times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.49 credit offer
The dcMBBO is 2.70 debit bid at 3.49 credit offer

Midpoint of dcMBBO is the difference between the bid and offer times
0.5 added to the dcMBB or subtracted from the dcMBO:

 2.70 + ((3.49-2.70) * 0.5) = 3.095 or
 3.49-((3.49-2.70 * 0.5) = 3.095

The URIP Percentage is 60% of the bid/ask spread or 0.47 (60% x 0.79 =
0.47)
Since the order price exceeds the URIP requirement (2.70 + 0.47 = 3.17)
to initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval is started.

The System starts the auction at the Initiating Priority Customer price
bidding 3.18 to buy 1000 strategies. The following responses are
received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.01 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.00 credit
sell of 250 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.00 credit
sell of 250 arrives

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the Complex Auction price determination will find the maximum quantity
that can trade. In this case the maximum quantity of 1000 can trade at
or within the prices of 3.01 and 3.18. To find the final trade price
the process will continue by taking the midpoint between the highest
and lowest price points that satisfy the maximum quantity, in this case
is 3.01 + ((3.18-3.01) * .5) = 3.095. Because the midpoint of the
highest and lowest price is also the midpoint of the dcMBBO and is not
0.01 increment the trade price is rounded up to the next 0.01
increment.

 Trade 1,000 at $3.10
 Customer buys 500 from BD1
 Customer buys 250 from MM1
 Customer buys 250 from MM3
Size Imbalance at End of Response Time Interval
    If there is a size imbalance, and if a single price satisfies the
maximum quantity criteria, that single price is used as the Complex
Auction price. If two or more prices satisfy the maximum quantity
criteria, the System will price the execution at the price on the
opposite side of the size imbalance that meets the maximum quantity
criteria, while also respecting limit prices and the pricing boundaries
which include the price protection boundary of $0.01 inside of the
icMBBO and the price protection range (if any) selected by the Members
whose interest makes up the order imbalance.

Example--Complex Auction Pricing when there is an imbalance and the
maximum quantity at two or more prices are used as the Complex Auction
price

    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and Sell 1 Mar 55 Call for a 3.20 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48 (60% x 0.80 =
0.48)

Since the order price exceeds the URIP requirement (2.70 + 0.48 = 3.18)
to initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval is started.
The System starts the auction at the Initiating Priority Customer price
bidding 3.20 to buy 1000 strategies. The following responses are
received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.15 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 200 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.15 credit
sell of 200 arrives

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the Complex Auction price determination will find the maximum quantity
that can trade. In this case the maximum quantity of 900 can trade at
or within the prices of 3.15 and 3.20. Because there is more quantity
to buy than to sell, this creates an imbalance therefore the final
trade price does not use the midpoint and instead will be at the price
on the opposite side of the size imbalance, in this case 3.20. After
the Auction process has terminated, the remaining bid for a size of 100
will be placed on the Strategy Book at its limit price of 3.20.

 Trade 900 at $3.20
 Customer buys 500 from BD1
 Customer buys 200 from MM1
 Customer buys 200 from MM3
 Post $3.20 bid for 100
    If, after trading the maximum quantity at the execution price,
Complex Auction interest remains with a managed price that locks or
crosses the opposite side icMBBO, the System will execute the
individual legs of eligible remaining Complex Auction eligible orders
and quotes against orders and quotes resting on the Simple Order Book
that were present prior to the beginning of the Complex Auction at the
icMBBO if available in the proper ratio and at or within the NBBO of
each component of the complex order.
    After executing the imbalance side interest to the extent possible
at the icMBBO, and if Priority Customer interest at the icMBBO that is
not in the proper ratio remains, the System will place such remaining
imbalance side interest on the Strategy Book and manage such interest
pursuant to proposed Rule 518(c)(4). If no Priority Customer interest
at the icMBBO remains, the System will execute Complex Auction interest
with any available complex orders, complex Standard quotes or complex
eQuotes priced at the icMBBO, and then with any orders or quotes on the
Simple Order Book at the icMBBO that were received or modified after
the beginning of the Response Time Interval.
    If after trading the maximum quantity at the initial icMBBO all
interest at the initial icMBBO has been executed, including through
Legging with the Simple Order Book (as described in proposed Rule
518(c)(2)(iii) above), and Complex Auction interest remains with a
managed price that crosses the exhausted icMBBO or dcMBBO (if the next
opposite side icMBBO is also the dcMBBO), or locks or crosses the next
opposite side icMBBO or dcMBBO (if the next opposite side icMBBO is
also the dcMBBO), the System will repeat the process for a size
imbalance

described in proposed Rule 518(d)(6)(i)(B)(1)-(3) above. At each icMBBO
price level the System will repeat this process at the end of the
Response Time Interval until reaching the dcMBBO price. If the Complex
Auction price is equal to or crosses the dcMBBO and the dcMBBO is
exhausted, the System will place any remaining Complex Auction interest
on the Strategy Book and manage the interest that is eligible to rest
on the Strategy Book pursuant to subparagraph (c)(4) to the exhausted
dcMBBO price, cancel Complex Auction interest, including remaining
complex order cAOC interest, that is not eligible to rest on the
Strategy Book, and cancel any complex Standard quotes that are locking
or crossing the exhausted dcMBBO price. The System will then
immediately initiate a re-evaluation of the remaining interest from the
Complex Auction and may initiate a new Complex Auction without regard
to the RIP.
Example--Remaining Complex Auction interest after trading the maximum
quantity, that locks or crosses the opposite side icMBBO will leg
against interest resting on the Simple Order Book

    ABBO--Mar 50 Call 6.20-6.30
    MIAX--LMM Mar 50 Call 6.00-6.20 (10x100) managed offer
    MIAX--LMM Mar 50 Call 6.00-6.30 (10x100) displayed offer
    MIAX--LMM Mar 55 Call 3.00-3.30 (100x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and Sell 1 Mar 55 Call for a 3.40 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.20 credit offer
The dcMBBO is 2.70 debit bid at 3.30 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.36 (60% x 0.60 =
0.36)

Since the order price exceeds the URIP requirement (2.70 + 0.36 = 3.06)
to initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at the Complex Auction price, imbalance quantity, and side is
sent and a 500 millisecond Response Time Interval is started.
The System starts the auction at the Initiating Priority Customer price
bidding 3.30 to buy 1000 strategies. The following responses are
received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.15 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 200 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.15 credit
sell of 200 arrives

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the Complex Auction price determination will find the maximum quantity
that can trade. In this case the maximum quantity of 900 can trade at
or within the prices of 3.15 and 0.01 inside the icMBBO, which results
in a boundary price of 3.19. Because there is more quantity to buy than
to sell, this creates an imbalance therefore the final trade price does
not use the midpoint and instead will be at the price on the opposite
side of the size imbalance, in this case 3.19.
The remaining balance of 100 to buy at 3.40 will execute by Legging
against interest resting on the Simple Order Book at the icMBBO price
of $3.20 buy 100 of the LMM Mar 50 Call at 6.20 and sell 100 of the LMM
Mar 55 Call at 3.00 for a net debit of 3.20.

 Trade 900 at $3.19
 Customer buys 500 from BD1
 Customer buys 200 from MM1
 Customer buys 200 from MM3
 Leg the balance against the $3.20 icMBBO
 Customer buys 100 of the Mar 50 Call at 6.20 from the LMM
 Customer sells 100 of the Mar 55 Call at 3.00 to the LMM

    If the trading described above was not at the dcMBBO, the System
will follow the same procedure at the dcMBBO. If after trading the
maximum quantity at the dcMBBO, interest at the dcMBBO remains, the
System will place any remaining Complex Auction interest on the
Strategy Book and manage the interest that is eligible to rest on the
Strategy Book pursuant to proposed Rule 518(c)(4), and cancel Complex
Auction interest, including remaining complex order cAOC interest, that
is not eligible to rest on the Strategy Book.
Example--Complex Auction interest trades the maximum quantity at the
initial icMBBO, and additional remaining interest locks or crosses the
next opposite side icMBBO or dcMBBO (if the next opposite side icMBBO
is also the dcMBBO) the system will repeat the process for a size
imbalance

    MIAX--LMM Mar 50 Call 6.00-6.20 (10x10) managed offer
    MIAX--LMM Mar 50 Call 6.00-6.30 (10x100) displayed offer
    MIAX--LMM Mar 55 Call 3.00-3.30 (1000x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and Sell 1 Mar 55 Call for a 3.40 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.20 credit offer
The dcMBBO is 2.70 debit bid at 3.30 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.36 (60% x 0.60 =
0.36)

Since the order price exceeds the URIP requirement (2.70+0.36=3.06) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval is started.

The System starts the auction at the Initiating Priority Customer price
bidding 3.30 (the opposite side dcMBBO) to buy 1000 strategies. The
following responses are received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.15 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 200 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.15 credit
sell of 200 arrives

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the Complex Auction price determination will find the maximum quantity
that can trade. In this case the maximum quantity of 900 can trade at
or within the prices of 3.15 and 0.01 inside the icMBBO, which results
in a boundary price of 3.19. Because there is more quantity to buy than
to sell, this creates an imbalance therefore the final trade price does
not use the midpoint and instead will be at the price on the opposite
side of the size imbalance, in this case 3.19.

The remaining balance of 100 to buy at 3.40 will execute by Legging
against interest resting on the Simple Order Book at the icMBBO that
was present prior to the beginning of the Complex Auction. The complex
order will in this case buy 10 of the LMM Mar 50 Call at 6.20 and sell
10 of the LMM Mar 55 Call at 3.00 for a net debit of 3.20 fully
executing the initial icMBBO. With all interest at the initial icMBBO
of 3.20 credit executed, Complex Auction

interest remains to buy 90 at 3.40, and will follow the process for a
size imbalance as described above and trade at the next icMBBO or in
this case the dcMBBO since the next opposite side icMBBO is also the
dcMBBO. The complex order will execute against by Legging interest
resting on the Simple Order Book at the dcMBBO, in this case buy 90 of
the LMM Mar 50 calls at 6.30 and sell 90 of the LMM Mar 55 calls at
3.00 for a net debit of 3.30.

 Trade 900 at $3.19
 Customer buys 500 from BD1
 Customer buys 200 from MM1
 Customer buys 200 from MM3
 Leg 10 against the $3.20 icMBBO
 Customer buys 10 of the Mar 50 calls at 6.20 from the LMM
 Customer sells 10 of the Mar 55 calls at 3.00 to the LMM
 Leg 90 against the $3.30 dcMBBO
 Customer buys 90 of the Mar 50 calls at 6.30 from the LMM
 Customer sells 90 of the Mar 55 calls at 3.00 to the LMM

Example--When the icMBBO is also the dcMBBO, remaining Complex Auction
interest that locks or crosses the opposite side dcMBBO will leg
against interest resting on the Simple Order Book exhausting interest
at the dcMBBO and then will be evaluated

    MIAX--LMM Mar 50 call 6.00-6.20 (10x10)
    MIAX--LMM Mar 55 call 3.00-3.30 (1000x10)

    The Exchange receives an Initiating Customer complex order to buy 1
Mar 50 call and Sell 1 Mar 55 call for a 3.30 debit, 1000 times. The
cAOA instruction is present on this order, so the order will initiate
an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.20 credit offer
The dcMBBO is 2.70 debit bid at 3.20 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.30 (60% x 0.50 =
0.30)

Since the order price exceeds the URIP requirement (2.70+0.30=3.00) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval is started.

The System starts the auction at the Initiating Priority Customer price
bidding 3.20 (the opposite side dcMBBO) to buy 1000 contracts. The
following responses are received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.15 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 200 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.15 credit
sell of 200 arrives
 @ 225 milliseconds MM2 complex Standard quote bidding @ 3.20
debit buy of 200 arrives
 @ 400 milliseconds MM2 response, cAOC eQuote @ 3.40 credit
sell of 200 arrives

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the Complex Auction price determination will find the maximum quantity
that can trade. In this case the maximum quantity of 900 can trade at
or within the prices of 3.15 and 0.01 inside of the icMBBO, which
results in a buy imbalance. Because there is more quantity to buy than
to sell, this creates an imbalance therefore the final trade price does
not use the midpoint and instead will be at the price on the opposite
side of the size imbalance, in this case 3.19.

