[Federal Register Volume 81, Number 165 (Thursday, August 25, 2016)]
[Notices]
[Pages 58769-58801]
[FR Doc No: 2016-20213]

Vol. 81

Thursday,

No. 165

August 25, 2016

Part IV

Securities and Exchange Commission

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 Self-Regulatory Organizations: Notice of Filing of a Proposed Rule
Change by Miami International Securities Exchange, LLC To Adopt New
Rules To Govern the Trading of Complex Orders on the Exchange; Notices

Federal Register / Vol. 81 , No. 165 / Thursday, August 25, 2016 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78620; File No. SR-MIAX-2016-26]

Self-Regulatory Organizations: Notice of Filing of a Proposed
Rule Change by Miami International Securities Exchange, LLC To Adopt
New Rules To Govern the Trading of Complex Orders on the Exchange

August 18, 2016.
    Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on August 8, 2016, Miami International Securities
Exchange LLC (``MIAX'' or the ``Exchange'') filed with the Securities
and Exchange Commission (``Commission'') a proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt new rules to govern the trading of
complex orders on the Exchange.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at
MIAX's principal office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to adopt new rules that describe the trading
of complex orders on the Exchange. Proposed new Rule 518, Complex
Orders, details the functionality of the MIAX System \3\ in the
handling of complex orders on the Exchange. The proposed rules are
based substantially on similar rules of other exchanges.\4\ The
Exchange believes that the similarity of its proposed complex order
rules to those of other exchanges will allow the Exchange's proposed
complex order functionality to fit seamlessly into the greater options
marketplace and benefit market participants who are already familiar
with similar functionality offered on other exchanges.
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    \3\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
    \4\ See, e.g., Chicago Board Options Exchange, Inc. (``CBOE'')
Rule 6.53(C)[sic]; International Securities Exchange LLC (``ISE'')
Rule 722; NYSE MKT Rule 980NY; BOX Options Exchange LLC (``BOX'')
Rule 7240; NASDAQ OMX PHLX LLC (``PHLX'') Rule 1098; NYSEArca Rule
6.91.
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    Additionally, the Exchange is proposing to amend Exchange Rule 516,
Order Types Defined, to add a cross-reference to Rule 518 stating that
complex order types are defined in Rule 518 and that, specifically,
derived orders (as discussed below) are defined in Rule 518(a)(9). The
Exchange is also proposing to amend Exchange Rules 519A, Risk
Protection Monitor, to include complex orders in the rule; 521,
Nullification and Adjustment of Options Transactions Including Obvious
Errors, to establish the process for handling complex order obvious
errors, and 605, Market Maker Orders, to add certain complex orders to
the enumerated orders in which Exchange Market Makers may place orders
on the Exchange, as described below.
Definitions
    Proposed Rule 518(a) provides definitions of terms that apply to
the trading of complex orders, and such terms are used throughout this
proposed rule change.
    The term ``ABBO'' means the best bid(s) or offer(s) disseminated by
other Eligible Exchanges (defined in Rule 1400(f)) \5\ and calculated
by the Exchange based on market information received by the Exchange
from OPRA.
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    \5\ ``Eligible Exchange'' means a national securities exchange
registered with the SEC in accordance with Section 6(a) of the Act
that: (1) Is a Participant Exchange in OCC (as that term is defined
in Section VII of the OCC by-laws); (2) is a party to the OPRA Plan
(as that term is described in Section I of the OPRA Plan); and (3)
if the national securities exchange is not a party to the Options
Order Protection and Locked/Crossed Markets Plan, is a participant
in another plan approved by the Commission providing for comparable
Trade-Through and Locked and Crossed Market protection. See Exchange
Rule 1400(f).
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    The Complex National Best Bid or Offer (``cNBBO'') is calculated
using the NBBO for each component of a complex strategy to establish
the best net bid and offer for a complex strategy. For stock-option
orders (described below), the cNBBO for a complex strategy will be
calculated using the NBBO in the individual option component(s) and the
NBBO in the stock component.
    A ``Complex Auction'' is an auction of a complex order as set forth
in proposed Rule 518(d), described below.
    A ``Complex Auction-eligible order'' is an order that meets the
requirements of proposed Rule 518(d)(1), as described below.
    A ``complex order'' is any order involving the concurrent purchase
and/or sale of two or more different options in the same underlying
security (the ``legs'' or ``components'' of the complex order),\6\ for
the same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for the
purposes of executing a particular investment strategy. Mini-options
may only be part of a complex order that includes other mini-
options.\7\ Only those complex orders in the classes designated by the
Exchange and communicated to Members via Regulatory Circular with no
more than the applicable number of legs, as determined by the Exchange
on a class-by-class basis and communicated to Members via Regulatory
Circular, are eligible for processing.
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    \6\ The different options in the same underlying security that
comprise a particular complex order are referred to as the ``legs''
or ``components'' of the complex order throughout this proposal.
    \7\ This definition is consistent with other options exchanges.
See e.g., CBOE Rule 6.53C(a)(1). See also PHLX Rule 1098(a)(i); NYSE
MKT Rule 900.3NY(e); and BOX Rule 7240(a)(5).
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    A complex order can also be a ``stock-option order'' as described
further, and subject to the limitations set forth, in proposed
Interpretations and Policies .01 of proposed Rule 518. A stock-option
order is an order to buy or sell a stated number of units of an
underlying security (stock or Exchange Traded Fund Share (``ETF'')) or
a security convertible into the underlying stock (``convertible
security'') coupled with the purchase or sale of options contract(s) on
the opposite side of the market representing either (i) the same number
of units of the underlying security or convertible security, or (ii)
the number of units of the underlying stock necessary to create a delta
neutral position, but in no case in a ratio greater than eight-to-one
(8.00), where the ratio represents the total number of units of

the underlying security or convertible security in the option leg to
the total number of units of the underlying security or convertible
security in the stock leg. Only those stock-option orders in the
classes designated by the Exchange and communicated to Members via
Regulatory Circular with no more than the applicable number of legs as
determined by the Exchange on a class-by-class basis and communicated
to Members via Regulatory Circular, are eligible for processing.\8\
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    \8\ This is substantially similar to the definition of a stock-
option order on other exchanges. See, e.g., CBOE Rule 6.53C(a)(2)
and PHLX Rule 1098.
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    The term ``complex strategy'' means a particular combination of
components and their ratios to one another. New complex strategies can
be created as the result of the receipt of a complex order, or by the
Exchange for a complex strategy that is not currently in the System.
The Exchange may limit the number of new complex strategies that may be
in the System at a particular time and will communicate this limitation
to Members via Regulatory Circular.
    A ``complex quote'' is a Market Maker complex Standard quote or
complex eQuote for a complex strategy as set forth in Interpretations
and Policies .02 of proposed Rule 518, described below.
    The Displayed Complex MIAX Best Bid or Offer (``dcMBBO'') is
calculated using the best displayed price for each component of a
complex strategy from the Simple Order Book. For stock-option orders,
the dcMBBO for a complex strategy will be calculated using the
Exchange's best displayed bid or offer in the individual option
component(s) and the NBBO in the stock component.
    A ``derived order'' is an Exchange-generated limit order on the
Simple Order Book that represents either the bid or offer of one
component of a complex order resting on the Strategy Book that is
comprised of orders to buy or sell an equal quantity (with a one-to-one
ratio) of two option components.\9\ This order type is also used on
other exchanges in the trading of complex orders. Derived orders will
not be routed outside of the Exchange regardless of the price(s)
disseminated by away markets. The Exchange will determine on a class-
by-class basis to make available derived orders and communicate such
determination to Members via a Regulatory Circular. The purpose of this
provision is to carefully manage the number of derived orders being
generated so that they do not negatively impact system capacity and
performance. Derived orders are firm orders (i.e., if executed, firm
for the disseminated price and size) that are included in the MBBO (as
defined below).\10\
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    \9\ The Exchange notes that a derived order is the equivalent of
a similar order type on other exchanges. See, e.g., PHLX Rule
1098(f)(iii)(C) (Legging Orders). Like a MIAX derived order, a
Legging Order on PHLX may be generated for one leg of a Complex
Order at a price: (i) That matches or improves upon the best PHLX
displayed bid or offer; and (ii) at which the net price can be
achieved when the other leg is executed against the best displayed
bid or offer on PHLX. The PHLX rule governs situations in which a
Legging Order will not be created; the proposed MIAX rule states
that a derived order will not be displayed at a price that locks or
crosses the best bid or offer of another exchange, and that a
derived order will not be created at a price increment less than the
minimum established by MIAX Rule 510, whereas the PHLX rule states
that Legging Orders may be generated and executed in an increment
other than the minimum increment for that series and will be ranked
on the order book at its generated price and displayed at a price
that is rounded to the nearest minimum increment for that series.
The rules also differ slightly in the manner and circumstances in
which derived or Legging Orders may be removed from the Simple Order
Book. See infra note 19.
    \10\ The derived order type is also firm on other exchanges.
See, e.g., ISE Rule 715(k), which states that ``Legging'' orders are
firm orders that are included in the ISE's displayed best bid or
offer. See also, e.g., BOX Rule 7240(c), which states that a
``Legging Order'' is a firm order that is included in the BBO if it
is equal to, or better than, the existing BBO.
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    A derived order may be automatically generated for one or more legs
of a complex order at a price that matches or improves upon the best
displayed bid or offer in the affected series on the Simple Order Book
and at a price at which the net price of the complex order on the
Strategy Book can be achieved when the other component(s) of the
complex order is (are) executed against the best displayed bid or offer
on the Simple Order Book. A derived order will not be displayed at a
price that locks or crosses the best bid or offer of another exchange
(the ``ABBO'').\11\ In such a circumstance, the System will display the
derived order on the Simple Order Book at a price that is one Minimum
Price Variation (``MPV'') \12\ away from the current opposite side best
bid or offer of such other exchange, and rank the derived order on the
Simple Order Book according to its actual price. A derived order will
not be created at a price increment less than the minimum established
by Rule 510.
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    \11\ This is similar to the rules of another exchange. BOX rules
state that a ``Legging Order'' that would lock or cross opposite
side NBBO will be ranked on the BOX Book at the locking price and
displayed at one minimum trading increment below the current NBO
(for bids) or one minimum trading increment above the current NBB
(for offers) for the applicable series (``display-price sliding'').
See BOX Rule 7240(c)(2)(i).
    \12\ For a complete description of MPVs, see Exchange Rule 510.

Example--Derived order adjusted so as not to lock (cross) the ABBO
    MIAX--Mar 50 Put 1.00 (10)--1.20 (20)
    MIAX--Mar 55 Call 1.00 (10)--1.20 (20)
    ABBO--Mar 50 Put 1.00 (10)--1.05 (10)
    ABBO--Mar 55 Call 1.00 (10)--1.20 (10)

The Exchange receives a Priority Customer buy order to purchase 1 Mar
50 put and purchase 1 Mar 55 call for a 2.25 debit, 10 times. The order
is not designated as Complex Auction-on-Arrival (cAOA) and will not
initiate an auction upon arrival even if it equals or improves the Upon
Receipt Improvement Percentage (``URIP,'' as defined in proposed Rule
518, Interpretations and Policies .04[sic](b)).

