
following:
     For the Transaction-Based Risk Limit, the minimum setting
would not be less than one and the maximum setting would not be more
than 2,000 (proposed Rule 6.40P-O(c)(2)(E)(i)).
     For the Volume-Based Risk Limit, the minimum setting would
not be less than one and the maximum setting would not be more than
500,000 (proposed Rule 6.40P-O(c)(2)(E)(ii)).
     For the Percentage-Based Risk Limit, the minimum setting
would not be less than 50 and the maximum setting would not be more
than 200,000 (proposed Rule 6.40P-O(c)(2)(E)(iii)).
    These proposed settings are identical to the Exchange-determined
settings provided under current Rule 6.40-O, Commentary .03.
    Proposed Rule 6.40P-O(c)(2)(F) would provide that the Exchange
would specify by Trader Update the Interval for the Activity-Based Risk
Controls, subject to the following:
     The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time (proposed Rule
6.40P-O(c)(2)(F)(i)).
     For transactions occurring in the Core Open Auction, per
Rule 6.64P-O, the applicable time period would be the lesser of (i) the
time between the Core Open Auction of a series and the initial
transaction or (ii) the Interval (proposed Rule 6.40P-O(c)(2)(F)(ii)).
    These proposed settings are identical to the Exchange-specified
time periods provided under current Rule 6.40-O, Commentary .03, except
that the Exchange has included a maximum allowable time period for the
Interval, which adds clarity to the rule.
    Proposed Rule 6.40P-O(c)(3) would set forth the automated breach
actions for the Global Risk Controls set by an Entering Firm.
     Proposed Rule 6.40P-O(c)(3)(A) would provide that if the
Global Risk Control limit is breached, the Exchange would Cancel and
Block, per proposed Rule 6.40P(c)(2)(C)(iii).
     Proposed Rule 6.40P-O(c)(3)(B) would provide that if an
Entering Firm breaches the Global Risk Control, the Automated Breach
Action would be applied to all orders and quotes of the Entering Firm
in all classes of options regardless of which class(es) of options
caused the underlying breach of Activity-Based Risk Controls. This
proposed functionality is consistent with the automated breach action
taken in the event of a breach of current Rule 6.40-O(f), per current
Rule 6.40-O, Commentaries .01 and .02.
     Proposed Rule 6.40P-O(c)(3)(C) would provide that the
Exchange would specify by Trader Update any applicable minimum, maximum
and/or default settings for the Global Risk Controls, provided that the
minimum setting would not be less than 25 and the maximum setting would
not be more than 100. These proposed settings are based on the
Exchange-determined setting provided under current rule 6.40-O,
Commentary .03, except that the current rule allows for a minimum
setting of one (1) whereas the proposed rule is increasing that minimum
to twenty-five (25), which the Exchange believes is a more appropriate
minimum.
     Proposed Rule 6.40P-O(c)(3)(D) would provide that the
Exchange would specify by Trader Update the Interval for the Global
Risk Controls, subject to the following:
    [cir] The Interval would not be less than 100 milliseconds and
would not be greater than 300,000 milliseconds, inclusive of the
duration of any trading halt occurring within that time, per proposed
Rule 6.40P-O(c)(3)(D)(i).
    [cir] For transactions occurring in the Core Open Auction, per Rule
6.64P-O, the applicable time period is the lesser of (i) the time
between the Core Open Auction of a series and the initial transaction
or (ii) the Interval, per proposed Rule 6.40P-O(c)(3)(D)(ii).
    Proposed Rule 6.40P-O(d) describes how an Entering Firm's ability
to enter orders, quotes, and related instructions would be reinstated
after a ``Block Only'' or ``Cancel and Block'' Automated Breach Action
has been triggered. In such case, proposed Rule 6.40P-O(d) provides
that the Exchange would not reinstate the Entering Firm's ability to
enter orders and quotes and related instructions on the Exchange (other
than instructions to cancel one or more orders or quotes (including
Auction-Only Orders and orders designated GTC) in full) without the
consent of the Entering Firm, which may be provided via automated
contact if it was a breach of an Activity-Based Risk Control. As
further proposed, an Entering Firm that breaches the Global Risk
Control would not be reinstated unless the Entering Firm provides
consent via non-automated contact with the Exchange. This proposed
functionality is consistent with current Rule 6.40-O, Commentary .02
regarding the need for an Entering Firm to make automated or non-
automated contact with the Exchange, as applicable, prior to being
reinstated. Proposed Rule 6.40P-O(d) is also consistent with the more
granular level of risk control under Pillar functionality available for
cash equity trading per Rule 7.19-E(d).
    Proposed Rule 6.40P-O(e) would set forth new ``kill switch''
functionality, which would allow an Entering Firm to direct the
Exchange to take certain bulk cancel or block actions with respect to
orders and quotes. In contrast to the Automated Breach Actions
described above, which the Exchange would take automatically after the
breach of a risk limit, the Exchange would not take any of the Kill
Switch Actions without express direction from an Entering Firm.
    Proposed Rule 6.40P-O(e) would specify that an Entering Firm could
direct the Exchange to take one or more of the following actions with
respect to orders and quotes at either an MPID, or if designated, sub-
ID Level: (1) Cancel all Auction-Only Orders; (2) Cancel all orders
designated GTC; (3) Cancel all unexecuted orders and quotes in the
Consolidated Book other than Auction-Only Orders and orders designated
GTC; or (4) Block the entry of any new order and quote messages and
related instructions, provided that the Exchange would continue to
accept instructions from Entering Firms to cancel one or more orders or
quotes (including Auction-Only Orders and orders designated GTC) in
full, and later, reverse that block. The proposed post-trade Kill
Switch Actions are not

currently available per Rule 6.40-O and are substantially identical to
the Kill Switch Action available on the Exchange's cash equity platform
pursuant to Rule 7.19-E(e), with a difference to address the handling
of orders designated GTC, which are not available on the cash equity
platform. The Exchange believes that offering this functionality for
options trading under Pillar would give Entering Firms more flexibility
in setting risk controls for options trading and add consistency with
the Exchange's risk control functionality available for cash equity
trading.
    Proposed Commentary .01 to Rule 6.40P-O would provide that the Pre-
Trade, Activity-Based, and Global Risk Controls described in the
proposed Rule 6.40P-O are meant to supplement, and not replace, the OTP
Holder's or OTP Firm's own internal systems, monitoring, and procedures
related to risk management and are not designed for compliance with
Rule 15c3-5 under the Exchange Act.\45\ Responsibility for compliance
with all Exchange and SEC rules remains with the OTP Holder or OTP
Firm. This proposed language is not included in existing Rule 6.40-O,
and is based on Commentary .01 to Rule 7.19-E. The proposed rule makes
clear that use of the proposed controls alone does not constitute
compliance with Exchange rules or the Exchange Act.
---------------------------------------------------------------------------

    \45\ 17 CFR 240.15c3-5.
---------------------------------------------------------------------------

    In connection with proposed Rule 6.40P-O, the Exchange proposes to
add the following preamble to Rule 6.40-O: ``This Rule will not be
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.40-O
would not be applicable to trading on Pillar.
Proposed Rule 6.41P-O: Price Reasonability Checks--Orders and Quotes
    The Exchange proposes to describe its Price Reasonability Checks
for orders and quotes in proposed Rule 6.41P-O.\46\ For the OX system,
the concept of ``Price Reasonability Checks'' for Limit Orders are
described in Rule 6.60-O(c) and the concept of price protection filters
for quotes are described in Rule 6.61-O. The proposed ``Price
Reasonability Checks'' on Pillar would be applicable to both orders and
quotes and would work similarly to how the current price checks for
Limit Orders function on the OX system, with updates to functionality
consistent with Pillar. The Exchange proposes to locate the rule text
for the proposed Price Reasonability Checks in Rule 6.41P-O to
immediately follow Rule 6.40P-O regarding the Pre-Trade and Activity-
Based Controls, as this placement would group the risk controls
together and make Exchange rules easier to navigate.
---------------------------------------------------------------------------

