[Federal Register Volume 79, Number 147 (Thursday, July 31, 2014)]
[Notices]
[Pages 44519-44548]
[FR Doc No: 2014-17989]

Vol. 79

Thursday,

No. 147

July 31, 2014

Part III

 Securities and Exchange Commission

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Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing of
Proposed Rule Change Relating To Include Additional Specificity Within
Rule 1.5 and Chapter XI Regarding Current System Functionality
Including the Operation of Order Types and Order Instructions; Notice

Federal Register / Vol. 79 , No. 147 / Thursday, July 31, 2014 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72676; File No. SR-EDGX-2014-18]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing of Proposed Rule Change Relating To Include Additional
Specificity Within Rule 1.5 and Chapter XI Regarding Current System
Functionality Including the Operation of Order Types and Order
Instructions

July 25, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 16, 2014, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 1.5 and Chapter XI of its rule
book to include additional specificity regarding the current
functionality of the Exchange's System,\3\ including the operation of
its order types and order instructions. These changes are designed to
update the rule book to reflect current system functionality and
include: (i) Further clarifying the Exchange's trading sessions and
hours of operation by amending Rule 11.1; (ii) describing the process
for initial opening and re-opening after a trading halt by adding
proposed Rule 11.7, Opening Process; (iii) amending the description of
order types, order instructions, and their functionality by deleting
the content of Rule 11.5, Order Types and Modifiers, renumbering it as
Rule 11.8, and adding proposed Rule 11.6, Definitions; (iv) amending
Rule 11.8, Priority of Orders, to provide additional specificity
regarding the execution priority of orders and renumbering it as Rule
11.9; and (v) making a series of organizational and conforming changes
to Rule 1.5, Rule 8.15, and Chapter XI, as well as moving text from
Footnote 4 of the Exchange's Fee Schedule into proposed Rule 11.21.
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    \3\ Exchange Rule 1.5(cc) defines ``System'' as ``the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away.''
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    The text of the proposed changes to Exchange Rule 1.5, 8.15 and
Chapter XI are attached as Exhibit 5A. The proposed change to the Fee
Schedule is attached as Exhibit 5B. Exhibits 5A and 5B are available on
the Exchange's Web site at www.directedge.com, at the Exchange's
principal office, and at the Public Reference Room of the Commission.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 1.5 and Chapter XI of its rule
book to include additional specificity regarding the current
functionality of the Exchange's System, including the operation of its
order types and order instructions. These changes are designed to
update the rule book to reflect current system functionality and
include: (i) Further clarifying the Exchange's trading sessions and
hours of operation by amending Rule 11.1; (ii) describing the process
for initial opening and re-opening after a trading halt by adding
proposed Rule 11.7, Opening Process; (iii) amending the description of
order types, order instructions, and their functionality by deleting
the content of Rule 11.5, Order Types and Modifiers, renumbering it as
Rule 11.8, and adding proposed Rule 11.6, Definitions; (iv) amending
Rule 11.8, Priority of Orders, to provide additional specificity
regarding the execution priority of orders and renumbering it as Rule
11.9; and (v) making a series of organizational and conforming changes
to Rule 1.5, Rule 8.15, and Chapter XI, as well as moving text from
Footnote 4 of the Exchange's Fee Schedule into proposed Rule 11.21.
Unless otherwise stated,\4\ the Exchange does not propose to
substantively modify the operation of any of the current defined order
types or terms or the operation of the System; rather, it intends to
provide additional specificity and transparency to Members, Users, and
the investing public regarding the Exchange's order types and system
functionality, and to organize its rules in a more intuitive and less
complex manner.\5\
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    \4\ As discussed in more detail below, the Exchange proposes the
following new System functionality: Proposed Rule 11.7(c).
Alternatively set the price of the Opening Process for securities
listed on either the New York Stock Exchange, Inc. or NYSE MKT LLC
at the midpoint of the then prevailing NBBO when the first two-sided
quotation published by the listing exchange after 9:30:00 a.m.
Eastern Time, but before 9:45:00 a.m. Eastern Time if no first trade
is reported by the listing exchange within one second of publication
of the first two-sided quotation by the listing exchange. Proposed
Rule 11.7(e). Alternatively set the price of a re-opening at the
midpoint of the then prevailing NBBO when the first two-sided
quotation is published by the listing exchange following the
resumption of trading after a halt, suspension, or pause if no first
trade is reported within one second of publication of the first two-
sided quotation by the listing exchange. Proposed Rule 11.6(j)(1).
Require that an order with a Market Peg instruction that is to be
displayed by the System on the EDGX Book include an offset equal to
or greater than one Minimum Price Variation. Proposed Rule
11.6(n)(4). Permit an order with a Post Only Instruction to execute
against an order resting on the EDGX Book where it is eligible to
receive price improvement as described under the proposed rule.
    \5\ See Mary Jo White, Chair, Commission, Speech at the Sandler
O'Neill & Partners, L.P. Global Exchange and Brokerage Conference,
(June 5, 2014), available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U7rxbLE4KSo.
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Trading Sessions, Hours of Operation, and Initial Opening and Re-
Opening Processes
    The Exchange proposes to further clarify its trading sessions and
hours of operation by amending Rule 11.1. The Exchange also proposes to
describe the processes for initial opening and re-opening after a
trading halt by adding proposed Rule 11.7, Opening Process. The
Exchange believes that these proposed rule changes provide greater
transparency to its Members,\6\ Users,\7\ and the investing public
regarding the Exchange's hours of operation and current opening
process.
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    \6\ The term ``Member'' is defined as ``any registered broker or
dealer, or any person associated with a registered broker or dealer,
that has been admitted to membership in the Exchange. A Member will
have the status of a ``member'' of the Exchange as that term is
defined in Section 3(a)(3) of the Act.'' See Exchange Rule 1.5(n).
    \7\ The term ``User'' is defined as ``any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).

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Rule 11.1, Hours of Trading and Trading Days
    The Exchange proposes to amend Rule 11.1, Hours of Trading and
Trading Days, to clarify when orders may be entered into the System and
to outline a User's ability to select the trading sessions for which an
order may be eligible for execution. Proposed Rule 11.1(a)(1), Session
Indicator, describes each of the Exchange's existing trading sessions.
A User may select the particular trading sessions for which their
order(s) may be eligible for execution. Specifically, orders designated
as:
     ``Pre-Opening Session'' are eligible for execution between
8:00 a.m. Eastern Time and 4:00 p.m. Eastern Time;
     ``Regular Session'' are eligible for execution between the
completion of the Opening Process or a Contingent Open as defined in
proposed Rule 11.7 (described below), whichever occurs first, and 4:00
p.m. Eastern Time, unless otherwise noted; \8\
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    \8\ Beginning at 9:30:00 a.m. Eastern Time, the System will
accept: (i) Incoming orders designated as Intermarket Sweep Orders,
and (ii) orders with a time-in-force instruction of Immediate-or-
Cancel. This is to assist Members' compliance with Rule 611 of
Regulation NMS.
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     ``Post-Closing Session'' are eligible for execution
between the start of the Regular Session and 8:00 p.m. Eastern Time;
and
     ``All Sessions'' are eligible for execution between 8:00
a.m. and 8:00 p.m. Eastern Time.
    Under proposed Rule 11.1(a)(1), orders may be entered into the
System from 6:00 a.m. until 8:00 p.m. Eastern Time, but orders entered
between 6:00 a.m. and 8:00 a.m. Eastern Time are not eligible for
execution until the start of the session selected by the User. All
orders are eligible for execution during the Regular Session. For an
order to be eligible for the Pre-Opening and/or Post-Closing Sessions,
Users must so designate the order. If the User does not select a
particular session or sessions, the order will default to the Regular
Session only.
Proposed Rule 11.7, Opening Process
    The Exchange also proposes to adopt proposed Rule 11.7 to further
describe its opening and re-opening processes.\9\ Proposed Rule 11.7(a)
states that prior to the beginning of the Regular Session, Users who
wish to participate in the Opening Process may enter orders to buy or
sell. Orders cancelled prior to the Opening Process will not
participate in the Opening Process. Proposed Rule 11.7(a)(2) provides
that all orders may participate in the Opening Process except for: (i)
Orders with a Stop Price \10\ or Stop Limit Price \11\ instruction,
(ii) Limit Orders with a Post Only \12\ instruction, (iii) orders with
a time-in-force (``TIF'') instruction of Fill-or-Kill (``FOK'') or
Immediate or Cancel (``IOC''), and (iv) Intermarket Sweep Orders
(``ISOs''). Orders that are designated for the Regular Session that
cannot participate in the Opening Process will not be accepted by the
System until the Opening Process is completed or a Contingent Opening
has occurred as described below. Limit Orders with a Reserve Quantity
\13\ may participate to the full extent of their displayed size and
Reserve Quantity. Limit Orders with a Discretionary Range \14\ may
participate up to their discretionary price for buy orders and down to
their discretionary price for sell orders. A Limit Order with a Pegged
instruction \15\ will be eligible for execution in the Opening Process
based on its pegged price at the time the Opening Process is conducted.
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    \9\ Proposed Rule 11.7 is based on and substantially similar to
International Securities Exchange, LLC (``ISE'') Rule 2106. See also
Securities Exchange Act Release No. 54287 (August 8, 2006), 71 FR
46947 (August 15, 2006) (Order Approving File No. SR-ISE-2006-48).
    \10\ The Stop Price instruction is proposed to be set forth in
Rule 11.8(a)(1), and is further discussed below.
    \11\ The Stop Limit Price instruction is proposed to be set
forth in Rule 11.8(b)(1), and is further discussed below.
    \12\ The Post Only instruction is proposed to be set forth in
Rule 11.6(n)(4), and is further discussed below.
    \13\ Reserve Quantity is proposed to be defined in Rule 11.6(m),
and is further discussed below.
    \14\ The Discretionary Range instruction is proposed to be
defined in Rule 11.6(d), and is further discussed below.
    \15\ The Pegged instruction is proposed to be defined in Rule
11.6(i), and is further discussed below.
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    Under proposed Rule 11.7(a)(3), the Exchange will open by
performing the Opening Process in which the System will attempt to
match buy and sell orders that are executable at the midpoint of the
National Best Bid and Offer (``NBBO''). Proposed Rule 11.7(c) codifies
the process by which the System sets the opening price of the Opening
Process. The System sets the price of the Opening Process at the
midpoint of the first NBBO after 9:30:00 a.m. Eastern Time. However,
for securities listed on either the New York Stock Exchange, Inc.
(``NYSE'') or NYSE MKT LLC (``NYSE MKT''), the System currently sets
the price of the Opening Process at the midpoint of the first NBBO
subsequent to the first reported trade on the listing exchange after
9:30:00 a.m. Eastern Time. In addition to this existing process, the
Exchange proposes to alternatively set the price of the Opening Process
for securities listed on either the NYSE or NYSE MKT at the midpoint of
the then prevailing NBBO when the first two-sided quotation published
by the relevant listing exchange after 9:30:00 a.m. Eastern Time, but
before 9:45:00 a.m. Eastern Time if no first trade is reported by the
listing exchange within one second of publication of the first two-
sided quotation by the listing exchange. The System waits to set the
price at the midpoint of the first NBBO as set forth above because
securities listed on the NYSE or NYSE MKT may not open at precisely
9:30:00 a.m. Eastern Time.
    Proposed Rule 11.7(b) describes the Opening Process. Under the
Opening Process, all orders executable at the midpoint of the NBBO will
be processed in time sequence, beginning with the order with the oldest
time stamp and not in accordance with proposed Rule 11.9(a)(2)(B),
which outlines priority at the midpoint of the NBBO and is described in
more detail below. Matches will occur until there are no remaining
contra-side orders or there is an imbalance of orders. An imbalance of
orders may result in orders that cannot be executed in whole or in
part. Any unexecuted orders may then be placed by the System on the
EDGX Book,\16\ cancelled, executed, or routed to away Trading Centers
in accordance with the Users' instructions pursuant to proposed
renumbered Rule 11.11.
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    \16\ The term ``EDGX Book'' is defined as ``the System's
electronic file of orders.'' See EDGX Rule 1.5(d).
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    Proposed Rule 11.7(d) describes the Exchange's process for a
Contingent Open, which would occur where the conditions to establish
the price of the Opening Process set forth under proposed Rule 11.7(c)
do not occur by 9:45:00 a.m. Eastern Time. For example, the Opening
Process will not occur where, if between 9:30:00 a.m. and 9:45:00 a.m.
Eastern Time, no NBBO is published, or, for securities listed on either
the NYSE or NYSE MKT, no first trade is reported or quote is published
by the listing exchange, as proposed above. If the conditions to
establish the price of the Opening Process do not occur by 9:45:00 a.m.
Eastern Time, orders will be placed by the System on the EDGX Book,
cancelled, executed, or routed to away Trading Centers in accordance
with the Users' instructions pursuant to proposed renumbered Rule
11.11. Notwithstanding the occurrence of a Contingent Open, MidPoint
Match Orders will not be placed by the System on the EDGX Book because
they are not eligible to trade until the conditions set forth under
Rule 11.7(c) for determining

