[Federal Register Volume 86, Number 192 (Thursday, October 7, 2021)]
[Notices]
[Pages 55926-55978]
[FR Doc No: 2021-21624]

Vol. 86

Thursday,

No. 192

October 7, 2021

Part II

Securities and Exchange Commission

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Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of
Amendment No. 1 and Order Instituting Proceedings To Determine Whether
To Approve or Disapprove a Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt New Rules 6.1P-O, 6.37AP-O, 6.40P-O, 6.41P-O,
6.62P-O, 6.64P-O, 6.76P-O, and 6.76AP-O and Amendments to Rules 1.1,
6.1-O, 6.1A-O, 6.37-O, 6.65A-O and 6.96-O; Notice

Federal Register / Vol. 86, No. 192 / Thursday, October 7, 2021 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93193; File No. SR-NYSEArca-2021-47]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Instituting Proceedings To Determine
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt New Rules 6.1P-O, 6.37AP-O, 6.40P-O, 6.41P-O,
6.62P-O, 6.64P-O, 6.76P-O, and 6.76AP-O and Amendments to Rules 1.1,
6.1-O, 6.1A-O, 6.37-O, 6.65A-O and 6.96-O

September 29, 2021.
    On June 21, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt new Rules 6.1P-O (Applicability), 6.37AP-
O (Market Maker Quotations), 6.40P-O (Pre-Trade and Activity-Based Risk
Controls), 6.41P-O (Price Reasonability Checks--Orders and Quotes),
6.62P-O (Orders and Modifiers), 6.64P-O (Auction Process), 6.76P-O
(Order Ranking and Display), and 6.76AP-O (Order Execution and Routing)
and proposes amendments to Rules 1.1 (Definitions), 6.1-O
(Applicability, Definitions and References), 6.1A-O (Definitions and
References--OX), 6.37-O (Obligations of Market Makers), 6.65A-O (Limit-
Up and Limit-Down During Extraordinary Market Volatility), and 6.96-O
(Operation of Routing Broker) to reflect the implementation of the
Exchange's Pillar trading technology on its options market.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal
Register on July 9, 2021.\3\ On August 18, 2021, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\5\ On September 28,
2021, the Exchange filed Amendment No. 1 to the proposed rule
change,\6\ which superseded the proposed rule change as originally
filed in its entirety. The Commission has received no comments on the
proposed rule change.
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    \3\ See Securities Exchange Act Release No. 92304 (June 30,
2021), 86 FR 36440 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 92696, 86 FR 47350
(August 24, 2021). The Commission designated October 7, 2021, as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
    \6\ Amendment No. 1 is available on the Commission's website at
https://www.sec.gov/comments/sr-nysearca-2021-47/srnysearca202147-9304467-259869.pdf.
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    The Commission is publishing this notice and order to solicit
comments on the proposed rule change, as modified by Amendment No. 1,
from interested persons and to institute proceedings pursuant to
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.
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    \7\ 15 U.S.C. 78s(b)(2).
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I. The Exchange's Description of the Proposed Rule Change, as Modified
by Amendment No. 1

    The Exchange plans to transition its options trading platform to
its Pillar technology platform. In connection with the implementation
of the Pillar technology, the Exchange proposes to adopt new rules, as
well as certain amendments to existing rules, to reflect how options
would trade on the Exchange once the Pillar technology is implemented.
This Amendment 1 to SR-NYSEArca-2021-47 replaces SR-NYSEArca-2021-47 as
originally filed and supersedes such filing in its entirety.
    The proposed rule change, as modified by Amendment No. 1, is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment
No. 1

    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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
Background
    The Exchange plans to transition its options trading platform to
its Pillar technology platform. The Exchange's and its national
securities exchange affiliates' \8\ (together with the Exchange, the
``NYSE Exchanges'') cash equity markets are currently operating on
Pillar. For this transition, the Exchange proposes to use the same
Pillar technology already in operation for its cash equity market. In
doing so, the Exchange will be able to offer not only common
specifications for connecting to both of its cash equity and equity
options markets, but also common trading functions. This Amendment No.
1 supersedes the original filing in its entirety.\9\
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    \8\ The Exchange's national securities exchange affiliates are
the New York Stock Exchange LLC (``NYSE''), NYSE American LLC
(``NYSE American''), NYSE National, Inc. (``NYSE National''), and
NYSE Chicago, Inc. (``NYSE Chicago'').
    \9\ This Amendment No. 1 provides more background information
regarding the proposed rule changes, makes clarifying changes to
certain proposed rules without any substantive differences as
compared to the original filing, and makes the following substantive
changes from the original filing: (1) Revises how the Specified
Threshold would be calculated for Limit Order Price Protection in
proposed Rule 6.62P-O(a)(3)(A) to include prices equal to the
Reference Price; (2) revises how a Trading Collar would be assigned,
as described in proposed Rule 6.62P-O(4)(A) and (B), to provide that
a Trading Collar would be reassigned to an order after a trading
halt, and makes related changes to proposed Rule 6.64P-
O(f)(3)(A)(ii); (3) revises proposed Rule 6.62P-O(g) to describe
proposed Complex Cross Orders (i.e., Complex QCC Orders) and makes
revisions to how a single-leg Cross Order priced at the market would
trade; (4) revises proposed Rule 6.62P-O(h)(1) to specify that a
Clear-the-Book Order would be entered contemporaneous with executing
an order in open outcry; (5) revises proposed Rule 6.62P-O(i)(2) to
specify which order with an MTS modifier would not be subject to
self-trade prevention modifiers; (6) revises proposed Rule 6.62P-O
to remove the proposed Non-Display Remove Modifier; (7) revises
proposed Rule 6.64P(a) to add a definition for the term ``Auction
Price;'' (8) revises proposed Rule 6.64P-O(g)(2) to provide that
during a trading halt, any unexecuted quantity of an order for which
the 500-millisecond Trading Collar timer has started would be
cancelled; and (9) revises proposed Rule 6.76AP-O(a)(1)(A) to
provide that only the first LMM quote in time priority would be
eligible for the LMM Guarantee.
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    The Exchange plans to roll out the new technology platform over a
period of time based on a range of underlying symbols, anticipated for
the fourth quarter of 2021. As was the case for the other NYSE
Exchanges that have transitioned to Pillar, the Exchange anticipates a
three-week roll-out period

and will announce by Trader Update \10\ when underlying symbols will be
transitioning to the Pillar trading platform. With this transition,
certain rules would continue to be applicable to options overlying
symbols trading on the current trading platform--the OX system,\11\ but
would not be applicable to options overlying symbols that have
transitioned to trading on Pillar.
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    \10\ Trader Updates are available here: https://www.nyse.com/trader-update/history. Anyone can subscribe to email updates of
Trader Updates, available here: https://www.nyse.com/subscriptions.
    \11\ ``OX'' refers to the Exchange's current electronic order
delivery, execution, and reporting system for designated option
issues through which orders and quotes of Users are consolidated for
execution and/or display. See Rule 6.1A-O(13). ``OX Book'' refers to
the OX's electronic file of orders and quotes, which contain all of
the orders in each of the Display Order and Working Order processes
and all of the Market Makers' quotes in the Display Order Process.
See Rule 6.1A-O(14). With the transition to Pillar, the Exchange
would no longer use the terms ``OX'' or ``OX Book'' and rules using
those terms would not be applicable to trading on Pillar. Once the
transition is complete, the Exchange will file a subsequent proposed
rule change to delete references to OX and OX Book from the
rulebook.
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    Instead, the Exchange proposes new rules to reflect how options
would trade on the Exchange once Pillar is implemented. These proposed
rule changes will (1) use Pillar terminology that is based on Exchange
Rule 7-E Pillar terminology governing cash equity trading; (2) provide
for common functionality on both its options and cash equity markets;
and (3) introduce new functionality.
    The Exchange notes that certain of the proposed new Pillar rules
concern functionality not currently available on the OX system and that
would be unique to how option contracts trade, and therefore would be
new rules with no parallel version for the Exchange's cash equity
market.
Proposed Use of ``P'' Modifier
    As proposed, new rules governing options trading on Pillar would
have the same numbering as current rules that address the same
functionality, but with the modifier ``P'' appended to the rule number.
For example, Rule 6.76-O, governing Order Ranking and Display--OX,
would remain unchanged and continue to apply to any trading in symbols
on the OX system. Proposed Rule 6.76P-O would govern Order Ranking and
Display for trading in options symbols migrated to the Pillar platform.
All other current rules that have not had a version added with a ``P''
modifier will be applicable to how trading functions on both the OX
system and Pillar. Once options overlying all symbols have migrated to
the Pillar platform, the Exchange will file a separate rule proposal to
delete rules that are no longer operative because they apply only to
trading on the OX system.
    To reflect how the ``P'' modifier would operate, the Exchange
proposes to add rule text immediately following the title ``Rule 6-O
Options Trading,'' and before ``Rules Principally Applicable to Trading
of Option Contracts'' that would provide that rules with a ``P''
modifier would be operative for symbols that are trading on the Pillar
trading platform. As further proposed, and consistent with the handling
of the transition to Pillar by the Exchange's cash equity platform, if
a symbol (and the option overlying such symbol) is trading on the
Pillar trading platform, a rule with the same number as a rule with a
``P'' modifier would no longer be operative for that symbol.\12\
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    \12\ The Exchange used the same description when it transitioned
its cash equity platform to Pillar. See Securities Exchange Act
Release Nos. 75494 (July 20, 2015), 80 FR 44170 (July 24, 2015) (SR-
NYSEArca-2015-38) (Approval Order) and 74951 (May 13, 2015), 80 FR
28721 (May 19, 2015) (``NYSE Arca Equities Pillar Notice'').
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    The Exchange believes that adding this explanation regarding the
``P'' modifier in Exchange rules would provide transparency regarding
which rules and definitions would be operative during the symbol
migration to Pillar.
Summary of Proposed Rule Changes
    In this filing, the Exchange proposes the following new Pillar
rules: Rules 6.1P-O (Applicability), 6.37AP-O (Market Maker
Quotations), 6.40P-O (Pre-Trade and Activity-Based Risk Controls),
6.41P-O (Price Reasonability Checks--Orders and Quotes), 6.62P-O
(Orders and Modifiers), 6.64P-O (Auction Process), 6.76P-O (Order
Ranking and Display), and 6.76AP-O (Order Execution and Routing). The
Exchange also proposes to amend Rules 1.1 (Definitions), 6.1-O
(Applicability, Definitions and References), and 6.1A-O (Definitions
and References--OX) to reflect definitions that would be applicable for
options trading on Pillar and make conforming amendments to Rules 6.37-
O (Obligations of Market Makers), 6.65A-O (Limit-Up and Limit-Down
During Extraordinary Market Volatility), and 6.96-O (Operation of
Routing Broker). These proposed rules would set forth the foundation of
the Exchange's options trading model on Pillar and, among other things,
would use existing Pillar terminology currently in effect for the
Exchange's cash equity platform.
    Because certain proposed rules have definitions and functions that
carry forward to other proposed rules, the Exchange proposes to
describe the new rules in the following order (rather than by rule
number order): Definitions, applicability, ranking and display,
execution and routing, orders and modifiers, market maker quotations,
pre-trade and activity-based risk controls, price reasonability checks,
and auctions.
    To promote clarity and transparency, the Exchange further proposes
to add a preamble to the following current rules specifying that they
would not be applicable to trading on Pillar: Rule 6.1-O
(Applicability, Definitions and References), 6.1A-O (Definitions and
References--OX), Rule 6.37A-O (Market Maker Quotations), 6.40-O (Risk
Limitation Mechanism), 6.60-O (Price Protection--Orders), 6.61-O (Price
Protections--Quotes), 6.62-O (Certain Types of Orders Defined), 6.64-O
(OX Opening Process), 6.76-O (Order Ranking and Display--OX), 6.76A-O
(Order Execution--OX), 6.88-O (Directed Orders), and 6.90-O (Qualified
Contingent Crosses).
    As discussed in greater detail below, the Exchange is not proposing
fundamentally different functionality applicable to options trading on
Pillar than on the OX system. However, with Pillar, the Exchange would
introduce new terminology, and as applicable, new or updated
functionality that would be available for options trading on the Pillar
platform.
    The Exchange notes that new rules relating to electronic complex
trading on Pillar are addressed in a separate proposed rule change.\13\
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    \13\ See Securities Exchange Act Release No. 92563 (August 4,
2021), 86 FR 43704 (August 10, 2021) (Notice of proposed Rule 6.91P-
O, regarding complex order trading on Pillar) (``Complex Pillar
Notice'').
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Proposed Rule Changes
Rule 1.1--Definitions
    Rule 1.1 sets forth definitions that are applicable to both the
Exchange's cash equity and options markets. Rule 6.1-O(b) sets forth
definitions that are applicable to the trading of option contracts on
the Exchange. Rule 6.1A-O sets forth definitions that are applicable to
trading on the Exchange's current OX system. In connection with the
transition of options trading to Pillar, the Exchange proposes to copy
the definitions currently set forth in Rules 6.1-O and 6.1A-O into Rule
1.1, with changes as described below. This proposed rule change would
streamline the Exchange's rules by consolidating definitions that would
be applicable for trading on Pillar into Rule 1.1. Once the transition
to Pillar is complete, the

