5592 Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92304 

(June 30, 2021), 86 FR 36440 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 92696, 

86 FR 47350 (August 24, 2021). The Commission 

designated October 7, 2021, as the date by which 

the Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

approve or disapprove, the proposed rule change. 

6Amendment No. 1 is available on the 

Commission’s website at https://www.sec.gov/ 

comments/sr-nysearca-2021-47/srnysearca202147- 

9304467-259869.pdf. 

7See Securities Exchange Act Release No. 93193, 

86 FR 55926 (October 7, 2021). 

8See Securities Exchange Act Release No. 93797, 

86 FR 72674 (December 22, 2021). 

9Amendment No. 2 is available on the 

Commission’s website at https://www.sec.gov/ 

comments/sr-nysearca-2021-47/srnysearca202147- 

20109876-264219.pdf. 

10Amendment No. 4 is available on the 

Commission’s website at https://www.sec.gov/ 

comments/sr-nysearca-2021-47/srnysearca202147- 

20112491-265389.pdf. In Amendment No. 4, 

compared to the original proposal, as modified by 

Amendment No. 1, 2, and 3, the Exchange, among 

other things: provides more background 

information regarding the proposed rule changes, 

makes clarifying changes to certain proposed rules 

without any substantive differences as compared to 

the original filing, and makes the following 

substantive changes from the original filing: (1) 

Adds a definition of Away Market BBO (ABBO) to 

replace the term Away Market NBBO; (2) revises the 

description of a Market Marker quotation, as 

described in proposed Rule 6.37A–O(a)(1); (3) 

revises how the Specified Threshold would be 

calculated for Limit Order Price Protection in 

proposed Rule 6.62P–O(a)(3)(A) to include prices 

equal to the Reference Price; (4) revises how a 

Trading Collar would be assigned, as described in 

proposed Rule 6.62P–O(4)(A) and (B), to provide 

that a Trading Collar would be reassigned to an 

order after a trading halt, and makes related changes 

to proposed Rule 6.64P–O(f)(3)(A)(ii); (5) revises 

proposed Rule 6.62P–O(g) to reorganize and 

streamline the proposed rule to specify that a Cross 

Order is a Qualified Contingent Cross Order and to 

describe the order type in paragraph (g)(1)(A) and 

to add proposed Complex QCC Orders; (6) revises 

proposed Rule 6.62P–O(h)(1) to specify that a Clearthe-Book Order would be entered contemporaneous 

with executing an order in open outcry; (7) revises 

proposed Rule 6.62P–O(i)(2) to specify which order 

with a Minimum Trade Size modifier would not be 

subject to self-trade prevention modifiers; (8) 

revises proposed Rule 6.62P–O to remove the 

proposed Non-Display Remove Modifier; (9) revises 

proposed Rule 6.64P–O(a) to add a definition for 

the term ‘‘Auction Price’’ and to modify the 

definition of ‘‘Legal Quote Width’’; (10) revises 

proposed Rule 6.64P–O(g)(2) to provide that during 

a trading halt, any unexecuted quantity of an order 

for which the 500-millisecond Trading Collar timer 

has started would be cancelled; (11) revises 

proposed Rule 6.64P–O(d)(3) and (4) to reduce the 

length of the proposed Opening MMQ Timers (from 

one minute to 30 seconds) and reduce the time 

before commencing opening of a series when there 

is a Calculated NBBO that is wider than the Legal 

Width Quote in a series (from five minutes to 90 

seconds), both of which measures would shorten 

the time the Exchange would wait before 

automatically opening a series in the specified 

circumstances; and (12) revises proposed Rule 

6.76AP–O(a)(1)(A) to provide that only the first 

LMM quote in time priority would be eligible for 

the LMM Guarantee. 

11The Exchange’s national securities exchange 

affiliates are the New York Stock Exchange LLC 

(‘‘NYSE’’), NYSE American LLC (‘‘NYSE 

American’’), NYSE National, Inc. (‘‘NYSE 

National’’), and NYSE Chicago, Inc. (‘‘NYSE 

Chicago’’). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94072; File No. SR– 

NYSEArca–2021–47] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of 

Amendment No. 4 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 4, To Adopt New 

Rules 6.1P–O, 6.37AP–O, 6.40P–O, 

6.41P–O, 6.62P–O, 6.64P–O, 6.76P–O, 

and 6.76AP–O and Amendments to 

Rules 1.1, 6.1–O, 6.1A–O, 6.37–O, 

6.65A–O and 6.96–O 

January 26, 2022. 

I. Introduction 

On June 21, 2021, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to adopt new Rules 6.1P–O 

(Applicability), 6.37AP–O (Market 

Maker Quotations), 6.40P–O (Pre-Trade 

and Activity-Based Risk Controls), 

6.41P–O (Price Reasonability Checks— 

Orders and Quotes), 6.62P–O (Orders 

and Modifiers), 6.64P–O (Auction 

Process), 6.76P–O (Order Ranking and 

Display), and 6.76AP–O (Order 

Execution and Routing) and proposed 

amendments to Rules 1.1 (Definitions), 

6.1–O (Applicability, Definitions and 

References), 6.1A–O (Definitions and 

References—OX), 6.37–O (Obligations of 

Market Makers), 6.65A–O (Limit-Up and 

Limit-Down During Extraordinary 

Market Volatility), and 6.96–O 

(Operation of Routing Broker) to reflect 

the implementation of the Exchange’s 

Pillar trading technology on its options 

market. The proposed rule change was 

published for comment in the Federal 

Register on July 9, 2021.3

On August 18, 2021, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to approve or 

disapprove the proposed rule change.5

On September 28, 2021, the Exchange 

filed Amendment No. 1 to the proposed 

rule change, which superseded the 

proposed rule change as originally filed 

in its entirety.6 On September 29, 2021, 

the Commission published the proposed 

rule change, as modified by Amendment 

No. 1, for notice and comment and 

instituted proceedings to determine 

whether to approve or disapprove the 

proposed rule change, as modified by 

Amendment No. 1.7

On December 16, 2021, the 

Commission desiFgnated a longer 

period within which to approve the 

proposed rule change or disapprove the 

proposed rule change, as modified by 

Amendment No. 1.8 On December 16, 

2021, the Exchange filed Amendment 

No. 2 to the proposed rule change, 

which superseded the original filing, as 

amended by Amendment No. 1, in its 

entirety.9 On January 19, 2022, the 

Exchange filed Amendment No. 3 to the 

proposed rule change, which 

superseded the original filing, as 

amended by Amendment No. 1 and 2, 

in its entirety. On January 21, the 

Exchange withdrew Amendment No. 3 

and filed Amendment No. 4, which 

superseded the original filing, as 

amended by Amendment No. 1, 2, and 

3, in its entirety.10 The Commission has 

received no comments on the proposed 

rule change. 

The Commission is publishing this 

notice to solicit comments on 

Amendment No. 4 from interested 

persons, and is approving the proposed 

rule change, as modified by Amendment 

No. 4, on an accelerated basis. 

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 

self-regulatory organization 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 those 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 

Background 

The Exchange plans to transition its 

options trading platform to its Pillar 

technology platform. The Exchange’s 

and its national securities exchange 

affiliates’ 11 (together with the Exchange, 

the ‘‘NYSE Exchanges’’) cash equity 

markets are currently operating on 

Pillar. For this transition, the Exchange 

proposes to use the same Pillar 


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12Amendment No. 4 provides more background 

information regarding the proposed rule changes, 

makes clarifying changes to certain proposed rules 

without any substantive differences as compared to 

the original filing, and makes the following 

substantive changes from the original filing: (1) 

Added definition of Away Market BBO (ABBO) to 

replace the term Away Market NBBO; (2) revises the 

description of a Market Marker quotation, as 

described in proposed Rule 6.37A–O(a)(1); (3) 

revises how the Specified Threshold would be 

calculated for Limit Order Price Protection in 

proposed Rule 6.62P–O(a)(3)(A) to include prices 

equal to the Reference Price; (4) revises how a 

Trading Collar would be assigned, as described in 

proposed Rule 6.62P–O(4)(A) and (B), to provide 

that a Trading Collar would be reassigned to an 

order after a trading halt, and makes related changes 

to proposed Rule 6.64P–O(f)(3)(A)(ii); (5) revises 

proposed Rule 6.62P–O(g) to reorganize and 

streamline the proposed rule to specify that a Cross 

Order is a Qualified Contingent Cross Order and to 

describe the order type in paragraph (g)(1)(A) and 

to add proposed Complex QCC Orders; (6) revises 

proposed Rule 6.62P–O(h)(1) to specify that a Clearthe-Book Order would be entered contemporaneous 

with executing an order in open outcry; (7) revises 

proposed Rule 6.62P–O(i)(2) to specify which order 

with a Minimum Trade Size modifier would not be 

subject to self-trade prevention modifiers; (8) 

revises proposed Rule 6.62P–O to remove the 

proposed Non-Display Remove Modifier; (9) revises 

proposed Rule 6.64P–O(a) to add a definition for 

the term ‘‘Auction Price’’ and to modify the 

definition of ‘‘Legal Quote Width’’; (10) revises 

proposed Rule 6.64P–O(g)(2) to provide that during 

a trading halt, any unexecuted quantity of an order 

for which the 500-millisecond Trading Collar timer 

has started would be cancelled; (11) revises 

proposed Rule 6.64P–O(d)(3) and (4) to reduce the 

length of the proposed Opening MMQ Timers (from 

one minute to 30 seconds) and reduce the time 

before commencing opening of a series when there 

is a Calculated NBBO that is wider than the Legal 

Width Quote in a series (from five minutes to 90 

seconds), both of which measures would shorten 

the time the Exchange would wait before 

automatically opening a series in the specified 

circumstances; and (12) revises proposed Rule 

6.76AP–O(a)(1)(A) to provide that only the first 

LMM quote in time priority would be eligible for 

the LMM Guarantee. 13Trader Updates are available here: https://

www.nyse.com/trader-update/history. Anyone can 

subscribe to email updates of Trader Updates, 

available here: https://www.nyse.com/subscriptions. 

14 ‘‘OX’’ refers to the Exchange’s current 

electronic order delivery, execution, and reporting 

system for designated option issues through which 

orders and quotes of Users are consolidated for 

execution and/or display. See Rule 6.1A–O(a)(13). 

‘‘OX Book’’ refers to the OX’s electronic file of 

orders and quotes, which contain all of the orders 

in each of the Display Order and Working Order 

processes and all of the Market Makers’ quotes in 

the Display Order Process. See Rule 6.1A–O(a)(14). 

With the transition to Pillar, the Exchange would 

no longer use the terms ‘‘OX’’ or ‘‘OX Book’’ and 

rules using those terms would not be applicable to 

trading on Pillar. Once the transition is complete, 

the Exchange will file a subsequent proposed rule 

change to delete references to OX and OX Book 

from the rulebook. 

15The Exchange used the same description when 

it transitioned its cash equity platform to Pillar. See 

Securities Exchange Act Release Nos. 75494 (July 

20, 2015), 80 FR 44170 (July 24, 2015) (SR– 

NYSEArca–2015–38) (Approval Order) and 74951 

(May 13, 2015), 80 FR 28721 (May 19, 2015) 

(‘‘NYSE Arca Equities Pillar Notice’’). 

technology already in operation for its 

cash equity market. In doing so, the 

Exchange will be able to offer not only 

common specifications for connecting to 

both of its cash equity and equity 

options markets, but also common 

trading functions. This Amendment No. 

4 supersedes and replaces Amendment 

No. 2 to the original filing in its 

entirety.12

The Exchange plans to roll out the 

new technology platform over a period 

of time based on a range of underlying 

symbols, anticipated for the first quarter 

of 2022. As was the case for the other 

NYSE Exchanges that have transitioned 

to Pillar, the Exchange anticipates a 

three-week roll-out period and will 

announce by Trader Update 13 when 

underlying symbols will be 

transitioning to the Pillar trading 

platform. With this transition, certain 

rules would continue to be applicable to 

options overlying symbols trading on 

the current trading platform—the OX 

system,14 but would not be applicable to 

options overlying symbols that have 

transitioned to trading on Pillar. 

Instead, the Exchange proposes new 

rules to reflect how options would trade 

on the Exchange once Pillar is 

implemented. These proposed rule 

changes will (1) use Pillar terminology 

that is based on Exchange Rule 7–E 

Pillar terminology governing cash equity 

trading; (2) provide for common 

functionality on both its options and 

cash equity markets; and (3) introduce 

new functionality. 

The Exchange notes that certain of the 

proposed new Pillar rules concern 

functionality not currently available on 

the OX system and that would be 

unique to how option contracts trade, 

and therefore would be new rules with 

no parallel version for the Exchange’s 

cash equity market. 

Proposed Use of ‘‘P’’ Modifier 

As proposed, new rules governing 

options trading on Pillar would have the 

same numbering as current rules that 

address the same functionality, but with 

the modifier ‘‘P’’ appended to the rule 

number. For example, Rule 6.76–O, 

governing Order Ranking and Display— 

OX, would remain unchanged and 

continue to apply to any trading in 

symbols on the OX system. Proposed 

Rule 6.76P–O would govern Order 

Ranking and Display for trading in 

options symbols migrated to the Pillar 

platform. All other current rules that 

have not had a version added with a ‘‘P’’ 

modifier will be applicable to how 

trading functions on both the OX system 

and Pillar. Once options overlying all 

symbols have migrated to the Pillar 

platform, the Exchange will file a 

separate rule proposal to delete rules 

that are no longer operative because 

they apply only to trading on the OX 

system. 

To reflect how the ‘‘P’’ modifier 

would operate, the Exchange proposes 

to add rule text immediately following 

the title ‘‘Rule 6–O Options Trading,’’ 

and before ‘‘Rules Principally 

Applicable to Trading of Option 

Contracts’’ that would provide that rules 

with a ‘‘P’’ modifier would be operative 

for symbols that are trading on the Pillar 

trading platform. As further proposed, 

and consistent with the handling of the 

transition to Pillar by the Exchange’s 

cash equity platform, if a symbol (and 

the option overlying such symbol) is 

trading on the Pillar trading platform, a 

rule with the same number as a rule 

with a ‘‘P’’ modifier would no longer be 

operative for that symbol.15

The Exchange believes that adding 

this explanation regarding the ‘‘P’’ 

modifier in Exchange rules would 

provide transparency regarding which 

rules and definitions would be operative 

during the symbol migration to Pillar. 

Summary of Proposed Rule Changes 

In this filing, the Exchange proposes 

the following new Pillar rules: Rules 

6.1P–O (Applicability), 6.37AP–O 

(Market Maker Quotations), 6.40P–O 

(Pre-Trade and Activity-Based Risk 

Controls), 6.41P–O (Price Reasonability 

Checks—Orders and Quotes), 6.62P–O 

(Orders and Modifiers), 6.64P–O 

(Auction Process), 6.76P–O (Order 

Ranking and Display), and 6.76AP–O 

(Order Execution and Routing). The 

Exchange also proposes to amend Rules 

1.1 (Definitions), 6.1–O (Applicability, 

Definitions and References), and 6.1A– 

O (Definitions and References—OX) to 

reflect definitions that would be 

applicable for options trading on Pillar 

and make conforming amendments to 

Rules 6.37–O (Obligations of Market 

Makers), 6.65A–O (Limit-Up and LimitDown During Extraordinary Market 

Volatility), and 6.96–O (Operation of 

Routing Broker). These proposed rules 

would set forth the foundation of the 

Exchange’s options trading model on 

Pillar and, among other things, would 

use existing Pillar terminology currently 

in effect for the Exchange’s cash equity 

platform. 

Because certain proposed rules have 

definitions and functions that carry 

forward to other proposed rules, the 

Exchange proposes to describe the new 

rules in the following order (rather than 

by rule number order): Definitions, 

applicability, ranking and display, 

execution and routing, orders and 

modifiers, market maker quotations, 

pre-trade and activity-based risk 


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16See Securities Exchange Act Release No. 92563 

(August 4, 2021), 86 FR 43704 (August 10, 2021) 

(Notice of proposed Rule 6.91P–O, regarding 

complex order trading on Pillar) (‘‘Complex Pillar 

Notice’’). 

17Rule 6.1–O(b) has definitions for: Options 

Clearing Corporation, Rules of the Options Clearing 

Corporation, Clearing Member, Participating 

Exchange, Option Contract, Exchange Option 

Transaction and Exchange Transaction, Type of 

Option, Call, Put, Class of Options, Series of 

Options, Option Issue, Underlying Stock or 

Underlying Security, Exercise Price, Aggregate 

Exercise Price, Expiration Month, Expiration Date, 

Long Position, Short Position, Opening Purchase 

Transaction, Opening Writing Transaction, Closing 

Sale Transaction, Closing Purchase Transaction, 

Covered, Uncovered, Outstanding, Primary Market, 

Options Trading, Customer, Trading Crowd, 

Foreign Broker/Dealer, Exchange-Traded Fund 

Share, Quote with Size, Trading Official, Non-OTP 

Firm or Non-OTP Holder Market Maker, Firm, 

Consolidated Book, Crowd Participants, Electronic 

Order Capture System, Short Term Option Series, 

and Quarterly Options Series. Unless otherwise 

specified, the Exchange proposes to copy the 

definitions from Rule 6.1–O(b) to Rule 1.1 without 

any differences. 

18The Exchange is not proposing to delete the 

definitions of ‘‘Quote with Size, ‘‘Foreign Broker/ 

Dealer,’’ or ‘‘Short Term Options Series’’ at this 

time as such terms would be deleted in the 

subsequent filing to delete Rule 6.1–O. 

19The Exchange proposes to make a similar nonsubstantive change to delete the term ‘‘ExchangeTrade Fund Share’’ in Rule 6.37–O(c). 

controls, price reasonability checks, and 

auctions. 

To promote clarity and transparency, 

the Exchange further proposes to add a 

preamble to the following current rules 

specifying that they would not be 

applicable to trading on Pillar: Rule 6.1– 

O (Applicability, Definitions and 

References), 6.1A–O (Definitions and 

References—OX), Rule 6.37A–O (Market 

Maker Quotations), 6.40–O (Risk 

Limitation Mechanism), 6.60–O (Price 

Protection—Orders), 6.61–O (Price 

Protections—Quotes), 6.62–O (Certain 

Types of Orders Defined), 6.64–O (OX 

Opening Process), 6.76–O (Order 

Ranking and Display—OX), 6.76A–O 

(Order Execution—OX), 6.88–O 

(Directed Orders), and 6.90–O 

(Qualified Contingent Crosses). 

As discussed in greater detail below, 

the Exchange is not proposing 

fundamentally different functionality 

applicable to options trading on Pillar 

than on the OX system. However, with 

Pillar, the Exchange would introduce 

new terminology, and as applicable, 

new or updated functionality that 

would be available for options trading 

on the Pillar platform. 

The Exchange notes that new rules 

relating to electronic complex trading 

on Pillar are addressed in a separate 

proposed rule change.16

Proposed Rule Changes 

Rule 1.1—Definitions 

Rule 1.1 sets forth definitions that are 

applicable to both the Exchange’s cash 

equity and options markets. Rule 6.1– 

O(b) sets forth definitions that are 

applicable to the trading of option 

contracts on the Exchange. Rule 6.1A– 

O sets forth definitions that are 

applicable to trading on the Exchange’s 

current OX system. In connection with 

the transition of options trading to 

Pillar, the Exchange proposes to copy 

the definitions currently set forth in 

Rules 6.1–O(b) and 6.1A–O into Rule 

1.1, with changes as described below. 