the price of the Opening Process have been met.
    Proposed Rule 11.7(e) describes the process by which the System
sets the price of a re-opening following the resumption of trading
after a halt, suspension, or pause. The System currently re-opens a
security at the midpoint of the first NBBO subsequent to the first
reported trade on the listing exchange following the resumption of
trading after a halt, suspension, or pause. In addition, the Exchange
proposes to alternatively set the price of a re-opening at the midpoint
of the then prevailing NBBO when the first two-sided quotation is
published by the listing exchange following the resumption of trading
after a halt, suspension, or pause if no first trade is reported within
one second of publication of the first two-sided quotation by the
listing exchange.
Order Type and System Functionality Clarification Under Chapter XI
    The Exchange proposes to describe the basic requirements for all
order types processed by the System by eliminating current Rule 11.5
and replacing it with proposed Rule 11.6, Definitions, and Rule 11.8,
Order Types, each of which are explained in more detail below. The
Exchange also proposes to amend current Rule 11.8, Priority of Orders,
to describe the time priority of orders at specific price points and
renumber it as Rule 11.9. Unless otherwise stated, the Exchange does
not propose to substantively modify the operation of any of the current
defined order types or terms or the operation of the System. The
Exchange believes the proposed amendments will provide greater
transparency regarding how the System operates, the order types the
Exchange offers, which instructions a User may attach to each order
type, and how order types and instructions when used in combination,
may affect an order's execution priority under proposed renumbered Rule
11.9.
    Specifically, the Exchange proposes to delete the content of
current Rule 11.5, Orders and Modifiers, and replace it with proposed
Rule 11.6, Definitions, and Rule 11.8, Order Types. The Exchange's
proposed rule change would outline the number of order types available
on the System as well as describe what instructions may be attached to
each order type. In certain cases, what was previously described under
the Exchange's rules as a standalone order type, is, in fact, an
instruction or set of instructions attached to an order type and not an
order type itself. The Exchange believes the order types that it now
proposes to classify as order instructions are derivative of and could
not operate independently from what the Exchange proposed as a
standalone order type. Specifically, and as described more fully below,
proposed Rule 11.8, Order Types, would describe the following
standalone order types that are available on the Exchange: Market
Orders, Limit Orders, ISOs, MidPoint Match Orders, NBBO Offset Peg
Orders, and Route Peg Orders. Proposed Rule 11.8 would further describe
each order type's functionality and the instructions a User may attach
to each. Proposed Rule 11.6, Definitions, would re-classify and
describe the features currently defined as order types as instructions
that may be attached to order types.
Proposed Rule 11.6, Definitions
    Proposed Rule 11.6 seeks to set forth in one rule current defined
terms and order instructions that are described in Chapter XI. The
proposed rule also includes additional defined terms and instructions
to aid in describing System functionality and the operation of the
Exchange's order types. Some features listed below and now codified in
proposed Exchange Rule 11.6 are currently included under current Rule
11.5, where they are described as standalone order types. As part of
the Exchange's order type clarification discussed below, the Exchange
proposes to relocate and reclassify these features as instructions that
may be appended to an order type.
    The Exchange notes that an instruction defined within Rule 11.6 may
not be available for all order types. Whether an instruction is
available for a particular order type is set forth in detail in
proposed Rule 11.8, Order Types.
    The terms and instructions defined within proposed Rule 11.6 are as
follows:
Attributable and Non-Attributable (Rule 11.6(a))
    The Exchange currently defines the terms ``Attributable Order'' and
``Non-Attributable Order'' in Exchange Rules 11.5(c)(18) and (19). An
Attributable Order is currently defined as ``[a]n order designated for
display (price and size) that includes the Member's market participant
identifier (``MPID'').'' A Non-Attributable Order is currently defined
as ``[a]n order designated for display (price and size) on an anonymous
basis by the System.'' The Exchange believes that a User choosing
whether to display its MPID on an order they submit to the Exchange is
more characteristic of an instruction, rather than an order type.
Therefore, the Exchange proposes to keep this definition but delete the
word Order from both terms, leaving just the terms Attributable and
Non-Attributable. As part of its order type clarification, the Exchange
proposes to relocate each term to proposed Rule 11.6. The Exchange does
not propose to alter the meaning of either term. The Exchange, however,
proposes to add additional specificity to the rule regarding the
designation of orders as Attributable and Non-Attributable.
Specifically, the Exchange proposes to state that unless the User
elects otherwise, all orders will be automatically defaulted by the
System to Non-Attributable. Further, a User may elect an order to be
Attributable on an order-by-order basis or instruct the Exchange to
default all its orders as Attributable on a port-by-port basis.
However, if a User instructs the Exchange to default all its orders as
Attributable on a particular port, such User would not be able to
designate any order from that port as Non-Attributable. Where a User
includes an Attributable instruction with an order, the User's MPID
will be visible via the Exchange's Book Feed.\17\ Conversely, if an
order is to be Non-Attributable, the User's MPID will not be visible
via the Exchange's Book Feed.
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    \17\ The Exchange's Book Feed is described under Rule 13.8.
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Cancel Back (Rule 11.6(b))
    Under current Exchange Rule 11.5(c)(4), a User may opt not to use
any re-pricing \18\ instructions if display of the User's order by the
System on the EDGX Book at its limit price would violate Regulation
NMS, Regulation SHO, or the National Market System Plan, also known as
Limit Up/Limit Down (``LULD''), to address extraordinary market
volatility (the ``LULD Plan'')\19\ at the time of receipt by the
System. In such a case, the System cancels the order back to the User.
The Exchange proposes to add a new defined term ``Cancel Back'' to its
rules to specifically describe this instruction. The Exchange proposes
to define Cancel Back as an instruction the User may attach to an order
instructing the System to cancel the order, when, if displayed by the
System on the EDGX Book at the time of entry, or upon return to the
System after being routed away, the order would create a violation of
Rule 610(d) of Regulation NMS, Rule 201 of Regulation SHO, or the order
cannot

otherwise be executed or posted by the System to the EDGX Book at its
limit price upon entry. The Cancel Back instruction is not currently
defined in the rules, but is currently available in the System. This
proposed addition merely codifies the existing ability of a User to
request that an order be cancelled if it would violate Regulation NMS,
Regulation SHO, or the LULD Plan if it was displayed by the System on
the EDGX Book at its limit price, upon entry.
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    \18\ The re-pricing instructions are proposed to be defined in
Rule 11.6(l), and are further discussed below.
    \19\ See Appendix A to Securities Exchange Act Release No. 67091
(May 31, 2012) 77 FR 33498 (June 6, 2012).
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Discretionary Range (Rule 11.6(d))
    The Exchange currently defines a ``Discretionary Order'' in Rule
11.5(c)(13) as an ``[o]rder to buy or sell a stated amount of a
security at a specified, undisplayed price (the ``discretionary
price''), as well as at a specified, displayed price.'' \20\ The
Exchange believes that a Member adding a non-displayed discretionary
price to its order is characteristic of an instruction, rather than an
order type. Therefore, the Exchange proposes to delete the word Order
from the defined term, and rename the term ``Discretionary Range.'' In
addition, the Exchange proposes to modify the definition of
Discretionary Range to clarify the order types that may include a
Discretionary Range instruction, and how the Discretionary Range of the
order operates. Specifically, the Exchange proposes to define
Discretionary Range as an instruction that may accompany an order to
buy (sell) a stated amount of a security at a specified, displayed
price with discretion to execute up (down) to a specified, non-
displayed price.\21\
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    \20\ Similar optionality is available on other exchanges. See
Nasdaq Stock Market LLC (``Nasdaq'') Rule 4751(f)(1), and NYSE Arca,
Inc. (``NYSE Arca'') Rule 7.31(h)(2).
    \21\ The Exchange proposes to modify the existing rule text to
make clear that an order with a Discretionary Range maintains the
ability to execute at its displayed price with discretion to execute
at prices to and including a specified, non-displayed price, and not
exclusively at those prices. The Discretionary Range may include
prices to and more aggressive than the midpoint of the NBBO.
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    The Exchange also proposes to state that the Discretionary Range of
an order to buy (sell) cannot be more than $0.99 higher (lower) than
the order's displayed price and that an order with a Discretionary
Range instruction resting on the EDGX Book will execute at its least
aggressive price when matched for execution against an incoming order
that also contains a Discretionary Range instruction, as permitted by
the terms of both the incoming and resting order. The Exchange does not
propose to add additional functionality to the operation of the
Discretionary Range instruction or to alter the meaning of the term or
the manner in which an order with a Discretionary Range instruction
currently operates in the System. Finally, as part of its order type
clarification, the Exchange proposes to relocate the term to proposed
Rule 11.6(d).
Display Options (Rule 11.6(e))
    An order may either be displayed or non-displayed on the EDGX Book.
Accordingly, the Exchange proposes to include definitions of
``Displayed'' and ``Non-Displayed.'' Although the words display and
displayed are used in various Exchange rules,\22\ these terms are not
currently defined in the Exchange's rules. Therefore, the Exchange
proposes to define Displayed in Rule 11.6(e) as ``an instruction the
User may attach to an order stating that the order is to be displayed
by the System on the EDGX Book.'' The addition of the definition is not
intended to change the substance of how that term is used in the
Exchange's existing rules. The Exchange is also proposing that the
Displayed instruction is the default instruction for all orders
eligible for display by the System on the EDGX Book.
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    \22\ See Exchange Rule 11.5(c).
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    Second, the Exchange proposes amend the definition of a Non-
Displayed Order. Current Exchange Rule 11.5(c)(8) defines a Non-
Displayed Order as:

[a] market or limit order that is not displayed on the Exchange. A
Non-Displayed Order is ranked based on the specified limit price and
time of order entry in accordance with Rule 11.8(a)(2) and is
available for potential execution against incoming marketable orders
in accordance with Rule 11.9(a)(4)(A)-(B). The System shall not
accept a Non-Displayed Order that is priced better than midpoint of
the NBBO.

The Exchange believes that a Member adding a Non-Displayed instruction
to its order is characteristic of an instruction, rather than a
standalone order type. Therefore, the Exchange proposes to delete the
word Order from the defined term, and rename the term ``Non-
Displayed.'' In addition, the Exchange proposes to modify the
definition of Non-Displayed in its rules and proposes to define it as
an ``instruction the User may attach to an order stating that the order
is not to be displayed by the System on the EDGX Book.'' \23\

    \23\ Other exchanges define Non-Displayed similarly, but as a
``Non-Displayed Order.'' See Nasdaq Rule 4751(e)(3), and BATS
Exchange, Inc. (``BZX'') Rule 11.9(c)(11). In addition, an order may
include a Displayed and Non-Displayed Instruction. See proposed Rule
11.6(m) infra.
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    The proposed definition of Non-Displayed differs from the existing
definition of Non-Displayed Order in several ways. The Exchange does
not propose to carry over to the definition of Non-Displayed in
proposed Rule 11.6 the current rule text regarding the priority and
ranking of Non-Displayed Orders given its re-categorization as an order
instruction described above. The Exchange notes that it is also
proposing to amend Rule 11.8 (to be renumbered as Rule 11.9) to outline
the priority of orders and the impact of this instruction will be
discussed therein. The Exchange also does not propose to carry over to
the definition of Non-Displayed in proposed Rule 11.6 the current rule
text that states the restriction that the System will not accept Non-
Displayed Orders that are priced better than the midpoint of the
NBBO.\24\ Orders that include a Non-Displayed instruction are currently
accepted by the System and posted to the EDGX Book regardless of
whether the order is priced better than the midpoint of the NBBO. In
such case, a User may include a Cancel Back instruction under proposed
Rule 11.6(b) or an instruction for its order to be re-priced pursuant
to proposed Rule 11.6(l)(3) described below.\25\ Therefore, the
Exchange believes it unnecessary to include these provisions in the
definition of Non-Displayed as they are redundant with provisions in
other rules. Lastly, the Exchange plans to move the definition of Non-
Displayed to proposed Rule 11.6(e).
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    \24\ The Exchange notes that a similar provision was removed
from EDGA Exchange, Inc. (``EDGA'') Rule 11.5(c)(8). See Securities
Exchange Act Release No. 64962 (July 26, 2011), 76 FR 45896 (August
1, 2011) (SR-EDGA-2011-21).
    \25\ See infra section entitled, ``Re-Pricing of Orders with a
Non-Displayed Instruction''.
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Locking Price (Rule 11.6(f))
    Under current Exchange Rule 11.5(c)(4), a re-pricing instruction
may be triggered if an order displayed at its limit price would be a
Locking Quotation \26\ upon entry into the System. The existing rules
do not provide a definition of the price at which an order would cause
such a violation. Therefore, the Exchange proposes to add a new term,
Locking Price, to its rules to specifically define this price as the
``price of an order to buy (sell) that, if, upon entry into the System,
or upon return to the System after being routed away, and displayed by
the System on the EDGX Book, it would be a Locking Quotation.'' The

introduction of the new defined term would provide additional
specificity to, but not change the substance of the existing rules.\27\
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    \26\ The term Locking Quotation is proposed to be defined in
Rule 11.6(g), and is further discussed below.
    \27\ The term, ``Locking Price'' is similarly defined in the
rules of other exchanges. See, e.g., BZX Rule 11.13(a)(1), which
defines ``locking price'' as ``. . . prices equal to displayed
orders on the other side of the market.''
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Locking Quotation and Crossing Quotations (Rule 11.6(c) and (g))
    Currently, Exchange Rule 11.16, Locking and Crossing Quotations in
NMS Stocks, defines the terms ``Locking Quotation'' and ``Crossing
Quotation.'' Specifically, Locking Quotation is defined as ``[t]he
display of a bid for an NMS stock during regular trading hours at a
price that equals the price of an offer for such NMS stock previously
disseminated pursuant to an effective national market system plan, or
the display of an offer for an NMS stock during regular trading hours
at a price that equals the price of a bid for such NMS stock previously
disseminated pursuant to an effective national market system plan.'' A
Crossing Quotation is defined as ``[t]he display of a bid (offer) for
an NMS stock during Regular Trading Hours at a price that is higher
(lower) than the price of an offer (bid) for such NMS stock previously
disseminated pursuant to an effective national market system plan.''
The Exchange does not propose any changes to these definitions, other
than to clarify that the Locking and Crossing Quotation would be in
violation of Rule 610(d) of Regulation NMS and to remove the term
``Regular Trading Hours'' from each definition as the Exchange applies
its re-pricing instructions to comply with Rule 610(d) of Regulation
NMS (described below) outside of Regular Trading Hours. These
definitions would also be relocated to proposed Rule 11.6.
Minimum Execution Quantity (Rule 11.6(h))
    The Exchange proposes to introduce, and provide a definition of, a
new term--``Minimum Execution Quantity.'' Minimum Execution Quantity is
an instruction a User may include with an order that includes a Non-
Displayed instruction requiring the System to execute the order to the
extent that a minimum quantity can be satisfied by execution against a
single order or multiple aggregated orders simultaneously. An order
with a Minimum Execution Quantity instruction may be partially executed
so long as the execution size is equal to or exceeds the quantity
provided in the instruction. The Exchange also proposes to state that,
unless the User elects otherwise, any shares remaining after a partial
execution will continue to be executed by the System at a size that is
equal to or exceeds the quantity provided with the instruction. The
Minimum Execution Quantity instruction would no longer apply to an
order where the number of shares remaining after a partial execution is
less than the quantity provided in the instruction. The Minimum
Execution Quantity instruction is not currently defined in the rules,
but is currently available in the System.\28\
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    \28\ The minimum execution quantity instruction is available on
other exchanges. See, e.g., Nasdaq Rule 4751(f)(5), and National
Stock Exchange, Inc. (``NSX'') Rule 11.11(c)(2)(B).
---------------------------------------------------------------------------

