[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54659-54671]
[FR Doc No: 2019-22157]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87237; File No. SR-CBOE-2019-093]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Exchange's Rules Regarding the Automated Improvement Mechanism and
Solicitation Auction Mechanism for Flexible Exchange Options, and Move
Those Rules From the Currently Effective Rulebook to the Shell
Structure for the Exchange's Rulebook That Will Become Effective Upon
the Migration of the Exchange's Trading Platform to the Same System
Used by the Cboe Affiliated Exchanges

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

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend the Exchange's Rules regarding the automated improvement
mechanism (``AIM'') and solicitation auction mechanism (``SAM'') for
flexible exchange options (``FLEX Options'') (``FLEX AIM'' and ``FLEX
SAM,'' respectively) and moves those Rules from the currently effective
Rulebook (``current Rulebook'') to the shell structure for the
Exchange's Rulebook that will become effective upon the migration of
the Exchange's trading platform to the same system used by the Cboe
Affiliated Exchanges (as defined below) (``shell Rulebook''). The text
of the proposed rule change is provided in Exhibit 5.

    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated
Exchanges''). The Cboe Affiliated Exchanges are working to align
certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its trading platform to the
same system used by the Cboe Affiliated Exchanges, which the Exchange
expects to complete on October 7, 2019. In connection with this
technology migration, the Exchange has a shell Rulebook that resides
alongside its current Rulebook, which shell Rulebook will contain the
Rules that will be in place upon completion of the Cboe Options
technology migration.
    The proposed rule change amends current Rules 24A.5A and 24A.5B
regarding the FLEX AIM Auction and the FLEX SAM Auction, respectively.
The proposed changes reflect recent amendments to general FLEX trading
rules as well as recent amendments to the non-FLEX AIM and SAM
Auctions.\5\ The proposed rule change amends and moves the following
provisions regarding the terms of FLEX AIM and SAM Auctions from the
current Rulebook to the shell Rulebook. In addition to the substantive
changes described below, the proposed rule change makes additional
nonsubstantive changes to these Rules, including to make the rule text
plain English, simplify the rule provisions, update cross-references
and paragraph numbering and lettering, reorganize certain provisions,
and eliminate redundant provisions.
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    \5\ See SR-CBOE-2019-045 (proposed changes to the Exchange's
non-FLEX AIM Auction); SR-CBOE-2019-051 (proposed changes to the
Exchange's non-FLEX complex AIM Auctions); SR-CBOE-2019-063
(proposed changes to the Exchange's non-FLEX SAM Auction); SR-CBOE-
2019-064 (proposed changes to the Exchange's non-FLEX C-SAM
Auction); and SR-CBOE-2019-084 (proposed changes to the Exchange's
FLEX trading rules).

----------------------------------------------------------------------------------------------------------------
                                      Current rule (current   Proposed rule (shell       Proposed substantive
           Rule provision                   rulebook)               rulebook)                  changes
----------------------------------------------------------------------------------------------------------------
                                                FLEX AIM Auction
----------------------------------------------------------------------------------------------------------------
A FLEX Trader may electronically     Rule 24A.5A,            Rule 5.73,              The proposed rule change
 submit for execution an order        introductory            introductory            clarifies that an
 (which may be a simple or complex    paragraph and           paragraph.              Initiating Order may
 order) it represents as agent        Interpretations and                             consist of one or more
 (``Agency Order'') against           Policies .04 and .05.                           solicited orders, as
 principal or solicited order(s)                                                      further discussed below.
 (except for the account of any                                                       The proposed rule change
 FLEX Market-Maker \6\ with an                                                        also specifies in the
 appointment in the applicable FLEX                                                   introductory paragraph
 Option class on the Exchange (an                                                     that both simple and
 ``Initiating Order'') provided it                                                    complex orders may be
 submits the Agency Order for                                                         submitted into a FLEX AIM
 electronic execution into a FLEX                                                     Auction, as the auction
 AIM Auction.                                                                         will apply to both simple
                                                                                and complex orders in a
                                                                                substantially similar
                                                                                manner, as further
                                                                                discussed below. The
                                                                                proposed rule change
                                                                                deletes a price
                                                                                requirement related to the
                                                                                best bid or offer
                                                                                (``BBO''),\7\ because
                                                                                there will no longer be an
                                                                                electronic book (and thus
                                                                                no BBO) for FLEX
                                                                                Options.\8\ Because the
                                                                                Exchange does not
                                                                                currently have an
                                                                                electronic book for FLEX
                                                                                Option classes, and thus
                                                                                there are no resting
                                                                                orders to potentially
                                                                                execute at the conclusion
                                                                                of a FLEX AIM Auction,
                                                                                deletion of this provision
                                                                                will have no impact on how
                                                                                FLEX AIM Auctions operate.
An Agency Order must be in a FLEX    Rule 24A.5A(a)(1).....  Rule 5.73(a)(1).......  None.
 Option class the Exchange
 designates as eligible for FLEX
 AIM Auctions.
The Agency Order and Initiating      N/A...................  Rule 5.73(a)(2).......  This requirement is not
 Order must each be a FLEX Order                                                      explicitly stated in the
 that complies with Rule 5.72(b) in                                                   current Rules; however, it
 a permissible FLEX Option series                                                     is consistent with current
 that complies with Rule 4.21.                                                        functionality, and the
                                                                                proposed rule change
                                                                                merely states this in the
                                                                                Rules. For a FLEX AIM
                                                                                Auction to occur, the
                                                                                orders submitted would
                                                                                need to be in a series
                                                                                eligible for FLEX trading,
                                                                                and thus include all the
                                                                                terms necessary to
                                                                                comprise a FLEX Option
                                                                                series.\9\
The Initiating FLEX Trader must      Rule..................  Rule..................  None.
 mark an Agency Order for FLEX AIM   24A.5A(b)(1)(i).......  5.73(a)(3)............
 Auction processing.
There is no minimum size for Agency  Rule 24A.5A(a)(1) and   Rule 5.73(a)(4).......  The proposed rule change
 Orders. The Initiating Order must    (2) and                                         deletes the provision from
 be for the same size as the Agency   Interpretation and                              current subparagraph
 Order.                               Policy .03.                                     (a)(1) that permits the
                                                                                Exchange to designate
                                                                                eligibility size
                                                                                parameters for FLEX AIM
                                                                                Auctions. The Exchange has
                                                                                not designated any such
                                                                                eligibility size
                                                                                parameters, and intends to
                                                                                continue to have no
                                                                                minimum size requirements
                                                                                for Agency Orders, so the
                                                                                Exchange no longer needs
                                                                                this flexibility. The
                                                                                proposed rule change
                                                                                clarifies in the Rules
                                                                                that the Initiating Order
                                                                                must be for the same size
                                                                                as the Agency Order, which
                                                                                is implied by the current
                                                                                Rules.\10\

The price of the Agency Order and    Rule..................  Rule 5.73(a)(5).......  The current rule state the
 Initiating Order must be in an      24A.5A(b)(1)(vii) and                            minimum increment for
 increment the Exchange determines    Interpretation and                              responses and the
 on a class basis (which may not be   Policy .05.                                     Initiating TPH's
 smaller than the amounts set forth                                                   submission is determined
 in Rule 5.4(c)(4)\11\ of the shell                                                   by the Exchange but may
 Rulebook). The price must be in                                                      not be smaller than $0.01
 the same format (i.e., price or                                                      or .01%, and premiums are
 percentage) as the exercise price                                                    rounded to the nearest
 of the FLEX Option series. If the                                                    minimum increment. This is
 Agency Order and Initiating Order                                                    consistent with the
 are complex orders, the price must                                                   minimum increment
 be a net price \12\ for the                                                          available for all FLEX
 complex strategy.                                                                    Trading, so the proposed
                                                                                rule change merely
                                                                                references Rule 5.4(c)(4)
                                                                                in the shell Rulebook,
                                                                                which describes the
                                                                                permissible minimum
                                                                                increments for FLEX Option
                                                                                series, rather than
                                                                                repeats those increments.