    \46\ Current Rule 6.41-O is held as Reserved. The Exchange
proposes to renumber the proposed rule with the ``P'' modifier and
remove reference to ``Reserved.''
---------------------------------------------------------------------------

    Proposed Rule 6.41P-O(a)(1)-(3) would set forth the circumstances
under which the proposed Price Reasonability Checks would apply.
Proposed Rule 6.41P-O(a) would provide that the Exchange would apply
the Price Reasonability Checks, as defined in proposed paragraphs (b)
and (c), to all Limit Orders and quotes during continuous trading on
each trading day, subject to the following:
     Proposed Rule 6.41P-O(a)(1) would provide that a Limit
Order or quote received during a pre-open state would be subject to the
proposed Price Reasonability Checks after an Auction concludes; that a
Limit Order or quote that was resting on the Consolidated Book before a
trading halt would be subject to the proposed Price Reasonability
Checks again after the Trading Halt Auction; and that a put option
message to buy would be subject to the Arbitrage Check regardless of
when it arrives. This proposed rule is based in part on current Rule
6.60-O(a), which provides that the Price Reasonability Checks (for
orders) are applied when a series opens or reopens for trading.
Proposed Rule 6.41P-O(a)(1) adds additional detail and granularity
regarding when the proposed Price Reasonability Checks would be applied
under Pillar.
     Proposed Rule 6.41P-O(a)(2) would provide that if the
calculation of the Price Reasonability Check is not consistent with the
MPV for the series, it would be rounded down to the nearest price
within the applicable MPV, which text adds new details regarding Pillar
rounding functionality.
     Proposed Rule 6.41P-O(a)(3) would provide that the
proposed Price Reasonability Checks would not apply to (i) any options
series for which the underlying security has a non-standard cash or
stock deliverable as part of a corporate action; (ii) any options
series for which the underlying security is identified as over-the-
counter (``OTC''); (iii) any option series on an index; and (iv) any
option series for which the Exchange determines it is necessary to
exclude underlying securities in the interests of maintaining a fair
and orderly market, which the Exchange would announce by Trader Update.
Proposed Rule 6.41P-O(a)(3) is based on current Commentary .01 to Rule
6.60-O (orders) and 6.61-O (quotes), with a non-substantive difference
that the proposed rule no longer references Binary Return Derivatives
(``ByRDs'') because ByRDs are no longer traded on the Exchange.
    Proposed Rule 6.41P-O(b) would set forth the ``Arbitrage Checks''
for buy orders or quotes, which subset of Price Reasonability Checks
are based on the principle that an option order is in error and should
be rejected (or canceled) when the same result can be achieved on the
market for the underlying equity security at a lesser cost.
     Proposed Rule 6.41P-O(b)(1) relates to ``puts'' and would
provide that order or quote messages to buy for put options would be
rejected if the price of the order or quote is equal to or greater than
the strike price of the option, which is substantively identical to
current Rule 6.60-O(c)(1)(A) for orders, with a proposed difference
that proposed ``Arbitrage Check'' would also apply to quotes.
     Proposed Rule 6.41P-O(b)(2) relates to ``calls'' and would
provide that order or quote messages to buy for call options would be
rejected or canceled (if resting) if the price of the order or quote is
equal to or greater than the last sale price of the underlying security
on the Primary Market, plus a specified dollar amount to be determined
by the Exchange and announced by Trader Update. This proposed rule is
substantially similar to current Rule 6.60-O(c)(1)(B) for orders, with
two differences. First, the proposed ``Arbitrage Checks'' would also
apply to quotes. Second, because the Exchange is monitoring last sales
from the Primary Market, the Exchange proposes that the Exchange-
specified dollar amount for the Checks would be based on the last sale
on the Primary Market rather than on the Consolidated Last Sale.
    Proposed Rule 6.41P-O(c) would set forth the ``Intrinsic Value
Checks'' for orders or quotes to sell, which are designed to protect
sellers of calls and puts from presumptively erroneous executions based
on the ``Intrinsic Value'' of an option.
     Proposed Rule 6.41P-O(c)(1)-(2) would set forth how the
Intrinsic Value of an option would be determined. Proposed Rule 6.41P-
O(c)(1) would provide that the Intrinsic Value for a put option is
equal to the strike price minus the last sale price of the underlying
security on the Primary Market. Proposed Rule 6.41P-O(c)(2) would
provide that the Intrinsic Value for a call option is equal to the last
sale price of the underlying security on the Primary Market minus the
strike price. Proposed Rule 6.41P-O(c)(1)-(2) is based on how the
intrinsic value is

