[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16119-16130]
[FR Doc No: 2019-07616]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85626; File No. SR-CboeEDGX-2019-017]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating To Adopt All-or-None (``AON'') Orders

April 11, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 2, 2019, Cboe EDGX Exchange, Inc. (``Exchange'' or
````EDGX'''') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
adopt all-or-none (``AON'') orders. The text of the proposed rule
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, 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

    In its filing with the Commission, the Exchange included statements

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

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(``Cboe Global''), which is the parent company of Cboe Exchange, Inc.
(``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''), acquired the
Exchange, Cboe EDGA Exchange, Inc. (``EDGA''), Cboe BZX Exchange, Inc.
(``BZX or BZX Options''), and Cboe BYX Exchange, Inc. (``BYX'' and,
together with C2, Cboe Options, the Exchange, EDGA, and BZX, the ``Cboe
Affiliated Exchanges''). The Cboe Affiliated Exchanges are working to
align certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its technology to the same
trading platform used by the Exchange, C2, and BZX Options in the
fourth quarter of 2019. The proposal set forth below is intended to add
certain functionality to the Exchange's System that is available on
Cboe Options in order to ultimately provide a consistent technology
offering for market participants who interact with the Cboe Affiliated
Exchanges. Although the Exchange intentionally offers certain features
that differ from those offered by its affiliates and will continue to
do so, the Exchange believes that offering similar functionality to the
extent practicable will reduce potential confusion for Users.
    The Exchange proposes to adopt AON orders. Proposed Rule 21.1(d)(4)
defines AON orders as orders to be executed in their entirety or not at
all. Additionally, it specifies that AON orders may be market or limit
orders. Several other options exchanges offer AON orders (which can be
market or limit orders), and this proposed definition is consistent
with the definition of AON orders in other options exchanges' rules,
including Cboe Options.\5\ The Exchange will not disseminate bids or
offers of AON orders to OPRA, as the prices of AON orders are not
included in the Exchange's best bid or offer (``BBO'') for a series.\6\
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    \5\ See, e.g., Cboe Options Rule 6.53(i); NASDAQ ISE, LLC
(``ISE'') Rule 715(c) (ISE requires AON orders to be entered as
immediate-or-cancel (``IOC'')); NASDAQ OMX PHLX, LLC (``PHLX'') Rule
1066(c)(4); NASDAQ Options Market LLC (``NOM'') Chapter VI, Section
1(e)(10) (NOM requires AON orders to be entered as IOC and only
after the market open); and NYSE Arca, Inc. (``Arca'') Rule 6.62-
O(d)(4). The proposed rule change permits Users to apply all Times-
in-Force to AON orders (as Cboe Options permits), as the Exchange
already offers fill-or-kill (``FOK'') orders, which are the
equivalent of an IOC AON order. See Rule 21.1(f)(5) (a FOK order is
a limit order that is to be executed in its entirety as soon as it
is received and, if not so executed, cancelled). However, as
discussed below, Users may not apply a Post Only instruction to AON
orders.
    \6\ See proposed Rule 21.1(d)(4)(A). Rules of other options
exchanges explicitly provide that AON orders are not disseminated to
OPRA. See, e.g., Cboe Options Rule 6.44, Interpretation and Policy
.02; and Phlx Option Floor Procedures A-9. Proposed Rule
21.1(d)(4)(E) states the Exchange may restrict the entry of AON
orders in a series or class if the Exchange deems it necessary or
appropriate to maintain a fair and orderly market. Cboe Options
rules provide it with the same authority. See, e.g., Cboe Options
Rule 6.44, Interpretation and Policy .03.
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    The proposed AON order is similar to the existing Minimum Quantity
Order currently available on the Exchange. Minimum Quantity Orders are
orders that require a specified minimum quantity of contracts be
obtained, or the order is cancelled.\7\ Today, a Minimum Quantity Order
with the minimum set as the full size of the order would function
similar to the proposed AON order (except, as noted above, an AON order
will not be required to be submitted as IOC).\8\ The Exchange also
offers a fill-or-kill (``FOK'') Time-in-Force, pursuant to which a
limit order is to be executed in its entirety as soon as it is received
and, if not so executed, cancelled.\9\ A FOK order is equivalent to an
AON entered with an IOC Time-in-Force. As discussed below, unlike
Minimum Quantity Orders or orders designated as FOK, AON orders may
rest in the Book or be routed, may also be market orders, and may have
any Time-in-Force. However, the primary characteristic of both, which
is that they must execute in their entirety, is the same.
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    \7\ See Rule 21.1(d)(3). While Minimum Quantity Orders may only
be IOC, the proposed rule change does not limit the Times-in-Force
that Users may apply to AON orders as discussed above.
    \8\ For example, a Minimum Quantity Order for 100 contracts with
a minimum set at 100 contracts has the same result as an AON order
for 100 contracts, because both can only trade against an order(s)
for 100 contracts.
    \9\ See Rule 21.1(f)(5). The proposed rule change does not adopt
a provision corresponding to Cboe Options Rule 6.44, Interpretation
and Policies .04 or .05, because the Exchange believes those
provisions are redundant and unnecessary. Cboe Options Rule 6.44
states that an all-or-none bid or offer shall be deemed to be made
only for the amount stated (i.e., deemed to be all-or-none), which
is redundant of the proposed definition of an AON order. Similarly,
Cboe Options Rule 6.44, Interpretation and Policy .04, which
essentially says that a FOK order will be deemed to be made only for
the amount stated, is redundant of the Exchange's current definition
of a FOK order. Cboe Options Rule 6.44, Interpretation and Policy
.05 relates to minimum volume orders (which are similar to Minimum
Quantity Orders on the Exchange, except minimum volume orders on
Cboe Options may only be executed in open outcry), and states
minimum volume orders will be deemed to be made only for the amount
stated (i.e., deemed to be all-or-none), which the Exchange believes
is redundant of the Exchange's current definition of a Minimum
Quantity Order.
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    The proposed rule change does not permit a User to designate an AON
order as Post Only.\10\ An AON order's size contingency, and the fact
that (as discussed below) AON orders will have last priority while
resting in the EDGX Options Book, will provide AON orders resting on
the EDGX Options Book with few opportunities for AON orders to receive
an execution. For this reason, the Exchange believes there will be
minimal investor demand for Post Only AON orders.\11\ The Exchange
believes it is appropriate to not restrict the opportunities for
execution of an AON order to the minimal execution opportunities that
would exist for an AON order while resting on the Book. This ensures
that an AON order may execute upon entry if there is sufficient size
resting on the EDGX Options Book, as well as have an opportunity for
execution if it cannot so execute.
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    \10\ See proposed Rule 21.1(d)(4)(B). Pursuant to Rule
21.1(d)(8), a Post Only order may not, among other things, remove
liquidity from the EDGX Options Book.
    \11\ Cboe Options does not offer a Post Only instruction.
Additionally, other exchanges, such as ISE and NOM, only permit AON
orders to be entered as IOC, and thus AON orders at those options
exchanges would only execute upon entry and never rest on the book
(and thus Post Only, if available on those exchanges, would not be
permitted).
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    Additionally, the proposed rule change only permits Users to apply
MCN (MTP cancel newest), but no other MTP Modifiers, to an AON
order.\12\ Rule 21.1(g)(1) provides that an incoming order marked with
the MCN Modifier will not execute against opposite side resting
interest market with any MTP modifier originating from the same Unique
Identifier. The incoming order marked with the MCN modifier will be
cancelled back to the originating User(s). The resting order marked
with an MTP modifier will remain on the EGDX Options Book. The Exchange
believes there will be little demand for the use of any MTP Modifiers
on AON orders given that primarily retail investors submit AONs, and
retail investors are unlikely to have interest

on both sides of the market. Given this expected minimal demand, the
Exchange believes offering one MTP Modifier for AON orders is
sufficient. The Exchange believes MCN is the most appropriate MTP
modifier for AON orders, because it is the simplest modifier to
implement from a System perspective and an offering of other MTP
modifier for investors would present significant technical complexities
given the size contingency of AON orders.\13\ Additionally, the
Exchange has determined to handle an AON order with any other MTP
Modifier as an MCN rather than cancel the AON, because the proposed
rules provide investors with sufficient transparency regarding how the
System will handle AON orders with MTP Modifiers, and Users may achieve
other results manually if so desired. For example, if User were to
prefer to have a resting order with an MTP Modifier cancel and let the
newer AON order rest, it could manually cancel the resting order and
then resubmit the AON order.