This proposed rule change would 

streamline the Exchange’s rules by 

consolidating definitions that would be 

applicable for trading on Pillar into Rule 

1.1. Once the transition to Pillar is 

complete, the Exchange will file a 

subsequent proposed rule change to 

delete current Rules 6.1–O and 6.1A–O 

as discussed further below. 

In connection with adding definitions 

to Rule 1.1, the Exchange proposes to 

delete the sub-paragraph numbering 

currently set forth in Rule 1.1. The 

Exchange does not believe that the subparagraph numbering is necessary 

because the definitions are organized in 

alphabetical order and would continue 

to be organized in alphabetical order. In 

addition, removing the sub-paragraph 

numbering would make any future 

amendments to Rule 1.1 easier to 

process as any new definitions would 

simply be added in alphabetical order. 

Certain definitions in Rule 1.1 

currently specify that they are only for 

‘‘equities’’ trading. With the proposed 

consolidation of definitions, some of 

those definitions will become applicable 

to both options and cash equity trading, 

and others will continue to be 

applicable only to cash equity trading. 

With the proposed consolidation, the 

Exchange proposes to remove existing 

language limiting those definitions to 

‘‘equities’’ traded on the Exchange if the 

definition would be equally applicable 

to options trading. In addition, to the 

extent that a proposed definition would 

continue to be applicable only to cash 

equity trading, the Exchange proposes to 

make a global change to update 

references to ‘‘equities’’ traded on the 

Exchange to ‘‘cash equity securities’’ 

traded on the Exchange. The Exchange 

believes these proposed modifications 

would add clarity and consistency to 

Exchange rules. 

The Exchange proposes the following 

amendments to Rule 1.1. 

First, definitions set forth in Rule 6.1– 

O(b) would be added to Rule 1.1 in 

alphabetical order with certain 

differences described in greater detail 

below.17 To promote clarity, if the 

definition that is being copied is not 

specifically about options trading, the 

Exchange proposes to add an 

introductory clause to the definition to 

specify that the term is for options 

traded on the Exchange. The Exchange 

does not propose to copy the definition 

of ‘‘Quote with Size,’’ which is currently 

defined in Rule 6.1–O(b)(33), to Rule 1.1 

because that term would not be used in 

the Pillar rules, and does not propose to 

copy the definition of ‘‘Short Term 

Options Series,’’ because it is 

duplicative of Commentary .07 to Rule 

6.4–O. In addition, the Exchange is not 

including the definition of ‘‘Foreign 

Broker/Dealer,’’ which is currently 

defined in Rule 6.1–O(b)(31), in Rule 

1.1, as this term is not used anywhere 

else in Exchange rules.18 The Exchange 

also proposes changes to certain 

definitions that are being copied from 

Rule 6.1–O(b) to Rule 1.1, as follows: 

• The Exchange proposes to amend 

certain definitions that are being copied 

to Rule 1.1 to use the term ‘‘underlying 

security’’ rather than referring 

separately to an ‘‘underlying stock or 

Exchange-Traded Fund Share.’’ The 

Exchange believes that this proposed 

change would not make any substantive 

changes because an Exchange-Traded 

Fund Share is a ‘‘security’’ as that term 

is defined in Rule 1.1 (and is also an 

NMS stock). Accordingly, the term 

‘‘underlying security,’’ by definition, 

would include Exchange-Traded Fund 

Shares. The Exchange proposes to make 

this change to the following definitions 

that are proposed to be added to Rule 

1.1: ‘‘Call,’’ ‘‘Class of Options,’’ 

‘‘Covered,’’ ‘‘Exercise Price,’’ ‘‘Primary 

Market,’’ ‘‘Put,’’ ‘‘Option Issue,’’ and 

‘‘Underlying Stock or Underlying 

Security.’’ 19

• The Exchange proposes to 

streamline the definitions of ‘‘Closing 

Purchase Transaction,’’ ‘‘Closing Sale 

Transaction,’’ ‘‘Opening Purchase 

Transaction,’’ and ‘‘Opening Writing 

Transaction’’ without any substantive 

differences, as follows: 

Æ The term ‘‘Closing Purchase 

Transaction’’ is currently defined in 

Rule 6.1–O(b)(23) to mean ‘‘an option 

transaction in which the purchaser’s 

intention is to reduce or eliminate a 

short position in the series of options 

involved in such transaction.’’ The 

proposed Rule 1.1 definition of this 

term would be ‘‘a transaction in a series 

in which the purchaser intends to 

reduce or eliminate a short position in 

such series.’’ 

Æ The term ‘‘Closing Sale 

Transaction’’ is currently defined in 

Rule 6.1–O(b)(22) to mean an ‘‘option 

transaction in which the seller’s 


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20For example, current Rule 6.76–O(d) refers to 

Floor Brokers representing orders ‘‘in the Trading 

Crowd,’’ i.e., the physical location for such open 

outcry trading. By contrast, current Rule 6.76– 

O(d)(2) refers to the requirement that priority be 

afforded to Crowd Participants in accordance with 

Rule 6.75–O(f), which refers to the individual 

Market Makers or Floor Brokers that are located 

within the Trading Crowd and that may be eligible 

for priority. As discussed below, the Exchange 

proposes to maintain this distinction in proposed 

Rule 6.76P–O(h). 

21See, e.g., Cboe Exchange Inc. (‘‘Cboe’’) Rule 1.1 

(defining the terms ‘‘in-crowd market participant’’ 

and ‘‘ICMP’’ to include ‘‘an in-crowd Market-Maker, 

an on-floor DPM or LMM with an allocation in a 

class, or a Floor Broker or PAR Official representing 

an order in the trading crowd on the trading floor’’). 

22Rule 6.1A–O(a) has definitions for: Authorized 

Trader, BBO, Complex BBO, Core Trading Hours, 

Customer, Professional Customer, Lead Market 

Maker, Market Center, Marketable, Market Maker, 

Market Maker Authorized Trader, Minimum Price 

Variation, NBBO, Complex NBBO, NOW Recipient, 

OX, OX Book, Routing Broker, Sponsored 

Participant, Sponsoring OTP Firm, Sponsorship 

Provisions, User, Directed Order Market Maker, and 

Order Flow Provider. 

intention is to reduce or eliminate a 

long position in the series of options 

involved in such transaction.’’ The 

proposed Rule 1.1 definition of this 

term would be ‘‘a transaction in a series 

in which the seller intends to reduce or 

eliminate a long position in such 

series.’’ 

Æ The term ‘‘Opening Purchase 

Transaction’’ is currently defined in 

Rule 6.1–O(b)(20) to mean ‘‘an option 

transaction in which the purchaser’s 

intention is to create or increase a long 

position in the series of options 

involved in such transaction.’’ The 

proposed Rule 1.1 definition of this 

term would be ‘‘a transaction in a series 

in which the purchaser intends to create 

or increase a long position in such 

series.’’ 

Æ The term ‘‘Opening Writing 

Transaction’’ is currently defined in 

Rule 6.1–O(b)(21) to mean ‘‘an option 

transaction in which the seller’s 

(writer’s) intention is to create or 

increase a short position in the series of 

options involved in such transaction.’’ 

The proposed Rule 1.1 definition of this 

term would be ‘‘a transaction in a series 

in which the seller (writer) intends to 

create or increase a short position in 

such series.’’ 

• The Exchange proposes to revise 

the definition of ‘‘Crowd Participants,’’ 

which is currently defined in Rule 6.1– 

O(b)(38) to mean ‘‘the Market Makers 

appointed to an option issue under Rule 

6.35–O, and any Floor Brokers actively 

representing orders at the best bid or 

offer on the Exchange for a particular 

option series,’’ to not include the clause 

‘‘for a particular option series’’ as 

unnecessary text. The Exchange 

considers that the definition of ‘‘Crowd 

Participants’’ as distinct from the 

current definition of ‘‘Trading Crowd.’’ 

Specifically, the term ‘‘Trading Crowd’’ 

refers to the physical location of the 

trading post for open outcry trading, 

whereas the term ‘‘Crowd Participants’’ 

refers to the individual Market Makers 

and Floor Brokers that comprise the 

Trading Crowd.20

• The Exchange proposes to revise 

the definition of ‘‘Electronic Order 

Capture System’’ to eliminate reference 

to the Commission’s order Instituting 

Public Administrative Proceedings 

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

Securities Exchange Act of 1934, 

Making Findings and Imposing 

Remedial Sanctions, which was the 

initial authority for the Exchange to 

specify requirements relating to the 

Electronic Order Capture System. The 

Exchange will continue to include 

requirements for the Electronic Order 

Capture System in its rules and does not 

believe it is necessary to continue to cite 

to the original authority for this 

requirement in Exchange rules. 

• The Exchange proposes to 

streamline the definition of ‘‘Expiration 

Date’’ to eliminate now obsolete 

language limiting the definition to 

options expiring before, on, or after 

February 15, 2015. In addition, the 

Exchange does not propose to include 

the following text in the Rule 1.1 

definition of ‘‘Expiration Date’’: 

‘‘Notwithstanding the foregoing, in the 

case of certain long-term options 

expiring on or after February 1, 2015 

that the Options Clearing Corporation 

has designated as grandfathered, the 

term ‘‘expiration date’’ shall mean the 

Saturday immediately following the 

third Friday of the expiration month.’’ 

This rule text is now obsolete as the 

Exchange does not have any series 

trading on the Exchange with such 

Saturday expiration dates. 

• The Exchange proposes to amend 

the definition of ‘‘Options Trading,’’ 

which is currently defined in Rule 6.1– 

O(b)(28), to delete the phrase ‘‘issued by 

the Options Clearing Corporation.’’ 

Accordingly, the proposed Rule 1.1 

definition of ‘‘options trading’’ would be 

as follows: ‘‘when not preceded by the 

word ‘Exchange,’ means trading in any 

option contract, whether or not 

approved for trading on the Exchange.’’ 

The Exchange believes that this 

proposed change is immaterial because 

the Exchange trades only options that 

have been issued by the Options 

Clearing Corporation, and therefore 

reference to the OCC is redundant and 

unnecessary. 

• The Exchange proposes to add to 

the definition of ‘‘Option Contract,’’ 

which is currently defined in Rule 6.1– 

O(b)(5), that option contracts would be 

included within the definition of 

‘‘security’’ or ‘‘securities’’ as such terms 

are used in the Bylaws and Rules of the 

Exchange. This proposed text is copied 

from the last sentence of current Rule 

6.1–O(a). As described below, proposed 

Rule 6.1P–O would not include this 

text. The Exchange believes that adding 

this text to the proposed Rule 1.1 

definition of ‘‘option contract’’ would 

promote clarity and transparency in 

Exchange rules by consolidating related 

definitions in a single location. 

• The Exchange proposes to 

streamline the definition of 

‘‘Outstanding’’ without any substantive 

differences. Specifically, the Exchange 

proposes to replace the following Rule 

6.1–O(b)(26) text, ‘‘has neither been the 

subject of a closing sale transaction on 

the Exchange or a comparable closing 

transaction on another participating 

Exchange nor been exercised nor 

reached its expiration date,’’ with the 

following, ‘‘has not been the subject of 

a closing sale transaction, exercised, or 

expired.’’ The Exchange believes that 

the proposed revised text has the same 

meaning, with more clear text. 

• The Exchange proposes to modify 

the definition of ‘‘Routing Agreement’’ 

to replace references to ‘‘NYSE Arca, 

L.L.C.,’’ an entity that no longer exists, 

with the term ‘‘the Exchange,’’ which is 

a defined term in Rule 1.1. 

• The Exchange proposes to modify 

the definition of ‘‘Trading Crowd,’’ 

which is currently defined in Rule 6.1– 

O(b)(30), to include Floor Brokers, 

which change is consistent with how 

this concept is defined on other options 

exchanges.21

• The Exchange proposes to modify 

the definition of an ‘‘Uncovered’’ 

position, which ‘‘in respect of a short 

position in an option contract means 

that the short position is not covered.’’ 

Because a ‘‘covered’’ position is also 

defined in proposed Rule 1.1, the 

Exchange proposes to add quotation 

marks around ‘‘covered’’ and, 

immediately after this term, to add ‘‘as 

defined above,’’ to make clear the crossreference is to another defined term, 

which would add transparency to the 

rule text. 

Second, definitions set forth in Rule 

6.1A–O(a) would be added to Rule 1.1 

in alphabetical order without any 

substantive differences.22 Because 

certain of these definitions are already 

set forth in Rule 1.1 for cash equity 

trading, the Exchange proposes to 

amend those existing definitions to 

specify that they would be applicable to 

options trading, and if applicable, set 


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23See Complex Pillar Notice, supra note 16. 

24The Exchange also proposes a non-substantive 

amendment to the definition of ‘‘Exchange’’ to add 

a period at the end of the sentence. 

25The proposed (combined) definition of 

‘‘Authorized Trader’’ for cash equity and options 

trading would still include reference to ‘‘Sponsored 

Participants,’’ which remains applicable to cash 

equity trading (although, as noted above, is no 

longer applicable to options trading). 

26See, e.g., infra, discussion regarding proposed 

Rule 6.62P–O(a)(1)(A)(iii), which would use the 

term ‘‘ABBO’’ when referring to a calculation of the 

national best bid and best offer that does not 

include the Exchange’s BBO. 

27See, e.g., Cboe Rule 1.1. (defining the term 

‘‘ABBO’’ to means ‘‘the best bid(s) or offer(s) 

disseminated by Eligible Exchanges (as defined in 

[Cboe] Rule 5.65) and calculated by the Exchange 

based on market information the Exchange receives 

from OPRA’’). The Exchange notes that Cboe’s 

reference to Eligible Exchanges is substantively the 

same as the Exchange’s reference to ‘‘Away 

Markets.’’ 

28Although the Exchange has not presently 

identified any circumstances under which it would 

use an unadjusted ABBO, it has included the 

‘‘[u]nless otherwise specified’’ text to allow for this 

possibility. Should the Exchange opt to utilize an 

unadjusted ABBO for purposes of a specified rule, 

it would file a subsequent rule change to this effect. 

29See Securities Exchange Act Release No. 91564 

(April 14, 2021), 86 FR 20541 (April 20, 2021) (SR– 

NYSEArca–2021–21) (Notice of filing and 

immediate effectiveness of proposed rule change to 

specify when the Exchange may adjust its 

calculation of the PBBO). 

30For determining the BBO for cash equities 

trading, the Exchange considers ‘‘the best bid or 

offer that is a protected quotation on the NYSE Arca 

Marketplace,’’ which ‘‘protected quotations’’ are, by 

definition, displayed. Thus, only displayed interest 

in included in the Exchange’s calculation of the 

BBO on both its options and cash equities markets. 

See proposed Rule 1.1 (defining Protected Bid, 

Protected Offer, Protected Quotation) and current 

Rule 1.1 (ss) (defining same). 

31The term ‘‘Consolidated Book’’ is currently 

defined as ‘‘the Exchange’s electronic book of limit 

orders for the accounts of Public Customers and 

forth differences for options trading, as 

described in more detail below. 

The Exchange does not propose to 

add the definition of ‘‘Directed Order 

Market Maker’’ to Rule 1.1 because in 

Pillar the Exchange would no longer 

support Directed Order Market Makers. 

In addition, the Exchange does not 

propose to add the definitions of 

‘‘Complex BBO’’ or ‘‘Complex NBBO’’ to 

Rule 1.1, and instead has proposed to 

define terms relating to complex trading 

in a separate proposed rule change 

relating to electronic complex trading.23

The Exchange also does not propose to 

add options-related definitions to Rule 

1.1 relating to ‘‘Sponsored Participant,’’ 

‘‘Sponsoring OTP Firm,’’ and 

‘‘Sponsorship Provisions’’ because there 

are currently not any Sponsored 

Participants trading options on the 

Exchange, and the Exchange does not 

propose to reintroduce this category of 

participants. As noted above, the terms 

‘‘OX’’ and ‘‘OX Book’’ will not be used 

in Pillar rules. 

Finally, in addition to definitions that 

are being added to Rule 1.1 without any 

changes from the defined terms from 

Rule 6.1A–O(a), the Exchange proposes 

the following specific changes to the 

definitions that would be included in 

the Rule 1.1 definitions: 24

• Approved Person: The Exchange 

proposes a non-substantive amendment 

to change the word ‘‘a’’ to ‘‘an’’ before 

‘‘OTP Firm.’’ 

• Authorized Trader: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘Authorized Trader’’ to 

remove the limitation to equities trading 

so that it is applicable to both cash 

equity securities and options traded on 

the Exchange, and to add that it can 

mean a person who may submit orders 

to the Exchange’s Trading Facilities on 

behalf of his or her OTP Holder. These 

proposed amendments combine the 

definition of Authorized Trader 

currently set forth in Rule 6.1A–O(a)(1) 

with the existing Rule 1.1 definition of 

Authorized Trader.25

• Away Market: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘Away Market’’ to add 

how that term would be used for 

options trading on the Exchange. As 

proposed, the new text would provide: 

‘‘[w]ith respect to options traded on the 

Exchange, the term ‘Away Market’ 

means any Trading Center (1) with 

which the Exchange maintains an 

electronic linkage, and (2) that provides 

instantaneous responses to orders 

routed from the Exchange.’’ This 

proposed definition is based on the Rule 

6.1A–O(a)(12) definition of ‘‘NOW 

Recipient,’’ which is currently defined 

as ‘‘any Market Center (1) with which 

the Exchange maintains an electronic 

linkage, and (2) that provides 

instantaneous responses to NOW Orders 

routed from OX. The Exchange shall 

designate from time to time those 

Market Centers that qualify as NOW 

Recipients and shall periodically 

publish such information via its 

website.’’ The Exchange proposes four 

non-substantive differences for the 

Pillar options trading definition of 

‘‘Away Market’’: (1) Use the Pillar term 

of ‘‘Away Market’’ instead of the term 

‘‘NOW Recipient;’’ (2) use the term 

‘‘Trading Center’’ instead of ‘‘Market 

Center’’; (3) refer to ‘‘orders routed from 

the Exchange’’ instead of ‘‘NOW Orders 

routed from OX’’; and (4) delete the text 

relating to the Exchange designating and 

publishing to its website certain Away 

Markets. The Exchange does not believe 

that this text needs to be included in the 

definition of Away Market because such 

markets are by definition those with 

which the Exchange maintains 

electronic linkage (i.e., pursuant to the 

Options Order Protection and Locked/ 

Crossed Market Plan). 