calculated in current Rule 6.60-O(c)(2) for orders, with two
differences. First, the proposed ``Intrinsic Value Checks'' would also
apply to quotes. Second, the Intrinsic Value of an option would be
based on the last sale on the Primary Market rather than on the
Consolidated Last Sale.
     Proposed Rule 6.41P-O(c)(3) would provide that ISOs to
sell would not be subject to the Intrinsic Value Check, which carve out
is substantively identical to current Rule 6.60-O(c)(2).
     Proposed Rule 6.41P-O(c)(4) would describe the application
of the Intrinsic Value Checks to puts and calls to sell.
    [cir] Proposed Rule 6.41P-O(c)(4)(A) would provide that orders or
quotes to sell for both puts and calls would be rejected or canceled
(if resting) if the price of the order or quote is equal to or lower
than its Intrinsic Value, minus a threshold percentage to be determined
by the Exchange and announced by Trader Update.
    [cir] Proposed Rule 6.41P-O(c)(4)(B) would provide that the
Exchange-determined threshold percentage (per paragraph (c)(4)(A))
would be based on the NBB, provided that, immediately following an
Auction, it would be based on the Auction Price, or, if none, the lower
Auction Collar price, or, if none, the NBB. This proposed threshold
percentage is similar to how the Reference Price would be determined
for Trading Collars, as described above pursuant to proposed Rule
6.62P-O(a)(3). As further proposed, Rule 6.41P-O(c)(4)(B) would provide
that for purposes of determining the Intrinsic Value, the Exchange
would not use an adjusted NBBO. The Exchange further proposes that the
Intrinsic Value Check for sell orders and quotes would not be applied
if the Intrinsic Value cannot be calculated.
    Proposed Rule 6.41P-O(c)(4)(A)-(B) is substantially similar to
current Rule 6.60-O(a)(2)(A), which sets forth the Intrinsic Value for
orders, except that the proposed rule would also apply to quotes and
provides additional detail regarding how the threshold percentage for
determining the Intrinsic Value would be applied depending on when such
sell order or quote arrives and the potential reference price(s)
available to calculate this Price Reasonability Check.
    Proposed Rule 6.41P-O(d) would provide the Automated Breach Action
to be applied when a Market Maker's order or quote fails one of the
Price Reasonability Checks. As proposed, if a Market Maker's order or
quote message is rejected or cancelled (if resting) pursuant to
proposed paragraph (b) (Arbitrage Checks) or (c) (Intrinsic Value
Checks) of proposed Rule 6.41P-O, the Exchange would Cancel and Block
orders and quotes in the affected class of options as described in Rule
6.40P-O(c)(2)(C)(iii) (as described above in section ``Proposed Rule
6.40P-O'').
    Proposed Rule 6.41P-O(d)(1) would provide that a breach of proposed
Rule 6.41P-O(d) would count towards a Market Maker's Global Risk
Control limit per Rule 6.40P-O(a)(4) (as described above in section
``Proposed Rule 6.40P-O'').
    Proposed Rule 6.41P-O(d)(2) concerns how a Market Maker would be
reinstated following an automated breach action. As proposed, the
Exchange would not reinstate the Market Maker's ability to enter orders
and quotes and related instructions on the Exchange in that class of
options (other than instructions to cancel one or more orders/quotes
(including Auction-Only Orders and orders designated GTC) in full)
without the consent of the Market Maker, which may be provided via
automated contact.
    Rule 6.41P-O(d) is substantially similar to current Rule 6.61-O(b),
except that the proposed rule applies to both the orders and quotes of
a Market Maker (not just quotes) and provides the additional
functionality that a breach of the Price Reasonability Checks would
count towards a Market Maker's Global Risk Control limit under proposed
Rule 6.40P-O(c)(3), which functionality would be new under Pillar.
    In connection with proposed Rule 6.41P-O, the Exchange proposes to
add the following preamble to Rules 6.60-O and 6.61-O: ``This Rule will
not be applicable to trading on Pillar.'' This proposed preamble is
designed to promote clarity and transparency in Exchange rules that
Rules 6.60-O and 6.61-O would not be applicable to trading on Pillar.
Proposed Rule 6.64P-O: Auction Process
    Current Rule 6.64-O, OX Opening Process, sets forth the opening
process currently used on the Exchange's OX system for opening trading
in a series each day and reopening trading in a series following a
trading halt. The Exchange proposes that new Rule 6.64P-O would set
forth the auction process for both opening and reopening trading in a
series on the Exchange. The Exchange proposes to specify that Rule
6.64-O would not be applicable to trading on Pillar.
    With the transition to Pillar, the Exchange proposes new
functionality regarding the auction process on the Exchange. In
addition, certain functionality available on the Exchange's cash equity
platform will now be available for options trading. Accordingly, the
Exchange proposes that proposed Rule 6.64P-O would use Pillar
terminology relating to auctions that is based on Pillar terminology
set forth in Rule 7.35-E for cash equity trading.
    Definitions. Proposed Rule 6.64P-O(a) would provide that the Rule
would be applicable to all series that trade on the Exchange other than
Flex Options.\47\ Proposed Rule 6.64P-O(a) would further set forth the
definitions that would be used for purposes of Rule 6-O Options Trading
that would be applicable to trading on Pillar.
---------------------------------------------------------------------------

    \47\ With the transition to Pillar, the Exchange is not making
any changes to how Flex Options trade. Rule 5.31-O provides that
Flex Options transactions may be effected during normal Exchange
options trading hours on any business day and there will be no
trading rotations in Flex Options. Rule 5.33-O sets forth the
procedures for trading Flex Options. The opening process for
Electronic Complex Orders is set forth in Rule 6.91-O.
---------------------------------------------------------------------------

     Proposed Rule 6.64P-O(a)(1) would define the term
``Auction'' to mean the opening or reopening of a series for trading
either on a trade or a quote. This proposed definition is based in part
on current Rule 6.64-O(a), which defines the term ``Trading Auction''
to be a process by which trading is initiated in a specified options
class that may be employed at the opening of the Exchange each business
day or to re-open trading after a trading halt. On Pillar, the Exchange
proposes that the term ``Auction'' would refer to the point in the
process where the Exchange determines that a series can be opened or
reopened either on a trade or a quote.
    Proposed Rule 6.64P-O(a)(1)(A) would provide that a ``Core Open
Auction'' means the Auction that opens trading after the beginning of
Core Trading Hours and proposed Rule 6.64P-O(a)(1)(B) would provide
that a ``Trading Halt Auction'' means the Auction that reopens trading
following a trading halt. These are Pillar terms currently used in Rule
7.35-E for the same purposes.
     Proposed Rule 6.64P-O(a)(2) would define the term
``Auction Collar'' to mean the price collar thresholds for the
Indicative Match Price for an Auction. As further proposed, the upper
Auction Collar would be the offer of the Legal Width Quote (defined
below) and the lower Auction Collar would be the bid of the Legal Width
Quote, provided that if the bid of the Legal Width Quote is zero, the
lower Auction Collar would be one MPV above zero for the series. The
proposed rule would further provide that if there is no Legal Width
Quote, the Auction Collars would be published

in the Auction Imbalance Information (defined below) as zero.
    The proposed terminology of ``Auction Collars'' would be new for
options trading and is based on the same term used in Rule 7.35-E for
trading cash equity securities. However, the concept would not be novel
because currently, the Exchange will not open a series if the bid-ask
differential is not within the bid-ask differential guidelines
established under Rule 6.37-O(b)(4).\48\ Auction Collars would function
similarly to prevent an Auction that results in a trade from being
priced outside the Legal Width Quote.
---------------------------------------------------------------------------

    \48\ See Rule 6.64-O(b)(D) and (E).
---------------------------------------------------------------------------

     Proposed Rule 6.64P-O(a)(3) would define the term
``Auction Imbalance Information'' to mean the information that the
Exchange disseminates about an Auction via its proprietary data feeds
and includes the Auction Collars, Auction Indicator, Book Clearing
Price, Far Clearing Price, Indicative Match Price, Matched Volume,
Market Imbalance, and Total Imbalance. With Pillar, the Exchange
proposes to disseminate Auction Imbalance Information for its options
market in the same manner that such information is disseminated for its
cash equity market. Accordingly, this proposed definition is based on
Rule 7.35-E, with differences to reflect the content that would be
included in Auction Imbalance Information for options trading. In
addition, the Exchange proposes that the Auction Imbalance Information
would reflect the orders and quotes eligible to participate in an
Auction and that contribute to price discovery. Accordingly, proposed
Rule 6.64P-O(a)(3) would further provide that Auction Imbalance
Information would be based on all orders and quotes (including the non-
displayed quantity of Reserve Orders) eligible to participate in an
Auction, excluding IO Orders.\49\
---------------------------------------------------------------------------

    \49\ This is consistent with the order information included in
Auction Imbalance Information for cash equity trading. See Rule
7.35-E(a)(7) and 7.35-E(a)(8). The Exchange proposes to exclude IO
Orders because they are conditional offsetting orders that would not
contribute to price discovery in the Auction Process.
---------------------------------------------------------------------------

    Proposed Rule 6.64P-O(a)(3)(A) would define the term ``Auction
Indicator'' to mean the indicator that provides a status update of
whether an Auction cannot be conducted because either (i) there is no
Legal Width Quote, or (ii) a Market Maker quote has not been received
during the Opening MMQ Time Parameter (defined below). The Exchange
currently disseminates an Auction Indicator on its cash equity market
and proposes similar functionality for options trading on the
Exchange.\50\
---------------------------------------------------------------------------

    \50\ See Rule 7.35-E(a)(13).
---------------------------------------------------------------------------

