adjustments in response to changes in the NBBO.
The Exchange's BBO Joins NBO
    The following information applies to each of the scenarios listed
below.
    Example. Assume the NBBO is $10.01 x $10.02 and the Exchange's BBO
is $10.01 x $10.03. Also assume that orders with a Post Only
instruction do not remove liquidity from the EDGA Book because the
value of an execution would not equal or exceed the value of an
execution if posted at its limit price, including the applicable fees
charged or rebates provided under proposed Rule 11.6(n)(4). The EDGA
Book contains the following buy orders, ranked in time order:
    Buyer One: $10.02 Book Only/Price Adjust instruction/displayed and
ranked at $10.01.
    Buyer Two: $10.02 Book Only/Single Re-Price instruction/displayed
and ranked at $10.01.
    Buyer Three: $10.02 Book Only/Hide Not Slide instruction/displayed
at $10.01 and ranked at $10.02.
    Scenario 1. Assume that Seller One enters a Limit Order with a Post
Only and Displayed instruction to sell at $10.02. Seller One's order
cannot remove liquidity pursuant to proposed Rule 11.6(n)(4) so it does
not execute in the System against Buyer Three's buy order. Rather, it
is displayed by the System on the EDGA Book at $10.02. The Exchange's
BBO narrows to $10.01 x $10.02. Buyer Three's ability to execute at
$10.02 is suspended to prevent later arriving sell orders priced at
$10.02 from violating Seller One's time priority at that price.
    Scenario 2. Assume the facts from above and that Seller Two enters
a Limit Order to sell at $10.02. This order does not execute against
Buyer Three because Buyer Three's ability to execute at $10.02 is
suspended because a contra-side order to sell at $10.02 is displayed on
the EDGA Book. Seller Two's offer is posted by the System to the EDGA
Book and joins the offer at $10.02 behind Seller One.
    Scenario 3. Assume the facts from above and next that Seller One
cancels its order. Buyer Three's ability to execute at $10.02 remains
suspended because a contra-side order to sell at $10.02 from Seller 2
remains displayed on the EDGA Book. Seller Two does not execute against
Buyer Three because Buyer Three's ability to execute at $10.02 is
suspended.
    Scenario 4. Assume the facts from above and next that Seller Three
enters a Limit Order to sell at $10.02. Seller Three does not execute
against Buyer Three because Buyer's Three's ability to execute at
$10.02 remains suspended. Seller Three's order is posted by the System
to the EDGA Book at $10.02 behind Seller Two.
Operation of Limit Orders with Displayed and Post Only Instructions
    The following information applies to each of the scenarios listed
below.
    Example No. 1. Assume the NBBO is $10.01 x $10.02 and the
Exchange's BBO is $10.01 x $10.02.
    Scenario No. 1. Buyer One enters a Limit Order with a Displayed and
Post Only instruction at $10.02. Buyer One's order will not execute at
$10.02 because an order with a Post Only instruction will not remove
liquidity from the EDGA Book at its limit price unless there is a
contra-side order to provide an execution, the value of which would
equal or exceed the value of an execution if posted at its limit price,
including the applicable fees charged or rebates. If Buyer One's Limit
Order is subject to the Hide Not Slide instruction, it will be
displayed by the System on the EDGA Book at $10.01 and ranked at
$10.02, the Locking Price. If Buyer One's Limit Order is subject to
either the Price Adjust or Single Re-Price instructions, it will not
execute and will be displayed and ranked by the System on the EDGA Book
at $10.01.
    Scenario No. 2. Assume that Buyer One instead enters a Limit Order
with a Displayed and Post Only instruction at $10.03. Also assume that
the value of an execution with one cent of price improvement would
equal or exceed the value of an execution if posted at its limit price,
including the applicable fees charged or rebates provided under
proposed Rule 11.6(n)(4). If Buyer One's order contains a Hide Not
Slide or Price Adjust instruction the order will be executed at 10.02.
    Example No. 2. For the following scenarios, assume the NBBO upon
order entry is $10.01 x $10.02. Also assume that orders with a Post
Only instruction

do not remove liquidity from the EDGA Book because the value of an
execution does not equal or exceed the value of an execution if posted
at its limit price, including the applicable fees charged or rebates
provided under proposed Rule 11.6(n)(4). Unless otherwise specified,
further assume that all Limit Orders with a Displayed and Post Only
instruction are Limit Orders to buy.
    Scenario No. 1. The Exchange BBO is $9.99 x $10.03. A Limit Order
to buy at $10.00 is entered into the System. The order is posted by the
System to the EDGA Book at $10.00. The order does not change the NBB;
but improves the Exchange BBO to $10.00 x $10.03.
    Scenario No. 2. The Exchange BBO is $9.99 x $10.03. A Limit Order
to buy at $10.02 is entered into the System and the User selected the
Price Adjust Process. If the buy order was displayed by the System on
the EDGA Book at its limit price, it would lock the NBO at $10.02 and,
hence, be considered a Locking Quotation. To avoid being a Locking
Quotation, the order is ranked and displayed by the System on the EDGA
Book at $10.01.
    Scenario No. 3. The Exchange BBO is $9.99 x $10.03. A Limit Order
to buy at $10.02 is entered into the System and the User elects the
Single Re-Price instruction. If displayed by the System on the EDGA
Book at its limit price, the order would lock the NBO at $10.02 and,
hence, be considered a Locking Quotation. To avoid being a Locking
Quotation, the order is ranked and displayed by the System on the EDGA
Book at $10.01 with no further price adjustments.
    Scenario No. 4. The Exchange BBO is $9.99 x $10.03. A Limit Order
to buy at $10.02 is entered into the System and the User elects that
the order Cancel Back should it become a Locking Quotation or Crossing
Quotation. If displayed on the EDGA Book at its limit price, the order
would lock the NBO at $10.02 and, hence, be considered a Locking
Quotation. The order is immediately canceled pursuant to the User's
instructions.
    Scenario No. 5. The Exchange BBO is $9.99 x $10.03. A buy order
priced at $10.02 is entered into the System. If displayed on the EDGA
Book at its limit price, the order would lock the NBO at $10.02 and,
hence, be considered a Locking Quotation. To avoid being a Locking
Quotation, order defaults to the Hide Not Slide instruction because the
User did not select either the Cancel Back, Price Adjust, or Single Re-
Price instructions, the order is displayed by the System on the EDGA
Book at $10.01, and ranked by the System at $10.02, the Locking Price.
Other Examples
    The following information applies to each of the scenarios listed
below.
    Example. Assume the NBBO is $10.00 x $10.01 and the Exchange's BBO
is $10.00 x $10.02. Also assume that orders with a Post Only
instruction do not remove liquidity from the EDGA Book because the
value of an execution does not equal or exceed the value of an
execution if posted at its limit price, including the applicable fees
charged or rebates provided under proposed Rule 11.6(n)(4). The
following buy orders are resting on the EDGA Book ranked in order of
time of arrival:
    Buyer One: $10.01 x 100 Book Only/Price Adjust instruction/
displayed and ranked by the System on the EDGA Book at $10.00.
    Buyer Two: $10.01 x 100 Book Only/Single Re-price instruction/
displayed and ranked by the System on the EDGA Book at $10.00.
    Buyer Three: $10.01 x 100 Book Only/Hide Not Slide instruction/
displayed by the System on the EDGA Book at $10.00 and ranked by the
System at $10.01
    Scenario No. 1. Seller One enters into the System a Limit Order to
sell 100 shares with a Post Only instruction at $10.01. Seller One's
order will be posted by the System to the EDGA Book at $10.01, updating
the Exchange's BBO to $10.00 x $10.01. Buyer Three's ability to execute
at $10.01 is suspended because a contra-side order to sell 100 shares
at $10.01 is now displayed by the System on the EDGA Book. Seller Two
enters a Limit Order to sell 100 shares at $10.01. Seller Two's order
may not execute in the System against Buyer Three's order because
Seller One currently has priority at that price. Accordingly, Seller
Two's order will be posted by the System to the EDGA Book at $10.01 and
ranked by the System behind Seller One. Seller One cancels its order.
Seller Two's order is now the Exchange's best offer at $10.01. Seller
Two's order would remain on the EDGA Book and not execute against Buyer
Three's order--Buyer Three's ability to execute at $10.01 continues to
be suspended because a contra-side order to sell 100 shares at $10.01
is displayed by the System on the EDGA Book.
    Scenario No. 2. Assume that Seller One instead enters into the
System a Limit Order to sell 100 shares at $10.01 without a Post Only
instruction. Seller One's order executes against Buyer Three's order at
$10.01.
    Scenario No. 3. Assume that Seller One instead enters into the
System a Limit Order to sell 500 shares at $10.00 without a Post Only
or Book Only instruction. Seller One's order executes 100 shares
against Buyer Three's order at $10.01, and then executes 100 shares
against Buyer One's order at $10.00, and lastly, executes 100 shares
against Buyer Two's order at $10.00. The remaining 200 shares of Seller
One's order are routed in accordance with proposed renumbered Rule
11.11.
    Scenario No. 4. Assume that Seller One instead enters into the
System a Limit Order to sell 500 shares with a Book Only instruction at
$10.00 and selects the Price Adjust Process. Seller One's order
executes 100 shares against Buyer Three's order at $10.01, and then
executes 100 shares against Buyer One's order at $10.00, and lastly,
executes 100 shares against Buyer Two's order at $10.00. The remaining
200 shares of Seller One's order are subject to the Price Adjust
instruction and are, therefore, ranked and displayed by the System on
the EDGA Book at $10.01.
    Scenario No. 5. Assume instead that prior to any contra-side sell
order being entered into the System, the NBBO updates to $10.00 x
$10.02. Buyer One's order is ranked and displayed by the System on the
EDGA Book at $10.01, and it, along with Buyer Three, establish a new
NBB. Buyer Three's order has execution priority ahead of Buyer One's
order.\59\ Buyer Two's order remains ranked and displayed by the System
at $10.00. The NBBO is now $10.01 x $10.02. Seller One enters into the
System a Limit Order to sell 100 shares at $10.01. Seller One's order
is executed against Buyer Three's order at $10.01.
---------------------------------------------------------------------------

    \59\ As described in more detail below, under proposed Rule
11.9(a)(2)(C), where such an order is re-ranked to the Locking Price
after a Locking Quotation clears, the System will re-rank and
display such orders at the Locking Price in time priority in the
following order: (i) ISO with a TIF instruction of Day that
establishes a new NBBO at the Locking Price; (ii) Limit Orders to
which the Hide Not Slide or Routed And Returned Re-Pricing
instruction has been applied; (iii) Limit Orders to which the Price
Adjust instruction has been applied; and (iv) orders with a Pegged
instruction. See infra section entitled ``Orders Re-Ranked upon
Clearance of a Locking Quotation''.
---------------------------------------------------------------------------