Minimum Price Variation (Rule 11.6(i))
    Exchange Rule 11.7, Price Variations, currently defines the term
``Price Variation.'' Specifically, the existing definition of Price
Variation makes clear that bids, offers, or orders in securities traded
on the Exchange shall not be made in an increment smaller than: (i)
$0.01 if those bids, offers, or orders are priced equal to or greater
than $1.00 per share; or (ii) $0.0001 if those bids, offers, or orders
are priced less than $1.00 per share; or (iii) any other increment
established by the Commission for any security which has been granted
an exemption from the minimum price increment requirements of Rule
612(a) or 612(b) of Regulation NMS. The Exchange does not propose to
amend the definition other than to remove the term, ``indications of
interest'', as indications of interest have not existed on the Exchange
since its withdrawal of the Exchange's Step-up order type.\29\ In
addition, the Exchange proposes to relocate the definition from Rule
11.7 to proposed Rule 11.6.
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    \29\ See Securities Exchange Act Release No. 64095 (March 18,
2011), 76 FR 16446 (March 23, 2011) (SR-EDGX-2011-06).
---------------------------------------------------------------------------

Pegged (Rule 11.6(j))
    The Exchange currently describes its price pegging functionality as
a ``Pegged Order'' under current Rule 11.5(c)(6). The Exchange proposes
to relocate the language describing this functionality as an
instruction under proposed Rule 11.6. Other than as described below,
the Exchange does not propose to substantively amend this
functionality; the Exchange believes that a User instructing the
Exchange to peg an order's price is characteristic of an instruction a
User may attach to an order, rather than an order type. Specifically,
the Exchange proposes to change the name Pegged Order to Pegged
instruction and to define a Pegged instruction as an order instruction
to automatically re-price an order in response to changes in the NBBO.
The revised definition of Pegged Order as a Pegged instruction would
continue to include the following provisions while also providing
additional specificity as described below: (i) A User may specify that
the order's price will peg to a price a certain amount away from the
NBB or NBO (offset); (ii) if an order with a Pegged instruction
displayed on the Exchange would lock the market, the price of the order
will be automatically adjusted by the System to one Minimum Price
Variation below the current NBO (for bids) or to one Minimum Price
Variation above the current NBB (for offers); (iii) a new time stamp is
created for the order each time it is automatically adjusted; and (iv)
orders with a Pegged instruction are not eligible for routing pursuant
to Rule 11.11. For purposes of the Pegged instruction, the rule would
also state that the System's calculation of the NBBO does not take into
account any orders with Pegged instructions that are resting on the
EDGX Book. The rule would also state that an order with a Pegged
instruction would be cancelled if an NBB or NBO, as applicable, is no
longer available.
    In addition, the Exchange proposes to further describe the options
available when using a Pegged instruction by introducing two new
terms--Primary Peg and Market Peg.\30\ Specifically, proposed Rule 11.6
would state that a Pegged instruction may be a Market Peg or Primary
Peg. An order that includes a Primary Peg instruction will have its
price pegged by the System to the NBB, for a buy order, or the NBO for
a sell order. A User may, but is not required to, select an offset
equal to or greater than one Minimum Price Variation \31\ above or
below the NBB or NBO that the order is pegged to. An order with a
Primary Peg instruction would be eligible to join the Exchange's Best
Bid or Offer (``Exchange BBO'') when the EDGX Book has been locked or
crossed by another market. If an order with a Primary Peg instruction
would create a Locking Quotation or Crossing Quotation, the price of
the order would be automatically adjusted by the System to one Minimum
Price Variation (discussed below) below the current NBO (for bids) or
to one Minimum Price

Variation above the current NBB (for offers).
---------------------------------------------------------------------------

    \30\ The Primary Peg and Market Peg order instructions are
available on other exchanges. See, e.g., New York Stock Exchange LLC
(``NYSE'') Rule 13 (defining Pegging Interest), and Nasdaq
4751(f)(4).
    \31\ The term Minimum Price Variation is proposed to be defined
in Rule 11.6(i), and is further discussed below.
---------------------------------------------------------------------------

    An order that includes a Market Peg instruction will have its price
pegged by the System to the NBB, for a sell order, or the NBO, for a
buy order. Historically, the System permitted Users to include an
offset amount of zero with a Market Peg instruction. The Exchange now
proposes to require that an order with a Market Peg instruction that is
to be displayed by the System on the EDGX Book include an offset equal
to or greater than one Minimum Price Variation. For an order that is to
be displayed by the System on the EDGX Book, the order will be required
to have an offset for an order to buy (sell) that is equal to or
greater than one Minimum Price Variation below (above) the NBO (NBB)
that the order is pegged to. If a User does not select an offset, the
System will automatically include an offset on an order to buy (sell)
that is equal to one Minimum Price Variation below (above) the NBO
(NBB) that the order is pegged to. Requiring an offset is necessary to
prohibit an order with a Market Peg instruction from becoming a Locking
Quotation. For an order with a Non-Displayed instruction, a User may,
but is not required to, select an offset for an order to buy (sell)
that is equal to or greater than one Minimum Price Variation below
(above) the NBO (NBB) that the order is pegged to.
    The Exchange also proposes to further describe how an order with a
Pegged and Non-Displayed instruction is handled by the System when its
offset causes it to be priced more aggressive than the midpoint of the
NBBO. In such case, the order will be ranked at the midpoint of the
NBBO pursuant to the re-pricing instruction under Rule 11.6(l)(3),
described below, with discretion to execute to the price established by
the offset, or the NBB (NBO) where the offset for an order to sell
(buy) is equal to or more aggressive than the NBB (NBO).
Operation of Limit Orders With a Pegged Instruction
    The following examples illustrate the operation of Limit Orders
with a Pegged instruction.

    Example No. 1.  Buy Limit Order with a Primary Peg instruction
and Offset
    Assume the NBBO is $10.00 by $10.06. A Limit Order is entered
into the System to buy 500 shares, with a Primary Peg instruction
and offset of +$0.02. The order will be pegged to the NBB and
initially displayed by the System on the EDGX Book at $10.02.
    Example No. 2.  Sell Limit Order with a Primary Peg instruction
and Offset
    Assume the NBBO is $10.00 by $10.06. A Limit Order is entered
into the System to sell 500 shares, with a Primary Peg instruction
and offset of -$0.02. The order will be pegged to the NBO and
initially displayed by the System on the EDGX Book at $10.04.
    Example No. 3.  Buy Limit Order with a Market Peg instruction
and Offset
    Assume the NBBO is $10.00 by $10.10. A Limit Order is entered
into the System to buy 500 shares with a Market Peg instruction and
offset of -$0.01. The order will be pegged to the NBO and initially
displayed by the System on the EDGX Book at $10.09.
    Example No. 4.  Sell Limit Order with a Market Peg instruction
and Offset
    Assume the NBBO is $10.00 by $10.10. A Limit Order is entered to
sell 500 shares with a Market Peg instruction and offset of +$0.01,
and a second Limit Order is entered to sell 800 shares with a Market
Peg instruction and offset of +$0.03. The orders will be pegged to
the NBB and initially displayed by the System on the EDGX Book at
$10.01 and $10.03, respectively. If the NBBO then changes to $10.02
by $10.10, the orders will be re-priced and displayed at $10.03 and
$10.05, respectively.
    Example No. 5.  Buy Limit Order with a Non-Displayed and Market
Peg instruction and Offset
    Assume the NBBO is $10.00 by $10.05, resulting in a midpoint of
the NBBO of $10.025. A Limit Order is entered into the System to buy
500 shares with a Non-Displayed and Market Peg instruction and
offset of -$0.02. Because the order's offset causes it to be priced
more aggressively than the midpoint of the NBBO, it will be ranked
at $10.025, the midpoint of the NBBO, with discretion to execute to
$10.03, the price established by the offset.\32\
---------------------------------------------------------------------------

    \32\ In such cases, the order will be given a new time stamp
each time it is re-priced by the System in response to changes in
the midpoint of the NBBO.
---------------------------------------------------------------------------

Permitted Price (Rule 11.6(k))
    The Exchange currently defines the term ``Permitted Price'' in
Exchange Rule 11.5(c)(4)(B), which states that a short sale order that
is subject to the Exchange's short sale price sliding process will ``be
re-priced to display at one Minimum Price Variation above the current
NBB.'' The Exchange does not propose to amend the definition other than
to delete it from Rule 11.5(c)(4)(B) and add relocate it under proposed
Rule 11.6.
Re-Pricing (Rule 11.6(l))
    The Exchange currently offers various re-pricing instructions
which, in all cases, result in the ranking and/or display of an order
at a price other than the order's limit price in order to comply with
applicable securities laws and Exchange Rules. Specifically, the
Exchange's re-pricing instructions that are designed to permit Users to
comply with: (i) Rule 610(d) of Regulation NMS; or (ii) Rule 201 of
Regulation SHO are currently described under Exchange Rules 11.5(c)(4)
as the ``displayed price sliding process'' \33\ and ``short sale price
sliding process.'' \34\ The Exchange proposes to delete Rule 11.5(c)(4)
in its entirety and replace it with proposed Rule 11.6(l), which will
describe in more detail and provide additional specificity regarding
the re-pricing instructions currently available to Users by introducing
and defining four new terms with regard to Regulation NMS compliance--
Price Adjust, Hide Not Slide, Single Re-Price, and Routed and Returned
Re-Pricing, and three new terms with regard to Regulation SHO
compliance--Short Sale Price Adjust, Short Sale Price Sliding, and
Short Sale Single Re-Price.\35\ The Exchange also proposes to describe
in its rules the re-

pricing instruction for orders that are not displayed by the System on
the EDGX Book. By providing additional specificity in proposed Rule
11.6(l) regarding the available re-pricing instructions, the Exchange
believes the proposed rules will aid the understanding of Members,
Users, and the investing public with respect to the operation of the
System and the manner in which orders subject to re-pricing are handled
and displayed by the System on the EDGX Book.
---------------------------------------------------------------------------

    \33\ The ``displayed price sliding process'' is currently
described under Rule 11.5(c)(4)(A) as follows:
    An EDGX Only Order that, at the time of entry, would cross a
Protected Quotation will be re-priced to the locking price and
ranked at such price in the EDGX Book. An EDGX Only Order that, if
at the time of entry, would create a violation of Rule 610(d) of
Regulation NMS by locking or crossing a Protected Quotation will be
displayed by the System at one minimum price variation (``MPV'')
below the current NBO (for bids) or to one MPV above the current NBB
(for offers) (collectively, the ``displayed price sliding
process''). In the event the NBBO changes such that the EDGX Only
Order at the original locking price would not lock or cross a
Protected Quotation, the order will receive a new timestamp, and
will be displayed at the original locking price.
    \34\ The ``short sale price sliding process'' is currently
described under Rule 11.5(c)(4)(B)--(C) as follows:
    An EDGX Only Order that, at the time of entry, could not be
executed or displayed pursuant to Rule 201 of Regulation SHO will be
re-priced by the System to prevent execution or display at or below
the current NBB (such entire process called the ``short sale price
sliding process''). Any EDGX Only order subject to such re-pricing
by the System will be re-priced to display at one MPV above the
current NBB (``Permitted Price''). Following the initial adjustment
provided for in this paragraph (B), the EDGX Only Order will, to
reflect declines in the NBB, continue to be re-priced at the lowest
Permitted Price down to the order's original limit price, or if a
market order, until the order is filled. The order will receive a
new timestamp each time it is re-priced. Alternatively, following
the initial adjustment provided for in paragraph (B), the EDGX Only
Order may, in accordance with the User's instructions, provided that
in all cases the display or execution of such lower prices does not
violate Rule 201 of Regulation SHO: (i) Be re-priced one additional
time to a price that is above the current NBB but equal to the NBB
at the time the EDGX Only Order was received and receive a new
timestamp; or (ii) not be adjusted further. In the event the NBB
changes such that the price of a Non-Displayed Order subject to
short sale price sliding would lock or cross the NBB, the Non-
Displayed Order will receive a new timestamp, and will be re-priced
by the System to a Permitted Price. EDGX Only Orders marked ``short
exempt'' shall not be subject to the short sale price sliding
process.
    \35\ Other exchanges utilize similar re-pricing processes. See,
e.g., Chicago Stock Exchange, Inc. (``CHX'') Art. I, Rule
2(b)(1)(C), BZX Rules 11.9(c)(4), (6) and 11.9(g)(2), BATS-Y
Exchange, Inc. (``BYX'') Rules 11.9(c)(4), (6) and 11.9(g)(2), and
Nasdaq's ``Re-pricing of Orders during Short Sale Period'' described
in Nasdaq Rule 4763(e).
---------------------------------------------------------------------------