                                                                                Additionally, while
                                                                                current rules permit bids
                                                                                and offers (including the
                                                                                price submitting into a
                                                                                FLEX AIM Auction) to be in
                                                                                a different format than
                                                                                the exercise price of a
                                                                                FLEX Option series, the
                                                                                current functionality does
                                                                                not permit this. Rule
                                                                                5.3(e)(3) in the shell
                                                                                Rulebook makes it clear
                                                                                that bids and offers must
                                                                                be in the same format as
                                                                                the exercise price, as it
                                                                                would be difficult to
                                                                                apply a dollar price for a
                                                                                FLEX Option series with a
                                                                                percentage-based exercise
                                                                                price.\13\ There is no
                                                                                substantive change to the
                                                                                permissible minimum
                                                                                increments for orders
                                                                                submitted to a FLEX AIM
                                                                                Auction. The proposed rule
                                                                                change maintains the rule
                                                                                provision that complex
                                                                                Agency and Initiating
                                                                                Orders must include a net
                                                                                price. See the discussion
                                                                                below regarding the
                                                                                application of FLEX AIM to
                                                                                complex orders, including
                                                                                proposed changes to
                                                                                current Rule 24A.5A,
                                                                                Interpretation and Policy
                                                                                .05.
An Initiating FLEX Trader may only   N/A...................  Rule..................  This is consistent with
 submit an Agency Order to a FLEX                            5.73(a)(6)............   current functionality, as
 AIM Auction after trading in FLEX                                                    executions cannot occur
 Options is open pursuant to Rule                                                     prior to the opening of
 5.71\14\.                                                                            trading. The proposed rule
                                                                                change clarifies this in
                                                                                the Rule.
The System rejects or cancels both   N/A...................  Rule 5.73(a)..........  This is consistent with
 an Agency Order and Initiating                                                       current functionality and
 Order submitted to a FLEX AIM                                                        the concept of eligibility
 Auction that do not meet the                                                         requirements, and the
 conditions in proposed paragraph                                                     proposed rule change
 (a).                                                                                explicitly states this in
                                                                                the Rule.
The Initiating Order must stop the   Rule..................  Rule 5.73(b)..........  The proposed rule change
 entire Agency Order at a price in   24A.5A(b)(1)(vii) and                            references Rule 5.4 in the
 the same format (i.e., price or      Interpretation and                              shell Rulebook, which
 percentage) as the exercise price    Policy .05.                                     describes the permissible
 of the FLEX Option series. If the                                                    minimum increments for
 Agency Order and Initiating Order                                                    FLEX Option series, rather
 are complex orders, the price must                                                   than repeats those
 be a net price for the complex                                                       increments. There is no
 strategy.                                                                            substantive change to the
                                                                                permissible minimum
                                                                                increments for orders
                                                                                submitted to a FLEX AIM
                                                                                Auction.
The Initiating FLEX Trader must      Rule..................  Rule 5.73(b)(1) and     The proposed rule change
 specify (1) a single price at       24A.5A(a)(2) and         (2).                    deletes the provision that
 which it seeks to execute the        (b)(1)(i).                                      the Agency Order will be
 Agency Order against the                                                             stopped at the better of
 Initiating Order (a ``single-price                                                   the BBO or the Agency
 submission''), including whether                                                     Order's limit price if
 it elects to have last priority in                                                   designated as auto-match,
 allocation (as described in                                                          and instead will have an
 proposed subparagraph (e)(4)); or                                                    initial stop price,
 (2) an initial stop price and                                                        because there will no
 instruction to automatically match                                                   longer be an electronic
 the price and size of all FLEX AIM                                                   book (and thus no BBO) for
 responses (``auto-match'') at each                                                   FLEX Options.\15\
 price, up to a designated limit
 price, better than the price at
 which the balance of the Agency
 Order can be fully executed ( the
 ``final auction price'').
The System rejects or cancels both   N/A...................  Rule 5.73(b)..........  This is consistent with
 an Agency Order and Initiating                                                       current functionality and
 Order submitted to a FLEX AIM                                                        the concept of eligibility
 Auction that do not meet the                                                         requirements, and the
 conditions in proposed paragraph                                                     proposed rule change
 (b).                                                                                explicitly states this in
                                                                                the Rule.
One or more FLEX AIM Auctions in     Rule..................  Rule 5.73(c)(1).......  The proposed rule change
 the same FLEX Option series or      24A.5A(b) and                                    permits concurrent FLEX
 complex strategy, as applicable,     Interpretation and                              AIM Auctions, which the
 may occur at the same time.          Policy .05.                                     current rule prohibits, as
                                                                                further discussed below.
                                                                                The proposed rule change
                                                                                also deletes the provision
                                                                                that says unrelated FLEX
                                                                                Orders may not be
                                                                                submitted to the
                                                                                electronic book for the
                                                                                duration of a FLEX AIM
                                                                                Auction, because there
                                                                                will no longer be an
                                                                                electronic book (and thus
                                                                                no BBO) for FLEX Options.
The System initiates the FLEX AIM    Rule..................  Rule 5.73(c)(2).......  The current rule states the
 Auction process by sending a FLEX   24A.5A(b)(1)(ii) and                             auction message (currently
 AIM Auction notification message     (vi).                                           called a request for
 detailing the side, size, Auction                                                    responses (``RFR''))
 ID, the length of the FLEX AIM                                                       details the size and side
 Auction period, and FLEX option                                                      of the order, which
 series or complex strategy, as                                                       message is set to all FLEX
 applicable, of the Agency Order to                                                   Traders that have elected
 all FLEX Traders that elect to                                                       to receive RFRs upon
 receive FLEX AIM Auction                                                             receipt of a properly
 notification messages. FLEX AIM                                                      designated Agency Order
 Auction notification messages are                                                    for FLEX AIM processing.