• ‘‘Away Market BBO’’ (‘‘ABBO’’): 

The Exchange proposes to add a new 

definition to Rule 1.1 for the Away 

Market BBO or ABBO which, with 

respect to options traded on the 

Exchange, refers to the best bid(s) or 

offer(s) disseminated by Away Markets 

(defined immediately below) and 

calculated by the Exchange based on 

market information the Exchange 

receives from OPRA.26 Consistent with 

this proposal, the Exchange also 

proposes that the term ‘‘ABB’’ would 

mean the best Away Market bid and the 

term ‘‘ABO’’ would mean the best Away 

Market offer. The Exchange notes that 

the proposed definition of ABBO is 

consistent with how this concept is 

defined on other options exchanges.27

In addition, the Exchange proposes 

that it would adjust its calculation of the 

ABBO for options traded on the 

Exchange in the same manner that the 

Exchange would calculate the NBBO (as 

described below). Accordingly, the 

Exchange proposes that, unless 

otherwise specified, the Exchange may 

adjust its calculation of the ABBO based 

on information about orders it sends to 

Away Markets, execution reports 

received from those Away Markets, and 

certain orders received by the 

Exchange.28 This proposed text reflects 

how the Exchange currently calculates 

the ABBO for options trading and uses 

text based on Rule 7.37–E(d)(2) to use 

Pillar terminology to describe current 

functionality.29 The Exchange believes 

that including this detail in the 

proposed definition of ABBO would 

promote clarity and transparency in 

Exchange rules. 

• BBO: The Exchange proposes to 

amend the Rule 1.1 definition of ‘‘BBO’’ 

to add how that term would be used for 

options trading on the Exchange. As 

proposed, with respect to options traded 

on the Exchange, BBO would mean the 

best displayed bid or best displayed 

offer on the Exchange. This definition is 

based on the Rule 6.1A–O(a)(2)(a) 

definition of BBO, which currently 

defines BBO as the ‘‘best bid or offer on 

OX.’’ The Exchange believes that the 

proposed difference would add 

granularity to be clear that nondisplayed quotes and orders would not 

be included in the BBO, which is 

consistent with current functionality.30

The Exchange also proposes to use the 

term ‘‘Exchange’’ instead of ‘‘OX.’’ 

• Consolidated Book: The term 

‘‘Consolidated Book’’ is currently 

defined in Rule 6.1–O(b)(37) 31 and the 


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broker-dealers, and Quotes with Size. All orders 

and Quotes with Size that are entered into the Book 

will be ranked and maintained in accordance with 

the rules of priority as provided in Rule 6.76–O. 

There is no limit to the size of orders or quotes that 

may be entered into the Consolidated Book.’’ 

32See supra note 14 (noting that the term ‘‘OX 

Book’’ is currently defined as ‘‘the OX’s electronic 

file of orders and quotes, which contains all of the 

orders in each of the Display Order and Working 

Order Processes and all of the Market Makers’ 

quotes in the Display Order Process’’). 

33See, e.g., Cboe Rule 1.1. (defining ‘‘Book’’ and 

‘‘Simple Book’’ as referring to ‘‘the electronic book 

of simple orders and quotes maintained by the 

System, which single book is used during both the 

RTH and GTH trading sessions,’’ without reference 

to any size limitations); MIAX Options Exchange 

(‘‘MIAX’’) Rule 100 (defining ‘‘Book’’ as referring to 

‘‘the electronic book of buy and sell orders and 

quotes maintained by the System,’’ without 

reference to any size limitations). 

34Rule 6.1A–O(a)(3) currently defines ‘‘Core 

Trading Hours’’ to mean ‘‘the regular trading hours 

for business set forth in the rules of the primary 

markets underlying those option classes listed on 

the Exchange; provided, however, that transactions 

may be effected on the Exchange until the regular 

time set for the normal close of trading in the 

primary markets with respect to equity option 

classes and ETF option classes, and 15 minutes 

after the regular time set for the normal close of 

trading in the primary markets with respect to 

index option classes, or such other hours as may be 

determined by the Exchange from time to time.’’ 

The Exchange does not propose to include in the 

Rule 1.1 definition of Core Trading Hours for 

options trading the current text regarding trading 

that continues 15 minutes after the regular time set 

for the normal close of trading in the primary 

markets with respect to index options classes, as 

this is already addressed in Rule 5.20–O(a) (Trading 

Sessions). 

35The Exchange proposes that the Rule 1.1 

definition of Professional Customer would not 

include the sub-header of ‘‘Calculation of 

Professional Customer Orders’’ as redundant of the 

following text in the rule that would provide 

‘‘[e]xcept as noted below, each order of any order 

type counts as one order for Professional order 

counting purposes.’’ 

36See, e.g., Cboe Rule 1.1. (defining ‘‘Public 

Customer’’ as referring to ‘‘a person that is not a 

Broker-Dealer). Thus, the Exchange does not 

propose to add to Rule 1.1 the definition of 

‘‘Customer’’ that is set forth in Rule 6.1–O(b)(29) 

(which simply cross-references ‘‘paragraph (c)(6) of 

Rule 15c3–1 under the Securities Exchange Act of 

1934, as amended’’) as unnecessary and potentially 

confusing. 

37The term ‘‘Marketable’’ is currently defined in 

Rule 1.1 to mean, ‘‘[w]ith respect to equities traded 

Continued 

term ‘‘OX Book’’ is currently defined in 

Rule 6.1A–O(a)(14).32 For Pillar, the 

Exchange proposes to define the term 

‘‘Consolidated Book’’ in Rule 1.1 to 

mean the Exchange’s electronic book of 

orders and quotes and state that all 

orders and quotes that are entered into 

the Consolidated Book would be ranked 

and maintained in accordance with the 

rules of priority, as provided for in 

proposed Rule 6.76P–O. This proposed 

definition uses terminology similar to 

the existing Rule 1.1 definition of 

‘‘NYSE Arca Book,’’ which would be 

amended to specify that the definition 

would only be for cash equity securities 

traded on the Exchange. The Exchange 

believes that the proposed definition of 

‘‘Consolidated Book’’ for options trading 

on Pillar is not substantively different 

from either the current Rule 6.1–O 

definition of ‘‘Consolidated Book’’ or 

the current Rule 6.1A–O definition of 

‘‘OX Book.’’ Rather, the changes are 

designed to eliminate text that would 

not be applicable on Pillar without 

changing the substance of the proposed 

definition and would use more 

streamlined text to describe the 

Exchange’s electronic order book. For 

example, the Exchange is not proposing 

to copy from Rule 6.1–O(b)(37) the (now 

antiquated) provision that ‘‘[t]here is no 

limit to the size of orders or quotes that 

may be entered into the Consolidated 

Book’’ because other options exchanges 

do not specify any capacity limit to 

orders and quotes in their defined terms 

relating to their electronic books.33

Further, the Exchange believes that the 

proposed use of the phrase ‘‘electronic 

book of orders and quotes’’ makes clear 

that the Consolidated Book would 

include all orders and quotes, including 

orders from both ‘‘Public Customers and 

broker-dealers,’’ and it is not necessary 

to separately reference what entity may 

be entering orders. In addition, as noted 

above, the Exchange does not propose to 

use the term ‘‘Quote with Size’’ in 

connection with options trading on 

Pillar and therefore does not propose to 

include reference to that term in the 

Pillar proposed definition for 

‘‘Consolidated Book.’’ And, as described 

in greater detail below in connection 

with proposed Rule 6.76P–O, on Pillar, 

the Exchange does not propose to use 

the terms ‘‘Display Order and Working 

Order Processes’’ and therefore these 

terms would not be included in the Rule 

1.1 definition of Consolidated Book. 

• Core Trading Hours: The Exchange 

proposes that the current definition of 

Core Trading Hours in Rule 1.1, which 

is defined as ‘‘the hours of 9:30 a.m. 

Eastern Time through 4:00 p.m. (Eastern 

Time) or such other hours as may be 

determined by the Exchange from time 

to time,’’ would be applicable to both 

cash equity securities and options 

trading on the Exchange. Because 

options trading may extend past 4:00 

p.m., the Exchange proposes to amend 

Rule 1.1 to provide that for options 

traded on the Exchange, transactions 

may be effected on the Exchange for an 

equity options class until close of 

trading of the Primary Market for the 

securities underlying an options class. 

This proposed text is based on current 

Rule 6.1A–O(a)(3).34

• Customer and Professional 

Customer: The Exchange proposes to 

amend Rule 1.1 to add the definitions of 

‘‘Customer’’ and ‘‘Professional 

Customer.’’ The proposed definitions 

use the same text as the definitions of 

Customer and Professional Customer set 

forth in Rules 6.1A–O(a)(4) and (4A) 

with non-substantive differences only to 

specify that these definitions would be 

applicable for options traded on the 

Exchange, eliminate redundant 

headers,35 and re-number the subparagraphs. The Exchange also proposes 

to include a cross-reference to the 

definition of a broker or dealer as 

defined in Sections 3(a)(4) and 3(a)(5) of 

the Exchange Act and rules thereunder, 

which specificity adds clarity and 

transparency to the proposed definition. 

The Exchange notes that the proposed 

definition of Customer is consistent 

with how this concept is defined on 

other options exchanges.36

• Floor: The Exchange proposes to 

amend the Rule 1.1 definition of 

‘‘Floor,’’ which refers to the options 

trading floor, to include the 

synonymous defined terms ‘‘Trading 

Floor’’ and ‘‘Options Trading Floor,’’ 

which terms are used throughout 

existing Exchange rules and make one 

change to remove the term ‘‘shall.’’ 

These proposed changes would add 

clarity and consistency to Exchange 

rules. 

• Lead Market Maker: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘Lead Market Maker’’ to 

add how that term would be used for 

options trading. As proposed, the new 

text would provide that for options 

traded on the Exchange, the term ‘‘Lead 

Market Maker’’ or ‘‘LMM’’ would ‘‘mean 

a person that has been deemed qualified 

by the Exchange for the purpose of 

making transactions on the Exchange in 

accordance with Rule 6.82–O. Each 

LMM must be registered with the 

Exchange as a Market Maker. Any OTP 

Holder or OTP Firm registered as a 

Market Maker with the Exchange is 

eligible to be qualified as an LMM.’’ 

This proposed definition is based on the 

Rule 6.1A–O(a)(5) definition of Lead 

Market Maker without any substantive 

differences. The Exchange proposes one 

non-substantive difference to use the 

term ‘‘person’’ instead of ‘‘individual or 

entity,’’ because the term ‘‘person,’’ as 

currently defined in Rule 1.1, is 

inclusive of natural persons and 

entities. 

• Marketable: The Exchange proposes 

to amend the Rule 1.1 definition of 

‘‘Marketable’’ to extend it to address 

options traded on the Exchange by 

deleting the phrase ‘‘[w]ith respect to 

equities traded on the Exchange.’’ 37 The 


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on the Exchange, the term ‘Marketable’ means for 

a Limit Order, an order that can be immediately 

executed or routed. Market Orders are always 

considered marketable.’’ 

38The term ‘‘Marketable’’ is currently defined in 

Rule 6.1A–O(a)(7) for options trading to mean ‘‘for 

a Limit Order, the price matches or crosses the 

NBBO on the other side of the market. Market 

orders are always considered marketable.’’ 

39See Securities Exchange Act Release No. 91564 

(April 14, 2021), 86 FR 20541 (April 20, 2021) (SR– 

NYSEArca–2021–21) (Notice of filing and 

immediate effectiveness of proposed rule change to 

specify when the Exchange may adjust its 

calculation of the PBBO). 

current description of the term 

‘‘Marketable,’’ for purposes of Market 

Orders, is the same in both Rules 1.1 

and 6.1A–O(a)(7).38 Accordingly, the 

existing Rule 1.1 text relating to the 

term ‘‘Marketable’’ with respect to 

Market Orders would be applicable to 

options trading without any differences. 

With respect to Limit Orders, in Rule 

1.1, the term ‘‘Marketable’’ currently 

means an order that can be immediately 

executed or routed. The current Rule 

6.1A–O(a)(7) definition of the term 

‘‘Marketable’’ for Limit Orders means 

when the price of the order matches or 

crosses the NBBO on the other side of 

the market. The current Rule 1.1 

definition relating to Limit Orders 

means substantively the same thing as 

the current Rule 6.1A–O(a)(7) 

description for Limit Orders, and the 

Exchange proposes to use the existing 

Rule 1.1 definition of the term 

‘‘Marketable’’ for both cash equity and 

options trading of Limit Orders. The 

Exchange also proposes a nonsubstantive amendment to add a comma 

after the phrase, ‘‘the term ‘Marketable’ 

means’’ and before ‘‘for a Limit Order.’’ 

• Market Maker: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘Market Maker’’ to add 

how that term would be used for 

options trading. As proposed, the new 

text would provide that for options 

traded on the Exchange, the term 

‘‘Market Maker’’ would refer ‘‘to an OTP 

Holder or OTP Firm that acts as a 

Market Maker pursuant to Rule 6.32– 

O.’’ This proposed definition is based 

on the Rule 6.1A–O(a)(8) definition of 

Market Maker, which is defined as ‘‘an 

OTP Holder or OTP Firm that acts as a 

Market Maker pursuant to Rule 6.32– 

O.’’ Accordingly, the proposed Rule 1.1 

definition of the term ‘‘Market Maker’’ 

for options trading would not have any 

differences from the current Rule 6.1A– 

O definition. The Exchange also 

proposes to include in the Rule 1.1 

definition of Market Maker for options 

trading that for purposes of Exchange 

rules, the term Market Maker includes 

Lead Market Makers, unless the context 

otherwise indicates. This proposed text 

is based on Rule 6.1–O(c), References, 

with a non-substantive difference to use 

the term ‘‘Exchange’’ instead of ‘‘NYSE 

Arca.’’ The Exchange believes this 

proposed change would streamline and 

clarify this definition by consolidating 

definitions relating to Market Makers in 

a single location. 

• Market Maker Authorized Trader: 

The Exchange proposes to amend the 

Rule 1.1 definition of ‘‘Market Maker 

Authorized Trader’’ to add how that 

term would be used for options trading. 

As proposed, the new text would 

provide that for options traded on the 

Exchange, the term ‘‘Market Maker 

Authorized Trader’’ or ‘‘MMAT’’ would 

‘‘mean an authorized trader who 

performs market making activities 

pursuant to Rule 6–O on behalf of an 

OTP Firm or OTP Holder registered as 

a Market Maker.’’ This proposed 

definition is based on the Rule 6.1A– 

O(a)(9) definition of Market Maker 

Authorized Trader without any 

differences. 

• Market Participant Identifier 

(‘‘MPID’’): The Exchange proposes to 

add a new definition to Rule 1.1 for 

‘‘Market Participant Identifier (‘MPID’).’’ 

This term is currently used in, but not 

defined in, Rules 7.19–E and 7.31– 

E(i)(2) for cash equities trading. Because 

this term would also be used for options 

trading on Pillar, the Exchange believes 

that defining this term in Rule 1.1 

would promote clarity and 

transparency. The proposed definition 

would provide that ‘‘Market Participant 

Identifier’’ or ‘‘MPID’’ refers to the 

identifier assigned to the orders and 

quotes of a single ETP Holder, OTP 

Holder, or OTP Firm for the execution 

and clearing of trades on the Exchange 

by that permit holder. The definition 

would further provide that an ETP 

Holder, OTP Holder, or OTP Firm may 

obtain multiple MPIDs and each such 

MPID may be associated with one or 

more sub-identifiers of that MPID. The 

Exchange believes that using the term 

MPID on the Exchange for options 

trading would promote clarity as this is 

an identifier commonly used by 

members of exchanges and the 

Exchange believes that using this term 

for its OTP Holders and OTP Firms 

would promote consistency, particularly 

for those firms that are also ETP Holders 

on the Exchange. 

• Minimum Price Variation or MPV: 

The Exchange proposes to amend Rule 

1.1 to add the definition of ‘‘Minimum 

Price Variation’’ or ‘‘MPV’’ for both cash 

equity securities and options that are 

traded on the Exchange. The Exchange 

proposes that the term ‘‘Minimum Price 

Variation’’ or ‘‘MPV’’ means the 

minimum price variations established 

by the Exchange. The Exchange further 

proposes that the MPVs for quoting cash 

equity securities traded on the Exchange 

are set forth in Rule 7.6–E. The 

Exchange further proposes that the 

MPVs for quoting and trading options 

traded on the Exchange are set forth in 

Rule 6.72–O(a). The proposed definition 

as it relates to options trading is based 

on the Rule 6.1A–O(a)(10) definition of 

MPV, which defines the term 

‘‘Minimum Price Variation’’ to mean 

‘‘the variations established by the 

Exchange pursuant to Rule 6.72–O(a).’’ 

Similar to this current rule, the 

proposed Rule 1.1 definition of MPV for 

options trading would cross reference 

Rule 6.72–O(a). The Exchange proposes 

a difference to add reference to ‘‘quoting 

and trading options’’ to distinguish how 

the MPV for options would be 

determined from how the MPV for 

quoting cash equity securities would be 

determined. 

• NBBO: The Exchange proposes to 

amend the Rule 1.1 definition of 

‘‘NBBO, Best Protected Bid, Best 

Protected Offer, Protected Best Bid and 

Offer (PBBO)’’ to add how the term 

NBBO would be used for options 

trading. The Exchange proposes that: 

‘‘[w]ith respect to options traded on the 

Exchange, the term ‘NBBO’ means the 

national best bid or offer. The terms 

‘NBB’ means the national best bid and 

‘NBO’ means the national best offer.’’ 

This proposed definition includes the 

current definition of NBBO from Rule 

6.1A–O(a)(11)(a), which defines that 

term as ‘‘the national best bid or best 

offer.’’ The Exchange proposes to add 

the terms ‘‘NBB’’ and ‘‘NBO’’ as 

clarifying terms for options trading. 

In addition, the Exchange proposes 

that, unless otherwise specified, for 

options trading, the Exchange may 

adjust its calculation of the NBBO based 

on information about orders it sends to 

Away Markets, execution reports 

received from those Away Markets, and 

certain orders received by the Exchange. 

This proposed text reflects how the 

Exchange currently calculates the NBBO 

for options trading and is based on how 

the PBBO is calculated on the 

Exchange’s cash equity market, as 

described in Rule 7.37–E(d)(2).39 The 

Exchange proposes that it would adjust 

its calculation of the NBBO for options 

traded on the Exchange in the same 

manner that the Exchange calculates the 

PBBO for cash equity securities traded 

on the Exchange. The Exchange believes 

that adding this detail to the proposed 

definition of NBBO would promote 

clarity and transparency in Exchange 

rules. The Exchange further notes that 

there are limited circumstances when 


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40The Exchange also proposes non-substantive 

amendments to Rule 6.96–O to refer to ‘‘the 

Exchange,’’ a defined term in Rule 1.1 (rather than 

NYSE Arca, Inc.) and to renumber current 

paragraphs (a), (b), and (c), as paragraphs (b), (c), 

and (d). 

41Rule 6.1–O(e) provides: Applicability of Other 

Exchange Rules. The following Rules apply to 

transactions on the Exchange in option contracts 

issued or subject to issuance by the Options 

Clearing Corporation: Rules 4.15–O–4.19–O, 5.1–O, 

9.21–O–9.28–O and 11.6. The following Rules do 

not apply to transactions on the Exchange in option 

contracts: Rule 1.1. All other Exchange rules are 

applicable to transactions on the Exchange in 

option contracts unless the context clearly indicates 

otherwise. In applying the Rules of the Exchange to 

transactions on the Exchange in option contracts, 

‘security’ or ‘securities’ includes option contracts, 

‘specialist’ means Market Maker on the Options 

Trading Floor.’’ 

the Exchange would not adjust its 

calculation of the NBBO and would 

determine the NBBO for options in the 

same way that the Exchange determines 

the NBBO for cash equity securities 

traded on the Exchange. As described in 

detail below, the Exchange will specify 

in its rules when it would not be using 

an adjusted NBBO for purposes of a 

specific rule. 

