12666 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 

22See Notice, supra note 3, at 1985. 

23See Notice, supra note 3, at 1985. 

24 15 U.S.C. 78s(b)(2). 25 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 replaces SR–EDGX–2015–08 

and supersedes such filing in its entirety. 4The term ‘‘System’’ is defined as ‘‘the electronic 

communications and trading facility designated by 

the Board through which securities orders of Users 

are consolidated for ranking, execution and, when 

applicable, routing away.’’ See Exchange Rule 

1.5(cc). 

5See Mary Jo White, Chair, Commission, Speech 

at the Sandler O’Neill & Partners, L.P. Global 

Exchange and Brokerage Conference, (June 5, 2014) 

(available at http://www.sec.gov/News/Speech/

Detail/Speech/1370542004312#.VD2HW610w6Y). 

6Securities Exchange Act Release No. 73468 

(October 29, 2014), 79 FR 65450 (November 4, 2014) 

(SR–EDGX–2014–18). 

general, to protect investors and the 

public interest. 

The proposed rule change provides a 

price protection mechanism for quotes 

entered by a Market Maker when an 

NBBO is available that are priced a 

specified dollar amount or percentage 

through the last sale or prevailing 

contra-side market, which the Exchange 

believes is evidence of error. The 

Commission believes that the proposed 

price protection mechanism is 

reasonably designed to promote just and 

equitable principles of trade by 

preventing potential price dislocation 

that could result from erroneous Market 

Maker quotes sweeping through 

multiple price points resulting in 

executions at prices that are through the 

last sale price or NBBO.22

The Exchange’s proposed use of 

benchmarks to check the reasonability 

of Market Maker bids for call and put 

options affords a second layer of price 

protection to Market Maker quotes. The 

Commission believes that the additional 

price reasonability check on Market 

Maker bids that are priced equal to or 

greater than the price of the underlying 

security for call options, and equal to or 

greater than the strike price for put 

options, is reasonably designed to 

operate in manner that would remove 

impediments to and perfect the 

mechanism of a free and open market 

and protect investors and the public 

interest. Further, the Commission notes 

the Exchange’s belief that the additional 

risk controls that result in the 

cancellation of a Market Maker’s resting 

same side quote and/or the temporary 

suspension a Market Maker’s quoting 

activity in the affected option class(es), 

as applicable, provide market 

participants with additional protection 

from anomalous executions.23

Accordingly, the Commission believes 

that the proposed price protection for 

Market Maker quotes is reasonably 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

IV. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,24 that the 

proposed rule change (SR–NYSEArca– 

2014–150), as modified by Amendment 

No. 1, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–05497 Filed 3–9–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74439; File No. SR–EDGX– 

2015–08] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing of a 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Amend Rules 

11.6, 11.8, 11.9, 11.10 and 11.11 of 

EDGX Exchange, Inc. 

March 4, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

20, 2015, EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which items have been prepared 

by the self-regulatory organization. On 

February 27, 2015, the Exchange filed 

Amendment No. 1 to the proposal.3 The 

Commission is publishing this notice, as 

modified by Amendment No. 1, to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange filed a proposal to 

amend Rules 11.6, 11.8, 11.9, 11.10 and 

11.11 to clarify and to include 

additional specificity regarding the 

current functionality of the Exchange’s 

System,4 including the operation of its 

order types and order instructions, as 

further described below. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On June 5, 2014, Chair Mary Jo White 

asked all national securities exchanges 

to conduct a comprehensive review of 

each order type offered to members and 

how it operates.5 The Exchange notes 

that a comprehensive rule filing 

clarifying and updating Exchange rules 

was recently approved.6 However, based 

on the request from Chair White, the 

Exchange did indeed conduct further 

review of each order types and its 

operation. The proposals set forth below 

are based on this comprehensive review 

and are intended to clarify and to 

include additional specificity regarding 

the current functionality of the 

Exchange’s System, including the 

operation of its order types and order 

instructions. The proposals set forth 

below are intended to supplement the 

recently approved filing based on 

further review conducted by the 

Exchange and are intended to clarify 

and enhance the understandability of 

the Exchange’s rules related to the 

ranking and execution of orders. The 

proposal is also intended to add 

additional detail with respect to the 

handling of orders with a Discretionary 

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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12667 

7See Exchange Rule 11.6(d). 

8See Exchange Rule 11.6(e)(2). 