Exchange will file a subsequent proposed rule change to delete current
Rules 6.1-O and 6.1A-O.
    In connection with adding definitions to Rule 1.1, the Exchange
proposes to delete the sub-paragraph numbering currently set forth in
Rule 1.1. The Exchange does not believe that the sub-paragraph
numbering is necessary because the definitions are organized in
alphabetical order and would continue to be organized in alphabetical
order. In addition, removing the sub-paragraph numbering would make any
future amendments to Rule 1.1 easier to process as any new definitions
would simply be added in alphabetical order.
    Certain definitions in Rule 1.1 currently specify that they are
only for ``equities'' trading. With the proposed consolidation of
definitions, some of those definitions will become applicable to both
options and cash equity trading, and others will continue to be
applicable only to cash equity trading. With the proposed
consolidation, the Exchange proposes to remove existing language
limiting those definitions to ``equities'' traded on the Exchange if
the definition would be equally applicable to options trading. In
addition, to the extent that a proposed definition would continue to be
applicable only to cash equity trading, the Exchange proposes to make a
global change to update references to ``equities'' traded on the
Exchange to ``cash equity securities'' traded on the Exchange. The
Exchange believes these proposed modifications would add clarity and
consistency to Exchange rules.
    The Exchange proposes the following amendments to Rule 1.1.
    First, definitions set forth in Rule 6.1-O(b) would be added to
Rule 1.1 in alphabetical order with certain differences described in
greater detail below.\14\ To promote clarity, if the definition that is
being copied is not specifically about options trading, the Exchange
proposes to add an introductory clause to the definition to specify
that the term is for options traded on the Exchange. The Exchange does
not propose to copy the definition of ``Quote with Size,'' which is
currently defined in Rule 6.1-O(b)(33), to Rule 1.1 because that term
would not be used in the Pillar rules, and does not propose to copy the
definition of ``Short Term Options Series,'' because it is duplicative
of Commentary .07 to Rule 6.4-O. In addition, the Exchange is not
including the definition of ``Foreign Broker/Dealer,'' which is
currently defined in Rule 6.1-O(b)(31), in Rule 1.1, as this term is
not used anywhere else in Exchange rules.\15\ The Exchange also
proposes changes to certain definitions that are being copied from Rule
6.1-O(b) to Rule 1.1, as follows:
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    \14\ Rule 6.1-O(b) has definitions for: Options Clearing
Corporation, Rules of the Options Clearing Corporation, Clearing
Member, Participating Exchange, Option Contract, Exchange Option
Transaction and Exchange Transaction, Type of Option, Call, Put,
Class of Options, Series of Options, Option Issue, Underlying Stock
or Underlying Security, Exercise Price, Aggregate Exercise Price,
Expiration Month, Expiration Date, Long Position, Short Position,
Opening Purchase Transaction, Opening Writing Transaction, Closing
Sale Transaction, Closing Purchase Transaction, Covered, Uncovered,
Outstanding, Primary Market, Options Trading, Customer, Trading
Crowd, Foreign Broker/Dealer, Exchange-Traded Fund Share, Quote with
Size, Trading Official, Non-OTP Firm or Non-OTP Holder Market Maker,
Firm, Consolidated Book, Crowd Participants, Electronic Order
Capture System, Short Term Option Series, and Quarterly Options
Series. Unless otherwise specified, the Exchange proposes to copy
the definitions from Rule 6.1-O(b) to Rule 1.1 without any
differences.
    \15\ The Exchange is not proposing to delete the definitions of
either ``Quote with Size'' or ``Foreign Broker/Dealer'' at this time
as such terms would be deleted in the subsequent filing to delete
Rule 6.1-O.
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     The Exchange proposes to amend certain definitions that
are being copied to Rule 1.1 to use the term ``underlying security''
rather than referring separately to an ``underlying stock or Exchange-
Traded Fund Share.'' The Exchange believes that this proposed change
would not make any substantive changes because an Exchange-Traded Fund
Share is a ``security'' as that term is defined in Rule 1.1 (and is
also an NMS stock). Accordingly, the term ``underlying security,'' by
definition, would include Exchange-Traded Fund Shares. The Exchange
proposes to make this change to the following definitions that are
proposed to be added to Rule 1.1: ``Call,'' ``Class of Options,''
``Covered,'' ``Exercise Price,'' ``Primary Market,'' ``Put,'' ``Option
Issue,'' and ``Underlying Stock or Underlying Security.'' \16\
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    \16\ The Exchange proposes to make a similar non-substantive
change to delete the term ``Exchange-Trade Fund Share'' in Rule
6.37-O(c).
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     The Exchange proposes to streamline the definitions of
``Closing Purchase Transaction,'' ``Closing Sale Transaction,''
``Opening Purchase Transaction,'' and ``Opening Writing Transaction''
without any substantive differences, as follows:
    [cir] The term ``Closing Purchase Transaction'' is currently
defined in Rule 6.1-O(b)(23) to mean ``an option transaction in which
the purchaser's intention is to reduce or eliminate a short position in
the series of options involved in such transaction.'' The proposed Rule
1.1 definition of this term would be ``a transaction in a series in
which the purchaser intends to reduce or eliminate a short position in
such series.''
    [cir] The term ``Closing Sale Transaction'' is currently defined in
Rule 6.1-O(b)(22) to mean an ``option transaction in which the seller's
intention is to reduce or eliminate a long position in the series of
options involved in such transaction.'' The proposed Rule 1.1
definition of this term would be ``a transaction in a series in which
the seller intends to reduce or eliminate a long position in such
series.''
    [cir] The term ``Opening Purchase Transaction'' is currently
defined in Rule 6.1-O(b)(20) to mean ``an option transaction in which
the purchaser's intention is to create or increase a long position in
the series of options involved in such transaction.'' The proposed Rule
1.1 definition of this term would be ``a transaction in a series in
which the purchaser intends to create or increase a long position in
such series.''
    [cir] The term ``Opening Writing Transaction'' is currently defined
in Rule 6.1-O(b)(21) to mean ``an option transaction in which the
seller's (writer's) intention is to create or increase a short position
in the series of options involved in such transaction.'' The proposed
Rule 1.1 definition of this term would be ``a transaction in a series
in which the seller (writer) intends to create or increase a short
position in such series.''
     The Exchange proposes to revise the definition of ``Crowd
Participants,'' which is currently defined in Rule 6.1-O(b)(38) to mean
``the Market Makers appointed to an option issue under Rule 6.35-O, and
any Floor Brokers actively representing orders at the best bid or offer
on the Exchange for a particular option series,'' to not include the
clause ``for a particular option series'' as unnecessary text.
     The Exchange proposes to revise the definition of
``Electronic Order Capture System'' to eliminate reference to the
Commission's order Instituting Public Administrative Proceedings
Pursuant to Section 19(h)(1) of the Securities Exchange Act of 1934,
Making Findings and Imposing Remedial Sanctions, which was the initial
authority for the Exchange to specify requirements relating to the
Electronic Order Capture System. The Exchange will continue to include
requirements for the Electronic Order Capture System in its rules and
does not believe it is necessary to continue to cite to the original
authority for this requirement in Exchange rules.
     The Exchange proposes to streamline the definition of
``Expiration

Date'' to eliminate now obsolete language limiting the definition to
options expiring before, on, or after February 15, 2015. In addition,
the Exchange does not propose to include the following text in the Rule
1.1 definition of ``Expiration Date'': ``Notwithstanding the foregoing,
in the case of certain long-term options expiring on or after February
1, 2015 that the Options Clearing Corporation has designated as
grandfathered, the term ``expiration date'' shall mean the Saturday
immediately following the third Friday of the expiration month.'' This
rule text is now obsolete as the Exchange does not have any series
trading on the Exchange with such Saturday expiration dates.
     The Exchange proposes to amend the definition of ``options
trading'' to delete the phrase ``issued by the Options Clearing
Corporation.'' Accordingly, the proposed Rule 1.1 definition of
``options trading'' would be as follows: ``when not preceded by the
word `Exchange,' means trading in any option contract, whether or not
approved for trading on the Exchange.'' The Exchange believes that this
proposed change is immaterial because the Exchange trades only options
that have been issued by the Options Clearing Corporation, and
therefore reference to the OCC is redundant and unnecessary.
     The Exchange proposes to add to the definition of ``option
contract'' that option contracts would be included within the
definition of ``security'' or ``securities'' as such terms are used in
the Bylaws and Rules of the Exchange. This proposed text is copied from
the last sentence of current Rule 6.1-O(a). As described below,
proposed Rule 6.1P-O would not include this text. The Exchange believes
that adding this text to the Rule 1.1 definition of ``option contract''
would promote clarity and transparency in Exchange rules by
consolidating related definitions in a single location.
     The Exchange proposes to streamline the definition of
``outstanding'' without any substantive differences. Specifically, the
Exchange proposes to replace the following Rule 6.1-O(b)(26) text,
``has neither been the subject of a closing sale transaction on the
Exchange or a comparable closing transaction on another participating
Exchange nor been exercised nor reached its expiration date,'' with the
following, ``has not been the subject of a closing sale transaction,
exercised, or expired.'' The Exchange believes that the proposed
revised text has the same meaning, with more clear text.
     The Exchange proposes to modify the definition of
``Trading Crowd,'' which is currently defined in Rule 6.1-O(b)(30), to
include Floor Brokers, which change is consistent with how this concept
is defined on other options exchanges.\17\
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    \17\ See, e.g., Cboe Exchange Inc. (``Cboe'') Rule 1.1 (defining
the terms ``in-crowd market participant'' and ``ICMP'' to include
``an in-crowd Market-Maker, an on-floor DPM or LMM with an
allocation in a class, or a Floor Broker or PAR Official
representing an order in the trading crowd on the trading floor'').
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    Second, definitions set forth in Rule 6.1A-O(a) would be added to
Rule 1.1 in alphabetical order without any substantive differences.\18\
Because certain of these definitions are already set forth in Rule 1.1
for cash equity trading, the Exchange proposes to amend those existing
definitions to specify that they would be applicable to options
trading, and if applicable, set forth differences for options trading,
as described in more detail below.
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    \18\ Rule 6.1A-O(a) has definitions for: Authorized Trader, BBO,
Complex BBO, Core Trading Hours, Customer, Professional Customer,
Lead Market Maker, Market Center, Marketable, Market Maker, Market
Maker Authorized Trader, Minimum Price Variation, NBBO, Complex
NBBO, NOW Recipient, OX, OX Book, Routing Broker, Sponsored
Participant, Sponsoring OTP Firm, Sponsorship Provisions, User,
Directed Order Market Maker, and Order Flow Provider.
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    The Exchange does not propose to add the definition of ``Directed
Order Market Maker'' to Rule 1.1 because in Pillar the Exchange would
no longer support Directed Order Market Makers. In addition, the
Exchange does not propose to add the definitions of ``Complex BBO'' or
``Complex NBBO'' to Rule 1.1, and instead has proposed to define terms
relating to complex trading in a separate proposed rule change relating
to electronic complex trading.\19\ The Exchange also does not propose
to add options-related definitions to Rule 1.1 relating to ``Sponsored
Participant,'' ``Sponsoring OTP Firm,'' and ``Sponsorship Provisions''
because there are currently not any Sponsored Participants trading
options on the Exchange, and the Exchange does not propose to
reintroduce this category of participants. As noted above, the terms
``OX'' and ``OX Book'' will not be used in Pillar rules.
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    \19\ See Complex Pillar Notice, supra note 13.
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    Finally, in addition to definitions that are being added to Rule
1.1 without any changes from the defined terms from Rule 6.1A-O(a), the
Exchange proposes the following specific changes to the definitions
that would be included in the Rule 1.1 definitions: \20\
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    \20\ The Exchange also proposes a non-substantive amendment to
the definition of ``Exchange'' to add a period at the end of the
sentence.
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     Approved Person: The Exchange proposes a non-substantive
amendment to change the word ``a'' to ``an'' before ``OTP Firm.''
     Authorized Trader: The Exchange proposes to amend the Rule
1.1 definition of ``Authorized Trader'' to remove the limitation to
equities trading so that it is applicable to both cash equity
securities and options traded on the Exchange, and to add that it can
mean a person who may submit orders to the Exchange's Trading
Facilities on behalf of his or her OTP Holder. These proposed
amendments combine the definition of Authorized Trader currently set
forth in Rule 6.1A-O(a)(1) with the existing Rule 1.1 definition of
Authorized Trader with one proposed substantive difference not to
include reference to ``Sponsored Participant'' in the proposed
amendment to Rule 1.1. As noted above, the Exchange does not currently
have any Sponsored Participants that trade on the Exchange, and
therefore, this term is no longer necessary.
     Away Market: The Exchange proposes to amend the Rule 1.1
definition of ``Away Market'' to add how that term would be used for
options trading on the Exchange. As proposed, the new text would
provide: ``[w]ith respect to options traded on the Exchange, the term
`Away Market' means any Trading Center (1) with which the Exchange
maintains an electronic linkage, and (2) that provides instantaneous
responses to orders routed from the Exchange.'' This proposed
definition is based on the Rule 6.1A-O(a)(12) definition of ``NOW
Recipient,'' which is currently defined as ``any Market Center (1) with
which the Exchange maintains an electronic linkage, and (2) that
provides instantaneous responses to NOW Orders routed from OX. The
Exchange shall designate from time to time those Market Centers that
qualify as NOW Recipients and shall periodically publish such
information via its website.'' The Exchange proposes four non-
substantive differences for the Pillar options trading definition of
``Away Market'': (1) Use the Pillar term of ``Away Market'' instead of
the term ``NOW Recipient;'' (2) use the term ``Trading Center'' instead
of ``Market Center''; (3) refer to ``orders routed from the Exchange''
instead of ``NOW Orders routed from OX''; and (4) delete the text
relating to the Exchange designating and publishing to its website
certain Away Markets. The Exchange does not believe that this text
needs to be included in the definition of Away Market because such
markets are by definition those with which the Exchange maintains
electronic linkage (i.e., pursuant to the Options Order Protection and
Locked/Crossed Market Plan).