    The Exchange describes each of these new terms in more detail below
and provides specific examples as to how each process operates.
Re-Pricing Instructions To Comply With Rule 610(d) of Regulation NMS
    Proposed Rule 11.6(l)(1) sets forth the following re-pricing
instructions to comply with Rule 610(d) of Regulation NMS: (i) Price
Adjust; (ii) Hide Not Slide; (iii) Single Re-Price; and (iv) and Routed
and Returned Re-Pricing. As discussed in more detail under the
description of proposed Rule 11.8, the Exchange notes a Limit Order
that, if displayed by the System on the EDGX Book at its limit price
upon entry would be a Locking Quotation or Crossing Quotation, will be
automatically defaulted by the System to the Price Adjust instruction,
unless the User affirmatively elects: (i) The Cancel Back instruction;
(ii) the Hide Not Slide instruction; or (iii) the Single Re-Price
instruction.
Price Adjust (Rule 11.6(l)(1)(A))
    Under the Price Adjust instruction, where a buy (sell) order would
be a Locking Quotation or Crossing Quotation if displayed by the System
on the EDGX Book at the time of entry, the order will be displayed and
ranked \36\ at a price that is one Minimum Price Variation lower
(higher) than the Locking Price.\37\ The order will be displayed and
ranked by the System on the EDGX Book at the Locking Price if: (i) The
NBBO changes such that the order, if displayed at the Locking Price,
would not be a Locking Quotation or Crossing Quotation, including where
an ISO with a TIF instruction of Day is entered into the System and
displayed on the EDGX Book on the same side of the market as the order
at a price that is equal to or more aggressive than the Locking
Price.\38\ The order would not be subject to further re-ranking and
will be displayed by the System on the EDGX Book at the Locking Price
until executed or cancelled by the User. The order will receive a new
time stamp at the time an order is re-ranked. Pursuant to proposed
renumbered Rule 11.9, all orders that are re-ranked and re-displayed
pursuant to the Price Adjust instruction will retain their priority as
compared to each other based upon the time such orders were initially
received by the System.
---------------------------------------------------------------------------

    \36\ For purposes of the description of the re-pricing
instructions under proposed Rule 11.6(l), the terms ``ranked'' and
``priced'' are synonymous and used interchangeably.
    \37\ The Exchange notes that other exchanges offer similar
functionality. See Nasdaq Rule 4751(f)(7) (Price to Comply Order),
BZX Rule 11.9(g)(1) (Display-Price Sliding), BYX 11.9(g)(1)
(Display-Price Sliding), and CHX Rule Art. I, Rule 2(b)(1)(C)(i)
(NMS Price Sliding).
    \38\ See Division of Trading and Markets: Response to Frequently
Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS,
Question 5.02, available at http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm (last visited March 6, 2014).
---------------------------------------------------------------------------

Operation of Orders With a Price Adjust Instruction
    The following examples \39\ illustrate the operation of the Price
Adjust instruction.
---------------------------------------------------------------------------

    \39\ Unless otherwise noted, the examples included under the
description of the re-pricing instructions in this section assume
that there is no Top of Book interest on the EDGX Book. Exchange
Rule 1.5(dd) defines ``Top of Book'' as ``the best-ranked order to
buy (or sell) in the EDGX Book as ranked pursuant to Rule 11.8.''
The Exchange notes that Exchange Rule 11.8 is being renumbered as
Exchange Rule 11.9. The definition of ``Top of Book'' under Exchange
Rule 1.5(dd) is proposed to be amended by this filing to reflect the
updated rule number.

    Example No. 1.  A Limit Order to Buy Executes at Displayed Price
    Assume the NBBO is $10.00 by $10.10. If a non-routable Limit
Order to buy 100 shares at $10.11 with a Price Adjust instruction is
to be displayed by the System on the EDGX Book, such order will be
displayed and ranked at $10.09. If a Limit Order to sell 100 shares
at $10.09 or less is entered into the System, such order would
execute against the resting Limit Order to buy at $10.09.
    Example No. 2.  The Displayed Price of a Limit Order to Buy
moves up one minimum Price Variation
    Assume the NBBO is $10.00 by $10.10. If a non-routable Limit
Order with a Price Adjust instruction to buy 100 shares at $10.11 is
to be displayed by the System on the EDGX Book, such order will be
displayed and ranked at $10.09. If the NBO subsequently moves to
$10.11, the order will be displayed and ranked at $10.10 and given a
new time stamp. If the NBO moves to $10.12, the order will remain
ranked and displayed at $10.10, the Locking Price.
Hide Not Slide (Rule 11.6(l)(1)(B))
    If the User elects the Hide Not Slide instruction, where a buy
(sell) order would be a Locking Quotation or Crossing Quotation if
displayed by the System on the EDGX Book at the time of entry, the
order will be displayed at a price that is one Minimum Price Variation
lower (higher) than the Locking Price, will be ranked at the midpoint
of the NBBO with discretion to execute at the Locking Price; provided,
however, that if a contra-side order that equals the Locking Price is
displayed by the System on the EDGX Book, the order will be ranked at
the midpoint of the NBBO but its discretion to execute at the Locking
Price will be suspended unless and until there is no contra-side
displayed order on the EDGX Book that equals the Locking Price. Where
the NBBO changes such that the order, if displayed by the System on the
EDGX Book at the Locking Price would not be a Locking Quotation or
Crossing Quotation, the System will rank and display such orders at the
Locking Price. The order will not be subject to further re-ranking and
will be displayed by the System on the EDGX Book at the Locking Price
until executed or cancelled by the User. The order will receive a new
time stamp when it is ranked at the Locking Price. All orders that are
re-ranked and re-displayed by the System on the EDGX Book pursuant to
the Hide Not Slide instruction will retain their priority as compared
to each other based upon the time such orders were initially received
by the System.\40\
---------------------------------------------------------------------------

    \40\ Orders that are re-ranked and re-displayed pursuant to the
Hide Not Slide instruction maintain the same priority as orders that
are re-ranked and re-displayed pursuant to the Routed and Returned
Re-Pricing instruction at the same price. See proposed Exchange
Rules 11.9(a)(2)(B)(i) and (C)(ii).
---------------------------------------------------------------------------

Operation of Orders With a Hide Not Slide Instruction
    The following examples illustrate the operation of the Hide Not
Slide instruction:
    Example No. 1.  Assume the NBBO is $10.00 by $10.10. A non-
routable Limit Order with a Hide Not Slide instruction to buy 100
shares at $10.11 is entered into the System. Such order will be
displayed by the System on the EDGX Book at $10.09 with discretion
to execute up to $10.10, and be ranked by the System at the new
midpoint of the NBBO of $10.095. The NBBO will update to $10.09 by
$10.10 and the midpoint of the NBBO will be $10.095. If a Limit
Order to sell 100 shares at $10.09 or more is entered into the
System, such order would execute against the Limit Order at $10.095.
    If a Limit Order to sell 100 shares is entered at $10.10 and
there are no displayed orders to sell in the System at $10.10, such
order will execute against the Limit Order to buy at $10.10.
    Example No. 2.  Cancellation and Reinstatement of Discretionary
Range
    Assume the NBBO is $10.00 by $10.10. A Limit Order with a Hide
Not Slide instruction to buy 100 shares at $10.10 is entered into
the System. The order will be displayed on the EDGX Book at $10.09
with discretion to execute at $10.10, and be ranked by the System at
the new NBBO midpoint of $10.095. If a Limit Order with a

Post Only instruction to sell 100 shares at $10.10 is entered into
the System, the buy order with the Hide Not Slide instruction will
have its discretion to execute at $10.10 suspended. If the sell
order with a Post Only instruction of 100 shares at $10.10 is then
canceled, the buy order with a Hide Not Slide instruction with have
its discretion to $10.10 reinstated.
    Example No. 3.  The Displayed Price of a Limit Order to Buy
Moves up One Minimum Price Variation
    Assume the NBBO is $10.00 by $10.10. A non-routable Limit Order
with a Hide Not Slide instruction to buy 100 shares at $10.11 is
entered into the System. Such order will be displayed by the System
on the EDGX Book at $10.09 with discretion to execute up to $10.10,
the Locking Price, and will be ranked at the new midpoint of the
NBBO of $10.095. The NBBO will update to $10.09 by $10.10 and the
midpoint of the NBBO will be $10.095. If the NBO moves to $10.11,
the Limit Order to buy will be ranked and displayed at $10.10, the
Locking Price. If the NBBO then moves to $10.10 by $10.12, the Limit
Order to buy will remain ranked and displayed at $10.10, the Locking
Price.
    Example No. 4.  Resting Sell Order Prevents Displayed Limit
Order with a Post Only Instruction to Buy from Executing at Locking
Price
    Assume the NBBO is $10.00 by $10.10. Also, assume there is a
Limit Order with a Displayed instruction to sell 100 shares at
$10.10 on the EDGX Book. A Limit Order with a Displayed, Post Only,
and Hide Not Slide instruction to buy 100 shares at $10.11 is
entered into the System. The Limit Order with the Displayed, Post
Only, and Hide Not Slide instructions will be ranked at $10.095 and
displayed by the System on the EDGX Book at $10.09. While the order
would have discretion to trade up at the Locking Price of $10.10,
that discretion is suspended and the order will not be able to
execute at the Locking Price of $10.10 because: (i) There is a
displayed sell order at that price on the EDGX Book; and (ii) the
Limit Order with a Post Only instruction prohibits execution at its
time of entry. If a Limit Order to sell 100 shares at $10.10 is
entered into the System, such order will not execute against the
Limit Order with both the Post Only and Hide Not Slide instructions
to buy at $10.10 because the resting displayed Limit Order to sell
100 shares at $10.10 has time priority. Assuming no changes to the
above conditions, if a Limit Order to sell 100 shares at $10.09 is
entered into the System, it would execute against the Limit Order
with a Post Only and Hide Not Slide instruction to buy at $10.095.
Routed and Returned Re-Pricing (Rule 11.6(l)(1)(B)(i))
    The portion of a Limit Order that is returned to the System after
being routed away in accordance with Rule 11.9(b) (proposed to be
renumbered as Rule 11.11), that, if displayed by the System on the EDGX
Book at its limit price at the time of entry in the System, would be a
Locking Quotation or Crossing Quotation, will be automatically
defaulted by the System to the Routed and Returned Re-Pricing
instruction, unless the User affirmatively elects the Cancel Back
instruction, Price Adjust instruction, Hide Not Slide instruction, or
the Single Re-Price instruction.
    Under the Routed and Returned Re-Pricing instruction, a Limit Order
that is returned to the EDGX Book after being routed to an away Trading
Center with a limit price that would cause the order to be a Locking
Quotation or Crossing Quotation will be displayed by the System on the
EDGX Book at a price that is one Minimum Price Variation lower (higher)
than the Locking Price for orders to buy (sell), will be ranked at the
midpoint of the NBBO with discretion to execute at the Locking Price;
provided, however, that if a contra-side order with a Post Only
instruction that equals the Locking Price is displayed by the System on
the EDGX Book, the order will be ranked at the midpoint of the NBBO but
its discretion to execute at the Locking Price will be suspended unless
and until there is no contra-side order displayed by the System on the
EDGX Book that equals the Locking Price. Each time the NBBO is updated,
a buy (sell) order subject to the Routed and Returned Re-Pricing
instruction will be further adjusted so that it continues to be
displayed by the System on the EDGX Book at one Minimum Price Variation
below (above) the NBO (NBB) and will be ranked at the updated midpoint
of the NBBO with discretion to execute at the Locking Price until the
price of such order reaches its limit price, at which point it will
remain displayed by the System on the EDGX Book at that price and cease
to be further adjusted pursuant to the Routed and Returned Re-Pricing
instruction. The order will receive a new time stamp when it is
returned to the EDGX Book and each time it is subsequently re-ranked.
Pursuant to Rule 11.9, all orders that are re-ranked and re-displayed
pursuant to the Routed and Returned Re-Pricing instruction will retain
their priority as compared to each other at the same price based upon
the time such orders were initially received by the System or upon
return to the System after being routed away.\41\
---------------------------------------------------------------------------

    \41\ Orders that are re-ranked and re-displayed pursuant to the
Routed and Returned Re-Pricing instruction maintain the same
priority as orders that are re-ranked and re-displayed pursuant to
the Hide Not Slide instruction at the same price. See proposed
Exchange Rules 11.9(a)(2)(B)(i) and (C)(ii).
---------------------------------------------------------------------------