    Scenario No. 6. Assume instead that prior to any contra-side sell
order being entered into the System Buyer Four enters into the System
an ISO with a TIF instruction of Day to buy 100 shares at $10.01. Buyer
Four's order is displayed by the System on the EDGA Book at $10.01.\60\
Buyer Three's order is then

also displayed by the System on the EDGA Book at $10.01 behind Buyer
Four's order. Buyer One's order is also displayed by the System on the
EDGA Book at $10.01, behind Buyer Three's order and Buyer Four's order.
Buyer Two's order remains ranked and displayed by the System at $10.00.
Seller One enters into the System a Limit Order to sell 200 shares at
$10.01. Seller One's order executes 100 shares against Buyer Four's
order at $10.01, then executes 100 shares against Buyer Three's order
at $10.01.
---------------------------------------------------------------------------

    \60\ Buyer Four's order may be posted to the EDGA Book under
proposed Rule 11.8(c)(4), which states that a User entering an ISO
with TIF instruction of Day represents that such User has
simultaneously routed one or more additional limit orders marked
ISO, if necessary, to away Trading Centers to execute against the
full displayed size of any Protected Quotation for the security with
a price that is superior or equal to the limit price of the ISO
entered in the System. This is consistent with the ISO exception
under the Exchange Rule 11.10(f), which requires that ISOs be routed
to execute against all protected quotations with a price that is
better than or equal to the display price, rather than solely to
protected quotations for a security with a price that is superior to
the ISO's limit price. See also Question 5.02 in the Division of
Trading and Markets, Responses to Frequently Asked Questions
Concerning Rule 611 and Rule 610 of Regulation NMS (last updated
April 4, 2008) available at http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm.
---------------------------------------------------------------------------

ISO (Rule 11.8(c))
    Proposed Rule 11.8(c) would define an ISO as it is currently
defined in Rule 11.5(d)(1), but would also include additional language
to describe which instructions may be attached to an ISO and how the
System will treat such orders. Just as in Rule 11.5(d)(1), proposed
Rule 11.8(c) will continue to state that the System will accept
incoming ISOs (as such term is defined in Regulation NMS) and that
``[t]o be eligible for treatment as an ISO, the order must be: (i) A
Limit Order; (ii) marked ISO; and (iii) the User entering the order
must simultaneously route one or more additional Limit Orders marked
ISO, if necessary, to away markets to execute against the full
displayed size of any Protected Quotation for the security with a price
that is superior to the limit price of the ISO entered in the System.
Such orders, if they meet the requirements of the foregoing sentence,
may be executed at one or multiple price levels in the System without
regard to Protected Quotations at away Trading Centers consistent with
Regulation NMS (i.e., may trade through such quotations).''
    Like current Rule 11.5(d)(1), proposed Rule 11.8(c) would continue
to make clear to Members that the Exchange relies on the marking of an
order as an ISO when handling such order, and thus, it is the entering
Member's responsibility, not the Exchange's responsibility, to comply
with the requirements of Regulation NMS relating to ISOs.
    Proposed Rule 11.8(c)(4) provides that incoming ISOs may be
submitted during the Pre-Opening Session, Regular Session and the Post-
Closing Session. Proposed Rule 11.8(c)(1)-(4) would also state that an
incoming ISO will have a default TIF instruction of Day, unless the
User selects a TIF instruction of GTT or IOC. Incoming ISOs cannot
include a TIF instruction of FOK. An ISO with a Post Only and TIF
instruction of GTT or Day will be rejected without execution if, when
entered, it is immediately marketable against an order with a Displayed
instruction resting on the EDGA Book, unless the User included on the
ISO a Price Adjust, Hide Not Slide, or the Single Re-Price instruction.
The rule would also state that a User entering an ISO with TIF
instruction of Day represents that such User has simultaneously routed
one or more additional limit orders marked ISO, if necessary, to away
Trading Centers to execute against the full displayed size of any
Protected Quotation for the security with a price that is superior or
equal to the limit price of the ISO entered in the System.\61\ Any
unfilled portion of an ISO with a TIF instruction of GTT or Day will be
posted by the System to the EDGA Book at the ISO's limit price.
---------------------------------------------------------------------------

    \61\ The operation of an ISO with a TIF instruction of Day is
similar to the Post ISO order on the National Stock Exchange, Inc.
(``NSX''), but for the NSX stating that it will reject a Post ISO if
it is immediately marketable against a displayed order on the NSX
Book, while the Exchange retains such orders where they include a
Price Adjust, Hide Not Slide, or Single Re-Price instruction. See
NSX Rule 11.11(c)(8)(ii). The ISO exception under Exchange Rule
11.10(f) requires that ISOs be routed to execute against all
protected quotations with a price that is better than or equal the
display price, rather than solely to protected quotations for a
security with a price that is superior to the ISO's limit price. See
Question 5.02 in the Division of Trading and Markets, Responses to
Frequently Asked Questions Concerning Rule 611 and Rule 610 of
Regulation NMS (last updated April 4, 2008) available at http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm.
---------------------------------------------------------------------------

    Similar to proposed Rule 11.8(b) on Limit Orders, proposed Rule
11.8(c) would also describe the various re-pricing instructions a User
may attach to an ISO to comply with Rule 610 of Regulation NMS or Rule
201 of Regulation SHO where the ISO includes a Post Only and TIF
instruction of GTT or Day. An ISO with a TIF instruction of GTT or Day
as well as a Short Sale instruction that cannot be executed or
displayed by the System at its limit price at the time of entry into
the System because of the existence of a Short Sale Circuit Breaker,
will be automatically defaulted by the System to the Short Sale Price
Adjust instruction, unless the User affirmatively elects the Cancel
Back instruction, the Short Sale Price Sliding instruction or the Short
Sale Single Re-Price instruction.
    Inbound ISOs are not eligible for routing pursuant to Rule 11.9(b)
(proposed to be renumbered as Rule 11.11). However, proposed Rule
11.8(c) would permit a User to attach an instruction to an ISO that
would allow the ISO to bypass the System and be immediately routed by
the Exchange as an outbound ISO to an away Trading Center specified by
the User for execution. It is the entering Member's responsibility, not
the Exchange's responsibility, to comply with the requirements of
Regulation NMS relating to ISOs. The Exchange notes that this
functionality is currently provided for under Exchange Rule 11.5(d)(2)
as a ``Direct Intermarket Sweep Order'' (``Directed ISO''). The
Exchange proposes to no longer classify a Directed ISO as a standalone
order type because it believes the functionality of a Directed ISO is
more indicative of an instruction a User may attach to an ISO directing
the System to route the order to a specified Trading Center, rather
than a standalone order type.
MidPoint Peg Order (Rule 11.8(d))
    Exchange Rule 11.5(c)(7) currently defines a MidPoint Peg Order as
``[a] limit order whose price is automatically adjusted by the System
in response to changes in the NBBO to be pegged to the midpoint of the
NBBO.'' The Exchange proposes to move the description of the
functionality of a MidPoint Peg Order into proposed Rule 11.8(d) and to
include additional language describing and outlining the instructions
that may be included with a MidPoint Peg Order. The Exchange also
proposes to amend the definition to expressly state that a MidPoint Peg
Order may be a Market Order or a Limit Order. However, proposed Rule
11.8(d) makes clear that notwithstanding that a MidPoint Peg Order may
be a Market Order or a Limit Order, as set forth in proposed Rules
11.8(a) and 11.8(b), respectively, the operation of and available
instructions applicable to a MidPoint Peg Order are limited to those
contained in proposed Rule 11.8(d).
    Like current Rule 11.5(c)(7), proposed Rule 11.8(d) would state
that a MidPoint Peg Limit Order may only contain the following TIF
instructions: Day, FOK, IOC, or GTT. Any unexecuted portion of a
MidPoint Peg Limit Order with a Day or GTT instruction that is resting
on the EDGA Book will receive a new time stamp each time it is re-
priced by the System in response to changes in the midpoint of the
NBBO.
    A MidPoint Peg Order may include a limit price that would specify
the highest or lowest prices at which the MidPoint Peg Order to buy or
sell would be eligible to be executed. Specifically,

a MidPoint Peg Order with a limit price that is more aggressive than
the midpoint of the NBBO will execute at the midpoint of the NBBO or
better subject to its limit price.\62\ For example, assume the NBBO is
$10.10 by $10.18, resulting in a midpoint of $10.14, and there are no
orders resting on the EDGA Book. An order with a Non-Displayed
instruction to sell is entered with a limit price of $10.12 and is
posted non-displayed on the EDGA Book. A MidPoint Peg Order to buy with
a limit price of $10.15 is then entered and executes against the order
to sell at $10.12, a price better than the midpoint of the NBBO because
the MidPoint Peg order is able to receive price improvement subject to
its limit price. A MidPoint Peg Order will be ranked at the midpoint of
the NBBO where its limit price is equal to or more aggressive than the
midpoint of the NBBO.
---------------------------------------------------------------------------

    \62\ A MidPoint Peg Order will execute at prices better than the
midpoint of the NBBO where it is able to receive price improvement
subject to its limit price either upon entry or re-pricing.
---------------------------------------------------------------------------

    A MidPoint Peg Order may execute at its limit price or better where
its limit price is less aggressive than the midpoint of the NBBO. For
example, assume the NBBO is $10.01 by $10.02, resulting in a midpoint
of $10.015, and there are no orders resting on the EDGA Book. A
MidPoint Peg Order to buy is entered with a limit price of $10.01 and
posted non-displayed on the EDGA Book at $10.01, its limit price,
because its limit price precludes it from being posted at $10.015, the
midpoint of the NBBO. An order to sell at $10.01 is then entered and
executes against the MidPoint Peg Order to buy at $10.01. A MidPoint
Peg Order will be ranked at its limit price where its limit price is
less aggressive than the midpoint of the NBBO. Expressly stating at
which prices a MidPoint Peg Orders are ranked and may execute is
intended to provide additional clarity regarding the operation of the
MidPoint Peg Orders.
    Proposed Rule 11.8(d) would also state that a MidPoint Peg Order
may only be entered as a Round Lot or a Mixed Lot. A User may include a
Minimum Execution Quantity instruction on a MidPoint Peg Order.
MidPoint Peg Orders are not eligible for routing pursuant to Rule
11.9(b)(1) (proposed to be renumbered as Rule 11.11), unless routed
utilizing the RMPT routing strategy as defined in proposed renumbered
Rule 11.11(g)(20). The rule would also state that a MidPoint Peg Order
is not eligible for execution when a Locking Quotation or Crossing
Quotation exists. In such case, a MidPoint Peg Order would rest on the
EDGA Book and would not be eligible for execution in the System until a
Locking Quotation or Crossing Quotation no longer exists.
    MidPoint Peg Orders are defaulted by the System to a Non-Displayed
instruction. MidPoint Peg Orders are not eligible to include a
Displayed instruction. MidPoint Peg Orders may only be executed during
Regular Trading Hours.
    MidPoint Peg Orders will not trade with any other orders at a price
above the Upper Price Band or below the Lower Price Band.
MidPoint Discretionary Order (Rule 11.8(e))
    The Exchange currently defines and explains the functionality of a
MidPoint Discretionary Order in Rule 11.5(c)(17).\63\ The Exchange
proposes to renumber current Rule 11.15(c)(17) as proposed Rule 11.8(e)
but does not propose to amend the functionality of the MidPoint
Discretionary Order. However, the Rule will be reformatted to be
consistent with the Exchange's description of other order types to
clearly delineate the various aspects of the MidPoint Discretionary
Order. The MidPoint Discretionary Order would continue to be defined as
``[a] Market or Limit Order to buy (sell) that is pegged to the NBB
(NBO) with discretion to execute at prices up to (down to) and
including the midpoint of the NBBO.'' Notwithstanding that a MidPoint
Discretionary Order may also considered a Market or Limit Order, its
operation and available modifiers would be set forth in proposed Rule
11.8(e); proposed Rules 11.8(a) and (b) regarding Market and Limit
Orders would generally not apply to MidPoint Discretionary Orders.
---------------------------------------------------------------------------