9The term ‘‘User’’ is defined as ‘‘any Member or 

Sponsored Participant who is authorized to obtain 

access to the System pursuant to Rule 11.3.’’ See 

Exchange Rule 1.5(ee). 

10See Exchange Rule 11.6(e)(1). 

11The term ‘‘EDGX Book’’ is defined as ‘‘the 

System’s electronic file of orders.’’ See Exchange 

Rule 1.5(d). 

12See Exchange Rule 11.6(n)(4). 

13See Exchange Rule 11.6(i). 

14The Exchange notes that the reference to orders 

with a Non-Displayed instruction is intended to 

apply to all orders that are not displayed on the 

Exchange, such as MidPoint Match Orders as 

defined in Rule 11.8(d). The Exchange notes, 

however, that because neither MidPoint Match 

Orders nor orders with a Discretionary Range 

instruction (as described below) can be entered 

with a Post Only instruction, that the Rule is not 

currently applicable to any orders other than Limit 

Orders with a Non-Displayed instruction. 

15See supra note 6. 

16See Exchange Rule 11.6(l)(1)(B). 

17See Exchange Rule 11.6(f). 

18See Exchange Rule 11.8(b). 

Range 7 instruction and orders with a 

Non-Displayed 8 instruction. The 

Exchange is not proposing any 

substantive modifications to the System. 

Orders With a Discretionary Range and 

Non-Displayed Orders 

Pursuant to current Rule 11.6(d), the 

Exchange defines a Discretionary Range 

as an instruction the User 9 may attach 

to an order to buy (sell) a stated amount 

of a security at a specified, displayed 

price with discretion to execute up 

(down) to a specified, non-displayed 

price. For purposes of this proposal, the 

Exchange will use the term 

‘‘Discretionary Range’’ to describe the 

amount between the displayed price to 

and including the highest price at which 

a buyer is willing to buy or lowest price 

at which a seller is willing to sell. The 

Exchange proposes to make clear that 

although an order with a Discretionary 

Range instruction may be accompanied 

by a Displayed 10 instruction, an order 

with a Discretionary Range instruction 

may also be accompanied by a NonDisplayed instruction, and if so, will 

have a non-displayed ranked price as 

well as a discretionary price. The 

Exchange further proposes to 

specifically state that resting orders with 

a Discretionary Range instruction will 

be executed at a price that uses the 

minimum amount of discretion 

necessary to execute the order against 

an incoming order. In addition, the 

Exchange proposes to make clear certain 

circumstances where the Discretionary 

Range of an order is temporarily 

reduced due to contra-side interest 

resting on the EDGX Book.11

The Exchange also proposes to specify 

certain situations where the 

Discretionary Range of an order is 

temporarily reduced based on contraside interest resting on the Exchange. 

The Exchange notes that it is possible 

for an order with a Discretionary Range 

instruction have its Discretionary Range 

temporarily reduced based on contraside interest resting on the Exchange 

because an incoming order with a Post 

Only instruction 12 will be posted to the 

EDGX Book rather than executing 

against the Discretionary Range of a 

resting order. 

With respect to displayed contra-side 

liquidity, the Exchange proposes to 

make clear that if an order posted to the 

EDGX Book has a Discretionary Range 

and there is a contra-side order that is 

displayed by the System on the EDGX 

Book within such Discretionary Range, 

the order with a Discretionary Range 

will not be permitted to execute at the 

price of or at a price more aggressive 

than such contra-side displayed order 

unless and until there is no contra-side 

displayed order on the EDGX Book 

within the Discretionary Range. In such 

case, the order with a Discretionary 

Range will have discretion to one 

Minimum Price Variation 13 below 

(above) the contra-side offer (bid) that is 

displayed by the System on the EDGX 

Book. 

With respect to non-displayed contraside liquidity, the Exchange proposes to 

make clear that if an order posted to the 

EDGX Book has a Discretionary Range 

and there is a contra-side order with a 

Non-Displayed instruction,14 the order 

with a Discretionary Range will not be 

permitted to execute at a price more 

aggressive than the ranked price of such 

contra-side order unless and until there 

is no contra-side order on the EDGX 

Book within the Discretionary Range. In 

such case, the order with a 

Discretionary Range will have discretion 

to the ranked price of the contra-side 

offer (bid) with a Non-Displayed 

instruction that is maintained by the 

System on the EDGX Book. 