• NYSE Arca Book: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘NYSE Arca Book’’ to 

specify that this term is applicable only 

for cash equity securities traded on the 

Exchange. As noted above, the Exchange 

uses the term ‘‘Consolidated Book’’ for 

options traded on the Exchange and 

would continue to use that term on 

Pillar for options trading. 

• NYSE Arca Marketplace: The 

Exchange proposes to amend the Rule 

1.1 definition of ‘‘NYSE Arca 

Marketplace’’ to specify that this term is 

applicable only for cash equity 

securities traded on the Exchange. 

• Order Flow Provider or OFP: The 

Exchange proposes to add the definition 

of ‘‘Order Flow Provider or OFP’’ to 

Rule 1.1 to mean ‘‘any OTP Holder that 

submits, as agent, orders to the 

Exchange.’’ This proposed definition is 

based on the Rule 6.1A–O(a)(21) 

definition of ‘‘Order Flow Provider’’ 

without any differences. 

• Trading Center: The Exchange 

proposes to amend the Rule 1.1 

definition of ‘‘Trading Center’’ to add 

how this term would be used for options 

trading. As proposed: ‘‘[w]ith respect to 

options traded on the Exchange, for 

purposes of Rule 6–O, the term 

‘‘Trading Center’’ means a national 

securities exchange that has qualified 

for participation in the Options Clearing 

Corporation pursuant to the provisions 

of the rules of the Options Clearing 

Corporation.’’ This proposed definition 

is based on the Rule 6.1A–O(a)(6) 

definition of ‘‘Market Center’’ with a 

non-substantive difference to use the 

term ‘‘Trading Center’’ instead of 

‘‘Market Center.’’ 

• User: The Exchange proposes to 

amend the Rule 1.1 definition of ‘‘User’’ 

to add how this term would be used for 

options trading. As proposed: ‘‘[w]ith 

respect to options traded on the 

Exchange, the term ‘User’ shall mean 

any OTP Holder or OTP Firm who is 

authorized to obtain access to the 

Exchange pursuant to Rule 6.2A–O.’’ 

This proposed definition is based on the 

Rule 6.1A–O(a)(19) definition of User, 

with one difference not to include the 

reference to Sponsored Participant, 

which, as described above, is no longer 

used in connection with options 

trading. 

• User Agreement: The Exchange 

proposes a non-substantive amendment 

to the Rule 1.1 definition of ‘‘User 

Agreement’’ to replace the term ‘‘NYSE 

Arca, L.L.C’’ with the term the 

‘‘Exchange.’’ 

In addition to proposed amendments 

to Rule 1.1, the Exchange proposes to 

amend Rule 6.96–O to add the 

definition of ‘‘Routing Broker,’’ which is 

currently defined in Rule 6.1A–O(a)(15) 

to mean ‘‘the broker-dealer affiliate of 

NYSE Arca, Inc. and/or any other nonaffiliate that acts as a facility of NYSE 

Arca, Inc. for routing orders entered into 

OX of OTP Holders, OTP Firms and 

OTP Firms’ Sponsored Participants to 

other Market Centers for execution 

whenever such routing is required by 

NYSE Arca Rules.’’ For options trading 

on Pillar, the Exchange proposes to 

define the term in Rule 6.96–O 

(Operation of a Routing Broker) to mean 

‘‘the broker-dealer affiliate of the 

Exchange and/or any other non-affiliate 

that acts as a facility of the Exchange for 

routing orders submitted to the 

Exchange to other Trading Centers for 

execution whenever such routing is 

required by Exchange Rules and federal 

securities laws.’’ 40 The proposed rule 

text is based on the current definition in 

Rule 6.1A–O(a)(15), with nonsubstantive differences to streamline the 

definition and to use Pillar terminology. 

Specifically, the Exchange does not 

propose to include terms that would no 

longer be applicable to trading on Pillar, 

including reference to OX, Market 

Centers, and Sponsored Participants. 

The Exchange notes that including the 

definition of ‘‘Routing Broker’’ in its 

rule governing the operation of the 

routing broker is consistent with the 

Exchange’s cash equity rules, which 

also defines the term ‘‘Routing Broker’’ 

in Rule 7.45–E(a) (Operation of Routing 

Broker). 

In connection with the proposed 

amendments to Rule 1.1, the Exchange 

proposes to add the following preamble 

to Rule 6.1A–O: ‘‘This Rule is not 

applicable to trading on Pillar.’’ This 

proposed preamble is designed to 

promote clarity and transparency in 

Exchange rules that Rule 6.1A–O would 

not be applicable to trading on Pillar. 

Proposed Rule 6.1P–O: Applicability 

Current Rule 6.1–O sets forth the 

applicability, definitions, and references 

in connection with options trading. As 

noted above, the definitions in Rule 6.1– 

O(b) and reference in Rule 6.1–O(c) to 

LMMs being included in the definition 

of Market Maker will be copied to 

proposed Rule 1.1 for purposes of 

trading on Pillar. 

The Exchange proposes new Rule 

6.1P–O to include only those portions of 

Rule 6.1–O relating to applicability of 

Exchange Rules that would continue to 

be applicable after the transition to 

Pillar. Proposed Rule 6.1P–O(a) would 

be identical to the first two sentences of 

current Rule 6.1–O(a). As noted above, 

the proposed definition of ‘‘option 

contract’’ would incorporate the final 

sentence of Rule 6.1–O(a), which states 

that option contracts are included in the 

definition of ‘‘security’’ or ‘‘securities.’’ 

Accordingly, the Exchange does not 

propose to include this text in proposed 

Rule 6.1P–O(a). 

Proposed Rule 6.1P–O(b) would 

provide that unless otherwise stated, 

Exchange rules would be applicable to 

transactions on the Exchange in option 

contracts. The proposed rule is similar 

to Rule 6.1–O(e) because it addresses 

the applicability of other Exchange 

Rules.’’ 41 The Exchange proposes 

differences from current Rule 6.1–O(e) 

to eliminate obsolete and duplicative 

text and to streamline the proposed rule 

text without any substantive differences. 

For example, the Exchange does not 

believe it is necessary to identify which 

rules are or are not applicable to trading 

of option contracts because any rule 

with ‘‘–O’’ appended to it is applicable 

to trading of option contracts. In 

addition, Rule 1.1 is now applicable to 

trading of options contracts. And, as 

discussed above, the Exchange has 

proposed to amend the definition of 

‘‘option contract’’ to specify that they 

are included in the definition of 

‘‘security’’ or ‘‘securities.’’ Finally, the 

reference in Rule 6.1–O(e) to 

‘‘ ‘specialist’ means ‘Market Maker’ ’’ is 

duplicative of Rule 6.32–O, and 

therefore is not necessary to add to 

proposed Rule 6.1P–O(b). 

In connection with proposed Rule 

6.1P–O, the Exchange proposes to add 

the following preamble to Rule 6.1–O: 

‘‘This Rule is not applicable to trading 

on Pillar.’’ This proposed preamble is 


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42As noted herein (see supra note 14), the 

Exchange also proposes to eliminate the use of the 

terms ‘‘OX’’ and ‘‘OX Book,’’ as these terms would 

not be applicable to trading on Pillar. 

designed to promote clarity and 

transparency in Exchange rules that 

Rule 6.1–O would not be applicable to 

trading on Pillar. 

Proposed Rule 6.76P–O: Order Ranking 

and Display 

Rule 6.76–O governs order ranking 

and display for the current Exchange 

options trading system. Proposed Rule 

6.76P–O would address order ranking 

and display for options trading under 

Pillar, including accounting for the 

quoting activity of options Market 

Makers as noted below. With the 

transition to Pillar, the Exchange does 

not propose any substantive differences 

to how orders and quotes would be 

ranked and displayed on the Exchange 

and, unless otherwise specified in the 

proposed rules, the Exchange proposes 

that same-priced orders and quotes 

would be ranked no differently than 

how they are ranked in the OX system. 

For example, same-priced displayed 

orders and quotes would be ranked 

ahead of same-priced non-displayed 

orders and quotes, and within each 

category of displayed or non-displayed 

interest, orders and quotes would be 

ranked in time priority. However, the 

Exchange proposes to eliminate the 

terminology relating to the ‘‘Display 

Order Process’’ and ‘‘Working Order 

Process’’ (each of which are described 

below) and instead use Pillar 

terminology based on Rule 7.36–E, 

which governs order ranking and 

display on the Exchange’s cash equity 

market.42

Options Market Makers enter quotes 

and orders and the current OX system 

processes quotes and orders together 

with respect to ranking and display. The 

Exchange proposes that it would operate 

the same way using the Pillar 

technology. As discussed in detail 

below, the Exchange believes that the 

proposed new rule text provides 

transparency with respect to how the 

Exchange’s price-time priority model 

would operate through the use of new 

terminology applicable to all orders and 

quotes on the Pillar trading platform. In 

addition, throughout proposed Rule 

6.76P–O, the Exchange proposes to 

change the term ‘‘shall’’ to ‘‘will,’’ 

which is a stylistic preference that 

would add consistency to Exchange 

rules. 

Proposed Rule 6.76P–O(a) would set 

forth definitions for purposes of all of 

Rule 6–O (Options Trading) on the 

Pillar trading platform, including 

proposed Rule 6.76AP–O (Order 

Execution and Routing), described 

below. The proposed definitions are 

based on Rule 7.36–E(a) definitions for 

purposes of Rule 7–E cash equity 

trading, with terminology differences, as 

noted above, to reference ‘‘orders and 

quotes’’ throughout proposed Rule 

6.76P–O. The Exchange believes that 

these proposed definitions would 

provide transparency regarding how the 

Exchange would operate its options 

platform on Pillar and serve as the 

foundation for how orders/quotes and 

modifiers would be described for 

options trading on Pillar, as discussed 

in more detail below. In addition, the 

Exchange believes that even with using 

Pillar terminology that is based on the 

Exchange’s cash equity rules, unless 

otherwise specified, the definitions that 

are described in these proposed rules do 

not differ in substance from current 

Rule 6.76–O relating to options trading. 

• Proposed Rule 6.76P–O(a)(1) would 

define the term ‘‘display price’’ to mean 

the price at which an order or quote 

ranked Priority 2—Display Orders or 

Market Order is displayed, which price 

may be different from the limit price or 

working price of the order (i.e., if it is 

a Non-Routable Limit Order or an ALO 

Order as described below in proposed 

Rule 6.62P–O(e)(1), (2), respectively). 

This proposed definition uses Pillar 

terminology based on Rule 7.36–E(a)(1). 

To incorporate quotes, the Exchange 

proposes one difference in terminology 

to refer to ‘‘order or quote ranked 

Priority 2—Display Orders,’’ versus 

referring to ‘‘Limit Order,’’ as set forth 

in Rule 7.36–E(a)(1). The term ‘‘Priority 

2—Display Orders’’ is described in more 

detail below. The Exchange also 

proposes a second difference compared 

to the Exchange’s cash equity rules to 

include Market Orders as interest that 

may have a display price (for example, 

as described below and consistent with 

current functionality, a Market Order 

could be displayed at its Trading Collar, 

which is unique to options trading and 

not available on the cash equity 

platform). 

• Proposed Rule 6.76P–O(a)(2) would 

define the term ‘‘limit price’’ to mean 

the highest (lowest) specified price at 

which a Limit Order or quote to buy 

(sell) is eligible to trade. The limit price 

is designated by the User. As noted in 

the proposed definitions of display 

price and working price, the limit price 

designated by the User may differ from 

the price at which the order/quote 

would be displayed or eligible to trade. 

This proposed definition uses Pillar 

terminology based on Rule 7.36–E(a)(2), 

with a terminology difference to refer to 

the specified price of a ‘‘Limit Order or 

quote,’’ versus referring to ‘‘Limit 

Order,’’ as set forth in Rule 7.36–E(a)(2). 

• Proposed Rule 6.76P–O(a)(3) would 

define the term ‘‘working price’’ to 

mean the price at which an order or 

quote is eligible to trade at any given 

time, which may be different from the 

limit price or display price of an order. 

This proposed definition is based on 

Rule 7.36–E(a)(3), with a terminology 

difference to refer to ‘‘order or quote’’ 

for purposes of determining ranking 

priority, versus referring solely to an 

‘‘an order,’’ as set forth in Rule 7.36– 

E(a)(3). The Exchange believes that the 

term ‘‘working price’’ would provide 

clarity regarding the price at which an 

order/quote may be executed at any 

given time. Specifically, the Exchange 

believes that use of the term ‘‘working’’ 

denotes that this is a price that is subject 

to change, depending on the 

circumstances. The Exchange will be 

using this term in connection with 

orders/quotes and modifiers, as 

described in more detail below. 

• Proposed Rule 6.76P–O(a)(4) would 

define the term ‘‘working time’’ to mean 

the effective time sequence assigned to 

an order or quote for purposes of 

determining its priority ranking. The 

Exchange proposes to use the term 

‘‘working time’’ in its rules for trading 

on the Pillar trading platform instead of 

terms such as ‘‘time sequence’’ or ‘‘time 

priority,’’ which are used in rules 

governing options trading on the 

Exchange’s current system. The 

Exchange believes that use of the term 

‘‘working’’ denotes that this is a time 

assigned to an order/quote for purposes 

of ranking and is subject to change, 

depending on circumstances. This 

proposed definition is based on Rule 

7.36–E(a)(4), with a terminology 

difference to refer to an ‘‘order or 

quote,’’ versus referring solely to ‘‘an 

order,’’ as set forth in Rule 7.36–E(a)(4). 

• Proposed Rule 6.76P–O(a)(5) would 

define an ‘‘Aggressing Order’’ or 

‘‘Aggressing Quote’’ to mean a buy (sell) 

order or quote that is or becomes 

marketable against sell (buy) interest on 

the Consolidated Book. The proposed 

terms would therefore refer to orders or 

quotes that are marketable against other 

orders or quotes on the Consolidated 

Book. These terms would be applicable 

to incoming orders or quotes, orders that 

have returned unexecuted after routing, 

or resting orders or quotes that become 

marketable due to one or more events. 

For the most part, resting orders or 

quotes will have already traded with 

contra-side interest against which they 

are marketable. 

To maximize the potential for orders 

or quotes to trade, the Exchange 

continually evaluates whether resting 


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43See Rule 6.76–O(a)(1)(A)–(B), (b) and (c). When 

the displayed portion of the Reserve Order is 

decremented completely, the displayed portion of 

the Reserve Order shall be refreshed for the 

displayed amount; or the entire reserve amount, if 

the remaining reserve amount is smaller than the 

displayed amount, from the reserve portion and 

shall be submitted and ranked at the specified limit 

price and the new time that the displayed portion 

of the order was refreshed. See Rule 6.76– 

O(a)(1)(B). As discussed in more detail below, the 

Exchange proposes to describe how Reserve Orders 

would function in proposed Rule 6.62P–O(d)(1). 

44See Rule 6.76–O(a)(2)(A)–(E). After the 

displayed portion of a Reserve Order is refreshed 

from the reserve portion, the reserve portion 

remains ranked based on the original time of order 

entry, while the displayed portion is sent to the 

Display Order Process with a new time-stamp. See 

Rule 6.76–O(a)(2)(A). 

45Rule 6.76–O(b) provides that ‘‘[e]xcept as 

otherwise permitted by Rule 6.76A–O, all bids and 

offers at all price levels in the Display Order 

Process of the OX Book shall be displayed on an 

anonymous basis.’’ 

46The second sentence of the preamble to current 

Rule 6.76–O states, ‘‘OX also will disseminate 

current consolidated quotations/last sale 

information, and such other market information as 

may be made available from time to time pursuant 

to agreement between the Exchange and other 

Market Centers, consistent with the Plan for 

Reporting of Consolidated Options Last Sale 

Reports and Quotation Information.’’ The Exchange 

proposes a difference to use the term ‘‘Trading 

Centers’’ instead of ‘‘Market Centers.’’ 

47Rule 6.76–O(a) states that the Exchange ranks 

bids and offers ‘‘according to price-time priority, 

such that within each price level, all bids and offers 

shall be organized by the time of entry’’. 

interest may become marketable. Events 

that could trigger a resting order to 

become marketable include updates to 

the working price of such order or 

quote, updates to the NBBO, changes to 

other interest resting on the 

Consolidated Book, or processing of 

inbound messages. To address such 

circumstances, the Exchange proposes 

to include in proposed Rule 6.76P– 

O(a)(5) that a resting order or quote may 

become an Aggressing Order or 

Aggressing Quote if its working price 

changes, if the NBBO is updated, 

because of changes to other orders or 

quotes on the Consolidated Book, or 

when processing inbound messages. 

The proposed definition of an 

‘‘Aggressing Order’’ is based on Rule 

7.36–E(a)(5), with differences in the 

proposed rule to account for options 

trading, such as including the defined 

term ‘‘Aggressing Quote’’; referring to an 

‘‘order or quote’’ versus ‘‘an order’’; 

referring to the Consolidated Book 

rather than NYSE Arca Book; and 

referring to the NBBO instead of the 

PBBO, which is not a term used in 

options trading. The Exchange believes 

that these proposed definitions would 

promote transparency in Exchange rules 

by providing detail regarding 

circumstances when a resting order or 

quote may become marketable, and thus 

would be an Aggressing Order or 

Aggressing Quote. 

Under current Rule 6.76–O, bids and 

offers are ranked and maintained in the 

Display Order Process and/or the 

Working Order Process of the OX Book 

according to price-time priority. In the 

Display Order Process, all Limit Orders 

(with no other conditions), quotes, and 

the displayed portion of Reserve Orders 

(not the reserve size) are ranked in 

price-time priority, displayed on an 

anonymous basis (except as permitted 

by Rule 6.76A–O), and the best-ranked 

interest is disseminated.43 In the 

Working Order Process, the reserve 

portion of Reserve Orders,44 All-orNone Orders, Stop and Stop Limit 

Orders and Stock Contingency Orders 

are ranked in price-time priority based 

on the limit price or, in the case of Stop 

and Stop Limit Orders, the stop price. 

As described in more detail below, 

proposed Rule 6.62P–O, relating to 

orders and modifiers, would specify 

whether an order or quote would be 

displayable, i.e., ranked Priority 2 

Display Orders, or non-displayable, i.e., 

ranked Priority 3—Non-Display Orders. 

Proposed Rule 6.76P–O(b) would 

govern the display of non-marketable 

Limit Orders and quotes. As proposed, 

the Exchange would display ‘‘all nonmarketable Limit Orders and quotes 

ranked Priority 2—Display Orders 

unless the order or modifier instruction 

specifies that all or a portion of the 

order is not to be displayed,’’ which 

functionality is the same as that set forth 

in the first sentence of the preamble to 

the current Rule 6.76–O, stating that the 

Exchange displays ‘‘all non-marketable 

limit orders in the Display Order 

Process.’’ The Exchange proposes to use 

Pillar ranking terminology (described 

further below) to describe the same 

functionality and references to the 

Display Order Process would not be 

included. 