A portion of the remaining balance of 100 to buy at 3.30 will execute
by Legging against interest resting on the Simple Order Book at the
combined icMBBO/dcMBBO that was present prior to the beginning of the
Complex Auction. The complex order will in this case buy 10 of the LMM
Mar 50 Call at 6.20 and sell 10 of the LMM Mar 55 Call at 3.00 for a
net debit of 3.20, exhausting the dcMBBO.

Once the dcMBBO has been exhausted and Auction interest remains, all
unexecuted cAOC eQuotes or orders and any unexecuted complex Standard
quotes that are locking or crossing the exhausted dcMBBO price are
cancelled. This results in the cancellation of MM2's 3.40 credit cAOC
response and MM2's 3.20 debit complex Standard quote bid.
Since the dcMBBO has been exhausted, the remaining balance of 90
contracts from the Initiating Priority Customer order will then be
placed on the Strategy Book at the exhausted dcMBBO price.

The new Simple Market quotes after exhausting the original icMBBO/
dcMBBO are:

MIAX--LMM Mar 50 Call 6.10-6.40 (10x10)
MIAX--LMM Mar 55 Call 2.90-3.00 (10x10)
The icMBBO is 3.10 debit bid at 3.50 credit offer
The dcMBBO is 3.10 debit bid at 3.50 credit offer
The RIP Percentage is 60% of the bid/ask spread or 0.24

Regardless of the fact that the order's limit price does not meet or
exceed the RIP requirement (3.10+0.24=3.34) to initiate an Auction upon
reevaluation, an RFR is broadcast to all subscribers showing price, the
quantity of matched complex quotes and/or orders at that price,
imbalance quantity, and side is sent and a 500 millisecond Response
Time Interval is started.

The System starts the Auction at the Initiating Priority Customer's
limit price bidding 3.30 to buy 90 contracts. The following responses
are received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.25 credit sell
of 100 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.30 credit
sell of 100 arrives
The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval ends,
the maximum quantity of 90 contracts will trade at 3.25[sic]
    If all interest at the dcMBBO has been exhausted and Auction orders
with a managed or limit price that locks or crosses the exhausted
dcMBBO price remain, the System will place any remaining Complex
Auction interest on the Strategy Book and manage the interest that is
eligible to rest on the Strategy Book pursuant to proposed Rule
518(c)(4) to the exhausted dcMBBO price, cancel Complex Auction
interest (including remaining complex order cAOC interest) that is not
eligible to rest on the Strategy Book, and cancel any complex Standard
quotes that are locking or crossing the exhausted dcMBBO price. The
System will then immediately initiate a reevaluation of the remaining
interest from the Complex Auction and may initiate a new Complex
Auction without regard to the RIP.
    The System will place any eligible remaining non-marketable Complex
Auction orders and quotes on the Strategy Book, cancel any remaining
Complex Auction interest that is not eligible to rest on the Strategy
Book, and cancel complex Standard quotes that would otherwise require
management because of their price as described in proposed Rule
518(c)(4) above if placed on the Strategy Book.
Trade Allocation Following the Complex Auction
    Proposed Rule 518(d)(7) describes the allocation of complex orders
and quotes that are executed in a Complex Auction. Once the Complex
Auction is complete

(at the end of the Response Time Interval), such orders and quotes will
be allocated first in price priority based on their original limit
price, and thereafter as stated herein.
    Individual orders and quotes in the leg markets resting on the
Simple Order Book prior to the initiation of a Complex Auction and that
have remained unchanged during the Auction have first priority,
provided the complex order can be executed in full (or in a permissible
ratio) against orders and quotes on the Simple Order Book, provided
that the prices of the components on the Simple Order Book are at or
within the NBBO for each component. Orders and/or quotes resting on the
Simple Order Book that execute against a complex order will be
allocated pursuant to Rule 514(c). The Exchange believes that unchanged
orders and quotes resting on the Simple Order Book should retain their
established priority when Legging against a complex order.
    Priority Customer complex orders resting on the Strategy Book
before, or that are received during, the Response Time Interval, and
Priority Customer RFR Responses, collectively have second priority and
will be allocated in price-time priority. This is consistent with the
handling of Priority Customers on other exchanges \68\ and on the MIAX
Simple Order Book \69\
---------------------------------------------------------------------------

    \68\ Similarly, on PHLX, after attempting to trade with the PHLX
simple limit order book for the individual components, customer
marketable Complex Orders on the PHLX CBOOK (their equivalent of the
Strategy Book) have priority over non-public customer Complex
Orders. See PHLX Rule 1098(e)(vi). CBOE also affords priority to
public customer complex orders after attempting to trade the complex
order against the individual components, followed by non-public
customer orders resting in the CBOE Complex Order Book. See CBOE
Rule 6.53C(d)(v). This is slightly distinguished from the MIAX
System which seeks first to match complex orders resting on the
Strategy Book.
    \69\ When the Priority Customer Overlay is in effect, the
highest bid and lowest offer shall have priority except that
Priority Customer Orders shall have priority over Professional
Interest and all Market Maker interest at the same price. If there
are two or more Priority Customer Orders for the same options series
at the same price, priority shall be afforded to such Priority
Customer Orders in the sequence in which they are received by the
System. See Exchange Rule 514(d)(1). Other exchanges have similar
allocation models for the simple market. For example, ISE Priority
Customer Orders have priority over Professional Orders and market
maker quotes at the same price in the same options series. See ISE
Rule 713(c). Similarly, on CBOE, Public customer orders in the
electronic book have priority. See CBOE Rule 6.45A(a)(i)(A)(1). PHLX
allocates contracts to non-public customers only after public
customer market and marketable limit orders have been executed. See
PHLX Rule 1014(g)(vii).
---------------------------------------------------------------------------

    Market Maker Priority Interest for Complex and RFR Responses from
Market Makers with Priority Interest for Complex collectively have
third priority and will be allocated on a pro-rata basis as defined in
Rule 514(c)(2).
    Market Maker non-Priority Interest for Complex and RFR Responses
from Market Makers with non-Priority Interest for Complex collectively
have fourth priority and will be allocated on a pro-rata basis as
defined in Rule 514(c)(2).
    Non-Market Maker Professional Interest complex orders resting on
the Strategy Book, non-Market Maker Professional Interest complex
orders placed on the Strategy Book during the Response Time Interval,
and non-Market Maker Professional Interest RFR Responses will
collectively have fifth priority and will be allocated on a pro-rata
basis as defined in Rule 514(c)(2).
    Finally, individual orders and quotes in the leg markets that are
received or changed during the Complex Auction will collectively have
sixth priority and will be allocated pursuant to Rule 514(c)(2).\70\
---------------------------------------------------------------------------

    \70\ This differs slightly from the execution of orders on other
exchanges. ISE may designate on a class basis whether bids and
offers at the same price on the complex order book will be executed
either in time priority; pursuant to ISE Rule 713(e) regarding
priority in the ISE simple order book, or pro-rata based on size.
See ISE Rule 722(b)(3)(i). Additionally, CBOE establishes priority
for the Complex Order Book based upon the rules of trading priority
otherwise applicable to incoming electronic orders in the individual
component legs or another electronic matching algorithm in the CBOE
rules. See CBOE Rule 6.53C(c)(ii)(2).
---------------------------------------------------------------------------

    The following examples illustrate the manner in which complex
orders and quotes are allocated at the conclusion of the Complex
Auction.\71\

    \71\ The Exchange notes that in all examples in the filing, a
Market Maker response should be considered from a Market Maker that
does not have a priority quote, unless the example specifically
states that the response is from a Market Maker with a priority
quote.
---------------------------------------------------------------------------

Example--Priority Customer has priority over other responding
participants

    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate a Complex Auction upon arrival if it equals or improves the
URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48

Since the initiating order price exceeds the URIP requirement
(2.70+0.48=3.18) to initiate an auction upon arrival, an RFR is
broadcast to all subscribers showing price, the quantity of matched
complex quotes and/or orders at that price, imbalance quantity, and
side is sent and a 500 millisecond Response Time Interval is started.
The System starts the auction at the Initiating Priority Customer price
bidding 3.20 to buy 1000 contracts. The following responses are
received:

 @ 50 milliseconds MM1 response, cAOC eQuote @ 3.10 credit sell
of 2000 arrives
 @ 150 milliseconds MM4 response, cAOC eQuote @ 3.00 credit
sell of 500 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.20 credit
sell of 500 arrives
 @ 250 milliseconds Priority Customer response, cAOC Order @
3.10 credit sell of 250 arrives
 @ 500 milliseconds the Response Time Interval ends, the
Complex Auction ends and the trade is allocated against the initiating
Priority Customer using the single best price at which the greatest
quantity can trade in the following manner:
1. 500 trade vs. MM4 @ 3.10 (MM4 achieved price priority by offering at
3.00)
2. 250 trade vs. the Priority Customer response @ 3.10 (The Priority
Customer has priority over the MM1 offering at the same price)
3. 250 trade vs. MM1 @ 3.10

Example--Market Maker with priority quotes has priority over Market
Makers without priority quotes
    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48

Since the order price exceeds the URIP requirement (2.70+0.48=3.18) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing price, the quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and

a 500 millisecond Response Time Interval is started.
The System starts the auction at the Initiating Priority Customer price
bidding 3.20 to buy 1000 contracts. The following responses are
received:

 @ 50 milliseconds MM1 non-priority response, cAOC eQuote @
3.10 credit sell of 2000 arrives
 @ 150 milliseconds MM4 non-priority response, cAOC eQuote @
3.00 credit sell of 500 arrives
 @ 200 milliseconds MM3 non-priority response, cAOC eQuote @
3.20 credit sell of 500 arrives
 @ 250 milliseconds MM5 with priority quotes response, cAOC
eQuote @ 3.10 credit sell of 500 arrives
 @ 500 milliseconds the Response Time Interval ends, the
Complex Auction ends and the trade is allocated against the initiating
Priority Customer using the single best price at which the greatest
quantity can trade in the following manner:
1. 500 trade vs. MM4 @ 3.10 (MM4 has price priority over the other MMs)
2. 500 trade vs. MM5 @ 3.10 (MM5 has price priority over MM3 and has
priority by virtue of priority quoting over MM1)

Example--Professional Interest starts Auction, joined by Priority
Customer Interest to show Priority Customer allocation priority

    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an initiating broker-dealer complex order to buy
1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000 times. The
cAOA instruction is present on this order, so the order will initiate
an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48

Since the order price exceeds the URIP requirement (2.70+0.48=3.18) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing the price, quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval begins.
The System starts the auction at the initiating broker dealer price
bidding 3.20 to buy 1000 contracts. The following responses are
received:

 @ 50 milliseconds Priority Customer #1 unrelated order buy 750
@ 3.20 debit arrives
 @ 150 milliseconds Priority Customer #2 unrelated order buy
500 @ 3.20 debit arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.20 credit
sell of 500 arrives
 @ 250 milliseconds Priority Customer #3 response, cAOC Order @
3.20 credit sell of 500 arrives
 @ 500 milliseconds the Response Time Interval ends, the
auction ends and the trade (including unrelated interest from Priority
Customer #s 1 and 2) is allocated against Initiating Customer using the
single best price at which the greatest quantity can trade in the
following manner:
1. 500 trade Priority Customer #1 buys (Priority Customer #1 has origin
type priority over the Broker-Dealer and time priority over Priority
Customer #2). Priority Customer #3 sells @ 3.20 (Priority Customer #3
has priority over MM3 offering at the same price).
2. 250 trade Priority Customer #1 buys (Priority Customer #1 has origin
type priority over the Broker-Dealer and time priority over Priority
Customer #2). MM3 sells @ 3.20 (MM3 is now alone at 3.20 since Priority
Customer #3 is filled.
3. 250 trade Priority Customer #2 (which is an unrelated order) buys
(Priority Customer #2 has origin type priority over the Broker-Dealer).
MM3 sells @ 3.20, and the balance of 250 is placed on the Strategy
Book.
Processing of Unrelated Complex Orders
    The Complex Auction is designed to work effectively with the
Strategy Book and is designed to maintain priority of all resting
quotes and orders and any RFR Responses received before the end of the
Response Time Interval. Proposed Rule 518(d)(8) describes the manner in
which the System handles incoming unrelated complex orders and quotes
that are eligible to join a Complex Auction and are received during the
Response Time Interval for a Complex Auction-eligible order. Such
incoming unrelated complex orders and quotes will simply join the
Complex Auction, will be ranked by price, and will be allocated as
described above.\72\
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    \72\ The Exchange proposes to include eligible unrelated
incoming complex orders and quotes in the Complex Auction Process.
This is similar to another exchange. Specifically, PHLX incoming
Complex Orders that were received during the COLA Timer (equivalent
to the MIAX Response Time Interval) for the same Complex Order
Strategy as the COLA-eligible order that are on the same side of the
market will join the COLA. See PHLX Rule 1098(e)(viii)(B). Incoming
PHLX Complex Orders on the opposite side of the market from the
COLA-eligible order will join the COLA or be executed after the COLA
under various circumstances described in the rule. Other exchanges
permit certain orders to join a complex auction under limited
circumstances, and other unrelated complex orders will terminate the
auction process. For example, on CBOE incoming complex orders that
are received prior to the expiration of the Response Time Interval
for the original COA that are on the opposite side of the market and
are marketable against the starting price of the original COA-
eligible order will cause the original COA to end. Incoming COA-
eligible orders are on the same side of the market, at the same
price or worse than the original COA-eligible order and better than
or equal to the starting price will join the original COA. See CBOE
Rule 6.53C(d)(viii). NYSE MKT distinguishes the processing of
unrelated complex orders by side of market. See NYSE MKT Rule
980NY(c)[sic](8).
---------------------------------------------------------------------------

    The ability for unrelated marketable orders to join and be executed
in a Complex Auction enhances the liquidity in the Complex Auction and
thus increases opportunities for execution of complex orders and quotes
on both sides of the market, all to the benefit of investors and to the
marketplace as a whole.
Example--Arrival of an unrelated marketable complex order on the
opposite side.

    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48

Since the order price exceeds the URIP requirement (2.70+0.48=3.18) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing the price, quantity of matched complex quotes and/
or orders at that price, imbalance quantity, and side is sent and a 500
millisecond Response Time Interval is started.

The System starts the auction at the initiating Priority Customer price
bidding 3.20 to buy 1000 contracts. The following responses are
received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.10 credit sell
of 1000 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.00 credit
sell of 500 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.20 credit
sell of 500 arrives

 @ 250 milliseconds MM4 response, cAOC eQuote @ 3.10 credit
sell of 250 arrives
 @ 350 milliseconds BD2 submits an unrelated complex order @
2.70 credit sell of 200 arrives
 @ 500 milliseconds the Response Time Interval ends, the
Complex Auction ends and the trade is allocated against the initiating
Priority Customer using the single best price at which the greatest
quantity can trade in the following manner:
1. 200 trade vs. unrelated complex order @ 3.10 (BD2 achieved price
priority by offering at 2.70)
2. 500 trade vs. MM1 @ 3.10 (MM1 achieved price priority by over the
other responses by offering at 3.00)
3. 250 trade vs. MM4 @ 3.10 (MM4 achieved price priority over MM3 by
offering at 3.10 and origin type priority over BD1)
4. 50 trade vs. BD1 @ 3.10 (BD1 achieved price priority over MM3 by
offering at 3.10)
Example--Arrival of unrelated marketable complex order on the same side
    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)

The Exchange receives an Initiating Priority Customer buy complex order
to purchase 1 Mar 50 call and Sell 1 Mar 55 call for a 3.20 debit, 1000
times. The cAOA instruction is present on this order, so the order will
initiate an auction upon arrival if it equals or improves the URIP.

The icMBBO is 2.70 debit bid at 3.50 credit offer
The dcMBBO is 2.70 debit bid at 3.50 credit offer
The URIP Percentage is 60% of the bid/ask spread or 0.48

Since the order price exceeds the URIP requirement (2.70+0.48=3.18) to
initiate an auction upon arrival, an RFR is broadcast to all
subscribers showing the price, quantity of matched complex quotes and/
or orders at the Exchange's disseminated price, imbalance quantity, and
side is sent and a 500 millisecond Response Time Interval is started.

The System starts the auction at the Initiating Priority Customer price
bidding 3.20 to buy 1000 contracts. The following responses are
received:
 @ 50 milliseconds BD1 response, cAOC Order @ 3.10 credit sell
of 1000 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.00 credit
sell of 500 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.20 credit
sell of 500 arrives
 @ 250 milliseconds MM4 response, cAOC eQuote @ 3.10 credit
sell of 250 arrives
 @ 350 milliseconds BD2 submits an unrelated complex order @
3.20 debit buy of 200 arrives
 @ 500 milliseconds the Response Time Interval ends, the
Complex Auction ends and the trade is allocated against the initiating
Broker-Dealer using the single best price at which the greatest
quantity can trade in the following manner:
1. Initiating Priority Customer buys 500 vs. MM1 @ 3.10 (The Priority
Customer initiating order has origin type priority over BD2. MM1
achieved price priority over other responses by offering at 3.00)
2. Initiating Priority Customer buys 250 vs. MM4 @ 3.10 (The Priority
Customer initiating order has origin type priority over BD2. MM4
achieved price priority over MM3 by offering at 3.10 and origin type
priority over BD1)
3. Initiating Priority Customer buys 250 vs. BD1 @ 3.10 (The Priority
Customer initiating order has origin type priority over BD2. BD1
achieved price priority over MM3)
4. BD2 buys 200 vs BD1 @ 3.10 (The Priority Customer initiating order
is filled. BD1 achieved price priority over MM3)

    Proposed Rule 518(d)(9) states that a complex order not designated
as cAOA will either be (i) executed in full at a single price or at
multiple prices up to its limit price, with remaining contracts placed
on the Strategy Book; (ii) executed until the order exhausts the
opposite side dcMBBO, at which time the order will be placed on the
Strategy Book and evaluated for Complex Auction eligibility; or (iii)
cancelled.
    Proposed Rules 518(d)(10), (11) and (12) each describe the
effect(s) of certain market conditions on the Complex Auction. Proposed
Rule 518[sic](10) provides that a change in the best bid or offer of
the leg markets will not affect the processing of the Complex Auction.
Any such changed bid or offer will be included in the evaluation at the
end of the Response Time Interval.
    Proposed Rule 518(d)(11) states that if the underlying security of
a Complex Auction-eligible order that is a market order enters a Limit
State or Straddle State, as defined in Rule 530 the Complex Auction
will end upon such underlying security's entering of the Limit or
Straddle State if such market order is the only trading interest
remaining on that side of the Complex Auction, in which case the
remaining portion of such market order will be cancelled. If there are
orders and/or quotes other than such market order on that side of the
Complex Auction, such market order will be cancelled and the Complex
Auction will continue. Any remaining complex orders and/or quotes that
joined the Complex Auction will continue to be processed according to
proposed Rule 518(d) as discussed above.
    Proposed Rule 518(d)(12), states that if, during a Complex Auction,
the underlying security and/or any component of a Complex Auction-
eligible order is subject to a wide market condition, a SMAT Event or a
trading halt, the Complex Auction will be handled as set forth in
proposed Rule 518, Interpretations and Policies .05(e) as described in
detail below.
    The Exchange believes that the provisions regarding the Complex
Auction provide a framework that will enable the efficient trading of
complex orders in a manner that is similar to other options exchanges
as stated above, and in some ways enhances the processing of unrelated
complex orders that join the Complex Auction process seamlessly.
Further, this clarity in the operation of the Complex Auction and its
consistency with other exchanges will help promote a fair and orderly
options market. As described above, the Complex Auction is designed to
work in concert with the Strategy Book and with a priority of
allocation that will be similar to the allocation of simple orders and
quotes on MIAX. If orders are received by the Exchange during the
Response Time Interval, such orders will be eligible to participate in
the Complex Auction, subject to the process above. If orders received
are not executed in the Complex Auction, the time stamps they received
will be used to determine time priority for their execution outside of
the auction.
Interpretations and Policies
    The Exchange also proposes several Interpretations and Policies to
proposed Rule 518.
Stock-Option Orders
    Proposed Interpretations and Policies .01 Special Provisions
Applicable to Stock-Option Orders provides additional detail regarding
the trading and regulation of stock-option orders on the Exchange. The
Exchange will determine when stock-option orders will be made available
for trading in the System and communicate such determination to Members
via Regulatory Circular.
    As set forth in proposed Rule 518, Interpretations and Policies
.01(a), stock-option orders may be executed

against other stock-option orders through the Strategy Book and Complex
Auction. Stock-option orders will not be legged against the individual
component legs, and the System will not generate a derived order based
upon a stock-option order. A stock-option order shall not be executed
on the System unless the underlying security component is executable at
the price(s) necessary to achieve the desired net price.
    Members may only submit stock-option orders if such orders comply
with the Qualified Contingent Trade Exemption from Rule 611(a) of
Regulation NMS \73\ under the Act. Members submitting such complex
orders represent that such orders comply with the Qualified Contingent
Trade Exemption.
---------------------------------------------------------------------------

    \73\ 17 CFR 242.611(a).
---------------------------------------------------------------------------

    To participate in stock-option order processing, a Member must give
up a Clearing Member previously identified to, and processed by the
Exchange as a Designated Give Up for that Member in accordance with
Rule 507 and which has entered into a brokerage agreement with one or
more Exchange-designated broker-dealers that are not affiliated with
the Exchange to electronically execute the underlying security
component of the stock-option order at a stock trading venue selected
by the Exchange-designated broker-dealer on behalf of the Member.
    Proposed Rule 518, Interpretations and Policies .01(b) sets forth
the process by which stock-option orders, including inbound and those
resting on the Strategy Book, will be handled. When a stock-option
order is received by the Exchange, the System will validate that the
stock-option order has been properly marked as required by Rule 200 of
Regulation SHO under the Act (``Rule 200'').\74\ Rule 200 requires all
broker-dealers to mark sell orders of equity securities as ``long,''
``short,'' or ``short exempt.'' Accordingly, Members submitting stock-
option orders must mark the underlying security component (including
ETF) ``long,'' ``short,'' or ``short exempt'' in compliance with Rule
200. If the stock-option order is not so marked, the order will be
rejected by the System. Likewise, any underlying security component of
a stock-option order sent by the Exchange to the Exchange-designated
broker-dealer shall be marked ``long,'' ``short,'' or ``short exempt''
in the same manner in which it was received by the Exchange from the
submitting Member.
---------------------------------------------------------------------------

    \74\ 17 CFR 242.200.
---------------------------------------------------------------------------

    If the stock-option order is properly marked, the System will
determine whether the stock-option order is Complex Auction-eligible.
If the stock-option order is Complex Auction-eligible, the System will
initiate the Complex Auction Process described in paragraph (d) of this
Rule. Any stock-option order executed utilizing the Complex Auction
Process will comply with the requirements of Rule 201 of Regulation SHO
under the Act (``Rule 201'') \75\ as discussed further below.
---------------------------------------------------------------------------

    \75\ 17 CFR 242.201.
---------------------------------------------------------------------------

    When the short sale price test in Rule 201 is triggered for a
covered security,\76\ a ``trading center,'' \77\ such as the Exchange,
an Exchange-designated broker-dealer, or a stock trading venue, as
applicable, must comply with Rule 201. Rule 201 requires a trading
center to establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the execution or display of a
short sale order of a covered security at a price that is less than or
equal to the current national best bid \78\ if the price of that
covered security decreases by 10% or more from the covered security's
closing price as determined by the listing market \79\ for the covered
security as of the end of regular trading hours on the prior day; \80\
and impose these requirements for the remainder of the day and the
following day when a national best bid for the covered security is
calculated and disseminated on a current and continuing basis by a plan
processor pursuant to an effective national market system plan.\81\ A
trading center such as the Exchange, an Exchange-designated broker-
dealer and a stock trading venue, as applicable, on which the
underlying security component is executed, must also comply with Rule
201(b)(1)(iii)(B),\82\ which provides that a trading center must
establish, maintain, and enforce written policies and procedures
reasonably designed to permit the execution or display of a short sale
order of a covered security marked ``short exempt'' \83\ without regard
to whether the order is at a price that is less than or equal to the
current national best bid.\84\
---------------------------------------------------------------------------