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    \12\ See proposed Rule 21.1(d)(4)(D). If a User applies any
other MTP Modifier to an AON order, the System will handle it as an
MCN).
    \13\ Additionally, the Decrement and Cancel MTP Modifier is
inconsistent with an AON order, because it may result in partial
execution of an order.
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    Cboe Options offers match trade prevention only for market-makers,
and thus the Cboe Options rules regarding AON orders contains no
restrictions on the use of match trade prevention instructions, as it
would only be available to market-makers that submit AON orders.
Because the Exchange has match-trade prevention functionality available
for all Users and not just Market-Makers, the Exchange believes it is
appropriate to provide this functionality to all Users that submit AON
orders and want match trade prevention functionality. The rules of
other exchanges are also silent on whether any match trade prevention
instructions are available for AON orders.
    An AON limit order will always be subject to the Price Adjust
process in Rule 21.1(i).\14\ Because AON orders will have last priority
on the EDGX Options Book (as discussed below), the Exchange believes it
will maximize execution opportunities for AON limit orders to be
subject to the Price Adjust process.\15\ The Price Adjust process
applies to orders (subject to the User's instructions or the Rules)
that do not execute upon entry and go to rest in the EDGX Options Book
(for example, because an order is not marketable upon entry, is not
eligible to route, or, in the case of an AON order, there is
insufficient size to satisfy its size contingency). It ensures these
orders rest at executable prices in accordance with linkage rules.\16\
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    \14\ See proposed Rule 21.1(d)(4)(C). If an AON market order is
unable to execute for any reason, it would cancel in accordance with
the terms of a market order. This is consistent with the handling of
any other market order that was not able to execute on the Exchange.
    \15\ If a User does not want an AON order to rest on the EDGX
Options Book at an adjusted price, it may cancel the AON order and
resubmit it for execution at a later time.
    \16\ See Rule 27.3, which provides that the Exchange will
reasonably avoid displaying quotations that lock or cross a
Protected Quotation.
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    Currently, if an order, at the time of entry, would lock or cross a
Protected Quotation of another options exchange or the Exchange, it
will be ranked and displayed by the System at one minimum price
variation below (above) the current NBO (NBB) for bids (offers).\17\ An
AON order resting on the EDGX Options Book is not displayed or part of
the BBO (thus is not protected and would not be part of the NBBO). The
proposed rule change provides that AON orders will rest on the EDGX
Options Book at potentially executable prices (and thus not at prices
that cross a Protected Quotation or the BBO).
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    \17\ See current Rule 21.1(i)(1) (which the proposed rule change
renumbers and letters to be Rule 21.1(i)(1)(A)(i)).
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    Specifically, proposed Rule 21.1(i)(1)(A)(ii) provides if a buy
(sell) non-AON order, at the time of entry, would lock or cross the
offer (bid) of a sell (buy) AON order resting on the EDGX Options Book
at or better than the Exchange's best offer (bid), the System ranks
\18\ the resting AON order at one minimum price variation above (below)
the bid (offer) of the non-AON order. This is consistent with the price
at which non-AON orders would rest on the EDGX Options Book if subject
to price adjustment (except price adjustment currently only applies to
incoming orders, not resting orders). For example, if an AON order to
buy 5 at 1.10 is resting on the EDGX Options Book (which is the NBB),
and a non-AON order to sell 1 (which does not satisfy the size of the
AON order) at 1.10 enters the EDGX Options Book, the System reprices
the AON order to rest in the EDGX Options Book at 1.05 (assuming the
minimum price variation for the class is $0.05).
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    \18\ In the EDGX Rules, the term ``ranked'' means that an order
will be prioritized and eligible for execution at its ranked price
for purposes of allocation if an execution were to occur at that
price. For an AON order ``ranked'' at a price, it would be
prioritized last at that price (as discussed above).
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    Similarly, pursuant to proposed Rule 21.1(i)(1)(B)(ii), if a buy
(sell) AON order, at the time of entry, would lock or cross a Protected
Offer (Bid) of the Exchange, the System ranks the incoming AON order at
a price one minimum price variation below (above) the offer (bid) of
the non-AON order resting on the EDGX Options Book at the Protected
Offer (Bid). This is consistent with how an incoming non-AON would be
handled if it locked or crossed a Protected Offer (Bid) of the
Exchange. For example, if a non-AON order to buy 1 at 1.10 is resting
at the top of the EDGX Options Book, and an AON order to sell 5 (which
cannot satisfied by the resting interest) at 1.10 enters the EDGX
Options Book, the System reprices the AON order to rest in the EDGX
Options Book at 1.15 (assuming the minimum price variation for the
class is $0.05).
    Proposed subparagraph (i)(1)(B)(i) states if a buy (sell) AON
order, at the time of entry, would cross a Protected Offer (Bid) of
another options exchange or a sell (buy) AON order resting on the EDGX
Options Book at or better than the Exchange's best offer (bid), the
System will rank the incoming AON order at a price equal to the
Protected Offer (Bid) or the offer (bid) of the resting AON order,
respectively. For example, if a buy AON order has a bid of 1.05 and
enters the EDGX Options Book when the NBO is 1.00, the System ranks the
AON order at a 1.00 bid.\19\ Or, if a sell AON order has an offer of
1.10 and enters the EDGX Options Book, where there is a resting AON
order with a bid of 1.15, the System ranks the incoming AON order at a
price of 1.15.
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    \19\ Pursuant to subparagraph (i)(2), if the NBO changes to
1.05, the resting AON order would receive a new timestamp and be
repriced to 1.05.
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    The proposed rule change applies the current Price Adjust process
to the existence of AONs to reflect the fact that AONs are not
displayed on the EDGX Options Book (and thus are not Protected
Quotations). This factor distinguishes AONs from other orders on the
Exchange. The Exchange believes the proposed application of the Price
Adjust process to AONs is reasonable, because an AON order will rest on
the EDGX Options Book at an executable price (i.e., a price that locks
or is one minimum price variation away from the new Protected Quotation
or AON resting on the EDGX Options Book at or better than the
Exchange's BBO).\20\ The

proposed process will generally re-price the incoming (and thus later
arriving order), which is consistent with the current Price Adjust
process. As proposed, if an incoming buy (sell) AON order locked or
crosses a Protected Offer (Bid) of the Exchange (i.e., a non-AON order
that was displayed at the Exchange's best offer (bid)), the System
would adjust the price of the AON order to be one minimum price
variation below (above) the Protected Offer (Bid). Similarly, if an
incoming buy (sell) AON order crossed a Protected Offer (Bid) of
another options market or a sell (buy) AON order resting on the
Exchange, the System would adjust the price of the incoming order.
However, unlike the current Price Adjust process, the proposed rule
change will reprice a resting AON order rather than an incoming non-AON
order, because AON orders have last priority (as discussed below) and
are not displayed, and thus should not cause the price of an incoming
non-AON order to reprice. Because AONs are not displayed and have last
priority on the Book, the Exchange believes it is appropriate to adjust
the price of an AON rather than an incoming order that would be
displayed and protected. The proposed rule change is consistent with
linkage rules, because AONs will not be part of the EDGX BBO, and
repricing an AON to lock an away exchange price or a resting (and
nondisplayed) order on the EDGX Options Book will, therefore, not
result in a displayed locked market.
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    \20\ The proposed rule change makes corresponding changes to
Rule 21.1(i)(2) to provide that in the event the circumstances that
caused the System to adjust the price of an order pursuant to
proposed subparagraph (1) change so that it would not lock or cross,
as applicable, a Protected Quotation or an AON resting on the EDGX
Options Book at a price at or better than the Exchange's BBO, the
order subject to the price adjust will receive a new timestamp and
be ranked or displayed at a price that locks or is one minimum price
variation away from the new Protected Quotation or AON resting on
the EDGX Options Book at a price at or better than the Exchange's
BBO. These proposed changes reflect the fact that the trade or
cancellation of an order resting on the EDGX Options Book at or
better than the Exchange's best offer (bid) (as applicable) may
cause a resting AON order to become repriced. Pursuant to the
current Price Adjust process applicable to non-AON orders, repricing
only occurs when the NBBO changes. The proposed rule change adds the
phrase ``if applicable'' to the current rule text regarding orders
being ranked and displayed to reflect the fact that AON orders will
not be displayed in the EDGX Options Book.
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    The proposed rule change also ensures that a resting AON order will
not lock the price of a Protected Quotation on the EDGX Options Book.