Rule 6.76P–O(b)(1), which is 

substantially identical to current Rule 

6.76–O(b), would provide that except as 

otherwise permitted in proposed new 

Rule 6.76AP–O (discussed below), all 

non-marketable displayed interest 

would be displayed on an anonymous 

basis.45

Proposed Rule 6.76P–O(b)(2) is 

substantially identical to the second 

sentence of the preamble to current Rule 

6.76–O, and mirroring that text, would 

provide that the Exchange would 

‘‘disseminate current consolidated 

quotations/last sale information, and 

such other market information as may 

be made available from time to time 

pursuant to agreement between the 

Exchange and other Trading Centers, 

consistent with the Plan for Reporting of 

Consolidated Options Last Sale Reports 

and Quotation Information.’’ 46

Finally, proposed Rule 6.76P–O(b)(3) 

would provide that if ‘‘an Away Market 

locks or crosses the Exchange BBO, the 

Exchange will not change the display 

price of any Limit Orders or quotes 

ranked Priority 2—Display Orders and 

any such orders will be eligible to be 

displayed as the Exchange’s BBO.’’ This 

proposed rule describes Pillar 

functionality, which is the same as 

current functionality. The Exchange 

believes that including this text in the 

proposed rules would promote clarity 

and granularity. In addition, this 

proposed concept, which is based on 

Rule 7.36–E(b)(4), makes clear that 

resting displayed interest that did not 

cause a locked or crossed market 

condition can stand its ground and 

maintain priority at the price at which 

it was originally displayed. This 

provision uses Pillar terminology and 

functionality described in Rule 7.36– 

E(b)(4), but does not include text from 

the cash equity rule providing for the 

treatment of displayed Limit Orders that 

are ‘‘marketable against protected 

quotations on Away Market’’ before 

‘‘resuming trading and publishing a 

quote in a UTP Security following a 

Regulatory Halts,’’ because the concept 

of trading a security on an unlisted 

trading privileges basis and how a nonprimary cash equity market would 

resume trading after a primary listing 

exchanges resumes trading following a 

trading halt is not applicable to options 

trading. 

Proposed Rule 6.76P–O(c) would 

describe the Exchange’s general process 

for ranking orders and quotes, which 

process is the same as that set forth in 

current Rule 6.76–O(a), with differences 

to use Pillar ranking terminology and 

include additional detail related to 

order/quote modifiers.47 As proposed, 

Rule 6.76P–O(c) would provide that all 

non-marketable orders and quotes 

would be ranked and maintained in the 

Consolidated Book according to pricetime priority in the following manner: 

(1) Price; (2) priority category; (3) time; 

and (4) ranking restrictions applicable to 

an order/quote or modifier condition. 

Accordingly, orders and quotes would 

be first ranked by price. Next, at each 

price level, orders and quotes would be 

assigned a priority category, which is 

similar to the Exchange’s current 

process to assign orders and quotes as 

being part of either the ‘‘Display Order 

Process’’ or ‘‘Working Order Process.’’ 

Orders and quotes in each priority 

category would be required to be 

exhausted before moving to the next 

priority category. Within each priority 


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48See supra notes 43 and 43 (regarding treatment 

of Reserve Orders per Rule 6.76–O(a)(1)(B) and 

(a)(2)(A)). 

49See, e.g., Rule 6.76–O(a)(1) and (2) (setting forth 

the price-time ranking and priority structure for 

bids and offers submitted to the Exchange, 

including ranking of certain order types with 

contingencies). 

50See, e.g., infra, discussion regarding proposed 

Non-Routable Limit Order per Rule 6.62P–O(e)(1). 

category, orders and quotes would be 

ranked by time. These general 

requirements for ranking are applicable 

to all orders and quotes, unless an order 

or quote or modifier has a specified 

exception to this ranking methodology, 

as described in more detail below. The 

Exchange is proposing this ranking 

description instead of using the abovedescribed terms of ‘‘Display Order 

Process’’ and ‘‘Working Order Process’’ 

in Rule 6.76–O. However, substantively 

there would be no difference in how the 

Exchange would rank orders and quotes 

on the Pillar trading platform from how 

it ranks orders and quotes in the current 

option trading system. For example, a 

non-displayed order would always be 

ranked after a displayed order at the 

same price, even if the non-displayed 

order has an earlier working time. In 

addition, this proposed rule would use 

Pillar terminology based on Rule 7.36– 

E(c), with terminology differences to 

reflect options trading, including that 

the proposed rule references ‘‘nonmarketable orders and quotes,’’ not 

solely ‘‘non-marketable orders,’’ and 

references the ‘‘Consolidated Book,’’ 

rather than the ‘‘NYSE Arca Book.’’ 

These differences between the equity 

rules and the proposed rules reflect the 

differences between cash equities and 

options trading; interest on the 

Exchange’s options market would be 

ranked (in price-time priority) as it is on 

the Exchange’s cash equity market. 

Proposed Rule 6.76P–O(d) would 

describe how orders and quotes would 

be ranked based on price, which 

additional detail would provide 

transparency regarding the Exchange’s 

price-ranking process. Specifically, as 

proposed, all orders and quotes would 

be ranked based on the working price of 

an order or quote. Orders and quotes to 

buy would be ranked from highest 

working price to lowest working price 

and orders and quotes to sell would be 

ranked from lowest working price to 

highest working price. The rule would 

further provide that if the working price 

of an order or quote changes, the price 

priority of an order or quote would 

change. This proposed pricing priority 

is current functionality, but the new 

rule would add detail regarding the 

concept of ‘‘working price’’ and its 

impact on priority and would use Pillar 

terminology. In addition, this proposed 

rule uses Pillar terminology from Rule 

7.36–E(d), with terminology differences 

to reflect options trading to reference 

‘‘orders and quotes’’ as opposed to 

solely ‘‘orders.’’ 

Proposed Rule 6.76P–O(e) would 

describe the proposed priority 

categories for ranking purposes, which 

added detail and terminology would be 

new for options trading without any 

functional differences.48 As proposed, at 

each price, all orders and quotes would 

be assigned a priority category. If, at a 

price, there are no orders or quotes in 

a priority category, the next category 

would have first priority. The Exchange 

does not propose to include in Rule 

6.76P–O, which sets forth the general 

rule regarding ranking, specifics about 

how one or more order or quote types 

may be ranked and displayed. Instead, 

as described in more detail below, the 

Exchange will address separately in new 

Rule 6.62P–O governing orders and 

modifiers which priority category 

correlates to different order types and 

modifiers. Accordingly, details 

regarding which proposed priority 

categories would be assigned to the 

display and reserve portions of Reserve 

Orders, which is currently addressed in 

Rule 6.76–O (a)(1)(B) and (a)(2)(A), will 

be addressed in proposed Rule 6.62P–O 

and therefore would not be included in 

proposed Rule 6.76P–O.49

The proposed changes are also the 

same as the terms used for priority 

categories for cash equity trading as set 

forth in Rule 7.36–E(e)(1)–(3), with 

terminology differences to include 

options-specific reference to ‘‘orders 

and quotes’’ rather than just orders as it 

relates to interest ranked Priority 2 and 

3. In addition, the Exchange does not 

propose to include the Priority 4— 

Tracking Orders category, which relates 

to an order type not available for 

options trading. The proposed 

terminology changes to use priority 

categories rather than refer to the 

‘‘Display Order Process’’ and ‘‘Working 

Order Process’’ would not result in any 

changes in how the Exchange would 

rank orders and quotes on Pillar from 

how it currently ranks orders and quotes 

on the OX system. 

The proposed priority categories 

would be: 

• Proposed Rule 6.76P–O(e)(1) would 

specify ‘‘Priority 1—Market Orders,’’ 

which provides that unexecuted Market 

Orders would have priority over all 

other same-side orders with the same 

working price. As described in greater 

detail below, a Market Order subject to 

a Trading Collar would be displayed on 

the Consolidated Book. In such 

circumstances, the displayed Market 

Order would have priority over all other 

resting orders at that price. Under 

current options trading functionality, 

Market Orders have priority over all 

other same-side orders with the same 

working price. The proposed level of 

detail and priority categorization would 

be new terminology for options trading 

and the Exchange believes that the 

proposed rule change would add 

transparency and specificity to 

Exchange rules without changing 

functionality. 

• Proposed Rule 6.76P–O(e)(2) would 

specify ‘‘Priority 2—Display Orders.’’ 

This proposed priority category would 

replace the ‘‘Display Order Process,’’ 

which is described above. As proposed, 

non-marketable Limit Orders or quotes 

with a displayed working price would 

have second priority, which treatment 

of displayed orders and quotes is 

consistent with current functionality. 

For an order or quote that has a display 

price that differs from the working price 

of the order or quote, the order or quote 

would be ranked Priority 3—NonDisplay Orders at the working price.50

This aspect of the proposed rule is 

consistent with current functionality. 

For example, as described above, 

currently, the display portion of a 

Reserve Order is subject to the Display 

Order Process and the reserve portion is 

subject to the Working Order Process. 

The proposed level of detail and priority 

categorization would be new for options 

trading and the Exchange believes that 

it would add transparency and 

specificity to Exchange rules. In 

addition, this priority category operates 

the same as how Priority 2—Display 

Orders function on the Exchange’s cash 

equity market, as described in Rule 

7.36–E(e)(2), with a terminology 

difference for the proposed rule to 

reflect options trading by including 

reference to quotes, which would not be 

processed differently on Pillar as 

compared to the OX system. 

• Proposed Rule 6.76P–O(e)(3) would 

specify ‘‘Priority 3—Non-Display 

Orders.’’ This priority category would 

be used in Pillar rules instead of 

reference to the ‘‘Working Order 

Process,’’ which is described above. As 

proposed, non-marketable Limit Orders 

or quotes for which the working price is 

not displayed, including the reserve 

interest of Reserve Orders, would have 

third priority. This proposed rule is 

consistent with current functionality. 

The proposed level of detail and priority 

categorization would be new for options 

trading and the Exchange believes that 

it would add transparency and 

specificity to Exchange rules. In 

addition, this priority category operates 


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51As discussed, infra, the Exchange proposes to 

rank orders and quotes on Pillar in the same 

manner as it does on the OX system, unless 

otherwise specified in the proposed rules (e.g., 

same-priced displayed orders and quotes would be 

ranked ahead of same-priced non-displayed orders 

and quotes, and within each category of displayed 

or non-displayed interest, orders and quotes would 

be ranked in time priority). 

52Currently, for cash equity trading, Rule 7.36– 

E(f)(2) provides that, ‘‘[a]n order is assigned a new 

working time any time the working price of an 

order changes.’’ The Exchange plans to propose 

changes to this cash equity rule to align with that 

being proposed for its options market at a later date. 53See, e.g., Cboe BZX (‘‘BZX’’) Rule 11.9(g)(1)(B) 

(providing that, for orders subject to ‘‘display price 

sliding,’’ BZX ‘‘will re-rank an order at the same 

price as the displayed price in the event such 

order’s displayed price is locked or crossed by a 

Protected Quotation of an external market’’ and that 

‘‘[s]uch event will not result in a change in priority 

for the order at its displayed price’’). 54Currently, on the Exchange’s OX system, if the 

size of a quote is reduced, the Exchange processes 

the reduced quantity as a new quote that is assigned 

a new effective time sequence. By contrast, orders 

reduced in size are not assigned a new working 

time by the OX system. The Exchange proposes 

that, on Pillar, both quotes and orders reduced in 

size would not receive a new working time. The 

proposed provision would provide for consistent 

handling of orders and quotes when the size of such 

interest is reduced. 

the same as how Priority 3—NonDisplay Orders function on the 

Exchange’s cash equity market, as 

described in Rule 7.36–E(e)(3), with a 

terminology difference for the proposed 

rule to reflect options trading by 

including reference to quotes, which 

would not be processed differently on 

Pillar as compared to the OX system. 

Proposed Rule 6.76P–O(f) would set 

forth that at each price level within each 

priority category, orders and quotes 

would be ranked based on time priority. 

This proposed rule is consistent with 

current Rule 6.76–(O)(a), which 

provides, in relevant part, that ‘‘within 

each price level, all bids and offers shall 

be organized by the time of entry.’’ The 

proposed changes set forth below are 

consistent with current functionality 

and would add detail not included in 

existing option rules. In addition, the 

proposed changes use terminology 

based on Rule 7.36–E(f)(1) and (3), with 

differences to reference options 

terminology of ‘‘orders and quotes’’ 

rather than just ‘‘orders’’ and to the 

‘‘Consolidated Book’’ rather than the 

‘‘NYSE Arca Book,’’ which differences 

are designed to address the distinction 

between cash equities and options 

trading without altering how such 

interest would be ranked (in price-time 

priority) on each market.51

• Proposed Rule 6.76P–O(f)(1) would 

provide that an order or quote would be 

assigned a working time when it is first 

added to the Consolidated Book based 

on the time such order or quote is 

received by the Exchange. This 

proposed process of assigning a working 

time to orders is current functionality 

and is substantively the same as current 

references to the ‘‘time of original order 

entry’’ found in several places in Rule 

6.76–O. This proposed rule uses Pillar 

terminology that is substantially the 

same as in Rule 7.36–E(f)(1). To provide 

transparency in Exchange rules, the 

Exchange further proposes to include in 

proposed Rule 6.76P–O(f) how the 

working time would be determined for 

orders that are routed, which is 

consistent with current options trading 

functionality. As proposed: 

Æ Proposed Rule 6.76P–O(f)(1)(A) 

would specify that an order that is fully 

routed to an Away Market on arrival, 

per proposed Rule 6.76AP–O(b)(1), 

would not be assigned a working time 

unless and until any unexecuted portion 

of the order returns to the Consolidated 

Book. The Exchange notes that this is 

the current process for assigning a 

working time to an order (although this 

detail would be new to option trading 

rules) and uses Pillar terminology that is 

substantially the same as in Rule 7.36– 

E(f)(1)(A), with a terminology difference 

that the proposed rule includes 

reference to the ‘‘Consolidated Book’’ 

rather than the ‘‘NYSE Arca Book.’’ This 

proposed rule is also consistent with 

current Rule 6.76A–O(c)(2)(C), which 

provides that when an order or portion 

of an order has been routed away and 

is not executed either in whole or in 

part at the other Market Center, it will 

be ranked and displayed in the OX Book 

in accordance with the terms of the 

order. 

Æ Proposed Rule 6.76P–O(f)(1)(B) 

would specify that for an order that, on 

arrival, is partially routed to an Away 

Market, the portion that is not routed 

would be assigned a working time. If 

any unexecuted portion of the order 

returns to the Consolidated Book and 

joins any remaining resting portion of 

the original order, the returned portion 

of the order would be assigned the same 

working time as the resting portion of 

the order. If the resting portion of the 

original order has already executed and 

any unexecuted portion of the order 

returns to the Consolidated Book, the 

returned portion of the order would be 

assigned a new working time. This 

process for assigning a working time to 

partially routed orders is the same as 

currently used by the Exchange 

(although this detail would be new to 

option trading rules) and uses Pillar 

terminology that is substantially the 

same as in Rule 7.36–E(f)(1)(B)), with a 

terminology difference that the 

proposed rule would reference the 

‘‘Consolidated Book’’ rather than the 

‘‘NYSE Arca Book.’’ 

• Proposed Rule 6.76P–O(f)(2) would 

provide that an order or quote would be 

assigned a new working time if: (A) The 

display price of an order or quote 

changes, even if the working price does 

not change, or (B) the working price of 

an order or quote changes, unless the 

working price is adjusted to be the same 

as the display price of an order or quote. 

This proposed text would be new and 

is different from how the Exchange 

adjusts the working time for cash 

equities trading when the working price 

of an order is updated to be the same as 

the display price.52 The Exchange 

believes that for its options market, 

adjusting the working time any time the 

display price of an order or quote 

changes, would respect the priority of 

orders/quotes that were previously 

displayed at the price to which the 

display price is changing. In addition, 

the Exchange believes it is appropriate 

to adjust the working time of an order 

or quote any time its working price 

changes, unless the display price does 

not change. This proposed order 

handling in Exchange rules is consistent 

with the rules of other options 

exchanges.53

• Proposed Rule 6.76P–O(f)(3) would 

provide that an order or quote would be 

assigned a new working time if the size 

of an order or quote increases and that 

an order or quote retains its working 

time if the size of the order or quote is 

decreased. This proposed detail about 

the process for assigning (or not) a new 

working time when the size of an order 

changes is not currently described in the 

Exchange’s option rules and is 

consistent with existing functionality 

for how orders (but not quotes) are 

processed on the OX system and would 

use Pillar terminology.54 This provision 

is substantively identical to Rule 7.36– 

E(f)(3), with a terminology difference to 

reference ‘‘orders or quotes’’ as opposed 

to solely ‘‘an order.’’ 

Proposed Rule 6.76P–O(g) would 

specify that the Exchange would apply 

ranking restrictions applicable to 

specified order, quote, or modifier 

instructions. These order, quote, and 

modifier instructions would be 

identified in proposed new Rule 6.62P– 

O, described below. Proposed Rule 

6.76P–O(g) uses Pillar terminology 

substantially the same as is used in Rule 

7.36–E(g), with a difference to reference 

quotes, which is unique to options 

trading. Current Rule 6.76–O(a)(2)(C)– 

(E) discusses ranking of certain order 

types with contingencies in the Working 

Order Process. The Exchange proposes 

that for Pillar, ranking details regarding 


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55As discussed, supra note 51, on Pillar, the 

Exchange would rank orders and quotes—including 

those with contingencies (i.e., MMALO and 

MMRP)–the same way it does on the OX system, 

unless otherwise specified in the proposed rules. 

See proposed Rule 6.62P–O(e) (for discussion of 

Non-Routable Limit Orders and ALO Orders, both 

of which have contingencies and may be designated 

as quotations under Pillar). 

56See proposed Rule 6.76P–O(h)(1) (removing ‘‘in 

addition’’) (B) (regarding ‘‘Trading Crowd’’) and (D) 

(updating the cross-reference to new subparagraph 

(B) in connection with the Section 11(a)(1)(G) of the 

Exchange Act and Rule 11a1–1(T) thereunder (‘‘G 

exemption rule’’)). 

57Rule 6.76A–O(a)–(c) sets forth a three-step 

process—the Display Order Process, the Working 

Order Process, and Routing Away, Steps 1–3, 

respectively—governing the handling of incoming 

marketable bids and offers. 

58See NYSE Arca Equities Pillar Notice, supra 

note 15 at 28728–29. 

59The Exchange proposes to add a preamble to 

Rule 6.88–O (Directed Orders) to provide that the 

Rule would not be applicable to trading on Pillar. 

orders and quotes designated with 

contingencies would be described in 

proposed Rule 6.62P–O(d) and (e). 

Accordingly, the Exchange does not 

propose to include the detail described 

in Rule 6.76–O(a)(2)(C)–(E) in proposed 

Rule 6.76P–O.55

Finally, proposed Rule 6.76P–O(h) 

would be applicable to ‘‘Orders 

Executed Manually’’ and would contain 

the same text as set forth in Rule 6.76– 

O(d) without any substantive 

differences except for the nonsubstantive change of capitalizing the 

defined term Trading Crowd (per 

proposed Rule 1.1), removing the 

superfluous clause ‘‘in addition,’’ and 

updating the cross-reference to reflect 

the new Pillar rule.56

In connection with proposed Rule 

6.76P–O, the Exchange proposes to add 

the following preamble to Rule 6.76–O: 

‘‘This Rule is not applicable to trading 

on Pillar.’’ This proposed preamble is 

designed to promote clarity and 

transparency in Exchange rules that 

Rule 6.76–O would not be applicable to 

trading on Pillar. 