    \63\ See Securities Exchange Act Release No. 67226 (June 20,
2012), 77 FR 38113 (June 26, 2012) (Notice of Filing and Immediate
Effectiveness to Amend EDGA Rules to Add the MidPoint Discretionary
Order).
---------------------------------------------------------------------------

    A MidPoint Discretionary Order with a limit price may only contain
a TIF of Day or GTT. MidPoint Discretionary Orders may only be a Round
Lot or Mixed Lot. MidPoint Discretionary Orders may only be submitted
during Regular Trading Hours. MidPoint Discretionary Orders are not
eligible for routing pursuant to proposed Rule 11.11.
    A MidPoint Discretionary Order that is a Limit Order to buy is
displayed at and pegged to the NBB, with discretion to execute at
prices up to and including the midpoint of the NBBO. A MidPoint
Discretionary Order to sell is displayed at and pegged to the NBO, with
discretion to execute at prices down to and including the midpoint of
the NBBO. A MidPoint Discretionary Order's displayed price and
discretionary range are bound by its limit price. A MidPoint
Discretionary Order to buy or sell with a limit price that is less than
the prevailing NBB or higher than the prevailing NBO, respectively, is
posted to the EDGA Book at its limit price. The displayed prices of
MidPoint Discretionary Orders are derived from the NBB or NBO, and
cannot independently establish the NBB or NBO. MidPoint Discretionary
Orders in stocks priced at $1.00 or more can only be executed in sub-
penny increments when they execute at the midpoint of the NBBO against
contra side MidPoint Peg Orders and against other MidPoint
Discretionary Orders. A new time stamp is created for a MidPoint
Discretionary Order to buy or sell each time its displayed price is
automatically adjusted based on a change in the NBB or NBO,
respectively. MidPoint Discretionary Orders are not eligible for
routing pursuant to Rule 11.11.
    Pursuant to proposed Rule 11.10(a)(3), a MidPoint Discretionary
Order to buy will be re-priced to the Upper Price Band where the price
of the Upper Price Band moves below an existing Protected Bid. A
MidPoint Discretionary Order to sell will be re-priced to the Lower
Price Band where the price of the Lower Price Band moves above an
existing Protected Offer. MidPoint Discretionary Orders will only
execute at their displayed prices and not within their discretionary
ranges when: (i) The price of the Upper Price Band equals or moves
below an existing Protected Bid; or (ii) the price of the Lower Price
Band equals or moves above an existing Protected Offer. When the
conditions in (i) or (ii) of the preceding sentence no longer exist,
MidPoint Discretionary Orders will resume trading against other orders
in their discretionary range and being displayed at and pegged to the
NBBO.
NBBO Offset Peg Order (Rule 11.8(f))
    The Exchange currently defines and explains the functionality of
the NBBO Peg Offset Order in Rule 11.5(c)(15).\64\ The Exchange
proposes to renumber

current Rule 11.15(c)(15) as proposed Rule 11.8(e) but does not propose
to amend the functionality of the NBBO Offset Peg Order. However, the
Rule will be reformatted to be consistent with the Exchange's
description of other order types to clearly delineate the various
aspects of the NBBO Offset Peg Order. The NBBO Offset Peg Order would
continue to be defined as ``[a] Limit Order that, upon entry, is
automatically priced by the System at the Designated Percentage (as
defined in Rule 11.21(d)(2)(D) (proposed to be renumbered as Rule
11.20(d)(2)(D)) away from the then current NBB (in the case of an order
to buy) or NBO (in the case of an order to sell), or if there is no NBB
or NBO at such time, at the Designated Percentage away from the last
reported sale from the responsible single plan processor.''
Notwithstanding that a NBBO Offset Peg Order is also considered a Limit
Order, as set forth in proposed Rule 11.8(b), its operation and
available instructions would be limited to those contained in proposed
Rule 11.8(e); proposed Rule 11.8(b) regarding Limit Orders would not
apply to NBBO Offset Peg Orders.
---------------------------------------------------------------------------

    \64\ See Securities Exchange Act Release No. 67960 (October 2,
2012), 77 FR 61463 (October 9, 2012) (SR-EDGA-2012-44) (notice of
filing and immediate effectiveness of the proposal to adopt the NBBO
Offset Peg Order) (``EDGA Adopting Release''); Securities Exchange
Act Release No. 68595 (January 7, 2013), 78 FR 2475 (January 11,
2013) (SR-EDGA-2012-47) (notice of filing and immediate
effectiveness to amend the NBBO Offset Peg Order); and Securities
Exchange Act Release No. 69876 (June 27, 2013), 78 FR 40257 (July 3,
2013) (SR-EDGA-2013-17) (notice of filing and immediate
effectiveness to amend the NBBO Offset Peg Order).
---------------------------------------------------------------------------

    Upon reaching the Defined Limit (as defined in Rule 11.21(d)(2)(F)
(proposed to be renumbered as Rule 11.20(d)(2)(F)), the price of an
NBBO Offset Peg Order bid or offer will be automatically adjusted by
the System to the Designated Percentage away from the then current NBB
or NBO, respectively, or if there is no NBB or NBO at such time, to the
Designated Percentage away from the last reported sale from the
responsible single plan processor. If an NBBO Offset Peg Order bid or
offer moves a specified number of percentage points away from the
Designated Percentage toward the then current NBB or NBO, the price of
such bid or offer will be automatically adjusted by the System to the
Designated Percentage away from the then current NBB or NBO. If there
is no NBB or NBO at such time, the order will be automatically adjusted
by the System to the Designated Percentage away from the last reported
sale from the responsible single plan processor. In the event that
pricing an NBBO Offset Peg Order at the Designated Percentage away from
the then current NBB or NBO, or, if there is no NBB or NBO, to the
Designated Percentage away from the last reported sale from the
responsible single plan processor, would result in the order exceeding
its limit price, the order will be cancelled or rejected.
    In the absence of an NBB or NBO and last sale reported by the
responsible single plan processor, the order will be cancelled or
rejected. If, after entry into the System, the NBBO Offset Peg Order is
priced based on the last sale reported by the responsible single plan
processor and such NBBO Offset Peg Order is established as the NBB or
NBO, the NBBO Offset Peg Order will not be subsequently adjusted in
accordance with this rule until either there is a new last sale
reported by the responsible single plan processor, or a new NBB or new
NBO is established by a national securities exchange. NBBO Offset Peg
Orders may only include a TIF instruction of Day. NBBO Offset Peg
Orders may only be entered as a Round Lot or Mixed Lot. NBBO Offset Peg
Orders are defaulted by the System to a Displayed instruction. NBBO
Offset Peg Orders are not eligible to include a Non-Displayed
instruction. Users may submit NBBO Offset Peg Orders to the Exchange
starting at the beginning of the Pre-Opening Session, but such orders
are not executable or automatically priced until after the first
regular way last sale on the relevant listing exchange for the
security, as reported by the responsible single plan processor. The
order expires at the end of the Regular Session.
    NBBO Offset Peg Orders are not eligible for routing pursuant to
Rule 11.9(b) (proposed to be renumbered as Rule 11.11). When a Crossing
Quotation exists, an NBBO Peg Offset Order will be automatically priced
by the System at the Designated Percentage (as defined in Rule
11.21(d)(2)(D) (proposed to be renumbered as Rule 11.20(d)(2)(D)) away
from the then current NBO (in the case of an order to buy) or NBB (in
the case of an order to sell). Notwithstanding the availability of the
NBBO Offset Peg Order functionality, a User acting as a Market Maker
remains responsible for entering, monitoring, and re-submitting, as
applicable, quotations that meet the requirements of Rule 11.21(d)
(proposed to be renumbered as Rule 11.20(d)). An NBBO Offset Peg Order
will receive a new time stamp each time it is re-priced in response to
changes in the NBB, NBO, or last reported sale.
Route Peg Order (Rule 11.8(g))
    The Exchange currently defines and explains the functionality of
the Route Peg Order under Rule 11.5(c)(14).\65\ The Exchange proposes
to renumber Rule 11.15(c)(14) as Rule 11.8(g) but does not propose to
amend the functionality of the Route Peg Order. However, the Rule would
be reformatted to be consistent with the Exchange's description of
other order types to clearly delineate the various aspects of the Route
Peg Order. The Route Peg Order would be defined as a non-displayed
Limit Order that is eligible for execution at the NBB for a buy order
and NBO for a sell order against an order that is in the process of
being routed to away Trading Centers with an order size equal to or
less than the aggregate size of the Route Peg Order interest available
at that price. Route Peg Orders are passive, resting orders on the EDGA
Book and do not remove liquidity. A Route Peg Order does not execute at
a price that is inferior to a Protected Quotation. Notwithstanding that
a Route Peg Order is also Limit Order, as set forth in proposed Rule
11.8(b), its operation and available instructions would be limited to
those contained in proposed Rule 11.8(f).
---------------------------------------------------------------------------

    \65\ See Securities Exchange Act Release No. 67726 (August 24,
2012), 77 FR 52771 (August 30, 2012) (SR-EDGA-2012-28) (Order
Approving Proposed Rule Change to Amend EDGA Rules to Add the Route
Peg Order).
---------------------------------------------------------------------------

