[Federal Register Volume 83, Number 95 (Wednesday, May 16, 2018)]
[Notices]
[Pages 22796-22829]
[FR Doc No: 2018-10417]

Vol. 83

Wednesday,

No. 95

May 16, 2018

Part III

Securities and Exchange Commission

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Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Rules in
Connection With the Migration of Cboe C2 to Cboe EDGX Options
Technology; Notice

Federal Register / Vol. 83 , No. 95 / Wednesday, May 16, 2018 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83214; File No. SR-C2-2018-005]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rules in Connection With the Migration of Cboe C2 to Cboe EDGX Options
Technology

May 11, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 27, 2018, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') filed with the Securities and Exchange Commission (the
``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

    The Exchange proposes to amend C2's rulebook in preparation for the
technology migration of C2 onto the options platform of an Exchange's
affiliated options exchange, Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options'').
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe Exchange, Inc. (``Cboe Options''), acquired
EDGX and its affiliated exchanges, Cboe EDGA Exchange, Inc. (``EDGA''
or ``EDGA Options''), Cboe BZX Exchange, Inc. (``BZX''), and Cboe BYX
Exchange, Inc. (``BYX'' and, together with C2, Cboe Options, EDGX,
EDGA, and BZX, the ``Cboe Affiliated Exchanges''). C2 intends to
migrate its technology onto the same trading platform as EDGX. In this
context, C2 proposes to align certain system functionality with EDGX
(and BZX in certain circumstances), while retaining certain C2
functionality, as well as to make other nonsubstantive changes to the
rules, retaining only intended differences between it and the Cboe
Affiliated Exchanges. Although the Exchange intentionally offers
certain features that differ from those offered by the Cboe Affiliated
Exchanges and will continue to do so, the Exchange believes offering
similar functionality to the extent practicable will reduce potential
confusion for market participants. The proposed rule change modifies or
adds certain system functionality currently offered by EDGX to provide
a consistent technology offering for users of Cboe Affiliated
Exchanges.
Chapter 1
    The proposed rule change makes the following changes to Chapter 1
of the C2 Rulebook.
    The following table identifies the defined terms that are proposed
to be added to or amended in C2 Rule 1.1, whether the proposed amended
rule was moved from a current C2 rule or corresponds to the rule of
EDGX or another exchange, and proposed substantive changes.

----------------------------------------------------------------------------------------------------------------
                                                                        Corresponding
    Defined term              Provision           Current C2 rule      other exchange     Description of change
                                                                            rule
----------------------------------------------------------------------------------------------------------------
ABBO................  best bid(s) or offer(s)   N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       disseminated by other                          21.20(a)(1).
                       Eligible Exchanges \5\
                       and calculated by the
                       Exchange based on
                       market information the
                       Exchange receives from
                       OPRA.
Adjusted Series.....  series in which, as a     8.5(a)(1)..........  N/A...............  Moved to C2 Rule 1.1.
                       result of a corporate
                       action by the
                       underlying security,
                       one option contract in
                       the series represents
                       the delivery of other
                       than 100 shares of
                       underlying stock or
                       Units.
Bid.................  the price of a limit      N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       order or quote to buy                          16.1(a)(6).
                       one or more options
                       contracts.
Book or Simple Book.  electronic book of        1.1................  EDGX Rule           Adding that Book may
                       simple orders and                              16.1(a)(9).         also be referred to as
                       quotes maintained by                                               Simple Book.
                       the System.
Call................  option contract under     1.1................  EDGX Rule           Added clarifying
                       which the holder of the                        16.1(a)(12).        language consistent
                       option has the right,                                              with put definition to
                       in accordance with the                                             conform to EDGX rule.
                       terms of the option and
                       Rules of the Clearing
                       Corporation, to
                       purchase from the
                       Clearing Corporation
                       the number of units of
                       the underlying security
                       or index covered by the
                       option contract, at a
                       price per unit equal to
                       the exercise price,
                       upon the timely
                       exercise of the option.

Capacity............  capacity in which a User  N/A................  N/A...............  C2 currently refers to
                       submits an order, which                                            capacity as origin
                       the User specifies by                                              code; current C2
                       applying the                                                       origin codes are in
                       corresponding code to                                              Regulatory Circular
                       the order, and includes                                            RG13-015, and are the
                       B (account of a broker                                             same as the proposed
                       or dealer, including a                                             Capacities, except the
                       Foreign Broker-Dealer),                                            proposed rule changes
                       C (Public Customer                                                 W to U (see EDGX
                       account), F (OCC                                                   specifications \6\),
                       clearing firm                                                      and adds L, which is
                       proprietary account), J                                            not currently
                       (joint back office                                                 permitted on C2 (see
                       account), L (non-                                                  Cboe Options
                       Trading Permit Holder                                              Regulatory Circular
                       affiliate account), M                                              RG13-038).
                       (Market-Maker account),
                       N (market-maker or
                       specialist on another
                       options exchange), U
                       (Professional account).
Cboe Trading........  Cboe Trading, Inc.,       3.18...............  EDGX Rule 2.11....  Moved to C2 Rule 1.1.
                       broker-dealer
                       affiliated with C2 and
                       will serve as inbound
                       and outbound router for
                       C2, as discussed below.
Class...............  all option contracts      1.1................  EDGX Rule           Deletes unnecessary
                       with the same unit of                          16.1(a)(13).        reference to options,
                       trading covering the                                               given only options
                       same underlying                                                    trade on C2; adds that
                       security or index.                                                 options may cover an
                                                                                index (see C2 Chapter
                                                                                24); deletes that a
                                                                                class means options of
                                                                                the same type
                                                                                (currently defined as
                                                                                put or call), as a
                                                                                class is comprised of
                                                                                both puts and calls;
                                                                                adds that a class is
                                                                                comprised of option
                                                                                contracts with the
                                                                                same unit of trading
                                                                                covering the same
                                                                                underlying security or
                                                                                index (discussed
                                                                                below).
Clearing Corporation  Options Clearing          1.1................  EDGX Rule 16.1(14)  Adding that the
 or OCC.               Corporation.                                                       Clearing Corporation
                                                                                may also be referred
                                                                                to as OCC.
Clearing Trading      a Trading Permit Holder   1.1................  EDGX Rule           Added that Clearing
 Permit Holder.        that has been admitted                         16.1(a)(15).        Trading Permit Holders
                       to membership in the                                               self-clear or clear on
                       Clearing Corporation                                               behalf of others
                       pursuant to the                                                    (consistent with C2
                       provisions of the rules                                            today).
                       of the Clearing
                       Corporation and is self-
                       clearing or that clears
                       transactions for other
                       Trading Permit Holders.
Commission or SEC...  U.S. Securities and       1.1................  EDGX Rule 1.5(g)..  Adding that the
                       Exchange Commission.                                               Commission may also be
                                                                                referred to as SEC.
Complex Order.......  order involving the       6.13(a)(1).........  EDGX Rule           Moved to C2 Rule 1.1
                       concurrent execution of                        21.20(a)(5).        and 6.12(a); added
                       two or more different                                              that C2, like EDGX,
                       series in the same                                                 can impose a maximum
                       class (the ``legs'' or                                             number of legs and
                       ``components'' of the                                              determine in which
                       order), for the same                                               classes complex orders
                       account, occurring at                                              are available.
                       or near the same time
                       in a ratio greater than
                       or equal to one-to-
                       three and less than or
                       equal to three-to-one
                       and for the purpose of
                       executing a particular
                       investment strategy
                       with no more than the
                       applicable number of
                       legs (which number the
                       Exchange determines on
                       a class-by-class
                       basis); the Exchange
                       determines in which
                       classes complex orders
                       are eligible for
                       processing.
Customer............  Public Customer or        N/A................  EDGX Rule           Added to C2 Rule 1.1;
                       broker-dealer.                                 16.1(a)(19).        new definition in C2
                                                                                Rules, but concept of
                                                                                customers exists
                                                                                throughout current C2
                                                                                rules (including in
                                                                                priority rules).
Customer Order......  agency order for the      N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       account of a Customer.                         16.1(a)(20).
Discretion..........  authority of a broker or  N/A................  EDGX Rule           Added to C2 Rule 1.1;
                       dealer to determine for                        16.1(a)(21).        substantively the same
                       a Customer the type of                                             as the EDGX
                       option, class or series                                            definition.
                       of options, the number
                       of contracts, or
                       whether options are to
                       be bought or sold.
EFID................  Executing Firm ID.......  N/A................  EDGX Rule           Added to C2 Rule 1.1;
                                                                      21.1(c)(1).         EDGX rule refers to
                                                                                the term MPID, which
                                                                                is generally
                                                                                equivalent to EFID;
                                                                                similar to the term
                                                                                acronym, which is used
                                                                                in current C2 rules;
                                                                                EFID is the term used
                                                                                in C2 technical
                                                                                specification
                                                                                following migration,
                                                                                and thus more
                                                                                appropriate for the C2
                                                                                rules; as noted below,
                                                                                a firm may have
                                                                                multiple EFIDs.
Equity Option.......  option on an equity       N/A (equity options  EDGX Rule           Added to C2 Rule 1.1.
                       security or Unit.         permitted by C2      16.1(a)(27).
                                                 Chapter 5).
Exchange Act........  Securities Exchange Act   1.1................  EDGX Rule           Added rules and
                       of 1934, including                             16.1(a)(23).        regulations, which
                       rules and regulations                                              also apply to the
                       thereunder.                                                        Exchange rules.
Expiration Date.....  third Friday of           1.1................  N/A...............  Deleted language about
                       expiration month.                                                  series that expire on
                                                                                Saturday rather than
                                                                                Friday, as no more
                                                                                grandfathered series
                                                                                are listed on the
                                                                                Exchange.
He, Him, His........  deemed to refer to        N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       persons of female as                           16.1(a)(25).
                       well as male gender and
                       to include
                       organizations, as well
                       as individuals, when
                       the context requires.
Index Option........  option on a broad-based,  N/A (index options   EDGX Rule           Added to C2 Rule 1.1.
                       narrow-based, micro       permitted by C2      16.1(a)(26).
                       narrow-based or other     Chapter 24).
                       index of equity
                       securities prices.