Similarly, the Exchange proposes to 

amend Rule 11.6(l)(3), which addresses 

re-pricing of orders with a NonDisplayed instruction. As set forth in 

Rule 11.6(l)(3), an order with a NonDisplayed instruction that is priced 

better than the midpoint of the NBBO 

will be ranked at the midpoint of the 

NBBO with discretion to execute to its 

limit price. The Exchange proposes to 

add language stating that if a contra-side 

order is resting on the EDGX Book at the 

limit price within the Discretionary 

Range, the order will be ranked at the 

mid-point of the NBBO but its 

discretion to execute to its limit price 

will be temporarily reduced consistent 

with the Discretionary Range definition 

described above. 

The Exchange notes that the language 

proposed with respect to the temporary 

reduction of the Discretionary Range of 

an order is consistent with the 

Exchange’s recently amended rules.15

Specifically, the Exchange suspends the 

discretion of an order subject to the 

Hide Not Slide 16 instruction for so long 

as a contra-side order that equals the 

Locking Price 17 is displayed by the 

System on the EDGX Book. The 

Exchange suspends this discretion to 

avoid an apparent priority issue. In 

particular, in such a situation the 

Exchange believes a User representing 

an order that is displayed on the 

Exchange might believe that an 

incoming order was received by the 

Exchange and then bypassed such 

displayed order, removing some other 

non-displayed liquidity on the same 

side of the market as such displayed 

order. For the same reason, the 

Exchange believes it is appropriate to 

prevent an order with a Discretionary 

Range instruction to execute at the same 

price or at a price more aggressive than 

a contra-side order that is displayed on 

the EDGX Book. Similarly, although the 

Exchange believes it is appropriate to 

permit an order with a Discretionary 

Range instruction to execute at the same 

price as a contra-side order with a NonDisplayed instruction, the Exchange 

suspends such discretion at any more 

aggressive prices in order to avoid 

trading through orders that have been 

ranked on and are resting on the EDGX 

Book. Below are examples of the 

operation of orders with a Discretionary 

Range. 

Example No. 1: Modification and 

Reinstatement of Discretionary Range 

With a Displayed Contra-Side Order 

Assume the NBBO is $10.00 by 

$10.10, that the best-priced order to buy 

in the System is a displayed bid at 

$9.99, and that the best-priced order to 

sell in the System is a displayed offer at 

$10.11. A Limit Order 18 to buy 100 

shares at $10.00 with a Discretionary 

Range of $0.05 is entered into the 

System. The order will be displayed on 

the EDGX Book at $10.00 with 

discretion to execute up to $10.05. If a 

Limit Order to sell 100 shares at $10.05 

with a Displayed instruction and a Post 

Only instruction is entered into the 

System such order will be posted and 

displayed by the System on the EDGX 

Book as an order to sell 100 shares at 

$10.05. The buy order with the 

Discretionary Range instruction will 

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12668 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 

have its discretion to execute at $10.05 

temporarily suspended but such order 

will continue to have discretion to 

execute up to $10.04. The following 

examples demonstrate various potential 

outcomes following the temporary 

suspension of the buy order’s discretion 

to execute at $10.05. 

• If a non-routable Limit Order to sell 

100 shares at $10.05 is entered into the 

System, depending on applicable User 

instructions, such order will either be 

posted and displayed by the System on 

the EDGX Book as an order to sell 100 

shares (i.e., with priority behind the 

order to sell that is already displayed on 

the EDGX Book at $10.05) or will be 

cancelled back to the entering User. 

• If, instead, a Limit Order to sell 100 

shares at $10.04 is entered into the 

System, such order will execute at 

$10.04 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to sell 100 

shares at $10.02 is entered into the 

System, such order will execute at 

$10.02 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to sell 100 

shares at $10.00 or lower or a Market 

Order to sell 100 shares is entered into 

the System, such order will execute at 

$10.00 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, the sell order at $10.05 

with a Post Only instruction is then 

canceled, the buy order with a 

Discretionary Range instruction will 

have its discretion to execute up to 

$10.05 reinstated. 

• If, instead, a Limit Order to buy 100 

shares at $10.05 or higher or a Market 

Order to buy 100 shares is then entered 

into the System, such order will execute 

at $10.05 against the displayed order to 

sell with a Post Only instruction and the 

buy order with a Discretionary Range 

instruction will have its discretion to 

execute up to $10.05 reinstated. 