    Proposed Rule 11.8(g) would delineate various aspects of the Route
Peg Order. Rule 11.8(g) would make clear that a Route Peg Order may
only have a TIF instruction of GTT or Day. Route Peg Orders are not
eligible to include a TIF instruction of IOC or FOK. Route Peg Orders
may only be entered as Round Lots or Mixed Lots. Route Peg Orders are
defaulted by the System to a Non-Displayed instruction. Route Peg
Orders are not eligible to include a Displayed instruction. A User may
specify a Minimum Execution Quantity instruction for a Route Peg Order.
Route Peg Orders may be entered, cancelled, and cancelled/replaced
prior to and during the Regular Session. Route Peg Orders are only
eligible for execution in a given security during the Regular Session,
except that, even after the commencement of the Regular Session, Route
Peg Orders are not eligible for execution: (i) In the Opening Session;
and (ii) until such time that orders in that security during the
Regular Session can be posted by the System to the EDGA Book. Any and
all remaining, unexecuted Route Peg Orders are cancelled at the
conclusion of the Regular Session. Route Peg Orders are not eligible
for routing pursuant to Rule 11.9(b)(2) (proposed to be renumbered as
Rule 11.11). A Route Peg Order is not eligible for execution when a
Locking Quotation or Crossing Quotation exists. In such case, a Route
Peg Order would rest on the EDGA Book and would not be eligible for
execution in the System until a Locking Quotation or Crossing Quotation
no longer exists.
Proposed Rule 11.9, Priority
    The Exchange proposes to renumber current Rule 11.8, Priority as
proposed Rule 11.9 and amend it to: (i) Outline

the priority of orders at certain price points; (ii) clarify the
priority of Limit Orders with a Reserve Quantity; and (iii) make
certain non-substantive, conforming and clarifying changes. The
Exchange does not propose to modify the current priority of orders at
the same price or the operation of the System. The Exchange simply
seeks to further outline current System functionality within the
Exchange's Rules. The Exchange believes the proposed amendments will
provide Members, Users, and the investing public with greater
transparency regarding how the System operates.
    Under Rule 11.9(a), orders of Users are first ranked and maintained
by the System on the EDGA Book according to their price. Orders at the
same price and of the same type are then ranked by the System depending
on the time they were entered into the System. The Exchange proposes to
amend Rule 11.9 to delineate, consistent with current System
functionality, how orders with certain instructions are to be ranked by
the System as well as how orders may be re-ranked when such orders
utilize instructions that cause them to be ranked by the System upon
clearance of a Locking Quotation.\66\ The Exchange also proposes to
clarify that, for purposes of priority under Rule 11.9(a)(2)(A): (i) An
ISO,\67\ the displayed price of a MidPoint Discretionary Order,\68\ and
NBBO Offset Peg Orders \69\ are to be treated as a Limit Order; \70\
and (ii) orders subject to a re-pricing instruction to comply with Rule
201 of Regulation SHO under proposed Rule 11.6(l)(2), including Market
Orders that are displayed on the EDGA Book pursuant to proposed Rule
11.8(a)(4)) and proposed re-numbered Rule 11.10(a)(3)(A), maintain the
same priority as Limit Orders at that price.
---------------------------------------------------------------------------

    \66\ For purposes of priority under proposed Rule 11.9(a)(2)(A)
and (B), the Exchange notes that orders of Odd Lot, Round Lot, or
Mixed Lot size are treated equally.
    \67\ See proposed Rule 11.8(c).
    \68\ See proposed Rule 11.8(e).
    \69\ See proposed Rule 11.8(f).
    \70\ See proposed Rule 11.8(b).
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General Priority
    Current Rule 11.8(a)(2) states, in sum, that the System shall
execute equally priced trading interest in time priority in the
following order: (i) Displayed size of limit orders; (ii) Non-displayed
limit orders and reserve orders; (iv)[sic] MidPoint Discretionary
Orders as set forth in Rule 11.5(c)(17) and the Discretionary range of
Discretionary Orders as set forth in current Rule 11.5(c)(13); and
(v)[sic] Route Peg Orders as set forth in current Rule 11.5(c)(14).
    The Exchange proposes to amend the above priority to state that it
applies to equally priced trading interest other than where orders are
re-ranked at the Locking Price after a Locking Quotation clears. The
Exchange also proposes to amend the description of order types under
proposed Rules 11.9(a)(2)(A)(i)-(iv) to be consistent with proposed
Rule 11.8, Order Types. As amended, proposed Rule 11.9(a)(2)(A) would
state that the System will execute equally priced trading interest
within the System other than where orders are re-ranked at the Locking
Price after a Locking Quotation clears in time priority in the
following order: (i) The portion of a Limit order with a Displayed
instruction; (ii) Limit Orders with a Non-Displayed instruction and the
Reserve Quantity of Limit Orders; (iii) MidPoint Discretionary Orders
executed within their Discretionary Range and Limit Orders executed
within their Discretionary Range; and (iv) Route Peg Orders.
Operation of General Priority
    Example. Assume the NBBO is $10.01 x $10.02 and the Exchange BBO is
$10.01 x $10.02. Also, assume that the displayed and Reserve Quantity
of each order have the same time stamp. The EDGA Book contains the
following buy orders, ranked in time order:
    Buyer One: $10.01 x 100 shares displayed/Reserve Quantity of 500.
    Buyer Two: $10.01 x 100 shares non-displayed.
    Buyer Three: $10.01 x 100 shares displayed/Reserve Quantity of 500.
    Seller One enters into the System a Limit Order to sell 1,000
shares at $10.01. Seller One's order first executes 100 shares against
the displayed quantity of Buyer One's order at $10.01, then executes
100 shares against the displayed quantity of Buyer Three's order at
$10.01, then executes 500 shares against the Reserve Quantity of Buyer
One's order at $10.01 (thus completely filling Buyer One's order), then
executes 100 shares against Buyer Two's order at $10.01 (thus
completely filling Buyer Two's order), and lastly, executes 200 shares
against the Reserve Quantity of Buyer Three's order at $10.01. Seller
One's order would be completely filled at this point, leaving 300
shares in Reserve Quantity for Buyer Three, which would be replenished
and displayed in accordance with Buyer Three's instructions.
Orders Re-Ranked Upon Clearance of a Locking Quotation
    Order priority also differs where buy (sell) orders utilize
instructions that result in their being re-ranked upon clearance of a
Locking Quotation. In such case, the System will re-rank and display
such orders at the Locking Price. The Exchange proposes to include
proposed Rule 11.9(a)(2)(C), which would state that, where such an
order is re-ranked to the Locking Price after a Locking Quotation
clears, the System will re-rank and display such orders at the Locking
Price in time priority in the following order: (i) ISO with a TIF
instruction of Day that establishes a new NBBO at the Locking Price;
(ii) Limit Orders to which the Hide Not Slide or Routed and Returned
Re-Pricing instruction has been applied; (iii) Limit Orders to which
the Price Adjust instruction has been applied; and (iv) orders with a
Pegged instruction. Orders not executed and remaining on the EDGA Book
after being re-ranked upon clearance of the Locking Quotation will be
executed in time priority under proposed Rule 11.9(a)(2)(A) described
above.
Operation of Priority for Orders Re-Ranked Upon Clearance of a Locking
Quotation
    Example. Assume the NBBO is 10.01 x 10.02 and the Exchange BBO is
10.01 x 10.03. The EDGA Book contains the following buy orders, ranked
in time order:
    Buyer One: $10.05 x 100 shares Primary Pegged instruction/displayed
and ranked at $10.01.
    Buyer Two: $10.02 x 100 shares Book Only/Price Adjust instruction/
displayed and ranked at $10.01.
    Buyer Three: $10.02 x 100 shares Book Only/Single Re-Price
instruction/displayed and ranked at $10.01.
    Buyer Four: $10.02 x 100 shares Book Only/Hide Not Slide
instruction/displayed at $10.01 and ranked at $10.02.
    Buyer Five: $10.03 x 100 shares MidPoint Peg/non-displayed at
$10.015, the midpoint of the NBBO.
    Scenario No. 1. Assume the NBO of $10.02 on an away Trading Center
is executed or cancelled. As a result, the Exchange is at the NBBO of
$10.01 x $10.03.
    Upon clearance of the Locking Quotation, Buyer Four's order is
displayed by the System on the EDGA Book at $10.02. The Exchange
established the new NBBO of $10.02 x $10.03. Buyer Two's order is
displayed by the System on the EDGA Book at $10.02 and given a new time
stamp

behind Buyer Four's order. Buyer One's order is displayed by the System
on the EDGA Book at $10.02 and given a new time stamp behind Buyers
Four and Two. Buyer Five's order remains non-displayed by the System on
the EDGA Book and is ranked at $10.025, the new midpoint of the NBBO,
and is provided a new time stamp. Buyer Three's order remains displayed
by the System on the EDGA Book at $10.01.
    Seller One enters into the System a Limit Order to sell 500 shares
at $10.01. Seller One's order is executed as follows: 100 shares
against Buyer Five's order at $10.025; 100 shares against Buyer Four's
order at $10.02; 100 shares against Buyer Two's order at $10.02; 100
shares against Buyer One's order at $10.02; and 100 shares against
Buyer Three's order at $10.01.
    Scenario No. 2. Buyer Six enters into the System an ISO buy order
with a limit price of $10.02 and a TIF instruction of Day. Buyer Six's
order is displayed by the System on the EDGA Book at $10.02 and locks
the NBBO. The Exchange's BBO is now $10.02 x $10.03 and the buy orders
will be ranked by the System as follows:
    Buyer Four's order is now displayed by the System on the EDGA Book
at $10.02, receives a new time stamp and is ranked behind Buyer Six.
Buyer Two's order is displayed by the System on the EDGA Book at
$10.02, receives a new time stamp and is ranked behind Buyers Six and
Four. Buyer One's order is displayed by the System on the EDGA book at
$10.02, receives a new time stamp and is ranked behind Buyers Six,
Four, and Two. The NBBO is updated to $10.02 x $10.02 resulting in a
locked market. Buyer Two's order remains displayed by the System on the
EDGA Book at $10.01. Buyer Five's order is not executable because the
NBBO is locked and MidPoint Peg Orders are not eligible for execution
during a locked market.
    Seller One enters into the System a Limit Order to sell 500 shares
at $10.01 and it is executed as follows: 100 shares against Buyer Six's
order at $10.02; 100 shares against Buyer Four's order at $10.02; 100
shares against Buyer Two's order at $10.02; 100 shares against Buyer
One's order at $10.02; and 100 shares against Buyer Three's order at
$10.01.
Reserve Quantity Priority
    The Exchange proposes to amend Rule 11.9(a)(6) to modify the
description of the priority of an order with a Reserve Quantity and to
amend certain terms to be consistent with the order type clarification
under proposed Rules 11.6 and 11.8.
    For both the Fixed Replenishment and Random Replenishment
instruction, the displayed quantity receives a new time stamp each time
it is replenished from the Reserve Quantity. The Reserve Quantity
retains the time stamp of its original entry. Current Rule 11.8(a)(6)
discusses the priority of the Reserve Quantity of an order and states
that ``[a] new time stamp is created both for the refreshed and
reserved portion of the order each time it is refreshed from reserve.''
The Exchange proposes to amend this description to state that a new
time stamp is created only for the displayed quantity of the order each
time it is replenished from Reserve Quantity. In addition, as discussed
above, proposed Rule 11.8(m)(1) states that a new time stamp is created
for the portion of the order with a Displayed instruction each time it
is replenished from the Reserve Quantity, while the Reserve Quantity
retains the time-stamp of its original entry.
    Example. Assume a Limit Order to buy 2,000 shares at $100 is
entered with a Displayed instruction for a quantity of 500 shares. The
order defaults to a Fixed Replenishment instruction of 500 shares,
equal to its initial displayed quantity. An inbound Market Order to
sell arrives for 490 shares and executes against the displayed quantity
of 500 shares. As per the Fixed Replenishment instructions, 500 shares
are deducted from the Reserve Quantity and added to the displayed
quantity of 10 shares. The now displayed 500 shares and remaining 10
shares are both given a new identical time stamp as of the time of
replenishment and displayed as a single order for 510 shares on the
EDGA Book.
Additional Clarifications
    The Exchange also proposes to make additional clarifying and
conforming changes to proposed Rule 11.9. First, the Exchange proposes
to add titles to Rules 11.9(a)(3)-(8). These titles are not intended to
alter the meaning of these subsections; they simply seek to assist the
reader in identifying the topic each subsection is to address. Second,
the Exchange proposes to replace the term, ``Market participants''
under Rule 11.9(a)(3) with the term ``Users.'' Lastly, the Exchange
proposes to update the cross-reference in Rule 11.9(a)(4) from Rule
11.5(e), Cancel/Replace Messages, to proposed Rule 11.10(e), Cancel
Replace Messages. As discussed below, the Exchange proposes to relocate
the text of Rule 11.5(e) and renumber it as Rule 11.10(e).
Organizational and Ministerial Changes to Rule 1.5, Rule 8.15, and
Chapter XI
    The Exchange also proposes to make a series of organizational,
conforming changes to internal references, and clarifying changes to
Rule 1.5, Rule 8.15, and Chapter XI. These changes are:
     Rules 1.5 and 8.15, update internal cross-references to
rules in Chapter XI to reflect the renumbering of certain rules;
     Rule 11.5(e), Cancel/Replace Messages, would be renumbered
and relocated to proposed Rule 11.10(e); \71\
---------------------------------------------------------------------------