Operation of Orders With a Routed and Returned Re-Pricing Instruction
    The following examples illustrate the operation of the Routed and
Returned Re-Pricing instruction:
    Assume the NBBO is $10.00 by $10.10. Also, assume there are no sell
orders resting on the EDGX Book. A Limit Order to buy 100 shares at
$10.11 is returned to the EDGX Book after being routed to an away
Trading Center. If displayed by the System on the EDGX Book, the
returned Limit Order would be a Crossing Quotation. The order would
default to the Routed and Returned Re-Pricing instruction unless the
User affirmatively elects the Cancel Back instruction, the Price Adjust
instruction, the Hide Not Slide instruction, or the Single Re-Price
instruction. The Limit Order subject to the Routed and Returned Re-
Pricing instruction will be ranked at $10.095, with discretion to
execute up to $10.10, and displayed by the System on the EDGX Book at
$10.09 with a new time stamp. If the NBO moves to $10.11, the Limit
Order subject to the Routed and Returned Re-Pricing instruction will be
re-priced and ranked at the new midpoint of the NBBO at $10.105 with
discretion to execute up to $10.11, and displayed by the System on the
EDGX Book at $10.10 with a new time stamp. If the NBO then moves to
$10.12, the Limit Order subject to the Routed and Returned Re-Pricing
instruction will now be ranked and displayed by the System on the EDGX
Book at $10.11, its limit price. Then, a new order with both a Hide Not
Slide and Post Only instruction is entered to buy 300 shares at 10.11.
The order with the Hide Not Slide instruction will also be ranked at
$10.105, with discretion to execute up to $10.11, and displayed by the
System on the EDGX Book at $10.10. If the NBO moves to $10.12, the
Limit Order subject to the Routed and Returned Re-Pricing instruction
and the order with the Hide Not Slide instruction will both be re-
priced, ranked, and displayed at $10.11. The Routed and Returned
instruction and the Hide Not Slide instruction receive the same
priority treatment, so the order with the Routed and Returned
instruction maintains time priority over the order with the Hide Not
Slide instruction, since the order with the Routed and Returned
instruction was placed on the EDGX Book first.
Single Re-Price (Rule 11.6(l)(1)(C))
    If the User selects the Single Re-Price instruction, where an order
would be a Locking Quotation or Crossing Quotation if displayed by the
System on the EDGX Book at the time of entry, the order will be
displayed and ranked at a price that is one Minimum Price Variation
lower (higher) than the Locking Price for orders to buy (sell)

and will not be subject to any further adjustment by the System.\42\
---------------------------------------------------------------------------

    \42\ The Exchange notes that other exchanges offer similar
functionality. See Nasdaq Rule 4751(f)(8) (Price to Comply Post
Order), BZX Rule 11.9(g)(1) (Display-Price Sliding), BYX 11.9(g)(1)
(Display-Price Sliding), and CHX Rule Art. I, Rule 2(b)(1)(C)(i)
(NMS Price Sliding).
---------------------------------------------------------------------------

Operation of Orders With a Single Re-Price Instruction
    The following examples illustrate the operation of the Single Re-
Price instruction:

    Example No.1:  Limit Order to Buy that is Subject to the Single
Re-Price Instruction Executes at Displayed Price
    Assume the NBBO is $10.00 by $10.10. If a non-routable Limit
Order with a Single Re-Price instruction to buy 100 shares at $10.11
is entered into the System, such order will be ranked and displayed
by the System on the EDGX Book at $10.09 and will not be further
adjustments by the System. If a Limit Order to sell 100 at $10.09 is
entered into the System, such order would execute against the Limit
Order to buy at $10.09.
    Example No. 2.  The Displayed Price of a Limit Order to Buy that
is Subject to the Single Re-Price Instruction
    Assume the NBBO is $10.00 by $10.10. If a non-routable Limit
Order with a Single Re-Price instruction to buy 100 shares at $10.11
is entered into the System, such order will be ranked and displayed
by the System on the EDGX Book at $10.09. If the NBBO moves to
$10.09 by $10.11, the Limit Order subject to the Single Re-Price
instruction will not be further adjusted and will remain ranked and
displayed by the System on the EDGX Book at $10.09.
Re-Pricing Instructions To Comply With Rule 201 of Regulation SHO
    Proposed Exchange Rule 11.6(l)(2) sets forth the following re-
pricing instructions for an order with a Short Sale instruction to
comply with Rule 201 of Regulation SHO: (i) Short Sale Price Adjust;
(ii) Short Sale Price Sliding; and (iii) Short Sale Single Re-Price.
The Exchange notes that a Limit Order to sell with a Short Sale
instruction that cannot be displayed by the System on the EDGX Book or
executed at its limit price at the time of entry into the System
because a short sale price restriction is in effect pursuant to Rule
201 of Regulation SHO (``Short Sale Circuit Breaker''),\43\ will be
automatically defaulted by the System to the Short Sale Price Adjust
instruction, unless the User affirmatively elects: (i) The Cancel Back
instruction; (ii) the Short Sale Price Sliding instruction; or (iii)
the Short Sale Single Re-Price instruction. Like current Rule
11.5(c)(4)(E), orders to sell with both a Short Sale and a Short Exempt
instruction are not eligible for any of the re-pricing instructions to
comply with Rule 201 of Regulation SHO and will execute, display and/or
route without regard to whether the order is at a Permitted Price above
the NBB or whether a Short Sale Circuit Breaker in effect. In addition,
when a Short Sale Circuit Breaker is in effect, the re-pricing
instructions to comply with Rule 610(d) of Regulation NMS will be
ignored with regard to a sell order that contains a Short Sale
instruction. In such case, the below re-pricing instructions to comply
with Rule 201 of Regulation SHO will apply.
---------------------------------------------------------------------------

    \43\ 17 CFR 242.200(g); 17 CFR 242.201. On February 26, 2010,
the Commission adopted amendments to Regulation SHO under the Act in
the form of Rule 201, pursuant to which, among other things, short
sale orders in covered securities generally cannot be executed or
displayed by a trading center, such as EDGX, at a price that is at
or below the current NBB when a Short Sale Circuit Breaker is in
effect for the covered security. See Securities Exchange Act Release
No. 61595 (February 26, 2010), 75 FR 11232 (March 10, 2010). In
connection with the adoption of Rule 201, Rule 200(g) of Regulation
SHO was also amended to include a ``short exempt'' marking
requirement. See also Securities Exchange Act Release No. 63247
(November 4, 2010), 75 FR 68702 (November 9, 2010) (extending the
compliance date for Rules 201 and 200(g) to February 28, 2011). See
also Division of Trading & Markets: Responses to Frequently Asked
Questions Concerning Rule 201 of Regulation SHO, www.sec.gov/divisions/marketreg/rule201faq.htm.
---------------------------------------------------------------------------

Short Sale Price Adjust (Rule 11.6(l)(2)(A))
    Under the Short Sale Price Adjust instruction, the System will
cause an order to sell with a Short Sale instruction to be ranked and
displayed by the System on the EDGX Book at the Permitted Price.\44\
Following the initial ranking, the order to sell with a Short Sale
instruction will, to the extent the NBB declines, continue to be re-
ranked and displayed by the System on the EDGX Book at the Permitted
Price down to the order's limit price. The order to sell with a Short
Sale instruction will receive a new time stamp each time it is re-
ranked. All orders to sell with Short Sale instructions that are re-
ranked and re-displayed by the System on the EDGX Book pursuant to the
Short Sale Price Adjust instruction will retain their priority as
compared to each other based upon the time such orders were initially
received by the System.
---------------------------------------------------------------------------

    \44\ The Exchange notes that other exchanges offer similar
functionality. See Nasdaq Rule 4763(e) (Re-Pricing of Orders During
Short Sale Period), BZX Rule 11.9(g)(2) (Short Sale Price Sliding),
BYX 11.9(g)(2) (Short Sale Price Sliding), and CHX Rule Art. I, Rule
2(b)(1)(C)(ii) (Short Sale Price Sliding).
---------------------------------------------------------------------------

Operation of Orders With a Short Sale Price Adjust Instruction
    The below example illustrates the Short Sale Price Adjust
instruction.
    Assume the NBBO is $10.00 by $10.10 and the Short Sale Circuit
Breaker is in effect for the relevant security. If a Limit Order \45\
to sell 200 shares at $9.95 is entered into the System with a Short
Sale instruction and is subject to the Short Sale Price Adjust
instruction, such order will be ranked and displayed at $10.01. If a
Limit Order to buy 100 shares at $10.01 is entered into the System,
such order would execute at $10.01 against the Limit Order to sell with
the Short Sale and Short Sale Price Adjust instructions.
---------------------------------------------------------------------------

    \45\ Assume for purposes of this example that a Limit Order
contains either a Post Only or Book Only instruction.
---------------------------------------------------------------------------

    If the NBBO then moves to $9.99 by $10.01, the Limit Order to sell
with the Short Sale and Short Sale Price Adjust instructions will be
ranked and displayed by the System on the EDGX Book at $10.00. If the
NBBO moves to $9.96 by $10.00, the order will be re-ranked and
displayed by the System on the EDGX Book at $9.97. If the NBBO moves to
$9.93 by $9.97, the order will be re-ranked and displayed by the System
on the EDGX Book at $9.95, and will not be re-ranked further because
the order reached its limit price.
Short Sale Price Sliding (Rule 11.6(l)(2)(B))
    If the User selects the Short Sale Price Sliding instruction, the
System will cause a Limit Order to sell with a Short Sale instruction
to be displayed by the System on the EDGX Book at the Permitted Price
and be ranked at the midpoint of the NBBO. Following the initial
ranking, the order will, to the extent the NBB declines, be re-ranked
and displayed by the System on the EDGX Book one additional time at a
price that is equal to the NBB at the time the order was received by
the System and will receive a new time stamp. All orders to sell with
Short Sale instructions that are re-ranked and re-displayed by the
System on the EDGX Book pursuant to the Short Sale Price Sliding
instruction will retain their priority as compared to each other based
upon the time the orders were initially received by the System.
Operation of Orders With a Short Sale Price Sliding Instruction
    The below example illustrates the Short Sale Price Sliding
instruction.
    Assume the NBBO is $10.00 by $10.10 and a Short Sale Circuit
Breaker is in effect for the security. A User enters a sell order into
the System with a Short Sale instruction for 200 shares at $9.95 and
elects the Short Sale Price Sliding instruction. The order will be
ranked at $10.005 and displayed by the System on the EDGX Book at
$10.01.

    In the above example, if the NBBO then moves to $9.99 by $10.01,
the order will be re-ranked and displayed by the System on the EDGX
Book at $10.00. If the NBBO moves to $9.98 by $10.00, the order will
remain displayed at $10.00 and not be subject to further re-ranking
because the price of the order reached the bid at which it could not
execute when it first arrived in the System because a Short Sale
Circuit Breaker was in effect.
Short Sale Single Re-Price (Rule 11.6(l)(2)(C))
    If the User elects the Short Sale Single Re-Price instruction, the
System will cause a Limit Order to sell with a Short Sale instruction
that is entered into the System to be ranked and displayed by the
System on the EDGX Book at the Permitted Price.\46\ Following the
initial ranking provided for in this rule, the order will not be
adjusted further to reflect a decline in the NBB.
---------------------------------------------------------------------------

    \46\ The Exchange notes that other exchanges offer similar
functionality. See Nasdaq Rule 4763(e) (Re-Pricing of Orders During
Short Sale Period), BZX Rule 11.9(g)(2) (Short Sale Price Sliding),
BYX 11.9(g)(2) (Short Sale Price Sliding), and CHX Rule Art. I, Rule
2(b)(1)(C)(ii) (Short Sale Price Sliding).
---------------------------------------------------------------------------

Operation of Orders With a Short Sale Single Re-Price Instruction
    The below example illustrates the Short Sale Single Re-Price
instruction.
    Assume the NBBO is $10.00 by $10.10 and a Short Sale Circuit
Breaker is in effect for the security. A User enters an order into the
System to sell 200 shares at $9.95 with a Short Sale instruction and
the Short Sale Single Re-Price instruction. Such order will be ranked
and displayed by the System on the EDGX Book at $10.01. If a Limit
Order buy 100 at $10.01 is entered into the System, such order would
execute at $10.01 against the sell order with the Short Sale
instruction and Single Re-Price instruction.
    In the above example, if the NBBO then moves to $9.99 by $10.01,
the order to sell with the Short Sale instruction and the Single Re-
Price instruction will not re-priced and will remain Displayed at
$10.01.
Re-Pricing of Orders With a Non-Displayed Instruction (Rule 11.6(l)(3))
    Proposed Rule 11.6(l)(3) states that an order entered into the
System that includes a Non-Displayed instruction and is priced better
than the midpoint of the NBBO, will be ranked at the midpoint of the
NBBO with discretion to execute to its limit price. Ranking the order
at the midpoint of the NBBO enables the System to avoid an internal
cross on the EDGX Book due to the existence of Mid-Point Match Orders,
which reside on the EDGX Book at the midpoint of the NBBO. The price of
the order will be automatically adjusted by the System in response to
changes in the NBBO to be re-ranked at the midpoint of the NBBO until
it reaches its limit price. A User may affirmatively elect that a buy
(sell) order with a Non-Displayed instruction Cancel Back when the
order's limit price is greater (less) than the NBO (NBB). A new time
stamp is created for the order each time the order is re-ranked due to
a change to the midpoint of the NBBO. Pursuant to Rule 11.9, all orders
with a Non-Displayed instruction that are re-ranked at the midpoint of
the NBBO will retain their priority as compared to each other based
upon the time such orders were ranked at the midpoint of the NBBO.
Operation of Orders With a Non-Displayed Instruction
    The below examples demonstrate how an order with a Non-Displayed
instruction may be ranked at the midpoint of the NBBO.