The icMBBO \13\ is 2.00 debit bid, 10 times at 2.40 credit offer, 20
times
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    \13\ The Implied Complex MIAX Best Bid or Offer (``icMBBO'') is
a calculation that uses thebest [sic] price from the Simple Order
Book for each component of a complex strategy including displayed
and non-displayed trading interest. For stock-option orders, the
icMBBO for a complex strategy will be calculated using the best
price (whether displayed or non-displayed) on the Simple Order Book
in the individual option component(s), and the NBBO in the stock
component. See proposed Rule 518(a)(11), described below.
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The dcMBBO is 2.00 debit bid, 10 times at 2.40 credit offer, 20 times
The URIP Percentage is 60% of the bid ask spread or 0.24

There is no offsetting complex order to sell and the complex order
cannot leg into the Simple Order Market because the icMBBO offer for
the complex order on the MIAX Simple Order Book is offered at 2.40.
A derived order to buy the Mar 50 put for 1.05 (calculated by
determining the component price that achieves the net price (2.25
debit) that can execute against the best displayed price on the Simple
Order Book), 10 times would lock the ABO if displayed at $1.05 and
therefore be in violation, so the derived order will instead be created
at 1.05 and displayed at 1.00, one MPV inside of the ABO, in this case
joining the MIAX's best bid for the Mar 50 put of 1.00; while managed
at a non-displayed price on the Simple Order Book to buy at 1.05:

Mar 50 Put 1.00 (20) (10 derived order displayed at 1.00 and booked at
1.05)--1.20 (20)
Mar 55 Call 1.00 (10)--1.20 (20)

The new icMBBO is 2.05 debit bid, 10 times at 2.40 credit offer, 20
times

    If a marketable order to sell Mar 50 put 1 or more times is
received, it will execute against the derived order to buy the Mar 50
put at the non-displayed price for 1.05 1 or more times and the

System will automatically execute the other leg of the complex order
against the Simple Order Book offer for the Mar 55 call at 1.20 for the
same quantity. As a result, the net price of 2.25 is achieved for the
complex order (buy the Mar 50 put for 1.05 and buy Mar 55 call for 1.20
= 2.25 net price).
    A derived order will be handled in the same manner as other orders
on the Simple Order Book except as otherwise provided in proposed Rule
518, and will be executed only after all other executable orders
(including orders subject to the managed interest process as described
below) and quotes at the same price are executed in full. When a
derived order is executed, the other component of the complex order on
the Strategy Book will be automatically executed against the best bid
or offer on the Exchange.\14\ The Exchange believes that a derived
order, created for the execution of a complex order, should not be
afforded priority over resting orders and quotes on the Simple Order
Book, and therefore has determined to protect the priority on the
Simple Order Book of such resting orders and quotes.
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    \14\ See Note 11.

Example--Derived order is last in priority on the Simple Order Book
    MIAX--Mar 50 Call 2.00 (10)--2.10 (60)
    MIAX--Mar 55 Call 1.00 (20)--1.10 (80)

The Exchange receives a Priority Customer complex order to buy 1 Mar 50
call and sell 1 Mar 55 call for a 1.00 debit, 5 times. The order is not
designated as cAOA and will not initiate a Complex Auction upon arrival
even if it equals or improves the URIP. There is no Customer interest
resting on the Strategy Book.

The icMBBO is 0.90 debit bid, 10 times at 1.10 credit offer, 20 times
The dcMBBO is 0.90 debit bid, 10 times at 1.10 credit offer, 20 times
The URIP Percentage is 60% of the bid ask spread or 0.12

    There is no offsetting complex order to sell and the complex order
cannot leg into the Simple Order Market because the icMBBO offer for
the complex order on the MIAX Simple Order Book is offered at 1.10. A
derived order to buy the Mar 50 call for 2.00, 5 times may be
automatically generated by the System without violating protected
quotations at away markets for either leg. The derived buy order will
join the MBB for the March 50 call and will not change the MIAX's
icMBBO price.

Mar 50 Call 2.00 (15 total, 5 from derived order)--2.10 (60)
The new icMBBO is 0.90 debit bid, 15 times at 1.10 credit offer, 20
times

If a marketable order to sell Mar 50 call 15 times or more is received,
it will execute first against the order on the Simple Order Book and
then against the derived order to buy the Mar 50 call for 2.00 5 times
and the System will automatically execute the other leg of the complex
order against the Simple Order Book bid for the Mar 55 call at 1.00 5
times. As a result, the net price of 1.00 is achieved for the complex
order (buy the Mar 50 call for 2.00 and sell the Mar 55 call at 1.00 =
1.00 net price).
    A derived order is automatically removed from the Simple Order Book
if (i) the displayed price of the derived order is no longer at the
displayed best bid or offer on the Simple Order Book, (ii) 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, (iii) the complex order is executed in full, (iv) the complex
order is cancelled, or (v) any component of the complex order resting
on the Strategy Book that is used to generate the derived order is
subject to a Simple Market Auction or Timer (``SMAT'') Event,\15\ a
wide market condition,\16\ or a halt \17\ (each as described
below).\18\ This is similar to the functionality regarding derived
order equivalents on other exchanges.\19\

    \15\ A SMAT Event is defined as any of the following: A PRIME
Auction (pursuant to Exchange Rule 515A); a Route Timer (pursuant to
Exchange Rule 529); or a liquidity refresh pause (pursuant to
Exchange Rule 515(c)(2)). See proposed Rule 518(a)(16).
    \16\ 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). See proposed Rule 518,
Interpretations and Policies .05(e).
    \17\ See Exchange Rule 504.
    \18\ See proposed Rule 518(a)(9).
    \19\ Respecting the removal of derived orders from the Simple
Order Book, PHLX Rule 1098(f)(iii)(C) lists additional scenarios
under which a PHLX ``legging'' Order on PHLX is automatically
removed from the regular order book: (i) If the price of the legging
Order is no longer at the Exchange's displayed best bid or offer on
the regular limit order book, (ii) if execution of the legging Order
would no longer achieve the net price of the Complex Order when the
other leg is executed against the Exchange's best displayed bid or
offer on the regular limit order book (other than another legging
Order), (iii) if the Complex Order is executed in full or in part
(this differs from proposed Rule 518(a)(9)(vi)(C), which states that
a derived order will be removed if executed in full), (iv) if the
Complex Order is cancelled or modified (proposed Rule
518(a)(9)(vi)(D) states that the derived order will be removed if
cancelled but not if modified). Similarly, a legging order on ISE is
automatically removed from the regular limit order book if: (i) The
price of the legging order is no longer at the displayed best bid or
offer on the regular limit order book, (ii) execution of the legging
order would no longer achieve the net price of the complex order
when the other leg is executed against the best displayed bid or
offer on the regular limit order book, (iii) the complex order is
executed in full or in part (again unlike proposed Rule
518(a)(9)(vi)(C) which only include a derived order executed in
full) against another complex order on the complex order book, or
(iv) the complex order is cancelled or modified (unlike Rule
518((a)(9)(vi)(C)[sic] which does not include a provision for
modification). See also, ISE Rule 715(k), which states that a
legging order is automatically removed from the regular limit order
book if: (i) The price of the legging order is no longer at the
displayed best bid or offer on the regular limit order book, (ii)
execution of the legging order would no longer achieve the net price
of the complex order when the other leg is executed against the best
displayed bid or offer on the regular limit order book, (iii) the
complex order is executed in full or in part against another complex
order on the complex order book, or (iv) the complex order is
cancelled or modified. See also, BOX Rule 7240(c) respecting BOX
``legging'' Orders.
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Example--Derived order is cancelled when a component of a complex order
is subject to a SMAT Event \20\
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    \20\ This example describes a PRIME Auction in any one of the
components used to generate the derived order. The example could
apply to such a component that is subject to any SMAT Event.
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    MIAX--Mar 50 Put 1.00 (10)--1.20 (20)
    MIAX--Mar 55 Call 1.00 (10)--1.20 (20)
    ABBO--Mar 50 Put 1.05 (10)--1.20 (10)
    ABBO--Mar 55 Call 1.00 (10)--1.20 (10)

The Exchange receives a Priority Customer complex order to buy 1 Mar 50
put and purchase 1 Mar 55 call for a 2.25 debit, 10 times. The order is
not designated as cAOA and will not initiate an auction upon arrival
even if it equals or improves the URIP.

The icMBBO is 2.00 debit bid, 10 times at 2.40 credit offer, 20 times
The dcMBBO is 2.00 debit bid, 10 times at 2.40 credit offer, 20 times
The URIP Percentage is 60% of the bid ask spread or 0.24

There is no offsetting complex order to sell and the complex order
cannot leg into the Simple Order Market because the icMBBO offer for
the complex order on the MIAX Simple Order Book is offered at 2.40.
Derived orders to buy the Mar 50 put for 1.05, 10 times and the Mar 55
call for 1.05, 10 times may be automatically generated by the System
without violating protected quotations at away markets for either leg,
improving the MIAX's best bid for each of the Mar 50 put and the Mar 55
call to 1.05:

Mar 50 Put 1.05 (10) (Derived order)--1.20 (20)
Mar 55 Call 1.05 (10) (Derived order)--1.20 (20)

If in the Simple Order Book, a PRIME Auction (or other SMAT Event) were
to start in either the Mar 50 put or the Mar 55 call, the System will
automatically cancel the derived order to buy the Mar 50 put while
simultaneously cancelling the derived order to buy the Mar 55 call.

Example--Derived order is created resulting in the execution of a
complex order and simultaneous cancellation of the other unneeded
derived order.
MIAX--Mar 50 Put 1.00 (10)--1.20 (20)
MIAX--Mar 55 Call 1.00 (10)--1.20 (20)
ABBO--Mar 50 Put 1.05 (10)--1.20 (10)
ABBO--Mar 55 Call 1.00 (10)--1.20 (10)

The Exchange receives a Priority Customer complex order to buy 1 Mar 50
put and buy 1 Mar 55 call for a 2.25 debit, 10 times. The order is not
designated as cAOA and will not initiate an auction upon arrival even
if it equals or improves the URIP.

The icMBBO is 2.00 debit bid, 10 times at 2.40 credit offer, 20 times
The dcMBBO is 2.00 debit bid, 10 times at 2.40 credit offer, 20 times
The URIP Percentage is 60% of the bid ask spread or 0.24

There is no offsetting complex order to sell and the complex order
cannot leg into the Simple Order Market because the icMBBO offer for
the complex order on the MIAX Simple Order Book is offered at 2.40.
Derived orders to buy the Mar 50 put for 1.05, 10 times and the Mar 55
call for 1.05, 10 times may be automatically generated by the System
without violating protected quotations at away markets for either leg,
improving the MIAX's best bid for each of the Mar 50 put and the Mar 55
call to 1.05:

Mar 50 Put 1.05 (10) (derived order)--1.20 (20)
Mar 55 Call 1.05 (10) (derived order)--1.20 (20)