This prevents the situation in which an incoming order may execute
ahead of the resting non-AON order. For example, if a non-AON order to
buy 1 at 1.10 is resting on the EDGX Options Book, and an AON order to
sell 5 (and thus is not satisfied by the resting interest) at 1.10
enters the EDGX Options Book, if the System permitted the AON order to
rest at a price of 1.10 (rather than reprice the AON to rest at 1.15 as
proposed), if subsequently an AON to buy 5 at 1.10 was submitted to
EDGX Options, that AON would execute against the resting AON at 1.10,
and thus ahead of the non-AON order to buy.\21\ The proposed rule
change will also reprice an AON order to a more aggressive price up to
the limit price at which it would be able to execute without causing a
trade-through as the market changes.\22\
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    \21\ Priority rules apply to orders resting in the Book, not
incoming orders. Therefore, with respect to an incoming order, the
System checks opposite side interest to see if the incoming order
can execute. It does not check to see if there is same-side interest
ahead of which it cannot trade, as there would only be marketable
same-side interest (from a price perspective) that would not
otherwise execute against opposite side interest if such opposite
side interest was an AON order.
    \22\ See Rules 27.2 (which prohibits trade-throughs, subject to
certain exceptions) and 27.3 (requires the Exchange to reasonably
avoid displaying quotes that lock a Protected Quotation).
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    Cboe Options does not have functionality that corresponds to the
Price Adjust process. However, Cboe Options rules do not provide any
special handling that applies to AON orders that lock or cross orders
on Cboe Options or the quote of an away options market. Therefore,
pursuant to Cboe Options' rules, if an AON order is unable to execute
upon entry into the Cboe Options System (or after routing, if eligible
for routing pursuant to Cboe Options' rules), the AON order will rest
at its price, even if it locks or crosses the Cboe Options BBO or the
quote of an away options market.\23\ The proposed rule change will
similarly permit an AON order to rest at a price that locks the quote
of an away options market, as well as an AON order resting on the EDGX
Options Book at a price at or better than the EDGX Options BBO. On Cboe
Options, an AON order resting at a price that locks or crosses an order
may only execute in accordance with the priority principles set forth
in Cboe Options Rule 6.45 and may not execute at prices that would
cause a trade-through pursuant to Cboe Options Rule 6.81. The Exchange
believes the proposed rule change ultimately creates the same result
for a resting AON order that would otherwise occur on Cboe Options (the
proposed rule change merely changes the price of an AON order upon
entry rather than at the time of execution), and in some cases results
in price improvement for an AON order.
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    \23\ If the AON order submitted to Cboe Options was a market
order and was unable to execute for any reason, it would cancel in
accordance with the terms of a market order. This is consistent with
the handling of any other market order that was not able to execute
on the Exchange.
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    For example, as proposed, if the EDGX BBO was 1.15 x 1.30 (size of
50), and the NBBO was 1.15 x 1.20 (size of 50), and a User submitted an
AON order for 100 to buy at 1.25, the AON order would rest on the EDGX
Options Book with a price of 1.20 (which locks the Protected Offer of
1.20). If an order to sell 100 at 1.20 was later submitted to EDGX
Options, it would execute against the resting AON order at its ranked
price of 1.20. On Cboe Options, the AON would rest at 1.25. If an order
to sell 100 at 1.20 was later submitted to Cboe Options, it would
execute against the resting AON order at a price of 1.20 (and thus the
same price at which it would execute on EDGX Options), as executions
may only occur at or within the NBBO.
    Additionally, suppose the EDGX BBO was 1.15 x 1.25 (non-AON order
with size of 50), and was also the NBBO, and a User submitted an AON
order for 100 to buy at 1.25, the AON order would rest on the EDGX
Options Book with a price of 1.20 (which is one minimum price variation
below the resting non-AON order). If an order to sell 100 at 1.20 was
later submitted to EDGX Options, it would execute against the resting
AON order at a price of 1.20 (which results in price improvement for
the AON order). On Cboe Options, the AON would rest at 1.25. If an
order to sell 100 at 1.20 was later submitted to Cboe Options, the AON
would receive execution at a price of 1.25.\24\ The Exchange believes
the proposed rule change is an enhancement that will prevent such
incoming orders to trade against a resting AON at the same price as a
resting non-AON order on the opposite side of the market that had
insufficient size to trade against the AON order.
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    \24\ See Cboe Options Rule 6.45.[sic]
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    As another example, if the EDGX BBO was 1.15 x 1.30 and was also
the NBBO, and there was a sell AON order for 50 to sell at 1.25 resting
on the EDGX Options Book, and a User submitted an AON order for 100 to
buy at 1.25, the incoming AON order would rest on the EDGX Options Book
at 1.25 (which locks the resting AON order). If an order to sell 100 at
1.25 was later submitted to EDGX Options, it would execute against the
resting AON order to buy at 1.25. This is the same result that would
occur on Cboe Options.
    Because the proposed Price Adjust process always applies to an AON
order, which provides that an AON order may rest at a price that locks
the price of an away options exchange, proposed Rule 21.9(a)(3)(B)
states that a User may not apply the Super Aggressive Re-Route
instruction. The Super Aggressive Re-Route instruction provides that if
an order resting on the EDGX Options Book

at a price that becomes subsequently locked or crossed by the price of
another options exchange, the System will route the order to that
exchange. This instruction conflicts with the proposed Price Adjust
process for an AON order, which may enter the EDGX Options Book at a
price that locks the price of another options exchange. A User may
apply the Aggressive Re-Route instruction pursuant to Rule
21.9(a)(3)(A), pursuant to which a resting AON order may be re-routed
if its price is subsequently crossed by another options exchange.
    Cboe Options does not have a process that corresponds to the
Exchange's Re-Route instructions. As a result, if an AON order were
resting on the Cboe Options Book, it will remain there, even if it is
resting at a price that subsequently becomes locked or crossed by
another options exchange. AON orders resting on the EDGX Options Book
that subsequently become locked by another options exchange will be
handled in the same manner as those AON orders would be handled by Cboe
Options--they will remain on the EDGX options Book and not route to an
away market. However, because the Exchange will make the Aggressive Re-
Route instruction available to AON orders (which Users may specify when
submitting AON orders), the proposed rule change will provide an AON
order submitted to the Exchange that includes an Aggressive Re-Route
instruction and rests at a price that subsequently becomes crossed by
another options exchange with additional routing (and thus execution)
opportunities not currently available to AON orders on Cboe Options.
    The proposed rule change provides that the Exchange will accept AON
orders for queuing prior to the completion of the Opening Process, but
AON orders will not participate in the Opening Process. Following
completion of the Opening Process, the System processes any queued AON
orders in accordance with Rule 21.8.\25\ In other words, it may execute
if possible or rest in the EDGX Options Book, subject to a User's
instructions (for example, the User may cancel the AON order). As set
forth in Rule 21.7(b), the System executes orders at the opening price,
in accordance with standard priority (as discussed below, AON orders
will have last priority at each price level). Given the size
contingency of an AON order and the last priority of AON orders, it
will not be known whether there will be sufficient size to execute AON
orders at the opening price until after the System executes all other
interest at the opening price. AON orders will be eligible for
execution once a series is open for trading.
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    \25\ See proposed Rule 21.7(a).
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    Currently on Cboe Options, AON orders may participate in the
opening process in classes in which it has activated the Hybrid Agency
Liaison (``HAL'') for openings.\26\ HAL is the Cboe Options equivalent
to the Exchange's Step Up Mechanism (``SUM''). EDGX does not activate
SUM for openings, making classes trading on EDGX similar to classes
trading on Cboe Options in which Cboe Options has not activated HAL for
openings. Therefore, the proposed rule change is consistent with the
Cboe Options rule.
---------------------------------------------------------------------------

    \26\ See Cboe Options Rule 6.2(c)(i)(B).
---------------------------------------------------------------------------

    Additionally, the opening process on Cboe Options is an auction and
thus significantly different than the Exchange's Opening Process, which
is a cross at a valid price as set forth in Rule 21.7. The Exchange
believes it is best for investors to open a series for trading as soon
as possible. As noted above, it will not be known whether there will be
sufficient size to execute AON orders at the opening price until after
the System executes all other interest at the opening price, since AON
orders will have last priority. The Exchange believes it is appropriate
to exclude AON orders from the Opening Process to ensure series can
open as fast as possible. Currently, once the Exchange determines the
Opening Price for a series (for example, the NBBO), it executes as much
interest as possible at that price and opens a series. If AONs were
eligible for execution during the Opening Process, after executing non-
AON interest, the System would then have to check to determine whether
there was sufficient size to execute against any AON orders. Rather
than delay the opening of a series to determine whether an execution of
AON orders can occur (and no execution may ultimately occur), the
Exchange believes it is appropriate to open the series and let all non-
executed orders (including AONs) be eligible for execution in an open
trading state. Execution of any AON orders whose size contingency can
be satisfied by any other interest on the Exchange would occur just
after the opening of the series, which is close to the time at which it
would have executed if the System waited to open the series and
executed these orders during the Opening Process. Therefore, the
Exchange believes not attempting to execute AON orders until after the
Opening Process would have a de minimis impact, if any, on the time of
execution of an AON order.