    \76\ For purposes of this proposal, the term ``covered
security'' shall have the same meaning as in Rule 201(a)(1) of
Regulation SHO. The term ``covered security'' is defined in Rule
201(a)(1) as any NMS stock as defined in Rule 600(b)(47) of
Regulation NMS. See also 17 CFR 242.600(b)(47).
    \77\ Rule 201(a)(9) states that the term ``trading center''
shall have the same meaning as in Rule 600(b)(78). Rule 600(b)(78)
of Regulation NMS defines a ``trading center'' as ``a national
securities exchange or national securities association that operates
an SRO trading facility, an alternative trading system, an exchange
market maker, an OTC market maker, or any other broker or dealer
that executes orders internally by trading as principal or crossing
orders as agent.'' See 17 CFR 242.600(b)(78). The definition
encompasses all entities that may execute short sale orders. Thus,
Rule 201 will apply to any entity that executes short sale orders.
    \78\ The term ``national best bid'' is defined in Rule
201(a)(4). 17 CFR 242.201(a)(4).
    \79\ The term ``listing market'' is defined in Rule 201(a)(3).
17 CFR 242.201(a)(3).
    \80\ 17 CFR 242.201(b)(1)(i).
    \81\ 17 CFR 242.201(b)(1)(ii).
    \82\ 17 CFR 242.201(b)(1)(iii)(B).
    \83\ 17 CFR 242.200(g)(2).
    \84\ Since the underlying security component of a stock-option
order is not displayed by the Exchange, the exception in Rule
201(b)(1)(iii)(A) is not available. 17 CFR 242.201(b)(1)(iii)(A).
---------------------------------------------------------------------------

    If the stock-option order is not Complex Auction-eligible, the
System will determine if it is eligible to be executed against another
inbound stock-option order or another stock-option order resting on the
Strategy Book. If eligible, the System will route both sides of the
matched underlying security component of the stock-option order as a
Qualified Contingent Trade (``QCT'') to an Exchange-designated broker-
dealer for execution on a stock trading venue. The stock trading venue
will then either successfully execute the QCT or cancel it back to the
Exchange-designated broker-dealer, which in turn will either report the
execution of the QCT or cancel it back to the Exchange. While the
Exchange is a trading center pursuant to Rule 201, the Exchange will
neither execute nor display the underlying security component of a
stock-option order. Instead, the execution or display of the underlying
security component of a stock-option order will occur on a trading
center other than the Exchange, such as an Exchange-designated broker-
dealer or other stock trading venue.
    If the Exchange-designated broker-dealer or other stock trading
venue, as applicable, cannot execute the underlying security component
of a stock-option order in accordance with Rule 201, the Exchange will
not execute the option component(s) of the stock-option order and will
either place the unexecuted stock-option order on the Strategy Book or
cancel it back to the submitting Member in accordance with the
submitting Member's instructions (except that cAOC and cIOC stock-
option orders and eQuotes will be cancelled). Once placed back onto the
Strategy Book, the stock-option order will be handled in accordance
with Proposed Rule 518, Interpretations and Policies .01(b) as
described herein.
    The execution price of the underlying security component must be
also within the high-low range for the day in the underlying security
at the time the

stock-option order is processed and within a certain price from the
current market, which the Exchange will establish and communicate to
Members via Regulatory Circular. If the underlying security component
price is not within these parameters, the stock-option order is not
executable.
    If the stock-option order is not Complex Auction-eligible and
cannot be executed or placed on the Strategy Book, it will be cancelled
by the System. Otherwise, the stock-option order will be placed on the
Strategy Book.
    As set forth in proposed Rule 518, Interpretations and Policies
.01(c) regarding the option component of a stock-option order, the
option leg(s) of a stock-option order shall not be executed (i) at a
price that is inferior to the Exchange's best bid (offer) in the option
or (ii) at the Exchange's best bid (offer) in that option if one or
more Priority Customer Orders are resting at the best bid (offer) price
on the Simple Order Book in each of the option components and the
stock-option order could otherwise be executed in full (or in a
permissible ratio). If one or more Priority Customer Orders are resting
at the best bid (offer) price on the Simple Order Book, at least one
option component must trade at a price that is better than the
corresponding bid or offer in the marketplace by at least $0.01. The
option leg(s) of a stock-option order may be executed in a $0.01
increment, regardless of the minimum quoting increment applicable to
that series.\85\
---------------------------------------------------------------------------

    \85\ See also CBOE Rule 6.53C.06(b), which states that the
option leg(s) shall not be executed at a price that is (i) at a
price that is inferior to the Exchange's best bid (offer) in the
series or (ii) at the Exchange's best bid (offer) in that series if
one or more public customer orders are resting at the best bid
(offer) price on the Ebook in each of the component option series
and the stock-option order could otherwise be executed in full (or
in a permissible ratio). The option leg(s) of a stock-option order
may be executed in a one-cent increment, regardless of the minimum
quoting increment applicable to that series.
---------------------------------------------------------------------------

    Proposed Rule 518, Interpretations and Policies .01(d) provides
that stock-option orders and quotes on the Strategy Book that are
marketable against each other will automatically execute, subject to
price and priority provisions described in the above paragraph relating
to the option component of the stock-option order. Orders and quotes
may be submitted by Members to trade against orders on the Strategy
Book.\86\
---------------------------------------------------------------------------

    \86\ See also CBOE Rule 6.53C.06(c), which differs slightly,
stating that orders and quotes may be submitted by market
participants to trade against orders in the COB except that the N
second group timer shall not be in effect for stock-option orders.
MIAX does not have an ``N-second group timer.''
---------------------------------------------------------------------------

    Proposed Rule 518, Interpretations and Policies .01(e) provides
that stock-option orders executed via Complex Auction shall trade in
the sequence set forth in proposed Rule 518(d)(5) described above
except that the provision regarding individual orders and quotes in the
leg markets resting on the Simple Order Book prior to the initiation of
a Complex Auction will not be applicable and such execution will be
subject to the conditions noted above concerning the price of the
option leg(s), together with all applicable securities laws.
    Proposed Rule 518, Interpretations and Policies .01(f) provides
that the underlying security of a stock-option order is in a limit up-
limit down state as defined in Rule 530, such order will only execute
if the calculated stock price is within the permissible Price Bands as
determined by SIPs \87\ under the Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of Regulation NMS, as it may be amended
from time to time (the ``LULD Plan'').
---------------------------------------------------------------------------

    \87\ See supra note 26.
---------------------------------------------------------------------------

Market Maker Complex Quotes
    Proposed Rule 518, Interpretations and Policies .02 describes the
manner in which the Exchange will determine to allow Market Maker
quotes in complex strategies.\88\ Market Maker complex quotes may be
entered as either complex Standard quotes or complex eQuotes, as
defined in proposed Rule 518, Interpretations and Policies .02(a).\89\
---------------------------------------------------------------------------

    \88\ ISE permits market maker complex quotes. See supra note 23.
    \89\ A complex Standard quote is defined as a complex quote
submitted by a Market Maker that cancels and replaces the Market
Maker's previous complex Standard quote for that side of the
strategy, if any. A complex eQuote is defined as a complex quote
submitted by a Market Maker with a specific time in force that does
not automatically cancel and replace the Market Maker's previous
complex Standard quote or complex eQuote.
---------------------------------------------------------------------------

    The Exchange will determine, on a class-by-class basis, the complex
strategies in which Market Makers may submit complex Standard quotes,
and will notify Members of such determination via Regulatory Circular.
Market Makers may submit complex eQuotes in their appointed options
classes.
    A ``Complex Auction or Cancel eQuote'' or ``cAOC eQuote'' is an
eQuote submitted by a Market Maker that is used to provide liquidity
during a specific Complex Auction with a time in force that corresponds
with the duration of the Complex Auction. cAOC eQuotes will not: (i) Be
executed against individual orders and quotes resting on the Simple
Order Book; (ii) be eligible to initiate a Complex Auction, but may
join a Complex Auction in progress; (iii) rest on the Strategy Book; or
(iv) be displayed.
    A ``Complex Immediate or Cancel eQuote'' or ``cIOC eQuote'' is a
complex eQuote with a time-in-force of IOC that may be matched with
another complex quote or complex order for an execution to occur in
whole or in part upon receipt into the System.\90\ cIOC eQuotes will
not: (i) Be executed against individual orders and quotes resting on
the Simple Order Book; (ii) be eligible to initiate a Complex Auction
or join a Complex Auction in progress; (iii) rest on the Strategy Book;
or (iv) be displayed. Any portion of a cIOC eQuote that is not executed
will be immediately cancelled.
---------------------------------------------------------------------------

    \90\ This is based on the Exchange's current IOC eQuotes in the
simple market. See Exchange Rule 517(a)(ii)[sic](iv).
---------------------------------------------------------------------------

    Market Maker complex quotes are executed in the same manner as
complex orders but will not be executed against bids and offers on the
Simple Order Book via Legging as described in proposed Rule
518(c)(2)(iii). Market Maker complex Standard quotes may rest on the
Strategy Book and are not subject to the managed interest process
described in proposed Rule 518(c)(4). An unexecuted complex Standard
quote with a limit price that would otherwise be managed to the icMBBO
will be cancelled.
    Market Makers are not required to enter complex quotes on the
Strategy Book. Quotes for complex strategies are not subject to any
quoting requirements that are applicable to Market Maker quotes in the
simple market for individual options series or classes. Volume executed
in complex strategies is not taken into consideration when determining
whether Market Makers are meeting quotation obligations applicable to
Market Maker quotes in the simple market for individual options.\91\
---------------------------------------------------------------------------

    \91\ See Proposed Rule 518, Interpretations and Policies .02.
This is substantially similar to complex quoting functionality
currently operative on another exchange. Specifically, ISE market
makers may enter quotes for complex order strategies on the complex
order book in their appointed options classes. Market Maker quotes
for complex order strategies are executed in the same manner as
orders as provided in other ISE rules but will not be automatically
executed against bids and offers on the Exchange for the individual
legs. Just as with the proposed MIAX rules, ISE market makers are
not required to enter quotes on the complex order book. Quotes for
complex orders are not subject to any quotation requirements that
are applicable to ISE market maker quotes in the regular market for
individual options series or classes, nor is any volume executed in
complex orders taken into consideration when determining whether ISE
market makers are meeting quotation obligations applicable to market
maker quotes in the regular market for individual options series.
See ISE Rule 722, Commentary [sic] .03.

---------------------------------------------------------------------------

Improvement Percentages
    Proposed Rule 518, Interpretations and Policies .03 establishes the
method by which the Exchange will determine whether complex order
interest is qualified to initiate a Complex Auction. Such qualification
is contingent on three categories of ``improvement percentages'' that
are used to determine the complex order's marketability at the time of
the System's evaluation.\92\
---------------------------------------------------------------------------

    \92\ This is similar to the manner in which other exchanges
determine a complex order's eligibility to initiate an auction for
complex orders. CBOE rules state that a ``COA-eligible order'' means
a complex order that, as determined by the Exchange on a class-by-
class basis, is eligible for a COA considering the order's
marketability (defined as a number of ticks away from the current
market). See CBOE Rule 6.53C(d)[sic](2). Respecting complex orders
resting on the CBOE Complex Order Book (``COB''), for each class
where COA is activated, CBOE may also determine to activate COA for
complex orders resting in COB. For such classes, any non-marketable
order resting at the top of the COB may be automatically subject to
COA if the order is within a number of ticks away from the current
derived net market. See CBOE Rule 6.53C, Interpretations and
Policies .04. This differs from proposed Rule 518, Interpretations
and Policies .03, which would make such a determination based upon
the percentage by which a complex order (a potential Complex
Auction-eligible order) improves the market at the time of
evaluation.
---------------------------------------------------------------------------

    For complex orders received prior to the opening of all individual
components of a complex strategy, the System will calculate an IIP
value, which is a defined percentage of the current dcMBBO bid/ask
differential once all of the components of the complex strategy have
opened. Such percentage will be defined by the Exchange and
communicated to Members via Regulatory Circular. If a Complex Auction-
eligible order is priced equal to or improves the IIP value and is also
priced equal to, or improves, other complex orders and/or quotes
resting at the top of the Strategy Book, the complex order will be
eligible to initiate a Complex Auction.