 not disseminated to OPRA.                                                            Other than changes to
                                                                                terminology and other
                                                                                nonsubstantive changes,
                                                                                the proposed rule change
                                                                                adds that this message
                                                                                will also include the
                                                                                Auction ID and options
                                                                                series or complex
                                                                                strategy, as applicable,
                                                                                of the Agency Order. This
                                                                                is consistent with the
                                                                                current RFR that is
                                                                                disseminated, and the
                                                                                proposed rule change
                                                                                merely adds details to the
                                                                                rule. The proposed rule
                                                                                change to add that the
                                                                                FLEX AIM Auction
                                                                                notification message
                                                                                includes the length of the
                                                                                FLEX AIM Auction period
                                                                                relates to the proposed
                                                                                change below that the
                                                                                Initiating FLEX Trader,
                                                                                rather than the Exchange,
                                                                                will designate the length
                                                                                of the FLEX AIM Auction
                                                                                period (and therefore FLEX
                                                                                Traders will know how long
                                                                                they have to respond to a
                                                                                FLEX AIM Auction). The
                                                                                proposed rule change also
                                                                                adds that AIM Auction
                                                                                notification messages are
                                                                                not included in the
                                                                                disseminated OPRA, which
                                                                                is also consistent with
                                                                                current functionality.\16\
The ``FLEX AIM Auction period'' is   Rule..................  Rule 5.73(c)(3).......  The proposed rule change
 a period of time designated by the  24A.5A(b)(1)(iii).....                           adds a maximum time to the
 Initiating FLEX Trader, which may                                                    range for the FLEX AIM
 be no less than three seconds and                                                    Auction period (the
 no more than five minutes. The                                                       minimum potential auction
 designated length of the FLEX AIM                                                    period remains three
 Auction period may not be longer                                                     seconds), which proposed
 than the amount of time remaining                                                    maximum time is consistent
 until the market close.                                                              with current Exchange
                                                                                authority under the
                                                                                current Rules.
                                                                                Additionally, this
                                                                                corresponds to the same
                                                                                permissible time range as
                                                                                that for electronic FLEX
                                                                                Auctions pursuant to Rule
                                                                                5.72(c) in the shell
                                                                                Rulebook, and permits the
                                                                                Initiating FLEX Trader to
                                                                                designate the length of
                                                                                the FLEX AIM Auction when
                                                                                submitting the Agency
                                                                                Order rather than have the
                                                                                Exchange establish a
                                                                                length for all FLEX AIM
                                                                                Auctions. It also ensures
                                                                                that a FLEX AIM Auction
                                                                                will conclude prior to the
                                                                                close of trading to
                                                                                prevent executions after
                                                                                the market close. This is
                                                                                consistent with the
                                                                                standard FLEX electronic
                                                                                auction, which permits
                                                                                FLEX Traders to designate
                                                                                the length of that auction
                                                                                (and permits it to be from
                                                                                three seconds to five
                                                                                minutes). This provides
                                                                                consistency among
                                                                                electronic FLEX auctions.
                                                                                Additionally, it provides
                                                                                FLEX Traders with
                                                                                flexibility regarding the
                                                                                duration of the exposure
                                                                                time, which it may want to
                                                                                be longer than three
                                                                                seconds due to the terms
                                                                                of the FLEX Option series
                                                                                being auctioned.\17\
An Initiating FLEX Trader may not    Rule..................  Rule 5.73(c)(4).......  The proposed rule change
 modify or cancel an Agency Order    24A.5A(b).............                           makes only nonsubstantive
 or Initiating Order after                                                            changes to this provision,
 submission to a FLEX AIM Auction.                                                    as well as clarifies that
                                                                                the prohibition on the
                                                                                Initiating FLEX Trader
                                                                                from modifying or
                                                                                cancelling an order after
                                                                                submission to a FLEX AIM
                                                                                Auction applies to both
                                                                                the Agency Order and the
                                                                                Initiating Order (the
                                                                                current rules only
                                                                                references the Agency
                                                                                Order; however, they are
                                                                                submitted as a pair, and
                                                                                thus not being able to
                                                                                modify or cancel the
                                                                                Agency Order means that
                                                                                the Initiating FLEX Trader
                                                                                is not able to modify or
                                                                                cancel the Initiating
                                                                                Order either).
Any FLEX Trader may submit           Rule..................  Rule 5.73(c)(5).......  The current rule specifies
 responses to a FLEX AIM Auction     24A.5A(b)(1)(iv) and                             that responses must
 that are properly marked             (v).                                            include prices and sizes;
 specifying price, size, side, and                                                    the proposed rule change
 the Auction ID for the FLEX AIM                                                      adds responses must also
 Auction to which the FLEX Trader                                                     specify side and an
 is submitting the response. A FLEX                                                   Auction ID, which is
 AIM response may only participate                                                    consistent with current
 in the FLEX AIM Auction with the                                                     functionality and merely
 Auction ID specified in the                                                          adds details to the rule.
 response.                                                                            The proposed rule change
                                                                                adds that a FLEX AIM
                                                                                response may only
                                                                                participate in the AIM
                                                                                Auction with the Auction
                                                                                ID specified in the
                                                                                response. This is
                                                                                consistent with current
                                                                                functionality. The
                                                                                Exchange proposes to
                                                                                include this language
                                                                                given the above proposal
                                                                                that permits concurrent
                                                                                FLEX AIM Auctions. The
                                                                                proposed rule change
                                                                                deletes the provision that
                                                                                caps the price of a FLEX
                                                                                AIM response at the
                                                                                opposite side of the BBO,
                                                                                because there will no
                                                                                longer be an electronic
                                                                                book (and thus no BBO) for
                                                                                FLEX Options.

The minimum price increment for      Rule..................  Rule 5.73(c)(5)(A)....  The proposed rule change
 FLEX AIM responses is the same as   24A.5A(b)(1)(vii) and                            adds that the System
 the one the Exchange determines      Interpretation and                              rejects a FLEX AIM
 for a class pursuant to              Policy .05.                                     response that is not in
 subparagraph (a)(4) above, and                                                       the applicable minimum
 must be in the same format (i.e.,                                                    increment or format, which
 price or percentage) as the                                                          is consistent with current
 exercise price of the FLEX Option                                                    functionality and merely
 series. A response to a FLEX AIM                                                     adds detail to the rule.
 Auction of a complex Agency Order                                                    See the discussion below
 must have a net price. The System                                                    regarding the application
 rejects a FLEX AIM response that                                                     of FLEX AIM to complex
 is not in the applicable minimum                                                     orders, including proposed
 increment or format.                                                                 changes to current Rule
                                                                                24A.5A, Interpretation and
                                                                                Policy .05.
A FLEX Trader may submit multiple    N/A...................  Rule..................  This is consistent with
 FLEX AIM responses at the same or                           5.73(c)(5)(B) and (C).   current functionality.
 multiple prices to a FLEX AIM                                                        Current Rule 24A.5A
 Auction. For purposes of a FLEX                                                      contains no restriction on
 AIM Auction, the System aggregates                                                   how many responses a FLEX
 all of a FLEX Trader's FLEX AIM                                                      Trader may submit; the
 responses for the same EFID at the                                                   proposed rule change
 same price. The System caps the                                                      merely makes this explicit
 size of a FLEX AIM response, or                                                      in the Rules. The proposed
 the aggregate size of a FLEX                                                         rule change also states
 Trader's FLEX AIM responses for                                                      for purposes of a FLEX AIM
 the same EFID at the same price,                                                     Auction, the System
 at the size of the Agency Order                                                      aggregates all of a FLEX
 (i.e., the System ignores size in                                                    Trader's FLEX AIM
 excess of the size of the Agency                                                     responses for the same
 Order when processing the FLEX AIM                                                   EFID at the same price.