    Proposed Rule 21.8(m) sets forth the priority of AON orders. AON
orders will have last priority at each price level (including after
nondisplayed Reserve Quantity). The System allocates AON orders at the
same price based on the time the System receives them (i.e., in time
priority), except if the Exchange applies the Customer Overlay to a
class, Priority Customer AON orders have priority over non-Priority
Customer AON orders.\27\ An AON order must always be last in priority
to ensure there is sufficient size to satisfy the condition of that
order to trade in its entirety after all other orders at the same price
have executed. Additionally, the Exchange believes it is reasonable for
orders not displayed in the book to not receive priority over orders
that are displayed, as this encourages market participants to display
their best bids and offers, which may lead to enhanced liquidity and
tighter markets. This is consistent with the non-inclusion of AON
orders in the BBO or NBBO, as discussed above.
---------------------------------------------------------------------------

    \27\ This priority is the same as the priority of AON orders on
Cboe Options. See Cboe Options Rule 6.45(a)(v)(D). This priority is
also consistent with Cboe Options Rule 6.44, Interpretation and
Policy .01, which the Exchange is not explicitly adopting because it
is redundant with this proposed provision, because having last
priority means that AON orders will only trade if there is no other
interest at the same price. Cboe Options Rule 6.44 does not address
customer priority.
---------------------------------------------------------------------------

    The proposed rule change states that a transaction may occur at the
same price as an AON order resting on the EDGX Options Book without the
AON order participating in the transaction, and that a transaction may
occur at a price lower (higher) than an AON order bid (offer) resting
on the EDGX Options Book if the size of the transaction is less than
the size of the resting AON order. As discussed above, an AON order
will trade last at each price level. These proposed provisions ensure
execution of an AON order if there is sufficient size to satisfy the
AON order, while not preventing execution of orders that can execute
against other interest but cannot satisfy the AON order size
contingency.\28\
---------------------------------------------------------------------------

    \28\ These provisions are substantively the same as Cboe Options
Rule 6.44, Interpretation and Policy .02.
---------------------------------------------------------------------------

    Users may designate AON orders to be routable pursuant to Rule
21.9. Pursuant to proposed rule 21.9(a)(1), the System only routes an
AON order (as an FOK) designated as available for routing to options
exchanges with sufficient size to satisfy the AON order. Pursuant to
current Rule 21.9(a)(1), orders are routed as IOCs. Because a FOK order
is equivalent to an AON order designated as IOC, routing an AON as a
FOK is

consistent with the Exchange's current routing rule. Only routing an
AON order to an exchange with sufficient size to satisfy the AON order
ensures the System will only route an AON order at which it may receive
an execution.\29\
---------------------------------------------------------------------------

    \29\ If the size at the away options exchange was not available
when the AON order arrived at the away options exchange, it would
return to the Exchange and continue to be processed, as is the case
for any other order that routes to an away options exchange and is
unable to execute. While not specified in Cboe Options rules, the
Exchange understands this proposed change is the same as Cboe
Options functionality.
---------------------------------------------------------------------------

    An AON order may be exposed pursuant to the Exchange's Step Up
Mechanism (``SUM'') pursuant to Rule 21.18. An AON order will be
exposed and executed in the same manner as a non-AON order during SUM,
except as follows:
     Currently, any responses priced at the prevailing NBBO
\30\ or better, and any unrelated order (or quote) on the opposite side
of the market from the exposed order that could trade against the
exposed order at the prevailing NBBO or better, will immediately trade
against the exposed order, and the exposure period will continue.\31\ A
SUM exposure period will currently terminate upon the receipt of a
response (or unrelated order or quote) to trade the entire exposed
order at the NBBO or better.\32\ Because an AON order cannot partially
execute pursuant to its terms, the proposed rule change provides that
during the exposure of an AON order, the System will hold responses
priced at or better than the prevailing NBBO (rather than trade against
the exposed AON immediately) until there is sufficient aggregate size
to satisfy the AON order, and that a SUM exposure period will terminate
upon the receipt of multiple responses with sufficient aggregate size
to satisfy the AON order.\33\ The proposed rule change also states that
if the exposed order is an AON order, the exposure period will
terminate upon the receipt of multiple responses and unrelated orders
in quotes with sufficient aggregate size to satisfy the exposed AON
order.\34\ This is consistent with size contingency of an AON order and
will provide an AON order with opportunities to have its size
contingency met during an exposure period, while ensuring the entire
AON order will trade at a price equal to or better than the NBBO.
---------------------------------------------------------------------------

    \30\ References to the ``prevailing NBBO'' mean the NBBO at the
time of any execution.
    \31\ See Rule 21.18(c)(1) and (2).
    \32\ See Rule 21.18(d).
    \33\ See proposed Rule 21.18(c)(1) and (d).
    \34\ While not specified in Cboe Options rules, the Exchange
understands this proposed change is the same as Cboe Options
functionality.
---------------------------------------------------------------------------

     Currently, as noted above, if the Exchange receives an
unrelated order or quote that could trade against the exposed order at
the prevailing NBBO price or better, that order executes against the
exposed order, and the exposure period continues. The proposed rule
change states if an AON order is exposed and the Exchange receives an
unrelated order (or quote) that would be displayed at a price at or
better than the NBBO with insufficient size to satisfy the exposed
order, the SUM exposure period terminates and the exposed order is
processed pursuant to Rule 21.18(c) (it either executes, routes, or
enters the EDGX Options Book, subject to a User's instructions).\35\ If
an AON order is exposed and the Exchange receives an unrelated AON
order with a price at or better than the NBBO with insufficient size to
satisfy the exposed order the exposure period will continue.\36\ This
is consistent with current SUM functionality, pursuant to which the
exposed price of an order will not lock the Exchange's opposite side
BBO if the BBO is not at the NBBO. Because a SUM would not have begun
if the Exchange displayed a contra-side order at the NBBO, the Exchange
believes it is appropriate to terminate the exposure period if that
situation arises during the exposure period. Unlike when non-AON orders
are exposed, an unrelated order (if it is smaller than the exposed AON
order) will not execute against the exposed order, and thus would enter
the EDGX Options Book. For example, suppose the NBBO is 1.00 x 1.20 and
the EDGX Options BBO is 1.00 x 1.25, and an AON order to buy 10 at 1.20
is exposed at 1.20 pursuant to SUM. During the exposure period, the
Exchange receives an order to sell 5 at 1.20. The incoming order cannot
satisfy the size of the exposed AON order, so it would enter the EDGX
Options Book and would cause the EDGX Options BBO to become 1.00 x
1.20. Therefore, upon receipt of that order, the exposure period
terminates and the exposed AON order will be process pursuant to Rule
21.18(c) (as further discussed below, it will be routed or will enter
the EDGX Options Book, subject to a User's instructions). In this case,
if there is insufficient size at the away markets to execute the AON
order at 1.20 (and assuming the AON order is eligible for routing), the
AON order will enter the EDGX Options Book and rest at a bid of 1.15
(pursuant to the Price Adjust process described above, an AON order
will be ranked at one minimum price variation (in this case, 0.05)
below the opposite side BBO).
---------------------------------------------------------------------------

    \35\ See proposed Rule 21.18(d)(3). While not explicitly stated
in Rule 21.18(c), pursuant to Rule 21.9(a)(1), any order that does
not execute in full after routing away may be posted (the unfilled
balance) to the EDGX Options Book.
    \36\ This is because the incoming AON order would not be
displayed at a price at or better than the NBBO.
---------------------------------------------------------------------------

    Except as noted above, an exposed AON order will be processed in
the same manner as any other order exposed through a SUM auction. If at
the end of the exposure period there is sufficient size to satisfy the
AON order, it will execute. If there is insufficient size, then the
Exchange would route the AON order if there was sufficient size at an
away market to satisfy the AON order (unless otherwise instructed by
the User), as it would any remaining portion of any other exposed order
(in the case of an AON order, the entire size would be remaining).\37\
Like any AON order that routes to another options exchange, if there is
sufficient size at the away market to satisfy the AON order once the
AON reaches that market, the AON will execute. If there is no longer
sufficient size when routed, the AON will return and rest on the EDGX
Options Book. Similarly, if an AON order is not eligible to route, it
will enter the EDGX Options Book (subject to the User's instructions).