Market Close........  time the Exchange         N/A (market close    EDGX Rule           Added to C2 Rule 1.1.
                       specifies for the end     time set forth in    16.1(a)(34).
                       of trading on the         C2 Rule 6.1).
                       Exchange on that
                       trading day.
Market Open.........  time the Exchange         N/A (market open     EDGX Rule           Added to C2 Rule 1.1.
                       specifies for the start   time set forth in    16.1(a)(35).
                       of trading on the         C2 Rules 6.1 and
                       Exchange on that          6.10).
                       trading day.
Notional Value......  value calculated by       6.15(e)(1)(C)......  EDGX Rule           Added to C2 Rule 1.1.
                       multiplying the number                         20.6(e)(1)(C).
                       of contracts (contract
                       size multiplied by the
                       contract multiplier) in
                       an order by the order's
                       limit price.
NBB, NBO, and NBBO..  national best bid,        1.1................  EDGX Rule           Added NBB and NBO to C2
                       national best offer,                           16.1(a)(29).        definition.
                       and national best bid
                       or offer the Exchange
                       calculates based on
                       market information it
                       receives from OPRA.
Offer...............  the price of a limit      N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       order or quote to sell                         16.1(a)(30).
                       one more option
                       contracts.
OPRA................  Options Price Reporting   N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       Authority.                                     16.1(a)(41).
Order...............  firm commitment to buy    1.1 and 6.10(a) and  EDGX Rule           Moved market order and
                       or sell option            (b).                 16.1(a)(42) and     limit order
                       contracts that the                             21.1(c).            definitions to C2 Rule
                       System receives from a                                             1.1, as all orders
                       User, which may be a                                               must be market or
                       limit order or market                                              limit.
                       order.
Order Entry Firm/OEF  Trading Permit Holder     N/A................  EDGX Rule           Added to C2 Rule 1.1.
                       representing as agent                          16.1(a)(36).
                       Customer Orders on the
                       Exchange and non-Market-
                       Maker Trading Permit
                       Holder conducting
                       proprietary trading.
Order Instruction...  processing instruction a  N/A................  EDGX Rule 21.1(d).  Added to C2 Rule 1.1
                       User may apply to an                                               (rules currently
                       order (multiple                                                    permit various
                       instructions may apply                                             instructions); various
                       to a single order) when                                            order instructions
                       entering it into the                                               substantively similar
                       System.                                                            to those available on
                                                                                EDGX.
Attributable........  order a User designates   6.10(f)............  EDGX Rule           Moved to C2 Rule 1.1,
                       for display (price and                         21.1(c)(1).         Order Instruction.
                       size) that includes the
                       User's EFID or other
                       unique identifier.
Book Only...........  order the System ranks    6.10(j)............  EDGX Rule           Moved to C2 Rule 1.1,
                       and executes pursuant                          21.1(d)(7).         Order Instruction
                       to Rule 6.12, subjects                                             (previously called C2-
                       to the Price Adjust                                                Only Order).
                       process pursuant to
                       Rule 6.12, or cancels,
                       as applicable (in
                       accordance with User
                       instructions), without
                       routing away to another
                       exchange.
Cancel Back.........  order a User designates   N/A................  EDGX Rule 11.6(b).  Added to C2 Rule 1.1
                       to not be subject to                                               (consistent with Rule
                       the Price Adjust                                                   6.82) and
                       process pursuant to                                                substantively similar
                       Rule 6.12 that the                                                 EDGX Rule (further
                       System cancels or                                                  discussed below).
                       rejects (immediately at
                       the time the System
                       receives the order or
                       upon return to the
                       System after being
                       routed away) if
                       displaying the order on
                       the Book would create a
                       violation of Rule 6.82,
                       or if the order cannot
                       otherwise be executed
                       or displayed in the
                       Book at its limit price.
Intermarket Sweep     order that has the        6.10(g)............  EDGX Rule           Moved to C2 Rule 1.1
 Order/ISO.            meaning provided in                            21.1(d)(2).         (consistent with
                       Section E of Chapter 6,                                            current C2 system).
                       which may be executed
                       at one or multiple
                       price levels in the
                       System without regard
                       to Protected Quotations
                       at other options
                       exchanges; the Exchange
                       relies on the marking
                       of an order by a User
                       as an ISO order when
                       handling such order,
                       and thus, it is the
                       entering Trading Permit
                       Holder's
                       responsibility, not the
                       Exchange's
                       responsibility, to
                       comply with the
                       requirements relating
                       to ISOs.
Match Trade           order not executed        6.10(k)............  EDGX Rule 21.1(g).  Moved to C2 Rule 1.1
 Prevention/MTP        against a resting                                                  and conformed to EDGX
 Modifier.             opposite side order or                                             rule (further
                       quote also designated                                              discussed below).
                       with an MTP modifier
                       and originating from
                       the same EFID, Trading
                       Permit Holder
                       identifier, trading
                       group identifier, or
                       Sponsored User
                       identifier (``Unique
                       Identifier''), with
                       five types of modifiers
                       available.
Minimum Quantity....  order that requires a     N/A................  EDGX Rule           Added to C2 Rule 1.1
                       specified minimum                              21.1(d)(3).         (further discussed
                       quantity of contracts                                              below).
                       be executed or is
                       cancelled; Minimum
                       Quantity orders will
                       only execute against
                       multiple, aggregated
                       orders if such
                       executions would occur
                       simultaneously, and
                       only a Book Only order
                       with TIF designation of
                       IOC may have a Minimum
                       Quantity instruction
                       (the System disregards
                       a Minimum Quantity
                       instruction on any
                       other order).
Non-Attributable....  order a User designates   N/A................  EDGX Rule           Added to C2 Rule 1.1--
                       for display (price and                         21.1(c)(2).         orders currently not
                       size) on an anonymous                                              marked Attributable on
                       basis or not designated                                            C2 are non-
                       as an Attributable                                                 attributable; proposed
                       Order.                                                             rule change merely
                                                                                permits Users to
                                                                                affirmatively
                                                                                designate orders as
                                                                                non-attributable, and
                                                                                specify the Exchange
                                                                                will by default treat
                                                                                orders as Non-
                                                                                Attributable unless
                                                                                the User designates it
                                                                                as Attributable.

Post Only...........  order the System ranks    N/A................  EDGX Rule           Added to C2 Rule 1.1
                       and executes pursuant                          21.1(d)(8).         (further discussed
                       to Rule 6.12, subject                                              below).
                       to the Price Adjust
                       process pursuant to
                       Rule 6.12, or cancels
                       or rejects (including
                       if it is not subject to
                       the Price Adjust
                       process and locks or
                       crosses a Protected
                       Quotation of another
                       exchange), as
                       applicable, except the
                       order may not remove
                       liquidity from the Book
                       or route away to
                       another Exchange.
Price Adjust........  order a User designates   N/A................  EDGX Rule 21.1(i).  Added to C2 Rule 1.1
                       to be subject to the                                               (Price Adjust process
                       Price Adjust process                                               described further
                       pursuant to Rule 6.12,                                             below).
                       or an order a User does
                       not designate as Cancel
                       Back.
Reserve Order.......  limit order with both a   6.10(c)(8) and       BZX Rule            Moved to C2 Rule 1.1
                       portion of the quantity   6.12(c).             21.1(d)(1).         (further discussed
                       displayed (``Display                                               below).
                       Quantity'') and a
                       reserve portion of the
                       quantity (``Reserve
                       Quantity'') not
                       displayed; both display
                       quantity and reserve
                       quantity are available
                       for potential execution
                       against incoming
                       orders, with Max Floor
                       and replenishment
                       instructions available.
Stop (Stop-Loss)      order to buy (sell) that  6. 10(c)(3)........  BZX Rule            Moved to C2 Rule 1.1;
 Order.                becomes a market order                         21.1(d)(11).        modified to compare
                       when the consolidated                                              stop prices to
                       last sale price                                                    national prices rather
                       (excluding prices from                                             than Exchange prices
                       complex order trades if                                            (EDGX similarly uses
                       outside the NBBO) or                                               the NBBO), which
                       NBB (NBO) for a                                                    reflect price from
                       particular option                                                  entire market (similar
                       contract is equal to or                                            change in Rule 6.10(c)
                       above (below) the stop                                             provision regarding
                       price specified by the                                             stop orders).
                       User.
Stop-Limit Order....  order to buy (sell) that  6.10(c)(4).........  BZX Rule            Moved to C2 Rule 1.1;
                       becomes a limit order                          21.1(d)(12).        modified to compare
                       when the consolidated                                              stop prices to
                       last sale price                                                    national prices rather
                       (excluding prices from                                             than Exchange prices
                       complex order trades if                                            (EDGX similarly uses
                       outside the NBBO) or                                               the NBBO), which
                       NBB (NBO) for a                                                    reflect price from
                       particular option                                                  entire market (similar
                       contract is equal to or                                            change in Rule 6.10(c)
                       above (below) the stop                                             provision regarding
                       price specified by the                                             stop orders).
                       User.
Port................  adds definitions of       N/A................  EDGX Rule 21.1(j).  Added to C2 Rule 1.1
                       various types of ports                                             (further discussed
                       available in the new                                               below).
                       Exchange system.
Primary Market......  primary exchange on       N/A................  EDGX Rule           Added to C2 Rule 1.1
                       which an underlying                            16.1(a)(44).        (concept exists in
                       security is listed.                                                current C2 rules, such
                                                                                a 6.11(b)).
Protected Quotation.  a Protected Bid or        6.80...............  EDGX Rule           Added to list of
                       Protected Offer, as                            16.1(a)(47).        defined terms in C2
                       each of those terms is                                             Rule 1.1.
                       defined in Rule 6.80.
Put.................  option contract under     1.1................  EDGX Rule           Added clarifying
                       which the holder of the                        16.1(a)(49).        language consistent
                       option has the right,                                              with put definition to
                       in accordance with the                                             conform to EDGX rule.
                       terms and provisions of
                       the option and Rules of
                       the Clearing
                       Corporation, to sell to
                       the Clearing
                       Corporation the number
                       of units of the
                       underlying security
                       covered by the option
                       contract, at a price
                       per unit equal to the
                       exercise price, upon
                       the timely exercise of
                       such option.
Quote or quotation..  bid or offer entered by   1.1................  EDGX Rule           Conforms C2 definition
                       a Market-Maker as a                            16.1(a)(51).        to EDGX definition
                       firm order, which                                                  (including to state
                       updates the Market-                                                that Market-Maker
                       Maker's previous bid or                                            quotes are entered
                       offer, if any.                                                     using order
                                                                                functionality).
SBBO................  best bid and offer on     1.1................  EDGX Rule           Moved to proposed C2
                       the Exchange for a                             21.20(a)(11).       Rule 6.13(a);
                       complex strategy                                                   currently defined as
                       calculated using the                                               Exchange Spread Market
                       BBO for each component                                             in C2 Rule 1.1, which
                       of a complex strategy                                              definition is being
                       to establish the best                                              deleted.
                       net bid and offer for a
                       complex strategy.
Series..............  all option contracts of   1.1................  EDGX 16.1(a)(55)..  Clarified that a series
                       the same class that are                                            consists of options of
                       the same type of option                                            the same type (i.e.
                       and have the same                                                  options with the same
                       exercise price, and                                                exercise price and
                       expiration date.                                                   date that are calls
                                                                                are a series, and
                                                                                options with the same
                                                                                exercise price and
                                                                                date that are puts are
                                                                                another series).
Size................  number of contracts up    N/A................  EDGX Rule 21.1(e).  Added to C2 Rule 1.1
                       to 999,999 associated                                              (consistent with
                       with an order or quote.                                            current C2 system).
SNBBO...............  national best bid and     1.1................  EDGX Rule           Moved to Rule 6.13(a);
                       offer for a complex                            21.20(a)(12).       currently defined as
                       strategy calculated                                                National Spread Market
                       using the NBBO for each                                            in C2 Rule 1.1, which
                       component of a complex                                             definition is being
                       strategy to establish                                              deleted.
                       the best net bid and
                       offer for a complex
                       strategy.
System Securities...  options that currently    N/A................  EDGX Rule 21.1(b).  Added to C2 Rule 1.1
                       trade on the Exchange                                              (additional term for
                       pursuant to Chapters 5                                             options listed for
                       and 24.                                                            trading).
Time-in-Force.......  period of time the        N/A................  EDGX Rule 21.1(f).  Added to C2 Rule 1.1
                       System will hold an                                                (general term to cover
                       order for potential                                                various time-in-force
                       execution.                                                         instructions).
Day.................  time-in-force that means  6.10(e)(1).........  EDGX Rule           Moved to C2 Rule 1.1.
                       an order to buy or sell                        21.1(f)(3).
                       that, if not executed,
                       expires at market close.
Fill-or-Kill/FOK....  time-in-force that means  6.10(c)(5).........  EDGX Rule           Moved to C2 Rule 1.1.
                       an order that is to be                         21.1(f)(5).
                       executed in its
                       entirety as soon as the
                       System receives it and,
                       if not so executed,
                       cancelled.