 Auction).                                                                            This (combined with the
                                                                                proposed size cap) will
                                                                                prevent a FLEX Trader from
                                                                                submitting multiple
                                                                                orders, quotes, or
                                                                                responses at the same
                                                                                price to obtain a larger
                                                                                pro-rata share of the
                                                                                Agency Order.
FLEX AIM responses must be on the    N/A...................  Rule..................  This is consistent with
 opposite side of the market as the                          5.73(c)(5)(D).........   current functionality, and
 Agency Order. The System rejects a                                                   the proposed rule change
 FLEX AIM response on the same side                                                   merely adds this detail to
 of the market as the Agency Order.                                                   the rules. Additionally,
                                                                                the Exchange believes this
                                                                                is reasonable given that
                                                                                the purpose of an AIM
                                                                                response is to trade
                                                                                against the Agency Order
                                                                                in the AIM Auction into
                                                                                which the AIM response was
                                                                                submitted.
FLEX AIM responses are not visible   Rule..................  Rule..................  None.
 to AIM Auction participants or      24A.5A(b)(1)(vi)......  5.73(c)(5)(E).........
 disseminated to OPRA.
A FLEX Trader may modify or cancel   Rule..................  Rule..................  The current Rule permits
 its FLEX AIM responses during the   24A.5A(b)(1)(viii)....  5.73(c)(5)(F).........   FLEX Traders to cancel a
 FLEX AIM Auction.                                                                    FLEX AIM response, but
                                                                                does not explicitly state
                                                                                that those responses may
                                                                                be modified. A
                                                                                modification of a response
                                                                                is equivalent to a
                                                                                cancellation of an
                                                                                existing response and
                                                                                submission of a new
                                                                                response, but may instead
                                                                                be done through a
                                                                                different message type.
                                                                                Therefore, the proposed
                                                                                rule change permits the
                                                                                same activity that can be
                                                                                done pursuant to the
                                                                                current rule, but merely
                                                                                in a different manner
                                                                                (i.e., modification rather
                                                                                than cancellation and
                                                                                separate entry).
A FLEX AIM Auction concludes at the  Rule..................  Rule..................  The proposed rule change
 earliest to occur of the following  24A.5A(b)(2)..........  5.73(d)...............   deletes the provision that
 times: (1) The end of the FLEX AIM                                                   says a FLEX AIM Auction
 Auction period; and (2) any time                                                     will conclude any time an
 the Exchange halts trading in the                                                    RFR response matches the
 affected series, provided,                                                           BBO on the opposite side
 however, that in such instance the                                                   of the market from the RFR
 FLEX AIM Auction concludes without                                                   responses, because there
 execution.                                                                           will no longer be an
                                                                                electronic book (and thus
                                                                                no BBO) for FLEX Options.
At the conclusion of the FLEX AIM    Rule 24A.5A(b)(3).....  Rule 5.73(e)..........  The proposed rule change
 Auction, the System allocates the                                                    deletes references to
 Initiating Order or FLEX AIM                                                         executions against FLEX
 responses against the Agency Order                                                   Orders, and whether the
 at the best price(s) to the price                                                    final auction price locks
 at which the balance of the Agency                                                   an order on the electronic
 Order can be fully executed (the                                                     book, because there will
 ``final auction price''). If the                                                     no longer be an electronic
 FLEX AIM Auction results in no                                                       book (and thus no BBO) for
 price improvement, the System                                                        FLEX Options, and thus
 executes the Agency Order at the                                                     Agency Orders will only
 stop price in the following order:                                                   execute responses or the
 Priority Customer responses                                                          Initiating Order, as
 receive first priority at each                                                       applicable. The proposed
 price level, the Initiating Order                                                    rule change deletes the
 participation entitlement (50% or                                                    reference to a FLEX
 40% depending on how many FLEX                                                       Appointed Market-Maker
 Traders submitted FLEX AIM                                                           participation entitlement,
 responses at the same price                                                          as there are currently no
 receives second priority at the                                                      FLEX Appointed Market-
 final auction price, all other                                                       Makers, and the Exchange
 responses have third priority and                                                    has not applied a
 are allocated on a pro-rata basis                                                    participation entitlement,
 pursuant to Rule 5.32(a)(1)(B),                                                      and as a result, the
 and the Initiating Order would                                                       Exchange is deleting FLEX
 have fourth priority to the extent                                                   Appointed Market-Makers
 there are any remaining contracts.                                                   from the Rules.\18\ The
 If the FLEX AIM Auction results in                                                   proposed rule change
 price improvement for the Agency                                                     provides that non-Priority
 Order and the Initiating FLEX                                                        Customer FLEX AIM
 Trader selected a single-price                                                       responses will be
 submission, at each price better                                                     allocated in a pro-rata
 than the final auction price, the                                                    manner rather than price-
 System executes the Agency Order                                                     time. The majority of
 first to Priority Customer                                                           classes on the Exchange
 responses (in time priority) and                                                     currently have a base
 then to all other FLEX AIM                                                           allocation algorithm of
 responses, allocated on a pro-rata                                                   pro-rata, and therefore
 basis. At the final auction price,                                                   the Exchange believes it
 the System executes any remaining                                                    is a reasonable manner in
 contracts from the Agency Order at                                                   which to allocate FLEX AIM
 that price in the order set forth                                                    responses. FLEX AIM
 in proposed subparagraph (e)(1).                                                     Priority Customer \19\
 If the FLEX AIM Auction results in                                                   responses will continue to
 price improvement for the Agency                                                     have priority at each
 Order and the Initiating FLEX                                                        price level (in time
 Trader selected auto-match, at                                                       priority); however, non-
 each price level better than the                                                     TPH broker-dealers will
 final auction price up to the                                                        not and will be treated in
 designated limit price, the System                                                   the same manner as all
 executes the Agency Order against                                                    other non-Priority
 the Initiating Order for the                                                         Customer responses, as
 number of contracts equal to the                                                     further discussed below.
 aggregate size of all FLEX AIM                                                       The Exchange notes the
 responses and then executes the                                                      current rule states public
 Agency Order against those                                                           customer orders have
 responses in the order set forth                                                     priority, rather than
 in proposed subparagraph (e)(2).                                                     Priority Customers.
 At the final auction price, the                                                      Currently, the Exchange
 System executes contracts at that                                                    does not permit the
 price in the order set forth in                                                      submission of FLEX Orders
 proposed subparagraph (e)(1). If                                                     with a Professional
 the Initiating FLEX Trader selects                                                   Capacity code, and so the
 a single-price submission, it may                                                    terms public customer and
 elect for the Initiating Order to                                                    Priority Customer
 have last priority to trade                                                          practically mean the same
 against the Agency Order. If the                                                     thing. However, the
 Initiating FLEX Trader elects last                                                   Exchange plans to make the
 priority, then notwithstanding                                                       Professional Capacity code
 proposed subparagraphs (e)(1) and                                                    available for FLEX orders
 (2), the System only executes the                                                    following migration, and
 Initiating Order against any                                                         because the System handles
 remaining Agency Order contracts                                                     Professional orders like
 at the stop price after the Agency                                                   broker-dealer orders,
 Order is allocated to all FLEX AIM                                                   those orders will not
 responses at all prices equal to                                                     receive priority in a FLEX
 or better than the stop price.                                                       AIM Auction. Therefore,
 Last priority information is not                                                     only Priority Customer
 available to other market                                                            responses will receive
 participants and may not be                                                          priority.\20\ The proposed
 modified after it is submitted.                                                      rule change also permits
                                                                                the Initiating FLEX Trader
                                                                                to select last priority,
                                                                                as further discussed
                                                                                below. Finally, the
                                                                                proposed rule change adds
                                                                                that any unexecuted
                                                                                responses (or portions) at
                                                                                the conclusion of the FLEX
                                                                                AIM Auction will be
                                                                                cancelled.