---------------------------------------------------------------------------

    \37\ See Rule 21.18(c)(4) and (5).
---------------------------------------------------------------------------

    The proposed reason to terminate the exposure period for an AON
order early similarly will cause an exposure period to end, because if
an order on the opposite side of the exposed order were displayed on
the EDGX Options Book prior to the exposure period, the AON order would
not have been exposed. For example, if the BBO and the NBBO was 1.00 x
1.20, and there was a non-AON order for 5 contracts resting at the 1.20
offer, an incoming AON order to buy 10 at 1.20 would not be exposed
pursuant to SUM, because neither of the conditions in Rule 21.18(a)
would be present). In this case, the AON order would enter the EDGX
Options Book at a price of 1.15 (pursuant to the Price Adjust process
as proposed above). Similar to the current reasons that would cause an
exposure period to terminate early (see current Rule 21.18(d)), the
proposed early termination provision will prevent an exposure period
from continuing while conditions exist that would have prevented an
exposure period from beginning if those conditions existed prior to the
exposure period.
    The proposed rule change amends Rule 21.19(e) to provide that AON
orders will have last priority at price levels better than the stop
price following the conclusion of an

Automated Improvement Mechanism (``AIM'') auction if there is
sufficient size to satisfy the size of the AON order (with Priority
Customer AON order trading ahead of non-Priority Customer AON orders).
AON orders resting at the stop price will not trade against the Agency
Order, even if the Initiating Member of an AIM auction selects last
priority.\38\ As discussed above, AON orders will have last priority at
each price level. The Exchange notes there would be significant
technical complexities associated with reprogramming priority within
the System to provide AON orders with second to last priority in a
specific (and likely uncommon situation), as would be required to
permit AON orders to execute at the stop price, even if the Initiating
Member selects last priority. The Exchange believes it would be rare
for there to be a resting AON order at the stop price of an AIM Auction
that could be satisfied by the remaining contracts of an Agency Order
at that stop price, and thus the Exchange believes the proposed rule
change will have a de minimis impact, if any, on the execution
opportunities for resting AON orders.
---------------------------------------------------------------------------

    \38\ See Rule 21.19(e)(1) and (5). The proposed rule change
amends Rule 21.19(e)(1), which sets forth the priority of resting
orders at the stop price, to state that AON orders will be excluded
when the Agency Order executes against contra-side interest (after
Priority Customer Orders, the specified percentage of the Initiating
Order, and Priority Orders). Therefore, AON orders at the stop price
will not execute at the stop price in any situation. While not
specified in Cboe Options rules, the Exchange understands this
proposed change is the same as Cboe Options functionality.
---------------------------------------------------------------------------

    The proposed rule change also provides that the System will exclude
the size of any AON orders when determining the number of contracts the
Initiating Order will execute against at each price level better than
the stop price when the Initiating Member selects auto-match.\39\ Due
to the size contingency of an AON order, the System cannot determine
whether there will be sufficient contracts remaining in the Agency
Order to execute against any AON order at a price level until after
execution of the applicable number of contracts against the Initiating
Order and other contra-side interest. However, after those auto-match
executions at that price level, the System will execute the Agency
Order against any AON orders at that price level for which the size can
be satisfied by the remaining contracts in the Agency Order.\40\
---------------------------------------------------------------------------

    \39\ See proposed Rule 21.19(e)(3). While not specified in Cboe
Options rules, the Exchange understands this proposed change is the
same as Cboe Options functionality.
    \40\ See proposed Rule 21.19(e)(3). After executions at price
levels better than the stop price, including against AON orders for
which the size can be satisfied at those price levels, if there are
remaining contracts from the Agency Order at the stop price, those
contracts will execute against contra-side interest as set forth in
subparagraph (e)(1). While not specified in Cboe Options rules, the
Exchange understands this proposed change is the same as Cboe
Options functionality.
---------------------------------------------------------------------------

    The Exchange proposes to make the AON instruction available for
complex orders.\41\ An AON complex order is a complex order that (like
an AON simple order) is to be executed in its entirety or not at
all.\42\ An AON complex order may only execute following a complex
order auction (``COA''),\43\ and will not be eligible to rest in the
complex order book (``COB'').\44\ An incoming AON complex order will
initiate a COA. If a Member marks an AON complex order to not initiate
a COA (i.e., as a do-no-COA order), or an AON complex order does not
satisfy the COA eligibility criteria in Rule 21.20(d)(1), the System
cancels the AON complex order.\45\ The Exchange believes that, like AON
simple orders, AON complex orders that would rest on the COB would have
last priority, and would have even fewer execution opportunities
because they would not be able to execute at the same price as resting
interest until after both simple and complex order interest executed.
Therefore, an AON complex order resting on the COB would have minimal
execution opportunities given its size contingency. The Exchange
believes there would be little value, in terms of executing
opportunities, in permitting AON complex orders to rest in the COB.
---------------------------------------------------------------------------

    \41\ See Cboe Options Rule 6.53C(b); see also Phlx Rule
1098(b)(v); and ISE Rule 722(b)(3). The proposed rule change amends
Rule 21.20(b) to change references to the term ``User'' to
``Member'' to be consistent with the remainder of Rule 21.20, which
only uses the term ``Member.''
    \42\ See proposed Rule 21.20(b)(6).
    \43\ See Rule 21.20(d).
    \44\ While not specified in Cboe Options rules, the Exchange
understands AON complex orders on Cboe Options may only initiate a
COA and will be cancelled if not executed following a COA (and thus
are not eligible to rest in the Cboe Options COB). This is set forth
in Cboe Options Regulatory Circular RG17-042 (March 24, 2017),
available at https://www.cboe.com/publish/RegCir/RG17-042.pdf. Other
options exchanges require AON complex orders to be IOC, and thus
similarly do not permit AON complex orders to rest in a complex
order book. It is not clear from their rules whether such orders may
enter a complex order auction on those exchanges. See, e.g., ISE
Rule 722(b)(3).
    \45\ See proposed Rule 21.20(b)(2) and (d)(1).
---------------------------------------------------------------------------

    At the conclusion of a COA of an AON complex order, the AON complex
order may only execute against COA responses and unrelated complex
orders on the COB in price-time priority if there is sufficient size to
satisfy the AON complex order. If there is insufficient size to satisfy
the AON complex order at the conclusion of the COA, the System cancels
the order.\46\ AON complex orders may not Leg into the Simple Book to
execute against individual orders in the legs because of the manner in
which complex orders on EDGX execute following a COA.\47\ Pursuant to
current EDGX Rules for execution following a COA, a complex order will
be allocated first in price priority and then at the same price to
Priority Customer orders resting on the Simple Book, COA responses and
unrelated complex orders on the COB in time priority, and remaining
individual orders in the Simple Book (i.e., non-Priority Customer),
which will be allocated pursuant to Rule 21.8.\48\
---------------------------------------------------------------------------

    \46\ See proposed Rule 21.20(d)(7). Currently, after a COA, a
complex order will execute first against Priority Customer orders
resting on the Simple Book, then against COA responses and unrelated
orders on the COB, and finally against remaining individual orders
in the Simple Book. See Rule 21.20(d)(7).
    \47\ See proposed Rule 21.20(c)(2)(F) and (d)(7).
    \48\ See Rule 21.20(d)(7).
---------------------------------------------------------------------------

    The Simple Book and the COB are separate, and orders on each do not
interact unless a complex order Legs into the Simple Book. As a result,
the System is not able to calculate the aggregate size of COA responses
and complex orders on the COB and the size of simple orders in the legs
that comprise the complex strategy at each potential execution price
(as executions may occur at multiple prices) prior to execution of an
order following a COA. Following a COA, the System first looks to
determine whether there are Priority Customer orders resting in the
Simple Book at the final auction price (and in the applicable ratio).