Good-til-Cancelled/   time-in-force that        6.10(c)(2).........  EDGX Rule           Moved to C2 Rule 1.1.
 GTC.                  means, if after entry                          21.1(f)(4).
                       into the System, the
                       order is not fully
                       executed, the order (or
                       unexecuted portion)
                       remains available for
                       potential display or
                       execution (with the
                       same timestamp) unless
                       cancelled by the
                       entering User, or until
                       the option expires,
                       whichever comes first.
Good-til-Date/GTD...  time-in-force that        N/A................  EDGX Rule           Added to C2 Rule 1.1
                       means, if after entry                          21.1(f)(1).         (similar to EDGX time-
                       into the System, the                                               in-force, as further
                       order is not fully                                                 discussed below).
                       executed, the order (or
                       unexecuted portion)
                       remains available for
                       potential display or
                       execution (with the
                       same timestamp) until a
                       date and time specified
                       by the entering User
                       unless cancelled by the
                       entering User.
Immediate-or-Cancel/  time-in-force for a       6.10(c)(6).........  EDGX Rule           Moved to C2 Rule 1.1.
 IOC.                  limit order that is to                         21.1(f)(2).
                       be executed in whole or
                       in part as soon as the
                       System receives it; the
                       System cancels and does
                       not post to the Book
                       any portion of an IOC
                       order (or unexecuted
                       portion) not executed
                       immediately on the
                       Exchange or another
                       options exchange.
At the Open/OPG.....  time-in-force means an    6.10(c)(7).........  EDGX Rule           Moved to C2 Rule 1.1.
                       order that may only                            21.1(f)(6).
                       participate in the
                       Opening Process on the
                       Exchange; the System
                       cancels an OPG order
                       (or unexecuted portion)
                       that does not execute
                       during the Opening
                       Process.
Trade Desk..........  Exchange operations       1.1................  N/A...............  Changed to Trade Desk,
                       staff authorized to                                                which is new term for
                       make certain trading                                               Help Desk at the
                       determinations on                                                  Exchange (which term
                       behalf of the Exchange.                                            is being deleted from
                                                                                the Rules).
Transaction.........  transaction involving a   N/A................  EDGX Rule           Added to C2 Rule 1.1
                       contract effected on or                        16.1(a)(11).        (same as EDGX rule,
                       through the Exchange or                                            consistent with
                       its facilities or                                                  industry term).
                       systems.
Unit................  shares or other           5.3, Interpretation  EDGX Rule 19.3(i)   Added to list of
                       securities traded on a    and Policy .06.      (Units defined as   defined terms in C2
                       national securities                            Fund Shares in      Rule 1.1.
                       exchange and defined as                        EDGX Rules).
                       an ``NMS stock'' under
                       Rule 600 of Regulation
                       NMS, and that satisfy
                       the criteria in Rule
                       5.3, Interpretation and
                       Policy .06.
Unit of Trading.....  defined in Rule 6.2.....  6.2................  N/A...............  Added to list of
                                                                                defined terms in C2
                                                                                Rule 1.1 (discussed
                                                                                below).
User................  any Trading Permit        N/A................  EDGX Rule           Added to C2 Rule 1.1
                       Holder or Sponsored                            16.1(a)(63).        (common term to apply
                       User who is authorized                                             to two types of market
                       to obtain access to the                                            participants defined
                       System pursuant to Rule                                            in C2 Rules, which are
                       6.8.                                                               the only two market
                                                                                participants that may
                                                                                access the System
                                                                                under C2 Rules).
----------------------------------------------------------------------------------------------------------------

    The proposed rule change makes changes throughout C2 Rules to
conform to the changes to defined terms.
---------------------------------------------------------------------------

    \5\ Eligible Exchange is defined in Cboe Rule 6.80(7).
    \6\ BOE Specifications, available at http://cdn.batstrading.com/resources/membership/BATS_US_Options_BOE2_Specification.pdf, and FIX
Specifications, available at http://cdn.batstrading.com/resources/membership/BATS_US_Options_BZX_FIX_Specification.pdf.
---------------------------------------------------------------------------

    As noted above, the proposed rule change amends the definition of
class to mean all option contracts with the same unit of trading
(including adjusted series as determined by OCC) covering the same
underlying security or index. The current definition states a class
consists of options of the same type, which is defined as either a put
or a call. However, the term class is generally understood to include
both puts and calls, which are types of series, not separate classes,
making this definition outdated. As described above, options with the
same exercise price and expiration date that are puts constitute one
series, and options with the same exercise price and expiration date
that are calls constitute another series. Additionally, there are some
exceptions for options that cover the same underlying but constitute a
separate class, and the proposed definition incorporates this
concept.\7\ For example, mini-options cover the same underlying
security as standard options, but are considered as separate class
since they have a different deliverable (10 shares of the underlying
security rather than 100 shares of the underlying security,
respectively). Additionally, when OCC adjusts series in connection with
corporate actions (see Rule 5.7), it announces whether those series are
part of the same existing class or a new class covering the same
underlying security. The concept of unit of trading more accurately
describes the series that constitute a class (e.g. the unit of trading
for a mini-option is 10, and the unit of trading for a standard option
is 100, making each a separate class under the proposed definition).
The proposed definition accounts for these exceptions, and is a more
accurate definition of what options constitute a class today on the
Exchange.
---------------------------------------------------------------------------

    \7\ The proposed definition is based on the OCC definition of
class. See OCC By-Laws Article I, C.(11). The proposed definition of
unit of trading is consistent with C2 Rule 6.2.
---------------------------------------------------------------------------

    As noted above, the proposed rule change adds the following order
instructions to C2 Rule 1.1, which order instructions are available on
EDGX or BZX, as indicated.
     Cancel Back: A Book Only or Post Only order a User
designates to not be subject to the Price Adjust Process pursuant to
Rule 6.12, which the System cancels or rejects if it locks or crosses
the opposite side of the ABBO. The System executes a Book Only--Cancel
Back order against resting orders and quotes, and cancels or rejects a
Post Only--Cancel Back order, that locks or crosses the opposite side
of the BBO. The proposed functionality is partially included in the
definition of Post Only in the EDGX rules.\8\ The proposed rule change
extends the definition to Book Only orders and is consistent with

linkage rules included in Chapter 6, Section E of the Rules and is
consistent with EDGX Rule 21.6(f). Book Only orders and Post Only
orders do not route by definition, and the Cancel Back instruction
provides an option for Users to determine how they will be handled
within the System, consistent with their definitions.\9\
---------------------------------------------------------------------------

    \8\ See EDGX Rule 21.6(d)(8).
    \9\ EDGX Rule 11.6(b) (which relates to the EDGX Equities
market) contains a similar Cancel Back instruction.
---------------------------------------------------------------------------

     Match Trade Prevention (MTP) Modifiers: Current C2 Rule
6.10(k) defines a Market-Maker Trade Prevention Order as an IOC order
market with the Market-Maker Trade Prevention designation. A Market-
Maker Trade Prevention Order that would trade against a resting quote
or order for the same Market-Maker will be cancelled, as will the
resting quote or order (unless the Market-Maker Trade Prevention Order
is received while an order for the same Market-Maker is subject to an
auction, in which case only the Market-Maker Trade Prevention Order
will be cancelled). The Exchange proposes to adopt MTP modifiers
substantively the same as those available on EDGX.\10\ The proposed MTP
modifiers expand this functionality to all Users, rather than just
Market-Makers, and provide Users with multiple options regarding how
the System handles orders and quotes with the same Unique Identifiers.
Pursuant to the proposed rule change, an order designated with any MTP
modifier is not executed against a resting opposite side order or quote
also designated with an MTP modifier and originating from the same
Unique Identifier. Except for the MDC modifier described below, the MTP
modifier on the incoming order controls the interaction between two
orders marked with MTP modifiers:
---------------------------------------------------------------------------

    \10\ See EDGX Rule 21.1(g).
---------------------------------------------------------------------------