     BBO: The Exchange proposes to amend the Rule 1.1
definition of ``BBO'' to add how that term would be used for options
trading on the Exchange. As proposed, with respect to options traded on
the Exchange, BBO would mean the best displayed bid or best displayed
offer on the Exchange. This definition is based on the Rule 6.1A-
O(a)(2)(a) definition of BBO, which currently defines BBO as the ``best
bid or offer on OX.'' The Exchange believes that the proposed
difference would add granularity to be clear that non-displayed quotes
and orders would not be included in the BBO. The Exchange also proposes
to use the term ``Exchange'' instead of ``OX.''
     Consolidated Book: The term ``Consolidated Book'' is
currently defined in Rule 6.1-O(b)(37) \21\ and the term ``OX Book'' is
currently defined in Rule 6.1A-O(a)(14).\22\ For Pillar, the Exchange
proposes to define the term ``Consolidated Book'' in Rule 1.1 to mean
the Exchange's electronic book of orders and quotes and that all orders
and quotes that are entered into the Consolidated Book would be ranked
and maintained in accordance with the rules of priority, as provided
for in proposed Rule 6.76P-O. This proposed definition uses terminology
similar to the existing Rule 1.1 definition of ``NYSE Arca Book,''
which would be amended to specify that the definition would only be for
cash equity securities traded on the Exchange. The Exchange believes
that the proposed definition of ``Consolidated Book'' for options
trading on Pillar is not substantively different from either the
current Rule 6.1-O definition of ``Consolidated Book'' or the current
Rule 6.1A-O definition of ``OX Book.'' Rather, the changes are designed
to eliminate text that would not be applicable on Pillar without
changing the substance of the proposed definition and would use more
streamlined text to describe the Exchange's electronic order book. For
example, the Exchange believes that the proposed use of the phrase
``electronic book of orders and quotes'' makes clear that the
Consolidated Book would include all orders and quotes, including orders
from both ``Public Customers and broker-dealers,'' and it is not
necessary to separately reference what entity may be entering orders.
In addition, as noted above, the Exchange does not propose to use the
term ``Quote with Size'' in connection with options trading on Pillar
and therefore does not propose to include reference to that term in the
Pillar proposed definition for ``Consolidated Book.'' And, as described
in greater detail below in connection with proposed Rule 6.76P-O, on
Pillar, the Exchange does not propose to use the terms ``Display Order
and Working Order Processes'' and therefore these terms would not be
included in the Rule 1.1 definition of Consolidated Book.
---------------------------------------------------------------------------

    \21\ The term ``Consolidated Book'' is currently defined as
``the Exchange's electronic book of limit orders for the accounts of
Public Customers and broker-dealers, and Quotes with Size. All
orders and Quotes with Size that are entered into the Book will be
ranked and maintained in accordance with the rules of priority as
provided in Rule 6.76-O. There is no limit to the size of orders or
quotes that may be entered into the Consolidated Book.''
    \22\ The term ``OX Book'' is currently defined as ``the OX's
electronic file of orders and quotes, which contains all of the
orders in each of the Display Order and Working Order Processes and
all of the Market Makers' quotes in the Display Order Process.''
---------------------------------------------------------------------------

     Core Trading Hours: The Exchange proposes that the current
definition of Core Trading Hours in Rule 1.1, which is defined as ``the
hours of 9:30 a.m. Eastern Time through 4:00 p.m. (Eastern Time) or
such other hours as may be determined by the Exchange from time to
time,'' would be applicable to both cash equity securities and options
trading on the Exchange. Because options trading may extend past 4:00
p.m., the Exchange proposes to amend Rule 1.1 to provide that for
options traded on the Exchange, transactions may be effected on the
Exchange for an equity options class until close of trading of the
Primary Market for the securities underlying an options class. This
proposed text is based on current Rule 6.1A-O(a)(3).\23\
---------------------------------------------------------------------------

    \23\ Rule 6.1A-O(a)(3) currently defines ``Core Trading Hours''
to mean ``the regular trading hours for business set forth in the
rules of the primary markets underlying those option classes listed
on the Exchange; provided, however, that transactions may be
effected on the Exchange until the regular time set for the normal
close of trading in the primary markets with respect to equity
option classes and ETF option classes, and 15 minutes after the
regular time set for the normal close of trading in the primary
markets with respect to index option classes, or such other hours as
may be determined by the Exchange from time to time.'' The Exchange
does not propose to include in the Rule 1.1 definition of Core
Trading Hours for options trading the current text regarding trading
that continues 15 minutes after the regular time set for the normal
close of trading in the primary markets with respect to index
options classes, as this is already addressed in Rule 5.20-O(a)
(Trading Sessions).
---------------------------------------------------------------------------

     Customer and Professional Customer: The Exchange proposes
to amend Rule 1.1 to add the definitions of ``Customer'' and
``Professional Customer.'' The proposed definitions use the same text
as the definitions of Customer and Professional Customer set forth in
Rules 6.1A-O(a)(4) and (4A) with non-substantive differences only to
specify that these definitions would be applicable for options traded
on the Exchange, eliminate redundant headers,\24\ and re-number the
sub-paragraphs. The Exchange also proposes to include a cross-reference
to the definition of a broker or dealer as defined Sections 3(a)(4) and
3(a)(5) of the Exchange Act and rules thereunder.\25\ The Exchange
believes that this specificity adds clarity and transparency to the
proposed definition.
---------------------------------------------------------------------------

    \24\ The Exchange proposes that the Rule 1.1 definition of
Professional Customer would not include the sub-header of
``Calculation of Professional Customer Orders'' as redundant of the
following text in the rule that would provide ``[e]xcept as noted
below, each order of any order type counts as one order for
Professional order counting purposes.''
    \25\ The Exchange does not propose to add to Rule 1.1 the
definition of ``Customer'' that is set forth in Rule 6.1-O(b)(29) as
unnecessary.
---------------------------------------------------------------------------

     Floor: The Exchange proposes to amend the Rule 1.1
definition of ``Floor,'' which refers to the options trading floor, to
include the synonymous defined terms ``Trading Floor'' and ``Options
Trading Floor,'' which terms are used throughout existing Exchange
rules and make one change to remove the term ``shall.'' These proposed
changes would add clarity and consistency to Exchange rules.
     Lead Market Maker: The Exchange proposes to amend the Rule
1.1 definition of ``Lead Market Maker'' to add how that term would be
used for options trading. As proposed, the new text would provide that
for options traded on the Exchange, the term ``Lead Market Maker'' or
``LMM'' would ``mean a person that has been deemed qualified by the
Exchange for the purpose of making transactions on the Exchange in
accordance with Rule 6.82-O. Each LMM must be registered with the
Exchange as a Market Maker. Any OTP Holder or OTP Firm registered as a
Market Maker with the Exchange is eligible to be qualified as an LMM.''
This proposed definition is based on the Rule 6.1A-O(a)(5) definition
of Lead Market Maker without any substantive differences. The Exchange
proposes one non-substantive difference to use the term ``person''
instead of ``individual or entity,'' because the term ``person,'' as
currently defined in Rule 1.1, is inclusive of natural persons and
entities.
     Marketable: The Exchange proposes to amend the Rule 1.1
definition of ``Marketable'' to extend it to address options traded on
the Exchange by deleting the phrase ``[w]ith respect to equities traded
on the Exchange.'' \26\ The

current description of the term ``Marketable,'' for purposes of Market
Orders, is the same in both Rules 1.1 and 6.1A-O(a)(7).\27\
Accordingly, the existing Rule 1.1 text relating to term ``Marketable''
with respect to Market Orders would be applicable to options trading
without any differences. With respect to Limit Orders, in Rule 1.1, the
term ``Marketable'' currently means an order that can be immediately
executed or routed. The current Rule 6.1A-O(a)(7) definition of the
term ``Marketable'' for Limit Orders means when the price of the order
matches or crosses the NBBO on the other side of the market. The
current Rule 1.1 definition relating to Limit Orders means
substantively the same thing as the current Rule 6.1A-O(a)(7)
description for Limit Orders, and the Exchange proposes to use the
existing Rule 1.1 definition of the term ``Marketable'' for both cash
equity and options trading of Limit Orders. The Exchange also proposes
a non-substantive amendment to add a comma after the phrase, ``the term
`Marketable' means'' and before ``for a Limit Order.''
---------------------------------------------------------------------------

    \26\ The term ``Marketable'' is currently defined in Rule 1.1 to
mean, ``[w]ith respect to equities traded on the Exchange, the term
`Marketable' means for a Limit Order, an order that can be
immediately executed or routed. Market Orders are always considered
marketable.''
    \27\ The term ``Marketable'' is currently defined in Rule 6.1A-
O(a)(7) for options trading to mean ``for a Limit Order, the price
matches or crosses the NBBO on the other side of the market. Market
orders are always considered marketable.''
---------------------------------------------------------------------------

     Market Maker: The Exchange proposes to amend the Rule 1.1
definition of ``Market Maker'' to add how that term would be used for
options trading. As proposed, the new text would provide that for
options traded on the Exchange, the term ``Market Maker'' would refer
``to an OTP Holder or OTP Firm that acts as a Market Maker pursuant to
Rule 6.32-O.'' This proposed definition is based on the Rule 6.1A-
O(a)(8) definition of Market Maker, which is defined as ``an OTP Holder
or OTP Firm that acts as a Market Maker pursuant to Rule 6.32-O.''
Accordingly, the proposed Rule 1.1 definition of the term ``Market
Maker'' for options trading would not have any differences from the
current Rule 6.1A-O definition. The Exchange also proposes to include
in the Rule 1.1 definition of Market Maker for options trading that for
purposes of Exchange rules, the term Market Maker includes Lead Market
Makers, unless the context otherwise indicates. This proposed text is
based on Rule 6.1-O(c), References, with a non-substantive difference
to use the term ``Exchange'' instead of ``NYSE Arca.'' The Exchange
believes this proposed change would streamline and clarify this
definition by consolidating definitions relating to Market Makers in a
single location.
     Market Maker Authorized Trader: The Exchange proposes to
amend the Rule 1.1 definition of ``Market Maker Authorized Trader'' to
add how that term would be used for options trading. As proposed, the
new text would provide that for options traded on the Exchange, the
term ``Market Maker Authorized Trader'' or ``MMAT'' would ``mean an
authorized trader who performs market making activities pursuant to
Rule 6-O on behalf of an OTP Firm or OTP Holder registered as a Market
Maker.'' This proposed definition is based on the Rule 6.1A-O(a)(9)
definition of Market Maker Authorized Trader without any differences.
     Market Participant Identifier (``MPID''): The Exchange
proposes to add a new definition to Rule 1.1 for ``Market Participant
Identifier (`MPID').'' This term is currently used in, but not defined
in, Rules 7.19-E and 7.31-E(i)(2) for cash equities trading. Because
this term would also be used for options trading on Pillar, the
Exchange believes that defining this term in Rule 1.1 would promote
clarity and transparency. The proposed definition would provide that
``Market Participant Identifier'' or ``MPID'' refers to the identifier
assigned to the orders and quotes of a single ETP Holder, OTP Holder,
or OTP Firm for the execution and clearing of trades on the Exchange by
that permit holder. The definition would further provide that an ETP
Holder, OTP Holder, or OTP Firm may obtain multiple MPIDs and each such
MPID may be associated with one or more sub-identifiers of that MPID.
The Exchange believes that using the term MPID on the Exchange for
options trading would promote clarity as this is an identifier commonly
used by members of exchanges and the Exchange believes that using this
term for its OTP Holders and OTP Firms would promote consistency,
particularly for those firms that are also ETP Holders on the Exchange.
     Minimum Price Variation or MPV: The Exchange proposes to
amend Rule 1.1 to add the definition of ``Minimum Price Variation'' or
``MPV'' for both cash equity securities and options that are traded on
the Exchange. The Exchange proposes that the term ``Minimum Price
Variation'' or ``MPV'' means the minimum price variations established
by the Exchange. The Exchange further proposes that the MPV for quoting
cash equity securities traded on the Exchange are set forth in Rule
7.6-E. The Exchange further proposes that the MPV for quoting and
trading options traded on the Exchange are set forth in Rule 6.72-O(a).
The proposed definition as it relates to options trading is based on
the Rule 6.1A-O(a)(10) definition of MPV, which defines the term
``Minimum Price Variation'' to mean ``the variations established by the
Exchange pursuant to Rule 6.72-O(a).'' Similar to this current rule,
the proposed Rule 1.1 definition of MPV for options trading would cross
reference Rule 6.72-O(a). The Exchange proposes a difference to add
reference to ``quoting and trading options'' to distinguish how the MPV
for options would be determined from how the MPV for quoting cash
equity securities would be determined.
     NBBO: The Exchange proposes to amend the Rule 1.1
definition of ``NBBO, Best Protected Bid, Best Protected Offer,
Protected Best Bid and Offer (PBBO)'' to add how the term NBBO would be
used for options trading. The Exchange proposes that: ``[w]ith respect
to options traded on the Exchange, the term `NBBO' means the national
best bid or offer. The terms `NBB' means the national best bid and
`NBO' means the national best offer.'' This proposed definition
includes the current definition of NBBO from Rule 6.1A-O(a)(11)(a),
which defines that term as ``the national best bid or best offer.'' The
Exchange proposes to add the terms ``NBB'' and ``NBO'' as clarifying
terms for options trading.
    In addition, the Exchange proposes that, unless otherwise
specified, for options trading, the Exchange may adjust its calculation
of the NBBO based on information about orders it sends to Away Markets,
execution reports received from those Away Markets, and certain orders
received by the Exchange. This proposed text reflects how the Exchange
currently calculates the NBBO for options trading and is based on how
the PBBO is calculated on the Exchange's cash equity market, as
described in Rule 7.37-E(d)(2).\28\ The Exchange proposes that it would
adjust its calculation of the NBBO for options traded on the Exchange
in the same manner that the Exchange calculates the PBBO for cash
equity securities traded on the Exchange. The Exchange believes that
adding this detail to the proposed definition of NBBO would promote
clarity and transparency in Exchange rules. The Exchange further notes
that there are limited circumstances when the Exchange would not adjust
its calculation of the NBBO, and would determine the NBBO for options
in the same way that the Exchange determines