Example--Initial Improvement Percentage (IIP)
    Option quotes immediately after entering free trading are as
follows
    MIAX--LMM quote Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 Call 2.00-2.30 (10x10)
    The strategy is buy 1 Mar 50 calls and sell 2 Mar 55 calls
    The dcMBBO is 1.40 debit bid at 2.50 credit offer
    The IIP has been set by the Exchange at 60%
    The bid/ask spread is 1.10 wide (2.50 - 1.40 = 1.10)
    The IIP value is 1.10 * 60% = 0.66

Buy orders received before the strategy components are all open must be
bid at a level that equals or crosses a 2.06 (1.40+0.66) debit in order
to initiate a Complex Auction when the components enter free trading.
    Sell orders received before the strategy components are all open
must be offered at a level that equals or crosses a 1.84 (2.50-0.66)
credit in order to initiate a Complex Auction when the components enter
free trading.
    Upon receipt of a complex order when the complex strategy is open,
the System will calculate an Upon Receipt Improvement Percentage
(``URIP'') value, which is a defined percentage of the current dcMBBO
bid/ask differential. Such percentage will be defined by the Exchange
and communicated to Members via Regulatory Circular. If a Complex
Auction-eligible order is priced equal to or improves the URIP value
and is also priced to improve other complex orders and/or quotes
resting at the top of the Strategy Book, the complex order will be
eligible to initiate a Complex Auction.

Example--Upon Receipt Improvement Percentage (URIP)
    Option quotes upon arrival of a cAOA designated complex order
    MIAX--LMM quote Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 Call 2.00-2.30 (10x10)
    The strategy is buy 1 Mar 50 call and sell 2 Mar 55 calls
    The dcMBBO is 1.40 debit bid at 2.50 credit offer
    The URIP has been set by the Exchange at 60%
    The bid/ask spread is 1.10 wide (2.50 - 1.40 = 1.10)
    The URIP value is 1.10 * 60% = 0.66

Buy orders designated as cAOA must be bid at a level that equals or
crosses a 2.06 (1.40+0.66) debit in order to initiate a Complex Auction
upon receipt.
    Sell orders designated as cAOA must be offered at a level that
equals or crosses a 1.84 (2.50-0.66) credit in order to initiate an
Auction upon receipt.
    Upon evaluation of a complex order resting at the top of the
Strategy Book, the System will calculate a Re-Evaluation Improvement
Percentage (``RIP'') value, which is a defined percentage of the
current dcMBBO bid/ask differential. Such percentage will be defined by
the Exchange and communicated to Members via Regulatory Circular. If a
complex order resting at the top of the Strategy Book is priced equal
to, or improves, the RIP value, the complex order will be eligible to
initiate a Complex Auction.

Example--Re-Evaluation Improvement Percentage (RIP)
    Option quotes upon re-evaluation
    MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM Mar 55 Call 2.00-2.30 (10x10)
    The strategy is Buy 1 Mar 50 call and Sell 2 Mar 55 calls
    The dcMBBO is 1.40 debit bid at 2.50 credit offer
    The RIP has been set by the Exchange at 70%
    The bid/ask spread is 1.10 wide (2.50-1.40 = 1.10)
    The RIP value is 1.10 * 70% = 0.77

Buy orders must be bid at a level that equals or crosses a 2.17
(1.40+0.77) debit in order to initiate a Complex Auction upon re-
evaluation.
    Sell orders must be offered at a level that equals or crosses a
1.73 (2.50-0.77) credit in order to initiate a Complex Auction upon re-
evaluation.
    Proposed Rule 518, Interpretations and Policies .04 is a regulatory
provision that prohibits the dissemination of information related to
Complex Auction-eligible orders by the submitting Member to third
parties. Such conduct will be deemed conduct inconsistent with just and
equitable principles of trade as described in Exchange Rule 301.
Price and Other Protections
    Proposed Interpretations and Policies .05 establishes Price
Protection standards that are intended to ensure that certain types of
complex strategies will not be executed outside of a preset standard
minimum and/or maximum price limit.
    First, the proposal establishes a price protection program for
Vertical Spreads and Calendar Spreads by establishing a Vertical Spread
Variance (``VSV'') and Calendar Spread Variance (``CSV''). VSV will
apply only to Vertical Spreads, and CSV will apply only to Calendar
Spreads.\93\
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    \93\ A ``Vertical Spread'' is a complex strategy consisting of
the purchase of one call (put) option and the sale of another call
(put) option overlying the same security that have the same
expiration but different strike prices. See proposed Rule 518,
Interpretations and Policies .05(a). The proposed MIAX VSV and CSV
price protections are substantially similar to the price protections
that are currently operative on other exchanges. For example, the
PHLX Strategy Price Protection (``SPP'') is a feature of the System
that prevents certain Complex Order Strategies from trading at
prices outside of pre-set standard limits. The PHLX SPP for Vertical
and Time (Calendar) spreads is virtually the same as the proposed
MIAX VSV and CSV price protections, except that the PHLX rule refers
to a ``Time Spread'' instead of a ``Calendar Spread.'' ISE's
Vertical and Calendar Spread price protections differ slightly in
that the ISE system will (i) prevent the execution of a vertical
spread order at a price that is less than zero; (ii) reject a
vertical spread order when entered with a net price greater than the
value of the higher strike price minus the lower strike price (plus
a pre-set value) (iii) prevent the execution of a vertical spread
order at a price that is greater than the value of the higher strike
price minus the lower strike price (plus a pre-set value) when
entered as a market order to buy; (iv) reject a calendar spread
order (i.e., an order to buy a call (put) option with a longer
expiration and to sell another call (put) option with a shorter
expiration in the same security at the same strike price) when
entered with a net price of less than zero (minus a pre-set value),
and will prevent the execution of a calendar spread order at a price
that is less than zero (minus a pre-set value) when entered as a
market order to sell. See ISE Rule 722, Supplementary Material
.07(c).

---------------------------------------------------------------------------

    The VSV establishes minimum and maximum trading price limits for
Vertical Spreads. The maximum possible trading price limit of the VSV
is the difference between the two component strike prices plus a pre-
set value. For example, a Vertical Spread consisting of the purchase of
one January 30 call and the sale of one January 35 call would have a
maximum trading price limit of $5.00 plus a pre-set value. The minimum
possible trading price limit of a Vertical Spread is always zero minus
a pre-set value. The pre-set value will be uniform for all option
classes traded on the Exchange as determined by the Exchange and
communicated to Members via Regulatory Circular.
    A ``Calendar Spread'' is a complex strategy consisting of the
purchase of one call (put) option and the sale of another call (put)
option overlying the same security that have different expirations but
the same strike price. The CSV establishes a minimum trading price
limit for Calendar Spreads. The CSV establishes a minimum trading price
limit for Calendar Spreads. The maximum possible value of a Calendar
Spread is unlimited, thus there is no maximum price protection for
Calendar Spreads. The minimum possible trading price limit of a
Calendar Spread is zero minus a pre-set value. The pre-set value will
be uniform for all option classes traded on the Exchange as determined
by the Exchange and communicated to Members via Regulatory Circular.
    If the execution price of a complex order would be outside of the
limits established in the VSV or the CSV, such complex order will be
placed on the Strategy Book and will be managed to the appropriate
trading price limit as described in proposed Rule 518(c)(4) above.
Orders to buy below the minimum trading price limit and orders to sell
above the maximum trading price limit (in the case of Vertical Spreads)
will be rejected by the System.
    Another feature in the System that is designed to protect investors
from executions that are outside of the price on any individual market
is the Implied Away Best Bid or Offer (``ixABBO'') price protection
feature. The ixABBO price protection feature is a price protection
mechanism under which, when in operation as requested by the submitting
Member, a buy order will not be executed at a price that is higher than
each other single exchange's best displayed offer for the complex
strategy, and under which a sell order will not be executed at a price
that is lower than each other single exchange's best displayed bid for
the complex strategy. The ixABBO is calculated using the best net bid
and offer for a complex strategy using each other exchange's displayed
best bid or offer on their simple order book. For stock-option orders,
the ixABBO for a complex strategy will be calculated using the BBO for
each component on each individual away options market and the NBBO for
the stock component. The ixABBO price protection feature must be
engaged on an order-by-order basis by the submitting Member and is not
available for complex Standard quotes, complex eQuotes, or cAOC orders.

Example--Complex order with ixABBO Protection Requested
    MIAX--quote Mar 50 Call 6.00-6.50 (10x10)
    MIAX--quote Mar 55 Call 2.00-2.30 (10x10)
    GEM Mar 50 Call 6.00-6.50 (10x10)
    GEM Mar 55 Call 2.00-2.10 (10x10)
    BOX Mar 50 Call 6.00-6.50 (10x10)
    BOX Mar 55 Call 2.10-2.30 (10x10)

The Exchange receives an Initiating Customer order to buy 1 Mar 50 call
and sell 2 Mar 55 calls for a 2.50 debit x 100, with ixABBO protection
requested.

The icMBBO is 1.40 debit bid at 2.50 credit offer
The ixABBO is 1.80 debit bid (GEM) at 2.30 credit offer (BOX)

The cAOA instruction is not present on this order, so the order will
not initiate an auction upon arrival regardless of its relationship to
the Improvement Percentage. The ABBO Price Protection instruction which
instructs the Exchange to apply ixABBO protection is present, so the
Exchange will protect the order to the best bid for the strategy or
best offer for the strategy available from any single exchange's
protected quotation in the Simple Order Market, including the MIAX.
Since the ixABBO protection has been selected, the inbound order cannot
be legged against the Strategy Book for a 2.50 debit (the strategy is
offered at 2.30 on BOX). In order to display the order at its maximum
tradable price, the inbound order is managed on the Strategy Book and
displayed at its protected limit of 2.30 debit bid. While the MIAX
icMBBO remains 1.40 debit bid at 2.50 credit offer, the combination of
the Simple Order Book and the Strategy Book becomes 2.30 debit bid at
2.50 credit offer.
    The BOX then updates their protected Simple Order Market quotation
while all other Simple Market quotations remain the same:

BOX Mar 50 Call 6.00-6.50 (10x10)
BOX Mar 55 Call 2.20-2.40 (10x10)
The ixABBO is now 1.80 debit (GEM) at 2.10 credit (BOX)

The MIAX System will now re-evaluate the order and will apply the new
ixABBO protection. The order will now be managed on the Strategy Book
and displayed at its protected limit of 2.10 debit bid. While the MIAX
icMBBO remains 1.40 debit bid at 2.50 credit offer, the combination of
the Simple Order Book and the Strategy Book becomes 2.10 debit bid at
2.50 credit offer. The BOX again updates their protected Simple Order
Market quotation while all other Simple Market quotations remain the
same:

BOX Mar 50 Call 6.00-6.50 (10x10)
BOX Mar 55 Call 2.10-2.30 (10x10)
The ixABBO is now 1.80 debit bid (GEM) at 2.30 credit offer (BOX)

The MIAX System will now re-evaluate the order and will apply the new
ixABBO protection. The order will now be managed on the Strategy Book
and displayed at its protected limit of 2.30 debit bid. While the MIAX
icMBBO remains 1.40 debit bid at 2.50 credit offer, the combination of
the Simple Order Book and the Strategy Book once again becomes 2.30
debit bid at 2.50 credit offer.
Wide Market Conditions, SMAT Events and Halts
    The Exchange is proposing to establish rules for additional
investor protections when external market events occur that affect
complex orders and quotes on the Exchange. These external events and
additional investor protections, and the manner in which the System
responds to them, are defined and specified in proposed Rule 518,
Interpretations and Policies .05(e). First, a ``wide market condition''
is defined as any individual component of a complex strategy having, at
the time of evaluation, an MBBO quote width that is wider than the
permissible valid quote width as defined in Rule 603(b)(4).\94\
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    \94\ A Market Maker on the Exchange is expected to price option
contracts fairly by, among other things, bidding and offering so as
to create differences of no more than $5 between the bid and offer
(``bid/ask differentials'') following the opening rotation in an
equity option contract. The Exchange may establish differences other
than the bid/ask differentials described above for one or more
option series or classes. See Exchange Rules 603(b)(4)(i) and (ii).