    \71\ The Exchange also proposed to amend paragraph (e)(1) of
proposed renumbered Rule 11.10 to state that orders may only be
cancelled or replaced if the order has a TIF instruction other than
IOC and FOK and if the order has not yet been executed in its
entirety.
---------------------------------------------------------------------------

     The content of Rule 11.6, Units of Trading, would be
amended (described above) and included as a set of defined terms in
proposed Rule 11.6, Definitions, as Rule 11.6(s);
     The content of Rule 11.7, Price Variations, would be
relocated and included as a set of defined terms in proposed Rule 11.6,
Definitions, as Rule 11.6(i) (described above);
     Current Rule 11.8, Priority of Orders is to be amended and
renumbered as Rule 11.9 (described above).
    [cir] Exchange Rule 1.5(dd) defines ``Top of Book'' as ``the best-
ranked order to buy (or sell) in the EDGA Book as ranked pursuant to
Rule 11.8.'' As a result of Rule 11.8 being renumbered to Rule 11.9,
the Exchange proposes to amend the cross reference to Rule 11.8 in Rule
1.5(dd) to reflect Rule 11.9;
     Rule 11.9, Order Execution, would be renumbered as Rule
11.10;
     Rule 11.9(b), Routing, and 11.9(c), Priority of Routed
Orders, would be removed in their entirety from Rule 11.9 and relocated
to form a new standalone Rule 11.11, Routing to Away Trading Centers;
     Rules 11.9(d), Display of Automated Quotations, would be
renumbered as Rule 11.10(b);
     Rule 11.9(e), Self-Help, would be renumbered as Rule
11.10(c);
     Rule 11.9(f), Anti-Internalization Qualifier (``AIQ''),
would be renumbered as Rule 11.10(d) and renamed ``EdgeRisk Self Trade
Prevention (``ERSTP''). All referenced to ``AIQ'' would be replaced
with ``ERSTP'';
     Rule 11.9(g), Market Access, would be relocated and
renumbered as Rule 11.11(i);
     Rule 11.10, Trade Execution and Reporting, would be
renumbered and renamed as Rule 11.12, Trade Reporting. The Exchange
believes this name

change more accurately reflects to the requirements of the rule;
     Rule 11.11, Clearance and Settlement; Anonymity, would be
renumbered as Rule 11.13;
     Rule 11.12, Limitation of Liability, would be renumbered
as Rule 11.14;
     Rule 11.13, Clearly Erroneous Executions, would be
renumbered at Rule 11.15;
     Rule 11.14, Trading Halts Due to Extraordinary Market
Volatility, would be renumbered as Rule 11.16;
     Rule 11.15, Short Sales, would be renumbered and relocated
as Rule 11.10(a)(5);
     The content of Rule 11.16(a), Locking or Crossing
Quotations in NMS Stocks, would be relocated to Rule 11.6, Definitions.
The content of Rule 11.16(b), (c), and (d) would be relocated and
renumbered as Rule 11.10(f), Locking and Crossing Quotations in NMS
Stocks;
     Rule 11.17, Reserved, would be deleted;
     Rule 11.18, Registration of Market Makers, would be
renumbered as Rule 11.17;
     Rule 11.19, Obligations of Market Maker Authorized
Traders, would be renumbered at Rule 11.18;
     Rule 11.20, Registration of Market Makers in a Security,
would be renumbered as Rule 11.19;
     Rule 11.21, Obligations of Market Makers, would be
renumbered at Rule 11.20. Rule 11.21 would be entitled, ``Retail
Orders'' as described below; and
     Rule 11.22, Input of Accurate Information would be
relocated and renumbered as Rule. 11.5.
Order Execution (renumbered Rule 11.10)
    The Exchange also proposes to make a series of ministerial changes
to proposed Rule 11.10, Order Execution. First, the Exchange proposes
to amend Rule 11.10(a)(3)(A) to clarify that it includes orders with a
TIF instruction of FOK. Currently, proposed Rule 11.10(a)(3)(A) states
``where a non-routable buy (sell) order is entered into the System at a
price less (greater) than or equal to the Upper (Lower) Price Band,
such order will be posted to the EDGA Book or executed, unless (i) the
order that is an IOC Order, in which case it will be cancelled if not
executed, or (ii) the User has entered instructions to cancel the
order.'' As amended, subsection (i) of Rule 11.10(a)(3)(A) would state
that an order with a TIF of IOC or FOK will be cancelled and not posted
to the EDGA Book in such circumstances.
    Second, the Exchange proposes to amend proposed Rule 11.10(a)(4) to
clarify the treatment of orders upon receipt by the System. Proposed
Rule 11.9(a)(4) currently states that ``[a]n incoming order shall first
attempt to be matched for execution against orders in the EDGA Book.''
The Exchange proposes to revise this language to state that the order
will be matched for execution against orders on the EDGA Book unless
the User instructs the System to bypass the EDGA Book and route the
order to an away Trading Center in accordance with Exchange Rules. This
amendment allows a User to specify instructions: (i) To route to an
away Trading Center; or (ii) for the order to be posted to the EDGA
Book and not immediately execute against resting liquidity upon receipt
by the System.
    Third, the Exchange proposes to amend current Rule 11.9(a)(2)
(renumbered as Rule 11.10(a)(2) to clarify the treatment of orders
entered during the Pre-Opening Session or Post-Closing Session. Current
Rule 11.9(a)(2) states that for any execution to occur during Regular
Trading Hours, the price must be equal to or better than the Protected
NBBO, unless the order is marked ISO or unless the execution falls
within another exception set forth in Rule 611(b) of Regulation NMS.
Current Rule 11.9(a)(2) also states that for any execution to occur
during the Pre-Opening Session or the Post-Closing Session, the price
must be equal to or better than the highest bid or lowest offer. The
Exchange proposes to clarify that an execution will occur during the
Pre-Opening Session or the Post-Closing Session at a price equal to or
better than the highest bid or lowest offer on the EDGA Book or
disseminated by the responsible single plan processor, unless the order
is marked ISO. Thus, the proposed text will make clear that the System
accepts orders marked ISO during the Pre-Opening Session and Post-
Closing Session, and will execute orders marked ISO regardless of the
highest bid or lowest offer.
    Fourth, current Exchange Rule 11.9(d) (renumbered as Rule
11.10(b)), Display of Automated Quotations, states that the Exchange
shall communicate to Users its procedures concerning a change from
automated to ``manual quotations'' (as defined in Regulation NMS) when
the System is incapable of displaying automated quotations. The
Exchange proposes to amend this rule to clarify that that when a system
malfunction renders the System incapable of displaying automated
quotations, the System will be disabled by the Exchange and will be
unable to accept any orders. The Exchange also proposes to amend the
rule to clarify that the Exchange shall promptly communicate to Users
the unavailability of the System.
    Lastly, as described more fully above, the Exchange proposes to
update various rule cross-references to reflect the proposed re-
numbering of certain rules within Chapter XI.
Rule 11.9(b), Routing (Proposed Rule 11.11)
    The Exchange proposes to amend Rule 11.9(b)(2) (renumbered as Rule
11.11(a)) to describe which re-pricing instructions to comply with Rule
201 of Regulation SHO may apply to the unexecuted portion of an order
routed to an away Trading Center when a Short Sale Circuit Breaker is
in place. The rule currently provides, in part, that ``[f]or any other
order ineligible for routing due to a short sale price test
restriction, the Exchange will post the unfilled balance of the order
to the EDGA Book, treat the order as if it was an EDGA Only Order, and
subject it to the short sale price sliding process, as described in
[current] Rule 11.5(c)(4).'' The Exchange proposes a conforming
amendment to this rule to reflect that the default process is the Short
Sale Price Adjust instruction, rather than the Short Sale Price Sliding
instruction, unless the User has elected to use an alternative process
as described in proposed Rule 11.6(l) or to have the ordered Cancel
Back as described in Rule 11.6(b). The Exchange also proposes to remove
the reference to the EDGA Only Order because it is no longer classified
as a standalone order type.
    The Exchange also proposes to amend Exchange Rule 11.9(b)(1)(C),
Routing of Market Orders (renumbered as Rule 11.11(e)) to be consistent
with current System functionality. Currently, Rule 11.9(b)(1)(C)
states, in part, that where a Market Order is routed to an away Trading
Center for execution, any unexecuted portion returned to the Exchange
will be treated as follows:

    Depending on parameters set by the User when the incoming order
was originally entered, the System will either: (i) Process the
unfilled balance of an order as a EDGA Only Order pursuant to Rule
11.5(c)(4), or (ii) repeat the process described in paragraph (a)(4)
above and this paragraph (b)(1)(C) by executing against the EDGA
Book and/or routing orders to other market centers until the
original, incoming order is executed in its entirety.