    Proposed Rule 6.64P-O(a)(3)(B) would define the term ``Book
Clearing Price'' to mean the price at which all contracts could be
traded in an Auction if not subject to the Auction Collar and that the
Book Clearing Price would be zero if a sell (buy) Imbalance cannot be
filled by any buy (sell) interest. The Exchange proposes that the
manner that the Book Clearing Price would be calculated for options
trading would be the same as how it is calculated for cash equity
trading. Accordingly, this proposed definition is based in part on the
definition of ``Book Clearing Price'' set forth in Rule 7.35-E(a)(11),
with differences to reflect options trading terminology.
    Proposed Rule 6.64P-O(a)(3)(C) would define the term ``Far Clearing
Price'' to mean the price at which all Auction-Only Orders could be
traded in an Auction within the Auction Collar. The Exchange proposes
that the manner that the Far Clearing Price would be calculated for
options trading would be the same as how it is calculated for cash
equity trading. Accordingly, this proposed definition is based on the
definition of ``Far Clearing Price'' set forth in Rule 7.35-E(a)(12),
without any differences.
    Proposed Rule 6.64P-O(a)(3)(D) would define the term ``Imbalance''
to mean the number of buy (sell) contracts that cannot be matched with
sell (buy) contracts at the Indicative Match Price at any given time.
The Exchange proposes that the manner that the Imbalance would be
calculated for options trading would be the same as how it is
calculated for cash equity trading. Accordingly, this proposed
definition is based in part on the definition of ``Imbalance'' set
forth in Rule 7.35-E(a)(7), with differences to reflect options trading
terminology.
    Proposed Rule 6.64P-O(a)(3)(D)(i) would define the term ``Total
Imbalance'' to mean the Imbalance of all buy (sell) contracts at the
Indicative Match Price for all orders and quotes eligible to trade in
an Auction. The Exchange proposes that the manner that the Total
Imbalance would be calculated for options trading would be the same as
how it is calculated for cash equity trading. Accordingly, this
proposed definition is based in part on the definition of ``Total
Imbalance'' set forth in Rule 7.35-E(a)(7)(A), with differences to
reflect options trading terminology.
    Proposed Rule 6.64P-O(a)(3)(D)(ii) would define the term ``Market
Imbalance'' to mean the Imbalance of any remaining buy (sell) Market
Orders and MOO Orders that are not matched for trading in the Auction.
The Exchange proposes that the manner that the Market Imbalance would
be calculated for options trading would be the same as how it is
calculated for cash equity trading. Accordingly, this proposed
definition is based in part on the definition of ``Market Imbalance''
set forth in Rule 7.35-E(a)(7)(B), with differences to reflect options
trading terminology.
     Proposed Rule 6.64P-O(a)(4) would define the term
``Auction Process'' to mean the process that begins when the Exchange
receives an Auction Trigger (defined below) for a series and ends when
the Auction is conducted. This would be a new term and is designed to
address all steps in the process that culminates in an Auction, as
described in proposed Rule 6.64P-O(d).
     Proposed Rule 6.64P-O(a)(5) would define the term
``Auction Processing Period'' to mean the period during which the
Auction is being processed. The Exchange proposes that this term would
have the same meaning as the same term on its cash equity market.
Accordingly, this proposed definition is based in part on the
definition of ``Auction Processing Period'' set forth in Rule 7.35-
E(a)(2), without any differences.
     Proposed Rule 6.64P-O(a)(6) would define the term
``Auction Trigger'' to mean the information disseminated by the Primary
Market in the underlying security that triggers the Auction Process for
a series to begin. For a Core Open Auction, the Auction Trigger would
be when the Primary Market first disseminates at or after 9:30 a.m.
Eastern Time both a two-sided quote and a trade of any size that is at
or within the quote. For a Trading Halt Auction, the Auction Trigger
would be when the Primary Market disseminates at the end of a trading
halt or pause a resume message, a two-sided quote, and a trade of any
size that is at or within the quote. This proposed functionality is not
new and is based on how the Exchange currently opens or reopens a
series for trading, as set forth in the last sentence of current Rule
6.64-O(b). The Exchange proposes to use Pillar terminology, including
to specify that an odd-lot transaction on the Primary Market could be
used as an Auction Trigger, which would be new on Pillar.
     Proposed Rule 6.64P-O(a)(7) would define the term
``Indicative Match Price'' to mean the price at which the maximum
number of contracts can be traded in an Auction, including the non-
displayed quantity of Reserve Orders and excluding IO Orders, subject
to the