    [cir] MTP Cancel Newest (``MCN''): An incoming order marked with
the ``MCN'' modifier does not execute against a resting order marked
with any MTP modifier originating from the same Unique Identifier. The
System cancels or rejects the incoming order, and the resting order
remains in the Book.
    [cir] MTP Cancel Oldest (``MCO''): An incoming order marked with
the ``MCO'' modifier does not execute against a resting order marked
with any MTP modifier originating from the same Unique Identifier. The
System cancels or rejects the resting order, and processes the incoming
order in accordance with Rule 6.12.
    [cir] MTP Decrement and Cancel (``MDC''): An incoming order marked
with the ``MDC'' modifier does not execute against a resting order
marked with any MTP modifier originating from the same Unique
Identifier. If both orders are equivalent in size, the System cancels
or rejects both orders. If the orders are not equivalent in size, the
System cancels or rejects the smaller of the two orders and decrements
the size of the larger order by the size of the smaller order, which
remaining balance remains on or processes in accordance with Rule 6.12,
as applicable. Notwithstanding the foregoing, unless a User instructs
the Exchange not to do so, the System cancels or rejects both orders if
the resting order is marked with any MTP modifier other than MDC and
the incoming order is smaller in size than the resting order.
    [cir] MTP Cancel Both (``MCB''): An incoming order marked with the
``MCB'' modifier does not execute against a resting order marked with
any MTP modifier originating from the same Unique Identifier. The
System cancels or rejects both orders.
    [cir] MTP Cancel Smallest (``MCS''): An incoming order marked with
the ``MCS'' modifier does not execute against a resting order marked
with any MTP modifier originating from the same Unique Identifier. If
both orders are equivalent in size, the System cancels or rejects both
orders. If the orders are not equivalent in size, the System cancels or
rejects the smaller of the two orders, and the larger order remains on
the Book or processes in accordance with Rule 6.12, as applicable.
    The proposed MTP functionality is designed to prevent market
participants from unintentionally causing a proprietary self-trade. The
Exchange believes these modifiers will allow firms to better manage
order flow and prevent undesirable executions with themselves. Trading
Permit Holders may have multiple connections into the Exchange
consistent with their business needs and function. As a result, orders
routed by the same firm via different connections may, in certain
circumstances, trade against each other. The proposed modifiers provide
Trading Permit Holders with functionality (in addition to what is
available on C2 today) with the opportunity to prevent these
potentially undesirable trades. The Exchange notes that offering the
MTP modifiers may streamline certain regulatory functions by reducing
false positive results that may occur on Exchange generated wash
trading surveillance reports when orders are executed under the same
Unique Identifier. For these reasons, the Exchange believes the MTP
modifiers offer users enhanced order processing functionality that may
prevent potentially undesirable executions without negatively impacting
broker-dealer best execution obligations.
     Minimum Quantity Order: An order that requires a specified
minimum quantity of contracts be executed or is cancelled. Minimum
Quantity orders will only execute against multiple, aggregated orders
if such executions would occur simultaneously. Only a Book Only order
with a time-in-force designation of IOC may have a Minimum Quantity
instruction (the System disregards a Minimum Quantity instruction on
any other order). This functionality ensures a User's order will not
partially execute for less than the minimum amount of contracts a User
desires to execute as part of its investment strategy. Only permitting
this functionality for Book Only IOC order is consistent with the
purpose of this functionality, as current Exchange functionality cannot
guarantee that an order that routes or rests on the book to execute
against incoming orders will be executed for the minimum requested
amount.
     Post Only Order: An order the System ranks and executes
pursuant to proposed Rule 6.12, subjects to the Price Adjust process
pursuant to Rule 6.12, or cancels (including if it is not subject to
the Price Adjust process and it would lock or cross a Protected
Quotation on another exchange), as applicable (in accordance with User
instructions), except the order may not remove liquidity from the Book
or route away to another Exchange. This proposed instructions is nearly
identical to the C2 Only/Book Only order instruction, except it will
also not remove liquidity from the Book. The Exchange currently has a
maker-taker fee structure, pursuant to which an execution taking
liquidity from the Book is subject to a taker fee. This proposed
instruction provides Users with flexibility to avoid incurring a taker
fee if their intent is to submit an order to add liquidity to the Book.
     Reserve Order: A limit order with both a portion of the
quantity displayed (``Display Quantity'') and a reserve portion of the
quantity (``Reserve Quantity'') not displayed. Both the Display
Quantity and Reserve Quantity of the Reserve Order are available for
potential execution against incoming orders. When entering a Reserve
Order, a User must instruct the Exchange as to the quantity of the
order to be initially displayed by the System (``Max Floor''). If the
Display Quantity of a Reserve Order is fully executed, the System will,
in accordance with the User's instruction, replenish the Display
Quantity from the Reserve Quantity

using one of the below replenishment instructions. If the remainder of
an order is less than the replenishment amount, the System will display
the entire remainder of the order. The System creates a new timestamp
for both the Display Quantity and Reserve Quantity of the order each
time it is replenished from reserve.
    [cir] Random Replenishment: An instruction that a User may attach
to an order with Reserve Quantity where the System randomly replenishes
the Display Quantity for the order with a number of contracts not
outside a replenishment range, which equals the Max Floor plus and
minus a replenishment value established by the User when entering a
Reserve Order with a Random Replenishment instruction.
    [cir] Fixed Replenishment: For any order for that a User does not
select Random Replenishment, the System will replenish the Display
Quantity of an order with the number of contracts equal to the Max
Floor.
    Current C2 Rule 6.10(c)(8) describes current reserve order
functionality available on C2. The proposed functionality is generally
the same as the current C2 functionality but enhances the use of
reserve orders by providing flexibility for Users to determine whether
the reserve replenishment amount is fixed or random. This proposed
functionality is substantively the same as that available on BZX.\11\
---------------------------------------------------------------------------

    \11\ See BZX Rule 21.1(d)(1).
---------------------------------------------------------------------------

    The Exchange will provide access to the C2 System to Users through
various ports, as is the case on EDGX. There are three different types
of ports: Physical ports, logical ports, and bulk order ports. The
Exchange notes a bulk order port is a type of logical port, and there
are other types of logical ports not specifically identified in the
proposed rule. The Exchange believes a separate definition is warranted
for bulk order ports given the specific functionality provided through
such ports but that other types of logical ports are sufficiently
described in the proposed definition of logical port.
    The proposed rule change defines the term ``port'' to the Rule 1.1,
including the following type of ports: \12\
---------------------------------------------------------------------------

    \12\ See EDGX Rule 21.1(j).
---------------------------------------------------------------------------

     A ``physical port'' provides a physical connection to the
System. A physical port may provide access to multiple logical ports.
     A ``logical port'' or ``logical session'' provides the
ability within the System to accomplish a specific function through a
connection, such as order entry, data receipt, or access to information
(for example, as discussed below, certain risk control settings may be
input by port).
     A ``bulk order port'' is a dedicated logical port that
provides Users with the ability to submit single and bulk order
messages to enter, modify, or cancel orders designated as Post Only
Orders with a Time-in-Force of Day or GTD with an expiration time on
that trading day. As noted below, quoting functionality will not be
available to Market-Makers after the technology migration. This bulk
order functionality will provide Market-Makers with a way to submit
orders that simulate current quoting functionality. Bulk order messages
will not route to other exchanges with use of the Post Only
instruction, which is consistent with current quoting functionality
that does not route Market-Maker quotes. Additionally, Market-Makers
generally enter new quotes at the beginning of each trading day based
on then-current market conditions, and the Day or GTD (with an
expiration time on that trading day) Time-in-Force instruction is
consistent with this practice. Because these messages will be used to
add liquidity to the Book, the Exchange will make this type of port
available to all Users to encourage all Users to provide liquidity to
the C2 market. This functionality is substantively the same as port
functionality available on EDGX.
    Port is the term the Exchange will use to describe the connection a
User will use to connect to the System following the technology
migration. Currently, the Exchange refers to System connections as
logins, but the functionality is generally the same.
    The proposed rule change restricts the type of messages that may be
submitted through bulk order ports to orders designated as Post Only
Orders with a Time-in-Force of Day or GTD with an expiration time on
that trading day. Based on definitions described in this rule filing,
Post Only Orders with a Time-in-Force of Day or GTD will be posted to
and displayed by the Exchange, rather than remove liquidity or route to
another options exchange. As a general matter, and as further described
below, the proposed change is intended to limit the use of bulk order
ports to liquidity provision, particularly by, but not limited to,
Market-Makers. In turn, the Exchange believes it is unnecessary to
allow orders entered via bulk order entry ports to be able to last
beyond the trading day on which they were entered. The Exchange notes
that while, as a general matter, bulk order entry provides an efficient
way for a market participant to conduct business on the Exchange by
allowing the bundling of multiple instructions in a single message, the
main purpose of such functionality has always been to encourage quoting
on exchanges.\13\
---------------------------------------------------------------------------

    \13\ For instance, when initially adopted by BZX, bulk order
entry was described as a ``bulk-quoting interface'' and such
functionality was limited to BZX market makers. See Securities
Exchange Act Release No. 65133 (August 15, 2011), 76 FR 52032
(August 19, 2011) (SR-BATS-2011-029). Bulk quoting was shortly
thereafter expanded to be available to all participants on BZX's
options platform but the focus remained on promoting liquidity
provision on the Exchange, even though the types of messages
permitted were not limited to liquidity providing orders. See
Securities Exchange Act Release No. 65307 (September 9, 2011), 76 FR
57092 (September 15, 2011) (SR-BATS-2011-034).
---------------------------------------------------------------------------

    The Exchange proposes to provide this functionality, which is more
similar to quoting functionality currently available on C2. In
particular, EDGX has never differentiated between a quote or an order
on entry. Rather, Users on EDGX submit orders to the Exchange
regardless of the Capacity (i.e., Customer, Market-Maker, or other Non-
Market-Maker professional) of the order and regardless of the intended
result from submitting such order (e.g., to remove liquidity, post and
display liquidity on EDGX, or route to another market). Following
migration, C2 will similarly not differentiate between a quote or an
order entry. Of course, an order that is posted and displayed on the
Exchange is a quotation and the Exchange does maintain various
requirements regarding quotations and quoting on the Exchange. The
Exchange, however, reiterates that C2 currently distinguishes between
orders and quotes, with quotes being required of and only available to
registered Market-Makers. In contrast, following migration, in order to
quote on the Exchange, a User (including a Market-Maker) will submit an
order. While the Exchange does not propose to limit bulk order entry
functionality to Market-Makers on the Exchange, the Exchange does
propose to limit the type of messages that may be submitted through
bulk order entry ports in order to mimic the quoting functionality
offered by C2 today.
    As noted above, the proposed rule change adds the Time-in-Force
option Good-til-Date, which is similar to Good-til-Date functionality
available on EDGX.\14\ For an order so designated, if after entry into
the System, the order is not fully executed, the order (or any
unexecuted portion) remains available for potential display or
execution until a date and time specified by the entering User unless
cancelled by the entering User. This Time-in-Force option will

provide Users with additional flexibility regarding the handling of
their orders on the System. It will permit Users' orders to be
automatically cancelled at specified dates and times rather than
require Users to manually cancel GTC orders at those times.
---------------------------------------------------------------------------

    \14\ See EDGX Rule 21.1(f)(1) and (3).
---------------------------------------------------------------------------

    The proposed rule change also deletes the following defined terms.
While these terms are used in rules C2 incorporates by reference to
Cboe Options rules, these terms are not currently used in the text of
the C2 rulebook:

 Aggregate Exercise Price
 American-style Option
 Capped-style Option
 Closing Purchase Transaction
 Closing Writing Transaction
 Covered
 European-style Option
 Opening Purchase Transaction
 Opening Writing Transaction
 Principal Shareholder
 Quarterly Option Series
 Security Future-Option Order
 Uncovered