A FLEX Trader may only use a FLEX    Rule..................  Rule..................  None.
 AIM Auction where there is a        24A.5A, Interpretation  5.73, Interpretation
 genuine intention to execute a       and Policy .01.         and Policy .01.
 bona fide transaction.
It will be deemed conduct            Rule..................  Rule..................  The proposed rule change
 inconsistent with just and          24A.5A, Interpretation  5.73, Interpretation     deletes the language that
 equitable principles of trade and    and Policy .02.         and Policy .02.         states the Agency Order
 a violation of Rule 10.1 (to which                                                   cannot be broken up into
 the Exchange intends to move Rule                                                    separate orders for ``two
 4.1 from the current Rulebook) to                                                    (2) or fewer contracts,''
 engage in a pattern of conduct                                                       as that language is not in
 where the Initiating FLEX Trader                                                     the corresponding
 breaks up an Agency Order into                                                       provision for non-FLEX AIM
 separate orders for the purpose of                                                   (see Rules 5.37,
 gaining a higher allocation                                                          Interpretation and Policy
 percentage than the Initiating                                                       .02 and 5.38,
 FLEX Trader would have otherwise                                                     Interpretation and Policy
 received in accordance with the                                                      .02 of the shell
 allocation procedures contained in                                                   Rulebook). Deletion of
 paragraph (e) above.                                                                 this language does not
                                                                                have any impact on the
                                                                                prohibited conduct in this
                                                                                provision, and provides
                                                                                consistency among the
                                                                                rules in the shell
                                                                                Rulebook regarding AIM
                                                                                Auctions.
----------------------------------------------------------------------------------------------------------------

                                                FLEX SAM Auction
----------------------------------------------------------------------------------------------------------------
A FLEX Trader (the ``Initiating      Rule..................  Rule..................  The proposed rule change
 FLEX Trader'') may electronically   24A.5B, introductory    5.74, introductory       adds that the Solicited
 submit for execution an order        paragraph and           paragraph.              Order cannot have a
 (which may be a simple or complex    Interpretations and                             Capacity F for the same
 order) it represents as agent        Policies .01 and .04.                           executing firm ID
 (``Agency Order'') against a                                                         (``EFID'') as the Agency
 solicited order(s) (which cannot                                                     Order. Current Rule 24A.5B
 have a Capacity of F for the same                                                    does not contain a similar
 EFID as the Agency Order or for                                                      provision, but the
 the account of any FLEX Market                                                       Exchange currently
 Maker with an appointment in the                                                     enforces the requirement
 applicable FLEX Option class on                                                      that the contra-side order
 the Exchange) (``Solicited                                                           be a solicitation rather
 Order'') if it submits the Agency                                                    than a facilitation
 Order for electronic execution                                                       through surveillance. The
 into a FLEX SAM Auction pursuant                                                     proposed rule change adds
 to this Rule.                                                                        this functionality, which
                                                                                will help with the
                                                                                enforcement of this
                                                                                requirement, in addition
                                                                                to surveillance. The
                                                                                proposed rule change also
                                                                                specifies in the
                                                                                introductory paragraph
                                                                                that both simple and
                                                                                complex orders may be
                                                                                submitted into a FLEX SAM
                                                                                Auction, as the auction
                                                                                will apply to both simple
                                                                                and complex orders in a
                                                                                substantially similar
                                                                                manner, as further
                                                                                discussed below.
An Agency Order must be in a FLEX    Rule..................  Rule..................  None.
 Option class the Exchange           24A.5B(a)(1)..........  5.74(a)(1)............
 designates as eligible for FLEX
 SAM Auctions.
The Agency Order and Solicited       N/A...................  Rule..................  This requirement is not
 Order must each be a FLEX Order                             5.74(a)(2)............   explicitly stated in the
 that complies with Rule 5.72(b) in                                                   current Rules; however, it
 a permissible FLEX Option series                                                     is consistent with current
 that complies with Rule 4.21.                                                        functionality, and the
                                                                                proposed rule change
                                                                                merely states this in the
                                                                                Rules. For a FLEX SAM
                                                                                Auction to occur, the
                                                                                orders submitted would
                                                                                need to be in a series
                                                                                eligible for FLEX trading,
                                                                                and thus include all the
                                                                                terms necessary to
                                                                                comprise a FLEX Option
                                                                                series.\21\
The Initiating FLEX Trader must      Rule..................  Rule..................  None.
 mark an Agency Order for FLEX SAM   24A.5B(b)(1)(i).......  5.74(a)(3)............
 Auction processing.
The Agency Order must be for at      Rule..................  Rule..................  The proposed rule change
 least the minimum size designated   24A.5B(a)(1) and (2)..  5.74(a)(4)............   deletes the requirement
 by the Exchange (which may not be                                                    that the Initiating FLEX
 less than 500 standard option                                                        Trader must designate each
 contracts or 5,000 mini-option                                                       order entered into a FLEX
 contracts). The Solicited Order                                                      SAM Auction as all-or-none
 must be for (or must total, if the                                                   (``AON''). The Exchange's
 Solicited Order is comprised of                                                      new system has been
 multiple solicited orders) the                                                       designed to automatically
 same size as the Agency Order. The                                                   handle any orders
 System handles each of the Agency                                                    submitted into a SAM
 Order and the Solicited Order as                                                     Auction (using the
 all-or-none.                                                                         appropriate messaging) as
                                                                                all-or-none, so the
                                                                                Initiating FLEX Trader
                                                                                will no longer be required
                                                                                to add any specific AON
                                                                                designations to the Agency
                                                                                Order or Solicited Order.
                                                                                Therefore, the proposed
                                                                                rule change adds that the
                                                                                System handles each of the
                                                                                Agency Order and the
                                                                                Solicited Order as all-or-
                                                                                none. The proposed rule
                                                                                change clarifies the size
                                                                                requirements for mini-
                                                                                option contracts, which
                                                                                are 1/10th the size of
                                                                                standard option contracts.
                                                                                This is consistent with
                                                                                current functionality and
                                                                                is merely adding detail to
                                                                                the rule. See Rule 5.5,
                                                                                Interpretation and Policy
                                                                                .22 in the current
                                                                                Rulebook (which permits
                                                                                the listing of mini-
                                                                                options); see also Rule
                                                                                5.39(a)(3) (which has the
                                                                                same size requirements for
                                                                                non-FLEX SAM Auctions).