    Example No. 1.  Assume the NBBO is $24.00 x $25.00. If an
incoming order with a Non-Displayed instruction is entered into the
System to buy at $25.00, it will be ranked by the System at $24.50
with discretion to $25.00, its limit price.
    Example No. 2.  Assume the NBBO is $20.00 by $25.00. If an
incoming order with a Non-Displayed instruction is entered into the
System to buy at $22.00, because the limit price is lower than the
midpoint of the NBBO ($22.50), it will remain ranked by the System
on the EDGX Book at $22.00. If the midpoint of the NBBO moves below
$22.00, the order with a Non-Displayed instruction will be ranked by
the System at the then current mid-point of the NBBO.
Reserve Quantity and Replenishment Amounts (Rule 11.6(m))
    Exchange Rule 11.5(c)(1) currently defines a ``Reserve Order'' as
``[a] limit order with a portion of the quantity displayed (`display
quantity') and with a reserve portion of the quantity (`reserve
quantity') that is not displayed.'' The Exchange believes that a
Reserve Order is more appropriately described as an order instruction,
rather than an order type. Therefore, the Exchange proposes to delete
the term Reserve Order and replace it with the order instruction
``Reserve Quantity'' in proposed Rule 11.6. The substantive definition
of Reserve Quantity would remain the same. Specifically, proposed Rule
11.6 would define Reserve Quantity to mean the portion of an order with
a Non-Displayed instruction in which a portion of that order is also
displayed on the EDGX Book. The Exchange believes that reclassifying a
Reserve Order as Reserve Quantity is consistent with the current
System's functionality that permits a User when entering an order into
the System to instruct the System to not display a portion of that
order on the EDGX Book. The Exchange also proposes to include within
the definition that both the portion of the order with a Displayed
instruction and the Reserve Quantity of the order are available for
execution against incoming orders.
    The Exchange proposes to include in proposed Rule 11.6 language
that describes how a User entering an order into the System with a
Reserve Quantity may instruct the System to update the displayed
quantity by setting a replenishment amount.\47\ Proposed Rule 11.6(m)
would also describe the two replenishment instructions offered by the
Exchange which are: (i) Fixed Replenishment; and (ii) Random
Replenishment.\48\ Where the displayed quantity of an order is reduced
to less than a Round Lot, the System will, in accordance with the
replenishment instruction selected by the User, replenish the displayed
quantity from the Reserve Quantity by at least a single Round Lot. A
new time stamp is created for the displayed portion of the order each
time it is replenished from the Reserve Quantity, while the Reserve
Quantity retains the time stamp of its original entry.\49\ Where the
combined amount of the displayed quantity and Reserve Quantity of an
order is reduced to less than one Round Lot, the order will be treated
as an order with a Displayed instruction for purposes of execution
priority under proposed renumbered Rule 11.9.
---------------------------------------------------------------------------

    \47\ Other exchanges offer similar functionality for refreshing
the displayed portion of an order from a Reserve Quantity. See,
e.g., Nasdaq Rule 4751(f)(2) (Reserve Orders) and NYSE Rule 13
(Reserve Order Types).
    \48\ The Random Replenishment instruction is consistent with
functionality described in existing Exchange rules related to the
objective of a User to avoid providing information that an order has
Reserve Quantity. Exchange Rule 13.8(b) contemplates the subsequent
replenishment of ``Reserve Orders'' by permitting Users to obfuscate
their order identification numbers on the Exchange's Book Feed when
replenishing the displayed quantity of a Reserve Order.
    \49\ The Exchange notes that other exchanges maintain similar
time stamp functionality when replenishing a displayed amount of an
order from the order's undisplayed quantity. See Nasdaq Rule
4751(f)(2) (Reserve Orders), and NYSE Rule 13 (Reserve Order Types,
Minimum Display Reserve Order).
---------------------------------------------------------------------------

    Under the Fixed Replenishment instruction, the displayed quantity
of an order is replenished by a fixed quantity designated by the User.
The Fixed Replenishment quantity for the order equals the initial
displayed quantity designated by the User. The displayed

replenishment quantity selected by the System may not be less than a
single Round Lot or greater than the remaining Reserve Quantity. As set
forth in proposed rule 11.8(b)(5) discussed below, unless the User
selects the Random Replenishment instruction, the System will
automatically default the order to the Fixed Replenishment instruction
with a replenishment value equal to the displayed quantity of the
order.
    Under the Random Replenishment instruction, both the actual
quantity of the order that will be initially displayed by the System on
the EDGX Book and subsequent displayed replenishment quantities are
randomly determined by the System within a replenishment range
established by the User. In particular, the User entering an order into
the System subject to the Random Replenishment instruction must select
a quantity around which the replenishment range is established and a
replenishment value. The actual quantity that will be initially
displayed, as well as subsequent displayed replenishment quantities,
will then be determined by the System randomly selecting a number of
shares in Round Lots within a replenishment range that is between: (i)
The quantity around which the replenishment range is established minus
the replenishment value; and (ii) the quantity around which the
replenishment range is established plus the replenishment value. In no
case can the displayed replenishment quantity exceed the remaining
Reserve Quantity of the order. The displayed replenishment quantity
selected by the System may not be less than a single Round Lot or
greater than the remaining Reserve Quantity.
Operation of Orders With Replenishment Amounts
    The following examples illustrate the operation of replenishment
amounts.
Fixed Replenishment
    Example No. 1.  A User enters an order into the System to buy
10,000 shares at $100 with a displayed quantity of 1,000 shares and
a Reserve Quantity of 9,000 shares. The order defaults to a Fixed
Replenishment quantity of 1,000 shares, equal to its displayed
quantity. An inbound Market Order to sell 400 shares is entered into
the System and executes against the displayed quantity of 1,000
shares, resulting in a remaining displayed quantity of 600 shares.
Another Market Order to sell 600 shares is entered into the System
and executes against the 600 displayed shares. The displayed
quantity is then replenished by the System from the Reserve Quantity
to the order's original displayed quantity of 1,000 shares,
resulting in a remaining Reserve Quantity of 8,000 shares.
    Example No. 2.  A User enters Order No. 1, an order to buy 6,000
shares at $30.50, the NBB, with a displayed quantity of 1,000 shares
and a Reserve Quantity of 5,000 shares. A User then enters Order No.
2 to buy 600 shares at $30.50 with no Reserve Quantity.
Subsequently, an inbound Market Order to sell 2,000 shares is
entered into the System. The order to sell first executes against
the displayed quantity of 1,000 shares of the Order No. 1, then
executes against the full 600 shares of Order 2, and then executes
400 shares from the Reserve Quantity of Order No. 1. The displayed
quantities of Order Nos. 1 and 2 execute in time priority, followed
by the Reserve Quantity of Order No. 1. The display quantity of
Order No. 1 is then replenished for 1,000 shares, leaving a Reserve
Quantity of 3,600 shares.
Random Replenishment
    Example No. 1.  A User enters an order into the System to buy
10,000 shares at $100 and the User selects Random Replenishment with
a quantity of 1,000 shares around which the replenishment range is
established and a replenishment value of 400 shares. Under Random
Replenishment, the System will generate the actual quantity of the
order that will be initially displayed by the System on the EDGX
Book and subsequent displayed replenishment quantities within a
replenishment range that is calculated by adding and subtracting the
400 share replenishment value from the order's quantity of 1,000
shares around which the replenishment range is to be established.
Hence, for this order, 1,000 shares plus or minus 400 shares equals
a replenishment range of 600 to 1,400 shares. Assume the System
randomly chooses an initial displayed quantity of 800 shares,
resulting in a Reserve Quantity of 9,200 shares. An inbound Market
Order to sell 800 shares is entered into the System and executes
against the 800 share displayed quantity. Under Random
Replenishment, the displayed quantity is randomly replenished to a
new Round Lot quantity within the replenishment range of 600 to
1,400 shares. Assume the System selects a replenishment quantity of
1,200 shares. The System will then display 1,200 shares to buy at
$100, resulting in a Reserve Quantity of 8,000 shares.
    Example No. 2.  A User enters an order into the System to buy
5,000 shares at $100 and the User selects Random Replenishment with
a quantity of 2,000 shares around which the replenishment range is
established and a replenishment value of 1,000 shares. Under Random
Replenishment, the System will generate the actual quantity of the
order that will be initially displayed by the System on the EDGX
Book and subsequent displayed replenishment quantities within a
replenishment range that is calculated by adding and subtracting the
1,000 share replenishment value from the order's quantity of 2,000
shares around which the replenishment range is established. Hence,
for this order, 2,000 shares plus or minus 1,000 shares equals a
replenishment range of 1,000 to 3,000 shares. Assume the System
randomly chooses an initial display quantity of 2,500 shares,
resulting in a Reserve Quantity of 2,500 shares. A Market Order to
sell 2,500 shares is entered into the System and is executed against
the displayed quantity of 2,500 shares. Because the upper end of the
replenishment range of 3,000 shares exceeds the remaining Reserve
Quantity of 2,500 shares, the replenishment range is reset by the
System to be between 1,000 shares and 2,500 shares. Assume the
System selects a Random Replenishment of 1,100 shares. The System
will then display on the EDGX Book 1,100 shares to sell at $100,
resulting in a Reserve Quantity of 1,400 shares. The System will
further reset the replenishment range to be between 1,000 shares and
1,400 shares. If, after subsequent executions, the lower end of the
replenishment range exceeds the remaining Reserve Quantity, the
System will generate a replenishment quantity that is equal to the
remaining Reserve Quantity.
Routing/Posting Instructions (Rule 11.6(n))
    As discussed in more detail below, the Exchange proposes to
describe the routing and posting instructions available to Users under
the Exchange's rules under new proposed Rule 11.6(n). Specifically,
proposed Rule 11.6(n) defines the following routing and posting
instructions that a User may select, depending on the order type: (i)
Aggressive; (ii) Super Aggressive; (iii) Book Only; (iv) Post Only; (v)
Destination Specified; and (vi) Destination-on-Open.
    The Exchange proposes to introduce two new terms to its rules--
Aggressive and Super Aggressive. Aggressive is an order instruction
that directs the System to route such order if an away Trading Center
crosses the limit price of the order resting on the EDGX Book. Super
Aggressive is an order instruction that directs the System to route
such order if an away Trading Center locks or crosses the limit price
of the order resting on the EDGX Book. The Exchange believes adding
definitions for these terms will provide additional transparency to the
Exchange's rules.
    The Exchange proposes to replace the term ``EDGX Only Order'' with
the term ``Book Only,'' revise the definition of EDGX Only Order, and
move the new definition to proposed Rule 11.6(n)(3). None of the
proposed changes introduce any substantive changes to the operation of
the functionality of the System. Specifically, current Rule 11.5(c)(4)
defines the term EDGX Only Order as follows:

[a]n order that is to be ranked and executed on the Exchange
pursuant to Rule 11.8 and Rule 11.9(a)(4) or cancelled, without
routing away to another trading center. The System will default to
the displayed price sliding process and short sale price sliding
process for an EDGX Only Order unless the User has entered
instructions not to use any of the processes.

    The Exchange believes that the operation of an EDGX Only Order is
indicative of an instruction a User may attach to a Limit Order and not
that of a standalone order type. Therefore, the Exchange proposes to
delete the word Order from the term, and to define the term as an order
instruction. In addition, the Exchange believes that the term Book Only
is a more commonly used term in the securities industry. Therefore, the
Exchange proposes to replace the term EDGX Only with Book Only.
Moreover, the Exchange does not propose to carry over the description
of an EDGX Only Order that states it is subject to the Exchange's
``display price sliding process and short sale price sliding process''
unless the User instructs otherwise. The Exchange believes this
language is unnecessary and redundant because the applicable defaults
are set forth in the proposed revisions to the Exchange's re-pricing
instructions, as described in proposed Rule 11.6(l). With these
changes, the proposed definition of Book Only reads as follows: ``[a]n
order instruction stating that an order will be matched against an
order on the EDGX Book or posted to the EDGX Book, but will not route
to an away Trading Center.'' \50\
---------------------------------------------------------------------------

    \50\ The proposed definition of Book Only is similar to that of
other exchanges. See BZX Rule 11.9(c)(4) (BATS Only Order), BYX Rule
11.9(c)(4) (BATS Only Order), NSX Rule 11.11(c)(6) (NSX Only Order).
---------------------------------------------------------------------------

    The Exchange also proposes to amend the term ``Post Only Order''
and move it to proposed Rule 11.6(n). Current Exchange Rule 11.5(c)(5)
defines the term Post Only Order as the following:

    An order that is to be ranked and executed on the Exchange
pursuant to Rule 11.8 and Rule 11.9(a)(4) or cancelled, as
appropriate, without routing away to another trading center except
that the order will not remove liquidity from the EDGX Book absent
an order instruction to the contrary. A EDGX Post Only Order will be
subject to the displayed price sliding process and short sale price
sliding process unless a User has entered instructions not to use
the either or both processes as set forth in paragraph (c)(4) above.