---------------------------------------------------------------------------

    Proposed Rule 518, Interpretations and Policies .05(e)(1)(i),
describes how the System functions when there is a wide market
condition during free trading (i.e., when there is not a Complex
Auction in progress). Specifically, if a wide market condition exists
for a component of a complex strategy, trading in the complex strategy
will be suspended. The Strategy Book will remain available for Members
to enter and manage complex orders and quotes. New Complex Auctions
will not be initiated and incoming Complex Auction-eligible orders that
could have otherwise caused an auction to begin will be placed on the
Strategy Book. Incoming complex orders with a time in force of IOC will
be cancelled.
    The System will continue to evaluate the Strategy Book. If a wide
market condition exists for a component of a complex strategy at the
time of evaluation, complex orders or quotes that could have otherwise
been executed will not be executed until the wide market condition no
longer exists. When the wide market condition no longer exists, the
System will again evaluate the Strategy Book and will use the process
and criteria respecting the RIP as described in proposed
Interpretations and Policies .03(c) to determine whether complex order
interest exists to initiate a Complex Auction, or whether to commence
trading in the complex strategy without a Complex Auction.
    Proposed Rule 518, Interpretations and Policies .05(e)(1)(ii),
describes how the System functions when there is a wide market
condition during a Complex Auction. If, at the expiration of the
Response Time Interval, a wide market condition exists for a component
of a complex strategy in the Complex Auction, trading in the complex
strategy will be suspended, and any RFR Responses will be cancelled.
Remaining Complex Auction-eligible orders will then be placed on the
Strategy Book. When the wide market condition no longer exists, the
System will evaluate the Strategy Book pursuant to proposed Rule
518(c)(5)(ii), and will use the process and criteria respecting the RIP
as described in proposed Interpretations and Policies .03(c) to
determine whether complex order interest exists to initiate a Complex
Auction, or whether to commence trading in the complex strategy without
a Complex Auction.
    The purpose of the rule and functionality concerning a wide market
condition is to limit the trading of complex orders when one or more of
the components of a complex strategy are wider than the defined valid
width in the simple market \95\ as this has the potential to create
unnaturally wide spreads in the complex strategy, which in turn could
result in a less than optimal execution price. The Exchange believes
that the rule and functionality are essential in protecting customers
submitting complex orders from extreme market conditions in the simple
market respecting the components of such complex orders.
---------------------------------------------------------------------------

    \95\ Id.
---------------------------------------------------------------------------

    Proposed Rule 518, Interpretations and Policies .05(e)(2) sets
forth the functionality of the System if a Simple Market Auction or
Timer (``SMAT'') Event (defined above as a PRIME Auction, a Route
Timer, or a liquidity refresh pause) \96\ exists for a component of a
complex strategy.
---------------------------------------------------------------------------

    \96\ See proposed Rule 518(a)(16).
---------------------------------------------------------------------------

    If a SMAT Event exists during free trading for a component of a
complex strategy, trading in the complex strategy will be suspended.
The Strategy Book will remain available for Members to enter and manage
complex orders and quotes. New Complex Auctions may be initiated for
incoming Complex Auction-eligible orders that meet the requirements of
the URIP (as described in proposed Rule 518, Interpretations and
Policies .03(b) above). Incoming complex orders and quotes that could
otherwise be executed during the SMAT Event(s) without entering the
Complex Auction process will be placed on the Strategy Book. Incoming
complex orders received during a SMAT Event with a time in force of IOC
will be cancelled by the System.
    The System will continue to evaluate the Strategy Book. When the
SMAT Event(s) no longer exist(s), the System will evaluate the Strategy
Book, and will use the process and criteria respecting the RIP to
determine whether complex order interest exists to initiate a Complex
Auction, or whether to commence trading in the complex strategy without
a Complex Auction.
    Proposed Rule 518, Interpretations and Policies .05(e)(2)(ii)
describes what happens when a SMAT Event occurs during a Complex
Auction. If, at the end of the Response Time Interval, a component of a
complex strategy is in a SMAT Event, trading in the complex strategy
will be suspended and all RFR Responses will be cancelled. Remaining
Complex Auction-eligible orders will then be placed on the Strategy
Book. When the SMAT Event(s) no longer exist(s), the System will
evaluate the Strategy Book pursuant to proposed Rule 518(c)(5)(ii), and
will use the process and criteria respecting the RIP as described in
Interpretations and Policies .03(c) of this Rule to determine whether
complex order interest exists to initiate a Complex Auction, or whether
to commence trading in the complex strategy without a Complex Auction.
    SMAT Events represent temporary interruptions of free trading in
one or more components of a complex strategy. The temporary suspension
of trading in complex orders during a SMAT event is intended to enhance
continuity, trade-through protection, and orderliness in the simple
markets and to protect complex order components from being executed at
prices that could be better following a SMAT Event or a wide market
condition. Once a SMAT Event is concluded or resolved, the System will
evaluate the Strategy Book as described above to provide the previously
suspended complex orders with more opportunities to be executed.
Halts
    Proposed Rule 518, Interpretations and Policies .05(e)(3) describes
the System's functionality when there is a halt in trading for the
underlying security or a component of a complex order. If a trading
halt exists for the underlying security or a component of a complex
strategy, trading in the complex strategy will be suspended.
    The Strategy Book will remain available for members to enter and
manage complex orders and quotes. Incoming complex orders and quotes
that could otherwise be executed or initiate a Complex Auction in the
absence of a halt will be placed on the Strategy Book. This is similar
to functionality that is currently operative on another exchange.\97\
Incoming complex orders and quotes with a time in force of IOC will be
cancelled.
---------------------------------------------------------------------------

    \97\ See, e.g., PHLX Rule 1098(c)(ii)(C), which states that
complex orders will not trade on the PHLX system during a trading
halt for any options component of the Complex Order.
---------------------------------------------------------------------------

    When trading in the halted component(s) and/or underlying security
of the complex order resumes, the System will evaluate the Strategy
Book as described in proposed Rule 518(c)(2)(i), and will use the
process and criteria respecting the IIP as described in proposed Rule
518, Interpretations and Policies .03(a) to determine whether complex
order interest exists to initiate a Complex Auction, or whether to
commence trading in the complex strategy without a Complex Auction.
    Proposed Interpretations and Policies .05(e)(3)(ii) describes what
happens

when there is a halt during a Complex Auction. Unlike during a wide
market condition or a SMAT Event, where a Complex Auction will end
without trading at the end of the Response Time Interval, if during a
Complex Auction any component or the underlying security of a Complex
Auction-eligible order is halted, the Complex Auction will end early
without trading \98\ and all RFR Responses will be cancelled. Remaining
complex orders will be placed on the Strategy Book if eligible, or
cancelled. When trading in the halted component(s) and/or underlying
security of the complex order resumes, the System will evaluate the
Strategy Book pursuant to proposed Rule 518(c)(2)(i) above, and will
use the process and criteria respecting the IIP as described in
Interpretations and Policies .03(a) of this Rule to determine whether
marketable complex order interest exists to initiate a Complex Auction,
or whether to commence trading in the complex strategy without a
Complex Auction.
---------------------------------------------------------------------------

    \98\ This is the only circumstance under which a Complex Auction
on MIAX would end early. In all other circumstances described in
proposed Rule 518 that would disrupt trading during a Complex
Auction, the Complex Auction will end after the Response Time
Interval without trading.
---------------------------------------------------------------------------

    Another investor protection proposed by the Exchange is described
in Interpretations and Policies .06 of proposed Rule 518, the MIAX
Order Monitor for Complex Orders (``cMOM'').\99\
---------------------------------------------------------------------------

    \99\ cMOM is substantially similar to the Exchange's MIAX Order
Monitor (``MOM'') protection for the Simple Order Book. See Exchange
Rule 519.
---------------------------------------------------------------------------

    cMOM defines a price range outside of which a complex limit order
will not be accepted by the System. cMOM is a number defined by the
Exchange and communicated to Members via Regulatory Circular. The
default price range for cMOM will be greater than or equal to a price
through the cNBBO for the complex strategy to be determined by the
Exchange and communicated to Members via Regulatory Circular. Such
price will not be greater than $2.50. A complex limit order to sell
will not be accepted at a price that is lower than the cNBBO bid, and a
complex limit order to buy will not be accepted at a price that is
higher than the cNBBO offer, by more than cMOM. A complex limit order
that is priced through this range will be rejected.
    cMOM includes complex order size protections, open complex order
protection, and open complex contract protection. Respecting complex
order size protections, the System will prevent certain complex orders
from executing or being placed on the Strategy Book if the size of the
complex order exceeds the complex order size protection designated by
the Member. If the maximum size of complex orders is not designated by
the Member, the Exchange will set a maximum size of complex orders on
behalf of the Member by default. Members may designate the complex
order size protection on a firm wide basis. The default maximum size
for complex orders will be determined by the Exchange and announced to
Members via Regulatory Circular.
    Under the open complex order protection, the System will reject any
complex orders that exceed the maximum number of open complex orders
held in the System on behalf of a particular Member, as designated by
the Member. Members may designate the open complex order protection on
a firm wide basis. If the maximum number of open complex orders is not
designated by the Member, the Exchange will set a maximum number of
open complex orders on behalf of the Member by default. The default
maximum number of open complex orders will be determined by the
Exchange and announced to Members via Regulatory Circular.
    Open complex contract protection provides that the System will
reject any complex orders that exceed the maximum number of open
complex contracts represented by complex orders held in the System on
behalf of a particular Member, as designated by the Member. Members may
designate the open complex contract protection on a firm wide basis. If
the maximum number of open complex contracts is not designated by the
Member, the Exchange will set a maximum number of open complex
contracts on behalf of the Member by default. The default maximum
number of open complex contracts will be determined by the Exchange and
announced to Members via Regulatory Circular.
    The cMOM protections will be available for complex orders as
determined by the Exchange and communicated to Members via Regulatory
Circular.
    The Exchange is also proposing to amend Exchange Rule 519A to state
that complex orders will participate in the Risk Protection Monitor.
The Risk Protection Monitor maintains a counting program (``counting
program'') for each participating Member that will count the number of
orders entered and the number of contracts traded via an order entered
by a Member on the Exchange within a specified time period that has
been established by the Member, and will reject orders that exceed a
Member-designated ``Allowable Order Rate'' and an ``Allowable Contract
Execution Rate.'' \100\
---------------------------------------------------------------------------

    \100\ For a complete description of the Risk Protection Monitor,
see Securities Exchange Act Release No. 74496 (March 13, 2015), 80
FR 14421 (March 19, 2015) (SR-MIAX-2015-03).
---------------------------------------------------------------------------

Obvious and Catastrophic Errors
    The Exchange proposes to adopt Rule 521(c)(5) to address the manner
in which obvious errors in complex order transactions will be handled
in situations where one or more components of a complex order is
eligible to be adjusted or nullified pursuant to Exchange Rule
521(c)(4).\101\
---------------------------------------------------------------------------

    \101\ Exchange Rule 521(c)(4) describes the actions to be taken
by the Exchange when a transaction resulting from an obvious error
(as defined elsewhere in Rule 521) has occurred, depending upon who
the parties to the transaction are.
---------------------------------------------------------------------------