                                                                                The proposed rule change
                                                                                clarifies in the Rules
                                                                                that the Solicited Order
                                                                                must be for the same size
                                                                                as the Agency Order, which
                                                                                is implied by the current
                                                                                Rules.\22\
The price of the Agency Order and    Rule..................  Rule..................  The current rule state the
 Solicited Order must be in an       24A.5B(a)(3)..........  5.74(a)(5)............   minimum increment for the
 increment the Exchange determines                                                    Initiating TPH's
 on a class basis (which may not be                                                   submission is determined
 smaller than the amounts set forth                                                   by the Exchange but may
 in Rule 5.4(c)(4)). The price must                                                   not be smaller than $0.01
 be in the same format (i.e., price                                                   or .01%, and premiums are
 or percentage) as the exercise                                                       rounded to the nearest
 price of the FLEX Option series.                                                     minimum increment. This is
 If the Agency Order and Solicited                                                    consistent with the
 Order are complex orders, the                                                        minimum increment
 price must be a net price for the                                                    available for all FLEX
 complex strategy.                                                                    Trading, so the proposed
                                                                                rule change merely
                                                                                references Rule 5.4(c)(4)
                                                                                in the shell Rulebook,
                                                                                which describes the
                                                                                permissible minimum
                                                                                increments for FLEX Option
                                                                                series, rather than
                                                                                repeats those increments.
                                                                                There is no substantive
                                                                                change to the permissible
                                                                                minimum increments for
                                                                                orders submitted to a FLEX
                                                                                SAM Auction. The proposed
                                                                                rule change maintains the
                                                                                rule provision that
                                                                                complex Agency and
                                                                                Initiating Orders must
                                                                                include a net price. See
                                                                                the discussion below
                                                                                regarding the application
                                                                                of FLEX SAM to complex
                                                                                orders, including proposed
                                                                                changes to current Rule
                                                                                24A.5B, Interpretation and
                                                                                Policy .01.
An Initiating FLEX Trader may only   N/A...................  Rule..................  This is consistent with
 submit an Agency Order to a FLEX                            5.74(a)(6)............   current functionality, as
 SAM Auction after trading in FLEX                                                    executions cannot occur
 Options is open pursuant to Rule                                                     prior to the opening of
 5.71.                                                                                trading. The proposed rule
                                                                                change clarifies this in
                                                                                the Rule.
The System rejects or cancels both   N/A...................  Rule 5.74(a)..........  This is consistent with
 an Agency Order and Solicited                                                        current functionality, and
 Order submitted to a FLEX SAM                                                        the proposed rule change
 Auction that do not meet the                                                         explicitly states this in
 conditions in proposed paragraph                                                     the Rule.
 (a).
The Solicited Order must stop the    Rule..................  Rule..................  The proposed rule change
 entire Agency Order at a price in   24A.5B(a)(3) and        5.74(b)...............   adds that the System
 the same format (i.e., price or      Interpretation and                              rejects or cancels both an
 percentage) as the exercise price    Policy .01, and                                 Agency Order and Solicited
 of the FLEX Option series. If the    24A.5B(b)(1).                                   Order submitted to a FLEX
 Agency Order and Solicited Order                                                     SAM Auction that does not
 are complex orders, the price must                                                   meet the conditions in
 be a net price for the complex                                                       proposed paragraph (b).
 strategy. The Initiating FLEX                                                        This is consistent with
 Trader must specify a single price                                                   current functionality, and
 at which it seeks to execute the                                                     the proposed rule change
 Agency Order against the Solicited                                                   explicitly states this in
 Order. The System rejects or                                                         the Rule. Additionally,
 cancels both an Agency Order and                                                     while current rules permit
 Solicited Order submitted to a                                                       bids and offers (including
 FLEX SAM Auction that does not                                                       the price submitting into
 meet the conditions in proposed                                                      a FLEX SAM Auction) to be
 paragraph (b).                                                                       in a different format than
                                                                                the exercise price of a
                                                                                FLEX Option series, the
                                                                                current functionality does
                                                                                not permit this. Rule
                                                                                5.3(e)(3) in the shell
                                                                                Rulebook makes it clear
                                                                                that bids and offers must
                                                                                be in the same format as
                                                                                the exercise price, as it
                                                                                would be difficult to
                                                                                apply a dollar price for a
                                                                                FLEX Option series with a
                                                                                percentage-based exercise
                                                                                price.\23\
One or more FLEX SAM Auctions in     Rule..................  Rule..................  The proposed rule change
 the same FLEX Option series or      24A.5B(b) and           5.74(c)(1)............   permits concurrent FLEX
 complex strategy, as applicable,     Interpretation and                              SAM Auctions, which the
 may occur at the same time.          Policy .01.                                     current rule prohibits, as
                                                                                further discussed below.
                                                                                The proposed rule change
                                                                                also deletes the provision
                                                                                that says unrelated FLEX
                                                                                Orders may not be
                                                                                submitted to the
                                                                                electronic book for the
                                                                                duration of a FLEX SAM
                                                                                Auction, because there
                                                                                will no longer be an
                                                                                electronic book (and thus
                                                                                no BBO) for FLEX Options.
The System initiates the FLEX SAM    Rule..................  Rule..................  The current rule states the
 Auction process by sending a FLEX   24A.5B(b)(1)(ii)......  5.74(c)(2)............   auction message (currently
 SAM Auction notification message                                                     called a request for
 detailing the side, size, price,                                                     responses (``RFR''))
 Capacity, Auction ID, the length                                                     details the price, size,
 of the FLEX SAM Auction period,                                                      and side of the order,
 and FLEX Option series or complex                                                    which message is set to
 strategy, as applicable, of the                                                      all FLEX Traders that have
 Agency Order to all FLEX Traders                                                     elected to receive RFRs
 that elect to receive FLEX SAM                                                       upon receipt of a properly
 Auction notification messages.                                                       designated Agency Order
 FLEX SAM Auction notification                                                        for FLEX SAM processing.
 messages are not disseminated to                                                     Other than changes to
 OPRA.                                                                                terminology and other
                                                                                nonsubstantive changes,
                                                                                the proposed provision
                                                                                specifies that the message
                                                                                will detail the Capacity
                                                                                of the Agency Order, an
                                                                                Auction ID, and the option
                                                                                series, in addition to the
                                                                                price, side, and size, of
                                                                                the Agency Order, which
                                                                                message is sent to all
                                                                                TPHs that elect to receive
                                                                                SAM Auction notification
                                                                                messages. This is
                                                                                consistent with the
                                                                                current auction message
                                                                                that is disseminated; the
                                                                                proposed rule change adds
                                                                                these details to the rule.
                                                                                The proposed rule change
                                                                                to add that the FLEX SAM
                                                                                Auction notification
                                                                                message includes the
                                                                                length of the FLEX SAM
                                                                                Auction period relates to
                                                                                the proposed change below
                                                                                that the Initiating FLEX
                                                                                Trader, rather than the
                                                                                Exchange, will designate
                                                                                the length of the FLEX SAM
                                                                                Auction period (and
                                                                                therefore FLEX Traders
                                                                                will know how long they
                                                                                have to respond to a FLEX
                                                                                SAM Auction). The proposed
                                                                                rule change also adds that
                                                                                FLEX SAM Auction
                                                                                notification messages are
                                                                                not included in the
                                                                                disseminated OPRA, which
                                                                                is also consistent with
                                                                                current functionality.\24\

The ``FLEX SAM Auction period'' is   Rule..................  Rule..................  The proposed rule change
 a period of time designated by the  24A.5B(b)(1)(iii).....  5.74(c)(3)............   adds a maximum time to the
 Initiating FLEX Trader, which may                                                    range for the FLEX SAM
 be no less than three seconds and                                                    Auction period (the
 no more than five minutes. The                                                       minimum potential auction
 designated length of the FLEX SAM                                                    period remains three
 Auction period may not be longer                                                     seconds), which is
 than the amount of time remaining                                                    consistent with current
 until the market close.                                                              Exchange authority under
                                                                                the current Rules.