If there are, the System executes the complex order against those
simple orders. Following that execution, the System then looks back at
the COA responses and complex orders resting in the COB to determine
whether there is interest against which the order can execute. If there
is, the System executes the remaining portion of the complex order
against that complex contra-side interest. Finally, if there is any
size left, the System looks back at the Simple Book to determine
whether any orders in the legs are able to trade against any remaining
contracts in the complex order. If there is, the System executes the
remaining portion of the complex order again against orders in the
Simple Book. Because of this process, prior to execution against any
Priority Customer orders, the System would not know whether there is
sufficient aggregate interest in both the Simple book and COB to
satisfy the entire size of the AON. Additionally, it is possible for a
complex order to execute at multiple price levels. This

process would have to occur at each price level. Therefore, if the
Exchange were to permit Legging of AON complex orders into the Simple
Book, it would be possible for a partial execution to occur, which is
inconsistent with the AON instruction. The Exchange notes there would
be significant technical complexities associated with reprogramming
priority within the System to permit AON complex orders to Leg into the
Simple Book and provide AON orders with priority consistent with these
standard priority principles. Only permitting an AON complex order to
execute against COA responses and complex orders in the COB ensures the
size contingency of the AON complex order can be satisfied.\49\
---------------------------------------------------------------------------

    \49\ Cboe Options does not restrict AON orders from legging into
its simple book. The priority on Cboe Options differs from the
priority on EDGX Options (on Cboe Options, all orders on the simple
book have priority over the complex book). However, another options
exchange restricts AON orders from legging into the simple book
during the complex order opening process, from the complex order
book, and following a complex order price improvement auction
(similar to COA). See, e.g., Phlx Rule 1098(d)(ii)(C)(2),
(e)(vi)(A), (e)(viii)(C)(3), and (f)(iii)(A). Phlx also only permits
non-broker-dealer customers to submit AON complex orders. See Phlx
Rule 1098(b)(v).
---------------------------------------------------------------------------

    To ensure protection of orders on the Simple Book given this
restriction on Legging, an AON complex order may only execute following
a COA if it improves the then-current (i.e., existing at the conclusion
of the COA) synthetic Exchange best bid or offer (``SBBO'').\50\ If
there is insufficient size among COA responses and unrelated complex
orders to satisfy the AON complex order following a COA, the System
cancels the order.\51\
---------------------------------------------------------------------------

    \50\ See proposed Rule 21.20(c)(2)(E) and (d)(6).
    \51\ See proposed Rule 21.20(d)(7).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\52\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \53\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \54\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78f(b).
    \53\ 15 U.S.C. 78f(b)(5).
    \54\ Id.
---------------------------------------------------------------------------

    In particular, the proposed rule change protects investors because
it provides them with an additional order instruction that may be
applied to both simple and complex orders. This provides investors with
additional flexibility and more control over their executions of both
simple and complex orders on the Exchange. The proposed rule change
also benefits investors by providing transparency regarding how the
System will handle and execute AON orders, which handling and execution
are consistent with the size contingency of AON orders. As noted above
and below, the proposed definition and several other portions of the
proposed rules are based on rules and current functionality of Cboe
Options.\55\
---------------------------------------------------------------------------

    \55\ See Cboe Options Rules 6.53(i) and 6.44, Interpretations
.02 and .03; see also ISE Rule 715(c); and NOM Chapter VI, section
1(e)(10).
---------------------------------------------------------------------------

    The Exchange believes not permitting Users to apply the Post Only
instruction to AON orders will protect investors, because it will
maximize execution opportunities for AON orders. An AON order's size
contingency, and the fact that AON orders will have last priority while
resting in the EDGX Options Book, will provide AON orders resting on
the EDGX Options Book with few opportunities for AON orders to receive
an execution. For this reason, the Exchange believes there will be
minimal investor demand for Post Only AON orders. This ensures that an
AON order may execute upon entry if there is sufficient size resting on
the EDGX Options Book. Additionally, as noted above, other exchanges do
not permit AON orders to rest in the book at all (as they are required
to be IOC).\56\ Unlike those exchanges, the Exchange will permit AON
orders to rest in the EDGX Options Book, and will merely not permit AON
orders to only rest in the book. Cboe Options does not offer a Post
Only instruction, and therefore, an AON order submitted to EDGX Options
will be handled in the same manner as it would be handled on Cboe
Options, as such an order would execute upon entry (if possible), route
(if eligible), or enter the EDGX Options Book (subject to any User
instructions).
---------------------------------------------------------------------------

    \56\ See, e.g., ISE Rule 715(c); NOM Chapter VI, section
1(e)(10); and Phlx Rule 1066(c)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to offer use of the
MCN Modifier (and not the other MTP Modifiers) for AON orders protects
investors, because it provides all investors with the option to apply
match-trade prevention functionality to AON orders. The Exchange
believes there will be little demand for the use of any MTP Modifiers
on AON orders given that primarily retail investors submit AONs, and
retail investors are unlikely to have interest on both sides of the
market. Given this expected minimal demand, the Exchange believes
offering one MTP Modifier for AON orders is sufficient. Additionally,
the Exchange believes that MCN is the most appropriate MTP modifier for
AON orders because an offering of other MTP modifier for investors
would present significant technical complexities given the size
contingency of AON orders and that MCN is the simplest modifier to
implement from a System perspective.\57\ The proposed rules provide
investors with sufficient transparency regarding how the System will
handle AON orders with MTP Modifiers, and Users may achieve other
results manually if so desired. For example, if a User were to prefer
to have a resting order with an MTP Modifier cancel and let the newer
AON order rest, it could manually cancel the resting order and then
resubmit the AON order. The Exchange has determined to handle an AON
order with any other MTP Modifier as an MCN rather than cancel the AON,
and the Exchange believes the proposed rules will protect investors
because they provide investors with sufficient transparency regarding
how the System will handle AON orders with MTP Modifiers. Additionally,
Users may achieve other results manually if so desired.
---------------------------------------------------------------------------

    \57\ Additionally, the Decrement and Cancel MTP Modifier is
inconsistent with an AON order, because it may result in partial
execution of an order.
---------------------------------------------------------------------------

    Cboe Options offers match trade prevention only for market-makers,
and thus the Cboe Options rules regarding AON orders contains no
restrictions on the use of match trade prevention instructions, as it
would only be available to market-makers that submit AON orders.
Because the Exchange has match-trade prevention functionality available
for all Users and not just Market-Makers, the Exchange believes it is
appropriate to provide this functionality to all Users that submit AON
orders and want match trade prevention functionality. The Exchange

believes offering one MTP Modifier is sufficient given that non-market-
makers on Cboe Options currently have no match-trade prevention
functionality available for AON orders.
    The Exchange believes the proposed Price Adjust process with
respect to AON orders will protect investors, because it will rest an
AON order on the EDGX Options Book at an executable price (i.e., a
price that locks or is one minimum price variation away from the new
Protected Quotation or AON resting on the EDGX Options Book at or
better than the Exchange's BBO) while preventing trade-throughs as the
market changes and protecting non-AON orders resting on the opposite
side of the EDGX Options Book. The proposed process will generally re-
price the incoming (and thus later arriving order), which is consistent
with the current Price Adjust process. However, the proposed rule
change will reprice a resting AON order rather than an incoming non-AON
order, because AON orders have last priority (as discussed below) and
are not displayed, and thus should not cause the price of a non-AON
order to reprice. Repricing an AON order one minimum price variation
away from the price of a resting non-AON order is consistent with the
repricing that applies to non-AON orders that lock or cross the
opposite side NBBO.
    The Exchange believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with linkage rules.
AON orders will not be part of the EDGX BBO, and repricing an AON order
to lock the Protected Quotation of an away market or a resting (and
nondisplayed) AON order on the EDGX Options Book at a price at or
better than the Exchange's BBO will, therefore, not result in a
displayed locked market in accordance with linkage rules.\58\ The
Exchange believes the proposed rule change is a reasonable application
of the current Price Adjust process to avoid displaying a locked or
crossed market and to prevent trade-throughs while making AON orders
resting on the EDGX Options Book available for execution at executable
prices (i.e., a price that locks (but not crosses) a Protected
Quotation of another options exchange or another AON resting on the
EDGX Options Book, but not a price that locks or crosses a Protected
Quotation on the EDGX Options Book. The proposed process will generally
re-price the incoming (and thus later arriving order), which is
consistent with the current Price Adjust process. However, the proposed
rule change will reprice a resting AON order rather than an incoming
non-AON order, because AON orders have last priority (as discussed
above) and are not displayed or protected, and thus should not cause
the price of an incoming non-AON order to reprice.
---------------------------------------------------------------------------

    \58\ See Rule 27.3(a).