Example No. 2: Modification and 

Reinstatement of Discretionary Range 

With a Non-Displayed Contra-Side 

Order Priced Less Aggressive Than the 

Midpoint of the NBBO 

Assume the NBBO is $10.00 by 

$10.10, that the best-priced order to buy 

in the System is a displayed bid at 

$9.99, and that the best-priced order to 

sell in the System is a displayed offer at 

$10.11. A Limit Order with to buy 100 

shares at $10.00 with a Discretionary 

Range of $0.07 is entered into the 

System. The order will be ranked and 

displayed on the EDGX Book at $10.00 

with discretion to execute up to $10.07. 

If a Limit Order to sell 100 shares at 

$10.06 with a Non-Displayed 

instruction and a Post Only instruction 

is entered into the System such order 

will be posted by the System on the 

EDGX Book as an order to sell 100 

shares at $10.06. The buy order’s 

discretion to execute at $10.07 will be 

temporarily suspended but such order 

will continue to have discretion to 

execute up to $10.06. The following 

examples demonstrate various potential 

outcomes following the temporary 

suspension of the buy order’s discretion 

to execute at $10.07. 

• If a non-routable Limit Order to sell 

100 shares at $10.07 with a Displayed 

instruction is entered into the System, 

depending on applicable User 

instructions, such order will be posted 

and displayed by the System on the 

EDGX Book as an order to sell 100 

shares at $10.07 or will be cancelled 

back to the entering User. 

• If, instead, a Limit Order to sell 100 

shares at $10.06 is entered into the 

System, such order will execute at 

$10.06 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to sell 100 

shares at $10.02 is entered into the 

System, such order will execute at 

$10.02 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to sell 100 

shares at $10.00 or lower or a Market 

Order to sell 100 shares is entered into 

the System, such order will execute at 

$10.00 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, the sell order with a 

Non-Displayed instruction of 100 shares 

that is ranked at $10.06 is then 

canceled, the buy order with a 

Discretionary Range instruction will 

have its discretion to execute up to 

$10.07 reinstated. 

Example No. 3: Modification and 

Reinstatement of Discretionary Range 

With a Non-Displayed Contra-Side 

Order Priced More Aggressive Than the 

Midpoint of the NBBO 

Assume the NBBO is $10.00 by 

$10.10, that the best-priced order to buy 

in the System is a displayed bid at 

$9.99, and that the best-priced order to 

sell in the System is a displayed offer at 

$10.11. A Limit Order with to buy 100 

shares at $10.00 with a Discretionary 

Range of $0.07 is entered into the 

System. The order will be displayed on 

the EDGX Book at $10.00 with 

discretion to execute up to $10.07. If a 

Limit Order to sell 100 shares at $10.04 

with a Non-Displayed instruction and a 

Post Only instruction is entered into the 

System such order will be posted by the 

System on the EDGX Book as an order 

to sell 100 shares at $10.05 (i.e., ranked 

at the midpoint of the NBBO, as 

described above) with discretion to 

$10.04. The buy order’s discretion to 

execute at $10.07 will be temporarily 

suspended but such order will continue 

to have discretion to execute up to 

$10.05. The following examples 

demonstrate various potential outcomes 

following the temporary suspension of 

the buy order’s discretion to execute at 

$10.07. 

• If a non-routable Limit Order to sell 

100 shares at $10.07 with a Displayed 

instruction is entered into the System, 

depending on applicable User 

instructions, such order will be posted 

and displayed by the System on the 

EDGX Book as an order to sell 100 

shares at $10.07 or will be cancelled 

back to the entering User. 

• If, instead, a Limit Order to sell 100 

shares at $10.05 is entered into the 

System, such order will execute at 

$10.05 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to buy 100 

shares at $10.05 is entered into the 

System, such order will execute at 

$10.05 against the resting sell order with 

a Non-Displayed instruction and a Post 

Only instruction (i.e., at the ranked 

price of such order). 

• If, instead, a Limit Order to sell 100 

shares at $10.04 is entered into the 

System, such order will execute at 

$10.04 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, a Limit Order to buy 100 

shares at $10.04 is entered into the 

System, such order will execute at 

$10.04 against the resting sell order with 

a Non-Displayed instruction and a Post 

Only instruction (i.e., using the 

discretion of the resting sell order with 

a Non-Displayed instruction to sell at 

the order’s limit price). 