    The Exchange proposes to amend the existing language of a ``Post
Only Order'' to classify it as a ``Post Only'' instruction. The revised
definition would read as follows:

    An instruction that may be attached to an order that is to be
ranked and executed on the Exchange pursuant to Rule 11.9 and Rule
11.10(a)(4) or cancelled, as appropriate, without routing away to
another trading center except that the order will not remove
liquidity from the EDGX Book, except as described below. An order
with a Post Only instruction and a Hide Not Slide or Price Adjust
instruction will remove contra-side liquidity from the EDGX Book if
the order is an order to buy or sell a security priced below $1.00
or if the value of such execution when removing liquidity equals or
exceeds the value of such execution if the order instead posted to
the EDGX Book and subsequently provided liquidity, including the
applicable fees charged or rebates provided.\51\
---------------------------------------------------------------------------

    \51\ Other exchanges offer similar functionality for Post Only
orders. See BZX Rule 11.9(c)(6) (BATS Post Only Order) and BYX Rule
11.9(c)(6); see also NYSE Rule 13 (Add Liquidity Only Modifier) and
NYSE Arca Rule 7.31(nn) (Adding Liquidity Only Order).

    This amended definition would change the rule in the following
ways. First, the Exchange believes that the operation of Post Only
functionality is indicative of an instruction a User may attach to a
Limit Order and not that of a standalone order type. Therefore, the
Exchange proposes to delete the word Order from the term, and to define
Post Only as an order instruction. The Exchange does not propose to
carry over the current description of Post Only functionality that
states it is subject to the Exchange's ``display price sliding process
and short sale price sliding process'' unless the User instructs
otherwise. The Exchange believes this language is unnecessary and
redundant because the applicable defaults are set forth in the proposed
revisions to the Exchange's re-pricing instructions and order types in
proposed Rule 11.6(l). The Exchange also proposes to remove from the
definition of Post Only the language that an order with a Post Only
instruction will not remove liquidity from the EDGX Book unless ``the
User enters an instruction to the contrary.'' The Exchange proposes to
replace this language with a description of the specific circumstances
under which an order with a Post Only instruction may remove liquidity
from the EDGX Book. Specifically, Price Adjust instruction will remove
contra-side liquidity from the EDGX Book if the order is an order to
buy or sell a security priced below $1.00 or if the value of such
execution when removing liquidity equals or exceeds the value of such
execution if the order instead posted to the EDGX Book and subsequently
provided liquidity, including the applicable fees charged or rebates
provided.\52\
---------------------------------------------------------------------------

    \52\ Examples may be found under the following section:
Operation of Limit Orders with a Displayed and Post Only
Instruction, Example, No. 1, Scenario Nos. 2 and 3; and Example, No.
2, Scenario No. 2.
---------------------------------------------------------------------------

    The Exchange also proposes to include the instruction ``Destination
Specified'' in proposed Rule 11.6. The Exchange currently defines the
term ``Destination Specific Order'' in Rule 11.5(c)(9) as

    A market or limit order that instructs the System to route the
order to a specified away trading center or centers, after exposing
the order to the EDGX Book. Destination Specific Orders that are not
executed in full after routing away are processed by the Exchange as
described below in Rule 11.9(a)(4), save where the User has provided
instructions that the order reside on the book of the relevant away
trading center.

    As part of its proposed order type clarification discussed below,
the Exchange proposes to amend its rules to classify the operation of a
Destination Specific Order as an instruction that may be appended to a
Market Order or a Limit Order. In doing so, the Exchange proposes to
change the name of the Destination Specific Order to Destination
Specified. The Exchange believes that treating the Destination Specific
Order not as a standalone order type, but rather as an instruction
assists in clarifying the operation of the Exchange's order types. The
Exchange further proposes that, depending on the User's routing
instructions, an order with a Destination Specified instruction may be
processed by the System as described in Rule 11.9(b)(1) (renumbered as
11.10(a)(4)), returned to the User, or posted to the EDGX Book, unless
the User instructs that the order reside on the book of the relevant
away Trading Center. With these proposed revisions, the definition of
Destination Specified reads: ``Destination Specified instructs the
System to route the order to a specified away Trading Center or
Centers, after exposing the order to the EDGX Book. Such orders that
are not executed in full after routing away are processed by the
Exchange as described in Exchange Rule 11.10(a)(4), unless the User has
provided instructions that the order reside on the book of the relevant
away Trading Center.'' The proposed changes do not reflect any
substantive change to the operation of the Destination Specified order
instruction in the System.
    Lastly, Exchange Rule 11.5(c)(10) currently defines the term
``Destination-on-Open Order.'' The Exchange proposes to relocate the
Destination-on-Open instruction from Exchange Rule 11.5(c)(10) to
proposed Rule 11.6(n)(6). In addition, as part of its proposed order
type clarification discussed below, the Exchange proposes to classify
Destination-on-Open as an instruction that may be appended to a Market
or a Limit Order. As a result, the Exchange proposes deleting the word
Order from its name. The Exchange believes that treating Destination-
on-Open as an instruction, rather than a standalone order type, will
assist in clarifying the operation of the Exchange's order types.

The Exchange also proposes that an unfilled portion of an order with a
Destination-on-Open instruction may also be cancelled or rerouted. The
proposed change does not involve any substantive changes to the
operation of the order instruction in the System.
Short Sale and Short Exempt (Rules 11.6(o) and (p))
    Although certain current Exchange rules refer to the terms ``short
sale order'' and ``short exempt,'' \53\ the Exchange rules do not
specifically define these terms. Therefore, the Exchange proposes to
add definitions for ``Short Sale'' and ``Short Exempt'' as these terms
are currently understood by Users of the Exchange and to clarify that
each are instructions that a User may include on an order.
Specifically, proposed Rule 11.6(o) would state that a ``Short Sale
instruction shall have the same meaning as the Short Sale definition
contained in Rule 200(a) of Regulation SHO.'' Rule 11.6(p) would define
a Short Exempt instruction as a ``an instruction on an order with a
Short Sale instruction that satisfies the requirements set forth in
Rule 201 of Regulation SHO.''
---------------------------------------------------------------------------

    \53\ See Exchange Rules 11.9(a)(1) and 11.15.
---------------------------------------------------------------------------

TIF (Rule 11.6(q))
    As described below, the Exchange proposes to describe the TIF
instructions available to Users on the Exchange under proposed Rule
11.6(q), to include the following instructions: IOC, Day, FOK, and
Good-`til Time (``GTT'').
    The Exchange proposes to relocate IOC, Day, and FOK from current
Rule 11.5(b) with minor clarifications.\54\ Specifically, the Exchange
proposes to incorporate the existing definitions of an ``IOC Order,''
``Day Order'' and ``Fill-or-Kill Order,'' as set forth in Rules
11.5(b)(1)-(3), into proposed Rule 11.6(q). The only change the
Exchange proposes to make is to delete the word Order from each term,
as the Exchange believes that each term is more accurately described as
an order instruction. In addition, the Exchange proposes to include in
the definition of Day that an order with a TIF instruction of Day
entered into the System before the start of the specified trading
session would be placed by the System in a pending state and activated
for potential execution upon the start of that trading session.
---------------------------------------------------------------------------

    \54\ Current Rule 11.5(b) includes two (2) additional TIF
instructions of Good-`til-Cancel and Good-`til-Day, which the
Exchange proposes to delete from its rules because they are not
currently offered by the Exchange.
---------------------------------------------------------------------------

    The Exchange also proposes to include a new TIF instruction of GTT,
which will instruct the System that the order is to be cancelled at a
specified time of day. A TIF instruction of GTT can be applied to an
order eligible for trading in any trading session. Any unexecuted
portion of an order with a TIF instruction of GTT will be cancelled at:
(i) The expiration of the User's specified time; (ii) at the end of the
User's specified trading session(s); or (iii) the end of the trading
day, as instructed by the User. In no event shall an order with a TIF
instruction of GTT be eligible for execution over multiple trading
days.\55\
---------------------------------------------------------------------------

    \55\ Other exchanges offer TIF instructions similar to GTT. See
CHX Rules Art. 1, Rule 2(d)(3) (Good `Til Date), BZX Rule 11.9(b)(4)
(Good `til Day), BYX Rule 11.9(b)(4) (Good `til Day), and Nasdaq
Rule 4751(h)(4) (System Hours Expire Time).
---------------------------------------------------------------------------

Trading Center (Rule 11.6(r))
    The Exchange also proposes to add a definition of the term
``Trading Center'' to proposed Rule 11.6. Trading Center would be
defined as ``[o]ther securities exchanges, facilities of securities
exchanges, automated trading systems, electronic communications
networks or other brokers or dealers.'' This definition also exists
within Exchange Rule 2.11(a). The term Trading Center appears
frequently within Chapter XI and the Exchange believes that repeating
this definition in Rule 11.6(r) adds further clarity to its Rules. In
addition, the Exchange notes that its proposed definition of Trading
Center is consistent with the definition of Trading Center under Rule
600(a)(78) of Regulation NMS.\56\
---------------------------------------------------------------------------

    \56\ Under Exchange Act Rule 600(a)(78), ``Trading Center'' is
defined as ``a national securities exchange or national securities
association that operates an SRO trading facility, an alternative
trading system, an exchange market maker, an OTC market maker, or
any other broker or dealer that executes orders internally by
trading as principal or crossing orders as agent.'' See 242 CFR
600(a)(78).
---------------------------------------------------------------------------

Units of Trading (Rule 11.6(s))
    Rule 11.6 currently provides that ``[o]ne hundred (100) shares
shall constitute a `round lot,' any amount less than 100 shares shall
constitute an `odd lot,' and any amount greater than 100 shares that is
not a multiple of a round lot shall constitute a `mixed lot.''' The
Exchange proposes to delete the definition of ``Units of Trading'' as a
standalone rule and proposes to relocate it to proposed Rule 11.6(s)
with the below modifications.
    First, the Exchange proposes to clarify that a Round Lot is 100
shares, unless an alternative number of shares is established as a
Round Lot by the listing exchange for the security. This proposed
revision acknowledges that for certain securities, a Round Lot is
smaller than 100 shares (e.g., for Berkshire Hathaway Class A's
``(BRK.A)'' a Round Lot is one (1) share). Similarly, in Rule
11.8(a)(6) (proposed to be renumbered as Rule 11.9(a)(6)), the Exchange
proposes to make an additional conforming change to replace the term
``99 shares or fewer'' with ``less than a Round Lot.'' The Exchange
also proposes to clarify the definition of Round Lot under proposed
Rule 11.6(s) by adding that orders that are a Round Lot are eligible to
be Protected Quotations.
    Current Rule 11.5(c)(2) provides that an Odd Lot Order is ``[a]n
order to buy or sell an odd lot.'' The Exchange proposes to move this
text into proposed Rule 11.6(s)(2) and also amend the definition of Odd
Lot to read ``[a]ny amount less than a Round Lot.'' The Exchange also
proposes to clarify that orders of Odd Lot size are only eligible to be
Protected Quotations if aggregated to form a Round Lot.
    Similarly, the Exchange proposes to make conforming amendments to
the definition of a Mixed Lot contained in current Rule 11.5(c)(3) and
to move such text to Rule 11.6(s)(3). Mixed Lot would be defined as
``[a]ny amount greater than a Round Lot that is not an integer multiple
of a Round Lot . . .'' The Exchange also proposes to clarify that Odd
Lot portions of an order of Mixed Lot size are only eligible to be
Protected Quotations if aggregated to form a Round Lot.\57\
---------------------------------------------------------------------------

    \57\ The Exchange notes that these proposed definitions are
similar to Nasdaq Rule 4751(g) (definition of ``Order Size'').
---------------------------------------------------------------------------

Proposed Rule 11.8, Order Types
    The Exchange proposes to add proposed Rule 11.8, Order Types, to
outline the characteristics of all orders accepted by the System.
Currently, Exchange Rule 11.5 lists twenty-six individual order
types.\58\ As discussed above, the Exchange believes that most of these
individual order types currently set forth under Exchange Rule 11.5 can
be reclassified as instructions that may be attached to order types.
Thus, the Exchange proposes to delete the content of current Rule 11.5
and replace it with proposed Rule 11.8, which describes the following
order types accepted by the

System: Market Orders, Limit Orders, ISOs, MidPoint Match Orders, NBBO
Offset Peg Orders, and Route Peg Orders. Proposed Rule 11.8 would
describe each order type's functionality and the instructions a User
may attach to each. The Exchange reiterates that, unless otherwise
stated, it is not proposing to amend its current System functionality.
The Exchange believes that the proposed rule change will provide
greater specificity and transparency regarding the function of each of
the order types and order instructions accepted by the System,
including which order types and order instructions can be combined with
each other.
---------------------------------------------------------------------------

    \58\ The order types listed under current Exchange Rule 11.5
are: Limit Order, Market Order, IOC Order, Day Order, FOK Order, GTC
Order, GTD Order, Reserve Order, Odd Lot Order, Mixed Lot Order,
EDGX Only Order, Post Only Order, Pegged Order, MidPoint Match
Order, Non-Displayed Order, Destination Specific Order, Destination-
on-Open Order, Stop Order, Stop Limit Order, Discretionary Order,
NBBO Peg Offset Order, Route Peg Order, Attributable Order, Non-
Attributable Order, Intermarket Sweep Order, and Directed
Intermarket Sweep Order. See Exchange Rule 11.5.
---------------------------------------------------------------------------

Market Orders (Rule 11.8(a))
    Exchange Rule 11.5(a)(2) currently defines a ``Market Order'' as:

[a]n order to buy or sell a stated amount of a security that is to
be executed at the NBBO when the order reaches the Exchange. Market
orders shall not trade through Protected Quotations. A market order
that is designated as ``EDGX Only'' will be cancelled if, when
reaching the Exchange, it cannot be executed on the System in
accordance with Rule 11.9(a)(4). Market orders that are not
designated as ``EDGX Only'' and that cannot be executed in
accordance with Rule 11.9(a)(4) on the System when reaching the
Exchange will be eligible for routing away pursuant to Rule
11.9(b)(1). Except with respect to a Destination-on-Open Order, as
defined in paragraph (c)(10), below, any portion of a market order
that would execute at a price more than $0.50 or 5 percent worse
than the consolidated last sale at the time the order initially
reaches the Exchange, whichever is greater, will be cancelled.
Market orders are not eligible for execution during the Pre-Opening
or the Post-Closing Trading Sessions.