Auction Collars. This proposed definition is based on Rule 7.35-E(a)(8)
with non-substantive differences to reflect options trading terminology
(i.e., contracts instead of shares). Proposed Rule 6.64P-O(a)(7) would
further provide that if there is no Legal Width Quote, the Indicative
Match Price included in the Auction Imbalance Information would be
calculated without Auction Collars. This would be a new feature
applicable only to options trading and an Indicative Match Price
without Auction Collars would be accompanied with an Auction Indicator
that the Auction cannot be conducted because there is no Legal Width
Quote.
    Proposed Rule 6.64P-O(a)(7)(A) would provide that if there is more
than one price level at which the maximum number of contracts can be
traded within the Auction Collars, the Indicative Match Price would be
the price closest to the midpoint of the Legal Width Quote, rounded to
the nearest MPV for the series, provided that the Indicative Match
Price will not be lower (higher) than the highest (lowest) price of a
Limit Order to buy (sell) ranked Priority 2--Display Orders that is
eligible to participate in the Auction. This proposed rule text is
based on Rule 7.31-E(a)(8)(A) with a substantive difference only to
reflect that in such circumstances, the Indicative Match Price would be
the price closest to the midpoint of the Legal Width Quote rather than
the price closest to an auction reference price.
    Proposed Rule 6.64P-O(a)(7)(B) would provide that an Indicative
Match Price that is higher (lower) than the upper (lower) Auction
Collar would be adjusted to the upper (lower) Auction Collar and orders
eligible to participate in the Auction would trade at the collared
Indicative Match Price. Proposed Rule 6.64P-O(a)(7)(B)(i) would provide
that Limit Orders to buy (sell) with a limit price above (below) the
upper (lower) Auction Collar would be included in the Auction Imbalance
Information at the collared Indicative Match Price and would be
eligible to trade at the Indicative Match Price. Proposed Rule 6.64P-
O(a)(7)(B)(ii) would provide that Limit Orders and quotes to buy (sell)
with a limit price below (above) the lower (upper) Auction Collar would
not be included in the Auction Imbalance Information and would not
participate in an Auction. The Exchange proposes that the manner that
orders and quotes priced outside of the Auction Collar would be
included in the Indicative Match Price would be the same as how it is
determined for cash equity trading. Accordingly, this proposed rule
text is based on Rules 7.31-E(a)(10)(A), (B), and (C) with a difference
only to reflect when the proposed rule would be applicable to quotes.
    Proposed Rule 6.64P-O(a)(7)(C) would provide that if the Matched
Volume (defined below) for an Auction consists of only buy and sell
Market Orders, the Indicative Match Price would be the midpoint of the
Legal Width Quote, rounded to the MPV for the series, or, if the Legal
Width Quote is locked, the locked price. This proposed rule text is
based in part on Rule 7.31-E(a)(8)(C), with differences to reflect that
options trading is based on a Legal Width Quote.
    Proposed Rule 6.64P-O(a)(7)(D) would provide that if there is no
Matched Volume, including if there are Market Orders on only one side
of the Market, the Indicative Match Price and Total Imbalance for the
Auction Imbalance Information would be zero. This proposed rule text is
based on Rule 7.31-E(a)(8)(D) and (E) with differences to reflect that
on options, the Indicative Match Price would be zero in both
circumstances.
     Proposed Rule 6.64P-O(a)(8) would define the term ``Legal
Width Quote'' to mean the highest bid and lowest offer among all Market
Maker quotes and the Away Market NBBO (together, ``Calculated NBBO'')
during the Auction Process. The proposed rule would further provide
that the Calculated NBBO can be a Legal Width Quote if it: (A) It is
locked, but not crossed; (B) does not contain a zero offer; and (C) has
a spread between the Calculated NBBO for each option contract that does
not exceed the following differentials, which can be widened as
provided for in Rule 6.37-O(c): (i) No more than .25 where the bid not
does exceed $2; (ii) no more than .40 where the bid is more than $2 but
does not exceed $5; (iii) no more than .50 where the bid is more than
$5 but does not exceed $10; (iv) no more than .80 where the bid is more
than $10 but does not exceed $20; and (v) no more than $1 where the bid
is more than $20, provided that a Trading Official may establish
differences other than the above for one or more series or classes of
options.
    Requiring that a bid-ask spread meet specified differentials before
an Auction can proceed is based on the current OX Opening Process,
which requires the bid-ask differential for a series to be in an
acceptable range. The proposed differential spread for the Pillar
Auction Process is based on the bid-ask differentials currently set
forth in Rule 6.37-O(b)(4) with a difference that for Auctions on
Pillar, for option contracts with a bid of $2, the differential will be
.25 instead of .40. The Exchange believes that including the proposed
bid-ask differential in the rule governing the Auction Process would
promote clarity and transparency in Exchange rules regarding which
quotes--both Market Maker quotes on the Exchange and the Away Market
NBBO--that the Exchange would use to determine if there is a Legal
Width Quote. The Exchange also proposes to make a conforming change to
Rule 6.37-O(c) to add a cross-reference to proposed Rule 6.64P-O(a)(8).
This proposed amendment would ensure that the existing procedures for
auctions specified in Rule 6.37-O(c) would continue to be available for
option symbols that have transitioned to Pillar.
     Proposed Rule 6.64P-O(a)(9) would define the term
``Matched Volume'' to mean the number of buy and sell contracts that
can be matched at the Indicative Match Price, excluding IO Orders. This
proposed rule text is based on the definition of ``Matched Volume'' set
forth in Rule 7.31-E(a)(9) with a non-substantive difference to
reference contracts instead of shares and to be clear that the Matched
Volume would not include IO Orders.
     Proposed Rule 6.64P-O(a)(10) would define the term ``pre-
open state'' to mean the period before a series is opened or reopened
and that during the pre-open state, the Exchange would accept Auction-
Only Orders, quotes, and orders designated Day or GTC, including orders
ranked Priority 3--Non-Display Orders that are not eligible to
participate in an Auction. The proposed rule would further provide that
the pre-open state for the Core Open Auction would begin at 6:00 a.m.
Eastern Time and would end when the Auction Processing Period begins
and that during the pre-open state before the Core Open Auction, the
Exchange would re-enter orders designated GTC. The proposed rule would
also provide that pre-open state for a Trading Halt Auction would begin
at the beginning of the trading halt and would end when the Auction
Processing Period begins. This proposed definition would be new for
Pillar and is designed to distinguish from both the Auction Processing
Period and the period when a series is opened for trading. As noted
above, this proposed definition would also be used in proposed Rules
6.40P-O, 6.41P-O, and 6.62P-O.
     Proposed Rule 6.64P-O(a)(11) would define the term
``Rotational Quote'' to mean the highest Market Maker bid and lowest
Market Maker offer on the Exchange when the Auction Process begins and
that during the Auction Process, the Exchange would

update the price and size of the Rotational Quote and a Rotational
Quote can be locked or crossed. The Exchange further proposes that if
there are no Market Maker quotes, the Rotational Quote would be
published with a zero price and size. The Exchange notes that it
currently publishes a ``rotational quote'' when it is in the process of
opening or reopening a series, i.e., a quote that is comprised only of
Market Maker quotes and does not include orders. The Exchange proposes
a difference on Pillar because currently, if the Market Maker Quotes
are crossed, the Exchange flips the bid and offer prices. In Pillar,
the Exchange would publish a Rotational Quote with the actual bid and
offer prices, even if crossed.
    Auction Ranking. Proposed Rule 6.64P-O(b) would describe the
ranking for Auctions and would provide that orders and quotes on the
side of the Imbalance are not guaranteed to participate in the Auction
and would be ranked in price-time priority under proposed Rule 6.76P-O
consistent with the priority ranking associated with each order or
quote, provided that: (1) Limit Orders, quotes, and LOO Orders would be
ranked based on their limit price and not the price at which they would
participate in the Auction; (2) MOO Orders would be ranked Priority 1--
Market Orders; (3) LOO Orders would be ranked Priority 2--Display
Orders; and (4) IO Orders would be ranked based on time among IO
Orders, subject to eligibility to participate at the Indicative Match
Price based on their limit price.
    This proposed rule is based on current Rule 6.62-O(b)(B), which
provides that orders and quotes in the system will be matched up with
one another based on price-time priority. The Exchange proposes a
difference in Pillar that orders in the same priority category as
quotes would not have priority over Market Maker quotes at the same
price, which is current functionality.\51\ Instead, orders and Market
Marker quotes in the same priority category would be ranked based on
time, consistent with proposed Rule 6.76P-O. Because the Exchange
proposes that orders and quotes in an options Auction would be
processed in the same manner as on its cash equity platform, including
that orders on the side of the Imbalance would not be guaranteed to
participate in an Auction, the remaining rule text is based in part on
Rule 7.35-E(a)(6)(A)--(D), with differences to reflect options trading
and to be clear that IO Orders would be ranked on working time among IO
Orders, subject to such orders' eligibility to participate at the
Indicative Match Price based on their limit price.\52\
---------------------------------------------------------------------------

    \51\ Current Rule 6.64-O(b)(B) provides that ``orders will have
priority over Market Maker quotes at the same price.''
    \52\ See discussion supra, regarding proposed Rule 6.62P-O(c)(3)
and how IO Orders would function.
---------------------------------------------------------------------------