the NBBO for cash equity securities traded on the Exchange. As
described in detail below, the Exchange will specify in its rules when
it would be not be using an adjusted NBBO for purposes of a specific
rule. The Exchange further proposes that the term ``Away Market NBBO''
would be subsumed in the definition of NBBO and would refer to a
calculation of the NBBO that excludes the Exchange's BBO. The term
``Away Market NBBO'' would be a new defined term for options trading
and would promote clarity and transparency regarding whether for
purposes of a specific rule, the NBBO would not include the Exchange's
BBO.\29\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 91564 (April 14,
2021), 86 FR 20541 (April 20, 2021) (SR-NYSEArca-2021-21) (Notice of
filing and immediate effectiveness of proposed rule change to
specify when the Exchange may adjust its calculation of the PBBO).
    \29\ See, e.g., infra, discussion regarding proposed Rule
6.62P(a)(1)(A)(iii), which would use the term ``Away Market NBBO.''
---------------------------------------------------------------------------

     NYSE Arca Book: The Exchange proposes to amend the Rule
1.1 definition of ``NYSE Arca Book'' to specify that this term is
applicable only for cash equity securities traded on the Exchange. As
noted above, the Exchange uses the term ``Consolidated Book'' for
options traded on the Exchange and would continue to use that term on
Pillar for options trading.
     NYSE Arca Marketplace: The Exchange proposes to amend the
Rule 1.1 definition of ``NYSE Arca Marketplace'' to specify that this
term is applicable only for cash equity securities traded on the
Exchange.
     Order Flow Provider or OFP: The Exchange proposes to add
the definition of ``Order Flow Provider or OFP'' to Rule 1.1 to mean
``any OTP Holder that submits, as agent, orders to the Exchange.'' This
proposed definition is based on the Rule 6.1A-O(a)(21) definition of
``Order Flow Provider'' without any differences.
     Trading Center: The Exchange proposes to amend the Rule
1.1 definition of ``Trading Center'' to add how this term would be used
for options trading. As proposed: ``[w]ith respect to options traded on
the Exchange, for purposes of Rule 6-O, the term `Trading Center' means
a national securities exchange that has qualified for participation in
the Options Clearing Corporation pursuant to the provisions of the
rules of the Options Clearing Corporation.'' This proposed definition
is based on the Rule 6.1A-O(a)(6) definition of ``Market Center'' with
a non-substantive difference to use the term ``Trading Center'' instead
of ``Market Center.''
     User: The Exchange proposes to amend the Rule 1.1
definition of ``User'' to add how this term would be used for options
trading. As proposed: ``[w]ith respect to options traded on the
Exchange, the term `User' shall mean any OTP Holder or OTP Firm who is
authorized to obtain access to the Exchange pursuant to Rule 6.2A-O.''
This proposed definition is based on the Rule 6.1A-O(a)(19) definition
of User, with one difference not to include the now obsolete reference
to Sponsored Participant, which, as described above, is no longer used
in connection with options trading.
     User Agreement: The Exchange proposes a non-substantive
amendment to the Rule 1.1 definition of ``User Agreement'' to replace
the term ``NYSE Arca, L.L.C'' with the term the ``Exchange.''
    In addition to proposed amendments to Rule 1.1, the Exchange
proposes to amend Rule 6.96-O to add the definition of ``Routing
Broker,'' which is currently defined in Rule 6.1A-O(a)(15) to mean
``the broker-dealer affiliate of NYSE Arca, Inc. and/or any other non-
affiliate that acts as a facility of NYSE Arca, Inc. for routing orders
entered into OX of OTP Holders, OTP Firms and OTP Firms' Sponsored
Participants to other Market Centers for execution whenever such
routing is required by NYSE Arca Rules.'' For options trading on
Pillar, the Exchange proposes to define the term in Rule 6.96-O
(Operation of a Routing Broker) to mean ``the broker-dealer affiliate
of NYSE Arca, Inc. and/or any other non-affiliate that acts as a
facility of the Exchange for routing orders submitted to the Exchange
to other Trading Centers for execution whenever such routing is
required by NYSE Arca Rules and federal securities laws.'' \30\ The
proposed rule text is based on the current definition in Rule 6.1A-
O(a)(15), with non-substantive differences to streamline the definition
and to use Pillar terminology. Specifically, the Exchange does not
propose to include terms that would no longer be applicable to trading
on Pillar, including reference to OX, Market Centers, and Sponsored
Participants. The Exchange notes that including the definition of
``Routing Broker'' in its rule governing the operation of the routing
broker is consistent with the Exchange's cash equity rules, which also
defines the term ``Routing Broker'' in Rule 7.45-E(a) (Operation of
Routing Broker).
---------------------------------------------------------------------------

    \30\ The Exchange also proposes non-substantive amendments to
Rule 6.96-O to renumber current paragraphs (a), (b), and (c), as
paragraphs (b), (c), and (d).
---------------------------------------------------------------------------

    In connection with the proposed amendments to Rule 1.1, the
Exchange proposes to add the following preamble to Rule 6.1A-O: ``This
Rule is not applicable to trading on Pillar.'' This proposed preamble
is designed to promote clarity and transparency in Exchange rules that
Rule 6.1A-O would not be applicable to trading on Pillar.
Proposed Rule 6.1P-O: Applicability
    Current Rule 6.1-O sets forth the applicability, definitions, and
references in connection with options trading. As noted above, the
definitions in Rule 6.1-O(b) and reference to LMMs being included in
the definition of Market Maker will be copied to proposed Rule 1.1 for
purposes of trading on Pillar.
    The Exchange proposes new Rule 6.1P-O to include only those
portions of Rule 6.1-O relating to applicability of Exchange Rules that
would continue to be applicable after the transition to Pillar.
Proposed Rule 6.1P-O(a) would be identical to the first two sentences
of current Rule 6.1-O(a). As noted above, the proposed definition of
``option contract'' would incorporate the final sentence of Rule 6.1-
O(a), which states that option contracts are included in the definition
of ``security'' or ``securities.'' Accordingly, the Exchange does not
propose to include this text in proposed Rule 6.1P-O(a).
    Proposed Rule 6.1P-O(b) would provide that unless otherwise stated,
Exchange rules would be applicable to transactions on the Exchange in
option contracts. The proposed rule is similar to Rule 6.1-O(e) because
it addresses the applicability of other Exchange Rules.'' \31\ The
Exchange proposes differences from current Rule 6.1-O(e) to eliminate
obsolete and duplicative text and to streamline the proposed rule text
without any substantive differences. For example, the Exchange does not
believe it is necessary to identify which rules are or are not
applicable to trading of option contracts because any rule with ``-O''
appended to it is applicable to trading of option contracts. In
addition, Rule 1.1 is now applicable to trading of options contracts.
And, as discussed above, the Exchange has proposed to amend the
definition of ``option contract'' to specify that they are included in
the definition of ``security'' or ``securities.'' Finally, the

reference in Rule 6.1-O(e) to `` `specialist' means `Market Maker' ''
is duplicative of Rule 6.32-O, and therefore is not necessary to add to
proposed Rule 6.1P-O(b).
---------------------------------------------------------------------------

    \31\ Rule 6.1-O(e) provides: ``Applicability of Other Exchange
Rules. The following Rules apply to transactions on the Exchange in
option contracts issued or subject to issuance by the Options
Clearing Corporation: Rules 4.15-O-4.19-O, 5.1-O, 9.21-O-9.28-O and
11.6. The following Rules do not apply to transactions on the
Exchange in option contracts: Rule 1.1. All other Exchange rules are
applicable to transactions on the Exchange in option contracts
unless the context clearly indicates otherwise. In applying the
Rules of the Exchange to transactions on the Exchange in option
contracts, `security' or `securities' includes option contracts,
`specialist' means Market Maker on the Options Trading Floor.''
---------------------------------------------------------------------------

    In connection with proposed Rule 6.1P-O, the Exchange proposes to
add the following preamble to Rule 6.1-O: ``This Rule is not applicable
to trading on Pillar.'' This proposed preamble is designed to promote
clarity and transparency in Exchange rules that Rule 6.1-O would not be
applicable to trading on Pillar.
Proposed Rule 6.76P-O: Order Ranking and Display
    Rule 6.76-O governs order ranking and display for the current
Exchange options trading system. Proposed Rule 6.76P-O would address
order ranking and display for options trading under Pillar, including
accounting for the quoting activity of options Market Makers as noted
below. With the transition to Pillar, the Exchange does not propose any
substantive differences to how orders would be ranked and displayed on
the Exchange. However, the Exchange proposes to eliminate the
terminology relating to the ``Display Order Process'' and ``Working
Order Process'' (each of which are described below) and instead use
Pillar terminology based on Rule 7.36-E, which governs order ranking
and display on the Exchange's cash equity market.\32\
---------------------------------------------------------------------------

    \32\ As noted herein (see supra note 11), the Exchange also
proposes to eliminate the use of the terms ``OX'' and ``OX Book,''
as these terms would not be applicable to trading on Pillar.
---------------------------------------------------------------------------

    The Exchange proposes a difference between proposed Pillar options
rules and the existing cash equity Pillar rules to reflect that, in
addition to entering orders, options Market Makers enter quotes, which
cash equity market makers do not. Accordingly, when the cash equity
rules refer to ``orders,'' the proposed options Pillar rules would
refer to both ``orders and quotes'' to incorporate this difference
between cash equity and options markets, except where specified
otherwise.\33\
---------------------------------------------------------------------------

    \33\ See, e.g., proposed Rules 6.76-O(a)(1), (3), (b)-(f) (as
described herein).
---------------------------------------------------------------------------