The new icMBBO is 2.10 debit bid, 10 times at 2.40 credit offer, 20
times. If a marketable order to sell Mar 50 put 10 times or more is
received, it will execute against the derived order to buy the Mar 50
put for 1.05 10 times and the System will automatically execute the
other leg of the complex order against the Simple Order Book offer for
the Mar 55 call at 1.20 while simultaneously cancelling the now
unneeded derived order to buy the Mar 55 call for 1.05. As a result,
the net price of 2.25 is achieved for the complex order (buy the Mar 50
put for 1.05 and buy Mar 55 call for 1.20 = 2.25 net price).
    Finally, proposed Rule 518(a)(9)(vii) provides that a derived order
that is locked (i.e., if the opposite side MBBO locks the derived
order) will be executed if the execution price is at the NBBO.
    The Exchange believes that derived orders will significantly
enhance the Strategy Book by enabling greater interaction of multi-
legged orders with the Simple Order Book. This functionality should
tighten spreads on the MIAX Simple Order Book, resulting in better
executions for complex orders and for regular orders.
    The term ``free trading'' means trading that occurs during a
trading session other than: (i) At the opening or re-opening for
trading following a halt, or (ii) during the Complex Auction Process
(as described below and in proposed Rule 518(d)).
    The Implied Complex Best Bid or Offer (``icMBBO'') is a calculation
that uses the best price from the Simple Order Book for each component
of a complex strategy including displayed and non-displayed trading
interest. For stock-option orders, the icMBBO for a complex strategy
will be calculated using the best price (whether displayed or non-
displayed) on the Simple Order Book in the individual option
component(s), and the national best bid or offer (``NBBO'') in the
stock component.
    Certain Market Maker complex Standard quotes and complex eQuotes
(as defined below) will qualify as ``Market Maker Priority Interest for
Complex'' on the Strategy Book (as defined below) if the criteria
described herein have been met.\21\ For purposes of the proposed Rule,
Market Maker Priority Interest for Complex is established at the
beginning of a Complex Auction (as described in proposed Rule 518(d)
below), or at the time of execution in free trading.
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    \21\ Market Maker complex quotes may be entered as either
complex Standard quotes or complex eQuotes. A complex eQuote is
either a Complex Auction or Cancel eQuote (``cAOC eQuote'') or an
``Immediate or Cancel eQuote'' (``cIOC eQuote'') A 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. A 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. 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; or (iii) rest
on the Strategy Book. Any portion of a cIOC eQuote that is not
executed will be immediately cancelled. See proposed Rule 518,
Interpretations and Policies .02.
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    If complex Standard quoting is engaged for a complex strategy,\22\
a Market Maker complex Standard quote or complex eQuote will qualify as
Market Maker Priority Interest for Complex if the Market Maker has a
complex Standard quote in the complex strategy that equals or improves
the dcMBBO on the opposite side from the incoming complex order or
quote at the time of evaluation (a ``Complex priority quote'').\23\ The
Exchange's proposal to adopt Market Maker Priority Interest for Complex
in the Strategy Book is substantially based upon principles and rules
currently operative on the Exchange respecting the Simple Order
Book.\24\ While the priority and trade allocation method for the
Strategy Book, described below, distinguishes among Market Maker
Priority Interest and Market Maker non-Priority Interest,\25\ the
proposed rules concerning complex priority are not novel, and have
simply emerged from the priority rules already in existence on the
Exchange.
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    \22\ Complex Standard quoting will be engaged by the Exchange
for complex strategies on a strategy-by-strategy basis. The
strategies for which complex Standard quoting is engaged will be
communicated to Members via Regulatory Circular. See proposed Rule
518, Interpretations and Policies .02. Among the criteria used in
determining the classes for which complex Standard quoting will be
engaged are average daily volume in the class, number of expiration
months and strike prices in the class, number of strike prices at or
near the money in the class, and input from Members. This differs
slightly from ISE, which states merely that market makers may enter
quotes for complex order strategies on the complex order book in
their appointed options classes. See ISE Rule 722, Supplementary
Material .03.
    \23\ The Exchange notes that, unlike the continuous quoting
requirements in the simple order market, there are no continuous
quoting requirements respecting complex orders. This is similar to
ISE, where 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 market maker quotes in
the regular market for individual options series or classes. See ISE
Rule 722, Supplementary Material .03.
    \24\ The Exchange currently follows the established hierarchy
that generally affords priority to Priority Customer Orders, then to
Market Makers with priority quotes, followed by Professional
Interest at the same price. See Exchange Rule 514.
    \25\ See proposed Rule 518(c)(3)(ii).
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    The term ``MBBO'' means the best bid or offer on the Simple Order
Book (as defined below) on the Exchange, and the term ``NBBO'' means
the national best bid or offer as calculated by the Exchange based on
market information received by the Exchange from the appropriate
Securities Information Processor (``SIP'').\26\
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    \26\ All U.S. exchanges and associations that quote and trade
exchange-listed securities must provide their data to a centralized
SIP for data consolidation and dissemination. See 15 U.S.C. 78c
(22)(A).
---------------------------------------------------------------------------

    The ``Simple Order Book'' is the Exchange's regular electronic book
of orders and quotes.
    A Simple Market Auction or Timer (``SMAT'') Event is defined as a
PRIME

Auction (pursuant to Rule 515A); \27\ a Route Timer (pursuant to Rule
529); \28\ or a liquidity refresh pause (pursuant to Rule
515(c)(2)).\29\ Complex orders and quotes will be handled during a SMAT
Event as described in proposed Interpretations and Policies .05(e)(2)
of proposed Rule 518, as discussed below.
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    \27\ The MIAX Price Improvement Mechanism (``PRIME'') is a
process by which a Member may electronically submit for execution
(``Auction'') an order it represents as agent (``Agency Order'')
against principal interest, and/or an Agency Order against solicited
interest. See Exchange Rule 515A.
    \28\ The Exchange may automatically route orders to other
exchanges under certain circumstances (``Routing Services''). In
connection with such services, one of two Route Mechanisms,
Immediate Routing or the Route Timer, will be used when a Public
Customer order is received and/or reevaluated that is both routable
and marketable against the opposite side ABBO upon receipt and the
Exchange's disseminated market is not equal to the opposite side
ABBO, or is equal to the opposite side ABBO and of insufficient size
to satisfy the order. For those initiating Public Customer orders
that are routable, but do not meet the additional criteria for
Immediate Routing, the System will implement a Route Timer not to
exceed one second (the duration of the Timer will be announced to
Members through a Regulatory Circular), in order to allow Market
Makers and other participants an opportunity to interact with the
initiating order. See Exchange Rule 529.
    \29\ The System will pause the market for a time period not to
exceed one second to allow additional orders or quotes refreshing
the liquidity at the MBBO to be received (``liquidity refresh
pause'') when at the time of receipt or reevaluation of the
initiating order by the System: (A) Either the initiating order is a
limit order whose limit price crosses the NBBO or the initiating
order is a market order, and the limit order or market order could
only be partially executed; (B) a Market Maker quote was all or part
of the MBBO when the MBBO is alone at the NBBO; and (C) and the
Market Maker quote was exhausted. See Exchange Rule 515(c)(2).
---------------------------------------------------------------------------

    The ``Strategy Book'' is the Exchange's electronic book of complex
orders and complex quotes.\30\
---------------------------------------------------------------------------

    \30\ This definition is consistent with that of another options
exchange. See BOX Rule 7240(a)(6). The BOX rule differs from
proposed Rule 518(a)(16), which defines the Strategy Book, in that
BOX refers to the book as the ``Complex Order Book'' and also refers
to the BOX Trading Host.
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Types of Complex Orders
    Proposed Rule 518(b), Types of Complex Orders, describes the
various types and specific times-in-force for complex orders handled by
the System.
    As an initial matter, proposed Rule 518(b)(1) states that the
Exchange will issue a Regulatory Circular listing which complex order
types, among the complex order types set forth in the proposed Rule,
are available for use on the Exchange. Additional Regulatory Circulars
will be issued as additional complex order types, among those complex
order types set forth in the proposed Rule, become available for use on
the Exchange. Regulatory Circulars will also be issued when a complex
order type that had been in usage on the Exchange will no longer be
available for use. This is substantially similar to, and based upon,
the manner in which the Exchange determines the available order types
in the Simple Order Book.\31\ The purpose of this provision is to
enable the Exchange to modify the complex order types that are
available on the Exchange as market conditions change. The Exchange
believes that this enhances its ability to remain competitive as
markets and market conditions change and evolve.
---------------------------------------------------------------------------

    \31\ See Exchange Rule 516.
---------------------------------------------------------------------------

    Among the complex order types that may be submitted are limit
orders, market orders, Good `til Cancelled (``GTC'') orders, or day
limit orders as each such term is defined in Rule 516,\32\ or Complex
Auction-on-Arrival (``cAOA'') orders, Complex Auction-or-Cancel
(``cAOC'') orders, or Complex Immediate-or-Cancel (``cIOC'') orders, as
such terms are defined below.
---------------------------------------------------------------------------

    \32\ For a complete description of these order types, see
Exchange Rule 516. The Exchange is not proposing to offer fill-or-
kill complex orders, as currently offered on other exchanges. The
Exchange does not believe that a fill-or-kill order is a critical
order type for effective complex order trading. See e.g., CBOE Rule
6.53C(b), which differs slightly from proposed Rule 518(b) in that
the CBOE rule states that orders may also be entered as fill-or-kill
or as all-or-none (the Exchange does not accept all-or-none orders);
and BOX Rule 7240(b)(4)(i), which differs slightly from proposed
Rule 518(b) in that the BOX rule states that orders may also be
entered as fill-or-kill or as ``Session'' orders.
---------------------------------------------------------------------------

    Complex orders will be considered ineligible to initiate a Complex
Auction upon receipt unless designated as Complex Auction-on-Arrival
(``cAOA'') orders.\33\ Proposed Rule 518(b)(2)(i) defines a cAOA order
as a complex order designated to be placed into a Complex Auction upon
receipt or upon evaluation. Complex orders that are not designated as
cAOA will, by default, not initiate a Complex Auction upon arrival, but
except as described herein will be eligible to participate in a Complex
Auction that is in progress when such complex order arrives or if
placed on the Strategy Book may participate in or may initiate a
Complex Auction, following evaluation conducted by the System (as
described below). Complex orders that are designated as cIOC or cAOC
are not eligible for cAOA designation, and their evaluation will not
result in the initiation of a Complex Auction either upon arrival or if
eligible when resting on the Strategy Book.
---------------------------------------------------------------------------

    \33\ The Exchange believes that this gives market participants
extra flexibility to control the handling and execution of their
complex orders by the System by giving them the additional ability
to determine not to have their complex order initiate a Complex
Auction by electing not to designate it as a cAOA order. This
differs slightly from CBOE Rule 6.53[sic](d)(ii)(B), which requires
CBOE Trading Permit Holders to affirmatively request, on an order-
by-order basis, that a COA-eligible order with two legs not be
placed into a CBOE Complex Order Auction (a ``do-not-COA'' request).
The MIAX System considers an order not designated as cAOA to be
ineligible to initiate an auction by default.
---------------------------------------------------------------------------

    A complex order may also be submitted as a cAOC order. A cAOC order
is a complex limit order used to provide liquidity during a specific
Complex Auction with a time in force that corresponds with that event.
cAOC orders are not displayed to any market participant, and are not
eligible for trading outside of the event.
    Additionally, a complex order may be submitted as a Complex
Immediate-or-Cancel or ``cIOC'' order, which is a complex order that is
to be executed in whole or in part upon receipt. Any portion not so
executed is cancelled.
Trading of Complex Orders and Quotes
    Proposed Rule 518(c), Trading of Complex Orders and Quotes,
describes the manner in which complex orders will be handled and traded
on the Exchange. The Exchange will determine and communicate to Members
via Regulatory Circular which complex order origin types (i.e., non-
broker-dealer customers, broker-dealers that are not Market Makers on
an options exchange, and/or Market Makers on an options exchange) are
eligible for entry onto the Strategy Book.\34\ The rule also states
that complex orders will be subject to all other Exchange Rules that
pertain to orders generally, unless otherwise provided in proposed Rule
518.
---------------------------------------------------------------------------

    \34\ See Proposed Rule 518(c). See also CBOE Rule 6.53C(c)(i),
which states that CBOE will determine which classes and which
complex order origin types (i.e., non-broker-dealer public customer,
broker-dealers that are not Market-Makers or specialists on an
options exchange, and/or Market-Makers or specialists on an options
exchange) are eligible for entry into the Complex Order Book.
---------------------------------------------------------------------------

    Proposed Rule 518(c)(1) provides that bids and offers on complex
orders and quotes may be expressed in $0.01 increments, and the
component(s) of a complex order may be executed in $0.01 increments,
regardless of the minimum increments otherwise applicable to individual
components of the complex order,\35\ and that if any component of a
complex strategy would be executed at a price that is equal to a
Priority Customer bid or offer on the Simple Order Book, at least one
other component of the complex strategy must

trade at a price that is better than the corresponding MBBO.\36\
---------------------------------------------------------------------------