---------------------------------------------------------------------------

    Cboe Options does not have functionality that corresponds to the
Price Adjust process. Therefore, an AON order that enters the Cboe
Options book may rest at a price that locks or crosses the Cboe Options
market or an away market (and thus, it is not novel or unique to permit
an AON order to rest at a price that locks or crosses the Exchange's
market or an away market, as the proposed rule change permits). As
demonstrated above, even though the proposed rule change does not
permit an AON order to rest at a price that crosses an away market or
an AON order on the EDGX Options Book, or that locks or crosses a
Protected Quotation on the EDGX Options Book, the Price Adjust process
as proposed will ultimately create the same potential execution for an
AON order resting on the EDGX Options Book that would otherwise occur
for an AON order resting on the Cboe Options Book, and in some cases
may result in price improvement for an AON.
    Additionally, while the current Price Adjust process does not
permit an incoming order to rest at a price that locks a Protected
Quotation on the Exchange or an away options exchange, the display-
price sliding process on BZX Options does permit an incoming order to
be ranked and eligible for execution at a locking price.\59\ Pursuant
to the BZX display-price sliding process, an order that, at the time of
entry, would lock or cross a Protected Quotation of another options
exchange will be ranked at the locking price in the BZX Options Book
and displayed by the System at one minimum price variation below [sic]
the current opposite-side NBBO. While an AON order, as proposed, will
not be displayed at any price on the Exchange (as an AON order is never
displayed), it will be ranked at a price that locks a Protected
Quotation of an away market (and a resting AON order on the Exchange).
---------------------------------------------------------------------------

    \59\ See BZX Options Rule 21.1(h).
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    Recently, NYSE Arca, Inc. (``Arca'') adopted order types called the
Repricing Liquidity Adding Order (``RALO'') and the Repricing Post No
Preference Order (``RPNP'').\60\ While these are different order types
than an AON, pursuant to the repricing process, if either of these
orders would not be able to trade upon entry (for example, because the
RALO would take liquidity or display at a price that locks or crosses
any interest on the Exchange or the NBBO), it would be displayed at one
minimum price variation below (above) such sell (buy) interest.
However, it would have an undisplayed price at which it is eligible to
trade. The displayed and nondisplayed prices would move as the market
moves. Like these order types, an AON order will rest at an undisplayed
price (which price will move as the market moves) at which it is
eligible for execution (in accordance with linkage rules). However, an
AON order will not have a displayed price, as it is never displayed
(unlike an RALO or RPNP).
---------------------------------------------------------------------------

    \60\ See Securities Exchange Act Release No. 84737 (December 6,
2018), 83 FR 63919 (December 12, 2018) (SR-NYSEArca-2018-74) (order
approving the proposed order types).
---------------------------------------------------------------------------

    Therefore, it is not novel or unique to permit an order to be
ranked at an undisplayed price on an exchange at a price that locks the
best-priced quote of that exchange or an away exchange, at which price
it is eligible for execution, and which price may be adjusted in
response to changes in the market.
    The proposed rule change to only route an AON order as a FOK to
options exchanges with sufficient size to satisfy the AON order will
remove impediments to and perfect the mechanism of a free and open
market and a national market system, because it is consistent with
linkage rules and current Cboe Options functionality.
    The proposed rule change to not permit use of the Super Aggressive
Re-Route instruction to AON orders is consistent with the proposed
Price Adjust process, which provides that an AON order may rest at a
price that locks the price of an away options exchange. This proposed
change will remove impediments to and perfect the mechanism of a free
and open market and a national market system, because it is consistent
with linkage rules. The Super Aggressive Re-Route instruction provides
that an order on the EDGX Options Book that subsequently locks or
crosses the price of another options exchange, the System will route
the order to that exchange to an AON order. This instruction conflicts
with the proposed Price Adjust process for an AON order, which may
enter the EDGX Options Book at a price that locks the price of another
options exchange, which price is executable if subsequent contra-side
interest is submitted to the Exchange.

    The proposed rule change will further remove impediments to and
perfect the mechanism of a free and open market and a national market
system, because it will handle resting AON orders that become
subsequently locked by an away market in the same manner as Cboe
Options handles resting AON orders that become subsequently locked by
an away market. In both cases, AON orders will remain on the local
respective book. However, the proposed rule change will benefit
investors, because it provides a resting AON order that becomes
subsequently crossed by an away market with an opportunity (if a User
designated the order with the Aggressive Re-Route instruction) to route
to the away market for execution. This execution opportunity is not
currently available on Cboe Options, and thus a similar AON order would
remain on the Cboe Options book.
    The proposed rule change to exclude AON orders from participating
in the Exchange's opening process will protect investors and promote
just and equitable principles of trade, because it will provide for the
opening of a series for trading as soon as possible and not delay the
opening of a series to attempt to execute AON orders (which ultimately
may not be able to execute). The Exchange believes not attempting to
execute AON orders until after the Opening Process would have a de
minimis impact, if any, on the time of execution of an AON order that
is able to execute at the opening. The proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because excluding AON orders from
participating during the Opening Process is equivalent to Cboe Options
excluding AON orders from participating in its opening process in
classes in which it has not activated HAL, because the Exchange has not
activated SUM during the Opening Process.\61\
---------------------------------------------------------------------------

    \61\ See Cboe Options Rule 6.2(c)(1)(B). Additionally, Cboe
Options' opening process is an auction and thus significantly
different than the Exchange's Opening Process, which is a cross at a
valid price as set forth in Rule 21.7.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change regarding the
priority and allocation of AON orders promotes just and equitable
principles of trade, as it is reasonable for orders not displayed in
the book to not receive priority over orders that are displayed, as
this encourages market participants to display their best bids and
offers, which may lead to enhanced liquidity and tighter markets. The
Exchange believes an AON order must always be last in priority at each
price level to ensure there is sufficient size to satisfy the condition
of that order to trade in its entirety after all other orders at the
same price have executed. The proposed priority for AON orders will
remove impediments to and perfect the mechanism of a free and open
market and national market system, because it is the same as the
priority of AON orders on Cboe Options.\62\
---------------------------------------------------------------------------

    \62\ See Cboe Options Rules 6.44, Interpretation and Policy .01
and 6.45(a)(v)(D); see also Cboe Options Rule 6.44, Interpretation
and Policy .02.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change regarding the
handling of AON orders exposed pursuant to SUM will protect investor,
because it will provide AON orders with execution opportunities when
the Exchange is not at the NBBO in a manner consistent with the current
SUM process. The proposed rule change modifies the SUM process only to
address an AON order's size contingency. The proposed rule change that
the exposure period for an AON order will terminate when there is
sufficient aggregate contra-side interest to satisfy the exposed AON
order is consistent with the current SUM process, except it will not
execute any incoming contra-side interest immediately against the
exposed AON order, unless it has sufficient size (as occurs for an
exposed non-AON order). This will prevent a partial execution in
conflict with the AON size contingency. This proposed rule change is
also the same as current Cboe Options HAL functionality. The proposed
rule change regarding an early termination of the exposure period of an
AON order is consistent with current reasons that will cause an
exposure period to terminate, as it will prevent an exposure period
from continuing while conditions exist that would have prevented an
exposure period from beginning if those conditions existed prior to the
exposure period. Except for these two proposed changes, an exposed AON
order will be processed in the same manner as any other order exposed
through SUM. The proposed rule change will remove impediments to and
perfect the mechanism of free and open market and a national market
system, because it ensures the entire AON order will trade at a price
equal to or better than the NBBO in accordance with linkage rules.
    The proposed allocation of AON orders following an AIM auction will
protect investors, because it will provide Priority Customers and other
displayed interest with priority over non-displayed orders and is
consistent with the proposed general priority of AON orders described
above. As noted above, the Exchange believes this encourages market
participants to display their best bids and offers, which may lead to
enhanced liquidity and tighter markets. While AON orders will not be
eligible for execution at the stop price, the Exchange believes it
would be rare for there to be a resting AON order at the stop price of
an AIM Auction that could be satisfied by the remaining contracts of an
Agency Order at that stop price. The Exchange notes there would be
significant technical complexities associated with reprogramming
priority within the System to provide AON orders with second to last
priority in a specific (and likely uncommon situation), as would be
required to permit AON orders to execute at the stop price, even if the
Initiating Member selects last priority. The Exchange believes the
proposed rule change will have a de minimis impact, if any, on the
execution opportunities for resting AON orders. Similarly, due to the
size contingency of an AON order, the System cannot determine whether
there will be sufficient contracts remaining in the Agency Order to
execute against any AON order at a price level until after execution of
the applicable number of contracts against the Initiating Order and
other contra-side interest. However, AON orders at each price level
better than the stop price for which the size can be satisfied by the
remaining contracts in the Agency Order will execute. The Exchange also
believes the proposed rule change will remove impediments to and
perfect the mechanism of a free and open market and a national market
system, because it is the same as the allocation of AON orders
following an AIM auction on Cboe Options.