    As discussed in detail below, the Exchange believes that the
proposed new rule text provides transparency with respect to how the
Exchange's price-time priority model would operate through the use of
new terminology applicable to all orders and quotes on the Pillar
trading platform. In addition, throughout proposed Rule 6.76P-O, the
Exchange proposes to change the term ``shall'' to ``will,'' which is a
stylistic preference that would add consistency to Exchange rules.
    Proposed Rule 6.76P-O(a) would set forth definitions for purposes
of all of Rule 6-O (Options Trading) on the Pillar trading platform,
including proposed Rule 6.76AP-O (Order Execution and Routing),
described below. The proposed definitions are based on Rule 7.36-E(a)
definitions for purposes of Rule 7-E cash equity trading, with
differences, as noted above, to reference ``orders and quotes''
throughout proposed Rule 6.76P-O. The Exchange believes that these
proposed definitions would provide transparency regarding how the
Exchange would operate its options platform on Pillar, and serve as the
foundation for how orders and modifiers would be described for options
trading on Pillar, as discussed in more detail below. In addition, the
Exchange believes that even with using Pillar terminology that is based
on the Exchange's cash equity rules, unless otherwise specified, the
definitions that are described in these proposed rules do not differ in
substance from current Rule 6.76-O relating to options trading.
     Proposed Rule 6.76P-O(a)(1) would define the term
``display price'' to mean the price at which an order or quote ranked
Priority 2--Display Orders or Market Order is displayed, which price
may be different from the limit price or working price of the order
(i.e., if it is a Non-Routable Limit Order or an ALO Order as described
below in proposed Rule 6.62P-O(e)(1), (2), respectively). This proposed
definition uses Pillar terminology based on Rule 7.36-E(a)(1). To
incorporate quotes, the Exchange proposes to refer to ``order or quote
ranked Priority 2--Display Orders,'' versus referring to ``Limit
Order,'' as set forth in Rule 7.36-E(a)(1). The term ``Priority 2--
Display Orders'' is described in more detail below. The Exchange also
proposes a second difference compared to the Exchange's cash equity
rules to include Market Orders as interest that may have a display
price (for example, as described below and consistent with current
functionality, a Market Order could be displayed at its Trading Collar,
which is unique to options trading and not available on the cash equity
platform).
     Proposed Rule 6.76P-O(a)(2) would define the term ``limit
price'' to mean the highest (lowest) specified price at which a Limit
Order or quote to buy (sell) is eligible to trade. The limit price is
designated by the User. As noted in the proposed definitions of display
price and working price, the limit price designated by the User may
differ from the price at which the order would be displayed or eligible
to trade. This proposed definition uses Pillar terminology based on
Rule 7.36-E(a)(2), with a difference to refer to the specified price of
a ``Limit Order or quote,'' versus referring to ``Limit Order,'' as set
forth in Rule 7.36-E(a)(2).
     Proposed Rule 6.76P-O(a)(3) would define the term
``working price'' to mean the price at which an order or quote is
eligible to trade at any given time, which may be different from the
limit price or display price of an order. This proposed definition is
based on Rule 7.36-E(a)(3), with a difference to refer to ``order or
quote'' for purposes of determining ranking priority, versus referring
solely to an ``an order,'' as set forth in Rule 7.36-E(a)(3). The
Exchange believes that the term ``working price'' would provide clarity
regarding the price at which an order may be executed at any given
time. Specifically, the Exchange believes that use of the term
``working'' denotes that this is a price that is subject to change,
depending on the circumstances. The Exchange will be using this term in
connection with orders and modifiers, as described in more detail
below.
     Proposed Rule 6.76P-O(a)(4) would define the term
``working time'' to mean the effective time sequence assigned to an
order or quote for purposes of determining its priority ranking. The
Exchange proposes to use the term ``working time'' in its rules for
trading on the Pillar trading platform instead of terms such as ``time
sequence'' or ``time priority,'' which are used in rules governing
option trading on the Exchange's current system. The Exchange believes
that use of the term ``working'' denotes that this is a time assigned
to an order for purposes of ranking and is subject to change, depending
on circumstances. This proposed definition is based on Rule 7.36-
E(a)(4), with a difference to refer to an ``order or quote,'' versus
referring solely to ``an order,'' as set forth in Rule 7.36-E(a)(4).
     Proposed Rule 6.76P-O(a)(5) would define an ``Aggressing
Order'' or ``Aggressing Quote'' to mean a buy (sell) order or quote
that is or becomes marketable against sell (buy) interest on the
Consolidated Book. The proposed terms would therefore refer to orders
or quotes that are marketable against other orders or quotes on the
Consolidated Book. These terms would be applicable to incoming orders
or quotes, orders that have returned unexecuted after routing, or
resting orders or quotes that become marketable due to one or more
events. For the most part, resting orders or quotes will have already
traded with

contra-side interest against which they are marketable.
    To maximize the potential for orders or quotes to trade, the
Exchange continually evaluates whether resting interest may become
marketable. Events that could trigger a resting order to become
marketable include updates to the working price of such order or quote,
updates to the NBBO, changes to other interest resting on the
Consolidated Book, or processing of inbound messages. To address such
circumstances, the Exchange proposes to include in proposed Rule 6.76P-
O(a)(5) that a resting order or quote may become an Aggressing Order or
Aggressing Quote if its working price changes, if the NBBO is updated,
because of changes to other orders or quotes on the Consolidated Book,
or when processing inbound messages.
    The proposed definition of an ``Aggressing Order'' is based on Rule
7.36-E(a)(5), with differences in the proposed rule to account for
options trading, such as including the defined term ``Aggressing
Quote''; referring to an ``order or quote'' versus ``an order'';
referring to the Consolidated Book rather than NYSE Arca Book; and
referring to the NBBO instead of the PBBO, which is not a term used in
options trading. The Exchange believes that these proposed definitions
would promote transparency in Exchange rules by providing detail
regarding circumstances when a resting order or quote may become
marketable, and thus would be an Aggressing Order or Aggressing Quote.
    Under current Rule 6.76-O, bids and offers are ranked and
maintained in the Display Order Process and/or the Working Order
Process of the OX Book according to price-time priority. In the Display
Order Process, all Limit Orders (with no other conditions), quotes, and
the displayed portion of Reserve Orders (not the reserve size) are
ranked in price-time priority, displayed on an anonymous basis (except
as permitted by Rule 6.76A-O), and the best-ranked interest is
disseminated.\34\ In the Working Order Process, the reserve portion of
Reserve Orders,\35\ All-or-None Orders, Stop and Stop Limit Orders and
Stock Contingency Orders are ranked in price-time priority based on the
limit price or, in the case of Stop and Stop Limit Orders, the stop
price. As described in more detail below, proposed Rule 6.62P-O,
relating to orders and modifiers, would specify whether an order or
quote would be displayable, i.e., ranked Priority 2 Display Orders, or
non-displayable, i.e., ranked Priority 3--Non-Display Orders.
---------------------------------------------------------------------------

    \34\ See Rule 6.76-O(a)(1)(A)-(B), (b) and (c). When the
displayed portion of the Reserve Order is decremented completely,
the displayed portion of the Reserve Order shall be refreshed for
the displayed amount; or the entire reserve amount, if the remaining
reserve amount is smaller than the displayed amount, from the
reserve portion and shall be submitted and ranked at the specified
limit price and the new time that the displayed portion of the order
was refreshed. See Rule 6.76-O(a)(1)(B). As discussed in more detail
below, the Exchange proposes to describe how Reserve Orders would
function in proposed Rule 6.62P-O(d)(1).
    \35\ See Rule 6.76-O(a)(2)(A)-(E). After the displayed portion
of a Reserve Order is refreshed from the reserve portion, the
reserve portion remains ranked based on the original time of order
entry, while the displayed portion is sent to the Display Order
Process with a new time-stamp. See Rule 6.76-O(a)(2)(A).
---------------------------------------------------------------------------

    Proposed Rule 6.76P-O(b) would govern the display of non-marketable
Limit Orders and quotes. As proposed, the Exchange would display ``all
non-marketable Limit Orders and quotes ranked Priority 2--Display
Orders unless the order or modifier instruction specifies that all or a
portion of the order is not to be displayed,'' which functionality is
the same as that set forth in the first sentence of the preamble to the
current Rule 6.76-O, stating that the Exchange displays ``all non-
marketable limit orders in the Display Order Process.'' The Exchange
proposes to use Pillar ranking terminology (described further below) to
describe the same functionality and references to the Display Order
Process would not be included.
    Rule 6.76P-O(b)(1), which is substantially identical to current
Rule 6.76-O(b), would provide that except as otherwise permitted in
proposed new Rule 6.76AP-O (discussed below), all non-marketable
displayed interest would be displayed on an anonymous basis.\36\
---------------------------------------------------------------------------

    \36\ Rule 6.76-O(b) provides that ``[e]xcept as otherwise
permitted by Rule 6.76A-O, all bids and offers at all price levels
in the Display Order Process of the OX Book shall be displayed on an
anonymous basis.''
---------------------------------------------------------------------------

    Proposed Rule 6.76P-O(b)(2) is substantially identical to the
second sentence of the preamble to current Rule 6.76-O, and mirroring
that text, would provide that the Exchange would ``disseminate current
consolidated quotations/last sale information, and such other market
information as may be made available from time to time pursuant to
agreement between the Exchange and other Trading Centers, consistent
with the Plan for Reporting of Consolidated Options Last Sale Reports
and Quotation Information.'' \37\
---------------------------------------------------------------------------

    \37\ The second sentence of the preamble to current Rule 6.76-O
states, ``OX also will disseminate current consolidated quotations/
last sale information, and such other market information as may be
made available from time to time pursuant to agreement between the
Exchange and other Market Centers, consistent with the Plan for
Reporting of Consolidated Options Last Sale Reports and Quotation
Information.'' The Exchange proposes a difference to use the term
``Trading Centers'' instead of ``Market Centers.''
---------------------------------------------------------------------------

    Finally, proposed Rule 6.76P-O(b)(3) would provide that if ``an
Away Market locks or crosses the Exchange BBO, the Exchange will not
change the display price of any Limit Orders or quotes ranked Priority
2--Display Orders and any such orders will be eligible to be displayed
as the Exchange's BBO.'' This proposed rule describes Pillar
functionality, which is the same as current functionality. The Exchange
believes that including this text in the proposed rules would promote
clarity and granularity. In addition, this proposed concept, which is
based on Rule 7.36-E(b)(4), makes clear that resting displayed interest
that did not cause a locked or crossed market condition can stand its
ground and maintain priority at the price at which it was originally
displayed. This provision uses Pillar terminology and functionality
described in Rule 7.36-E(b)(4), but does not include text from the cash
equity rule providing for the treatment of displayed Limit Orders that
are ``marketable against protected quotations on Away Market'' before
``resuming trading and publishing a quote in a UTP Security following a
Regulatory Halts,'' because the concept of trading a security on an
unlisted trading privileges basis and how a non-primary cash equity
market would resume trading after a primary listing exchanges resumes
trading following a trading halt is not applicable to options trading.
    Proposed Rule 6.76P-O(c) would describe the Exchange's general
process for ranking orders and quotes, which process is the same as
that set forth in current Rule 6.76-O(a), with differences to use
Pillar ranking terminology and include additional detail related to
order/quote modifiers.\38\ As proposed, Rule 6.76P-O(c) would provide
that all non-marketable orders and quotes would be ranked and
maintained in the Consolidated Book according to price-time priority in
the following manner: (1) Price; (2) priority category; (3) time; and
(4) ranking restrictions applicable to an order/quote or modifier
condition. Accordingly, orders and quotes would be first ranked by
price. Next, at each price level, orders and quotes would be assigned a
priority category, which is similar to the Exchange's current process
to assign orders and quotes as being part of either the ``Display Order

Process'' or ``Working Order Process.'' Orders and quotes in each
priority category would be required to be exhausted before moving to
the next priority category. Within each priority category, orders and
quotes would be ranked by time. These general requirements for ranking
are applicable to all orders and quotes, unless an order or quote or
modifier has a specified exception to this ranking methodology, as
described in more detail below. The Exchange is proposing this ranking
description instead of using the above-described terms of ``Display
Order Process'' and ``Working Order Process'' in Rule 6.76-O. However,
substantively there would be no difference in how the Exchange would
rank orders and quotes on the Pillar trading platform from how it ranks
orders and quotes in the current option trading system. For example, a
non-displayed order would always be ranked after a displayed order at
the same price, even if the non-displayed order has an earlier working
time. In addition, this proposed rule would use Pillar terminology
based on Rule 7.36-E(c), with differences to reflect options trading,
including that the proposed rule references ``non-marketable orders and
quotes,'' not solely ``non-marketable orders,'' and references the
``Consolidated Book,'' rather than the ``NYSE Arca Book.''
---------------------------------------------------------------------------

    \38\ Rule 6.76-O(a) states that the Exchange ranks bids and
offers ``according to price-time priority, such that within each
price level, all bids and offers shall be organized by the time of
entry''.
---------------------------------------------------------------------------

    Proposed Rule 6.76P-O(d) would describe how orders and quotes would
be ranked based on price, which additional detail would provide
transparency regarding the Exchange's price-ranking process.
Specifically, as proposed, all orders and quotes would be ranked based
on the working price of an order or quote. Orders and quotes to buy
would be ranked from highest working price to lowest working price and
orders and quotes to sell would be ranked from lowest working price to
highest working price. The rule would further provide that if the
working price of an order or quote changes, the price priority of an
order or quote would change. This proposed pricing priority is current
functionality, but the new rule would add detail regarding the concept
of ``working price'' and its impact on priority and would use Pillar
terminology. In addition, this proposed rule uses Pillar terminology
from Rule 7.36-E(d), with differences to reflect options trading to
reference ``orders and quotes'' as opposed to solely ``orders.''
    Proposed Rule 6.76P-O(e) would describe the proposed priority
categories for ranking purposes, which added detail and terminology
would be new for option trading without any functional differences.\39\
As proposed, at each price, all orders and quotes would be assigned a
priority category. If, at a price, there are no orders or quotes in a
priority category, the next category would have first priority. The
Exchange does not propose to include in Rule 6.76P-O, which sets forth
the general rule regarding ranking, specifics about how one or more
order or quote types may be ranked and displayed. Instead, as described
in more detail below, the Exchange will address separately in new Rule
6.62P-O governing orders and modifiers which priority category
correlates to different order types and modifiers. Accordingly, details
regarding which proposed priority categories would be assigned to the
display and reserve portions of Reserve Orders, which is currently
addressed in Rule 6.76-O (a)(1)(B) and (a)(2)(A), will be addressed in
proposed Rule 6.62P-O and therefore would not be included in proposed
Rule 6.76P-O.\40\
---------------------------------------------------------------------------