    Specifically, if a complex order executes against another complex
order on the Strategy Book and one or more components of the
transaction is deemed eligible to be adjusted or nullified, the entire
trade (all components) will be nullified, unless both parties agree to
adjust the transaction to a different price within thirty (30) minutes
of being notified by the Exchange of the decision to nullify the
transaction. Additionally, if a complex order executes against orders
or quotes on the Simple Order Book, each component of the complex order
will be reviewed and handled independently in accordance with Exchange
Rule 521.\102\
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    \102\ This differs slightly from rules on other exchanges. For
example, ISE rules provide that if both parties to a trade that is
one component of a complex order execution are parties to all of the
trades that together comprise the execution of a complex order at a
single net debit or credit, then if one of those component trades
can be nullified under ISE rules, all component trades that were
part of the same complex order shall be nullified as well. See ISE
Rule 720, Commentary [sic] .04. PHLX rules also include this
provision. See PHLX Rule 1092, Commentary .01. This differs slightly
from the rules of other exchanges.
---------------------------------------------------------------------------

    The Exchange also proposes a minor change to Exchange Rule 605,
Market Maker Orders, to codify in Rule 605(a) that, in addition to the
other order types specified in the rule, Market Makers may place
complex orders in option classes to which they are appointed respecting
cAOC complex orders.
    Because of the technology changes associated with this rule
proposal, the Exchange will announce the implementation date of the
proposal in a Regulatory Circular to be published no later than 90 days
after the publication of the approval order in the Federal Register.
The implementation date will be no later than 90 days following
publication of the Regulatory Circular

announcing publication of the approval order in the Federal Register.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \103\ in general, and furthers the objectives
of Section 6(b)(5) of the Act \104\ in particular, in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest. The Exchange believes in
particular that its proposal regarding executions of complex orders
against the Simple Order Book is consistent with the Act and furthers
the objectives of Section 6(b)(5) of the Act \105\ because it provides
greater liquidity to the marketplace as a whole by fostering the
interaction between the components of complex orders on the Strategy
Book and the Simple Order Book. This should enhance the opportunity for
executions of both complex orders and simple orders.
---------------------------------------------------------------------------

    \103\ 15 U.S.C. 78f(b).
    \104\ 15 U.S.C. 78f(b)(5).
    \105\ Id.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change will result in more
efficient trading and reduce the risk that complex orders fail to
execute for investors by providing additional opportunities to fill
complex orders, and that the changes are consistent with the Act. The
Exchange believes that increased interaction, where possible, on a
continuous and real-time basis of the bids and offers on each component
of a complex strategy with the bids and offers on the corresponding
complex strategy and vice versa, through derived orders and Legging,
will benefit market participants and investors. The proposed rule
change will allow complex orders to interact with interest on the MIAX
Simple Order Book and, conversely, allow interest on the MIAX Simple
Order Book to interact with complex orders in an efficient and orderly
manner.
    The Exchange also believes the interaction of orders will benefit
investors by increasing the opportunity for complex orders to receive
execution, while also enhancing execution quality for orders on the
MIAX Simple Order Book. Generally, the options industry rules for the
execution of complex orders provide that two complex orders may execute
against one another if the execution prices of the component legs
result in a net price that is better than the best customer limit order
available for the individual component legs. This permits an exchange,
when executing two complex orders against one another, to execute each
component leg on the market's best bid or offer so long as the
execution does not trade ahead of customer interest.
    The Exchange believes it is reasonable to permit complex orders
that are subject of this rule change to leg into the Simple Order Book.
The proposed rule concerning Legging will facilitate the execution of
more complex orders, and will thus benefit investors and the general
public because complex orders will have a greater chance of execution
when they are allowed to leg into the simple market and thereby
increase the execution rate for these orders, thus providing market
participants with an increased opportunity to execute these orders on
MIAX. The prohibition against the Legging of complex orders with two
option legs where both legs are buying or both legs are selling and
both legs are calls or both legs are puts, and on complex orders with
three option legs where all legs are buying or all legs are selling
regardless of whether the option leg is a call or a put, protects
investors and the public interest by ensuring that Market Makers
providing liquidity do not trade above their established risk tolerance
levels.
    The Exchange believes it is reasonable to limit the types of
complex orders that are eligible to leg into the Simple Order Book. The
Exchange believes that the vast majority of complex orders sent to the
Exchange will be unaffected by this proposed rule. Moreover, the
Exchange believes that the potential risk of offering legging
functionality for complex orders such as those impacted by the proposed
rule could limit the amount of liquidity that Market Makers are willing
to provide in the Simple Order Book. In particular, Market Makers,
without the proposed limitation, are at risk of executing the
cumulative size of their quotations across multiple options series
without an opportunity to adjust their quotes. Market Makers may be
compelled to change their quoting and trading behavior to account for
this additional risk by widening their quotes and reducing the size
associated with their quotes, which would diminish the Exchange's
quality of markets and the quality of the markets in general. The
limitations in proposed Rule 518(c)(2)(iii) substantially diminish a
potential source of unintended Market Maker risk when certain types of
complex orders leg into the Simple Order Book, thereby removing
impediments to and perfecting the mechanisms of a free and open market
and a national market system and, in general, protecting investors and
the public interest by adding confidence and stability in the
Exchange's marketplace. This benefit to investors far exceeds the small
amount of potential liquidity provided by the few complex orders to
which this aspect of the proposal applies.
    Additionally, investors will have greater opportunities to manage
risk with the new availability of trading in complex orders. The
proposed adoption of rules governing complex order auctions will
facilitate the execution of complex orders while providing
opportunities to access additional liquidity and fostering price
improvement. The Exchange believes the proposed rules are appropriate
in that complex orders are widely recognized by market participants as
invaluable, both as an investment, and a risk management strategy. The
proposed rules will provide an efficient mechanism for carrying out
these strategies. In addition, the proposed complex order rules promote
equal access by providing Members that subscribe to the Exchange's data
feeds that include auction notifications with the opportunity to
interact with orders in the Complex Auction. In this regard, any Member
can subscribe to the options data provided through the Exchange's data
feeds that include auction notifications.
    The Exchange believes that the general provisions regarding the
trading of complex orders provide a clear framework for trading of
complex orders in a manner consistent with other options exchanges.
This consistency should promote a fair and orderly national options
market system. The Exchange believes that the proposed rules will
result in efficient trading and reduce the risk for investors that
complex orders could fail to execute by providing additional
opportunities to fill complex orders.
    The proposed execution and priority rules will allow complex orders
to interact with interest in the MIAX Simple Order Book and,
conversely, interest on the MIAX Simple Order Book to interact with
complex orders in an efficient and orderly manner. Consistent with
other exchanges and with well-established principles of customer
protection, the proposed rules state that a complex order may be
executed at a net credit or debit price with one other Member without
giving priority to bids or offers established in

the marketplace that are no better than the bids or offers comprising
such net credit or debit; provided, however, that if any of the bids or
offers established in the marketplace consist of a Priority Customer
Order, at least one leg of the complex order must trade at a price that
is better than the corresponding bid or offer in the marketplace by at
least a $0.01 increment.\106\ Additionally, before executing against
another complex order, a complex order on MIAX will execute first
against orders on the MIAX Simple Order Book (except in the limited
circumstance described in proposed Rule 518(c)(2)(iii)) if the net
price of such orders is equal to the best price on the Strategy Book if
any of the bids or offers established in the simple marketplace consist
of a Priority Customer Order.
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    \106\ See proposed Rule 518(c)(3)(i).
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    For the reasons set forth above, the Exchange believes the proposed
rule change regarding complex order execution is consistent with the
goals of the Act to remove impediments to and to perfect the mechanism
of a free and open market and a national market system, and to protect
investors and the public interest.
Market Maker Priority Interest for Complex
    The Exchange believes that affording priority in the Strategy Book
to Market Makers with complex Standard quotes that are priced at or
inside the dcMBBO further perfects the mechanisms of a free and open
market and a national market system and, in general, protects investors
and the public interest, by providing Market Makers with additional
incentive to submit complex Standard quotes at the best price in the
Strategy Book.
    Certain Market Maker complex Standard quotes and complex eQuotes
will qualify as ``Market Maker Priority Interest for Complex'' on the
Strategy Book at the beginning of a Complex Auction, or at the time of
execution in free trading. Affording priority in the Strategy Book to
Market Makers with a Complex priority quote should provide incentive to
MIAX participants to submit complex quotes at the best prices.
    Moreover, the Exchange believes that this treatment of Market
Makers is a suitable reward for Market Makers quoting in the Strategy
Book at the best price in the complex strategy. The Exchange believes
this furthers the objectives of Section 6(b)(5) of the Act \107\
because it provides greater depth and liquidity in the Strategy Book,
all to the benefit of investors. The Exchange believes its proposal to
afford priority in the Strategy Book to certain Market Maker quotes on
the Strategy Book will result in enhanced liquidity on the Exchange,
and thus further perfects the mechanisms of a free and open market and
a national market system, consistent with the Act.
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    \107\ 15 U.S.C. 78f(b)(5).
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Derived Orders
    The Exchange believes the generation of derived orders as set forth
in proposed Rule 518(a)(9) is consistent with the goals of the Act to
remove the impediments to and perfect the mechanism of a free and open
market because their addition to the marketplace should facilitate
additional transactions and interaction between orders on the Strategy
Book and orders on the Simple Order Book. The Exchange believes the
addition of derived orders to the MIAX market will benefit Market
Makers, traders, and retail investors trading on MIAX by enhancing
execution quality and the likelihood and efficiency of trade execution.
In the absence of the proposed rule, complex orders that could
otherwise execute against interest on the Simple Order Book would not
trade.
    A derived order is automatically removed from the Simple Order Book
if the displayed price of the derived order is no longer at the
displayed best bid or offer on the Simple Order Book; if execution of
the derived order would no longer achieve the net price of the complex
order on the Strategy Book when the other component of the complex
order is executed against the best bid or offer on the Simple Order
Book; if the complex order is executed in full; if the complex order is
cancelled, or if any component of the complex order resting on the
Strategy Book that is used to generate the derived order is subject to
a SMAT Event, a wide market condition, or a halt. Until such removal,
derived orders provide additional likelihood and efficiency of trade
execution in furtherance of the goals of the Act. Applying these
limitations, the Exchange will closely monitor the generation of
derived orders to ensure they do not negatively impact system capacity
and performance, thus removing these potential impediments to, and
perfecting the mechanism of, a free and open market.
    The Exchange further believes that the automatic generation of
derived orders will provide additional execution opportunities for
complex orders and interest on the MIAX Simple Order Book, and thus
enhance execution quality for investors on MIAX. The Exchange believes
the additional opportunities for potential execution through the
interaction of orders on the Strategy Book and orders on the Simple
Order Book as achieved through derived orders, and the potential for
enhanced execution quality, as outlined above, promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market, are in the public interest and,
therefore, consistent with the Act.
    The Exchange believes that the availability of derived orders will
provide additional execution opportunities for complex orders without
negatively impacting any investors in the simple market. The
availability of derived orders may enhance the quality of execution for
investors on the MIAX Simple Order Book by improving the price and/or
size of the MBBO and by providing additional execution opportunity for
resting interest on the MIAX Simple Order Book. The Exchange also
believes that derived orders are compliant with Rule 602 of Regulation
NMS \108\ because each derived order is included in the MBBO if it is
equal to or better than the otherwise existing MBBO.
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    \108\ 17 CFR 242.602.
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Types of Complex Orders
    The Exchange proposes that complex orders may be submitted as limit
orders, market orders, IOC orders, GTC orders, or day limit orders as
each such term is defined in Exchange Rule 516, or as a cAOA order, or
cAOC order.\109\ In particular, the Exchange believes that limit
orders, IOC orders, GTC orders and day limit orders all provide
valuable limitations on execution price and time that help to protect
MIAX participants and investors in both the Simple Order Book and in
the proposed Strategy Book. The Exchange believes that permitting
complex orders to be entered with these varying order contingency types
will give MIAX participants greater control and flexibility over the
manner and circumstances in which their orders may be executed,
modified, or cancelled, and thus will provide for the protection of
investors and contribute to market efficiency.
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    \109\ See proposed Rule 518(b).
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Evaluation
    The Exchange believes that the regular and event-driven evaluation
of the Strategy Book for the eligibility of complex orders or, as
appropriate, complex quotes, to initiate or participate in a Complex
Auction, and to determine their eligibility to participate in the
managed interest process, whether a