    The proposed rule change deletes the terms Participant and Permit
Holder, which both mean a Trading Permit Holder, another defined term.
To simplify the C2 rulebook, the Exchange proposes to have one term
refer to a Trading Permit Holder and makes conforming changes
throughout the Rules.
    The proposed rule change adds Interpretation and Policy .01 to Rule
1.1, which states to the extent a term is used in any Rules
incorporated by reference to Cboe Options rules and not otherwise
defined in the Rules, the term will have the meaning set forth in the
Cboe Options rules. To the extent a market participant is reviewing an
incorporated by reference rule, the Exchange believes it is appropriate
to direct market participants to the Cboe Options rulebook for the
definitions of terms used in that rule, because that rule essentially
incorporates the definition of any defined terms used in that rule. The
Exchange believes it is simpler and less confusing to refer market
participants to the Cboe Options rulebook for definitions than to refer
them back to the C2 rulebook.
    The proposed rule change moves Interpretation and Policy .01 to the
defined term Professional to Interpretation and Policy .02 at the end
of Rule 1.1, as the Exchange believes it is less confusing to have all
Interpretations and Policies to a rule located in the same place. The
proposed rule change adds a cross-reference to this Interpretation and
Policy to the definition of Professional.
    The proposed rule change deletes the term Voluntary Professional,
as that Capacity designation will no longer be available on C2. It is
currently unavailable on EDGX.
    Finally, the proposed rule change makes nonsubstantive changes
throughout the definitions in Rule 1.1, including to conform language
throughout the rules, to conform language to corresponding EDGX rules,
and to use plain English.
    Proposed C2 Rule 1.2 states the Exchange announces to Trading
Permit Holders all determinations it makes pursuant to the Rules via
(a) specifications, Notices, or Regulatory Circulars with appropriate
advanced notice, which will be posted on the Exchange's website, or as
otherwise provided in the Rules, (b) electronic message, or (c) other
communication method as provided in the Rules. Current C2 Rules states
the Exchange will generally announce determinations by Regulatory
Circular, and the proposed rule expands the different type of documents
that may be used to announce determinations, consistent with EDGX.
Proposed Rule 1.2 makes clear this information will be available on
C2's website in an easily accessible manner, regardless of the manner
in which the Exchange announces it. Additionally, certain
determinations are made more real-time pursuant to electronic message
received by Trading Permit Holders (e.g., providing intra-day relief
for parameter settings in in price protection mechanisms described in
proposed Rule 6.14, Interpretation and Policy .01, other determinations
related to need to maintain fair and orderly market). This single rule
simplifies the Rules by eliminating the need to repeatedly state in the
rules how the Exchange will announce determinations. The proposed rule
change makes conforming changes throughout the Rules.
    Proposed C2 Rule 1.3 states unless otherwise specified, all times
in the Rules are Eastern Time, except for times in Rules incorporated
by reference to Cboe Options rules, which are times as set forth in the
applicable Cboe Options rules. Current C2 Rules are generally in
Chicago time, so the proposed rule change makes conforming changes
throughout the Rules. This single rule simplifies the Rules by
eliminating the need to repeatedly state times are in Eastern Time.
Chapter 3
    The proposed rule change moves the provision regarding Exchange
affiliations with Trading Permit Holders from current Rule 3.2(f) to
proposed Rule 3.16. Current Rule 3.2(f) prohibits the Exchange from
acquiring or maintaining an ownership interest in a Trading Permit
Holder, as well as prohibits Trading Permit Holder affiliations with
the Exchange or an affiliate of the Exchange without prior Commission
approval. Current exceptions include equity interests in CBSX LLC and
affiliations with OneChicago, LLC. EDGX Rule 2.10 contains similar
restrictions on Exchange affiliations with EDGX Members, but also
contains additional exceptions, including (a) a Member's acquisition of
an equity interest in Cboe Global that is permitted by the ownership
and voting limitations contained in the Certificate of Incorporation
and Bylaws of Cboe Global, (b) affiliations solely by reason of a
Member (or any officer, director, manager, managing member, partner, or
affiliate of such Member) becoming a director of the Exchange or Cboe
Global, or (c) affiliations with Cboe Trading or other Cboe-affiliated
exchanges. Cboe Global and C2 governing documents (which have been
filed with the Commission) describe any applicable restrictions on
equity ownership of Cboe Global, as well as criteria for directors of
C2 and Cboe Global Markets. Additionally, C2 governing documents are
substantially similar to those of EDGX, and C2 and EDGX have the same
parent company (C2 Global). As discussed below, C2's affiliation with
Cboe Trading has recently been approved by the Commission. Therefore,
the proposed rule change adds to Rule 3.16 similar exclusions from the
affiliation prohibition contained in EDGX Rule 2.10, as the same
affiliate restrictions apply to both exchanges and are consistent with
governing documents of C2 and Cboe Global previously filed with the
Commission.
    The proposed rule change adopts Rule 3.17 to govern the Exchange's
use of Cboe Trading as an outbound router. Proposed Rule 3.17 is based
on EDGX Rule 2.11. As long as Cboe Trading is affiliated with C2 and is
providing outbound routing of orders from C2 to other securities
exchanges, facilities of securities exchanges, automated trading
systems, electronic communications networks or other brokers or dealers
(``Trading Centers'' and, such function of Cboe Trading is referred to
as the ``Outbound Router''), Cboe Trading's outbound routing services
would be subject to the following conditions and limitations:
     C2 will regulate the Outbound Router function of Cboe
Trading as a facility (subject to Section 6 of the Act),

and will, among other things, be responsible for filing with the
Commission rule changes and fees relating to the Cboe Trading Outbound
Router function and Cboe Trading will be subject to exchange non-
discrimination requirements; [sic]
     FINRA, a self-regulatory organization unaffiliated with
the Exchange or any of its affiliates, will carry out oversight and
enforcement responsibilities as the designated examining authority
designated by the Commission pursuant to Rule 17d-1 of the Act with the
responsibility for examining Cboe Trading for compliance with
applicable financial responsibility rules.
     A Trading Permit Holder's use of Cboe Trading to route
orders to another Trading Center will be optional. Any Trading Permit
Holder that does not want to use Cboe Trading may use other routers to
route orders to other Trading Centers.
     Cboe Trading will not engage in any business other than
(a) its Outbound Router function, (b) its Inbound Router function as
described in Rule 3.18, (c) its usage of an error account in compliance
with proposed paragraph (a)(7) below, and (d) any other activities it
may engage in as approved by the Commission.
     The Exchange will establish and maintain procedures and
internal controls reasonably designed to adequately restrict the flow
of confidential and proprietary information between the Exchange and
its facilities (including Cboe Trading), and any other entity,
including any affiliate of Cboe Trading, and, if Cboe Trading or any of
its affiliates engages in any other business activities other than
providing routing services to the Exchange, between the segment of Cboe
Trading or its affiliate that provides the other business activities
and the routing services.
     The Exchange or Cboe Trading may cancel orders as either
deems to be necessary to maintain fair and orderly markets if a
technical or systems issue occurs at the Exchange, Cboe Trading, or a
routing destination. The Exchange or Cboe Trading will provide notice
of the cancellation to affected Trading Permit Holders as soon as
practicable.
     Cboe Trading will maintain an error account for the
purpose of addressing positions that are the result of an execution or
executions that are not clearly erroneous under Rule 6.29 and result
from a technical or systems issue at Cboe Trading, the Exchange, a
routing destination, or a non-affiliate third-party Routing Broker that
affects one or more orders (``Error Positions'').
    [cir] For purposes of proposed Rule 3.17(a)(7), an Error Position
will not include any position that results from an order submitted by a
Trading Permit Holder to the Exchange that is executed on the Exchange
and automatically processed for clearance and settlement on a locked-in
basis.
    [cir] Except as provided in proposed subparagraph (7)(C) (described
in the next bullet), Cboe Trading does not accept any positions in its
error account of a Trading Permit Holder or permit any Trading Permit
Holder to transfer any positions from the Trading Permit Holder's
account to Cboe Trading's error account.
    [cir] If a technical or systems issue results in the Exchange not
having valid clearing instructions for a Trading Permit Holder to a
trade, Cboe Trading may assume the Trading Permit Holder's side of the
trade so that the trade can be automatically processed for clearance
and settlement on a locked-in basis.
    [cir] In connection with a particular technical or systems issue,
Cboe Trading or the Exchange will either assign all resulting Error
Positions to the Trading Permit Holders in accordance with proposed
subparagraph (D)(i),\15\ or have all resulting Error Positions
liquidated in accordance with proposed subparagraph (D)(ii).\16\ Any
determination to assign or liquidate Error Positions, as well as any
resulting assignments, will be made in a nondiscriminatory fashion.
---------------------------------------------------------------------------

    \15\ Proposed subparagraph (a)(7)(D)(i) states Cboe Trading or
the Exchange will assign all Error Positions resulting from a
particular technical or systems issue to the Trading Permit Holders
affected by that technical or systems issue if Cboe Trading or the
Exchange (a) determines it has accurate and sufficient information
(including valid clearing information) to assign the positions to
all of the Trading Permit Holders affected by that technical or
systems issue; (b) determines it has sufficient time pursuant to
normal clearance and settlement deadlines to evaluate the
information necessary to assign the positions to all of the Trading
Permit Holders affected by that technical or systems issue; and (c)
has not determined to cancel all orders affected by that technical
or systems issue in accordance with proposed subparagraph (a)(6).
    \16\ Proposed subparagraph (a)(7)(D)(ii) states if Cboe Trading
or the Exchange is unable to assign all Error Positions resulting
from a particular technical or systems issue to all of the affected
Trading Permit Holders in accordance with proposed subparagraph (D),
or if Cboe Trading or the Exchange determines to cancel all orders
affected by the technical or systems issue in accordance with
proposed subparagraph (a)(6), then Cboe Trading will liquidate any
applicable Error Positions as soon as practicable. In liquidating
such Error Positions, Cboe Trading will (a) provide complete time
and price discretion for the trading to liquidate the Error
Positions to a third-party broker-dealer and not attempt to exercise
any influence or control over the timing or methods of such trading;
and (b) establish and enforce policies and procedures that are
reasonably designed to restrict the flow of confidential and
proprietary information between the third-party broker-dealer and
Cboe Trading/the Exchange associated with the liquidation of the
Error Positions.
---------------------------------------------------------------------------

    [cir] Cboe Trading and the Exchange will make and keep records to
document all determinations to treat positions as Error Positions and
all determinations for the assignment of Error Positions to Trading
Permit Holders or the liquidation of Error Positions, as well as
records associated with the liquidation of Error Positions through the
third-party broker-dealer.
     The books, records, premises, officers, agents, directors,
and employees of Cboe Trading as a facility of the Exchange are deemed
to be the books, records, premises, officers, agents, directors, and
employees of the Exchange for purposes of, and subject to oversight
pursuant to, the Exchange Act. The books and records of Cboe Trading as
a facility of the Exchange are subject at all times to inspection and
copying by the Exchange and the Commission. Nothing in the Rules
precludes officers, agents, directors, or employees of the Exchange
from also serving as officers, agents, directors, and employees of Cboe
Trading.
    The Exchange will comply with the above-listed conditions prior to
offering outbound routing from Cboe Trading. In meeting the conditions,
the Exchange will have mechanisms in place to protect the independence
of the Exchange's regulatory responsibility with respect to Cboe
Trading, as well as demonstrate the Cboe Trading cannot use any
information that it may have because of its affiliation with the
Exchange to its advantage. Current Rule 3.2(f) and proposed Rule 3.16
provide that without prior Commission approval, no Trading Permit
Holder may be or become affiliated with the Exchange. The Commission
recently approved the adoption of Rule 3.18 regarding Cboe Trading (a
C2 Trading Permit Holder) as the Inbound Router for C2.\17\ Such
approval satisfies the requirement in current Rule 3.2(f) (and proposed
Rule 3.16) for Commission approval of the Exchange affiliation with
Cboe Trading.\18\
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 82952 (March 27,
2018), 83 FR 14096 (April 2, 2018) (SR-C2-2018-004).
    \18\ The proposed rule change makes nonsubstantive changes to
Rule 3.18, including updating paragraph numbering and lettering and
reflecting the defined term Cboe Trading and Cboe Exchange.
---------------------------------------------------------------------------