    Auction Imbalance Information. Proposed Rule 6.64P-O(c) would
provide that Auction Imbalance Information would be updated at least
every second until the Auction is conducted, unless there is no change
to the information and that the Exchange would begin disseminating
Auction Imbalance Information at the following times: (1) Core Open
Auction Imbalance Information would begin at 8:00 a.m. Eastern Time;
and (2) Trading Halt Auction Imbalance Information would begin at the
beginning of the trading halt. Because the Exchange proposes to
disseminate Auction Imbalance Information for its options market in the
same manner that such information is disseminated for its cash equity
market, this proposed rule text is based in part on Rule 7.35-
E(a)(4)(A) and (C).
    Auction Process. Proposed Rule 6.64P-O(d) would set forth the
Exchange's proposed Auction Process on Pillar. Similar to current
functionality, a series would not be opened or reopened for trading if
there is no Legal Width Quote. The Exchange proposes to add on Pillar
that a series should also have Market Maker quotes and the Exchange
proposes to provide time for this requirement to be established, and if
not established within those time frames, providing for a mechanism to
open or reopen a series even if there are no Market Maker quotes.
    Proposed Rule 6.64P-O(d)(1) would concern the Rotational Quote and
would provide that when the Exchange receives the Auction Trigger for a
series, the Exchange would send a Rotational Quote to both OPRA and
proprietary data feeds indicating that the Exchange is in the process
of transitioning from a pre-open state to continuous trading for that
series.
    Proposed Rule 6.64P-O(d)(2) would provide that once a Rotational
Quote has been sent, the Exchange would conduct an Auction when there
is both a Legal Width Quote and, if applicable, Market Maker quote with
a non-zero offer in the series (subject to the Opening MMQ Time
Parameter requirements specified in proposed Rule 6.64P-O(d)(3)). The
proposed rule would further provide that the Exchange would wait a
minimum of two milliseconds after the Rotational Quote has been sent
before an Auction can be conducted. This proposed rule text is designed
to provide transparency and determinism in Exchange rules of the
earliest potential time that a series could be opened after the
Exchange receives an Auction Trigger, and subject to the series meeting
all other requirements for opening or reopening.
    Proposed Rule 6.64P-O(d)(2)(A) would provide that if there is
Matched Volume that can trade at or within the Auction Collars, the
Auction would result in a trade at the Indicative Match Price. Proposed
Rule 6.64P-O(d)(2)(B) would provide that if there is no Matched Volume
that can trade at or within the Auction Collars, the Exchange would
transition to continuous trading as described in proposed Rule 6.64P-
O(f) below and the Auction would result in a quote. This proposed rule
text is designed to provide transparency of when an Auction would
result in a trade or a quote.
    Proposed Rule 6.64P-O(d)(3) would specify the Opening MMQ Time
Parameter. As proposed, once the Auction Process begins, the Exchange
would begin a one-minute timer for the Market Maker(s) assigned to a
series to submit a quote with a non-zero offer. This one-minute timer
would be the Opening MMQ Time Parameter. The Opening MMQ Time Parameter
is designed to provide the Market Makers assigned to a series an
opportunity to submit a quote, and provide transparency in Exchange
rules of the circumstances of when the Exchange would open a series for
trading if the assigned Market Maker(s) does not submit a quote within
the specified time periods, as follows:
     Proposed Rule 6.64P-O(d)(3)(A) would provide that if there
are no Market Makers assigned to a series, the Exchange would conduct
an Auction in that series based on only a Legal Width Quote, without
waiting for the Opening MMQ Time Parameter to end.
     Proposed Rule 6.64P-O(d)(3)(B) would provide that if there
is only one Market Maker assigned to a series:
    [cir] The Exchange would conduct the Auction, without waiting for
the Opening MMQ Time Parameter to end, as soon as there is both a Legal
Width Quote and the assigned Market Maker has submitted a quote with a
non-zero offer (proposed Rule 6.64P-O(d)(3)(B)(i)).
    [cir] If the Market Maker has not submitted a quote with a non-zero
offer by the end of the Opening MMQ Time Parameter and there is a Legal
Width Quote, the Exchange would conduct the

Auction (proposed Rule 6.64P-O(d)(3)(B)(ii)).
     Proposed Rule 6.64P-O(d)(3)(C) would provide that if there
are two or more Market Makers assigned to a series:
    [cir] The Exchange would conduct the Auction, without waiting for
the Opening MMQ Time Parameter to end, as soon as there is both a Legal
Width Quote and at least two assigned Market Makers have submitted a
quote with a non-zero offer (proposed Rule 6.64P-O(d)(3)(C)(i)).
    [cir] If at least two Market Makers have not submitted a quote with
a non-zero offer by the end of the Opening MMQ Time Parameter, the
Exchange would begin a second Opening MMQ Time Parameter and that
during the second Opening MMQ Time Parameter, the Exchange would
conduct the Auction, without waiting for the second Opening MMQ Time
Parameter to end, if there is both a Legal Width Quote and at least one
Market Maker has submitted a quote with a non-zero offer (proposed Rule
6.64P-O(d)(3)(C)(ii)).
    [cir] If no Market Maker has submitted a quote with a non-zero
offer by the end of the second Opening MMQ Time Parameter and there is
a Legal Width Quote, the Exchange would conduct the Auction (proposed
Rule 6.64P-O(d)(3)(C)(iii).
    Proposed Rule 6.64P-O(d)(4) would provide that for the first five
minutes of the Auction Process, if there is no Legal Width Quote, the
Exchange would not conduct an Auction, even if there is Matched Volume.
This proposed rule text provides transparency that when there is
Matched Volume, the Exchange would not open a series if there is no
Legal Width Quote.
    The Exchange proposes new functionality for Pillar to allow the
Exchange to open a series when there is a Calculated NBBO wider than
the Legal Width Quote, provided that there is also no Matched Volume.
As proposed, five minutes after the Auction Process begins:
     Proposed Rule 6.64P-O(d)(4)(A) would provide that if there
is no Matched Volume and the Calculated NBBO is wider than the Legal
Width Quote, is not crossed, and does not contain a zero offer, the
Exchange would transition to continuous trading as described in
paragraph (f) of this Rule. As further proposed, in such case, the
Auction would result in a quote, provided that there may be an Auction
trade even if there is no Legal Width Quote if orders or quotes arrive
during the period when the Exchange is evaluating the status of orders
and quotes.\53\ The Exchange believes this proposed rule would provide
an opportunity for more series to open for trading when there is a
Calculated NBBO in a series that is wider than the Legal Width Quote
and is not crossed and does not contain a zero offer.
---------------------------------------------------------------------------

    \53\ The Exchange expects this to be a rare race condition that
would result when the Exchange receives orders and quotes at
virtually the same time it is evaluating whether it can open a
series based on a wide Calculated NBBO and that as a result of that
race condition, those new orders or quotes are marketable against
contra-side interest at the same time that the Exchange concludes,
based on interest that had previously been received, that it can
open on a quote.
---------------------------------------------------------------------------