    \39\ See supra notes 34 and 35 (regarding treatment of Reserve
Orders per Rule 6.76-O(a)(1)(B) and (a)(2)(A).
    \40\ See, e.g., Rule 6.76-O(a)(1) and (2) (setting forth the
price-time ranking and priority structure for bids and offers
submitted to the Exchange, including ranking of certain order types
with contingencies).
---------------------------------------------------------------------------

    The proposed changes are also the same as the terms used for
priority categories for cash equity trading as set forth in Rule 7.36-
E(e)(1)-(3), with differences to include options-specific reference to
``orders and quotes'' rather than just orders as relates to interest
ranked Priority 2 and 3. In addition, the Exchange does not propose to
include the Priority 4--Tracking Orders category, which relates to an
order type not available for option trading.
    The proposed priority categories would be:
     Proposed Rule 6.76P-O(e)(1) would specify ``Priority 1--
Market Orders,'' which provides that unexecuted Market Orders would
have priority over all other same-side orders with the same working
price. As described in greater detail below, a Market Order subject to
a Trading Collar would be displayed on the Consolidated Book. In such
circumstances, the displayed Market Order would have priority over all
other resting orders at that price. Under current options trading
functionality, Market Orders have priority over all other same-side
orders with the same working price. The proposed level of detail and
priority categorization would be new terminology for options trading
and the Exchange believes that the proposed rule change would add
transparency and specificity to Exchange rules without changing
functionality.
     Proposed Rule 6.76P-O(e)(2) would specify ``Priority 2--
Display Orders.'' This proposed priority category would replace the
``Display Order Process,'' which is described above. As proposed, non-
marketable Limit Orders or quotes with a displayed working price would
have second priority. For an order or quote that has a display price
that differs from the working price of the order or quote, the order or
quote would be ranked Priority 3--Non-Display Orders at the working
price.\41\ This proposed rule is consistent with current functionality.
For example, as described above, currently, the display portion of a
Reserve Order is subject to the Display Order Process and the reserve
portion is subject to the Working Order Process. The proposed level of
detail and priority categorization would be new for options trading and
the Exchange believes that it would add transparency and specificity to
Exchange rules. In addition, this priority category operates the same
as how Priority 2 -Display Orders function on the Exchange's cash
equity market, as described in Rule 7.36-E(e)(2), with a difference for
the proposed rule to reflect options trading by including reference to
quotes.
---------------------------------------------------------------------------

    \41\ See, e.g., infra, discussion regarding proposed Non-
Routable Limit Order per Rule 6.62P-O(e)(1).
---------------------------------------------------------------------------

     Proposed Rule 6.76P-O(e)(3) would specify ``Priority 3--
Non-Display Orders.'' This priority category would be used in Pillar
rules instead of reference to the ``Working Order Process,'' which is
described above. As proposed, non-marketable Limit Orders or quotes for
which the working price is not displayed, including the reserve
interest of Reserve Orders, would have third priority. This proposed
rule is consistent with current functionality. The proposed level of
detail and priority categorization would be new for options trading and
the Exchange believes that it would add transparency and specificity to
Exchange rules. In addition, this priority category operates the same
as how Priority 3--Non-Display Orders function on the Exchange's cash
equity market, as described in Rule 7.36-E(e)(3), with a difference for
the proposed rule to reflect options trading by including reference to
quotes.
    Proposed Rule 6.76P-O(f) would set forth that at each price level
within each priority category, orders and quotes would be ranked based
on time priority. This proposed rule is consistent with current Rule
6.76-(O)(a), which provides, in relevant part, that ``within each price
level, all bids and offers shall

be organized by the time of entry.'' The proposed changes set forth
below are consistent with current functionality and would add detail
not included in existing option rules. In addition, the proposed
changes use terminology based on Rule 7.36-E(f)(1) and (3), with
differences to reference options terminology of ``orders and quotes''
rather than just ``orders'' and to the ``Consolidated Book'' rather
than the ``NYSE Arca Book.''
     Proposed Rule 6.76P-O(f)(1) would provide that an order or
quote is assigned a working time when it is first added to the
Consolidated Book based on the time such order or quote is received by
the Exchange. This proposed process of assigning a working time to
orders is current functionality and is substantively the same as
current references to the ``time of original order entry'' found in
several places in Rule 6.76-O. This proposed rule uses Pillar
terminology that is substantially the same as in Rule 7.36-E(f)(1). To
provide transparency in Exchange rules, the Exchange further proposes
to include in proposed Rule 6.76P-O(f) how the working time would be
determined for orders that are routed, which is consistent with current
options trading functionality. As proposed:
    [cir] Proposed Rule 6.76P-O(f)(1)(A) would specify that an order
that is fully routed to an Away Market on arrival, per proposed Rule
6.76AP-O(b)(1), would not be assigned a working time unless and until
any unexecuted portion of the order returns to the Consolidated Book.
The Exchange notes that this is the current process for assigning a
working time to an order (although this detail would be new to option
trading rules) and uses Pillar terminology that is substantially the
same as in Rule 7.36-E(f)(1)(A), with a difference that the proposed
rule includes reference to the ``Consolidated Book'' rather than the
``NYSE Arca Book.'' This proposed rule is also consistent with current
Rule 6.76A-O(c)(2)(C), which provides that when an order or portion of
an order has been routed away and is not executed either in whole or in
part at the other Market Center, it will be ranked and displayed in the
OX Book in accordance with the terms of the order.
    [cir] Proposed Rule 6.76P-O(f)(1)(B) would specify that for an
order that, on arrival, is partially routed to an Away Market, the
portion that is not routed would be assigned a working time. If any
unexecuted portion of the order returns to the Consolidated Book and
joins any remaining resting portion of the original order, the returned
portion of the order would be assigned the same working time as the
resting portion of the order. If the resting portion of the original
order has already executed and any unexecuted portion of the order
returns to the Consolidated Book, the returned portion of the order
would be assigned a new working time. This process for assigning a
working time to partially routed orders is the same as currently used
by the Exchange (although this detail would be new to option trading
rules) and uses Pillar terminology that is substantially the same as in
Rule 7.36-E(f)(1)(B)), with a difference that the proposed rule would
reference the ``Consolidated Book'' rather than the ``NYSE Arca Book.''
     Proposed Rule 6.76P-O(f)(2) would provide that an order or
quote would be assigned a new working time if: (A) The display price of
an order or quote changes, even if the working price does not change,
or (B) the working price of an order or quote changes, unless the
working price is adjusted to be the same as the display price of an
order or quote. This proposed text would be new and is different from
how the Exchange adjusts the working time for cash equities trading
when the working price of an order is updated to be the same as the
display price.\42\ The Exchange believes that for its options market,
adjusting the working time any time the display price of an order
changes, would respect the priority of orders that were previously
displayed at the price to which the display price is changing. In
addition, the Exchange believes it is appropriate to adjust the working
time of an order any time its working price changes, unless the display
price does not change. This proposed order handling in Exchange rules
is consistent with the rules of other options exchanges.\43\
---------------------------------------------------------------------------

    \42\ Currently, for cash equity trading, Rule 7.36-E(f)(2)
provides that, ``[a]n order is assigned a new working time any time
the working price of an order changes.'' The Exchange plans to
propose changes to this cash equity rule to align with that being
proposed for its options market at a later date.
    \43\ See, e.g., Cboe BZX (``BZX'') Rule 11.9(g)(1)(B) (providing
that, for orders subject to ``display price sliding,'' BZX ``will
re-rank an order at the same price as the displayed price in the
event such order's displayed price is locked or crossed by a
Protected Quotation of an external market'' and that ``[s]uch event
will not result in a change in priority for the order at its
displayed price'').
---------------------------------------------------------------------------

     Proposed Rule 6.76P-O(f)(3) would provide that an order or
quote would be assigned a new working time if the size of an order or
quote increases and that an order or quote retains its working time if
the size of the order or quote is decreased. This proposed detail about
the process for assigning a new working time when the size of an order
changes is not currently described in the Exchange's option rules but
is consistent with existing functionality and uses Pillar terminology.
This provision is substantively identical to Rule 7.36-E(f)(3), with a
difference to reference ``an orders or quotes'' as opposed to solely
``an order.''
    Proposed Rule 6.76P-O(g) would specify that the Exchange would
apply ranking restrictions applicable to specified order or modifier
instructions. These order and modifier instructions would be identified
in proposed new Rule 6.62P-O, described below. Proposed Rule 6.76P-O(g)
uses Pillar terminology substantially the same as is used in Rule 7.36-
E(g). Current Rule 6.76-O(a)(2)(C)-(E) discusses ranking of certain
order types with contingencies in the Working Order Process. The
Exchange proposes that for Pillar, ranking details regarding orders
with contingencies would be described in proposed Rule 6.62P-O(d).
Accordingly, the Exchange does not propose to include the detail
described in Rule 6.76-O(a)(2)(C)-(E) in proposed Rule 6.76P-O.
    Finally, proposed Rule 6.76P-O(h) would be applicable to ``Orders
Executed Manually'' and would contain the same text as set forth in
Rule 6.76-O(d) without any substantive differences except for the non-
substantive change of capitalizing the defined term Trading Crowd (per
proposed Rule 1.1), removing the superfluous clause ``in addition,''
and updating the cross-reference to reflect the new Pillar rule.\44\
---------------------------------------------------------------------------

    \44\ See proposed Rule 6.76P-O(h)(1) (removing ``in addition'')
(B) (regarding ``Trading Crowd'') and (D) (updating the cross-
reference to new subparagraph (B) in connection with the Section
11(a)(1)(G) of the Exchange Act and Rule 11a1-1(T) thereunder (``G
exemption rule'')).
---------------------------------------------------------------------------

    In connection with proposed Rule 6.76P-O, the Exchange proposes to
add the following preamble to Rule 6.76-O: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.76-O
would not be applicable to trading on Pillar.
Proposed Rule 6.76AP-O: Order Execution and Routing
    Current Rule 6.76A-O, titled ``Order Execution--OX,'' governs order
execution and routing at the Exchange. The Exchange proposes that Rule
6.76AP-O would set forth the order execution and routing rules for
options trading on Pillar. The Exchange proposes that the title for new
Rule 6.76AP-O would be ``Order Execution and Routing'' instead of
``Order Execution--OX'' because the Exchange does not propose to use
the term ``OX''

in connection with Pillar. The Exchange believes that because proposed
Rule 6.76AP-O, like Rule 6.76A-O, would specify the Exchange's routing
procedures, referencing to ``Routing'' in the rule's title would
provide additional transparency in Exchange rules regarding what topics
would be covered in new Rule 6.76AP-O. This proposed rule is based on
Rule 7.37-E, which describes the order execution and routing rules for
cash equity securities trading on the Pillar platform, with differences
described below to reflect differences for options trading. In
addition, throughout proposed Rule 6.76AP-O, the Exchange proposes to
use the term ``will'' instead of ``shall,'' which is a stylistic
preference that would add consistency to Exchange rules.
    Proposed Rule 6.76AP-O(a) and its subparagraphs would set forth the
Exchange's order execution process and would cover the same subject as
the preamble to Rule 6.76A-O, which provides that like-priced orders
and quotes are matched for execution, provided the execution price is
equal to or better than the NBBO, unless such order has been routed to
an Away Market at the NBBO.\45\ The Exchange proposes a difference from
current Rule 6.76A-O(a)-(c) to use Pillar terminology of ``Aggressing
Order'' and ``Aggressing Quote''--rather than refer to an ``incoming
marketable bid or offer,'' because (as described above) the proposed
terms are more expansive and allow for interest to be (or become)
marketable even after arrival (i.e., not limited to ``incoming''
interest). As proposed, per Rule 6.76AP-O(a), an Aggressing Order or
Aggressing Quote would be matched for execution against contra-side
orders or quotes in the Consolidated Book according to the price-time
priority ranking of the resting interest, subject to specified
parameters.
---------------------------------------------------------------------------

    \45\ Rule 6.76A-O(a)-(c) sets forth a three-step process--the
Display Order Process, the Working Order Process, and Routing Away,
Steps 1-3, respectively--governing the handling of incoming
marketable bids and offers.
---------------------------------------------------------------------------

    The Exchange does not propose to include in proposed Rule 6.76AP-O
text based on current Rule 6.76A-O(a)(1), which describes ``Step 1:
Display Order Process,'' or text based on current Rule 6.76A-O(b),
which describes ``Step 2: Working Order Process,'' because by proposing
detailed text in Rule 6.76P-O(c)-(f) regarding how orders and quotes
would be ranked on the Exchange, it would be duplicative and
unnecessary to describe this process again in proposed Rule 6.76AP-O.
Instead, the Exchange believes that cross referencing the price-time
priority ranking of the resting interest, per proposed Rule 6.76P-O,
would provide transparency regarding how an Aggressing Order or
Aggressing Quote would trade with resting interest. The Exchange notes
that it made a similar change for its cash equity platform to eliminate
reference to the ``Display Order Process'' and ``Working Order
Process'' in Rule 7.37-E when it transitioned to Pillar.\46\
---------------------------------------------------------------------------

    \46\ See NYSE Arca Equities Pillar Notice, supra note 12 at
28728-29.
---------------------------------------------------------------------------