Proposed Rule 6.76AP–O: Order 

Execution and Routing 

Current Rule 6.76A–O, titled ‘‘Order 

Execution—OX,’’ governs order 

execution and routing at the Exchange. 

The Exchange proposes that Rule 

6.76AP–O would set forth the order 

execution and routing rules for options 

trading on Pillar. The Exchange 

proposes that the title for new Rule 

6.76AP–O would be ‘‘Order Execution 

and Routing’’ instead of ‘‘Order 

Execution—OX’’ because the Exchange 

does not propose to use the term ‘‘OX’’ 

in connection with Pillar. The Exchange 

believes that because proposed Rule 

6.76AP–O, like Rule 6.76A–O, would 

specify the Exchange’s routing 

procedures, referencing to ‘‘Routing’’ in 

the rule’s title would provide additional 

transparency in Exchange rules 

regarding what topics would be covered 

in new Rule 6.76AP–O. This proposed 

rule is based on Rule 7.37–E, which 

describes the order execution and 

routing rules for cash equity securities 

trading on the Pillar platform, with 

differences described below to reflect 

differences for options trading. In 

addition, throughout proposed Rule 

6.76AP–O, the Exchange proposes to 

use the term ‘‘will’’ instead of ‘‘shall,’’ 

which is a stylistic preference that 

would add consistency to Exchange 

rules. 

Proposed Rule 6.76AP–O(a) and its 

subparagraphs would set forth the 

Exchange’s order execution process and 

would cover the same subject as the 

preamble to Rule 6.76A–O, which 

provides that like-priced orders and 

quotes are matched for execution, 

provided the execution price is equal to 

or better than the NBBO, unless such 

order has been routed to an Away 

Market at the NBBO.57 The Exchange 

proposes a difference from current Rule 

6.76A–O(a)–(c) to use Pillar terminology 

of ‘‘Aggressing Order’’ and ‘‘Aggressing 

Quote’’—rather than refer to an 

‘‘incoming marketable bid or offer,’’ 

because (as described above) the 

proposed terms are more expansive and 

allow for interest to be (or become) 

marketable even after arrival (i.e., not 

limited to ‘‘incoming’’ interest). As 

proposed, per Rule 6.76AP–O(a), an 

Aggressing Order or Aggressing Quote 

would be matched for execution against 

contra-side orders or quotes in the 

Consolidated Book according to the 

price-time priority ranking of the resting 

interest, subject to specified parameters. 

The Exchange does not propose to 

include in proposed Rule 6.76AP–O text 

based on current Rule 6.76A–O(a)(1), 

which describes ‘‘Step 1: Display Order 

Process,’’ or text based on current Rule 

6.76A–O(b), which describes ‘‘Step 2: 

Working Order Process,’’ because by 

proposing detailed text in Rule 6.76P– 

O(c)–(f) regarding how orders and 

quotes would be ranked on the 

Exchange, it would be duplicative and 

unnecessary to describe this process 

again in proposed Rule 6.76AP–O. 

Instead, the Exchange believes that cross 

referencing the price-time priority 

ranking of the resting interest, per 

proposed Rule 6.76P–O, would provide 

transparency regarding how an 

Aggressing Order or Aggressing Quote 

would trade with resting interest. The 

Exchange notes that it made a similar 

stylistic change for its cash equity 

platform to eliminate references to the 

‘‘Display Order Process’’ and ‘‘Working 

Order Process’’ in Rule 7.37–E (which 

was replaced by the aforementioned 

priority categories) when it transitioned 

to Pillar.58

Proposed Rule 6.76AP–O(a)(1) would 

set forth the LMM Guarantee, which is 

substantively the same as the current 

LMM Guarantee, as described in Rule 

6.76A–O(a)(1)(A)–(D). Specifically, as 

with the current OX system, if an LMM 

is quoting at the NBBO, that LMM quote 

would be guaranteed to trade with 40% 

of the incoming bid or offer. This LMM 

guarantee is currently described in Rule 

6.76A–O(a)(1)(A), which provides, in 

relevant part, that an LMM or Directed 

Order Market Maker (‘‘DOMM’’) that is 

quoting at the NBBO may be entitled to 

an allocation guarantee of the greater of: 

An amount equal to 40% of the 

incoming bid or offer up to the LMM’s 

or DOMM’s disseminated quote size; or 

the LMM’s or DOMM’s share in the 

order of ranking. However, current Rule 

6.76A–O(a)(1)(A)(ii) provides that if 

there are Customer orders ranked ahead 

of the LMM (or DOMM, as applicable), 

or if there is no LMM (or DOMM) 

quoting at the NBBO, the incoming bid 

or offer will be matched against orders 

and quotes in the Display Process 

strictly in the order of their ranking. The 

Exchange proposes a substantive 

difference from current rules because, 

on Pillar, the Exchange would no longer 

support DOMMs or Directed Orders. 

Accordingly, rule text relating to 

DOMMs or Directed Orders is not 

included in proposed Rule 6.76AP–O 

and, as described below, only LMM’s 

would be entitled to the LMM 

Guarantee.59

Proposed Rule 6.76AP–O(a)(1) would 

describe the LMM Guarantee on Pillar 

and would provide that an LMM would 

be entitled to an allocation guarantee 

when the execution price is equal to the 

NBB (NBO), the LMM has a displayed 

quote at the NBB (NBO), and there is no 

displayed Customer interest in time 

priority at the NBBO in the 

Consolidated Book. If the execution 

would meet these conditions, which are 

the same as under the Exchange’s 

current options rules, the Aggressing 

Order or Aggressing Quote would be 

matched against the quote of the LMM 

for an amount equal to 40% of the 

Aggressing Order or Aggressing Quote, 

up to the size of the LMM’s quote (the 

‘‘LMM Guarantee’’). The Exchange 

proposes to use the term ‘‘Aggressing 

Order or Aggressing Quote’’ instead of 

the term ‘‘incoming bid or offer’’ to 

provide greater specificity that the LMM 


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60While not specified in the current rules, the OX 

system utilizes a unique identifier for LMMs to 

send quotes and each LMM may only send LMM 

quotes in their assigned series using this single 

unique identifier. Therefore, LMM quotes are 

subject to the current Rule 6.37A(a)(1) requirement 

that a new same-side quote sent by that LMM 

updates the previous bid or offer, if any. Unlike 

LMMs, on the OX system, Market Makers not acting 

as an LMM may opt to utilize multiple OTPs to 

send more than one same-side quote in the same 

assigned series. See infra note 140. 

61See, e.g., infra, discussion regarding proposed 

Rule 6.37AP–O(a)(1). 

62See proposed Rule 6.76AP–O, Commentary .01, 

which will not include cross-reference that appears 

in the current rule Commentary .02 to Rule 6.76A– 

O because the Exchange determined such crossreference was superfluous and opted to remove 

excess verbiage. 

63Under the current rule, each eligible order is 

routed ‘‘as limit order equal to the price and up to 

the size of the quote published by the Market 

Center(s)’’ or, if ‘‘a marketable Reserve Order, the 

Exchange may route such order serially as 

component orders, such that each component 

corresponds to the displayed size.’’ See Rule 

6.76AP–O(c)(1)(A), (B). In the proposed Pillar rule, 

the Exchange proposes to use the term ‘‘Away 

Market’’ instead of ‘‘Market Center.’’ 

Guarantee would be applied against any 

order or quote that becomes an 

Aggressing Order or Aggressing Quote, 

which is consistent with current 

functionality and uses Pillar 

terminology to describe that same 

functionality. Accordingly, the LMM 

Guarantee would function on Pillar, as 

described in current Rule 6.76A–O(a)(1), 

except as noted above to exclude 

reference to Directed Orders or DOMMs. 

The Exchange proposes non-substantive 

clarifying differences to specify that the 

execution price must be equal to the 

NBBO in addition to the proposed text 

that the LMM must have a displayed 

quote at the NBBO, which adds 

specificity compared to existing rule 

text that such LMM must be ‘‘quoting at 

the NBBO.’’ 

Proposed Rule 6.76AP–O(a)(1)(A) 

would provide that if an LMM has more 

than one quote at a price, the LMM 

Guarantee would be applied only to the 

first LMM quote in time priority, which 

text would add granularity and 

transparency to Exchange rules. This 

text would be new and reflects that on 

Pillar, the Exchange would permit 

multiple quotes from the same LMM at 

the same price and that only the first 

quote in time priority would be eligible 

for the LMM Guarantee. On the OX 

system, an LMM may send only one 

same-side quotation using the OTP 

associated with its status as LMM.60

Under Pillar, as described below 

regarding proposed Rule 6.37AP–O 

(Market Maker Quotations), LMMs 

would be able to send multiple sameside quotes associated with its OTP by 

utilizing different order/quote entry 

ports (i.e., in Pillar, LMM1 can send a 

bid for 1.00 in XYZ over order/quote 

entry port 1 and another bid for 1.00 in 

XYZ over order/quote entry port 2 and 

the bid sent via order/quote entry port 

2 would not replace the quote sent over 

order/quote entry port 1). Because an 

LMM using Pillar could have more than 

one same-side, same-priced quote in an 

assigned series,61 proposed Rule 

6.76AP–O(a)(1)(A) is necessary to 

provide that only one such LMM quote 

(the first in time) would be eligible for 

the LMM Guarantee, consistent with 

current functionality. 

Proposed Rule 6.76AP–O(a)(1)(B), 

which is substantively identical to 

current Rule 6.76A–O(a)(1)(B), would 

provide that if an LMM is entitled to an 

allocation (i.e., an LMM Guarantee 

pursuant to proposed paragraph (a)(1)) 

and the Aggressing Order or Aggressing 

Quote had an original size of five (5) 

contracts or fewer, then such order or 

quote would be matched against the 

quote of the LMM for an amount equal 

to 100%, up to the size of the LMM’s 

quote. The Exchange also proposes to 

add Commentary .01 to the proposed 

rule (which is substantively identical to 

Commentary .02 of current Rule 6.76A– 

O) to make clear that on a quarterly 

basis, the Exchange would evaluate 

what percentage of the volume executed 

on the Exchange comprised of orders for 

five (5) contracts or fewer that was 

allocated to LMMs and would reduce 

the size of the orders included in this 

provision if such percentage is over 

40%.62

Proposed Rule 6.76AP–O(a)(1)(C) 

would specify that if the result of 

applying the LMM Guarantee is a 

fractional allocation of contracts, the 

LMM Guarantee would be rounded 

down to the nearest contract and if the 

result of applying the LMM Guarantee 

results in less than one contract, the 

LMM Guarantee would be equal to one 

contract. The Exchange believes that 

including this additional detail (which 

is based on current functionality) in the 

proposed rule would add transparency 

to Exchange rules. 

Finally, the Exchange proposes Rule 

6.76AP–O(a)(1)(D), which would 

provide that after applying any LMM 

Guarantee, the Aggressing Order or 

Aggressing Quote would be allocated 

pursuant to proposed paragraph (a) of 

this Rule, i.e., that such orders or quotes 

would be matched for execution against 

contra-side interest resting in the 

Consolidated Book according to pricetime priority. This proposed text is 

substantively identical to Rule 6.76A– 

O(a)(1)(C) and uses Pillar terminology, 

and eliminates the now obsolete 

reference to DOMMs, Directed Orders, 

and the Display Order Process. 

Consistent with the Exchange’s 

proposed approach to new Rule 6.76P– 

O, proposed Rule 6.76AP–O would not 

include references to specific order 

types and instead would state the 

Exchange’s general order execution 

methodology. Any exceptions to such 

general requirements would be set forth 

in connection with specific order or 

modifier definitions in proposed Rule 

6.62P–O, described below. 

Proposed Rule 6.76AP–O(b) would set 

forth the Exchange’s routing process and 

is intended to address the same subject 

as Rule 6.76A–O(c), which is currently 

referred to as ‘‘Step 3: Routing Away’’ 

in order processing, without any 

substantive differences. Under current 

Rule 6.76A–O(c), the Exchange will 

route to another Market Center any 

unexecuted portion of an order that is 

eligible to route.63 Proposed Rule 

6.76AP–O(b) would provide that, absent 

an instruction not to route, the 

Exchange would route marketable 

orders to Away Market(s) after such 

orders are matched for execution with 

any contra-side interest in the 

Consolidated Book in accordance with 

proposed paragraph (a) of this Rule 

regarding Order Execution. Proposed 

Rule 6.76AP–O(b) also uses the same 

Pillar terminology that is used in 

current Rule 7.37–E(b), which governs 

the Exchange’s routing process on the 

Exchange’s cash equity platform, with 

differences to use option trading 

terminology such as ‘‘Consolidated 

Book.’’ 

The proposed rule would then set 

forth additional details regarding 

routing that are consistent with current 

routing functionality, but are not 

described in current rules: 

• Proposed Rule 6.76AP–O(b)(1) 

would provide that an order that cannot 

meet the pricing parameters of proposed 

Rule 6.76AP–O(a) may be routed to 

Away Market(s) before being matched 

for execution against contra-side interest 

in the Consolidated Book. The Exchange 

believes that this proposed rule text, 

which is consistent with current 

functionality, provides transparency 

that an order may be routed before being 

matched for execution, for example, to 

prevent locking or crossing or trading 

through the NBBO. This rule uses Pillar 

terminology that is substantially the 

same as in Rule 7.37–E(b)(1), with a 

terminology difference to reference the 

‘‘Consolidated Book’’ rather than the 

‘‘NYSE Arca Book.’’ 

• Proposed Rule 6.76AP–O(b)(2) 

would provide that an order with an 

instruction not to route would be 


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64See, e.g., infra, discussion regarding proposed 

Rule 6.62P–O(e), Orders with Instructions Not to 

Route. 

65Market Orders are currently defined in Rule 

6.62–O(a) as follows: ‘‘A Market Order is an order 

to buy or sell a stated number of option contracts 

and is to be executed at the best price obtainable 

when the order reaches the Exchange. Market 

Orders entered before the opening of trading will 

be eligible for trading during the Opening Auction 

Process. The system will reject a Market Order 

entered during Core Trading Hours if at the time the 

order is received there is not an NBB and an NBO 

(‘‘collectively NBBO’’) for that series as 

disseminated by OPRA. If the Exchange receives a 

Market Order to buy (sell) and there is an NBB 

(NBO) but no NBO (NBB) as disseminated by OPRA 

at the time the order is received, the order will be 

processed pursuant to Rule 6.60–O(a)—Trade Collar 

Protection.’’ 

66The ability for a Market Order to be designated 

Day or GTC is based on current Rules 6.62–O(m) 

(describing a ‘‘Day Order’’) and 6.62–O(n) 

(describing a ‘‘Good-til-Cancelled Order’’ or ‘‘GTC 

Order’’) and Commentary .01 to Rule 6.62–O, which 

requires all orders to be either ‘‘day,’’ ‘‘immediate 

or cancel,’’ or ‘‘good ‘til cancelled.’’ As described 

in more detail below, on Pillar, the time-in-force 

designation, e.g., Day or GTC, would be a modifier 

that can be added to an order type and would not 

be described in the rules as a separate order type. 

Similar to Rule 7.31–E, the Exchange would specify 

which time-in-force designations are available for 

each order type. 

processed as provided for in proposed 

Rule 6.62P–O.64 As described in greater 

detail below, the Exchange proposes to 

describe how orders and quotes with an 

instruction not to route would be 

processed in proposed Rule 6.62P–O(e). 

• Proposed Rule 6.76AP–O(b)(3) 

would provide that any order or portion 

thereof that has been routed would not 

be eligible to trade on the Consolidated 

Book, unless all or a portion of the order 

returns unexecuted. This routing 

methodology is current functionality 

and covers that same subject as current 

Rule 6.76A–O(c)(2) with no substantive 

differences and is based in part on Pillar 

terminology used in Rule 7.37–E(b)(6). 

Similar to Rule 6.76A–O(c)(2)(A), which 

provides that an order routed to an 

Away Market is subject to the trading 

rules of that market and, while so 

routed, has no standing relative to other 

orders on the Exchange in the OX Book, 

the Exchange proposes that Rule 

6.76AP–O(b)(3) would state that once 

routed, an order would not be eligible 

to trade on the Consolidated Book. The 

Exchange does not believe it is 

necessary to include the text that once 

routed an order would be subject to the 

routing destination’s trading rules, as 

such detail is obvious and unnecessary. 

In addition, because, as discussed 

above, the working time assigned to 

orders that are routed is being proposed 

to be addressed in new Rule 6.76P– 

O(f)(1)(A) and (B), the Exchange 

believes it would be unnecessary to 

restate this information in new Rule 

6.76AP–O. 

• Proposed Rule 6.76AP–O(b)(4) 

would provide that requests to cancel an 

order that has been routed in whole or 

part would not be processed unless and 

until all or a portion of the order returns 

unexecuted. This proposed rule uses 

Pillar terminology and operates 

substantively the same as Rule 7.37– 

E(b)(7)(A). This rule represents current 

functionality and is based on Rule 

6.76A–O(c)(2)(B), except that, unlike the 

current rule, the proposed rule does not 

state that such orders (while still routed 

away) are subject to the applicable 

trading rules of the market to which 

such order was routed. 

• Finally, proposed Rule 6.76AP–O(c) 

would provide that after trading with 

eligible contra-side interest on the 

Consolidated Book and/or returning 

unexecuted after routing to Away 

Market(s), any unexecuted nonmarketable portion of an order would be 

ranked consistent with new Rule 6.76P– 

O. This rule represents current 

functionality as set forth in Rule 6.76A– 

O generally and paragraph (c)(2)(C) as it 

pertains to orders that were routed away 

and then returned unexecuted in whole 

or part to the Exchange without any 

substantive differences. This proposed 

rule uses Pillar terminology and 

operates substantively the same as Rule 

7.37–E(c). 

The Exchange believes that the 

specific routing methodologies for an 

order type or modifier should be 

included with how the order type is 

defined, which will be described in 

proposed Rule 6.62P–O. Accordingly, 

the Exchange does not believe it needs 

to specify in proposed Rule 6.76AP–O 

whether an order is eligible to route, 

and if so, whether there are any specific 

routing instructions applicable to the 

order and therefore will not be carrying 

over such specifics that are currently 

included in Rule 6.76A–O. 

In connection with proposed Rule 

6.76AP–O, the Exchange proposes to 

add the following preamble to Rule 

6.76A–O: ‘‘This Rule is not applicable to 

trading on Pillar.’’ This proposed 

preamble is designed to promote clarity 

and transparency in Exchange rules that 

Rule 6.76A–O would not be applicable 

to trading on Pillar. 

Proposed Rule 6.62P–O: Orders and 

Modifiers 

Current Rule 6.62–O (Certain Types of 

Orders Defined) defines the order types 

that are currently available for options 

trading both on the OX system and for 

open outcry trading on the Exchange. 

The Exchange proposes that new Rule 

6.62P–O would set forth the order types 

and modifiers that would be available 

for options trading both on Pillar (i.e., 

electronic order entry) and in open 

outcry trading. The Exchange proposes 

to specify that Rule 6.62–O would not 

be applicable to trading on Pillar. 