    The proposed rule change to require AON complex orders to COA and
not permit them to rest in the COB or Leg into the Simple Book will
protect investors, because it will provide AON complex orders with
opportunities for execution and continue to protect orders on the
Simple Book. As the Exchange noted above, there would be significant
technical complexities associated with reprogramming priority within
the System to permit AON complex orders to Leg into the Simple Book and
provide AON orders with priority consistent with the standard priority
principles described above. The Exchange notes that other options
exchange do not permit AON complex orders to rest in the complex order
book \63\ or to leg into

the simple book.\64\ In addition, as described above, the proposed rule
change protects resting Leg market interest because AON complex orders
may not execute unless they improve the SBBO at the conclusion of a
COA.
---------------------------------------------------------------------------

    \63\ See, e.g., ISE Rule 722(b)(3) (which requires AON complex
orders to be submitted as IOC orders). While not specified in Cboe
Options rules, the Exchange understands this proposed change is the
same as Cboe Options functionality.
    \64\ See, e.g., Phlx Rule 1098(e)(vi)(A).
---------------------------------------------------------------------------

    As noted above, the proposed rule change will remove impediments to
and perfect the mechanism of free and open market and a national market
system, because other options exchanges offer similar
functionality.\65\ Additionally, as discussed above, the proposed rule
change will benefit investors, because it provides additional detail on
which the rules of other exchanges are silent, such as detail regarding
routing and handling during auctions. The Exchange believes the
proposed application of Exchange functionality to AON orders (some of
which is not available on other exchanges) is consistent with current
Exchange functionality. Additionally, any differences with respect to
how that functionality will apply to AON orders have been proposed only
due to the size contingency of an AON order and the fact that an AON
order is not displayed. The Exchange believes that the proposed rule
change will provide Users with transparency regarding how the System
will handle their AON orders.
---------------------------------------------------------------------------

    \65\ See, e.g., Cboe Options Rule 6.53(i); ISE Rule 715(c); PHLX
Rule 1066(c)(4); NOM Chapter VI, Section 1(e)(10); and Arca Rule
6.62-O(d)(4) (AON simple orders); see also Cboe Options Rule
6.53C(b); Phlx Rule 1098(b)(v); and ISE Rule 722(b)(3) (AON complex
orders).
---------------------------------------------------------------------------

    The proposed rule change will protect investors, because it will
provide Users with additional flexibility to manage their orders on the
Exchange, as well as increased functionality on the Exchange. This may
encourage market participants to bring additional liquidity to the
market, which benefits all investors. Additionally, this will provide
Users with greater harmonization between the order handling
instructions available among the Cboe Affiliated Exchanges. The
proposed rule change is generally intended to align system
functionality currently offered by the Exchange with Cboe Options
functionality in order to provide a consistent technology offering for
the Cboe Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes, and
maintenance by Users of the Exchange that are also participants on Cboe
Affiliated Exchanges. The proposed rule change would also provide Users
with access to functionality that is generally available on options
exchanges other than the Cboe Affiliated Exchanges,\66\ which will
provide Users with additional flexibility and increased functionality
on the Exchange's System.
---------------------------------------------------------------------------

    \66\ Id.
---------------------------------------------------------------------------

    When Cboe Options migrates to the same technology as that of the
Exchange and other Cboe Affiliated Exchanges, Users of the Exchange and
other Cboe Affiliated Exchanges will have access to similar
functionality on all Cboe Affiliated Exchanges. As such, the proposed
rule change would foster cooperation and coordination with persons
engaged in facilitating transactions in securities and would remove
impediments to and perfect the mechanism of a free and open market and
a national market system.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change
will not impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act,
because use of the AON order instruction on simple and complex orders
will be optional and available to all Users. All Users may determine
whether to apply an AON order instruction to the simple or complex
orders they submit to the Exchange. The System will handle all AON
orders submitted to the Exchange in the same manner in accordance with
the proposed rule change. The Exchange believes the proposed priority
and allocation of AON orders is reasonable, as it is consistent with
current allocation principles that provide for displayed interest to
trade ahead of nondisplayed interest, and ensures an AON order will
only execute if there is sufficient size to satisfy its size
contingency.
    Additionally, the proposed rule change will not impose any burden
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, because other options exchanges
offer similar functionality, as discussed above.\67\ The Exchange
believes this proposed rule change is necessary to permit fair
competition among the options exchanges. Additionally, the Exchange
believes the proposed application of Exchange functionality (such as
MTP Modifiers, SUM, routing instructions, and AIM) to AON orders is
consistent with current Exchange functionality and modified such
functionality only to account for the size contingency of an AON order
and the fact that an AON order is not displayed, and believes that the
proposed rule change will provide Users with additional transparency
regarding how the System will handle their AON orders. The Exchange
believes that the proposed rule change will relieve any burden on, or
otherwise promote, competition, because it will permit the Exchange to
offer Users similar functionality that is current available to market
participants on other options exchanges.
---------------------------------------------------------------------------

    \67\ See, e.g., Cboe Options Rule 6.53(i); ISE Rule 715(c); PHLX
Rule 1066(c)(4); NOM Chapter VI, Section 1(e)(10); and Arca Rule
6.62-O(d)(4) (AON simple orders); see also Cboe Options Rule
6.53C(b), Phlx Rule 1098(b)(v), and ISE Rule 722(b)(3) (AON complex
orders).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \68\ and
Rule 19b-4(f)(6) \69\ thereunder.\70\
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 78s(b)(3)(A).
    \69\ 17 CFR 240.19b-4(f)(6).
    \70\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-CboeEDGX-2019-017 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeEDGX-2019-017. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGX-2019-017 and should be
submitted on or before May 8, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\71\
---------------------------------------------------------------------------

    \71\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07616 Filed 4-16-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: June 6, 2006 (Volume 71, Number 108)]
[Notices]
[Page 32531]
[DOCID:fr06jn06-49]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM06-16-000]

Mandatory Reliability Standards for the Bulk-Power System; Notice
of Technical Conference

May 31, 2006.
    On May 11, 2006, the Commission released a Staff Assessment of the
North American Electric Reliability Council's (NERC) current
reliability standards. The Staff Assessment is a preliminary evaluation
intended to assist in developing the public record in anticipation of
Commission action on NERC's April 4, 2006 petition for approval of
reliability standards.
    Take notice that the Federal Energy Regulatory Commission will hold
a Technical Conference to consider NERC's April 4, 2006 petition and to
address issues raised in the Staff Assessment. This Technical
Conference will be held on July 6, 2006, in the offices of the
Commission, 888 First Street, NE., Washington, DC, from approximately 9
a.m. until approximately 4 p.m. (EST). This conference will be held in
the Commission Meeting Room on the second floor of the Commission. All
interested persons may attend, and registration is not required. This
will be a staff conference, but Commissioners may attend.
    Transcripts of the conference will be immediately available from
Ace Reporting Company<PHONE_NUMBER> or 1-800-336-6646) for a fee. They
will be available for the public on the Commission's eLibrary system
and the calendar posting for this event seven calendar days after the
Commission receives the transcript.
    A free webcast of this event is available through http://www.ferc.gov.
 Anyone with Internet access who desires to view this

event can do so by navigating to http://www.ferc.gov's Calendar of

Events and locating this event in the Calendar. The event will contain
a link to its webcast. The Capitol Connection provides technical
support for the webcasts; and offers access to the open meetings via
television in the DC area and via phone bridge for a fee. If you have
any questions, visit http://www.CapitolConnection.org or contact

Danelle Perkowski or David Reininger at<PHONE_NUMBER>.
    Commission conferences are accessible under section 508 of the
Rehabilitation Act of 1973. For accessibility accommodations please
send an e-mail to<EMAIL_ADDRESS>or call toll free<PHONE_NUMBER>
(voice) or<PHONE_NUMBER> (TTY), or send a FAX to<PHONE_NUMBER> with the
required accommodations.
    For more information about the conference, please contact Sarah
McKinley at<PHONE_NUMBER> (sarah.mckinley@ferc.gov).

Magalie R. Salas,
Secretary.
[FR Doc. E6-8744 Filed 6-5-06; 8:45 am]

BILLING CODE 6717-01-P