    Proposed Rule 6.76AP-O(a)(1) would set forth the LMM Guarantee,
which is substantively the same as the current LMM Guarantee, as
described in Rule 6.76A-O(a)(1)(A)-(D). Rule 6.76A-O(a)(1)(A) provides,
in relevant part, that an LMM or Directed Order Market Maker (``DOMM'')
that is quoting at the NBBO may be entitled to an allocation guarantee
of the greater of: An amount equal to 40% of the incoming bid or offer
up to the LMM's or DOMM's disseminated quote size; or the LMM's or
DOMM's share in the order of ranking. However, current Rule 6.76A-
O(a)(1)(A)(ii) provides that if there are Customer orders ranked ahead
of the LMM (or DOMM, as applicable), or if there is no LMM (or DOMM)
quoting at the NBBO, the incoming bid or offer will be matched against
orders and quotes in the Display Process strictly in the order of their
ranking. The Exchange proposes a substantive difference because on
Pillar, the Exchange would no longer support DOMMs or Directed Orders.
Accordingly, rule text relating to DOMMs or Directed Orders will not be
included in proposed Rule 6.76AP-O.\47\
---------------------------------------------------------------------------

    \47\ The Exchange proposes to add a preamble to Rule 6.88-O
(Directed Orders) to provide that the Rule would not be applicable
to trading on Pillar.
---------------------------------------------------------------------------

    Proposed Rule 6.76AP-O(a)(1) would provide that an LMM would be
entitled to an allocation guarantee when the execution price is equal
to the NBB (NBO) and there is no displayed Customer interest in time
priority at the NBBO in the Consolidated Book. In such cases, the
Aggressing Order or Aggressing Quote would be matched against the quote
of the LMM for an amount equal to 40% of the Aggressing Order or
Aggressing Quote, up to the size of the LMM's quote (the ``LMM
Guarantee''). With respect to how the LMM Guarantee would function on
Pillar, the Exchange does not propose any substantive differences from
current Rule 6.76A-O(a)(1), except as noted above to exclude reference
to Directed Orders or DOMMs.
    Proposed Rule 6.76AP-O(a)(1)(A) would provide that if an LMM has
more than one quote at a price, the LMM Guarantee would be applied only
to the first LMM quote in time priority, which text would add
granularity and transparency to Exchange rules. This text would be new
and reflects that on Pillar, the Exchange would permit multiple quotes
from the same LMM at the same price and that only the first quote in
time priority would be eligible for the LMM Guarantee.
    Proposed Rule 6.76AP-O(a)(1)(B), which is substantively identical
to current Rule 6.76A-O(a)(1)(B), would provide that if an LMM is
entitled to an LMM Guarantee (pursuant to proposed paragraph (a)(1))
and the Aggressing Order or Aggressing Quote had an original size of
five (5) contracts or fewer, then such order or quote would be matched
against the quote of the LMM for an amount equal to 100%, up to the
size of the LMM's quote. The Exchange also proposes to add Commentary
.01 to the proposed rule (which is substantively identical to
Commentary .02 of current Rule 6.76A-O) to make clear that on a
quarterly basis, the Exchange would evaluate what percentage of the
volume executed on the Exchange comprised of orders for five (5)
contracts or fewer that was allocated to LMMs and would reduce the size
of the orders included in this provision if such percentage is over
40%.\48\
---------------------------------------------------------------------------

    \48\ See proposed Rule 6.76AP-O, Commentary .01, which will not
include cross-reference that appears in the current rule Commentary
.02 to Rule 6.76A-O because the Exchange determined such cross-
reference was superfluous and opted to remove excess verbiage.
---------------------------------------------------------------------------

    Proposed Rule 6.76AP-O(a)(1)(C) would specify that if the result of
applying the LMM Guarantee is a fractional allocation of contracts, the
LMM Guarantee would be rounded down to the nearest contract and if the
result of applying the LMM Guarantee results in less than one contract,
the LMM Guarantee would be equal to one contract. The Exchange believes
that including this additional detail (which is based on current
functionality) in the proposed rule would add transparency to Exchange
rules.
    Finally, the Exchange proposes Rule 6.76AP-O(a)(1)(D), which would
provide that after applying any LMM Guarantee, the Aggressing Order or
Aggressing Quote would be allocated pursuant to proposed paragraph (a)
of this Rule, i.e., that such orders or quotes would be matched for
execution against contra-side interest resting in the Consolidated Book
according to price-time priority. This proposed text is substantively
identical to Rule 6.76A-O(a)(1)(C) and uses Pillar terminology, and
eliminates the now obsolete

reference to DOMMs, Directed Orders, and the Display Order Process.
    Consistent with the Exchange's proposed approach to new Rule 6.76P-
O, proposed Rule 6.76AP-O would not include references to specific
order types and instead would state the Exchange's general order
execution methodology. Any exceptions to such general requirements
would be set forth in connection with specific order or modifier
definitions in proposed Rule 6.62P-O, described below.
    Proposed Rule 6.76AP-O(b) would set forth the Exchange's routing
process and is intended to address the same subject as Rule 6.76A-O(c),
which is currently referred to as ``Step 3: Routing Away'' in order
processing, without any substantive differences. Under current Rule
6.76A-O(c), the Exchange will route to another Market Center any
unexecuted portion of an order that is eligible to route.\49\ Proposed
Rule 6.76AP-O(b) would provide that, absent an instruction not to
route, the Exchange would route marketable orders to Away Market(s)
after such orders are matched for execution with any contra-side
interest in the Consolidated Book in accordance with proposed paragraph
(a) of this Rule regarding Order Execution. Proposed Rule 6.76AP-O(b)
also uses the same Pillar terminology that is used in current Rule
7.37-E(b), which governs the Exchange's routing process on the
Exchange's cash equity platform, with differences to use option trading
terminology such as ``Consolidated Book.''
---------------------------------------------------------------------------

    \49\ Under the current rule, each eligible order is routed ``as
limit order equal to the price and up to the size of the quote
published by the Market Center(s)'' or, if ``a marketable Reserve
Order, the Exchange may route such order serially as component
orders, such that each component corresponds to the displayed
size.'' See Rule 6.76AP-O(c)(1)(A), (B). In the proposed Pillar
rule, the Exchange proposes to use the term ``Away Market'' instead
of ``Market Center.''
---------------------------------------------------------------------------

    The proposed rule would then set forth additional details regarding
routing that are consistent with current routing functionality, but are
not described in current rules:
     Proposed Rule 6.76AP-O(b)(1) would provide that an order
that cannot meet the pricing parameters of proposed Rule 6.76AP-O(a)
may be routed to Away Market(s) before being matched for execution
against contra-side interest in the Consolidated Book. The Exchange
believes that this proposed rule text, which is consistent with current
functionality, provides transparency that an order may be routed before
being matched for execution, for example, to prevent locking or
crossing or trading through the NBBO. This rule uses Pillar terminology
that is substantially the same as in Rule 7.37-E(b)(1), with a
difference to reference the ``Consolidated Book'' rather than the
``NYSE Arca Book.''
     Proposed Rule 6.76AP-O(b)(2) would provide that an order
with an instruction not to route would be processed as provided for in
proposed Rule 6.62P-O.\50\ As described in greater detail below, the
Exchange proposes to describe how orders and quotes with an instruction
not to route would be processed in proposed Rule 6.62P-O(e).
---------------------------------------------------------------------------

    \50\ See, e.g., infra, discussion regarding proposed Rule 6.62P-
O(e), Orders with Instructions Not to Route.
---------------------------------------------------------------------------

     Proposed Rule 6.76AP-O(b)(3) would provide that any order
or portion thereof that has been routed would not be eligible to trade
on the Consolidated Book, unless all or a portion of the order returns
unexecuted. This routing methodology is current functionality and
covers that same subject as current Rule 6.76A-O(c)(2) with no
substantive differences and is based in part on Pillar terminology used
in Rule 7.37-E(b)(6). Similar to Rule 6.76A-O(c)(2)(A), which provides
that an order routed to an Away Market is subject to the trading rules
of that market and, while so routed, has no standing relative to other
orders on the Exchange in the OX Book, the Exchange proposes that Rule
6.76AP-O(b)(3) would state that once routed, an order would not be
eligible to trade on the Consolidated Book. The Exchange does not
believe it is necessary to include the text that once routed an order
would be subject to the routing destination's trading rules, as such
detail is obvious and unnecessary. In addition, because, as discussed
above, the working time assigned to orders that are routed is being
proposed to be addressed in new Rule 6.76P-O(f)(1)(A) and (B), the
Exchange believes it would be unnecessary to restate this information
in new Rule 6.76AP-O.
     Proposed Rule 6.76AP-O(b)(4) would provide that requests
to cancel an order that has been routed in whole or part would not be
processed unless and until all or a portion of the order returns
unexecuted. This proposed rule uses Pillar terminology and operates
substantively the same as Rule 7.37-E(b)(7)(A). This rule represents
current functionality and is based on Rule 6.76A-O(c)(2)(B), except
that, unlike the current rule, the proposed rule does not state that
such orders (while still routed away) are subject to the applicable
trading rules of the market to which such order was routed.
     Finally, proposed Rule 6.76AP-O(c) would provide that
after trading with eligible contra-side interest on the Consolidated
Book and/or returning unexecuted after routing to Away Market(s), any
unexecuted non-marketable portion of an order would be ranked
consistent with new Rule 6.76P-O. This rule represents current
functionality as set forth in Rule 6.76A-O generally and paragraph
(c)(2)(C) as it pertains to orders that were routed away and then
returned unexecuted in whole or part to the Exchange without any
substantive differences. This proposed rule uses Pillar terminology and
operates substantively the same as Rule 7.37-E(c).
    The Exchange believes that the specific routing methodologies for
an order type or modifier should be included with how the order type is
defined, which will be described in proposed Rule 6.62P-O. Accordingly,
the Exchange does not believe it needs to specify in proposed Rule
6.76AP-O whether an order is eligible to route, and if so, whether
there are any specific routing instructions applicable to the order and
therefore will not be carrying over such specifics that are currently
included in Rule 6.76A-O.
    In connection with proposed Rule 6.76AP-O, the Exchange proposes to
add the following preamble to Rule 6.76A-O: ``This Rule is not
applicable to trading on Pillar.'' This proposed preamble is designed
to promote clarity and transparency in Exchange rules that Rule 6.76A-O
would not be applicable to trading on Pillar.
Proposed Rule 6.62P-O: Orders and Modifiers
    Current Rule 6.62-O (Certain Types of Orders Defined) defines the
order types that are currently available for options trading both on
the OX system and for open outcry trading on the Exchange. The Exchange
proposes that new Rule 6.62P-O would set forth the order types and
modifiers that would be available for options trading both on Pillar
(i.e., electronic order entry) and in open outcry trading. The Exchange
proposes to specify that Rule 6.62-O would not be applicable to trading
on Pillar.
    Because the Exchange proposes to use for options trading the Pillar
technology that is currently used for cash equity trading, the Exchange
has identified opportunities to offer additional order and modifier
functionality for options trading that is based on existing
functionality on cash equity trading but has not previously been
available for options trading. In addition, certain order types and
modifiers that would be available for options trading on Pillar

would be based on, or similar to, order types and modifiers available
on the Exchange's cash equity market. Because there would be similar
orders and modifiers on both the Exchange's cash equity and options
markets using similar terminology, the Exchange proposes to structure
proposed Rule 6.62P-O based on Rule 7.31-E and use similar terminology.
The Exchange also proposes to title proposed Rule 6.62P-O as ``Orders
and Modifiers,'' which is the title of Rule 7.31-E.
    Primary Order Types. Proposed Rule 6.62P-O(a) would specify the
Exchange's primary order types, which would be Market Orders and Limit
Orders, and is based on Rule 7.31-E(a), which sets forth the Exchange's
cash equity primary order types. Similar to Rule 7.31-E(a), proposed
Rule 6.62P-O(a) would also set forth the Exchange's proposed Limit
Order Price Protection functionality and Trading Collars.
    Market Orders. Proposed Rule 6.62P-O(a)(1) would define a Market
Order as an unpriced order message to buy or sell a stated number of
option contracts at the best price obtainable, subject to the Trading
Collar assigned to the order, and would further specify that unexecuted
Market Orders may be designated Day or GTC, which represents current
functionality, and that unexecuted Market Orders would be ranked
Priority 1--Market Orders.\51\ This proposed rule text uses Pillar
terminology similar to Rule 7.31-E(a)(1) to describe Market Orders for
options trading, with differences to reflect options trading
functionality. For example, proposed Rule 6.62P-O(a)(1) would specify
the ability to designate a Market Order as GTC, which is current
options trading functionality that would continue on Pillar (but which
modifier is not available on the Exchange's cash equity platform).\52\
Similarly, the Exchange proposes to reference that trading of a Market
Order would be subject to the Trading Collar assigned to the order,
which is similar to the third paragraph of the current definition of
Market Order in Rule 6.62-O(a). As described in greater detail below,
the Exchange proposes changes to its Trading Collar functionality on
Pillar.
---------------------------------------------------------------------------