Because the Exchange proposes to use 

for options trading the Pillar technology 

that is currently used for cash equity 

trading, the Exchange has identified 

opportunities to offer additional order, 

quote, and modifier functionality for 

options trading that is based on existing 

functionality on cash equity trading but 

has not previously been available for 

options trading. In addition, certain 

order and quote types and modifiers 

that would be available for options 

trading on Pillar would be based on, or 

similar to, order types and modifiers 

available on the Exchange’s cash equity 

market. Because there would be similar 

orders and modifiers on both the 

Exchange’s cash equity and options 

markets using similar terminology, the 

Exchange proposes to structure 

proposed Rule 6.62P–O based on Rule 

7.31–E and use similar terminology. The 

Exchange also proposes to title 

proposed Rule 6.62P–O as ‘‘Orders and 

Modifiers,’’ which is the title of Rule 

7.31–E. 

Primary Order Types. Proposed Rule 

6.62P–O(a) would specify the 

Exchange’s primary order types, which 

would be Market Orders and Limit 

Orders, and is based on Rule 7.31–E(a), 

which sets forth the Exchange’s cash 

equity primary order types. Similar to 

Rule 7.31–E(a), proposed Rule 6.62P– 

O(a) would also set forth the Exchange’s 

proposed Limit Order Price Protection 

functionality and Trading Collars. 

Market Orders. Proposed Rule 6.62P– 

O(a)(1) would define a Market Order as 

an unpriced order message to buy or sell 

a stated number of option contracts at 

the best price obtainable, subject to the 

Trading Collar assigned to the order, 

and would further specify that 

unexecuted Market Orders may be 

designated Day or GTC, which 

represents current functionality, and 

that unexecuted Market Orders would 

be ranked Priority 1—Market Orders.65

This proposed rule text uses Pillar 

terminology similar to Rule 7.31–E(a)(1) 

to describe Market Orders for options 

trading, with differences to reflect 

options trading functionality. For 

example, proposed Rule 6.62P–O(a)(1) 

would specify the ability to designate a 

Market Order as GTC, which is current 

options trading functionality that would 

continue on Pillar (but which modifier 

is not available on the Exchange’s cash 

equity platform).66 Similarly, the 

Exchange proposes to reference that 

trading of a Market Order would be 

subject to the Trading Collar assigned to 


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67See discussion supra, regarding the proposed 

Rule 1.1 definition of ‘‘NBBO’’ and that when using 

an unadjusted NBBO, the NBBO would not be 

adjusted based on information about orders the 

Exchange sends to Away Markets, execution reports 

received from those Away Markets, and certain 

orders received by the Exchange. The Exchange 

believes that the unadjusted NBBO is a more 

conservative view of the NBBO because the 

Exchange waits for an update from OPRA rather 

than updating it based on its view of the NBBO. 

68The Exchange will also reject a Market Order 

if it is entered when the underlying NMS stock is 

either in a Limit State or a Straddle State, which 

is current functionality. See Rule 6.65A–O(a)(1). 

The Exchange proposes a non-substantive 

amendment to Rule 6.65A–O(a)(1) to add a cross 

reference to proposed Rule 6.62P–O(a)(1). The 

Exchange also proposes to amend the second 

sentence of Rule 6.65A–O(a)(1) to remove 

references to trading collars, and instead specify 

that the Exchange would cancel any resting Market 

Orders if the underlying NMS stock enters a Limit 

State or a Straddle State and would notify OTP 

Holders of the reason for such cancellation. This 

proposed change would describe both how Market 

Orders function today on the OX system and how 

they would be processed on Pillar. 

69See, e.g., Cboe Rule 5.34(a)(2) (setting forth the 

‘‘Market Order NBBO Width Protection’’ wherein 

Cboe cancels or rejects market orders submitted 

‘‘when the NBBO width is greater than x% of the 

midpoint of the NBBO,’’ subject to minimum and 

maximum dollar values determined by Cboe). 

70The Exchange has defined an Aggressing Order 

in proposed Rule 6.76P–O(a)(5). An Aggressing 

Market Order is a Market Order that is an 

Aggressing Order. 

the order, which is similar to the third 

paragraph of the current definition of 

Market Order in Rule 6.62–O(a). As 

described in greater detail below, the 

Exchange proposes changes to its 

Trading Collar functionality on Pillar. 

Proposed Rule 6.62P–O(a)(1) would 

further provide that for purposes of 

processing Market Orders, the Exchange 

would not use an adjusted NBBO.67 On 

the Exchange’s cash equity market, the 

Exchange does not use an adjusted 

NBBO when processing Market Orders. 

The Exchange proposes to similarly not 

use an adjusted NBBO when processing 

Market Orders on its options market, 

which would be new for options 

trading. The Exchange believes that 

because Market Orders trade 

immediately on arrival, using an 

unadjusted NBBO would provide a 

price protection mechanism by using a 

more conservative view of the NBBO. 

Proposed Rule 6.62P–O(a)(1)(A) 

would provide that a Market Order that 

arrives during continuous trading would 

be rejected, or that was routed, returns 

unexecuted, and has no resting quantity 

to join would be cancelled if it fails the 

validations specified in proposed Rule 

6.62P–O(a)(1)(A)(i)—(iv). This proposed 

rule is based in part on Rule 6.62–O(a), 

which specifies that a Market Order will 

be rejected during Core Trading Hours 

if, when received, there is no NBBO for 

the applicable option series as 

disseminated by OPRA, with differences 

to use Pillar terminology and to expand 

the circumstances when a Market Order 

would be rejected beyond the absence of 

an NBBO. As proposed, a Market Order 

would be rejected (or cancelled if routed 

first) if: 68

• There is no NBO (proposed Rule 

6.62P–O(a)(1)(A)(i)). This criterion is 

similar to the current rule, which 

provides that a Market Order will be 

rejected if there is no NBO. The 

Exchange believes that in the absence of 

an NBO, Market Orders should not trade 

as there is no market for the option. 

• There is no NBB and the NBO is 

higher than $0.50 (for sell Market 

Orders only). The Exchange further 

proposes that if there is no NBB and the 

NBO is $0.50 or below, a Market Order 

to sell would not be rejected and would 

have a working price and display price 

one MPV above zero and would not be 

subject to a Trading Collar (proposed 

Rule 6.62P–O(a)(1)(A)(ii)). The 

Exchange believes that if there is no 

NBB, but an NBO $0.50 or below, the 

Exchange would be able to price that 

Market Order to sell at one MPV above 

zero. The functionality described in this 

proposed rule would be new and is 

designed to provide an opportunity for 

an arriving sell Market Order to trade 

when the NBO is below $0.50. The 

proposed rule would further provide 

that a Market Order to sell would be 

cancelled if it was assigned a Trading 

Collar, routed, and when it returns 

unexecuted, it has no resting portion to 

join and there is no NBB, regardless of 

the price of the NBO. Accordingly, in 

this scenario, if there is no NBB and 

there is an NBO that is $0.50 or below, 

the returned, unexecuted Market Order 

would be cancelled rather than 

displayed at one MPV above zero. 

• There are no contra-side Market 

Maker quotes on the Exchange or 

contra-side ABBO, provided that a 

Market Order to sell would be accepted 

as provided for in proposed Rule 6.62P– 

O(a)(1)(A)(ii) (proposed Rule 6.62P– 

O(a)(1)(A)(iii)). This functionality would 

be new and is designed to prevent a 

Market Order from trading at prices that 

may not be current for that series in the 

absence of Market Maker quotations or 

an ABBO. 

• The NBBO is not locked or crossed, 

and the spread is equal to or greater 

than a minimum amount based on the 

midpoint of the NBBO (proposed Rule 

6.62P–O(a)(1)(A)(iv)). The proposed 

‘‘wide-spread’’ parameter for purposes 

of determining whether to reject a 

Market Order is similar to the widespread parameter applied when 

determining whether a trade is a 

Catastrophic Error, as set forth in Rule 

6.87–O(b)(3), with two differences. First, 

as shown below, the lowest bucket 

would be $0.00 up to and including 

$2.00, instead of $0.00 to $1.99, which 

means the $2.00 price point would be 

included in this bucket. The Exchange 

proposes this difference because it 

would simplify the application to have 

the break points after whole dollar price 

points. Second, the wide-spread 

calculation would be based off of the 

midpoint of the NBBO, rather than off 

of the bid price, as follows: 

The midpoint of the NBBO Spread 

parameter 

$0.00 to $2.00 ....................................... $0.75 

Above $2.00 to and including $5.00 ..... 1.25 

Above $5.00 to and including $10.00 ... 1.50 

Above $10.00 to and including $20.00 2.50 

Above $20.00 to and including $50.00 3.00 

Above $50.00 to and including $100.00 4.50 

Above $100.00 ...................................... 6.00 

The Exchange notes that this 

proposed protection for Market Orders 

is a new risk control designed to protect 

against erroneous executions and use of 

the midpoint of the NBBO as a basis for 

a price protection mechanism is 

consistent with similar functionality on 

other options markets.69

Proposed Rule 6.62P–O(a)(1)(B) 

would provide that an Aggressing 

Market Order to buy (sell) would trade 

with all orders or quotes to sell (buy) on 

the Consolidated Book priced at or 

below (above) the Trading Collar before 

routing to Away Market(s) at each 

price.70 Proposed Rule 6.62P–O(a)(1)(B) 

would further provide that after trading 

or routing, or both, a Market Order 

would be displayed at the Trading 

Collar, subject to proposed Rule 6.62P– 

O(a)(1)(C), which is consistent with 

current functionality that Market Orders 

would be displayed at a Trading Collar, 

per Rule 6.60–O(a)(5). 

Proposed Rule 6.62P–O(a)(1)(C) 

would provide that a Market Order 

would be cancelled before being 

displayed if there are no remaining 

contra-side Market Maker quotes on the 

Exchange or contra-side ABBO. 

Proposed Rule 6.62P–O(a)(1)(D) would 

provide that a Market Order would be 

cancelled after being displayed at its 

Trading Collar if there ceases to be a 

contra-side NBBO. These proposed 

cancellation events are similar to 

functionality described in Rule 6.60– 

O(a)(4)(E), which provides that ‘‘[t]he 

Exchange will cancel a Market Order, or 

the balance thereof, that has been 

collared pursuant to paragraph (a)(1)(A) 

or (B) [of that Rule] above, if after 

exhausting trading opportunities within 

the Collar Range, the Exchange 

determines there are no quotes on the 

Exchange and/or no interest on another 


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71As described above for proposed Rule 6.76P– 

O(b)(3), displayed interest other than displayed 

Market Orders would stand their ground if locked 

or crossed by an Away Market. The Exchange 

would provide an option for Limit Orders to instead 

be routed, see discussion infra, regarding proposed 

Rule 6.62P–O(i)(1) and the proposed Proactive if 

Locked/Crossed Modifier. 

72Current Rule 6.60–O(b) provides that unless 

otherwise determined by the Exchange, the 

specified threshold percentage for orders is 100% 

when the contra-side NBB or NBO is priced at or 

below $1.00 and 50% when the contra-side NBB or 

NBO is priced above $1.00. Current Rule 6.61– 

O(a)(1)(A) provides that unless otherwise 

determined by the Exchange, the specified 

threshold for Market Maker bids is $1.00 if the 

contra-side NBO is priced at or below $1.00 and for 

Market Maker offers no limit if the NBB is priced 

at or below $1.00. Current Rule 6.61–O(a)(1)(B) 

provides that unless otherwise determined by the 

Exchange, the specified threshold for Market Maker 

bids is 50% if the contra-side NBO (NBB) is priced 

above $1.00. 

73See, e.g., Cboe Rule 5.6(c) (setting forth the 

‘‘reference price’’ applicable to orders for which 

Cboe delta-adjusts the execution price after the 

market close). As discussed infra, the Exchange 

likewise proposes to use the term Reference Price 

in connection with Trading Collars (proposed Rule 

6.62P–O(a)(4)) and other risk checks (proposed Rule 

6.41P–O). 

market in the affected option series.’’ As 

proposed, in Pillar, the Exchange would 

cancel a Market Order in similar 

circumstances, with proposed 

modifications that a Market Order 

would be cancelled only if there are no 

remaining contra-side Market Maker 

quotes on the Exchange or if there is no 

contra-side ABBO. The Exchange 

believes that this proposed change from 

the current rule would provide that a 

Market Order would be cancelled when 

there is no contra-side interest against 

which to determine the price at which 

such order could trade. 

Finally, proposed Rule 6.62P– 

O(a)(1)(E) would provide that a resting, 

displayed Market Order that is locked or 

crossed by an Away Market would be 

routed to that Away Market. Because 

Market Orders are intended to trade at 

the best price obtainable, the Exchange 

proposes to route displayed Market 

Orders if they are locked or crossed by 

an Away Market.71 This proposed Rule 

is based on current functionality, which 

is not described in current rule. 

Therefore, the proposed rule is designed 

to promote clarity and transparency in 

Exchange rules. 

Limit Orders. Proposed Rule 6.62P– 

O(a)(2) would define a Limit Order as an 

order message to buy or sell a stated 

number of option contracts at a 

specified price or better, subject to Limit 

Order Price Protection and the Trading 

Collar assigned to the order, and that a 

Limit Order may be designated Day, 

IOC, or GTC. In addition, unless 

otherwise specified, the working price 

and the display price of a Limit Order 

would be equal to the limit price of the 

order, it is eligible to be routed, and it 

would be ranked under the proposed 

category of ‘‘Priority 2—Display 

Orders.’’ This proposed rule text uses 

Pillar terminology that is based in part 

on Rule 7.31–E(a)(2). The ability for a 

Limit Order to be designated IOC, Day, 

or GTC is based on current Rules 6.62– 

O(k), (m) and (n), respectively, and 

therefore would differ from the cash 

equity rules because (unlike on the cash 

equity platform) a Limit Order could be 

designated GTC, but is consistent with 

current options trading functionality. In 

addition, unlike cash equity trading, but 

consistent with current options trading 

functionality, Limit Orders would be 

subject to trading collars. As described 

in more detail below, on Pillar, trading 

collars will differ from both current 

options trading collar functionality and 

trading collar functionality available on 

the Exchange’s cash equity platform 

(which is available only for Market 

Orders). 

Proposed Rule 6.62P–O(a)(2)(A) 

would provide that a marketable Limit 

Order to buy (sell) received by the 

Exchange would trade with all orders 

and quotes to sell (buy) on the 

Consolidated Book priced at or below 

(above) the NBO (NBB) before routing to 

the ABO (ABB) and may route to prices 

higher (lower) than the NBO (NBB) only 

after trading with orders and quotes to 

sell (buy) on the Consolidated Book at 

each price point, and once no longer 

marketable, the Limit Order would be 

ranked and displayed on the 

Consolidated Book. This proposed rule 

text is based on Rule 6.62–O(b), which 

provides that a ‘‘ ‘marketable’ limit order 

is a Limit Order to buy (sell) at or above 

(below) the NBBO.’’ The proposed rule 

text is more specific and uses the same 

Pillar terminology used to describe 

Limit Orders in Rule 7.31–E(a)(2)(A) for 

cash equity trading. In addition, 

proposed Rule 6.62P–O(a)(2)(A) would 

use terminology specific to options 

trading (i.e., the proposed rule refers to 

the Consolidated Book rather than the 

NYSE Arca Book as well as to the NBBO 

as opposed to the PBBO). 

Limit Order Price Protection. The 

Exchange proposes to describe its 

proposed Limit Order Price Protection 

functionality in proposed Rule 6.62P– 

O(a)(3). On the OX system, the concept 

of ‘‘Limit Order Price Protection’’ for 

orders is set forth in Rule 6.60–O(b) and 

is called the ‘‘Limit Order Filter.’’ For 

quotes, price protection filters are 

described in Rule 6.61–O. The proposed 

‘‘Limit Order Price Protection’’ on Pillar 

would be applicable to both Limit 

Orders and quotes and, at a high level, 

would work similarly to how the 

current price protection mechanisms 

function on the OX system because a 

Limit Order or quote would be rejected 

if it is priced at a specified threshold 

away from the contra-side NBB or 

NBO.72 The Exchange proposes to 

enhance the functionality for options 

trading on Pillar by using new 

thresholds and reference prices (as 

discussed further below) that would be 

applicable to both orders and quotes. 

The concept of a ‘‘Reference Price’’ as 

used in connection with risk controls 

would be new for options but consistent 

with Pillar terminology for the 

Exchange’s cash equity market as well 

as how this term is used on other option 

exchanges.73 Thus, this term is not new 

or novel. 

Proposed Rule 6.62P–O(a)(3)(A) 

would provide that each trading day, a 

Limit Order or quote to buy (sell) would 

be rejected or cancelled (if resting) if it 

is priced at a ‘‘Specified Threshold,’’ 

described below, equal to or above 

(below) the Reference Price, rounded 

down to the nearest price within the 

MPV for the Series (‘‘Limit Order Price 

Protection’’). In other words, a Limit 

Order designated GTC would be reevaluated for Limit Order Price 

Protection on each day that it is eligible 

to trade and would be cancelled if the 

limit price is through the Specified 

Threshold. In addition, the proposed 

rounding down is consistent with 

current functionality, is standard on 

Pillar for price protection mechanisms, 

and is based on how Limit Order Price 

Protection is calculated on the 

Exchange’s cash equity market if it is 

not within the MPV for the security, as 

described in the last sentence of Rule 

7.31–E(a)(2)(B). The proposed text 

would therefore promote granularity in 

Exchange rules. The proposed rule 

would further provide that Cross Orders 

and Limit-on-Open (‘‘LOO’’) Orders 

(described below) as well as orders 

represented in open outcry (except CTB 

Orders), would not be subject to Limit 

Order Price Protection and that Limit 

Order Price Protection would not be 

applied to a Limit Order or quote if 

there is no Reference Price, which is 

consistent with current functionality. 

• Proposed Rule 6.62P–O(a)(3)(A)(i) 

would provide that a Limit Order or 

quote that arrives when a series is open 

would be evaluated for Limit Order 

Price Protection on arrival. 

• Proposed Rule 6.62P–O(a)(3)(A)(ii) 

would provide that a Limit Order or 

quote received during a pre-open state 

would be evaluated for Limit Order 


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74See discussion infra, regarding proposed Rule 

6.64P–O(a) and proposed definitions for the terms 

‘‘Auction,’’ ‘‘Auction Price,’’ Auction Collar,’’ ‘‘preopen state,’’ and ‘‘Trading Halt Auction.’’ 

75References to the NBBO, NBB, and NBO in 

Rule 7.31–E refer to using a determination of the 

national best bid and offer that has not been 

adjusted. 

76On the OX system, the thresholds for price 

protection on orders and quotes (per Rules 6.60– 

O(b) and 6.61–O(a)(1), respectively), depend solely 

on whether the contra-side NBBO (i.e., the reference 

price) is more or less than $1.00. The Exchange 

believes the additional Reference Price levels—and 

corresponding Specified Thresholds—would make 

the application of the Limit Order Price Protection 

more precise to the benefit of all market 

participants. 

77See, e.g., Cboe Rule 5.34(a)(4) (describing the 

‘‘Drill-Through Protection’’ and that Cboe 

‘‘determines the buffer amount on a class and 

premium basis’’ without specifying the amount of 

such buffers); and the Nasdaq Stock Market LLC 

(‘‘Nasdaq’’) Options 3, Section 15(a)(1)(B) 

(specifying that ‘‘Order Price Protection’’ can be a 

configurable dollar amount not to exceed $1.00 

through such contra-side Reference BBO as 

specified by Nasdaq and announced via an Options 

Trader Alert). 