    \35\ See Proposed Rule 518(c)(1). See also ISE Rule 722(b)(1),
which is slightly distinguished from proposed Rule 518(c)(1) because
it states that bids and offers on complex orders may be expressed in
any decimal price, and the leg(s) of a complex order may be executed
in one cent increments, regardless of the minimum increments
otherwise applicable to the individual legs of the order.
    \36\ See Proposed Rule 518(c)(1)(ii). See also, ISE Rule
722(b)(2), which states that in this situation at least one leg must
trade at a price that is better by at least one minimum trading
increment, and PHLX Rule 1098(c)(iii), requiring in this situation
that at least one option leg is executed at a better price than the
established bid or offer for that option contract and no option leg
is executed at a price outside of the established bid or offer for
that option contract.
---------------------------------------------------------------------------

    Additionally, respecting execution pricing, proposed Rule
518(c)(1)(iii) states generally that a complex order will not be
executed at a net price that would cause any component of the complex
strategy to be executed: (A) At a price of zero; or (B) ahead of a
Priority Customer order on the Simple Order Book without improving the
MBBO of at least one component of the complex strategy. The Exchange
will never trade through Priority Customer orders, thus protecting the
priority that is established in the Simple Order Book.
Execution of Complex Orders and Quotes
    Proposed Rule 518(c)(2) describes the process of the opening of the
Strategy Book (and reopening after a halt) for trading, prices at which
executions may occur on the Exchange for complex strategies, execution
of complex orders against the individual components or ``legs'' on the
Simple Order Book, the automatic generation of derived orders, and the
process of evaluation that is conducted by the System on an ongoing
basis respecting complex orders.
    Proposed Rule 518(c)(2)(i) states that complex orders and quotes do
not participate in the opening process for the individual option legs
conducted pursuant to Rule 503.\37\ At the beginning of each trading
session, and upon reopening after a halt, once all components of a
complex strategy are open, an initial evaluation will be conducted in
order to determine whether a complex order is a Complex Auction-
eligible order, using the process and criteria described in
Interpretations and Policies .03(a) of proposed Rule 518 regarding the
Initial Improvement Percentage (``IIP''). The IIP is used to calculate
a percentage of the dcMBBO bid/ask differential at or within which the
System will determine to initiate a Complex Auction when the Strategy
Book opens for trading.\38\ 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.
---------------------------------------------------------------------------

    \37\ This is similar to the opening of complex orders on other
exchanges. Complex Orders on PHLX will not open for trading until
each option component of a Complex Order Strategy has opened or
reopened following a trading halt. See PHLX Rules 1098(d)(i) and
(ii). Similarly, complex orders on NYSE MKT do not participate in
the opening Auction Process for individual component option series
legs conducted pursuant to Rule 952NY. The NYSE MKT Complex Matching
Engine will not process an Electronic Complex Order until all of the
individual component option series that make up a complex order
strategy have opened. See NYSE MKT Rule 980NY(c)(i)(A).
    \38\ Similarly, as discussed more fully below, the System will
also calculate an Upon Receipt Improvement Percentage (``URIP'')
value to determine whether a complex order is priced equal to, or
improves, the URIP value upon receipt when the complex strategy is
open for trading, and a Re-evaluation Improvement Percentage
(``RIP'') value, to determine whether a complex order resting at the
top of the Strategy Book is priced equal to, or improves, the RIP
value. If so, in either case, the complex order will be Complex
Auction-eligible. See Proposed Rule 518, Interpretations and
Policies .03(b) and (c).
---------------------------------------------------------------------------

    The purpose of this provision is to ensure that a complex order
will not initiate a Complex Auction if it does not improve the current
complex bid or offer by at least a defined percentage (i.e., the IIP)
where it is not reasonable to anticipate that it would generate a
meaningful number of RFR Responses such that there would be 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 a
disproportionate amount of quote and message activity that could affect
the orderliness of the market. The Exchange believes that the use of
the IIP in this manner ensures that a Complex Auction will be conducted
when there is a meaningful opportunity for price improvement, and
accordingly will benefit participants and investors that submit complex
orders to the Exchange by limiting unnecessary activity on the
Exchange.
    The System will also evaluate the eligibility of complex orders and
quotes (as applicable) to participate in the managed interest process
for complex orders as set forth in proposed Rule 518(c)(4) and
described below; 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 as set forth in proposed
Rule 518(c)(2)(iii) and described below; whether the complex order or
quote should be cancelled; and whether all or any remaining portion of
the complex order or quote should be placed on the Strategy Book. This
evaluation process is ongoing and is designed to handle complex orders
in the most efficient manner possible as market conditions change. The
various outcomes are determined at the time of evaluation based on
then-existing market conditions, which are continually evolving and
require such evaluation for determination of the System's handling of
complex orders.
    The Strategy Book will open for trading, or reopen for trading
after a halt, with a Complex Auction if it is determined that one of
the following conditions is present: (A) A complex order with no
matching interest on the Strategy Book equals or improves the IIP, (B)
matching interest exists at a price that is equal to or through the
IIP, or (C) a size imbalance exists where the price at which the
maximum quantity that can trade is equal to or through the IIP. If the
Strategy Book contains matched interest or a size imbalance exists
where the price at which the maximum quantity can trade is not equal to
or through the IIP, the Strategy Book will open for trading with a
trade and a Complex Auction will not be initiated. The remaining
portion of any complex order for which there is a size imbalance will
be placed on the Strategy Book. If the Strategy Book contains no
matching interest or interest equal to or through the IIP, the complex
strategy will open without a trade and a Complex Auction will not be
initiated.
    Proposed Rule 518(c)(2)(ii) describes the manner in which the
System determines the price of execution of complex orders and quotes.
Incoming complex orders and quotes will be executed by the System in
accordance with the provisions below, and will not be executed at
prices inferior to the icMBBO or at a price that is equal to the icMBBO
when there is a Priority Customer Order (as defined in Rule 100) \39\
at the best icMBBO price. Complex orders will never be executed at a
price that is outside of the individual component prices on the Simple
Order Book. Furthermore, the net price of a complex order executed
against another complex order on the Strategy Book will never be
inferior to the price that would be available if the complex order
legged into the Simple Order Book. The purpose of this provision is to
prevent a component of a complex order from being executed at a price
that is inferior to the best-priced contra-side orders or quotes on the

Simple Order Book (on which the icMBBO is based) and to prevent a
component of a complex order from being executed at a price that
compromises the priority already established by a Priority Customer on
the Simple Order Book. The Exchange believes that such priority should
be protected and that such protection should be extended to the
execution of complex orders on the Strategy Book.\40\
---------------------------------------------------------------------------

    \39\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial accounts(s). The term
``Priority Customer Order'' means an order for the account of a
Priority Customer. See Exchange Rule 100.
    \40\ Other exchanges protect Priority and Public Customer
priority. ISE Priority Customer Orders on the Exchange shall have
priority over Professional Orders and market maker quotes at the
same price in the same options series. See ISE Rule 713(c). See
also, CBOE Rule 6.45A(a)(i)(1), which states that CBOE Public
customer orders in the electronic book have priority, and NYSE MKT
Rule 964NY(b)(2)(A), which provides that bids and offers in the
Consolidated Book for Customer accounts have first priority over
other bids or offers at the same price.
---------------------------------------------------------------------------

    Incoming complex orders that could not be executed because the
executions would be priced (A) outside of the icMBBO, or (B) equal to
or through the icMBBO due to a Priority Customer Order at the best
icMBBO price, will be cancelled if such complex orders are not eligible
to be placed on the Strategy Book. Complex orders and quotes will be
executed without consideration of any prices for the complex strategy
that might be available on other exchanges trading the same options
contracts provided, however, that such complex order price may be
subject to the Implied Exchange Away Best Bid or Offer (``ixABBO'')
Protection set forth in Interpretations and Policies .05(d) proposed
Rule 518.\41\
---------------------------------------------------------------------------

    \41\ 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 offer, and under
which a sell order will not be executed at a price that is lower
than each other single exchange's best 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 version of the 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. The Exchange believes that these
limitations on the execution price provide a price protection option
for Members that choose to place the ixABBO protection in operation.
---------------------------------------------------------------------------

    Proposed Rule 518(c)(2)(iii) describes the Legging process through
which complex orders, under certain circumstances, are executed against
the individual components of a complex strategy on the Simple Order
Book. Complex orders up to a maximum number of legs (determined by the
Exchange on a class-by-class basis as either two or three legs and
communicated to Members via Regulatory Circular) may be automatically
executed against bids and offers on the Simple Order Book for the
individual legs of the complex order (``Legging''), provided the
complex order can be executed in full or in a permissible ratio by such
bids and offers, and provided that the execution price of each
component is not executed at a price that is outside of the NBBO.\42\
---------------------------------------------------------------------------

    \42\ See proposed Rule 518(c)(2)(iii). This is similar to CBOE
Rule 6.53C(c)(ii)(1), which states that complex order in the COB
will automatically execute against individual orders or quotes
residing in the EBook provided the complex order can be executed in
full (or in a permissible ratio) by the orders and quotes in EBook;
see also BOX Rule 7240(b)(3)(ii) providing that Complex Orders will
be automatically executed against bids and offers on the BOX Book
for the individual legs of the Complex Order to the extent that the
Complex Order can be executed in full or in a permissible ratio by
such bids and offers. Legging is not available on the Exchange for
cAOC orders, complex Standard quotes, complex eQuotes, or stock-
option orders.
---------------------------------------------------------------------------

    Legging is not available for cAOC orders, complex Standard quotes,
complex eQuotes, or stock-option orders. The benefit of Legging against
the individual components of a complex order or quote on the Simple
Order Book is that complex orders can access the full liquidity of the
Exchange's Simple Order Book, thus enhancing the possibility of
executions at the best available prices on the Exchange.
    Notwithstanding the foregoing, the Exchange is proposing to
establish, in proposed Rule 518(c)(2)(iii), that complex orders that
could otherwise be eligible for Legging will only be permitted to trade
against other complex orders in the Strategy Book in certain
situations.
    Specifically, proposed Rule 518(c)(2)(iii) would provide that
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 may only
trade against other complex orders on the Strategy Book and will not be
permitted to leg into the Simple Order Book. Similarly, proposed Rule
518(c)(2)(iii) would impose a similar restriction by stating that
complex orders with three option legs where all legs are buying or all
legs are selling may only trade against other complex orders on the
Strategy Book (regardless of whether the option leg is a call or a
put).\43\ The System will not generate derived orders for these complex
orders.
---------------------------------------------------------------------------

    \43\ This is substantially similar to ISE Rules 722(b)(3)(ii)(A)
and (B), which state that Complex orders with 2 option legs where
both legs are buying or both legs are selling and both legs are
calls or both legs are puts may only trade against other complex
orders in the complex order book. The trading system will not
generate legging orders for these complex orders, and complex orders
with 3 or 4 option legs where all legs are buying or all legs are
selling may only trade against other complex orders in the complex
order book. See also, Securities Exchange Act Release No. 73023
(September 9, 2014), 79 FR 55033 (September 15, 2014)(SR-ISE-2014-
10). This differs slightly from the Exchange's proposal because the
Exchange's proposal applies to complex orders with two option legs
in the same manner as the ISE rule, but applies to complex orders
with three option legs (instead of three or four legs) where all
legs are buying or all legs are selling, regardless of whether the
option leg is a call or a put.
---------------------------------------------------------------------------

    Currently, Market Makers in the Simple Order Book are protected
from undue risk of executions by way of the Aggregate Risk Manager
(``ARM'') \44\ by limiting the number of contracts they execute in an
option class on the Exchange within a specified time period (a
``specified time period''). ARM automatically cancels and removes the
Market Maker's Standard quotes from the Exchange's disseminated
quotation in all series of a particular option class when it has
determined that a Market Maker has traded a number of contracts equal
to or above a percentage of their quotations (the ``Allowable
Engagement Percentage'' or ``AEP'') during the specified time period.
The purpose of ARM is to allow Market Makers to provide liquidity
across potentially hundreds of options series without executing the
full cumulative size of all such quotes before being given adequate
opportunity to adjust the price and/or size of their quotes.
---------------------------------------------------------------------------