    \51\ Market Orders are currently defined in Rule 6.62-O(a) as
follows: ``A Market Order is an order to buy or sell a stated number
of option contracts and is to be executed at the best price
obtainable when the order reaches the Exchange. Market Orders
entered before the opening of trading will be eligible for trading
during the Opening Auction Process. The system will reject a Market
Order entered during Core Trading Hours if at the time the order is
received there is not an NBB and an NBO (``collectively NBBO'') for
that series as disseminated by OPRA. If the Exchange receives a
Market Order to buy (sell) and there is an NBB (NBO) but no NBO
(NBB) as disseminated by OPRA at the time the order is received, the
order will be processed pursuant to Rule 6.60-O(a)--Trade Collar
Protection.''
    \52\ The ability for a Market Order to be designated Day or GTC
is based on current Rules 6.62-O(m) (describing a ``Day Order'') and
6.62-O(n) (describing a ``Good-til-Cancelled Order'' or ``GTC
Order'') and Commentary .01 to Rule 6.62-O, which requires all
orders to be either ``day,'' ``immediate or cancel,'' or ``good `til
cancelled.'' As described in more detail below, on Pillar, the time-
in-force designation, e.g., Day or GTC, would be a modifier that can
be added to an order type and would not be described in the rules as
a separate order type. Similar to Rule 7.31-E, the Exchange would
specify which time-in-force designations are available for each
order type.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(1) would further provide that for purposes
of processing Market Orders, the Exchange would not use an adjusted
NBBO.\53\ On the Exchange's cash equity market, the Exchange does not
use an adjusted NBBO when processing Market Orders. The Exchange
proposes to similarly not use an adjusted NBBO when processing Market
Orders on its options market, which would be new for options trading.
The Exchange believes that because Market Orders trade immediately on
arrival, using an unadjusted NBBO would provide a price protection
mechanism by using a more conservative view of the NBBO.
---------------------------------------------------------------------------

    \53\ See discussion supra, regarding the proposed Rule 1.1
definition of ``NBBO'' and that when using an unadjusted NBBO, the
NBBO would not be adjusted based on information about orders the
Exchange sends to Away Markets, execution reports received from
those Away Markets, and certain orders received by the Exchange.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(1)(A) would provide that a Market Order
that arrives during continuous trading would be rejected, or that was
routed, returns unexecuted, and has no resting quantity to join would
be cancelled if it fails the validations specified in proposed Rule
6.62P-O(a)(1)(A)(i)--(iv). This proposed rule is based in part on Rule
6.62-O(a), which specifies that a Market Order will be rejected during
Core Trading Hours if, when received, there is no NBBO for the
applicable option series as disseminated by OPRA, with differences to
use Pillar terminology and to expand the circumstances when a Market
Order would be rejected beyond the absence of an NBBO. As proposed, a
Market Order would be rejected (or cancelled if routed first) if: \54\
---------------------------------------------------------------------------

    \54\ The Exchange will also reject a Market Order if it is
entered when the underlying NMS stock is either in a Limit State or
a Straddle State, which is current functionality. See Rule 6.65A-
O(a)(1). The Exchange proposes a non-substantive amendment to Rule
6.65A-O(a)(1) to add a cross reference to proposed Rule 6.62P-
O(a)(1). The Exchange also proposes to amend the second sentence of
Rule 6.65A-O(a)(1) to remove references to trading collars, and
instead specify that the Exchange would cancel any resting Market
Orders if the underlying NMS stock enters a Limit State or a
Straddle State and would notify OTP Holders of the reason for such
cancellation. This proposed change would describe both how Market
Orders function today on the OX system and how they would be
processed on Pillar.
---------------------------------------------------------------------------

     There is no NBO (proposed Rule 6.62P-O(a)(1)(A)(i)). This
criterion is similar to the current rule, which provides that a Market
Order will be rejected if there is no NBO. The Exchange believes that
in the absence of an NBO, Market Orders should not trade as there is no
market for the option.
     There is no NBB and the NBO is higher than $0.50 (for sell
Market Orders only). The Exchange further proposes that if there is no
NBB and the NBO is $0.50 or below, a Market Order to sell would not be
rejected and would have a working price and display price one MPV above
zero and would not be subject to a Trading Collar (proposed Rule 6.62P-
O(a)(1)(A)(ii)). The Exchange believes that if there is no NBB, but an
NBO $0.50 or below, the Exchange would be able to price that Market
Order to sell at one MPV above zero. The proposed rule would further
provide that a Market Order to sell would be cancelled if it was
assigned a Trading Collar, routed, and when it returns unexecuted, it
has no resting portion to join and there is no NBB, regardless of the
price of the NBO. Accordingly, in this scenario, if there is no NBB and
there is an NBO that is $0.50 or below, the returned, unexecuted Market
Order would be cancelled rather than displayed at one MPV above zero.
The functionality described in this proposed rule would be new and is
designed to provide an opportunity for an arriving sell Market Order
(that is not first routed) to trade when the NBO is below $0.50.
     There are no contra-side Market Maker quotes on the
Exchange or contra-side Away Market NBBO, provided that a Market Order
to sell would be accepted as provided for in proposed Rule 6.62P-
O(a)(1)(A)(ii) (proposed Rule 6.62P-O(a)(1)(A)(iii)). This
functionality would be new and is designed to prevent a Market Order
from trading at prices that may not be current for that series in the
absence of Market Maker quotations or an Away Market NBBO.
     The NBBO is not locked or crossed and the spread is equal
to or greater than a minimum amount based on the midpoint of the NBBO
(proposed Rule 6.62P-O(a)(1)(A)(iv)). The proposed ``wide-spread''
parameter for purposes of determining whether to reject a Market Order
is similar to the wide-spread parameter applied when determining
whether a trade is a Catastrophic Error, as set forth in Rule

6.87-O(b)(3), with two differences. First, as shown below, the lowest
bucket would be $0.00 up to and including $2.00, instead of $0.00 to
$1.99, which means the $2.00 price point would be included in this
bucket. The Exchange proposes this difference because it would simplify
the application to have the break points after whole dollar price
points. Second, the wide-spread calculation would be based off of the
midpoint of the NBBO, rather than off of the bid price, as follows:

------------------------------------------------------------------------
                                                                Spread
                  The midpoint of the NBBO                     parameter
------------------------------------------------------------------------
$0.00 to $2.00..............................................       $0.75
Above $2.00 to and including $5.00..........................        1.25
Above $5.00 to and including $10.00.........................        1.50
Above $10.00 to and including $20.00........................        2.50
Above $20.00 to and including $50.00........................        3.00
Above $50.00 to and including $100.00.......................        4.50
Above $100.00...............................................        6.00
------------------------------------------------------------------------

    The Exchange notes that this proposed protection for Market Orders
is a new risk control designed to protect against erroneous executions
and use of the midpoint of the NBBO as a basis for a price protection
mechanism is consistent with similar functionality on other options
markets.\55\
---------------------------------------------------------------------------

    \55\ See, e.g., Cboe Rule 5.34(a)(2) (setting forth the ``Market
Order NBBO Width Protection'' wherein Cboe cancels or rejects market
orders submitted ``when the NBBO width is greater than x% of the
midpoint of the NBBO,'' subject to minimum and maximum dollar values
determined by Cboe).
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(1)(B) would provide that an Aggressing
Market Order to buy (sell) would trade with all orders or quotes to
sell (buy) on the Consolidated Book priced at or below (above) the
Trading Collar before routing to Away Market(s) at each price.\56\
Proposed Rule 6.62P-O(a)(1)(B) would further provide that after trading
or routing, or both, a Market Order would be displayed at the Trading
Collar, subject to proposed Rule 6.62P-O(a)(1)(C), which is consistent
with current functionality that Market Orders would be displayed at a
Trading Collar, per Rule 6.60-O(a)(5).
---------------------------------------------------------------------------

    \56\ The Exchange has defined an Aggressing Order in proposed
Rule 6.76P-O(a)(5). An Aggressing Market Order is a Market Order
that is an Aggressing Order.
---------------------------------------------------------------------------

    Proposed Rule 6.62P-O(a)(1)(C) would provide that a Market Order
would be cancelled before being displayed if there are no remaining
contra-side Market Maker quotes on the Exchange or contra-side Away
Market NBBO. Proposed Rule 6.62P-O(a)(1)(D) would provide that a Market
Order would be cancelled after being displayed at its Trading Collar if
there ceases to be a contra-side NBBO. These proposed cancellation
events are similar to functionality described in Rule 6.60-O(a)(4)(E),
which provides that ``[t]he Exchange will cancel a Market Order, or the
balance thereof, that has been collared pursuant to paragraph (a)(1)(A)
or (B) [of that Rule] above, if after exhausting trading opportunities
within the Collar Range, the Exchange determines there are no quotes on
the Exchange and/or no interest on another market in the affected
option series.'' As proposed, in Pillar, the Exchange would cancel a
Market Order in similar circumstances, with proposed modifications that
a Market Order would be cancelled only if there are no remaining
contra-side Market Maker quotes on the Exchange or if there is no
contra-side Away Market NBBO. The Exchange believes that this proposed
change from the current rule would provide that a Market Order would be
cancelled when there is no contra-side interest against which to
determine the price at which such order could trade.
    Finally, proposed Rule 6.62P-O(a)(1)(E) would provide that a
resting, displayed Market Order that is locked or crossed by an Away
Market would be routed to that Away Market. Because Market Orders are
intended to trade at the best price obtainable, the Exchange proposes
to route displayed Market Orders if they are locked or crossed by an
Away Market.\57\ This proposed Rule is based on current functionality,
which is not described in current rule. Therefore, the proposed rule is
designed to promote clarity and transparency in Exchange rules.
---------------------------------------------------------------------------

    \57\ As described above for proposed Rule 6.76P-O(b)(3),
displayed interest other than displayed Market Orders would stand
their ground if locked or crossed by an Away Market. The Exchange
would provide an option for Limit Orders to instead be routed, see
discussion infra, regarding proposed Rule 6.62P-O(i)(1) and the
proposed Proactive if Locked/Crossed Modifier.
---------------------------------------------------------------------------

    Limit Orders. Proposed Rule 6.62P-O(a)(2) would define a Limit
Order as an order message to buy or sell a stated number of option
contracts at a specified price or better, subject to Limit Order Price
Protection and the Trading Collar assigned to the order, and that a
Limit Order may be designated Day, IOC, or GTC. In addition, unless
otherwise specified, the working price and the display price of a Limit
Order would be equal to the limit price of the order, it is eligible to
be routed, and it would be ranked under the proposed category of
``Priority 2--Display Orders.'' This proposed rule text uses Pillar
terminology that is based in part on Rule 7.31-E(a)(2). The ability for
a Limit Order to be designated IOC, Day, or GTC is based on current
Rules 6.62-O(k), (m) and (n), respectively, and therefore would differ
from the cash equity rules because (unlike on the cash equity platform)
a Limit Order could be designated GTC, but is consistent with current
options trading functionality. In addition, unlike cash equity trading,
but consistent with current options trading functionality, Limit Orders
would be subject to trading collars. As described in more detail below,
on Pillar, trading collars will differ from both current options
trading collar functionality and trading collar functionality available
on the Exchange's cash equity platform (which is available only for
Market Orders). Proposed Rule 6.62P-O(a)(2)(A) would provide that a
marketable Limit Order to buy (sell) received by the Exchange would
trade with all orders and quotes to sell (buy) on the Consolidated Book
priced at or below (above) the NBO (NBB) before routing to an Away
Market NBO (NBB) and may route to prices higher (lower) than the NBO
(NBB) only after trading with orders and quotes to sell (buy) on the
Consolidated Book at each price point, and once no longer marketable,
the Limit Order would be ranked and displayed on the Consolidated Book.
This proposed rule text is based on Rule 6.62-O(b), which provides that
a ```marketable' limit order is a Limit Order to buy (sell) at or above
(below) the NBBO.'' The proposed rule text is more specific and uses
the same Pillar terminology used to describe Limit Orders in Rule 7.31-
E(a)(2)(A) for cash equity trading. In addition, proposed Rule 6.62P-
O(a)(2)(A) would use terminology specific to options trading (i.e., the
proposed rule refers to the Consolidated Book rather than the NYSE Arca
Book as well as to the NBBO as opposed to the PBBO).
    Limit Order Price Protection. The Exchange proposes to describe its
proposed Limit Order Price Protection functionality in proposed Rule
6.62P-O(a)(3). On the OX system, the concept of ``Limit Order Price
Protection'' for orders is set forth in Rule 6.60-O(b) and is called
the ``Limit Order Filter.'' For quotes, price protection filters are
described in Rule 6.61-O. The proposed ``Limit Order Price Protection''
on Pillar would be applicable to both Limit Orders and quotes and, at a
high level, would work similarly to how the current price protection
mechanisms function on the OX system because a Limit Order or quote
would be rejected if it is priced at a specified threshold

away from the contra-side NBB or NBO.\58\ The Exchange proposes to
enhance the functionality for options trading on Pillar by using new
thresholds and reference prices (as discussed further below) that would
be applicable to both orders and quotes. The concept of a ``Reference
Price'' as used in connection with risk controls would be new for
options but consistent with Pillar terminology for the Exchange's cash
equity market as well as how this term is used on other option
exchanges.\59\ Thus, this term is not new or novel.
---------------------------------------------------------------------------

    \58\ Current Rule 6.60-O(b) provides that unless otherwise
determined by the Exchange, the specified threshold percentage for