    Under proposed Rule 11.8(a), the Exchange proposes to amend the
definition of a Market Order to clarify its operation and the
instructions available to Users when entering a Market Order into the
System. The Exchange proposes to carry over the language of current
Rule 11.5(a)(2) into proposed Rule 11.8(a).
    Proposed Rule 11.8(a) would define a Market Order as ``[a]n order
to buy or sell a stated amount of a security that is to be executed at
the NBBO or better when the order reaches the Exchange.'' Proposed Rule
11.8(a) would also include descriptions of the instructions that may be
attached to a Market Order. First, the rule would make clear that an
order may include a Stop Price that will convert the order into a
Market Order when the Stop Price is triggered. An order to buy converts
to a Market Order when a consolidated last sale in the security occurs
at, or above, the specified Stop Price. An order to sell converts into
a Market Order when the consolidated last sale in the security occurs
at, or below, the specified Stop Price. This functionality is currently
described in the Exchange's rules as a Stop Order under Rule
11.5(c)(11). The Exchange believes that a Stop Order is more
appropriately described as an order instruction for a Market Order,
rather than a stand-alone order type. Therefore, the Exchange proposes
to delete the term Stop Order and replace it with the order instruction
Stop Price in proposed Rule 11.8(a)(1). The proposed definition of Stop
Price will remain the same as the current definition of Stop Order.
    Proposed Rule 11.8(a)(2) would state that unless otherwise
instructed by the User, the System will automatically default a Market
Order to a TIF instruction of Day. A User may instead select TIF
instructions of IOC or FOK for a Market Order. If a Market Order
includes a TIF instruction of FOK, any portion of the Market Order not
executed immediately after entry into the System will be cancelled. If
a Market Order includes a TIF instruction of IOC, any portion of the
Market Order not executed after checking the System for available
shares, and, if applicable, after return to the System after being
routed to an away Trading Center, will be cancelled. A Market Order may
not trade through a Protected Quotation.
    Market Orders may be an Odd Lot, Round Lot, or Mixed Lot. A User
may attach a Minimum Execution Quantity instruction to a Market Order
with a TIF instruction of IOC. Under proposed renumbered Rule
11.10(a)(3)(A), where a non-routable buy (sell) Market Order is entered
into the System and the NBO (NBB) is greater (lesser) than the Upper
(Lower) Price Band, such order will be posted by the System to the EDGX
Book and priced at the Upper (Lower) Price Band, unless (i) the order
includes a TIF instruction of IOC or FOK, in which case it will be
cancelled if not executed, or (ii) the User has entered a Cancel Back
instruction.\59\ The Exchange also proposes under Rule 11.8(a)(4) that
a Market Order that includes both a TIF instruction of Day and a Short
Sale instruction that cannot be executed because of the existence of a
Short Sale Restriction, will also be posted and displayed by the System
to the EDGX Book and priced in accordance with the Short Sale Price
Sliding instruction described in proposed Rule 11.5(l)(2).
---------------------------------------------------------------------------

    \59\ Current Exchange Rule 11.9(a)(3)(A) states, ``[w]here a
non-routable buy (sell) Market Order is entered into the System and
the NBB (NBO) is greater (less) than to the Upper (Lower) Price
Band, such order will be posted to the EDGX Book or executed, unless
(i) the order is an IOC Order, in which case it will be cancelled if
not executed, or (ii) the User has entered instructions to cancel
the order.'' See also Securities Exchange Act Release No. 69003
(February 27, 2013), 78 FR 14380 (March 5, 2013) (SR-EDGX-2013-08).
---------------------------------------------------------------------------

    Market Orders are only eligible for execution by the System during
the Regular Session.
    A Market Order may include a Book Only instruction. Except as
described above with respect to re-pricing of a Market Order where the
NBO (NBB) is greater (less) than the Upper (Lower) Price Band, a Market
Order that includes a Book Only instruction will be cancelled if, when
entered into the System, it cannot be executed in accordance with
proposed Rule 11.10(a)(4). Except for a Market Order that includes a
Destination-on-Open instruction, any portion of a Market Order that
would execute at a price more than the greater of $0.50 or 5 percent
worse than the consolidated last sale as published by the responsible
single plan processor at the time the order is entered into the System,
will be cancelled. A Market Order that does not include a Book Only
instruction, or a TIF instruction of IOC or FOK, and cannot be executed
by the System in accordance with proposed renumbered Rule 11.10(a)(4)
will be eligible for routing to a Trading Center pursuant to proposed
Rule 11.11.
Operation of Market Order With a Book Only Instruction
    The below examples demonstrate the functionality of a Market Order
that is entered with a Book Only instruction.

    Example No. 1. Assume the NBBO is $10.01 x $10.02 and the
Exchange's BBO is $9.99 x $10.02. A Market Order with a Book Only
instruction to buy 100 shares is entered into the System and
executes against the $10.02 offer displayed by the System on the
EDGX Book.
    Example No. 2. Assume the NBBO is $10.01 x $10.02 and the
Exchange's BBO is $9.99 x $10.02. An order with a Non-Displayed
instruction to sell priced at the midpoint of the NBBO of $10.015 is
resting on the EDGX Book. A Market Order with a Book Only
instruction to buy 100 shares is entered into the System and
executes against the order with a Non-Displayed instruction to sell
at $10.015.
    Example No. 3. Assume the NBBO is $10.01 x $10.02 and the
Exchange's BBO is $9.99 x $10.03 and no better priced orders with a
Non-Displayed instruction are resting on the EDGX Book. A Market
Order with a Book Only instruction to buy 100 shares is entered into
the System but is cancelled back to the User because the order is
not routable and the NBO is displayed only on an away Trading
Center.

Limit Orders (Rule 11.8(b))
    Exchange Rule 11.5(a)(1) defines a Limit Order as, ``[a]n order to
buy or sell a stated amount of a security at a specified price or
better'' and a ``marketable'' Limit Order as a ``Limit Order to buy
(sell) at or above (below) the lowest (highest) Protected Offer
(Protected Bid) for the security.'' The Exchange proposes to relocate
these definitions without modification to proposed Rule 11.8(b).
Proposed Rule 11.8(b) would further describe a Limit Order's
functionality and which instructions are available to Users when
entering a Limit Order. Rule 11.8(b) would also describe the re-pricing
instructions for Limit Orders available to Users seeking to comply with
Rule 610 of Regulation NMS and Rule 201 of Regulation SHO.
    First, proposed Rule 11.8(b) will describe how a Limit Order may
include a ``Stop Limit Price''. An order with a Stop Limit Price will
convert to a Limit Order once the Stop Limit Price is triggered. A
Limit Order to buy with a Stop Limit Price becomes eligible for
execution by the System when the consolidated last sale in the security
occurs at, or above, the specified Stop Limit Price. A Limit Order to
sell with a Stop Limit Price becomes eligible for execution when the
consolidated last sale in the security occurs at, or below, the
specified Stop Limit Price. This functionality is currently described
in the Exchange's rules as a Stop Limit Order under Rule 11.5(c)(12).
The Exchange believes that a Stop Limit Order is more appropriately
described as an order instruction for a Limit Order, rather than a
stand-alone order type. Therefore, the Exchange proposes to delete the
term Stop Limit Order and replace it with the description of the Stop
Limit Price functionality in proposed Rule 11.8(b)(1). The proposed
description of a Stop Limit Price will remain the same as the current
definition of Stop Limit Order.
    Proposed Rule 11.8(b)(2) would state that a Limit Order must have
one of the following TIF instructions: IOC, FOK, Day or GTT and that
unless otherwise instructed by the User, the System will automatically
default a Limit Order to a TIF instruction of Day.
    A Limit Order may be an Odd Lot, Round Lot or Mixed Lot. A User may
include a Minimum Execution Quantity instruction only for Limit Orders
that also include a Non-Displayed instruction. A Limit Order is
eligible for execution during the Pre-Opening Session, Regular Session
and the Post-Closing Session.
    A Limit Order will default to a Displayed instruction unless the
User includes a Non-Displayed instruction on the order, or a portion
thereof. A Limit Order with a Displayed instruction will default to a
Non-Attributable instruction unless the User selects the Attributable
instruction. Unless the order is re-priced in accordance with proposed
Rule 11.8(b)(13), a Limit Order that includes a Non-Displayed
instruction is ranked based on the specified limit price at the time
the order is entered into the System in accordance with proposed Rule
11.9(a)(2)(A) and is available for potential execution in the System
against incoming orders in accordance with proposed Rule
11.10(a)(4)(A)-(B). A Limit Order with a Displayed instruction may also
include a Reserve Quantity. A Limit Order with both a Displayed
instruction and Reserve Quantity must include a replenishment amount.
Unless the User selects the Random Replenishment instruction, the
System will automatically default the order to a Fixed Replenishment
instruction with a replenishment value equal to the displayed quantity
of the order.
    A Limit Order may include a Post Only or Book Only instruction.
Unless a Limit Order includes a Post Only or Book Only instruction,
proposed Rule 11.8(b)(7) would specify that a marketable Limit Order
would be eligible to be routed to a Trading Center pursuant to current
Rule 11.9(b) (proposed to be renumbered as Rule 11.11). In such case,
the routable, marketable Limit Order may include a Destination
Specified, or a Destination-on-Open instruction. A Limit Order may also
include an Aggressive or Super Aggressive instruction.
    Limit Orders that include a TIF instruction of Day or GTT
(``Eligible Limit Orders'') may include a Discretionary Range or Pegged
instruction (e.g., Market Peg or Primary Peg). A Limit Order that
includes a Pegged instruction is not eligible to be routed to another
Trading Center in accordance with proposed renumbered Rule 11.11.
    Proposed Rules 11.8(b)(10) and (11) would also describe the various
re-pricing instructions a User may attach to an Eligible Limit Order to
comply with Rule 610 of Regulation NMS or Rule 201 of Regulation SHO.
The operation of these re-pricing instructions is explained in detail
above.\60\ Proposed Rules 11.8(b)(10) and (11) would explain which re-
pricing instructions the System may default to absent a selection by
the User. The Rule would also state that a User may elect to Cancel
Back the order should its display by the System on the EDGX Book or
execution by the System trigger the application of a re-pricing
instruction.
---------------------------------------------------------------------------

    \60\ See supra notes 33 to 46 and accompanying text.
---------------------------------------------------------------------------

    First, Eligible Limit Orders are subject to one of the three re-
pricing instructions the Exchange offers to comply with Rule 610 of
Regulation NMS. A Limit Order that, if displayed at its limit price at
the time of entry into the System, would become a Locking Quotation or
Crossing Quotation will be automatically defaulted by the System to the
Price Adjust instruction, unless the User affirmatively elects the
Cancel Back instruction, the Hide Not Slide instruction or the Single
Re-Price instruction. A Limit Order to buy (sell) with a limit price
that would be a Crossing Quotation at the time of entry will not
execute at a price that is higher (lower) than the Locking Price.
    Second, should a Short Sale Circuit Breaker be in effect, an
Eligible Limit Order may also be subject to one of the three re-pricing
instructions the Exchange offers to comply with Rule 201 of Regulation
SHO. Proposed Rule 11.8(b)(11) would state that a Limit Order that
includes a Short Sale instruction and that is not marked Short Exempt
and that cannot be executed in the System or displayed by the System on
the EDGX Book at its limit price at the time of entry into the System
because a Short Sale Circuit Breaker is in effect, will be
automatically defaulted by the System to the Short Sale Price Adjust
instruction, unless the User affirmatively elects the Cancel Back
instruction, the Short Sale Price Sliding instruction or the Short Sale
Single Re-Price instruction.
    Third, when a Limit Order, or a portion thereof, is returned to the
Exchange after being routed away in accordance with Rule 11.11, and, if
displayed by the System on the EDGX Book at its limit price it would
become a Locking Quotation or Crossing Quotation, such Limit Order will
be automatically defaulted by the System to the Routed and Returned Re-
Pricing instruction, unless the User affirmatively elects the Cancel
Back instruction, the Price Adjust instruction, Hide Not Slide
instruction, or the Single Re-Price instruction.
    Lastly, proposed Rule 11.8(b)(13) would state that a Limit Order
with a Non-Displayed instruction and a limit price that is better than
the midpoint of the NBBO will be ranked by the System at the midpoint
of the NBBO with discretion to execute to its limit price in accordance
with the Re-Pricing of Orders with a Non-Displayed

instruction under proposed Rule 11.6(l)(3). However, a User may
affirmatively elect that a Limit Order to buy (sell) with a Non-
Displayed instruction not be ranked at the midpoint of the NBBO and
Cancel Back when the order's limit price is greater (less) than the NBO
(NBB).
    The below examples describe the functionality of a Limit Order with