    \44\ See Exchange Rule 612.
---------------------------------------------------------------------------

    All of a Market Maker's quotes in each option class are considered
firm until such time as the AEP threshold has been equaled or exceeded
and the Market Maker's quotes are removed by ARM in all series of that
option class.\45\ Thus the Legging of complex orders presents higher
risk to Market Makers as compared to simple orders being entered in
multiple series of an options class in the simple market, as it can
result in Market Makers exceeding their established AEP by a greater
number of contracts. Although Market Makers can limit their risk
through the use of ARM, the Market Maker's quotes are not removed until
after a trade is executed. As a result, because of the way complex
orders leg into the regular market as a single transaction, Market
Makers may end up trading more than the cumulative AEP they have
established, and are therefore exposed to greater risk. The Exchange
believes that 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.
---------------------------------------------------------------------------

    \45\ See Exchange Rule 612(c).
---------------------------------------------------------------------------

    The purpose of the limitations in proposed Rule 518(c)(2)(iii) is
to minimize the impact of Legging on single leg Market Makers by
limiting a potential source of unintended Market Maker risk when
certain types of complex orders leg into the Simple Order Book. The
Exchange believes that the proposed limitation on the availability of
Legging to (i) 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 (ii) 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, should serve to reduce the risk of Market Makers
trading above their risk tolerance levels.
    Proposed Rule 518(c)(2)(iv) states that derived orders, as
described above, may be automatically generated on behalf of complex
orders so that they are represented at the best bid or offer on the
Exchange for the individual legs, and shall be executed as provided in
proposed Rule 518(a)(9), described above.
    Proposed Rule 518(c)(2)(v) sets forth the process for evaluation of
complex orders and quotes, and the Strategy Book, on a regular basis
and for various conditions and events that result in the System's
particular handling and execution of complex orders and quotes in
response to such regular evaluation, conditions and events. The System
will evaluate complex orders and quotes initially once all components
of the complex strategy are open as set forth in proposed Rule
518(c)(2)(i) as described above, upon receipt as set forth in proposed
Rule 518(c)(5)(i) as described below, and continually as set forth in
proposed Rule 518(c)(5)(ii) as described below.\46\
---------------------------------------------------------------------------

    \46\ Other exchanges' systems conduct evaluations as well. For
example, PHLX conducts an opening ``COOP Evaluation'' to determine,
for a Complex Order Strategy, the price at which the maximum number
of contracts can trade, taking into account Complex Orders marked
all-or-none (which will be executed if possible) unless the maximum
number of contracts can only trade without including all-or-none
orders. See, e.g., PHLX Rule 1098(d)(ii)(C).
---------------------------------------------------------------------------

    The purpose of the evaluation process for complex orders and quotes
is to determine (A) their eligibility to initiate, or to participate
in, a Complex Auction as described in proposed Rule 518(d)(1) below;
(B) their eligibility to participate in the managed interest process as
described in proposed Rule 518(c)(4) below; (C) whether a derived order
should be generated or cancelled; (D) 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 (as
described in proposed Rule 518(c)(2)(iii) above); (E) whether the
complex order or quote should be cancelled; and (F) whether the complex
order or quote or any remaining portion thereof should be placed or
remain on the Strategy Book.
    The Exchange notes that, while the rules of other exchanges do not
include descriptions of the evaluation process with the same level of
detail and specificity as the rules concerning the evaluation process
in proposed Rule 518, such a process occurs on trading systems on other
exchanges. For example, the CBOE system evaluates its book in a similar
manner to the proposed evaluation of the Strategy Book when determining
how to execute complex orders.\47\ PHLX evaluates the opening price and
whether or not a trade can take place.\48\ ISE evaluates price limits
for complex orders and quotes both on ISE and on away exchanges,
outside of which they will either not be executed or will be rejected
outright before entering the ISE system.\49\ The evaluation process is
thus not a novel or unique concept; the Exchange is simply codifying it
so that Members will know precisely how their complex orders are
evaluated and handled by the System. The Exchange believes that this
transparency provides Members with the necessary details concerning the
manner in which the Strategy Book and their complex orders are
evaluated.
---------------------------------------------------------------------------

    \47\ A similar evaluation takes place in that a complex order in
the CBOE Complex Order Book will automatically execute against
individual orders or quotes residing in the EBook (simple orders)
provided the complex order can be executed in full (or in a
permissible ratio) by the orders and quotes in EBook; complex orders
in the COB that are marketable against each other will automatically
execute. See CBOE Rules 6.53[sic](c)(ii)(1) and (2).
    \48\ Upon expiration of the Complex Order Opening Process Timer,
the PHLX system will conduct a COOP Evaluation to determine, for a
Complex Order Strategy, the price at which the maximum number of
contracts can trade, taking into account Complex Orders marked all-
or-none (which will be executed if possible) unless the maximum
number of contracts can only trade without including all-or-none
orders. The PHLX will open the Complex Order Strategy at that price,
executing marketable trading interest, in the following order:
first, to non-broker-dealer customers in time priority; next to Phlx
electronic market makers on a pro rata basis; and then to all other
participants on a pro rata basis. The imbalance of Complex Orders
that are unexecutable at that price are placed on the CBOOK. If at
the end of the COOP Timer the System determines that no market or
marketable limit Complex Orders or COOP Sweeps, Complex Orders or
COOP Sweeps that are equal to or improve the cPBBO, and/or Complex
Orders or COOP Sweeps that cross within the cPBBO exist in the
System, all Complex Orders received during the COOP Timer will be
placed on the CBOOK. If at the end of the COOP Timer the System
determines that there are market or marketable limit Complex Orders
or COOP Sweeps, Complex Orders or COOP Sweeps that are equal to or
improve the cPBBO, and/or Complex Orders or COOP Sweeps that cross
within the cPBBO in the System, the System will do the following: if
such interest crosses and does not match in size, the execution
price is based on the highest (lowest) executable offer (bid) price
when the larger sized interest is offering (bidding), provided,
however, that if there is more than one price at which the interest
may execute, the execution price when the larger sized interest is
offering (bidding) is the midpoint of the highest (lowest)
executable offer (bid) price and the next available executable offer
(bid) price rounded, if necessary, down (up) to the closest minimum
trading increment. If the crossing interest is equal in size, the
execution price is the midpoint of lowest executable bid price and
the highest executable offer price, rounded, if necessary, up to the
closest minimum trading increment. Executable bids/offers include
any interest which could be executed at the net price without
trading through residual interest or the cPBBO or without trading at
the cPBBO where there is non-broker-dealer customer interest at the
best bid or offer for any leg, consistent with Rule 1098(c)(iii).
See PHLX Rule 1098(d)(ii)(C).
    \49\ ISE evaluates, among other things, prices at which complex
orders are eligible or ineligible for execution. The legs of a
complex order may be executed at prices that are inferior to the
prices available on other exchanges trading the same options series.
Notwithstanding, the ISE System will not permit any leg of a complex
order to trade through the NBBO for the series by a configurable
amount calculated as the lesser of (i) an absolute amount not to
exceed $0.10, and (ii) a percentage of the NBBO not to exceed 500%,
as determined by the Exchange on a class or series basis. A Member
can also include an instruction on a complex order entered on the
complex order book that each leg of the complex order is to be
executed only at a price that is equal to or better than the
national best bid or offer for the options series or any stock
component, as applicable. The ISE System evaluates complex orders
for rejection. ISE will reject any complex order strategy where all
legs are to buy if it is entered at a price that is less than the
minimum price, which is calculated as the sum of the ratio on each
leg of the complex order multiplied by $0.01 per leg (e.g., an order
to buy 2 calls and buy 1 put would have a minimum price of $0.03).
See ISE Rule 722, Supplementary Material .07.
---------------------------------------------------------------------------

    The continual and event-triggered evaluation process ensures that
the System is monitoring and assessing the Strategy Book for incoming
complex orders and quotes, and changes in market conditions or events
that cause complex orders to become due for execution or Complex
Auction-eligible, and conditions or events that result in the
cancellation of complex orders on the Strategy Book. This ensures the
integrity of the Exchange's System in handling complex orders and
results in a fair and orderly market for complex orders on MIAX.
Complex Order Priority
    Proposed Rule 518(c)(3) describes how the system will establish
priority for complex orders. The proposed complex order priority
structure is based generally on the same approach

and structure currently effective on MIAX respecting priority of orders
and quotes in the simple market as established in Exchange Rule
514.\50\ 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.\51\ Under the
circumstances described above, if a stock-option order has one option
leg, such option leg has priority over bids and offers established in
the marketplace by Professional Interest (as defined in Rule 100) \52\
and Market Makers with priority quotes \53\ that are no better than the
price of the options leg, but not over such bids and offers established
by Priority Customer Orders. If a stock-option order has more than one
option leg, such option legs may be executed in accordance with
proposed Rule 518(c)(3)(i).
---------------------------------------------------------------------------

    \50\ Exchange Rule 514, Priority of Quotes and Orders, describes
among other things the various execution priority, trade allocation
and participation guarantees generally applicable to the Simple
Order Book. Some sections of Exchange Rule 514 are cross-referenced
herein and will apply as noted to complex orders, as the context
requires.
    \51\ See Proposed Rule 518(c)(3). See also, ISE Rule 722(b)(2),
which states that in this situation at least one leg must trade at a
price that is better by at least one minimum trading increment, and
PHLX Rule 1098(c)(iii), requiring in this situation that at least
one option leg is executed at a better price than the established
bid or offer for that option contract and no option leg is executed
at a price outside of the established bid or offer for that option
contract.
    \52\ The term ``Professional Interest'' means (i) an order that
is for the account of a person or entity that is not a Priority
Customer or (ii) an order or non-priority quote for the account of a
Market Maker. See Exchange Rule 100.
    \53\ See Exchange Rule 517(b)(1).
---------------------------------------------------------------------------

    Regarding execution and allocation of complex orders, proposed Rule
518(c)(3)(ii) establishes that complex orders will be automatically
executed against bids and offers on the Strategy Book in price
priority. Bids and offers at the same price on the Strategy Book will
be executed pursuant to the following priority rules: (A) Priority
Customer complex orders resting on the Strategy Book will have first
priority to trade against a complex order. Priority Customer complex
orders resting on the Strategy Book will be allocated in price time
priority; (B) Market Maker Priority Interest for Complex will
collectively have second priority. Market Maker Priority Interest for
Complex will be allocated on a pro-rata basis as defined in Rule
514(c)(2); (C) Market Maker non-Priority Interest for Complex will
collectively have third priority. Market Maker non-Priority Interest
for Complex will be allocated on a pro-rata basis as defined in Rule
514(c)(2); (D) Non-Market Maker Professional Interest orders resting on
the Strategy Book will collectively have fourth priority. Non-Market
Maker Professional Interest orders will be allocated on a pro-rata
basis as defined in Rule 514(c)(2).\54\
---------------------------------------------------------------------------

    \54\ In contrast, PHLX rules state that an incoming marketable
Complex Order that does not trigger a COLA Timer will execute first
against quotes or orders on the limit order book for the individual
components of the order (whereas, under the instant proposal,
outside of a Complex Auction the Exchange will first execute bids
and offers at the same price on the Strategy Book), second, against
non-broker-dealer customer Complex Orders and non-market maker
broker-dealer Complex Orders resting in the CBOOK in price priority
and, at the same price, against (i) non-broker-dealer customer
Complex Orders in the order in which they were received; (ii) SQTs,
RSQTs, non-SQT ROTs, specialists and non-PHLX market makers on
another exchange on a size pro rata basis (whereas, under the
instant proposal, the Exchange does not bundle all Market Makers in
the same priority tier, and instead distinguishes between Market
Maker Priority Interest, which is executed and allocated on a pro
rata basis before Market Maker non-Priority Interest, which is
thereafter executed and allocated on a pro rata basis); and (iii)
non-market-maker broker-dealer Complex Orders on a size pro rata
basis. See PHLX Rule 1098(f)(iii).
---------------------------------------------------------------------------