• If, instead, a Limit Order to sell 100 

shares at $10.00 or lower or a Market 

Order to sell 100 shares is entered into 

the System, such order will execute at 

$10.00 against the resting buy order 

with a Discretionary Range instruction. 

• If, instead, the sell order with a 

Non-Displayed instruction of 100 shares 

that is ranked at $10.05 is then 

canceled, the buy order with a 

Discretionary Range instruction will 

have its discretion to execute up to 

$10.07 reinstated. 

As the above examples demonstrate, 

the Exchange prevents executions 

against the Discretionary Range of an 

order at or through the price of a resting 

contra-side order with a Displayed 

instruction and through the price of a 

resting contra-side order with a NonDisplayed instruction (i.e., an execution 

can occur at the ranked price of an order 

with a Non-Displayed instruction but 

not at a price that would be better than 

such order’s ranked price). The 

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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12669 

19The Exchange notes that it recently filed an 

immediately effective proposal containing marking 

errors with respect to the rule text proposed for subparagraphs (a)(2), (a)(2)(A) and (a)(2)(B). See 

Securities Exchange Act Release No. 74023 (January 

9, 2015), 80 FR 2163 (January 15, 2015) (SR–EDGX– 

2015–03). Accordingly, the Exchange has correctly 

marked the change in connection with this 

proposal. 

Exchange does not, however, prevent 

executions against the Discretionary 

Range of an order when there is a 

contra-side order with a Discretionary 

Range at or through that price same 

price. 

The Exchange’s handling of orders 

with a Discretionary Range instruction, 

including the discretion of an order 

with a Non-Displayed instruction more 

aggressive than the midpoint of the 

NBBO to its limit price, is intended to 

reflect the relatively passive nature of 

orders with a Discretionary Range. In all 

cases, although the Users submitting 

such orders have indicated a 

willingness to execute at a more 

aggressive price, such orders are ranked 

at a lower price to buy or a higher price 

to sell. In turn, if an order is executed 

at its ranked price, rather than at a price 

within the Discretionary Range, then the 

User that submitted the order receives a 

better result in each case (i.e., buys for 

less or sells for more). With this 

background, the Exchange believes it is 

reasonable that an order with a 

Discretionary Range instruction or a 

Non-Displayed instruction might 

temporarily become not executable at 

certain prices because such prices are 

more aggressive than their ranked price 

(i.e., higher prices for orders to buy or 

lower prices for orders to sell). Further, 

to the extent a User would prefer an 

execution at more aggressive price 

levels, such User could simply choose 

other order type instructions that would 

increase the likelihood of execution at 

these prices (e.g., a routable order rather 

than a non-routable order, an order that 

is ranked at its full price rather than an 

order ranked at a less aggressive price 

with a Discretionary Range, or an order 

with a Displayed instruction rather than 

an order with a Non-Displayed 

instruction). 

In addition to the changes described 

above, the Exchange proposes to relocate within Rule 11.8(b) and re-word 

the statement regarding the inclusion of 

a Discretionary Range on a Limit Order. 

Current Rule 11.8(b)(8) currently states 

that a ‘‘User may include a 

Discretionary Range instruction.’’ This 

ability to include a Discretionary Range 

instruction on a Limit Order is currently 

grouped with other functionality that 

can be elected for Limit Orders that also 

include a Post Only or Book Only 

instruction as well as specified time-inforce instructions for orders that can be 

entered into the System and post to the 

EDGX Book. However, the System does 

not allow the combination of a 

Discretionary Range and a Post Only 

instruction. Accordingly, the Exchange 

proposes to re-locate the reference to the 

Discretionary Range instruction within 

Rule 11.8(b) so that it is no longer 

grouped with other orders that can be 

combined with a Post Only instruction. 

The Exchange also proposes to state in 

Rule 11.8(b) that: (i) A Limit Order with 

a Discretionary Range instruction may 

also include a Book Only instruction; 

and (ii) a Limit Order with a 

Discretionary Range instruction and a 

Post Only instruction will be rejected. 

Further, the Exchange proposes to refer 

to the ability of a Limit Order to include 

a Discretionary Range instruction, rather 

than a ‘‘User’’ that may include a 

Discretionary Range instruction. 