                                                                                Additionally, this
                                                                                corresponds to the same
                                                                                permissible time range as
                                                                                that for electronic FLEX
                                                                                Auctions pursuant to Rule
                                                                                5.72 in the shell
                                                                                Rulebook, and permits the
                                                                                Initiating FLEX Trader to
                                                                                designate the length of
                                                                                the FLEX SAM Auction when
                                                                                submitting the Agency
                                                                                Order rather than have the
                                                                                Exchange establish a
                                                                                length for all FLEX SAM
                                                                                Auctions. It also ensures
                                                                                that a FLEX SAM Auction
                                                                                will conclude prior to the
                                                                                close of trading to
                                                                                prevent executions after
                                                                                the market close. This is
                                                                                consistent with standard
                                                                                FLEX electronic auction,
                                                                                which permits FLEX Traders
                                                                                to designate the length of
                                                                                that auction (and permits
                                                                                it to be from three
                                                                                seconds to five minutes).
                                                                                This provides consistency
                                                                                among FLEX trading.
                                                                                Additionally, it provides
                                                                                FLEX Traders with
                                                                                flexibility regarding the
                                                                                duration of the exposure
                                                                                time, which it may want to
                                                                                be longer than three
                                                                                seconds due to the terms
                                                                                of the FLEX Option series
                                                                                being auctioned.\25\
The Initiating FLEX Trader may not   Rule..................  Rule..................  The proposed rule change
 modify or cancel an Agency Order    24A.5B(b).............  5.74(c)(4)............   makes only nonsubstantive
 or Solicited Order after                                                             changes to this provision,
 submission to a SAM Auction.                                                         as well as clarifies that
                                                                                the prohibition on
                                                                                cancelling a FLEX SAM
                                                                                Auction practically means
                                                                                that the Initiating FLEX
                                                                                Trader may not cancel (or
                                                                                modify, which would change
                                                                                the terms of the auction
                                                                                after it started,
                                                                                essentially creating a new
                                                                                auction) the Agency Order
                                                                                or the Solicited Order,
                                                                                the entry of which
                                                                                (subject to eligibility
                                                                                requirements) initiates
                                                                                the FLEX SAM Auction.
Any FLEX Trader other than the       Rule..................  Rule..................  The current rule specifies
 Initiating FLEX Trader (determined  24A.5B(b)(1)(iii) and   5.74(c)(5)............   that responses must
 by EFID) may submit responses to a   (vi).                                           include prices and sizes;
 FLEX SAM Auction that are properly                                                   the proposed rule change
 marked specifying price, size,                                                       adds responses must also
 side, and the Auction ID for the                                                     specify side and an
 FLEX SAM Auction to which the FLEX                                                   Auction ID, which is
 Trader is submitting the response.                                                   consistent with current
 A FLEX SAM response may only                                                         functionality and merely
 participate in the FLEX SAM                                                          adds details to the rule.
 Auction with the Auction ID                                                          The proposed rule change
 specified in the response.                                                           adds that a FLEX SAM
                                                                                response may only
                                                                                participate in the FLEX
                                                                                SAM Auction with the
                                                                                Auction ID specified in
                                                                                the response. This is
                                                                                consistent with current
                                                                                functionality. The
                                                                                Exchange proposes to
                                                                                include this language
                                                                                given the above proposal
                                                                                that permits concurrent
                                                                                FLEX SAM Auctions. The
                                                                                proposed rule change
                                                                                deletes the provision that
                                                                                caps the price of a FLEX
                                                                                SAM response at the
                                                                                opposite side of the BBO,
                                                                                because there will no
                                                                                longer be an electronic
                                                                                book (and thus no BBO) for
                                                                                FLEX Options. The proposed
                                                                                rule change permits all
                                                                                FLEX Traders (including
                                                                                Market-Makers from another
                                                                                options exchange) to
                                                                                submit responses to a FLEX
                                                                                SAM Auction. By permitting
                                                                                additional participants to
                                                                                submit responses to FLEX
                                                                                SAM Auctions, the Exchange
                                                                                believes this may provide
                                                                                the opportunity for
                                                                                additional liquidity in
                                                                                these auctions, which
                                                                                could lead to additional
                                                                                price improvement
                                                                                opportunities.
The minimum price increment for      Rule..................  Rule..................  The proposed rule change
 FLEX SAM responses is the same as   24A.5B(b)(1)(v) and     5.74(c)(5)(A).........   adds that the System
 the one the Exchange determines      Interpretation and                              rejects a FLEX SAM
 for a class pursuant to              Policy .01.                                     response that is not in
 subparagraph (a)(4) above, and                                                       the applicable minimum
 must be in the same format (i.e.,                                                    increment or format, which
 price or percentage) as the                                                          is consistent with current
 exercise price of the FLEX Option                                                    functionality and merely
 series. A response to a FLEX SAM                                                     adds detail to the rule.
 Auction of a complex Agency Order                                                    See the discussion below
 must have a net price. The System                                                    regarding the application
 rejects a FLEX SAM response that                                                     of FLEX SAM to complex
 is not in the applicable minimum                                                     orders, including proposed
 increment or format.                                                                 changes to current Rule
                                                                                24A.5B, Interpretation and
                                                                                Policy .01.
A FLEX Trader may submit multiple    N/A...................  Rule..................  This is consistent with
 FLEX SAM responses at the same or                           5.74(c)(5)(B) and (C).   current functionality.
 multiple prices to a FLEX SAM                                                        Current Rule 24A.5B
 Auction. For purposes of a FLEX                                                      contains no restriction on
 SAM Auction, the System aggregates                                                   how many responses a FLEX
 all of a FLEX Trader's FLEX SAM                                                      Trader may submit; the
 responses for the same EFID at the                                                   proposed rule change
 same price. The System caps the                                                      merely makes this explicit
 size of a FLEX SAM response, or                                                      in the Rules. The proposed
 the aggregate size of a FLEX                                                         rule change also states
 Trader's FLEX SAM responses for                                                      for purposes of a FLEX SAM
 the same EFID at the same price,                                                     Auction, the System
 at the size of the Agency Order                                                      aggregates all of a FLEX
 (i.e., the System ignores size in                                                    Trader's FLEX SAM
 excess of the size of the Agency                                                     responses for the same
 Order when processing the FLEX SAM                                                   EFID at the same price.
 Auction).                                                                            This (combined with the
                                                                                proposed size cap) will
                                                                                prevent a FLEX Trader from
                                                                                submitting multiple
                                                                                orders, quotes, or
                                                                                responses at the same
                                                                                price to obtain a larger
                                                                                pro-rata share of the
                                                                                Agency Order.