Managed Interest Process for Complex Orders
    In order to ensure that complex orders (which are non-routable)
receive the best executions on the Exchange, proposed Rule 518(c)(4),
sets forth the price(s) at which complex orders will be placed on the
Strategy Book. The managed interest process is initiated when a complex
order that is eligible to be placed on the Strategy Book cannot be
executed against either the Strategy Book or the Simple Order Book
(with the individual legs) at the complex order's net price, and is
intended to ensure that a complex order to be managed does not result
in a locked or crossed market on the Exchange. Once initiated, the
managed interest process for complex orders will be based upon the
icMBBO.\55\
---------------------------------------------------------------------------

    \55\ A complex order for which the ixABBO protection is engaged
will be managed to the ixABBO as described below and in proposed
Rule 518, Interpretations and Policies .05(d).
---------------------------------------------------------------------------

    Under the managed interest process, a complex order that is resting
on the Strategy Book and is either a complex market order as described
in proposed Rule 518(c)(6) and discussed below, or has a limit price
that locks or crosses the current opposite side icMBBO when the icMBBO
is the best price, may be subject to the managed interest process for
complex orders as discussed herein. Complex Standard quotes are not
eligible for inclusion in the managed interest process. An unexecuted
complex Standard quote with a limit price that would otherwise be
managed to the icMBBO will be cancelled. If the order is not a Complex
Auction-eligible order as defined in proposed Rule 518(d)(1) and
described below, the System will first determine if the inbound complex
order can be matched against other complex orders and/or quotes resting
on the Strategy Book at a price that is at or inside the icMBBO
(provided there are no Priority Customer orders on the Simple Order
Book at that price). Second, the System will determine if the inbound
complex order can be executed by Legging against individual orders and
quotes resting on the Simple Order Book at the icMBBO. A complex order
subject to the managed interest process will never be executed at a
price that is through the individual component prices on the Simple
Order Book. Furthermore, the net price of a complex order subject to
the managed interest process that is executed against another complex
order on the Strategy Book will never be inferior to the price that
would be available if the complex order legged into the Simple Order
Book. When the opposite side icMBBO includes a Priority Customer Order,
the System will book and display such booked complex order on the
Strategy Book at a price (the ``book and display price'') that is $0.01
away from the current opposite side icMBBO.
Example--Complex order managed interest when Priority Customer Interest
at the icMBBO is Present

    MIAX--LMM quote Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 Call 2.00-2.30 (10x10)
    MIAX Priority Customer order Mar 55 Call 2.10 bid (1)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and sell 2 Mar 55 Calls for a 2.30 debit, 100
times. 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.

icMBBO is 1.40 debit bid at 2.30 credit offer

Since the Mar 55 call is 2.10 bid for only one contract (the MIAX
Priority Customer order), the complex order cannot be legged against
the Simple Order Book at a 2.30 debit as a 2.30 debit would require
selling two March 55 Calls at 2.10 while buying one March 50 Call at
6.50. Since there is Priority

Customer interest on one leg of the complex order on the Simple Order
Book, the inbound complex order cannot trade at this price by matching
with other complex liquidity. Thus, the order is managed for display
purposes at a price one penny inside of the opposite side icMBBO, 2.29
and is available to trade with other complex liquidity at 2.29. Since
there is no managed interest on the Simple Order Book, the icMBBO is
equal to the dcMBBO in this case and remains 1.40 debit bid at 2.30
credit offer. The combination of the Simple Order Book and the Strategy
Book will be a one penny wide market of 2.29 debit bid at 2.30 credit
offer. If additional interest were to arrive on the Mar 55 Call 2.10
bid, the inbound complex order would be re-evaluated and would in this
example become eligible to leg with the Priority Customer interest on
the Simple Order Book at the 2.30 credit offer.
    When the opposite side icMBBO does not include a Priority Customer
Order and is not available for execution in the ratio of such complex
order, or cannot be executed through Legging with the Simple Order
Book, the System will place such complex order on the Strategy Book and
display such booked complex order at a book and display price that will
lock the current opposite side icMBBO because it is a price at which
another complex order or quote can trade.
Example--Complex Market order managed interest when Priority Customer
Interest at the icMBBO is Present

    MIAX--LMM quote Mar 50 Call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 Call 2.00-2.30 (10x10)
    MIAX Priority Customer order Mar 55 Call 2.10 bid (1)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and sell 2 Mar 55 Calls for a market debit, 100
times. 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 IIP.

The icMBBO is 1.40 debit bid at 2.30 credit offer
The dcMBBO is 1.40 debit bid at 2.30 credit offer

Since the Mar 55 call is 2.10 bid for only one contract (the MIAX
Priority Customer order), the complex order cannot be legged against
the Simple Order Book at a 2.30 debit (the complex market order's
assigned dcMBBO price), because a 2.30 debit would require selling two
March 55 Calls at 2.10 while buying one March 50 Call at 6.50. Since
there is Priority Customer interest on one leg of the complex order on
the Simple Order Book, the inbound complex order cannot trade at this
price by matching with other complex liquidity. Thus, the complex order
is managed for display purposes at a price one penny inside of the
opposite side icMBBO, 2.29 and is available to trade with other complex
liquidity at 2.29. Since there is no managed interest on the Simple
Order Book, the icMBBO is equal to the dcMBBO in this case and remains
1.40 debit bid at 2.30 credit offer. The combination of the Simple
Order Book and the Strategy Book will be a one penny wide market of
2.29 debit bid at 2.30 credit offer.
    If additional interest were to arrive on the Mar 55 Call 2.10 bid,
the resting complex order would be re-evaluated and would in this
example become eligible to leg with the icMBBO or dcMBBO since they are
equal, which includes Priority Customer interest on the Simple Order
Book at the 2.30 credit offer.
Example--Complex order managed interest when the ratio to allow Legging
does not exist, and there is no Priority Customer Interest

    MIAX--LMM quote Mar 50 call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 call 2.00-2.30 (10x10)
    MIAX Professional order Mar 55 Call 2.10 bid (1)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 call and sell 2 Mar 55 calls for a 2.30 debit, 100
times.
The icMBBO is 1.40 debit bid at 2.30 credit offer

The cAOA instruction is not present on this complex order, so the
complex order will not initiate an auction upon arrival regardless of
its relationship to the URIP.
    Since the Mar 55 call is 2.10 bid for only one contract (the MIAX
Professional order), the complex order cannot be legged against the
Simple Order Book at a 2.30 debit, as a 2.30 debit would require
selling two March 55 Calls at 2.10 while buying one March 50 Call at
6.50. Although the inbound complex order cannot trade at this time
because there is insufficient interest to buy the March 55 Call, there
is no Priority Customer interest on either side of the 2.30 credit
offer and therefor the order will be able to trade at that price when
sufficient interest exists. Thus, the order is managed for display
purposes at a price locking the opposite side icMBBO 2.30 and is
available to trade against other complex interest at 2.30. Since there
is no managed interest on the Simple Order Book, the icMBBO is equal to
the dcMBBO and remains 1.40 debit bid at 2.30 credit offer. The
combination of the Simple Order Book and the Strategy Book will be a
locked market of 2.30 debit bid at 2.30 credit offer.
Example--Complex Market order managed interest when the ratio to allow
Legging does not exist, and there is no Priority Customer Interest

    MIAX--LMM quote Mar 50 call 6.00-6.50 (10x10)
    MIAX--LMM quote Mar 55 call 2.00-2.30 (10x10)
    MIAX Professional order Mar 55 Call 2.10 bid (1)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 call and sell 2 Mar 55 calls for a market debit, 100
times.

The icMBBO is 1.40 debit bid at 2.30 credit offer
The dcMBBO is 1.40 debit bid at 2.30 credit offer

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 URIP.
Since the Mar 55 call is 2.10 bid for only one contract (the MIAX
Professional order), the complex order cannot be legged against the
Simple Order Book at a 2.30 debit (the complex market order's assigned
dcMBBO price), as a 2.30 debit would require selling two March 55 Calls
at 2.10 while buying one March 50 Call at 6.50. Although the inbound
complex order cannot trade at this time because there is insufficient
interest to buy the March 55 Call, there is no Priority Customer
interest on either side of the 2.30 credit offer and therefor the order
will be able to trade at that price when sufficient interest exists.
Thus, the complex order is managed for display purposes at a price
locking the opposite side icMBBO which is equal to the dcMBBO at 2.30
and is available to trade against other complex interest at 2.30. Since
there is no managed interest on the Simple Order Book, the icMBBO is
equal to the dcMBBO and remains 1.40 debit bid at 2.30 credit offer.
The combination of the Simple Order Book and the Strategy Book will be
a locked market of 2.30 debit bid at 2.30 credit offer.
    Should the icMBBO change, the complex order's book and display
price will continuously re-price to the new icMBBO until (A) the
complex order has been executed in its entirety; (B) if not executed,
the complex order has been placed on the Strategy Book at prices up to
and including its limit price or, in the case of a complex market
order, at the

new icMBBO; (C) the complex order has been partially executed and
remaining unexecuted contracts have been placed on the Strategy Book at
prices up to and including their limit price or, in the case of a
complex market order, at the new icMBBO; or (D) the complex order or
any remaining portion of the complex order is cancelled. If the
Exchange receives a new complex order or quote for the complex strategy
on the opposite side of the market from the managed complex order that
can be executed, the System will immediately execute the remaining
contracts from the managed complex order to the extent possible at the
complex order's current book and display price, provided that the
execution price is not outside of the current icMBBO. If unexecuted
contracts remain from the complex order on the Strategy Book, the
complex order's size will be revised and disseminated to reflect the
complex order's remaining contracts at its current managed book and
display price.
    The purpose of using the calculated icMBBO is to enable the System
to determine a valid trading price range for complex strategies and to
protect orders resting on the Simple Order Book by ensuring that they
are executed when entitled. Additionally, the managed interest process
is designed to ensure that the System will not execute any component of
a complex order at a price that would trade through an order on the
Simple Order Book or that would disrupt the established priority of
Priority Customer interest resting on the Simple Order Book.\56\ The
Exchange believes that this is reasonable because it prevents the
components of a complex order from trading at a price that is inferior
to a price at which the individual components may be traded on MIAX and
it maintains the priority for Priority Customers resting on the Simple
Order Book.
---------------------------------------------------------------------------

    \56\ For a complete description of priority in the Simple Order
Book, see Exchange Rule 514.
---------------------------------------------------------------------------

Evaluation Process
    Proposed Rule 518(c)(5) describes how and when the System
determines to execute or otherwise handle complex orders in the System.
As stated above, the System will evaluate complex orders and quotes and
the Strategy Book on a regular basis and to respond to the existence of
various conditions and/or events that trigger an evaluation. Evaluation
results in the various manners of handling and executing complex orders
and quotes as described herein. The System will evaluate complex orders
and quotes initially once all components of the complex strategy are
open as set forth in proposed Rule 518(c)(2)(i) as described above,
upon receipt as set forth in proposed Rule 518(c)(5)(i) as described
below, and continually as set forth in proposed Rule(c)(5)(ii) as
described below.
    Proposed Rule 518(c)(5)(i) describes the evaluation process that
occurs upon receipt of complex orders and quotes once a complex
strategy is open for trading. After a complex strategy is open for
trading, all new complex orders and quotes that are received for the
complex strategy are evaluated upon arrival. The System will determine
if such complex orders are Complex Auction-eligible orders, using the
process and criteria regarding the Upon Receipt Improvement Percentage
(``URIP'') as described below.\57\ The System will also evaluate (A)
whether such complex orders or quotes are eligible for full or partial
execution against a complex order or quote resting on the Strategy
Book; (B) whether such complex orders or quotes are eligible for full
or partial execution through Legging with the Simple Order Book (as
described in proposed Rule 518(c)(2)(iii) and discussed above); (C)
whether all or any remaining portion of a complex order or quote should
be placed on the Strategy Book; (D) whether a derived order should be
generated or cancelled; (E) the eligibility of such complex orders and
quotes (as applicable) to participate in the managed interest process
as described above; \58\ and (F) whether such complex orders should be
cancelled.
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    \57\ See proposed Rule 518, Interpretations and Policies .03(b).
    \58\ See proposed Rule 518(c)(4).
---------------------------------------------------------------------------