Priority and Execution Algorithm 

With respect to the Exchange’s 

priority and execution algorithm, the 

Exchange is proposing various minor 

and structural to changes that are 

intended to emphasize the processes by 

which orders are accepted, priced, 

ranked, displayed and executed, as well 

as a new provision related to the ability 

of orders to rest at locking prices that is 

consistent with the changes to 

provisions related to the operation of 

orders with a Discretionary Range 

instruction described above. First, the 

Exchange has proposed modifications to 

Rule 11.9, Priority of Orders, to make 

clear that the ranking of orders 

described in such rule is in turn 

dependent on Exchange rules related to 

the execution of orders, primarily Rule 

11.10. The Exchange believes that this 

has always been the case under 

Exchange rules but there was not 

previously a description of the crossreference to Rule 11.10 within such 

rules. Accordingly, the Exchange 

proposes to add reference to the 

execution process in addition to the 

numeric cross-reference to Rule 11.10.19

The Exchange also proposes to change 

certain references within Rule 11.9 to 

refer to ranking rather than executing 

equally priced trading interest, as the 

Rule as a whole is intended to describe 

the manner in which resting orders are 

ranked and maintained, specifically in 

price and time priority, while awaiting 

execution against incoming orders. The 

Exchange does not believe that the 

proposed modifications substantively 

modify the operation of the rules but the 

Exchange believes that it is important to 

make clear that the ranking of orders is 

a separate process from the execution of 

orders. The Exchange also proposes 

changes to Rule 11.9(a)(4) and (a)(5) to 

specify that orders retain and lose 

‘‘time’’ priority under certain 

circumstances as opposed to priority 

generally because retaining or losing 

price priority does not require the same 

descriptions, as price priority will 

always be retained unless the price of an 

order changes. 

Next, the Exchange proposes to move 

language contained within subparagraph (a)(2) of Rule 11.10 to the 

main paragraph, paragraph (a), such that 

the language is more generally 

applicable to the rules. Although subparagraph (a)(2) contains information 

relevant to executability, in that it 

describes orders that are executable in 

compliance with Regulation NMS or 

otherwise do not trade through 

quotations of other markets, there are 

other provisions set forth in paragraph 

(a) that relate to executability. 

Accordingly, the Exchange proposes to 

relocate language stating that any order 

falling within the parameters of this 

paragraph shall be referred to as 

‘‘executable’’ and that an order will be 

cancelled back to the User, if based on 

market conditions, User instructions, 

applicable Exchange Rules and/or the 

Act and the rules and regulations 

thereunder, such order is not 

executable, cannot be routed to another 

Trading Center pursuant to Rule 11.11 

or cannot be posted to the EDGX Book. 

The Exchange proposes to adopt 

paragraph (C) of Rule 11.10(a)(4) to 

provide further clarity regarding the 

situations where orders are not 

executable, which although covered in 

other existing rules, would focus on the 

incoming order on the same side of an 

order displayed on the EDGX Book 

rather than the resting order that is 

rendered not executable because it is 

opposite such order displayed on the 

EDGX Book. Proposed paragraph (C) 

would further state that if an incoming 

order is on the same side of the market 

as an order displayed on the EDGX Book 

and upon entry would execute against 

contra-side interest at the same price as 

such displayed order, such incoming 

order will be cancelled or posted to the 

EDGX Book and ranked in accordance 

with Rule 11.9. As described above, the 

Exchange suspends the discretion of an 

order subject to the Hide Not Slide 

instruction for so long as a contra-side 

order that equals the Locking Price is 

displayed by the System on the EDGX 

Book. Similarly, as proposed to be 

added to EDGX Rules, the Exchange 

temporarily suspends the ability of an 

order to execute at the same price as a 

contra-side displayed order for any 

order with a Discretionary Range 

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12670 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 

20The Exchange notes that an incoming order for 

purposes of comparison to a resting order can be 

any incoming order unless the terms of that 

incoming order itself preclude execution. In this 

example, a Limit Order to buy 100 shares at $10.01 

that executes against the order to sell displayed at 

$10.01 on the EDGX Book could be a Limit Order 

with a Displayed instruction, a Limit Order with a 

Non-Displayed instruction, a Limit Order with a 

Hide Not Slide instruction, a Limit Order with a 

Price Adjust instruction, a routable Limit Order, a 

non-routable Limit Order, an order with a Limit 

Price of $10.00 and a Discretionary Range of $0.01, 

or any other type of incoming Limit Order to buy 

that is executable at $10.01. Thus, this example 

demonstrates that on entry the incoming order is 

compared to contra-side orders on the EDGX Book 

regardless of the modifiers that will determine how 

it will be displayed, ranked or otherwise handled 

by the System and that unless the ability of an order 

to execute has been suspended based on the 

Exchange’s rules, the resting contra-side order with 

priority at that price will be executed against the 

incoming order. 