    The Exchange proposes to delete this language from Rule
11.9(b)(1)(C) and to add new language to proposed renumbered Rule
11.11(e) to reflect that any unexecuted portion of a Market Order that
is returned to the System will be cancelled back to the User. This

language reflects current System functionality.
2. Statutory Basis
    The Exchange believes that its proposal to amend and reorganize its
rules to provide additional specificity regarding the functionality of
the Exchange's System, including the operation of its order types and
order instructions, is consistent with the requirements of the Act and
the rules and regulations thereunder that are applicable to a national
securities exchange, and, in particular, with the requirements of
Section 6(b) of the Act.\72\ In particular, the proposal is consistent
with Section 6(b)(5) of the Act,\73\ because it would promote just and
equitable principles of trade, remove impediments to, and perfect the
mechanism of, a free and open market and a national market system, and,
in general, protect investors and the public interest. The proposed
rule change also is designed to support the principles of Section
11A(a)(1) \74\ of the Act in that it seeks to assure fair competition
among brokers and dealers and among exchange markets. The Exchange
believes that the reorganized and enhanced descriptions of the
Exchange's order types, order instructions, and System functionality
would promote just and equitable principles of trade and remove
impediments to a free and open market by providing greater transparency
concerning the operation of the Exchange. The Exchange also believes
that the proposed amendments will contribute to the protection of
investors and the public interest by making the Exchange's rules easier
to understand. Moreover, the Exchange believes that the additional
clarity, transparency and readability of the proposed rule change would
promote the efficient execution of investor transactions, and thus
strengthen investor confidence in the market. In addition, the Exchange
believes that additional specificity in its rules will lead to a better
understanding of the Exchange's operation, thereby facilitating fair
competition among brokers and dealers and among exchange markets. In
particular, the Exchange believes that the revised descriptions of the
Exchange's order types, order instructions, and System functionality
will provide Members, Users, and the investing public further
clarification about how the Exchange operates.
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78f(b).
    \73\ 15 U.S.C. 78f(b)(5).
    \74\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

Opening Process
    The newly added description of the Opening Process in Rule 11.7 is
designed to promote just and equitable principles of trade and remove
impediments to, and perfect the mechanism of, a free and open market
system because it would describe: (i) Which orders may participate in
the process; (ii) how the price of the Opening Transaction is
determined; and (iii) the process for late openings and re-openings.
    The Exchange believes setting the price of the Opening Process at
the midpoint of the first NBBO disseminated after 9:30:00 a.m. Eastern
Time will promote just and equitable principles of trade, removes
impediments to, and perfect the mechanism of, a free and open market
and a national market system because it enables the System to execute
the Opening Process at a price that is objectively established by the
market for the security. In addition, the Exchange believes that it is
reasonable to set the price of the Opening Process for securities
listed on either the NYSE or NYSE MKT at the midpoint of the: (i) First
NBBO subsequent to the first reported trade on the listing exchange
after 9:30:00 a.m. Eastern Time; or (ii) then prevailing NBBO when the
first two-sided quotation published by the listing exchange after
9:30:00 a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no
first trade is reported within one second of publication of the first
two-sided quotation by the listing exchange. The Exchange believes it
is reasonable to require a first reported trade or two-sided quotation
for securities listed on the NYSE or NYSE MKT because those markets do
not operate a pre-market trading session during which Members, Users,
and the investing public may discover the market price for a security.
Therefore, the Exchange believes utilizing the first NBBO subsequent to
the first reported trade or then prevailing NBBO when the first two-
sided quotation is published promotes just and equitable principles of
trade because it ensures a midpoint price that the Exchange believes
accurately reflects the market for the security. The Exchange also
believes it is reasonable to set the price of the Opening Process for
NYSE and NYSE MKT securities at the then prevailing NBBO when the first
two-sided quotation is published by the listing exchange when no first
trade is reported within one second of publication of the first two-
sided quotation. At times, no first trade is reported immediately
following the publication of the first two-sided quotation. This is
common in less liquid securities. Setting the price of the Opening
Process at the then prevailing midpoint in such circumstances would
permit the System to open the security in a timely manner at a price
that is objectively determined by the market for the security.
    In addition, the Exchange believes the Opening Process following a
halt, suspension, or pause is designed to promote just and equitable
principles of trade. Under proposed Rule 11.7(e), re-openings will
occur at the midpoint of the: (i) First NBBO subsequent to the first
reported trade on the listing exchange following a halt, suspension, or
pause; or (ii) then prevailing NBBO when the first two-sided quotation
is published by the listing exchange following the resumption of
trading after a halt, suspension, or pause if no first trade is
reported within one second of publication of the first two-sided
quotation by the listing exchange. Like when pricing the Opening
Process for securities listed on the NYSE and NYSE MKT discussed above,
the Exchange also believes it is reasonable to require a first reported
trade or two-sided quotation prior to opening a security because no
trading occurs during a halt, suspension or pause during which Members,
Users, and the investing public may gauge the market for a security.
Therefore, the Exchange believes calculating a midpoint price at which
to re-open a security following a halt, suspension, or pause as
described above promotes just and equitable principles of trade because
it ensures a midpoint price that accurately reflects the market for the
security.
    The operation of the Contingent Open under proposed Rule 11.7 is
designed to promote just and equitable principles of trade and remove
impediments to, and perfect the mechanism of, and free and open market
system because it would enable the System to transition to the Regular
Session in a timely manner where a security has not opened on the
relevant listing exchange. In the Exchange's experience, most
securities are open by 9:45:00 a.m. Eastern Time. However, at times, a
security may not open by 9:45:00 a.m. This is common in less liquid
securities. The Exchange notes that other exchanges that do not employ
an opening process may begin trading the security at 9:30:00 a.m.
Eastern Time despite the security not being open on the relevant
listing exchange.\75\ The Exchange believes it is

reasonable to transition to the Regular Session pursuant to the
Contingent Open process under proposed Rule 11.7 so that orders may be
placed by the System on the EDGA Book, cancelled, executed, or routed
to away Trading Centers in accordance with proposed renumbered Rule
11.11.
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    \75\ NSX Rule 1.5(R) defining ``Regular Trading Hours'' as ``the
time between 9:30 a.m. and 4:00 p.m. Eastern Time.'' NSX Rules do
not account for an opening process. CHX Article 20, Rule 1 stating
that the regular trading session begins at 8:30 Central Time. Like
the NSX, CHX Rules do not account for an opening process.
---------------------------------------------------------------------------

    Lastly, proposed Exchange Rule 11.7 is similar to, and based on,
ISE Rule 2106. Unlike, ISE Rule 2106, Exchange Rule 11.7(d) contains
provisions for late openings if the conditions in proposed Rules
11.7(c)(1) and (2) are not satisfied.\76\ Also unlike ISE Rule 2106,
proposed Rule 11.7 permits the Exchange to alternatively set the price
of the Opening Process for securities listed on either the NYSE or NYSE
MKT at the midpoint of the then prevailing NBBO when the first two-
sided quotation published by the relevant listing exchange after
9:30:00 a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no
first trade is reported by the listing exchange within one second of
publication of the first two-sided quotation by the listing exchange.
---------------------------------------------------------------------------

    \76\ See Securities Exchange Act Release No. 54287 (August 8,
2006), 71 FR 46947 (August 15, 2006) (SR-ISE-2006-48).
---------------------------------------------------------------------------

Order Types and Order Instructions
    Similarly, the Exchange believes that the proposed changes to its
rulebook related to order types and order instructions provide further
clarification to Members, Users, and the investing public regarding the
operation of the Exchange's order types and order instructions. Unless
otherwise stated, the Exchange is not proposing to substantively modify
the operation of any of the current defined order types or instructions
or the operation of the System. The Exchange believes the proposed
amendments will provide greater transparency regarding the Exchange's
order types, order instructions, and System functionality.
Re-Pricing
    The Exchange believes that the proposed clarification of its re-
pricing instructions are consistent with Section 6(b)(5) of the
Act,\77\ as well as Rule 610 of Regulation NMS \78\ and Rule 201 of
Regulation SHO.\79\ The Exchange is not modifying the overall existing
functionality of its re-pricing instructions, which, to avoid becoming
a Locking Quotation or Crossing Quotation or to comply with Rule 201 of
Regulation SHO, displays orders at permissible prices while in some
cases retaining a different non-displayed, ranked price at which the
User is willing to buy or sell. Instead, the Exchange proposes to
describe the re-pricing instructions currently available to Users by
renaming displayed price sliding under current Rule 11.5(c)(4) as Hide
Not Slide and introducing and defining three new instructions in
proposed Rule 11.6(l) with regard to Regulation NMS compliance--Price
Adjust, Single Re-Price,\80\ and Routed and Returned Re-Pricing, and
three new instructions with regard to Regulation SHO compliance--Short
Sale Price Adjust, Short Sale Price Sliding, and Short Sale Single Re-
Price.\81\ The Exchange also proposes to describe in its rules the re-
pricing instruction for orders with a Non-Displayed instruction. The
Exchange believes these further clarifications of its re-pricing
instructions will provide increased transparency to Members, Users, and
the investing public regarding how orders with a re-pricing instruction
are to be handled and displayed by the System.
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    \77\ Id.
    \78\ 17 CFR 242.610.
    \79\ 17 CFR 242.201.
    \80\ The Exchange notes that other exchanges offer similar
functionality. See Nasdaq Rule 4751(f)(7) (Price to Comply Order),
BZX Rule 11.9(g)(1) (Display-Price Sliding), BYX 11.9(g)(1)
(Display-Price Sliding), and CHX Rule Art. I, Rule 2(b)(1)(C)(i)
(NMS Price Sliding).
    \81\ Other exchanges utilize similar re-pricing processes. See
e.g., CHX Art. I, Rule 2(b)(1)(C), BZX Rules 11.9(c)(4), (6) and
11.9(g)(2), BYX Rules 11.9(c)(4), (6) and 11.9(g)(2), and Nasdaq's
``Re-pricing of Orders during Short Sale Period'' described in
Nasdaq Rule 4763(e).
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    Rule 610(d) of Regulation NMS requires exchanges to establish,
maintain, and enforce rules that require members reasonably to avoid
``[d]isplaying quotations that lock or cross any protected quotation in
an NMS stock.'' \82\ Such rules must be ``reasonably designed to assure
the reconciliation of locked or crossed quotations in an NMS stock,''
and must ``prohibit . . . members from engaging in a pattern or
practice of displaying quotations that lock or cross any quotation in
an NMS stock.'' \83\ Similarly, Rule 201 of Regulation SHO \84\
requires trading centers to establish, maintain, and enforce written
policies and procedures reasonably designed to prevent the execution or
display of a short sale order at a price at or below the current NBB
under certain circumstances. Thus, the re-pricing instructions offered
by the Exchange are designed to comply with Rule 610(d) and Rule 201 by
assisting Users in displaying and executing orders at permissible
prices. In addition, as described in further detail below, the Exchange
notes that other exchanges offer similar functionality.\85\
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    \82\ 17 CFR 242.610(d).
    \83\ Id.
    \84\ 17 CFR 242.201.
    \85\ See Nasdaq Rule 4751(f)(7) (Price to Comply Order), BZX
Rule 11.9(g)(1) (Display-Price Sliding), BYX 11.9(g)(1) (Display-
Price Sliding), and CHX Rule Art. I, Rule 2(b)(1)(C)(i) (NMS Price
Sliding). See also CHX Art. I, Rule 2(b)(1)(C), BZX Rules
11.9(c)(4), (6) and 11.9(g)(2), BYX Rules 11.9(c)(4), (6) and
11.9(g)(2), and Nasdaq's ``Re-pricing of Orders during Short Sale
Period'' described in Nasdaq Rule 4763(e).
---------------------------------------------------------------------------