    Proposed Rule 518(c)(5)(ii) describes the System's ongoing regular
evaluation of the Strategy Book. The System will continue to evaluate
complex orders and quotes on the Strategy Book to determine if such
complex orders are Complex Auction-eligible orders, using the process
and criteria described in Proposed Rule 518, Interpretations and
Policies .03(c) regarding the Re-evaluation Improvement Percentage
(``RIP'') described below. The System will also continue, on a regular
basis, to evaluate the factors listed in (A)-(F) above.
    The System will also continue to evaluate whether there is a SMAT
Event as defined above, a wide market condition (as described in
Proposed Rule 518, Interpretations and Policies .05(e)(1) and discussed
below), a halt (as described in proposed Rule 518, Interpretations and
Policies .05(e)(3) and discussed below) affecting any component of a
complex strategy. Complex orders and quotes will be handled during such
events in the manner set forth in proposed Rule 518, Interpretations
and Policies .05(e), as discussed below.
    Proposed Rule 518(c)(5)(iii) states that if the System determines
that a complex order is a Complex Auction-eligible order (described
below), such complex order will be submitted into the Complex Auction
process as described in proposed Rule 518(d) and discussed below.
    Proposed Rule 518(c)(5)(iv) describes the handling of orders that
are determined not to be Complex Auction-eligible. If the System
determines that a complex order is not a Complex Auction-eligible
order, such complex order may be, as applicable, immediately matched
and executed against a complex order or quote resting on the Strategy
Book; executed against the individual components of the complex order
on the Simple Order Book through Legging (as described in proposed Rule
518(c)(2)(iii) above; placed on the Strategy Book and managed pursuant
to the managed interest process as described in proposed Rule 518(c)(4)
and discussed above; or cancelled by the System if the time-in-force
(i.e., IOC) of the complex order does not allow it to rest on the
Strategy Book.
    The Exchange is proposing to establish complex orders that may be
submitted as market orders. Proposed Rule 518(c)(6) states that complex
orders may be submitted as market orders and may be designated as cAOA.
The proposed rule distinguishes between complex market orders
designated as cAOA and those that are not so designated.
    Proposed Rule 518(c)(6)(i) states that complex market orders
designated as cAOA may initiate a Complex Auction upon arrival or join
a Complex Auction in progress. The Complex Auction process is set forth
in proposed Rule 518(d) and discussed below. Proposed Rule
518(c)(6)(ii), Complex Market Orders not Designated as cAOA, states
that complex market orders not designated as cAOA will trade
immediately with any contra-side complex orders or quotes, or against
the individual legs, up to and including the dcMBBO, and may be subject
to the managed interest process, and the Evaluation Process, each as
described above.
Complex Auction Process
    Proposed Rule 518(d), Complex Auction Process, describes the
process for determining if a complex order is

eligible to begin a Complex Auction, and to participate in a Complex
Auction that is in progress. Certain option classes, as determined by
the Exchange and communicated to Members via Regulatory Circular, will
be eligible to participate in a Complex Auction (an ``eligible
class''). Upon evaluation as described above, the Exchange may
determine to automatically submit a Complex Auction-eligible order
(defined below) into a Complex Auction (as described below). Upon entry
into the System or upon evaluation of a complex order resting at the
top of the Strategy Book, Complex Auction-eligible orders may be
subject to an automated request for responses (``RFR''), as described
below.
    Proposed Rule 518(d)(1) defines and describes the handling of a
Complex Auction-eligible order. A ``Complex Auction-eligible order''
means a complex order that, as determined by the Exchange, is eligible
to initiate or join a Complex Auction based upon the order's
marketability (i.e., if the price of such order is equal to or within a
specific range of the current dcMBBO) as established by the Exchange,
number of components, and complex order origin types (i.e., non-broker-
dealer customers, broker-dealers that are not market makers on an
options exchange, and/or market makers on an options exchange as
established by the Exchange and communicated to Members via Regulatory
Circular).\59\ Exchange Market Makers have an obligation to provide
liquidity on the Exchange, and the Exchange believes that it is not
appropriate for Exchange Market Makers to submit orders intended to
initiate Complex Auctions, and instead that they should provide
liquidity via RFR Responses (described below) during the Response Time
Interval (described below). Other exchanges also have limited auction
eligibility for complex orders based on order origin type.\60\
---------------------------------------------------------------------------

    \59\ See also NYSE MKT Rule 980NY(e)(1), which lists Customers,
broker-dealers that are not Market-Makers or specialists on an
options exchange, and/or Market-Makers or specialists on an options
exchange.
    \60\ See id. See also, e.g., CBOE Regulatory Circular RG14-143
(October 14, 2014), limiting Complex Order Auction (``COA'')
eligibility to non-broker-dealer public customer orders and
professional customer orders.
---------------------------------------------------------------------------

    In order to initiate a Complex Auction upon receipt, a Complex
Auction-eligible order must be designated as cAOA and must meet the
criteria described in proposed Rule 518, Interpretations and Policies
.03(b) regarding the URIP as described below. A complex order not
designated as cAOA (i.e., a complex order considered by default to be
``do not auction on arrival'' by the System) may (i) join a Complex
Auction in progress at the time of receipt; (ii) become a Complex
Auction-eligible order after resting on the Strategy Book and may then
automatically join a Complex Auction then in effect for the complex
strategy; or (iii) initiate a Complex Auction if it meets the criteria
described in proposed Rule 518, Interpretations and Policies .03(a)
regarding the IIP or .03(c) regarding the RIP.
    A complex order not designated as cAOA will still have execution
opportunities. A complex order not designated as cAOA is deemed to be
``do not auction on arrival'' by the System by default. Such a complex
order will still have the opportunity to execute upon entry into the
System without initiating a Complex Auction. For example, such an order
may execute automatically upon entry into the System by matching with
complex orders and/or quotes resting on the Strategy Book at a price
that is at or inside the icMBBO, or via Legging against the Simple
Order Book to the extent they are marketable. Additionally, such an
order on the opposite side of, and marketable against, a Complex
Auction-eligible order may trade against the Complex Auction-eligible
order if the System receives the order while a Complex Auction
ongoing.\61\
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    \61\ A MIAX complex order not designated as cAOA will not be
considered a Complex Auction-eligible order by default. The Exchange
believes that this gives market participants extra flexibility to
control the handling and execution of their complex orders by the
System by giving them the ability to determine affirmatively to have
their complex order initiate a Complex Auction by way of the cAOA
designation. In contrast, CBOE Rule 6.53C (d)(ii)(B) expressly
states that Trading Permit Holders may request on an order by order
basis that an incoming COA eligible order with two legs not COA (a
``do not COA'' request).
---------------------------------------------------------------------------

    Complex orders processed through a Complex Auction may be executed
without consideration to prices of the same complex interest that might
be available on other exchanges.
    Proposed Rule 518(d)(2) describes the circumstances under which a
Complex Auction is begun. Upon receipt of a Complex Auction-eligible
order or upon an evaluation by the System indicating that there is a
Complex Auction-eligible order resting on the Strategy Book, the
Exchange may begin the Complex Auction process by sending an RFR
message. The RFR message will be sent to all subscribers to the
Exchange's data feeds that deliver RFR messages. The RFR message will
identify the complex strategy, the price, quantity of matched complex
quotes and/or orders at that price, imbalance quantity, and side of the
market of the Complex Auction-eligible order. The inclusion of the
quantity of matched complex quotes and/or orders at the price included
in the RFR message is intended to inform participants considering
submitting an RFR Response of the number of contracts for which there
is matched interest, and the purpose of including the imbalance
quantity in the RFR message is to inform such participants of the
number of contracts that do not have matched interest. The Exchange
believes that this level of detail should provide such participants
with specific information about a Complex Auction in which they may
decide to participate. The sum of the matched interest quantity and the
imbalance quantity is equal to the size of the initiating Complex
Auction-eligible order that is being auctioned.\62\ The price included
in the RFR message will be the limit order price, unless that price is
through the opposite side dcMBBO or the Complex Auction is initiated by
a complex market order, in which case such price will be the dcMBBO.
---------------------------------------------------------------------------

    \62\ See also NYSE MKT Rule 980NY(e)(2), which differs slightly
because it includes size, but does not include an imbalance quantity
or matched quantity, but states similarly that RFR messages will
identify the component series and side of the market of the order
and any contingencies.
---------------------------------------------------------------------------

    The Exchange may determine to limit the frequency of Complex
Auctions for a complex strategy (i.e., establish a minimum time period
between Complex Auctions initiated for complex orders in that strategy
resting on the Strategy Book). The duration of such limitation will be
established on an Exchange-wide basis and communicated to Members via
Regulatory Circular.\63\ The Exchange will not change the duration of
the minimum time period on an intra-day basis during any trading
session. The purpose of this limitation is to safeguard the integrity
of the System and to ensure an orderly market on the Exchange. The
Exchange believes that it is possible that there could be multiple
Complex Auctions commencing and in progress at any particular time, and
that without such a limitation the Exchange could be inundated with
Complex Auctions and that an unusually large number of simultaneous
Complex Auctions could be disruptive to the orderly function of the
System. Despite this limitation respecting orders resting on the
Strategy Book, however, a new

complex order received by the System during such limitation that
ordinarily triggers a Complex Auction will still trigger a Complex
Auction upon receipt.
---------------------------------------------------------------------------

    \63\ The frequency of auctions for complex orders is also
limited on another exchange. See, e.g., CBOE Rule 6.53C,
Interpretations and Policies .04, which states that CBOE may also
determine on a class-by-class and strategy basis to limit the
frequency of COAs initiated for complex orders resting in COB.
---------------------------------------------------------------------------

    Proposed Rule 518(d)(3) defines the amount of time within which
participants may respond to an RFR message. The term ``Response Time
Interval'' means the period of time during which responses to the RFR
may be entered. The Exchange will determine the duration of the
Response Time Interval, which shall not exceed 500 milliseconds, and
will communicate it to Members via Regulatory Circular.\64\
---------------------------------------------------------------------------

    \64\ Unlike other exchanges, the Exchange is not proposing a
minimum Response Time Interval (see NYSEArca Rule 6.91, which
establishes a minimum Response Time Interval of 500 milliseconds and
a maximum of 1 second), and is limiting the Response Time Interval
to a maximum of 500 milliseconds, whereas other exchanges have a
maximum Response Time Interval of 100 milliseconds (see BOX Rule
7245(f)(1)) and others have a Response Time Interval of up to 3
seconds (see CBOE Rule 6.53C(d)(iii)(2)). The Exchange believes that
500 milliseconds is a reasonable amount of time within which
participants can respond to an RFR message.
---------------------------------------------------------------------------

    Proposed Rule 518(d)(4) states that Members may submit a response
to the RFR message (an ``RFR Response'') during the Response Time
Interval. RFR Responses may be submitted in $0.01 increments. RFR
Responses must be a cAOC order or a cAOC eQuote \65\ (discussed below),
and may be submitted on either side of the market. RFR Responses
represent non-firm interest that can be modified or withdrawn at any
time prior to the end of the Response Time Interval. At the end of the
Response Time Interval, RFR Responses are firm (i.e., guaranteed at the
RFR price and size). All RFR Responses and other complex orders and
quotes on the opposite side of the Complex Auction-eligible order are
also firm with respect to other incoming Complex Auction-eligible
orders that are received during the Response Time Interval. Any RFR
Responses not executed in full will expire at the end of the Complex
Auction.\66\
---------------------------------------------------------------------------