derived order should be generated or cancelled, if they are eligible
for full or partial execution against a complex order or quote resting
on the Strategy Book or through Legging with the Simple Order Book,
whether the complex order or quote should be cancelled; and whether the
complex order or quote or any remaining portion thereof should be
placed on the Strategy Book are consistent with the principles of the
Act to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest.
    Evaluation of the executability of complex orders and quotes and
for the determination as to whether a complex order is Complex Auction-
eligible is central to the removal of impediments to, and the
perfection of, the mechanisms of a free and open market and a national
market system and, in general, the protection of investors and the
public interest. The evaluation process ensures that the System will
capture and act upon complex orders and quotes that are due for
execution or placed in a Complex Auction. The regular and event-driven
evaluation process removes potential impediments to the mechanisms of
the free and open market and the national market system by ensuring
that complex orders and quotes are given the best possible chance at
execution at the best price, evaluating the availability of complex
orders and quotes to be handled in a number of ways as described in
this proposal. Any potential impediments to the order handling and
execution process respecting complex orders and quotes are
substantially removed due to their continual and event-driven
evaluation for subsequent action to be taken by the System. This
protects investors and the public interest by ensuring that complex
orders and quotes in the System are continually monitored and evaluated
for potential action(s) to be taken on behalf of investors that submit
their complex orders and quotes to MIAX.
Complex Auction Process
    The Complex Auction process is also designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system and, in general, to protect
investors and the public interest.
    Following evaluation, a Complex Auction-eligible order may begin a
Complex Auction or may join a Complex Auction in progress.\110\ The
Complex Auction process promotes just and equitable principles of
trade, fosters cooperation and coordination with persons engaged in
facilitating transactions in securities, removes impediments to and
perfects the mechanisms of a free and open market and a national market
system and, in general, protects investors and the public interest by
ensuring that eligible complex orders and quotes are given every
opportunity to be executed at the best prices against an increased
level of contra-side liquidity responding to the RFR message. This
mechanism of a free and open market is designed to enhance liquidity
and the potential for better execution prices during the Response Time
Interval, all to the benefit of investors on MIAX, and thereby
consistent with the Act.
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    \110\ A cAOC eQuote will not initiate a Complex Auction but may
join a Complex Auction in progress; an IOC eQuote will not initiate
or join a Complex Auction in progress. See proposed Rule 518,
Interpretations and Policies .02(c)(1) and (2).
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    The Exchange believes that the determination to initiate a Complex
Auction using the IIP, URIP or RIP value, as applicable, removes
impediments to, and perfects the mechanisms of, a free and open market
and a national market system and, in general, protects investors and
the public interest, by ensuring that a Complex Auction is conducted
for a complex order only when there is a reasonable and realistic
chance for price improvement through a Complex Auction. The IIP, URIP
and RIP are used to calculate a percentage of the dcMBBO bid/ask
differential at or within which the System will determine to initiate a
Complex Auction. If a complex order is priced equal to, or improves,
the IIP, URIP or RIP value, the complex order will be eligible to
initiate a Complex Auction.
    The purpose of this provision is to ensure that a complex order
will not initiate a Complex Auction if it is priced through the bid or
offer at a point (i.e., outside of the IIP, URIP or RIP) where it is
not reasonable to anticipate that it would generate a meaningful number
of RFR Responses such that there would be price improvement of the
complex order's limit price. Promoting the orderly initiation of a
Complex Auction is essential to maintaining a fair and orderly market
for complex orders; otherwise, the initiation of Complex Auctions that
are unlikely to result in price improvement might result in unnecessary
activity in the marketplace when there is no meaningful opportunity for
price improvement. The Exchange believes that the IIP, URIP and RIP
remove this potential impediment to the MIAX market and to the
marketplace as a whole.
    If a complex order is not priced equal to, or better than, the IIP,
URIP or RIP value, the Exchange believes that it is not reasonable to
anticipate that it would generate a meaningful number of RFR Responses
such that there would be price improvement of the complex order's limit
price. Promoting the orderly initiation of Complex Auctions is
essential to maintaining a fair and orderly market for complex orders;
otherwise, the initiation of Complex Auctions that are unlikely to
result in price improvement could affect the orderliness of the
marketplace in general.
    The Exchange believes that this removes impediments to and perfects
the mechanisms of a free and open market and a national market system
by promoting the orderly initiation of Complex Auctions, and by
limiting the likelihood of unnecessary Complex Auctions that are not
expected to result in price improvement.
    The Exchange believes the proposed maximum 500 millisecond Response
Time Interval promotes just and equitable principles of trade and
removes impediments to a free and open market because it allows
sufficient time for Members participating in a Complex Auction to
submit RFR Responses and would encourage competition among
participants, thereby enhancing the potential for price improvement for
complex orders in the Complex Auction to the benefit of investors and
public interest. The Exchange believes the proposed rule change is not
unfairly discriminatory because it establishes a Response Time Interval
applicable to all MIAX participants participating in a Complex Auction.
    The proposed Complex Auction process is designed to protect the
integrity of the System and of the MIAX marketplace for the protection
of investors and the public interest by, among other things, limiting
the number of Complex Auctions that may be initiated within a given
time period. Multiple Complex Auctions may be in progress at any
particular time across multiple strategies, but only one Complex
Auction per strategy may be in progress at any particular time. Without
such a limitation, investors could be faced with an unusually large
number of simultaneous Complex Auctions in the same strategy, which in
turn could

impact the orderly function of the markets. The Exchange believes that
this limitation is consistent with the Act because it is designed to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system by ensuring orderliness in the
Complex Auction process.
    The Complex Auction Process also protects investors and the public
interest by creating more opportunities for price improvement of
complex orders, all to the benefit of MIAX participants and the
marketplace as a whole.
Complex Order Price Protections
    The Exchange believes that the proposed complex order price
protections will provide market participants with valuable price and
order size protections in order to enable them to better manage their
risk exposure when trading complex orders. The VSV will ensure that a
Vertical Spread will not trade at a net price of less than the minimum
possible value minus a pre-set price setting an acceptable range or
greater than the maximum possible value plus a pre-set price setting an
acceptable range. The CSV will ensure that a Calendar Spread will not
trade at a price of less than zero (minus a pre-set price setting an
acceptable range). Orders to buy below the minimum price and orders to
sell above the maximum price will be rejected by the System.
    cMOM defines a price range outside of which a complex limit order
will not be accepted by the System. A complex order that is priced
through this range will be rejected. This is intended to provide a fair
and orderly market in complex orders on the Exchange by filtering and
rejecting inbound complex orders at prices that could be erroneous and/
or disruptive.
Other Protections
    The Exchange is proposing to suspend and in some cases restart
trading in complex orders and quotes, to remove certain complex orders
from the Strategy Book, and to end a complex Auction either early or at
the end of the Response Time Interval when there is a wide market
condition, SMAT Event and/or a halt in the underlying security of, or
in an individual component of, a complex order. This protection is
intended to protect investors and the public interest by causing the
System not to execute during potentially disruptive conditions or
events that could affect customer protection, and to resume trading in
complex orders and quotes to the extent possible upon the conclusion or
resolution of the potentially disruptive condition or event.
    The System's proposed functionality during a wide market condition
protects investors and the public interest by ensuring that the
execution of complex orders and quotes on behalf of investors and the
public will only occur at times when there is a fair and orderly
market.
Risk Protection Monitor
    The proposed amendment to Exchange Rule 519A, Risk Protection
Monitor, to reject complex orders that exceed a Member-designated
``Allowable Order Rate'' and an ``Allowable Contract Execution Rate''
is designed to protect investors and the public interest by assisting
Members submitting complex orders in their risk management. Members are
vulnerable to the risk from system or other error or a market event
that may cause them to send a large number of orders or receive
multiple, automatic executions before they can adjust their order
exposure in the market. Without adequate risk management tools, such as
the Risk Protection Monitor, Members could reduce the amount of order
flow and liquidity that they provide to the market. Such actions may
undermine the quality of the markets available to customers and other
market participants. Accordingly, the proposed amendments to the Risk
Protection Monitor should instill additional confidence in Members that
submit orders to the Exchange that their risk tolerance levels are
protected, and thus should encourage such Members to submit additional
order flow and liquidity to the Exchange with the understanding that
they have this protection respecting all orders they submit to the
Exchange, including complex orders, thereby removing impediments to and
perfecting the mechanisms of a free and open market and a national
market system and, in general, protecting investors and the public
interest.
Obvious and Catastrophic Errors
    The proposed amendment to Exchange Rule 521, Nullification and
Adjustment of Options Transactions Including Obvious Errors protects
investors and the public interest by extending the obvious error
process for complex orders.
    Under the proposal, if a complex order executes against another
complex order on the Strategy Book and one or more components of the
transaction is deemed eligible to be adjusted or nullified, the entire
trade (all components) will be nullified, unless both parties agree to
adjust the transaction to a different price within thirty (30) minutes
of being notified by the Exchange of the decision to nullify the
transaction. If a complex order executes against orders or quotes on
the Simple Order Book, each component of the complex order will be
reviewed and handled independently in accordance with Rule 521.
    This addition to Exchange Rule 521 should help add more certainty
to the obvious/catastrophic error process and reduce the price risk to
parties trading on the Exchange, and mitigate risk for the parties to a
complex order where all or one or more components of the complex order
traded at an erroneous price. Parties to complex trades on MIAX will
have less trading risk because all of the components will be nullified
under the proposal.
    This additional risk protection for parties to a complex trade
promotes just and equitable principles of trade and is designed to
protect investors and the public interest, by providing additional
mechanisms through which investors may nullify or adjust erroneous
trades, and is therefore consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues who offer similar
functionality. The Exchange believes that the proposal to offer the
ability to execute complex orders on the Exchange is pro-competitive by
providing market participants with the opportunity to execute complex
orders in a manner that is similar to that allowed on other options
exchanges.
    The Exchange believes that the proposal will enhance competition
among the various markets for complex order execution, potentially
resulting in more active complex order trading on all exchanges.
    The Exchange notes that as to intramarket competition, its proposal
is designed to treat all Exchange participants in the same category of
participant equally. The Exchange believes that it is equitable and
reasonable to afford trade allocation priority to certain categories of
participants. The proposal to establish first priority to Priority
Customer complex orders resting on the Strategy Book is consistent with
the long-

standing policies of customer protection found throughout the Act.
Allocating thereafter to Market Maker Priority Interest for Complex is
justified because Market Maker Priority Interest for Complex only
applies if the Market Maker has a complex Standard quote in the complex
strategy that equals or improves the dcMBBO. The Exchange's proposal to
afford such a Market Maker priority in the Strategy Book is not new
conceptually; Market Makers are afforded priority on the Exchange in
the Simple Order Book in certain situations.\111\ Thus, the Exchange
believes that a Market Maker whose quoting activity qualifies for
Market Maker Priority Interest for Complex is justifiably afforded
priority with respect to such quoting activity.
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    \111\ For example, after executions resulting from Priority
Overlays when the pro-rata allocation method applies, if there is
other interest at the NBBO, after all Priority Customer Orders (if
any) at that price have been filled, executions at that price will
be first allocated to other remaining Market Maker priority quotes,
which have not received a participation entitlement, and have
precedence over Professional Interest. See Exchange Rule
514(e)(i)[sic].
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    The Exchange also believes that affording priority to them (after
Priority Customer complex orders) is reasonable in light of the
liquidity they provide, which other MIAX participants such as non-
Market Maker Professional Interest participants are not required to
provide.

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

    Written comments were neither solicited nor received.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-MIAX-2016-26 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2016-26. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on