21 15 U.S.C. 78f(b). 

22 15 U.S.C. 78f(b)(5). 23 15 U.S. C. 78k–1(a)(1). 

instruction or any order with a NonDisplayed instruction that has been repriced to the midpoint of the NBBO 

pursuant to Exchange rules. The 

Exchange temporarily suspends this 

discretion to avoid an apparent priority 

issue where a User representing an 

order that is displayed on the Exchange 

either believes such order has time 

priority among displayed orders at that 

price or that the displayed order is the 

only order at such price level and then 

sees an execution published by the 

Exchange at that price. 

To demonstrate the functionality in 

place on the Exchange described above, 

assume the NBBO is $10.00 by $10.01. 

A non-routable Limit Order to buy 100 

shares at $10.01 with a Hide Not Slide 

instruction is entered into the System. 

The order will be displayed on the 

EDGX Book at $10.00 and ranked at 

$10.005 with discretion to $10.01. If a 

Limit Order to sell 100 shares at $10.01 

with a Displayed instruction and a Post 

Only instruction is entered into the 

System such order will be posted and 

displayed by the System on the EDGX 

Book as an order to sell 100 shares at 

$10.01. The buy order with the Hide Not 

Slide instruction will have its discretion 

to execute at $10.01 temporarily 

suspended but such order will continue 

to be ranked at $10.005. The following 

examples demonstrate various potential 

outcomes following the temporary 

suspension of the buy order’s discretion 

to execute at $10.01. 

• If a non-routable Limit Order to sell 

100 shares at $10.01 is entered into the 

System, depending on applicable User 

instructions, such order will either be 

posted and displayed by the System on 

the EDGX Book as an order to sell 100 

shares (i.e., with priority behind the 

order to sell that is already displayed on 

the EDGX Book at $10.01) or will be 

cancelled back to the entering User. 

• If, instead, a Limit Order to sell 100 

shares at $10.00 is entered into the 

System, such order will execute at 

$10.005 against the resting buy order 

with a Hide Not Slide instruction. 

• If, instead, a Limit Order to buy 100 

shares at $10.01 or higher or a Market 

Order to buy 100 shares is entered into 

the System,20 such order will execute at 

$10.01 against the resting sell order 

displayed on the EDGX Book, as such 

resting order is fully executable and 

displayed as an offer on the EDGX Book. 

The Exchange notes that it is 

proposing to add descriptive titles to 

paragraphs (A) and (B) of Rule 

11.10(a)(4), which describe the process 

by which executable orders are matched 

within the System. Specifically, so long 

as it is otherwise executable, an 

incoming order to buy will be 

automatically executed to the extent 

that it is priced at an amount that equals 

or exceeds any order to sell in the EDGX 

Book and an incoming order to sell will 

be automatically executed to the extent 

that it is priced at an amount that equals 

or is less than any other order to buy in 

the EDGX Book. These rules further 

state that an order to buy shall be 

executed at the price(s) of the lowest 

order(s) to sell having priority in the 

EDGX Book and an order to sell shall be 

executed at the price(s) of the highest 

order(s) to buy having priority in the 

EDGX Book. The Exchange emphasizes 

these current rules only insofar as to 

highlight the interconnected nature of 

the priority rule. 

The Exchange also proposes to modify 

paragraph (h) of Rule 11.11 to clarify the 

Exchange’s rule regarding the priority of 

routed orders. Paragraph (h) currently 

sets forth the proposition that a routed 

order does not retain priority on the 

Exchange while it is being routed to 

other markets. The Exchange believes 

that its proposed clarification to 

paragraph (h) is appropriate because it 

more clearly states that a routed order 

is not ranked and maintained in the 

EDGX Book pursuant to Rule 11.9(a), 

and therefore is not available to execute 

against incoming orders pursuant to 

Rule 11.10. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule changes are consistent 

with Section 6(b) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’) 21 and 

further the objectives of Section 6(b)(5) 

of the Act 22 because they are designed 

to promote just and equitable principles 

of trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 

and, in general, to protect investors and 

the public interest. The proposed rule 

changes are also designed to support the 

principles of Section 11A(a)(1) 23 of the 

Act in that they seek to assure fair 

competition among brokers and dealers 

and among exchange markets. 