Chapter 6
    The proposed rule change adds a reference to C2 Rule 6.1 regarding
the times at which the System accepts orders and quotes, which are set
forth in

proposed C2 Rule 6.9 (as discussed below). The proposed rule change
also adds Units to the list of options that the Exchange designates to
remain open for trading beyond 4:00 p.m. but no later than 4:15 p.m.,
which is consistent with EDGX rules.\19\ The proposed rule change also
deletes Interpretation and Policy .03 regarding the trading hours of
Quarterly Index Expiration options, as they currently do not and will
not trade on C2 upon the System migration.
---------------------------------------------------------------------------

    \19\ See, e.g., EDGX Rule 21.2(a) (referred to as Fund Shares
and exchange-traded notes in that rule); see also Cboe Options Rule
6.1, Interpretation and Policy .03.
---------------------------------------------------------------------------

    The proposed rule change reformats C2 Rule 6.4 regarding the
minimum increments for bids and offers on simple orders for options
traded on the Exchange into a table, which the Exchange believes is
easier to read, and moves certain information into Interpretations and
Policies .01 and .02. The only substantive change is to provide that
Mini-SPX Index (XSP) options, for as long as SPDR options (SPY)
participate in the Penny Pilot Program, will have a $0.01 increment for
all series rather than $0.01 for all series quoting less than $3 and a
$0.05 for all series quoting more than $3. The current minimum
increments for bids and offers for SPY options, which is an exchange-
traded fund that tracks the performance of 1/10th the value of the S&P
500 Index, is $0.01 regardless of whether option series is quoted
above, at, or below $3. Because both XSP options and SPY options prices
are based, in some manner, on 1/10th the price of the S&P 500 Index,
the Exchange believes that it is important that these products have the
same minimum increments for consistency and competitive reasons. This
is also consistent with rules of other exchanges.\20\ The proposed rule
change also modifies the paragraph formatting and moves certain
provisions to the Interpretations and Policies.
---------------------------------------------------------------------------

    \20\ See, e.g., Cboe Options Rule 6.42, Interpretation and
Policy .03.
---------------------------------------------------------------------------

    Current C2 Rule 6.34 describes current provisions regarding System
access and connectivity, and the proposed rule change moves relevant
provisions to proposed Rule 6.8. As stated in proposed Rule 6.8(a),
only authorized Users and associated persons of Users may establish
connectivity to and access the Exchange to submit orders and quotes and
enter auction response in accordance with the Exchange's System access
procedures, technical specifications, and requirements. This is
consistent with current Rule 6.34(a), (d), and (e), which provides only
authorized market participants (which may only be Trading Permit
Holders and associated persons with authorized access, as well as
Sponsored Users pursuant to C2 Rule 3.15) may access the Exchange
electronically to facilitate quote and order entry as well as auction
processing, in accordance with Exchange-prescribed technical
specifications (to the extent any agreement is required to be signed,
as indicated in current Rule 6.34(d), that would be indicated in such
specifications).
    Proposed Rule 6.8(b) describes EFIDs. A Trading Permit Holder may
obtain one or more EFIDs from the Exchange (in a form and manner
determined by the Exchange). The Exchange assigns an EFID to a Trading
Permit Holder, which the System uses to identify the Trading Permit
Holder and clearing number for the execution of orders and quotes
submitted to the System with that EFID. Each EFID corresponds to a
single Trading Permit Holder and a single clearing number of a Clearing
Trading Permit Holder with the Clearing Corporation. A Trading Permit
Holder may obtain multiple EFIDs, which may be for the same or
different clearing numbers. A Trading Permit Holder may only identify
for any of its EFIDs the clearing number of a Clearing Trading Permit
Holder that is a Designated Give Up or Guarantor of the Trading Permit
Holder as set forth in Rule 6.30. A Trading Permit Holder is able (in a
form and manner determined by the Exchange) to designate which of its
EFIDs may be used for each of its ports. If a User submits an order or
quote through a port with an EFID not enabled for that port, the System
cancels or rejects the order or quote. The proposed rule change
regarding EFIDs is similar to the current use of acronyms on the
Exchange and consistent with the use of EFIDs on EDGX. The Exchange
believes including a description of the use of EFIDs in the Rules adds
transparency to the Rules.
    Consistent with the definition of port above, the proposed rule
change adds Rule 6.8(c), which states a User may connect to the
Exchange using a logical port available through an API, such as the
industry-standard Financial Information eXchange (``FIX'') protocol or
Binary Order Entry (``BOE'') protocol (Cboe Market Interface will no
longer be available, as that is an API on C2's current system while BOE
is an API available on the new technology platform). Users may use
multiple logical ports. Additionally, this functionality is similar to
bandwidth packets currently available on C2, as described in current
Rule 6.35 (and therefore which the proposed rule change deletes).
Bandwidth packets restrict the maximum number of orders and quotes per
second in the same way logical ports do, and Users may similarly have
multiple logical ports as they may have bandwidth packets to
accommodate their order and quote entry needs. The Exchange believes it
is reasonable to not limit bulk order ports, as the purpose of those
ports is to submit message orders in bulk. As discussed below, the
Exchange will be able to otherwise mitigate message traffic as
necessary.
    Proposed Rule 6.9 describes the entry of orders. Users can enters
into the System, or cancel previously entered orders, from 7:30 a.m.
until market close, subject to the following requirements and
conditions:
    (a) Users may transmit to the System multiple orders at a single
price level or multiple price levels;
    (b) Each order a User submits to the Exchange must contain the
minimum information identified in the Exchange's order entry
specifications;
    (c) The System timestamps an order upon receipt, which determines
the time ranking of the order for purposes of processing the order; and
    (d) For each System Security, the System transmits to OPRA for
display the aggregate size of all orders in the System eligible for
display at the best price to buy and sell.
    (e) After market close, Users may cancel orders with Time in Force
of GTC or GTD that remain on the book until 4:45 p.m.
    Pursuant to current Rule 6.11(a), the Exchange begins accepting
order and quotes no earlier than 2:00 a.m. Chicago time, so the
proposed change amends this time to 7:30 a.m. Eastern time to be
consistent with EDGX.\21\ The Exchange notes C2 currently begins
accepting orders and quotes at approximately 6:30 a.m. Chicago time,
which is consistent with the proposed rule change, and thus the
proposed rule change will not modify the time at which the Exchange
begins accepting orders and quotes. The provisions in paragraphs (a)
through (d) above are consistent with current C2 System functionality,
and the Exchange believes adding these provisions to the Rules provides
additional transparency for market participants. They are also
substantively the same as EDGX rules.\22\ Paragraph (e) above provides
Users with additional flexibility to manage their orders that remain in
the book following the market close. Cancelling a GTC or GTD order at
4:30 p.m. has the same

effect as cancelling that order at 7:30 a.m. the following day--
ultimately, it accommodates the User's goal of cancelling an order
prior to it potentially executing during the Opening Process the
following morning.
---------------------------------------------------------------------------

    \21\ See EDGX Rule 21.7(a).
    \22\ See EDGX Rule 21.6(a) through (d).
---------------------------------------------------------------------------

    Proposed C2 Rule 6.10 states the Exchange may determine to make
certain order types, Order Instructions, and Times in Force not
available for all Exchange systems or classes. This provision is
consistent with current C2 Rule 6.10, which provides the Exchange with
similar flexibility. As discussed above, the proposed rule change moves
definitions of order types that will be available on C2 following the
technology migration to proposed C2 Rule 1.1. The proposed rule change
deletes all-or-none and market-on-close orders from Rule 6.10, as they
will no longer be available on C2 following the technology
migration.\23\ Additionally, the proposed rule change maintains a
general definition of complex order in proposed C2 Rule 1.1 (as
discussed above), but deletes the specific types of complex orders set
forth in current Rule 6.10(d) (i.e. spread order, combination order,
straddle order, strangle order, ratio order, butterfly spread orders,
box/roll spread orders, collar orders and risk reversals). While these
types of orders will continue to be permitted, the Exchange does not
believe it is necessary to limit complex orders to these specific
definitions, as investors may determine complex orders of other types
are more appropriate with their investment strategies. The EDGX rules
do not contain similar definitions and instead only contain a general
definition of complex orders. The proposed rule change moves the
provisions in Interpretation .01(A) and (C) ((B) is deleted, as it
relates to an order type that will no longer be available) to Rule
6.12(c), which will consolidate all provisions regarding order handling
in a single location in the Rules.
---------------------------------------------------------------------------

    \23\ The proposed rule change makes conforming changes
throughout the rules to delete references to these order types and
provisions solely related to these order types.
---------------------------------------------------------------------------

    The proposed rule change deletes current Rule 6.11 regarding the
opening process on C2, as that opening process will not be available on
C2 following the technology migration. Proposed Rule 6.11 describes the
opening process that will apply to C2 following the technology
migration, which is substantively the same as the current opening
process on EDGX.\24\ The proposed opening process is generally similar
to the current C2 opening process, as it provides for a pre-opening
period and a determination of an opening price subject to certain
restrictions to ensure the opening trading price for a series is
reasonable and not too far away from the market price for a series.
Additionally, the proposed process is used following a trading halt.
---------------------------------------------------------------------------

    \24\ See EDGX Rule 21.7.
---------------------------------------------------------------------------