     Proposed Rule 6.64P-O(d)(4)(A)(i) would provide that any
time a series is opened or reopened when there is no Legal Width Quote,
Market Orders and MOO Orders would not participate in the Auction and
would be cancelled before the Exchange transitions to continuous
trading.
     Proposed Rule 6.64P-O(d)(4)(B) would provide that if the
Exchange still cannot conduct an Auction, the Exchange would continue
to evaluate both the Calculated NBBO and interest on the Consolidated
Book until the earlier of: (i) A Legal Width Quote is established and
an Auction can be conducted; (ii) the series can be opened as provided
for in proposed Rule 6.64P-O(d)(4)(A); (iii) the series is halted; or
(iv) the end of Core Trading Hours. The proposed rule provides
transparency that the Exchange would continue to look for an
opportunity to open a series based on changes to the Calculated NBBO or
orders and quotes on the Consolidated Book.
    Proposed Rule 6.64P-O(d)(5) would provide that the Exchange may
deviate from the standard manner of the Auction Process, including
adjusting the timing of the Auction Process in any option series or
opening or reopening a series when there is no Legal Width Quote, when
it believes it is necessary in the interests of a fair and orderly
market. This proposed rule is based on Rule 6.64-O(b)(F) and is
designed to provide the Exchange with flexibility to open a series even
if there is no Legal Width Quote. For example, a Floor Broker may have
a two-sided open outcry order. If the series is not opened, that trade
could not be consummated. Accordingly, this proposed rule would allow
the Exchange to open a series for trading to facilitate open outcry
trading.
    Order Processing during an Auction Processing Period. As described
above, the Auction Processing Period is the abbreviated time period
(i.e., generally measured in less than a second) when the Exchange
conducts the Auction. For example, if there is a Legal Width Quote,
Market Maker quotes, and Matched Volume, the Auction Processing Period
is when that Matched Volume will trade at the Indicative Match Price.
New orders and quotes received during the Auction Processing Period
would not be eligible to participate in an Auction. Because the
Exchange will be using the same Pillar auction functionality for
options trading that is used for its cash equity market, the Exchange
proposes that proposed Rule 6.64P-O(e) would be based on Rule 7.35-E(g)
and sub-paragraphs (1) and (2) with differences only to references
quotes in addition to orders.
    Accordingly, as proposed, during an Auction Processing Period, new
order and quote messages received during the Auction Processing Period
would be accepted but would not be processed until after the Auction
Processing Period. As with Rule 7.35-E(g), for purposes of proposed
Rule 6.64P-O(e) and (f), an ``order instruction'' would refer to a
request to cancel, cancel and replace, or modify an order or quote.
    As proposed, during the Auction Processing Period, order
instructions would be processed as follows:
     An order instruction that arrives during the Auction
Processing Period would not be processed until after the Auction
Processing Period if it relates to an order or quote that was received
before the Auction Processing Period. Any subsequent order instructions
relating to such order would be rejected (proposed Rule 6.64P-O(e)(1)).
     An order instruction that arrives during the Auction
Processing Period would be processed on arrival if it relates to an
order that was received during the Auction Processing Period (proposed
Rule 6.64P-O(e)(2)).
    Transition to Continuous Trading. After the Auction Processing
Period concludes, i.e., once the Auction is done, the Exchange
transitions to continuous trading. During this transition, the way
orders, quotes, and order instructions are processed differs depending
on when such messages arrived at the Exchange. Proposed Rule 6.64P-O(f)
would describe how the Exchange would transition to continuous trading
after the Auction Processing Period concludes, and is based on how the
Exchange transitions to continuous trading on its cash equity market
following a Trading Halt Auction, as described in Rule 7.35-E(h). The
transition to continuous trading would proceed as follows.
    Proposed Rule 6.64P-O(f)(1) would provide that orders that are no
longer eligible to trade would be cancelled. This proposed rule text is
based in part on Pillar terminology used in Rule 7.35-

E(h)(1). For options trading, the only orders that would no longer be
eligible to trade would be Auction-Only Orders.
    Proposed Rule 6.64P-O(f)(2) would provide that order instructions
would be processed as follows:
     An order instruction that arrives during the transition to
continuous trading or the Auction Processing Period under paragraph
(e)(1) of this Rule would be processed in time sequence with the
processing of orders and quotes as specified in paragraphs (f)(3)(A) or
(B) of this Rule if it relates to an order or quote that was received
before the Auction Processing Period or that has already transitioned
to continuous trading and any subsequent order instructions relating to
such order or quote would be rejected (proposed Rule 6.64P-O(f)(2)(A)).
This proposed rule text is based on Rule 7.35-E(h)(2)(A) without any
substantive differences. This proposed rule text provides transparency
regarding how order instructions that arrived during the Auction
Processing Period would be processed if they relate to order or quotes
that were received before the Auction Processing Period.
     An order instruction that arrives during the transition to
continuous trading would be processed on arrival if it relates to an
order or quote that was entered during either the Auction Processing
Period or the transition to continuous trading and such order or quote
has not yet transitioned to continuous trading (proposed Rule 6.64P-
O(f)(2)(B)). This proposed rule text is based on Rule 7.35-E(h)(2)(B)
without any substantive differences.
    Proposed Rule 6.64P-O(f)(3) would set forth how orders and quotes
would be processed during the transition to continuous trading
following an Auction. The Exchange proposes that it would process
Auction-eligible orders and quotes that were received before the
Auction Processing Period and orders ranked Priority 3--Non-Display
Orders received before a trading halt as follows:
     Proposed Rule 6.64P-O(f)(3)(A)(i) would provide that Limit
Orders and quotes would be subject to the Limit Order Price Check,
Arbitrage Check, and Intrinsic Value Check, as applicable. This
proposed rule is new for Pillar, and is consistent with the proposed
rule changes, described above, regarding when the Limit Order Price
Check, Arbitrage Check, and Intrinsic Value Check would be applied
against orders and quotes that were received during a pre-open state.
The Exchange proposes to apply these checks to orders and quotes before
they become eligible for trading or routing during continuous trading.
     Proposed Rule 6.64P-O(f)(3)(A)(ii) would provide that
Limit Orders that are not cancelled and Market Orders would be subject
to the Trading Collar assigned to it. This proposed rule is also
consistent with the proposed changes to Trading Collars, described
above, that an order received during a pre-open state would be assigned
a Trading Collar after an Auction concludes.
     Proposed Rule 6.64P-O(f)(3)(A)(iii) would provide that
orders eligible to route that are marketable against Away Market
Protected Quotations would route based on the ranking of such orders as
set forth in Rule 6.76P-O(c). This proposed rule is based on Rule 7.35-
E(h)(3)(A)(ii)(b) with non-substantive differences to use the term
``Away Market Protected Quotations'' instead of ``protected quotations
on Away Markets.''
     Proposed Rule 6.64P-O(f)(3)(A)(iv) would provide that
after routing eligible orders, orders and quotes not eligible to route
that are marketable against Away Market Protected Quotations would
cancel. This proposed rule is based on Rule 7.35-E(h)(3)(A)(ii)(b) with
non-substantive differences to use the term ``Away Market Protected
Quotations'' instead of ``protected quotations on Away Markets.''
     Proposed Rule 6.64P-O(f)(3)(A)(v) would provide that once
there are no more unexecuted orders marketable against Away Market
Protected Quotations, orders and quotes that are marketable against
other orders and quotes in the Consolidated Book would trade or be
repriced. This proposed rule is based on Rule 7.35-E(h)(3)(A)(ii)(c)
with a clarifying, non-substantive difference to be clear that an order
could be repriced based on this assessment. For example, an ALO Order
that would be marketable against a contra-side order or quote on the
Consolidated Book would be repriced as provided for in proposed Rule
6.62P-O(e)(2). The Exchange further notes that, similar to the
Exchange's cash equity market, the Exchange could transition to
continuous trading without any Matched Volume that trades at the
Indicative Match Price, and yet still report a trade to OPRA before its
first quote.\54\ The Exchange would not consider a trade that occurs
during the transition to continuous trading to be an Auction trade.
---------------------------------------------------------------------------

    \54\ For example, as described in proposed Rule 6.62P-
O(d)(4)(A), if there is no Legal Width Quote, after five minutes,
the Exchange could open a series for trading if there is no Matched
Volume and would transition to continuous trading as described in
proposed Rule 6.62P-O(f).
---------------------------------------------------------------------------