    The Exchange notes that an order that, if displayed at its limit
price, would be a Locking Quotation or Crossing Quotation, would be
automatically defaulted by the System to the Hide Not Slide
instruction, unless the User affirmatively elects an alternative
instruction: (i) The Cancel Back instruction; (ii) the Price Adjust
instruction; or (iii) the Single Re-Price instruction. Users who do not
prefer the defaulted re-pricing instruction are free to select another
re-pricing instruction or to select the Cancel Back instruction. The
Exchange believes it is reasonable to default orders to the Hide Not
Slide instruction because an order with the Hide Not Slide instruction
ranks the order at the most aggressive price as possible, the Locking
Price, thereby providing an increased probability of an execution at
the order's limit price as compared to other re-pricing instructions.
Because EDGA is currently a taker-maker market that charges liquidity
providers, the Exchange believes that Users utilizing re-pricing
functionality on EDGA would prefer a more aggressive re-pricing option
that would increase the likelihood of execution, because such Users are
expecting to pay a fee when acting as a liquidity provider. Therefore,
the Exchange believes defaulting to the Hide Not Slide instruction is
designed to promote just and equitable principles of trade because it
is designed to assist a market participant in utilizing a re-pricing
instruction most closely aligned with the User's intent to achieve an
execution at the most aggressive price as possible.
    The displayed price sliding process under current Rule
11.5(c)(4)(A) is essentially the same as the Hide Not Slide Process
under proposed Rule 11.6(l)(1)(B). The only difference is that current
Rule 11.5(c)(4)(A) incorrectly states that an order subject to the
displayed price sliding process would receive a new time stamp where
the NBBO changes such that the order would no longer lock or cross the
market and is displayed at the Locking

Price. Under Hide Not Slide, the Exchange proposes to correctly state
that the order would retain its time stamp where the NBBO changes such
that the order, if displayed by the System on the EDGA Book at the
Locking Price would not be a Locking Quotation or Crossing Quotation,
will be ranked and displayed by the System at the Locking Price. Under
Hide Not Slide, the order retains its original time stamp because it
remains ranked at the Locking Price. An order subject to the Hide Not
Slide instruction will only receive a new time stamp when it is re-
ranked by the System upon clearance of a Locking Quotation due to the
receipt of an ISO with a TIF instruction of Day that establishes a new
NBBO at the Locked Price in accordance with proposed Rule 11.9(a)(2)(B)
described above. All other aspects of displayed price sliding and Hide
Not Slide are similar.\86\
---------------------------------------------------------------------------

    \86\ See supra section entitled ``Hide Not Slide (Rule
11.6(l)(1)(B))''.
---------------------------------------------------------------------------

    The Exchange also believes that ranking orders with a Non-Displayed
instruction at the Locking Price where such order would trade through a
Protected Quotation displayed on an external market is designed to
promote just and equitable principles of trade and remove impediments
to, and perfect the mechanism of, and free and open market system.
Ranking to the Locking Price in such cases would enable the System to
avoid trading though a Protected Quotation in compliance with Rule 611
of Regulation NMS. Therefore, the Exchange believes the proposed rule
change will promote just and equitable principles of trade, removes
impediments to, and perfects the mechanism of, a free and open market
and a national market system.
    The Exchange also believes that its proposed Routed and Returned
Re-Pricing instruction promotes just and equitable principles of trade
because it is designed to permit routed orders returned to the EDGA
Book that, if displayed, would be a Locking Quotation or Crossing
Quotation, to be displayed and re-displayed up to their limit price in
response to changes in the NBBO. The Exchange believes that it is
reasonable and appropriate to default an order returning to the EDGA
Book after having routed to away destinations to the Routed and
Returned Re-Pricing instruction because it can be presumed that such
orders are aggressive price takers. The Routed and Returned Re-Pricing
instruction provides such orders the ability to execute at the
previously locked prices on the way to it being ranked to its limit
price. The Exchange notes that Users who do not prefer the defaulted
re-pricing instruction are free to select another re-pricing
instruction or to select the Cancel Back instruction.
    Likewise, the Exchange also believes it is reasonable to default
Short Sale Orders to the Short Sale Price Adjust instruction because it
would enable Short Sale Orders to be continuously re-ranked and
displayed up to their limit price in response to declines in the NBB.
An order subject to the Short Sale Price Adjust instruction would be
re-ranked and displayed at the Permitted Price, which is one Minimum
Price Variation above the current NBB. Following the initial re-
ranking, the order will, to the extent the NBB declines, continue to be
re-ranked and displayed at the Permitted Price down to the order's
limit price. Orders subject to the Short Sale Price Sliding instruction
are only re-ranked once following the initial ranking. Under the Short
Sale Single Re-Price instruction, the Short Sale Order would not be
adjusted further to reflect a decline in the NBB following its initial
ranking. Therefore, the Exchange believes automatically defaulting
Short Sale Orders to the Short Sale Price Adjust instruction promotes
just and equitable principles of trade because it would enable the
order to be displayed and re-displayed up to its limit price by being
continuously re-priced in response to declines in the NBB. The Exchange
notes that Users who do not prefer the defaulted re-pricing instruction
are free to select another re-pricing instruction or to select the
Cancel Back instruction.
    In addition, the Exchange notes that other exchanges offer
functionality similar to that proposed by this filing. The Price Adjust
instruction under proposed Rule 11.6(l)(1)(A) and Hide Not Slide
instruction under proposed Rule 11.6(l)(1)(B) are similar to Nasdaq's
Price to Comply under Nasdaq Rule 4751(f)(7). Under Nasdaq Rule
4751(f)(7), a Price to Comply order is an order that, if, at the time
of entry, would lock or cross the quotation of an external market, the
order will be priced to the current low offer (for bids) or to the
current best bid (for offers) and, like the Exchange's proposed Price
Adjust instruction, displayed at a price one minimum price increment
lower than the offer (for bids) or higher than the bid (for offers).
Like Nasdaq's Price to Comply Order, under the Hide Not Slide
instruction described in proposed Rule 11.6(l)(1)(B), a buy (sell)
order that, if displayed by the System on the EDGA Book at the time of
entry, would be a Locking Quotation or Crossing Quotation will also be
displayed at a price that is one Minimum Price Variation lower (higher)
than the Locking Price and ranked at the Locking Price. Unlike Nasdaq's
Price to Comply order, a buy (sell) order subject to the Price Adjust
instruction would also be ranked one Minimum Price Variation lower
(higher) than the Locking Price.
    The Price Adjust instruction under proposed Rule 11.6(l)(1)(A) and
Hide Not Slide instruction under proposed Rule 11.6(l)(1)(B) are
similar to the display-price sliding functionality set forth in BZX
Rule 11.9(g) and BYX Rule 11.9(g). Like the functionality offered by
BZX and BYX, under both the Price Adjust instruction and the Hide Not
Slide instruction an order will be displayed at one Minimum Price
Variation below the NBO (for bids) or above the NBB (for offers) and
displayed at the Locking Price when that price no longer locks the
Protected Quotation. Similar to BZX and BYX functionality, an order
subject to the Hide Not Slide instruction is ranked at the Locking
Price. The differences are as follows: BZX and BYX offers multiple
price sliding, while the Exchange does not. Also, under the Price
Adjust instruction, an order is ranked at its displayed price, whereas
an order subject to display-price sliding is ranked at the Locking
Price for BZX and BYX.
    The Single Re-price instruction under proposed Rule 11.6(l)(1)(C)
is similar to Nasdaq's Price to Comply Post Only under Nasdaq Rule
4751(f)(8). Like an order subject to the Exchange's Single Re-Price
instruction, a Price to Comply Post Only Order that, ``at the time of
entry, would create a violation of Rule 610(d) of Regulation NMS under
the Act by locking or crossing the protected quotation of an external
market or would cause a violation of Rule 611 of Regulation NMS under
the Act, the order will also be re-priced and displayed by the System
to one minimum price increment (i.e., $0.01 or $0.0001) below the
current NBO (for bids) or to one penny above the current NBB (for
offers).''
    The Exchange's Short Sale Price Adjust instruction in Rule
11.6(l)(2) is functionally similar to BZX and BYX Short Sale Price
Sliding in BZX Rule 11.9(g)(2) and BYX Rule 11.9(g)(2) and Nasdaq's
``Re-pricing of Orders during Short Sale Period'' described in Nasdaq
Rule 4763(e). Under both the Exchange's Short Sale Price Adjust
instruction and Nasdaq's Re-pricing of Orders during Short Sale Period,
orders that cannot be executed or displayed in compliance with Rule 201
of Regulation SHO will be re-priced at one minimum price variation
above the current NBB. The order will continue to be re-priced to
reflect declines in the NBB down to the