    \65\ 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. See
proposed Rule 518, Interpretations and Policies .02(c)(2)[sic]. cAOC
eQuotes are not displayed to any market participant, are not
included in the MBBO and therefore are not eligible for trading
outside of the event (in this case the Complex Auction). A cAOC
eQuote does not automatically cancel or replace the Market Maker's
previous Standard quote or eQuote. See Exchange Rule 517(a)(2)(ii).
The Exchange notes that any orders or quotes received by the System
during the Complex Auction that are not cAOC orders or cAOC eQuotes
will be treated as unrelated trading interest. In addition, the
Exchange notes that a cAOC order or a cAOC eQuote could trade at a
price inferior to the away market if it is a part of an exempt
transaction. See Exchange Rule 1402.
    \66\ This differs slightly from, but has the same effect as, the
language in CBOE Rule 6.53C(d)(vii), which states that any RFR
Responses not accepted in whole or in a permissible ratio will
expire at the end of the Response Time Interval.
---------------------------------------------------------------------------

    Proposed Rule 518(d)(5) describes how Complex Auction-eligible
orders are handled following the Response Time Interval.
    At the end of the Response Time Interval, Complex Auction-eligible
orders (and other complex orders and quotes) may be executed in whole
or in part. Complex Auction-eligible orders will be executed against
the best priced contra side interest, and any unexecuted portion of a
Complex Auction-eligible order remaining at the end of the Response
Time Interval will either be evaluated to determine if it may initiate
another Complex Auction, or placed on the Strategy Book and ranked
pursuant to proposed Rule 518(c)(3) as discussed above.
    The Complex Auction will terminate at the end of the Response Time
Interval without trading when any individual component of a complex
strategy in the Complex Auction process is subject to a wide market
condition as described in proposed Rule 518, Interpretations and
Policies .05(e)(1), or to a SMAT Event as described in proposed Rule
518(a)(16) and proposed Interpretations and Policies .05(e)(2), or
immediately without trading if any individual component or underlying
security of a complex strategy in the Complex Auction process is
subject to a halt as described in proposed Rule 518, Interpretations
and Policies .05(e)(3). Upon the conclusion of these condition(s) or
process(es), an affected complex order will be evaluated and may
initiate a new Complex Auction if such complex order is determined to
be a Complex Auction-eligible order.
Example--Complex Auction termination without trading due to a SMAT
Event (a PRIME Auction) followed by a new Evaluation upon resolution of
the PRIME Auction.

    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, 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 and joins the Complex Auction
 @ 400 milliseconds a PRIME Auction begins in either the Mar 50
Call or the Mar 55 Call

The Complex Auction process will continue until the Response Time
Interval ends. When the 500 millisecond Response Time Interval
ends,\67\ the Complex Auction ends without a trade, because one
component is in a PRIME Auction. All RFR Responses, cAOC orders and
eQuotes are cancelled. The unrelated complex order to sell @ 2.70
credit is placed on the Strategy Book. If at the conclusion of the SMAT
Event (PRIME Auction), the initiating Customer buy complex order to
purchase 1 Mar 50 call and sell 1 Mar 55 call for a 3.20 debit is
resting on the Complex book and available upon the next evaluation
following the PRIME Auction an evaluation and a new Complex Auction can
be initiated. Upon evaluation the initiating Customer complex order to
buy 1000 @ 3.20 is now crossing the BD2 complex order to sell 200 @
2.70. Because there is an imbalance the best price of the imbalance is
used to determine if the

imbalance price equals or improves the Re-evaluation Improvement
Percentage (RIP).
---------------------------------------------------------------------------

    \67\ The Exchange will determine the duration of the Response
Time Interval, which shall not exceed 500 milliseconds, and will
communicate it to Members via Regulatory Circular. See proposed Rule
518(d)(3). All examples in this proposal assume a 500 millisecond
Response Time Interval unless otherwise indicated.

MIAX--LMM Mar 50 Call 6.00-6.50 (10x10)
MIAX--LMM Mar 55 Call 3.00-3.30 (10x10)
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 best order price on the imbalance side exceeds the RIP
requirement (2.70 + 0.48 = 3.18) to initiate a new Complex Auction, an
RFR message is broadcast to all subscribers showing the price, quantity
of matched complex quotes and/or orders at that price, the imbalance
quantity, and side and a 500 millisecond Response Time Interval is
started.
    The System starts the auction at the best imbalance price, in this
case the Initiating Priority Customer price bidding 3.20 to buy 1000
strategies. In addition to the existing crossed interest of BD2 complex
order to sell 200 @ 2.70 credit, the following responses are received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.20 credit sell
of 400 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 a single price of 3.20 satisfies the
maximum quantity of 1000 and becomes the final auction price.

 Trade 1,000 at $3.20
 Customer buys 400 from BD1
 Customer buys 200 from BD2
 Customer buys 200 from MM1
 Customer buys 200 from MM3
Complex Auction Pricing
    Proposed Rule 518(d)(6) describes the manner in which the System
prices and executes complex orders and quotes at the conclusion of the
Response Time Interval.
    The proposed Rule initially states the broader pricing policy and
functionality of all trading of complex orders in the System (whether a
trade is executed in the Complex Auction process or in free trading).
Specifically, a complex strategy will not be executed at a net price
that would cause any component of the complex strategy to be executed:
(A) At a price of zero; or (B) ahead of a Priority Customer order on
the Simple Order Book without improving the MBBO on at least one
component of the complex strategy by at least $.01.
    At the conclusion of the Response Time Interval, using $0.01 inside
the current icMBBO as the boundary (the ``boundary''), the System will
calculate the price where the maximum quantity of contracts can trade
and also determine whether there is an imbalance. The purpose of using
a boundary of $.01 inside the icMBBO as the Complex Auction price in
this situation is to protect the Simple Order Book and to ensure that
executions following the Response Time Interval are not blocked by a
bid or offer on the Simple Order Book on the opposite side of the
market for a component of a Complex strategy that will not satisfy the
requisite ratio for the complex order.
Example--Complex Auction takes place $.01 inside of the icMBBO to avoid
a situation where nothing can trade and the incoming order cannot be
satisfied at the Complex Auction price.

    MIAX--LMM Mar 50 Call 0.99-1.05 (10x10)
    MIAX--LMM Mar 55 Call 0.80-0.95 (10x10)
    MIAX Priority Customer order to buy a Mar 50 Call for 1.00 (2)

The Exchange receives an initiating Priority Customer complex order to
sell 3 Mar 50 calls and buy 2 Mar 55 calls at a 1.10 credit, 100 times.
The cAOA instruction is present on this complex order, so the complex
order will initiate a Complex Auction upon arrival if it equals or
improves the URIP.

The icMBBO is 1.10 debit at 1.55 credit
The dcMBBO is 1.10 debit at 1.55 credit
The URIP Percentage is 60% of the bid/ask spread or 0.27
Since the initiating Priority Customer order price exceeds the URIP
requirement (1.55-0.27=1.28) to initiate a Complex Auction upon
arrival, an RFR is broadcast showing price, the quantity of matched
complex quotes and/or orders at that price, imbalance quantity, and
side and a 500 millisecond Response Time Interval is started.
The System starts the Complex Auction at the initiating Priority
Customer price offering to sell 100 strategies at 1.11. The following
responses are received:

 @ 50 milliseconds MM1 response, cAOC eQuote to buy 100 @ 1.10
debit arrives
 @ 150 milliseconds MM4 response, cAOC eQuote to buy 50 @ 1.11
debit arrives
 @ 500 milliseconds the Response Time Interval expires, the
Complex Auction ends and the trade is allocated against initiating
Priority Customer using the single best price at which the greatest
quantity can trade in the following manner:
1. 50 trade vs. MM4 @ 1.11
2. Nothing can trade at 1.10 due to the presence of Priority Customer
interest in the March 50 Call on the Simple Order Book at 1.00 in
insufficient quantity to meet the ratio required by the Priority
Customer order. Therefore, the 1.10 cAOC response by MM1 expires
untraded at the end of the Complex Auction and the balance of the
initiating Priority Customer complex order to sell is placed on the
Strategy Book at a managed and displayed price of 1.11

    The Exchange begins Complex Auctions at a price that is $.01 inside
of the icMBBO to protect the integrity of the Simple Order Book and to
eliminate the possibility of beginning a Complex Auction at a price at
which the order cannot execute.
No Imbalance at End of Response Time Interval
    If there is no imbalance, and 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 calculate the midpoint of the lowest and highest price
points that satisfy the maximum quantity criteria, such midpoint price
is used as the Complex Auction price. For orders with ixABBO Price
Protection, as described above, (``price protection''), the midpoint
pricing will use the price protection range selected by the Member at
the end of the Complex Auction. If the midpoint price is not in a $0.01
increment, the System will round toward the midpoint of the dcMBBO to
the nearest $0.01. If the midpoint of the highest and lowest prices is
also the midpoint of the dcMBBO and is not in a $0.01 increment, the
System will round the price up to the next $0.01 increment.
Example--Complex Auction Pricing when there is no imbalance and the
maximum quantity at a single price is 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 @ 3.20 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 250 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.15 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 a single price of 3.20 satisfies the
maximum quantity of 1000 and becomes the final auction price.

 Trade 1,000 at $3.20
 Customer buys 500 from BD1
 Customer buys 250 from MM1
 Customer buys 250 from MM3

Example--Complex Auction Pricing when there is no imbalance and the
maximum quantity at two or more prices is 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 @ 3.10 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 250 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.10 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 3.10 and 3.20. 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 3.15.

 Trade 1,000 at $3.15
 Customer buys 500 from BD1
 Customer buys 250 from MM1
 Customer buys 250 from MM3

Example--Complex Auction Pricing when there is no imbalance and the
maximum quantity at two or more prices is used as the Complex Auction
price. If the midpoint price is not in a $0.01 increment, the System
will round toward the midpoint of the dcMBBO to the nearest $0.01.

    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 3.19 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

Midpoint of dcMBBO is the difference between the bid and offer divided
by 2 added to the dcMBB or subtracted from the dcMBO:
 2.70 + ((350-2.70) *.5) = 3.10 or
 3.50-((3.50-2.70 *.5) = 3.10
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 3.19 to buy 1000 strategies. The following responses are
received:

 @ 50 milliseconds BD1 response, cAOC Order @ 3.10 credit sell
of 500 arrives
 @ 150 milliseconds MM1 response, cAOC eQuote @ 3.10 credit
sell of 250 arrives
 @ 200 milliseconds MM3 response, cAOC eQuote @ 3.10 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 3.10 and 3.19. 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 2.70 + ((3.19-3.10) *.5) = 3.145. Because the midpoint price is not
0.01 increment the trade price is rounded toward 3.10 the midpoint
price of the dcMBBO to the nearest 0.01.

 Trade 1,000 at $3.14
 Customer buys 500 from BD1
 Customer buys 250 from MM1
 Customer buys 250 from MM3
Example--Complex Auction Pricing when there is no imbalance and the
maximum quantity at two or more prices is used as the Complex Auction
price. If the midpoint of the highest and lowest prices is also the
midpoint of the dcMBBO and is not in a $0.01 increment, the System will
round the price up to the next $0.01 increment.

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

    MIAX--LMM Mar 55 Call 3.01-3.30 (10x10)

The Exchange receives an Initiating Customer buy complex order to
purchase 1 Mar 50 Call and Sell 1 Mar 55 Call for a 3.18 debit, 1000