FLEX SAM responses must be on the    N/A...................  Rule..................  This is consistent with
 opposite side of the market as the                          5.74(c)(5)(D).........   current functionality, and
 Agency Order. The System rejects a                                                   the proposed rule change
 FLEX SAM response on the same side                                                   merely adds this detail to
 of the market as the Agency Order.                                                   the rules. Additionally,
                                                                                the Exchange believes this
                                                                                is reasonable given that
                                                                                the purpose of a FLEX SAM
                                                                                response is to trade
                                                                                against the Agency Order
                                                                                in the FLEX SAM Auction
                                                                                into which the FLEX SAM
                                                                                response was submitted.
FLEX SAM responses are not visible   Rule..................  Rule..................  None.
 to FLEX SAM Auction participants    24A.5B(b)(1)(iv)......  5.74(c)(5)(E).........
 or disseminated to OPRA.
A FLEX Trader may modify or cancel   Rule..................  Rule..................  The current Rule permits
 its FLEX SAM responses during the   24A.5B(b)(1)(vii).....  5.74(c)(5)(F).........   FLEX Traders to cancel a
 FLEX SAM Auction.                                                                    FLEX SAM response, but
                                                                                does not explicitly state
                                                                                that those responses may
                                                                                be modified. A
                                                                                modification of a response
                                                                                is equivalent to a
                                                                                cancellation of an
                                                                                existing response and
                                                                                submission of a new
                                                                                response, but may instead
                                                                                be done through a
                                                                                different message type.
                                                                                Therefore, the proposed
                                                                                rule change permits the
                                                                                same activity that can be
                                                                                done pursuant to the
                                                                                current rule, but merely
                                                                                in a different manner
                                                                                (i.e., modification rather
                                                                                than cancellation and
                                                                                separate entry).
A FLEX SAM Auction concludes at the  Rule..................  Rule..................  The proposed rule change
 earliest to occur of the following  24A.5A(b)(2)..........  5.74(d)...............   deletes the provision that
 times: (1) The end of the FLEX SAM                                                   says a FLEX SAM Auction
 Auction period; and (2) any time                                                     will conclude any time an
 the Exchange halts trading in the                                                    RFR response matches the
 affected series, provided,                                                           BBO on the opposite side
 however, that in such instance the                                                   of the market from the RFR
 FLEX SAM Auction concludes without                                                   responses, , because there
 execution.                                                                           will no longer be an
                                                                                electronic book (and thus
                                                                                no BBO) for FLEX Options.
The Agency Order executes against    Rule..................  Rule 5.74(e)..........  The proposed rule change
 the Solicited Order at the stop     24A.5B(b)(3)..........                           deletes references to
 price if there are no Priority                                                       executions against FLEX
 Customer FLEX SAM responses and                                                      Orders, and whether the
 the aggregate size of FLEX SAM                                                       execution price is better
 responses at an improved price(s)                                                    than the BBO, because
 is insufficient to satisfy the                                                       there will no longer be an
 Agency Order. The Agency Order                                                       electronic book (and thus
 executes against FLEX SAM                                                            no BBO) for FLEX Options,
 responses if: (a) There is a                                                         and thus Agency Orders
 Priority Customer FLEX SAM                                                           will only execute
 response and the aggregate size of                                                   responses or the
 that response and all other FLEX                                                     Initiating Order, as
 SAM responses is sufficient to                                                       applicable. The proposed
 satisfy the Agency Order or (b)                                                      rule change deletes the
 the aggregate size of FLEX SAM                                                       reference to a FLEX
 responses at an improved price(s)                                                    Appointed Market-Maker
 is sufficient to satisfy the                                                         participation entitlement,
 Agency Order. At each price level,                                                   as there are currently no
 Priority Customer FLEX SAM                                                           FLEX Appointed Market-
 responses have first priority, and                                                   Makers, and the Exchange
 all other FLEX SAM responses are                                                     has not applied a
 allocated second on a pro-rata                                                       participation entitlement,
 basis. There is no execution at                                                      and as a result, the
 the conclusion of a FLEX SAM                                                         Exchange is deleting FLEX
 Auction if there is a Priority                                                       Appointed Market-Makers
 Customer FLEX SAM response and the                                                   from the Rules (as noted
 aggregate size of that response                                                      above). The proposed rule
 and other FLEX SAM responses is                                                      change provides that FLEX
 insufficient to satisfy the Agency                                                   SAM responses will be
 Order. The System cancels or                                                         allocated in a pro-rata
 rejects any unexecuted FLEX SAM                                                      manner rather than time
 responses (or unexecuted portions)                                                   priority. The majority of
 at the conclusion of a FLEX SAM                                                      classes on the Exchange
 Auction.                                                                             currently have a base
                                                                                allocation algorithm of
                                                                                pro-rata, and therefore
                                                                                the Exchange believes it
                                                                                is a reasonable manner in
                                                                                which to allocate FLEX SAM
                                                                                responses. FLEX SAM
                                                                                Priority Customer
                                                                                responses will continue to
                                                                                have priority at each
                                                                                price level; however, non-
                                                                                TPH broker-dealers will
                                                                                not and will be treated in
                                                                                the same manner as all
                                                                                other non-Priority
                                                                                Customer responses, as
                                                                                further discussed below.
                                                                                Finally, the proposed rule
                                                                                change adds that any
                                                                                unexecuted responses (or
                                                                                portions) at the
                                                                                conclusion of the FLEX SAM
                                                                                Auction will be cancelled.
                                                                                See discussion above with
                                                                                respect to FLEX AIM
                                                                                regarding changing the
                                                                                term ``public customer''
                                                                                to ``Priority Customer,''
                                                                                as the same reasoning
                                                                                applies to the proposed
                                                                                change in the FLEX SAM
                                                                                rule.

Prior to entering Agency Orders      Rule 24A.5B,            Rule 5.74,              None.
 into a FLEX SAM Auction on behalf    Interpretation and      Interpretation and
 of customers, Initiating FLEX        Policy .03.             Policy .01.
 Traders must deliver to the
 customer a written notification
 informing the customer that his
 order may be executed using the
 FLEX SAM Auction. The written
 notification must disclose the
 terms and conditions contained in
 proposed Rule 5.74 and be in a
 form approved by the Exchange.
Under proposed Rule 5.74,            Rule 24A.5B,            Rule 5.74,              None.
 Initiating FLEX Traders may enter    Interpretation and      Interpretation and
 contra-side orders that are          Policy .04.             Policy .02.
 solicited. FLEX SAM provides a
 facility for FLEX Traders that
 locate liquidity for their
 customer orders. FLEX Traders may
 not use the FLEX SAM Auction to
 circumvent Rule 5.9 or 5.73 in the
 shell Rulebook limiting principal
 transactions. This may include,
 but is not limited to, FLEX
 Traders entering contra-side
 orders that are solicited from (a)
 affiliated broker-dealers or (b)
 broker-dealers with which the FLEX
 Trader has an arrangement that
 allows the FLEX Traders to realize
 similar economic benefits from the
 solicited transaction as it would
 achieve by executing the customer
 order in whole or in part as
 principal.