     Proposed Rule 6.64P-O(f)(3)(A)(vi) would provide that
Market Orders received during a pre-open state would be subject to the
validation specified in proposed Rule 6.62P-O(a)(1)(C). The Exchange
notes that because such Market Orders would have been already received
by the Exchange, if they fail one of those validations, they would be
cancelled instead of rejected. This would be new rule text as compared
to the Exchange's cash equity rules to reflect the validations that
would be applicable to Market Orders for options trading on Pillar.
     Proposed Rule 6.64P-O(f)(3)(A)(vii) would provide that the
display quantity of Reserve Orders would be replenished. This proposed
rule is based on Rule 7.35-E(h)(3)(A)(ii)(d).
     Proposed Rule 6.64P-O(f)(3)(A)(viii) would describe the
last step in this process, which is that the Exchange would send a
quote to OPRA and proprietary data feeds representing the highest-
priced bid and lowest-priced offer of any remaining unexecuted Auction-
eligible orders and quotes that were received before the Auction
Processing Period. This proposed rule is based on current cash equity
functionality, as set forth in Rule 7.35-E(h)(3)(a)(ii). Although the
functionality would be the same for both markets, for options traded on
the Exchange, the Exchange proposes to describe this aspect of the
process in sequence, and reference both orders and quotes. The Exchange
notes that this quote would be different than the Rotational Quote sent
at the beginning of the Auction Process as it could be comprised of
both orders and quotes.
    Proposed Rule 6.64P-O(f)(3)(B) would provide that next, orders
ranked Priority 3--Non-Display Orders that were received during a pre-
open state would be assigned a new working time in time sequence
relative to one another based on original entry time and would be
subject to the Limit Order Price Check, Arbitrage Check, and Intrinsic
Value Check, as applicable, and if not cancelled, would be traded or
repriced. This proposed functionality would be new for Pillar and
applicable only for options traded on the Exchange. Even though orders
ranked Priority 3--Non-Display Orders would not be eligible to trade in
an Auction (other than the reserve interest of Reserve Orders), the
Exchange proposes to accept such orders during a pre-open state. These
orders would transition to continuous trading after orders and quotes
that were eligible to trade in an Auction would have transitioned to
continuous trading, as described above in proposed Rule 6.64P-
O(f)(3)(A)(i)-(viii). The Exchange believes that waiting to process
non-displayed orders in this sequence would ensure that there is an
NBBO against

which such orders could be priced, as described in proposed Rule 6.62P-
O(d) above.
    Proposed Rule 6.64P-O(f)(3)(C) would provide that next, orders and
quotes that were received during the Auction Processing Period would be
assigned a new working time in time sequence relative to one another
based on original entry time and would be subject to the Limit Order
Price Check, Pre-Trade Risk Controls, Arbitrage Check, Intrinsic Value
Check, and validations specified in proposed Rule 6.62P-O(a)(1)(A), as
applicable, and if not cancelled would be processed consistent with the
terms of the order or quote. This proposed rule text is designed to
reflect that even though orders and quotes were received during the
Auction Processing Period, they would not be subjected to these
validations until after the Exchange has transitioned to continuous
trading, and that if they fail these validations, such orders or quotes
would be cancelled instead of rejected. This proposed rule text is
based in part on Rule 7.35-E(h)(3)(B) with differences to reflect the
validations that would be applicable to orders and quotes for options
trading.
    Proposed Rule 6.64P-O(f)(3)(D) would further provide that when
transitioning to continuous trading:
     The display price and working price of orders and quotes
would be adjusted based on the contra-side interest in the Consolidated
Book or Away Market NBBO, as provided for in Rule 6.62P-O (proposed
Rule 6.64P-O(f)(3)(D)(i)). This proposed rule is based in part on Rule
7.35-E(h)(3)(C) with differences to reflect that for options trading,
the display price or working price of an order may be adjusted based
either on contra-side interest on the Consolidated Book or the Away
Market NBBO.
     The display price and working price of a Day ISO would be
adjusted in the same manner as a Non-Routable Limit Order until the Day
ISO is either traded in full or displayed at its limit price and the
display price and working price of a Day ISO ALO would be adjusted in
the same manner as an ALO Order until the Day ISO ALO is either traded
in full or displayed at its limit price (proposed Rule 6.64P-
O(f)(3)(D)(ii)). This proposed rule is based in part on Rule 7.35-
E(h)(3)(D) with differences to reflect how a Day ISO ALO would be
processed.
    Proposed Rule 6.64P-O(g) would describe order processing during a
trading halt. The proposed rule is based in part on Rule 7.18-E(c) with
differences to reflect how options would trade on Pillar. As proposed,
the Exchange would process new and existing orders and quotes in a
series during a trading halt as follows:
     Maintain any unexecuted portion of orders ranked Priority
3--Non-Display Orders (proposed Rule 6.64P-O(g)(1)). This proposed rule
would be unique to options traded on the Exchange because the Exchange
cancels non-displayed orders on its cash equity market during a trading
halt (see, e.g., Rule 7.18-E(c)(1)).
     Cancel any unexecuted quantity of orders displayed at a
Trading Collar and Market Maker quotes (proposed Rule 6.64P-O(g)(2)).
This proposed rule would be unique for options traded on the Exchange.
The Exchange proposes to cancel resting Market Maker quotes during a
trading halt, but as noted below, would accept new Market Maker quotes
during a trading halt, which would be the basis for the Rotational
Quote that would be published for a Trading Halt Auction. The Exchange
also proposes to cancel any unexecuted quantity of orders displayed at
a Trading Collar because such orders would have already been subject to
a 500-millisecond timer, which would have ended during a trading halt.
     Re-price all other resting orders on the Consolidated Book
to their limit price. The repricing of a Non-Routable Limit Order, ALO
Order, or Day ISO ALO to its limit price during a trading halt would
not be counted toward the number of times such order may be repriced
and any subsequent repricing of such order during the transition to
continuous trading would be permitted as the additional repricing event
as provided for in Rule 6.62P-O(e)(1)(B) and (e)(2)(C) (proposed Rule
6.64P-O(g)(3)). As described above, once resting, a Non-Routable Limit
Order, ALO Order, or Day ISO ALO that was repriced on arrival is
eligible to be repriced only one additional time. This proposed rule
provides transparency that the repricing of such orders to their limit
price during a trading halt would not count towards that ``one''
additional repricing, but that any subsequent repricing after the
Auction concludes would count.
     Accept and process all cancellations (proposed Rule 6.64P-
O(g)(4)). This proposed rule is based on Rule 7.18-E(c)(4) without any
differences.
     Reject Incoming Limit Orders designated IOC or FOK
(proposed Rule 6.64P-O(g)(5)). This proposed rule is based in part on
Rule 7.18-E(c)(5) with a difference to add orders designated FOK and
not include non-displayed orders.
     Accept all other incoming order and quote messages and
instructions until the Auction Processing Period for the Trading Halt
Auction, at which point, paragraph (e) of proposed Rule 6.64P-O would
govern the entry of incoming orders, quotes, and order instructions
(proposed Rule 6.64P-O(g)(6)). This proposed rule is based on Rule
7.18-E(c)(6) with non-substantive differences to cross reference the
options rule relating to the transition to continuous trading.
     Disseminate a zero bid and zero offer quote to OPRA and
proprietary data feeds (proposed Rule 6.64P-O(g)(7)). This proposed
rule is based on current functionality and is designed to promote
clarity and transparency in Exchange rules that when a trading halt
begins, the Exchange will ``zero'' out the Exchange's BBO.
    Finally, proposed Rule 6.64P-O(h) would provide that whenever in
the judgment of the Exchange the interests of a fair and orderly market
so require, the Exchange may adjust the timing of or suspend the
Auctions set forth in this Rule with prior notice to ATP Holders. This
proposed rule is based on Rule 7.35-E(i) without any differences.
    In connection with proposed Rule 6.64P-O, the Exchange proposes to
add the following preamble to Rule 6.64-O: ``This Rule will not be
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.64-O
would not be applicable to trading on Pillar.
    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 OX
system will continue to be available pending the full migration to
Pillar.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\55\ in general, and
furthers the objectives of Section 6(b)(5),\56\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating

transactions in securities, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, to protect investors and the public interest. The Exchange
believes that the proposed rules to support Pillar would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because the proposed rules would promote