    Proposed Rule 6.11(a) describes the order entry period. The System
accepts orders and quotes (including GTC and GTD orders remaining on
the Book from the previous trading day) for inclusion in the opening
process (the ``Opening Process'') beginning at 7:30 a.m. and continues
to accept market and limit orders and quotes until the time when the
System initiates the Opening Process in that option series (the ``Order
Entry Period''). The System does not accept IOC or FOK orders prior to
the completion of the Opening Process. The System accepts but does not
enforce MTP Modifiers during the Opening Process. Complex orders will
not participate in the Opening Process described in proposed Rule 6.11,
and instead may participate in the COB Opening Process described in
proposed Rule 6.13(c). The System converts all ISOs received prior to
the completion of the Opening Process into non-ISOs. Orders entered
during the Order Entry Period are not eligible for execution until the
opening trade occurs, as described below. Pursuant to current C2 Rule
6.11(a), the System begins accepting orders and quotes no earlier than
2:00 a.m. central time (that time is currently set to 7:30 a.m. eastern
time). The Exchange believes beginning the order entry period at 7:30
a.m. eastern time will provide Users with sufficient time to submit
orders and quotes prior to the beginning of the Opening Process. This
time is the same as when the order entry period on C2 (and EDGX)
currently begins. C2 currently also does not accept IOC or FOK orders
during the pre-opening period (see current Rule 6.11(a)(1)), and it
also does not accept ISOs (see current Rule 6.11(a)(1)) (rather than
convert them to non-ISOs). The proposed functionality to convert ISOs
to non-ISOs is the same as functionality that exists on EDGX today, and
the Exchange believes this may increase the opportunity for execution
of these orders during the Opening Process.
    Following the technology migration, the C2 System will not have
functionality available to disseminate opening messages as it does
today, so the proposed rule change deletes current Rule 6.11(a)(2).
Additionally, when the Opening Process begins, the System will not
disseminate a notice as it does today, so the proposed rule change
deletes current Rule 6.11(b) and (c)(2).
    Following the technology migration, the Opening Process will be
initiated at a similar time as it is today on C2. Proposed Rule 6.11(a)
states after a time period (which the Exchange determines for all
classes) following the first transaction in the securities underlying
the options on the primary market that is disseminated (``First Listing
Market Transaction'') after 9:30 a.m. with respect to Equity Options,
or following 9:30 a.m. with respect to Index Options, the related
option series open automatically in a random order, staggered over
regular intervals of time (the Exchange determines the length and
number of these intervals for all classes) pursuant to proposed
subparagraphs (2) through (5). This is substantively the same as EDGX
Rule 21.7(a). The proposed times will be the same for all classes of
Equity Options, and all classes of Index Options, unlike currently on
C2 (see current Rule 6.11(b)), where the opening of certain equity
classes is triggered by time rather than the First Listing Market
Transaction, and the opening of certain index classes is triggered by
the receipt of a disseminated index value. Additionally, current C2
Rule 6.11(c) provides for a similar Exchange-configurable delay before
a series opens and provides for series to open in a random, staggered
order over Exchange-determined time intervals.
    Proposed Rule 6.11(a)(2) describes how the new C2 System will
calculate the opening price of a series. The System determines a single
price at which a particular option series will be opened (the ``Opening
Price'') within 30 seconds of the First Listing Market Transaction or
9:30 a.m., as applicable. If there are no contracts in a series that
would execute at any price, the System will open the series for trading
without determining an Opening Price. The Opening Price, if determined
to be valid as described below, of a series will be:
    (a) If there is both an NBB and NBO, the midpoint of the NBBO (if
the midpoint is a half increment, the System rounds down to the nearest
minimum increment (the ``NBBO Midpoint'');
    (b) if the NBBO Midpoint is not valid, the last disseminated
transaction price in the series after 9:30 a.m. (the ``Last Print'');
or
    (c) if the NBBO Midpoint and the Last Print are not valid, the last
disseminated transaction in the series from the previous trading day
(the ``Previous Close'').
    If the NBBO Midpoint, Last Print, and Previous Close are not valid,
the

Exchange in its discretion may extend the Order Entry Period by up to
30 seconds or open the series for trading.
    For purposes of validating the Opening Price:
    (a) the NBBO Midpoint, the Last Print, or the Previous Close is a
valid price if it is not outside the NBBO, and the price is no more
than the following Minimum Amount away from the NBB or NBO for the
series:

------------------------------------------------------------------------
                                                                Minimum
                             NBB                                 amount
------------------------------------------------------------------------
Below $2.00..................................................      $0.25
$2.00 to $5.00...............................................       0.40
Above $5.00 to $10.00........................................       0.50
Above $10.00 to $20.00.......................................       0.80
Above $20.00 to $50.00.......................................       1.00
Above $50.00 to $100.00......................................       1.50
Above $100.00................................................       2.00
------------------------------------------------------------------------

or
    (b) the Last Print or Previous Close is a valid price if there is
no NBB and no NBO, or there is a NBB (NBO) and no NBO (NBB) and the
price is equal to or greater (less) than the NBB (NBO).
    While these conditions to determine the validity of an opening
price differ than the opening conditions currently applied on C2, the
Exchange believes application of the proposed conditions will still
determine a reasonable and fair opening price for series on C2. The
proposed process to determine and validate an Opening Price is
substantively the same as the process currently used on EDGX.\25\
---------------------------------------------------------------------------

    \25\ See EDGX Rule 21.7(a)(1) and (2).
---------------------------------------------------------------------------

    Proposed Rule 6.11(a)(4) states after establishing a valid Opening
Price, the System matches orders and quotes in the System that are
priced equal to or more aggressively than the Opening Price in
accordance with priority applicable to the class pursuant to Rule 6.12.
In other words, the System allocates orders and quotes in a class
during the Opening Process using the same allocation from Rule 6.12(a)
the Exchange applies to the class intraday. Matches occur until there
is no remaining volume or an imbalance of orders. All orders and quotes
(or unexecuted portions) matched pursuant to the Opening Process will
be executed at the Opening Price. The System enters any non-executed
orders and quotes (or unexecuted portions) into the Book in time
sequence, where they may be processed in accordance with Rule 6.12. The
System cancels any OPG orders (or unexecuted portions) that do not
execute during the Opening Process. Proposed subparagraph (a)(5) states
if the Exchange opens a series for trading when the NBBO Midpoint, Last
Print, and Previous Close are not valid as described above, the System
enters non-executed orders and quotes (or unexecuted portions) into the
Book in time sequence, where they may be processed in accordance with
Rule 6.12. This is similar to the opening rotation period described in
current Rule 6.11(c) and Interpretation and Policy .01.\26\ While EDGX
and C2 have different matching algorithms consistent with their market
models, the proposed opening process represents a fair and objective
manner to match orders during the opening. Additionally, proposed Rule
6.11 indicates the opening process will generally occur within 30
seconds (or an extended time at the discretion of the Exchange as noted
above), while current Rule 6.11 indicates the opening process generally
must occur within 60 seconds (subject to various opening conditions).
---------------------------------------------------------------------------

    \26\ The Exchange does not intend to have a different algorithm
apply at the open and intraday, and therefore proposes to delete
current Rule 6.11, Interpretation and Policy .01.
---------------------------------------------------------------------------

    Proposed Rule 6.11(a)(5) provides if the Exchange opens a series
for trading when the NBBO Midpoint, Last Print, and Previous Close are
not valid as described above, the System enters non-executed orders and
quotes (or unexecuted portions) into the Book in time sequence, where
they may be posted, cancelled, executed, or routed in accordance with
proposed Rule 6.12. This is similar C2's current authority to compel
opening in a series even if the opening conditions are not met, as set
forth in current Rule 6.11(e).
    Proposed Rule 6.11(b) describes how the Opening Process will be
used to reopen trading following a halt. The Opening Process following
a trading halt will be the same as the one used for regular trading (as
described above), except as modified by proposed paragraph (b).
Proposed Rule 6.11(b)(1) states there will be an Order Entry Period
that begins immediately when the Exchange halts trading in the series
if there is a Regulatory Halt (i.e. if the primary market for the
applicable underlying security declares a regulatory trading halt,
suspension, or pause with respect to such security); however, there
will be no Order Entry Period if the Exchange halts for another reason.
This is consistent with current Rule 6.11(f), which permits the
Exchange to shorten or eliminate the pre-opening period after a halt.
Proposed Rule 6.11(b)(2) states the System queues a User's open orders
upon a Regulatory Halt, unless the User entered instructions to cancel
its open orders upon a Regulatory Halt, for participation in the
Opening Process following the Regulatory Halt. The System cancels a
User's open orders upon a halt that is not a Regulatory Halt. This
functionality will provide Users with additional flexibility to
instruct the System how to handle their orders in the event of a
Regulatory Halt. Following a trading halt, the System opens a series
once the primary market lifts the Regulatory Halt or upon the
Exchange's determination that the conditions that led to the halt are
no longer present or that the interests of a fair and orderly market
are best served by a resumption of trading, as described in proposed
Rule 6.11(b)(3). Pursuant to proposed Rule 6.11(b)(4), the System
determines the Opening Price within 30 seconds of the Regulatory Halt
or other trading halt being lifted. The Exchange believes this proposed
process for opening following a halt will permit C2 to reopen as
quickly as possible and in a fair and orderly manner following a halt.
The proposed rule change regarding how the System will open following a
trading halt is substantively similar to the Opening Process that may
be used following a trading halt described in EDGX Rule 21.7(a).
    The proposed rule change moves current Rule 6.11(e) regarding the
Exchange's ability to deviate from the standard opening procedure to
proposed Rule 6.11(c).
    Current C2 Rule 6.11 may be used for closing; however, the proposed
rule change only applies to openings. Because C2 generally does not use
its current process for a closing, the Exchange does not believe the
fact that the proposed process may only be used for openings following
the technology migration will impact trading on C2. Therefore, the
proposed rule change deletes current C2 Rule 6.11(g).
    The proposed rule change moves current Rule 6.11, Interpretation
and Policy .03 regarding how the System handles market orders if the
underlying security is in a limit up-limit down state during the
opening process to proposed Rule 6.11(d).
    Proposed Rule 6.11 is substantively the same as EDGX Rule 21.7, and
the Exchange believes the proposed opening process (based on current
use on EDGX) is a fair and orderly way to open series on C2 following
the technology migration.
    The proposed rule change deletes current Rule 6.11, Interpretation
and Policy .02 regarding Exchange determinations made pursuant to Rule
6.11, as that is replaced by proposed Rule 1.2.
    Proposed Rule 6.12 describes how the System will process, display,
prioritize,

and execute orders and quotes entered into the Book. Current C2 Rule
6.12 provides orders and quotes may be allocated pursuant to price-time
or pro-rata, and those two options will also be available on the new
System. The proposed rule change revises the description to be similar
to EDGX and BZX Rules 21.8. Proposed Rule 6.12(a)(1) states resting
orders and quotes \27\ in the Book with the highest bid and lowest
offer have priority.\28\ Proposed Rule 6.12(a)(2) states if there are
two or more resting orders or quotes at the best price, the Exchange
will determine for each class whether the time or pro-rata allocation
applies. Pursuant to time priority (i.e. price-time), the System
prioritizes orders and quotes at the same price in the order in which
the System receives them (i.e. in time priority).\29\ Pursuant to pro-
rata priority, the System allocates orders and quotes proportionally
according to size (i.e. in a pro-rata basis).\30\ All classes on EDGX
are allocated in a pro-rata manner; however, current C2 rules permit
the Exchange to determine for each class whether price-time or pro-rata
will apply, and the proposed rule change maintains that flexibility.
---------------------------------------------------------------------------

    \27\ Displayed orders and quotes always have priority over
undisplayed orders and quotes, which is consistent with current C2
functionality. See current Rule 6.12(c)(1) and proposed Rule
6.12(a)(3). Since all-or-none orders will no longer be available on
C2 following the technology migration, the only orders that will not
be displayed on C2 are the reserve portions of Reserve Orders.
    \28\ See current C2 Rule 6.12(a)(1) and (2) (under both
allocation algorithms, orders and quotes are first prioritized based
on price); see also EDGX Rule 21.8(b).
    \29\ See current C2 Rule 6.12(a)(1); see also BZX Rule 21.8(a).
    \30\ See current C2 Rule 6.12(a)(2); see also EDGX Rule 21.8(c).
---------------------------------------------------------------------------