Specifically, the Exchange also 

believes that the changes to provide 

additional clarity and specificity 

regarding the functionality of the 

System with respect to an order with a 

Discretionary Range instruction and an 

order with a Non-Displayed instruction 

that has discretion pursuant to the 

Exchange’s re-pricing process would 

promote just and equitable principles of 

trade and remove impediments to a free 

and open market by providing greater 

transparency concerning the operation 

of the System. The Exchange also 

believes that the proposed amendments 

to clarify and re-structure the 

Exchange’s priority, execution and 

routing rules will contribute to the 

protection of investors and the public 

interest by making the Exchange’s rules 

easier to understand. Further, the 

Exchange believes that it is consistent 

with the Act to temporarily reduce the 

Discretionary Range of an order that has 

been posted to the EDGX Book for so 

long as there is contra-side liquidity on 

the EDGX Book because this 

functionality prevents an apparent 

priority issue on the EDGX Book as 

described above as well as the ability of 

an order to execute at a price that trades 

through the ranked price of an order 

resting on the EDGX Book. The 

Exchange reiterates that such behavior, 

as described above, is temporary in 

nature; an order’s full Discretionary 

Range will be returned as soon as the 

contra-side liquidity that caused the 

reduction in the first place is no longer 

maintained on the EDGX Book. The 

Exchange believes that its overall 

handling of orders, including the 

temporary suspension of the ability of 

an order with a Discretionary Range to 

execute at one or more prices is 

consistent with the Act because it 

removes impediments to and perfects 

the mechanism of a free and open 

market and a national market system by 

reflecting the relatively passive nature 

of an order with a Discretionary Range 

instruction while honoring the 

instructions of a User submitting a 

contra-side order that does not remove 

liquidity on entry. As explained above, 

the Exchange’s handling of orders with 

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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12671 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

a Discretionary Range instruction, 

including the discretion of an order 

with a Non-Displayed instruction more 

aggressive than the midpoint of the 

NBBO to its limit price, is intended to 

reflect the relatively passive nature of 

orders with a Discretionary Range. The 

Exchange believes it is reasonable that 

an order with a Discretionary Range 

instruction or a Non-Displayed 

instruction might temporarily become 

not executable at certain prices because 

such prices are more aggressive than 

their ranked price (i.e., higher prices for 

orders to buy or lower prices for orders 

to sell). Further, to the extent a User 

would prefer an execution at more 

aggressive price levels, such User could 

simply choose other order type 

instructions that would increase the 

likelihood of execution at these prices. 

Finally, the Exchange believes that its 

proposal to re-locate and re-word the 

Discretionary Range instruction 

reference within Rule 11.8(b), related to 

Limit Orders, is consistent with the Act 

because the change will correct an error 

within the Exchange’s rules and prevent 

potential confusion regarding the ability 

to combine a Discretionary Range 

instruction with a Post Only instruction. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule changes are not designed 

to address any competitive issue but 

rather to add specificity and clarity to 

Exchange rules, thus providing greater 

transparency regarding the operation of 

the System. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule changes. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Exchange consents, 

the Commission will: (a) By order 

approve or disapprove such proposed 

rule change, or (b) institute proceedings 

to determine whether the proposed rule 

change should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as modified by Amendment No. 

1, is consistent with the Act. Comments 

may be submitted by any of the 

following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

EDGX–2015–08 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–EDGX–2015–08. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–EDGX– 

2015–08 and should be submitted on or 

before March 31, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–05485 Filed 3–9–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74438; File No. SR–CBOE– 

2015–022] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of a 

Proposed Rule Change Related to 

Equipment and Communication on the 

Exchange’s Trading Floor 

March 4, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

20, 2015, Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’ 

or ‘‘CBOE’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange seeks to amend its rules 

related to equipment and 

communication on the Exchange’s 

trading floor 

(additions are italicized; deletions are 

[bracketed]) 

* * * * * 

Chicago Board Options Exchange, 

Incorporated Rules 

* * * * * 

Rule 6.23. [Trading Permit Holder Wires 

From Floor] Equipment and 

Communications on the Trading Floor 

(a) Subject to the requirements of this 

Rule Trading Permit Holders may use 

any communication device (e.g., any 

hardware or software related to a phone, 

system or other device, including an 

instant messaging system, email system 

or similar device) on the floor of the 

Exchange and in any trading crowd of 

the Exchange. The Exchange reserves 

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