order's original limit price. BZX and BYX's Short Sale Price Sliding
under BZX Rule 11.9(g)(2) and BYX Rule 11.9(g)(2) operate in a similar
manner but with one non-material difference: Members must elect that
their order continue to be re-priced to reflect declines in the NBB
down to the order's original limit price.
Priority
    The Exchange also believes its further clarifications under
proposed Rule 11.9 to reflect the priority of orders promotes just and
equitable principles of trade, remove impediments to, and perfect the
mechanism of, a free and open market and a national market system by
providing Members, Users, and the investing public with greater
transparency regarding how the System operates. The Exchange does not
propose to modify the priority of orders at the same price or the
operation of the System. The proposed rule change clearly delineates
the three order priority scenarios that the Exchange utilizes, thereby
providing valuable, clear information to Members, Users, and the
investing public on how their orders would be executed. Specifically,
proposed Rule 11.9 would describe execution priority for orders as well
as how orders may be re-ranked when such orders utilize instructions
that cause them to be ranked by the System upon clearance of a Locking
Quotation. Furthermore, the Exchange believes that the proposed rule
changes regarding order priority will provide greater transparency and
further clarity on how the various order types will be assigned
priority under various scenarios, thereby assisting Members, Users and
the investing public in understanding the manner in which the System
may execute their orders.
    The first category of order priority is set forth under proposed
Rule 11.9(a)(2)(A), which outlines the general priority of orders. The
Exchange notes that the priority under proposed Rule 11.9(a)(2)(A) is
substantively consistent with current Exchange Rule 11.8(a)(2). The
Exchange is simply modifying the language to amend the description of
order types under proposed Rules 11.9(a)(2)(A)(i)-(iv) to be consistent
with proposed Rule 11.8, Order Types. As amended, proposed Rule
11.9(a)(2)(A) would state that the System will execute equally priced
trading interest within the System in time priority in the following
order: (i) The portion of a Limit Order with a Displayed instruction;
(ii) Limit Orders with a Non-Displayed instruction and the Reserve
Quantity of Limit Orders; (iii) MidPoint Discretionary Orders executed
within their Discretionary Range and Limit Orders executed within their
Discretionary Range; and (iv) Route Peg Orders. The priority scheme
outlined in proposed Rule 11.9(a)(2)(A) does not modify the Exchange's
existing functionality; it merely seeks to state that it applies to
equally priced trading interest at prices other than the NBBO.
Furthermore, the order priority set forth under Rule 11.9(a)(2)(A) is
similar to the rules of other exchanges.\87\
---------------------------------------------------------------------------

    \87\ See BZX Rule 11.12(a)(2); NYSE Arca Rule 7.36(a)(1); and
Nasdaq Rule 4757.
---------------------------------------------------------------------------

    The order priority set forth under proposed Rule 11.9(a)(2)(B)
clarifies the priority of orders that utilize instructions that result
in their being re-priced contingent upon a Locking Quotation or
Crossing Quotation no longer existing. In such case, the System would
re-price such orders to the Locking Price. Proposed Rule 11.9(a)(2)(C)
would state that where an order is re-priced to the Locking Price after
the Locking Quotation or Crossing Quotation no longer exists, the
System will re-rank and display such orders at the Locking Price in
time priority in the following order: (i) ISO with a TIF instruction of
Day that establishes a new NBBO at the Locking Price; (ii) Limit Orders
to which the Hide Not Slide or Routed and Returned instruction has been
applied; (iii) Limit Orders to which the Price Adjust instruction has
been applied; and (iv) orders with a Pegged instruction. The Exchange
believes it is reasonable and appropriate to grant first priority in
such circumstances to ISOs with a TIF instruction of Day because such
orders cause the Locking Price to clear resulting in a new NBBO. The
Exchange also believes that granting second priority to Limit Orders
subject to the Hide Not Slide instruction is also appropriate because
prior to the Locking Quotation or Crossing Quotation existing, these
orders were eligible to be executed, Non-Displayed, at the Locking
Price. In addition, Limit Orders subject to the Hide Not Slide
instruction are more aggressively priced when a Locking Quotation or
Crossing Quotation does not exist than orders subject to the Price
Adjust instruction. Therefore, the Exchange believes the above priority
promotes just and equitable principles of trade because it is designed
to grant priority to orders that are the first to establish a new price
point, thereby contributing to the price discovery process, and
appropriately awards priority to orders based on the aggressiveness of
their pricing.
    The Exchange also believes that proposed Rule 11.9(a)(2)(D)
furthers the objectives of Section 6(b)(5) of the Act,\88\ because it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. Proposed Rule 11.9(a)(2(D) further
clarifies current order priority of orders that are displayed on the
EDGA Book due in certain circumstances. Specifically, proposed Rule
11.9(a)(2)(D) clarifies that, for purposes of priority under proposed
Rule 11.9(a)(2)(A) and (B): (i) ISOs and NBBO Offset Peg Order are to
be treated as Limit Orders; (ii) orders subject to a re-pricing
instruction to comply with Rule 201 of Regulation SHO under proposed
Rule 11.6(l)(2), including Market Orders that are displayed on the EDGA
Book pursuant to proposed Rule 11.8(a)(4), maintain the same priority
as Limit Orders with a Displayed instruction; and (iii) non-routable
Market Orders that are posted by the System to the EDGA Book at the
price of the Upper or Lower Price Band in accordance with proposed Rule
11.8(a)(4) and proposed re-numbered Rule 11.10(a)(3)(A) will maintain
the same priority as a Limit Order with a Displayed Instruction at that
price. The Exchange believes that the proposed Rule 11.9(a)(2)(D)
provides greater transparency and further clarity on how the various
orders are assigned priority equal to a Limit Order with a Displayed
instruction under various scenarios, thereby assisting Members, Users
and the investing public in understanding the manner in which the
System may execute their orders.
---------------------------------------------------------------------------

    \88\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Miscellaneous
    The Exchange notes that several rules proposed by this filing and
described above are based on or similar to the approved rules of other
exchanges, as set forth below.
    Discretionary Range under Exchange Rule 11.6(d) is similar to
Nasdaq Rule 4751(f)(1), Discretionary Order. However, unlike Exchange
Rule 11.6(d), Nasdaq Rule 4751(f)(1) states ``[t]he non-displayed
trading interest is not entered into the System book but is, along with
the displayed size, converted to an IOC buy (sell) order priced at the
highest (lowest) price in the discretionary price range when displayed
shares become available or an execution takes place at any price within
the discretionary price range. The generation of this IOC order is
triggered by the cancellation of the open shares of the Discretionary
Order. If more than one Discretionary Order is available for conversion
to an IOC order, the system will convert all such orders

at the same time and priority will be given to the first IOC order(s)
that reaches the trading interest on the other side of the market. If
an IOC order is not executed in full, the unexecuted portion of the
order is automatically re-posted and displayed in the System book with
a new time stamp, at its original displayed price, and with its non-
displayed discretionary price range.'' Also unlike Nasdaq Rule 4751,
Exchange Rule 11.6(d) would state that the Discretionary Range of an
order to buy (sell) cannot be more than $0.99 higher (lower) than the
order's displayed price and that an order with a Discretionary Range
instruction resting on the EDGA Book will execute at its least
aggressive price when matched for execution against an incoming order
that also contains a Discretionary Range instruction, as permitted by
the terms of both the incoming and resting order.
    The term, ``Locking Price'' under proposed Rule 11.6(f) is
similarly defined in the BZX Rule 11.13(a)(1), which defines ``locking
price'' as ``. . . prices equal to displayed orders on the other side
of the market.''
    Minimum Execution Quantity under proposed Rule 11.6(h) is similar
to Nasdaq Rule 4751(f)(5) and NSX Rule 11.11(c)(2)(B). Proposed
Exchange Rule 11.6(h) does differ from Nasdaq Rule 4751(f)(5) and NSX
Rule 11.11(c)(2)(B) by providing additional specificity regarding the
operation of an order with a Minimum Execution Quantity, partial
executions, and when a Minimum Execution Quantity may no longer apply.
    The Primary Peg and Market Peg instructions under proposed Rule
11.6(j) are similar to Nasdaq Rule 4751(f)(4). Under Nasdaq Rule
4751(f)(4), Pegged Orders are orders that, after entry, have their
price automatically adjusted by the System in response to changes in
the NBBO. Like the Primary Peg and Market Peg instructions under
proposed Rule 11.6(j), the Nasdaq's Pegged Order under Nasdaq Rule
4751(f)(4) can ``specify that its price will equal the inside quote on
the same side of the market (`Primary Peg'), or the opposite side of
the market (`Market Peg').'' Like under proposed Exchange Rule 11.6(j),
NYSE's Pegged Order may have a limit price beyond which the order shall
not be executed and NYSE's Primary Peg and Market Peg Orders may also
include an offset. Proposed Exchange Rule 11.6(j) does differ from NYSE
Rule 13 by providing additional specificity regarding the operation of
an offset, the order's functionality during a locked or crossed market,
and where an order that contains both a Pegged and Non-Displayed
instruction may be re-priced.
    The replenishing of the displayed portion of an order from a
Reserve Quantity under proposed Rule 11.6(m) is similar to, but
contains more specificity than Nasdaq Rule 4751(f)(2) (Reserve Orders)
and NYSE Rule 13 (Reserve Order Types). Under Exchange Rule 11.6(m),
Nasdaq Rule 4751(f)(2), and NYSE Rule 13, the displayed portion is
given a new time stamp when it is replenished while the non-displayed
portion retains its original time stamp.
    The proposed definition of Post Only under proposed Rule 11.6(n) is
similar to the BATS Post Only Order under BZX Rule 11.9(c)(6) and BYX
Rule 11.9(c)(6). Like proposed Rule 11.6(n), BZX Rule 11.9(c)(6), BYX
Rule 11.9(c)(6) permit an execution where the price improvement
associated with such execution equals or exceeds the sum of fees
charged for such execution and the value of any rebate that would be
provided if the order posted to the BATS Book and subsequently provided
liquidity.
    TIF instruction of GTT under proposed Rule 11.6(q) is similar to
CHX Rules Art. 1, Rule 2(d)(3) (Good `Til Date), BZX Rule 11.9(b)(4)
(Good `til Day), BYX Rule 11.9(b)(4) (Good `til Day), and Nasdaq Rule
4751(h)(4) (System Hours Expire Time).
    The operation of an ISO with a TIF instruction of Day is similar to
the Post ISO order on the NSX under NSX Rule 11.11(c)(8)(ii), but for
the NSX stating that is will reject a Post ISO if it is immediately
marketable against a displayed order on the NSX Book, while the
Exchange retains such orders where they include Price Adjust, Hide Not
Slide, or the Single Re-Price instruction.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Unless otherwise stated,\89\
the Exchange does not propose to substantively modify the operation of
any of the current defined order types or terms or the operation of the
System; rather, it intends to enhance the clarity of the descriptions
of what is currently provided in or implied by the rules regarding its
current System functionality. The proposed rule change is not designed
to address and competitive issues, but rather provide additional
specificity and transparency to Members, Users, and the investing
public regarding the Exchange's order types and system functionality,
and to organize its rules in a more intuitive and less complex manner.
Since the Exchange does not propose to substantively modify the
operation of order types or system functionality, the proposed changes
will not impose any burden on competition.
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    \89\ See supra note 4.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from Members or other interested
parties.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-EDGA-2014-20 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-EDGA-2014-20. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's

Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-EDGA-2014-20 and should be
submitted on or before September 8, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\90\
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    \90\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19415 Filed 8-15-14; 8:45 am]
BILLING CODE 8011-01-P