    Currently on C2, with respect to the pro-rata allocation algorithm,
the System allocates contracts to the first resting order or quote
proportionally according to size (based on the number of contracts to
be allocated and the size of the resting orders and quotes). Then, the
System recalculates the number of contracts to which each remaining
resting order and quote is afforded proportionally according to size
(based on the number of remaining contracts to be allocated and the
size of the remaining resting orders and quotes) and allocates
contracts to the next resting order or quote. The System repeats this
process until it allocates all contracts from the incoming order or
quote. Following the System migration, the System instead will allocate
executable quantity to the nearest whole number, with fractions \1/2\
or greater rounded up (in size-time priority) and fractions less than
\1/2\ rounded down. If the executable quantity cannot be evenly
allocated, the System distributes remaining contracts one at a time in
size-time priority to orders that were rounded down. The Exchange
believes this is a fair, objective process and simple systematic
process to allocate ``extra'' contracts when more than one market
participant may be entitled to those extra contracts after rounding,
and it is consistent with EDGX Rule 21.8(c).
    Proposed Rule 6.12(a)(3) states displayed orders have priority over
nondisplayed orders. This is consistent with current C2 Rule
6.12(c)(1). Following migration, the only nondisplayed orders will be
the reserve portions of reserve orders (as discussed above, all-or-none
orders will no longer be available).
    The proposed rule change deletes current C2 Rule 6.12(a)(3) and
(b), which permit the Exchange to apply customer priority, trade
participation rights, or additional priority overlays (small order and
market turner) to classes. The Exchange does not currently, and does
not intend to, apply any of these priority overlays to any class.
Therefore, it is not necessary to include these Rules in the C2
Rulebook, and deleting these rules will have no impact on C2
trading.\31\ The proposed rule change makes conforming changes
throughout the rules to delete references to these priority overlays.
---------------------------------------------------------------------------

    \31\ The Exchange notes EDGX Rule 21.8 includes customer
priority and trade participation right overlays.
---------------------------------------------------------------------------

    Proposed Rule 6.12(b) describes a new Price Adjust process, which
is a re-pricing mechanism offered to Users on EDGX.\32\ As discussed
above, orders designated to be subject to the Price Adjust process or
not designated as Cancel Back (and thus not subject to the Price Adjust
process), will be handled pursuant to proposed Rule 6.12(b).\33\ If an
order is subject to the Price Adjust process, the System ranks and
displays a buy (sell) order that, at the time of entry, would lock or
cross a Protected Quotation of the Exchange or another Exchange at one
minimum price increment below (above) the current NBO (NBB).
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    \32\ See EDGX Rule 21.1(i).
    \33\ Under EDGX rules, the price adjust process is not the
default setting for orders, like it will be for C2. However, EDGX
Users still have the option to use or not use the price adjust
process with various order instructions. Therefore, this is not a
significant difference.
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    If the NBBO changes so that an order subject to Price Adjust would
not lock or cross a Protected Quotation, the System gives the order a
new timestamp and displays the order at the price that locked the
Protected Quotation at the time of entry. All orders the System re-
ranked and re-displayed pursuant to Price Adjust retain their priority
as compared to other orders subject to Price Adjust based upon the time
the System initially received such orders. Following the initial
ranking and display of an order subject to Price Adjust, the System
will only re-rank and re-display an order to the extent it achieves a
more aggressive price. The System adjusts the ranked and displayed
price of an order subject to Price Adjust once or multiple times
depending upon the User's instructions and changes to the prevailing
NBBO. A limit order subject to the Price Adjust process will not be
displayed at any price worse than its limit price. This re-pricing
mechanism (in addition to the proposed Cancel Back instruction
described above) is an additional way in which C2 will ensure
compliance with locked and crossed market rules in Chapter 6, Section
of the C2 Rulebook and is substantively the same as EDGX Rule 21.1(i).
It also provides Users with additional flexibility regarding how they
want the System to handle their orders.
    Proposed Rule 6.12(c) describes how the System will handle orders
in additional circumstances. Proposed subparagraph (1) states, subject
to the exceptions contained in Rule 6.82(b), the System does not
execute an order at a price that trades through a Protected Quotation
of another options exchange. The System routes an order a User
designates as routable in compliance with applicable Trade-Through
restrictions. The System cancels or rejects any order not eligible for
routing or the Price Adjust process that is entered with a price that
locks or crosses a Protected Quotation of another options exchange.
C2's System currently will not execute orders at trade-through prices,
consistent with Chapter 6, Section E of the Rules. This provision is
substantively the same as EDGX Rule 21.6(e) and (f).
    Additionally, the proposed rule change modifies the handling of
stop orders to state the System cancels or rejects a buy (sell) stop or
stop-limit order if the NBB (NBO) at the time the System receives the
order is equal to or above (below) the stop price, and accepts a buy
(sell) stop or stop-limit order if the consolidated last sale price at
the time the System receives the order is equal to or above (below) the
stop price.\34\ The Exchange believes comparing the stop price of a
stop or

stop-limit order to the NBBO and last consolidated sale price rather
than prices available on the Exchange is appropriate, as the NBBO
better reflects the market price of the series. This is similar to
various price protections in the rules, as discussed below, that
compare order prices to national prices rather than Exchange prices.
This is also the same as EDGX Rule 21.1(d)(11) and (12), which provide
that stop and stop-limit orders on EDGX compare the stop price to the
NBBO and last consolidated sale price. The C2 System following the
technology migration will be unable to compare the stop price of a stop
or stop-limit order to the last consolidated sale price upon receipt of
the order, which is why the order will still be accepted even if the
stop price is above (below) the last consolidated sale price when the
System receives it.
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    \34\ Current description of the handling of stop orders is in
current C2 Rule 6.11(i), which is being deleted.
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    Proposed Rule 6.12(c)(3) states the System cancels or rejects a GTC
or GTD order in an adjusted series.\35\ Pursuant to Rule 5.7, due to a
corporate action by the issuer of the underlying, OCC may adjust the
price of an underlying security. After a corporate action and a
subsequent adjustment to the existing options, OPRA and OCC identify
the series in question with a separate symbol consisting of the
underlying symbol and a numerical appendage. As a standard procedure,
exchanges listing options on an underlying security that undergoes a
corporate action resulting in adjusted series will list new standard
option series across all appropriate expiration months the day after
the existing series are adjusted. The adjusted series are generally
actively traded for a short period of time following adjustment, but
prices of those series may have been impacted by the adjustment. As a
result, any GTC or GTD orders submitted prior to the adjustment may no
longer reflect the market price of the adjusted series, as the prices
of the GTC or GTD orders do not factor in the adjustment. The Exchange
believes any executions of such GTC and GTD orders in adjusted series
may be at erroneous prices, and thus believes it is appropriate for the
System to cancel these orders, which will permit Users to resubmit
orders in the adjusted series at prices that reflect the adjustment and
to submit orders in the new series.
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    \35\ This is true on any trading day on which the adjusted
series continues to trade.
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    Proposed Rule 6.12(c)(4) states the System does not execute an
order with an MTP Modifier entered into the System against an order
entered with an MTP Modifier and the same Unique Identifier, and
instead handles them in accordance with Rule 1.1, as discussed above.
This is consistent with the definition of MTP Modifiers added to Rule
1.1 above and substantively the same as EDGX Rule 21.8(k).
    The proposed rule change moves provisions regarding how the System
handles market and stop orders during a limit up-limit down state from
current Rule 6.10, Interpretation and Policy .01 to proposed Rule
6.12(c)(5).
    The proposed rule change deletes current C2 Rule 6.12(c) related to
contingency orders. The Exchange does not believe the introductory
language and subparagraphs (c)(2) and (3) are necessary, as the order
instruction definitions discussed above and order handling instructions
below contain detail regarding how the System will handle orders
designated as stop, stop-limit, or reserve.\36\ The proposed rule
change moves the provision in subparagraph (c)(1) regarding priority of
displayed orders over nondisplayed orders to proposed Rule 6.12(a)(3),
as discussed above. Because all-or-none orders will no longer be
available following the technology migration, the proposed rule change
deletes subparagraph (c)(4), which relates to handling of all-or-none
orders.
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    \36\ Current C2 rules categorize all-or-none, market-on-close,
stop, stop-limit, FOK, IOC, OPG, and reserve orders as contingency
orders. As discussed above, the Exchange will no longer make all-or-
none and market-on-close orders available following the technology
migration. Additionally, the Exchange believes FOK, IOC, and OPG
relate to the time of execution of orders rather than a contingency,
and thus the proposed rule change categorizes these instructions as
Times-in-Force, as discussed above. Therefore, the only current
orders that could be deemed contingency under current rules are
stop, stop-limit, and reserve.
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    The proposed rule change deletes current Rule 6.12(e)(2), which
states if the price or quantity of one side of a quote is changed, the
unchanged side retains its priority position. Additionally, the
proposed rule change deletes the reference in Rule 6.12(e)(1) related
to the changed side of a quote. Current C2 functionality provides
Market-Maker with the ability to submit two-sided quotes, to which the
above provisions relates. Following the technology migration, there
will be no such functionality available. Market-Makers will submit
quotes using order functionality, but it will only permit one-sided
quotes to be input. Therefore, these provisions are no longer
applicable.
    The proposed rule change deletes current Rule 6.12(g) regarding a
complex order priority exception. Proposed Rule 6.13 (as described
below) describes the priority rules related to the execution of complex
orders, so current Rule 6.12(g) is not necessary. As further discussed
below, complex orders will trade with leg markets prior to trading with
other complex orders, and will never trade at the same price as the
SBBO, which is consistent with current Rule 6.12(g).\37\
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    \37\ See proposed C2 Rule 6.13(f)(2).
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    The proposed rule change adds proposed Rule 6.12(g), which states
options subject to a trading halt initiated pursuant to Rule 6.32 open
for trading following the halt at the time specified in Rule 6.11,
which is consistent with current Rule 6.11(f). Additionally, proposed
Rule 6.12(g) states when trading resumes, the System places orders and
quotes that do not execute during the Opening Process in the Book in
time priority and processes or executes them as described in Rule 6.12.
The Exchange believes this is a fair, objective process and simple
systematic process to prioritize orders following a trading halt, and
is consistent with EDGX Rule 21.8(j).
    Proposed Rule 6.13 modifies C2's current complex order
functionality to substantially conform to functionality that will be
available on C2's new System and is currently used on EDGX. Trading of
complex orders will be subject to all other Rules applicable to trading
of orders, unless otherwise provided in Rule 6.13 (which is currently
the case).
    The proposed rule change moves the definitions of COA and COB to
proposed paragraph (a). Additionally, the proposed rule change adds