78See Rule 6.60–O(a)(3) (‘‘Trade Collar Protection 

does not apply to quotes, IOC Orders, AON Orders, 

FOK Orders, and NOW Orders.’’). 

Price Protection after an Auction 

concludes.74

• Proposed Rule 6.62P–O(a)(3)(A)(iii) 

would provide that a Limit Order or 

quote that was resting on the 

Consolidated Book before a trading halt 

would be evaluated for Limit Order 

Price Protection again after the Trading 

Halt Auction concludes. 

The Exchange believes that these 

proposed rules would add clarity and 

transparency to when the Exchange 

would evaluate a Limit Order or quote 

for Limit Order Price Protection. 

Proposed Rule 6.62P–O(a)(3)(B) 

would specify that the Reference Price 

for calculating Limit Order Price 

Protection for an order or quote to buy 

(sell) would be the NBO (NBB), 

provided that, immediately following an 

Auction, the Reference Price would be 

the Auction Price, or if none, the upper 

(lower) Auction Collar price, or, if none, 

the NBO (NBB). The Exchange believes 

that adjusting the Reference Price for 

Limit Order Price Protection 

immediately following an Auction 

would ensure that the most up-to-date 

price would be used to assess whether 

to cancel a Limit Order that was 

received during a pre-open state or 

would be reevaluated after a Trading 

Halt Auction. The Exchange further 

proposes that for purposes of calculating 

Limit Order Price Protection, the 

Exchange would not use an adjusted 

NBBO, which use of an unadjusted 

NBBO is consistent with how Limit 

Order Price Protection currently 

functions on the Exchange’s cash equity 

market, as described in Rule 7.31– 

E(a)(2)(B).75 The Exchange believes that 

using an unadjusted NBBO for risk 

protection mechanisms is consistent 

with the goal of such mechanisms to 

prevent erroneous executions by using a 

more conservative view of the NBBO. 

Proposed Rule 6.62P–O(a)(3)(C) 

would specify the Specified Threshold 

and would provide that unless 

determined otherwise by the Exchange 

and announced to OTP Holders and 

OTP Firms by Trader Update, the 

Specified Threshold applicable to Limit 

Order Price Protection would be: 

Reference price Specified 

threshold 

$0.00 to $1.00 ............................ $0.30 

$1.01 to $10.00 .......................... 50% 

$10.01 to $20.00 ........................ 40% 

Reference price Specified 

threshold 

$20.01 to $50.00 ........................ 30% 

$50.01 to $100.00 ...................... 20% 

$100.01 and higher .................... 10% 

The Exchange believes that it would 

provide a more reasonable and 

deterministic trading outcome to use a 

fixed dollar amount (of $0.30) rather 

than a percentage calculation when the 

Reference Price is $1.00 or less. The 

Exchange believes that the balance of 

the proposed thresholds, which are 

percentages tied to the amount of the 

Reference Price that decrease as that 

Price increases, are more granular than 

those currently specified in Rules 6.60– 

O(b) (for orders) and 6.61–O(a)(1)(A) 

and (B) (for quotes) and therefore 

determining whether to reject a Limit 

Order or quote will be more tailored to 

the applicable Reference Price.76 In 

addition, consistent with Rules 6.60– 

O(b) and 6.61–O(a)(1), the Exchange 

proposes that these thresholds could 

change, subject to announcing the 

changes by Trader Update. Providing 

flexibility in Exchange rules regarding 

how the Specified Thresholds would be 

set is consistent with the rules of other 

options exchanges.77

Trading Collar. Trading Collars on the 

OX system are currently described in 

Rule 6.60–O(a). Under the current rules, 

incoming Market Orders and marketable 

Limit Orders are limited in having an 

immediate execution if they would 

trade at a price greater than one 

‘‘Trading Collar.’’ A collared order is 

displayed at that price and then can be 

repriced to new collars as the NBBO 

updates. On Pillar, the Exchange 

proposes Trading Collar functionality 

that would be new for Pillar and is not 

currently available on the Exchange’s 

cash equity platform. 

Unlike current options trading collar 

functionality, which permits a collared 

order to be repriced, as proposed, a 

Market Order or Limit Order would be 

assigned a single Trading Collar that 

would be applicable to that order until 

it is fully executed or cancelled (unless 

the series is halted). The new proposed 

Trading Collar would function as a 

ceiling (for buy orders) or floor (for sell 

orders) of the price at which such order 

could be traded, displayed, or routed. 

The Exchange further proposes that 

when an order is working at its assigned 

Trading Collar, it would cancel if not 

executed within a specified time period. 

More specifically, proposed Rule 

6.62P–O(a)(4) would provide that a 

Market Order or Limit Order to buy 

(sell) would not trade or route to an 

Away Market at a price above (below) 

the Trading Collar assigned to that 

order. As further proposed, AuctionOnly Orders, Limit Orders designated 

IOC or FOK, Cross Orders, ISOs, and 

Market Maker quotes would not be 

subject to Trading Collars, which 

interest is excluded under current 

functionality.78 The proposed rule, 

however, would explicitly add reference 

to Auction-Only Orders, Cross Orders, 

and ISOs being excluded from Trading 

Collars, which new detail would add 

granularity to the proposed rule and 

would also address that the proposed 

Day ISOs, described below, would not 

be subject to Trading Collars. In 

addition, Trading Collars would not be 

applicable during Auctions but (as 

described below) would be calculated 

after such Auction concludes. 

Proposed Rule 6.62P–O(a)(4)(A) 

would provide that a Trading Collar 

assigned to an order would be 

calculated once per trading day and 

would be updated only if the series is 

halted. Accordingly, an order 

designated GTC would receive a new 

Trading Collar each day, but that 

Trading Collar would not be updated 

intraday unless the series is halted. 

Proposed Rule 6.62P–O(a)(4)(A)(i) 

would provide that an order that is 

received during continuous trading 

would be assigned a Trading Collar 

before being processed for either 

trading, repricing, or routing and that an 

order that is routed on arrival and 

returned unexecuted would use the 

Trading Collar previously assigned to it. 

Proposed Rule 6.62P–O(a)(4)(A)(ii) 

would provide that an order received 

during a pre-open state would be 

assigned a Trading Collar after an 

Auction concludes. Finally, proposed 

Rule 6.62P–O(a)(4)(A)(iii) would 

provide that the Trading Collar for an 

order resting on the Consolidated Book 


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79Under current rules, trading collars are 

calculated based off of the contra-side NBBO. See 

Rule 6.60–O(a)(1)(A)(ii). 

80See discussion regarding Cboe Rule 5.34(a)(4) 

and Nasdaq Options 3, Section 15(a)(1)(B), supra 

note 77. 

81Under the current rule, the Trading Collar for 

buy (sell) orders is as follows: $0.25 for each option 

contract for which the NBB (NBO) is less than 

$2.00; $0.40 where the NBB (NBO) is between 

$2.00–$5.00; $0.50 where the NBB (NBO) is 

between $5.01–$10.00; $0.80 where the NBB (NBO) 

is between $10.01 but does not exceed—$20.00; and 

$1.00 when the NBB (NBO) is $20.01 or more. 

82See Rules 6.87–O(c)(1) (thresholds for Obvious 

Errors) and 6.87–O(d)(1) (thresholds for 

Catastrophic Errors). 

83The proposed rule does not include the second 

sentence of Rule 7.31–E(b)(2), which provides that 

the ‘‘IOC Modifier will override any posting or 

before a trading halt would be 

calculated again after the Trading Halt 

Auction concludes. The Exchange 

believes that because Trading Collars 

are intended as a price protection 

mechanism, updating the Trading Collar 

after a series has reopened would allow 

for the Trading Collar assigned to an 

order to reflect more updated pricing. 

Proposed Rule 6.62P–O(a)(4)(B) 

would provide that the Reference Price 

for calculating the Trading Collar for an 

order to buy (sell) would be the NBO 

(NBB), which is consistent with how 

trading collars are currently determined 

for Limit Orders, with differences to use 

this Reference Price for all orders and 

for how the Reference Price would be 

determined after an Auction.79 The 

Exchange proposes to use the Pillar term 

‘‘Reference Price’’ to describe what 

would be used for Trading Collar 

calculations.80 The proposed rule would 

further provide that for Auction-eligible 

orders to buy (sell) that were received 

during a pre-open state or orders that 

were re-assigned a Trading Collar after 

a trading halt, the Reference Price 

would be the Auction Price or, if none, 

the upper (lower) Auction Collar price 

or, if none, the NBO (NBB). For reasons 

similar to those described above, the 

Exchange proposes to use a more 

conservative view of the NBBO for 

purposes of risk protection mechanisms. 

Therefore, the Exchange proposes that 

for purposes of calculating a Trading 

Collar, the Exchange would not use an 

adjusted NBBO. Proposed Rule 6.62P– 

O(a)(4)(B)(i) would further provide that 

a Trading Collar would not be assigned 

to a Limit Order if there is no Reference 

Price at the time of calculation, which 

is consistent with current functionality 

and the proposed rule would add 

granularity to Exchange rules. 

Proposed Rule 6.62P–O(a)(4)(C) 

would describe how the Trading Collar 

would be calculated and would provide 

that the Trading Collar for an order to 

buy (sell) would be a specified amount 

above (below) the Reference Price, as 

follows: (1) For orders with a Reference 

Price of $1.00 or lower, $0.25; or (2) for 

orders with a Reference Price above 

$1.00, the lower of $2.50 or 25%. 

Trading Collars under the current rule 

are based on a specified dollar amount 

(set forth in four tranches).81 The 

Exchange believes the proposed 

functionality (set forth in two tranches) 

would tailor the Trading Collar 

calculations with either a specified 

dollar amount or percentage, depending 

on the Reference Price of the order, 

while at the same time providing that 

the thresholds would be within the 

current parameters for determining 

whether a trade is an Obvious Error or 

Catastrophic Error.82 Proposed Rule 

6.62P–O(a)(4)(C)(i) would further 

provide that if the calculation of a 

Trading Collar would not be in the MPV 

for the series, it would be rounded 

down to the nearest price within the 

applicable MPV, which is consistent 

with current functionality and based on 

how Trading Collars are calculated on 

the Exchange’s cash equity market, as 

described in Rule 7.31–E(a)(1)(B). 

Proposed Rule 6.62P–O(a)(4)(C)(ii) 

would further provide that for orders to 

sell, if subtracting the Trading Collar 

from the Reference Price would result in 

a negative number, the Trading Collar 

for Limit Orders would be the limit 

price and the Trading Collar for Market 

Orders would be one MPV above zero, 

which would provide more granularity 

in Exchange rules and would ensure 

that there will be a Trading Collar 

calculated for low-priced orders to sell. 

Proposed Rule 6.62P–O(a)(4)(D) 

would describe how the Trading Collar 

would be applied and would provide 

that if an order to buy (sell) would trade 

or route above (below) the Trading 

Collar or would have its working price 

repriced to a Trading Collar that is 

below (above) its limit price, the order 

would be added to the Consolidated 

Book at the Trading Collar for 500 

milliseconds and if not traded within 

that period, would be cancelled. In 

addition, once the 500-millisecond 

timer begins for an order, the order 

would be cancelled at the end of the 

timer even if it repriced or has been 

routed to an Away Market during that 

period, in which case any portion of the 

order that is returned unexecuted would 

be cancelled. 

The Exchange believes that the 

proposed Trading Collar functionality is 

designed to provide a similar type of 

order protection as is currently available 

(as described in Rule 6.60–O(a)) because 

it would limit the price at which a 

marketable order could be traded, 

routed, or displayed. The Exchange 

believes that the proposed differences 

are designed to simplify the 

functionality by applying a static ceiling 

price (for a buy order) or floor price (for 

a sell order) at which such order could 

be traded or routed that would be 

determined at the time of entry (or after 

a series opens or reopens) and would be 

applicable to the order until it is traded 

or cancelled. The Exchange believes that 

the proposed functionality would 

provide greater determinism to an OTP 

Holder or OTP Firm of the Trading 

Collar that would be applicable to a 

Market Order or Limit Order and when 

such order may be cancelled if it 

reaches its Trading Collar. 

Time in Force Modifiers. Proposed 

Rule 6.62P–O(b) would set forth the 

time-in-force modifiers that would be 

available for options trading on Pillar 

and uses Pillar terminology similar to 

that used in Rule 7.31–E(b), with 

differences to offer time-in-force 

modifiers currently available for options 

trading that are not available for cash 

equity trading. The Exchange proposes 

to offer the same time-in-force modifiers 

that are currently available for options 

trading on the Exchange and use Pillar 

terminology to describe the 

functionality. As noted above, the 

Exchange proposes to describe the Time 

in Force Modifiers in proposed Rule 

6.62P–O(b), and then specify for each 

order type which Time in Force 

Modifiers would be available for such 

orders or quotes. 

Day Modifier. Proposed Rule 6.62P– 

O(b)(1) would provide that any order or 

quote to buy or sell designated Day, if 

not traded, would expire at the end of 

the trading day on which it was entered 

and that a Day Modifier cannot be 

combined with any other Time in Force 

Modifier. This proposed rule text uses 

Pillar terminology based on Rule 7.31– 

E(b)(1) with one difference to reference 

‘‘quotes’’ in addition to orders. This 

proposed functionality would operate 

no differently than how a ‘‘Day Order,’’ 

as described in Rule 6.62–O(m), 

currently functions. 

Immediate-or-Cancel (‘‘IOC’’) 

Modifier. Proposed Rule 6.62P–O(b)(2) 

would provide that a Limit Order may 

be designated IOC or Routable IOC, as 

described in proposed Rules 6.62P– 

O(b)(2)(A) and (B) and that a Limit 

Order designated IOC would not be 

eligible to participate in any Auctions. 

This proposed rule text is based on the 

first and third sentences of Rule 7.31– 

E(b)(2) without any differences and 

makes explicit current (but not defined) 

functionality.83 The Exchange proposes 


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routing instructions of orders that include the IOC 

Modifier,’’ as this functionality is not applicable to 

options because an order that is not eligible to 

include an IOC Modifier would be rejected on 

Pillar. 

84See discussion infra, regarding proposed Rule 

6.64P–O and definitions relating to Auctions. As 

proposed, an ‘‘Auction’’ includes the opening or 

reopening of a series for trading either on a trade 

or quote. See proposed Rule 6.64P–O(a)(5). 

85Rule 6.62–O(r) defines an ‘‘Opening Only 

Order’’ as ‘‘a Market Order or Limit Order which 

is to be executed in whole or in part during the 

opening auction of an options series or not at all. 

Any portion not so executed is to be treated as 

cancelled.’’ Per Rule 6.64–O(d), the Exchange 

utilizes the same process for orders eligible to 

participate in the opening or reopening (following 

a trading halt) of a series. 

86See Rule 6.62–O(r) (providing that any portion 

of an Opening Only Order ‘‘not so executed is to 

be treated as cancelled’’). 

to use Pillar terminology based on Rule 

7.31–E(b)(2) to describe this 

functionality. 

Proposed Rule 6.62P–O(b)(2)(A) 

would define a ‘‘Limit IOC Order’’ as a 

Limit Order designated IOC that would 

be traded in whole or in part on the 

Exchange as soon as such order is 

received, and the unexecuted quantity 

would be cancelled and that a Limit IOC 

Order does not route. This proposed 

rule text uses Pillar terminology based 

on Rule 7.31–E(b)(2)(A) without any 

substantive differences. The proposed 

Pillar Limit IOC Order would function 

the same as an ‘‘Immediate-or-Cancel 

Order (IOC Order),’’ as currently 

described in Rule 6.62–O(k), without 

any differences. 

Proposed Rule 6.62P–O(b)(2)(B) 

would define a ‘‘Limit Routable IOC 

Order’’ as a Limit Order designated 

Routable IOC that would be traded in 

whole or in part on the Exchange as 

soon as such order is received, and the 

unexecuted quantity routed to Away 

Market(s) and that any quantity not 

immediately traded either on the 

Exchange or an Away Market would be 

cancelled. This proposed rule text uses 

Pillar terminology based on Rule 7.31– 

E(b)(2)(B) without any substantive 

differences. The proposed Pillar Limit 

Routable IOC Order is also based on the 

‘‘NOW Order,’’ as currently described in 

Rule 6.62–O(o) and uses Pillar 

terminology. 

Fill-or-Kill (‘‘FOK’’) Modifier: 

Proposed Rule 6.62P–O(b)(3) would 

provide that a Limit Order designated 

FOK would be traded in whole on the 

Exchange as soon as such order is 

received, and if not so traded is to be 

cancelled and that a Limit Order 

designated FOK does not route and does 

not participate in any Auctions. The 

Exchange does not offer the FOK 

Modifier on its cash equity market, and 

this proposed rule uses Pillar 

terminology to offer the same 

functionality that is currently described 

in Rule 6.62–O(l) as the ‘‘Fill-or-Kill 

Order (FOK Order)’’ without any 

substantive differences. 

Good-‘Til-Cancelled (‘‘GTC’’) 

Modifier. Proposed Rule 6.62P–O(b)(4) 

would provide that a Limit or Market 

Order designated GTC remains in force 

until the order is filled, cancelled, the 

MPV in the series changes overnight, 

the option contract expires, or a 

corporate action results in an 

adjustment to the terms of the option 

contract. The Exchange does not offer 

the GTC Modifier on its cash equity 

market, and this proposed rule uses 

Pillar terminology to offer the same 

functionality that is currently described 

in Rule 6.62–O(n) as the ‘‘Good-TillCancelled (GTC Order),’’ with the 

substantive difference that the proposed 

text makes clear (consistent with current 

functionality) that such orders may be 

cancelled if the MPV changes overnight. 

Otherwise, the proposed Rule describes 

the same functionality that is currently 

described in Rule 6.62–O(n) as the 

‘‘Good-Till-Cancelled (GTC Order).’’ 

Auction-Only Orders. Proposed Rule 

6.62P–O(c) would define an ‘‘AuctionOnly Order’’ as a Limit Order or Market 

Order that is to be traded only in an 

Auction pursuant to Rule 6.64P–O,84

which uses Pillar terminology based on 

Rule 7.31–E(c) in lieu of the current 

description of an ‘‘Opening Only Order’’ 

set forth in Rule 6.62–O(r), without any 

functional differences to how such 

orders trade on Pillar.85 The proposed 

rule would further provide that an 

Auction-Only Order would not be 

accepted when a series is opened for 

trading (i.e., would be accepted only 

during a pre-open state, which includes 

a trading halt) and any portion of an 

Auction-Only Order that is not traded in 

a Core Open Auction or Trading Halt 

Auction would be cancelled. This 

represents current functionality.86 The 

proposed rule is designed to provide 

clarity and uses Pillar terminology from 

both the last sentence of Rule 7.31– 

E(c)(1) and the last sentence of Rule 

7.31–E(c)(2) for options trading. 

Proposed Rule 6.62P–O(c)(1) would 

define a ‘‘Limit-on-Open Order (‘LOO 

Order’)’’ as a Limit Order that is to be 

traded only in an Auction. This 

proposed rule uses Pillar terminology 

based on Rule 7.31–E(c)(1) to describe 

functionality that would be no different 

from current functionality, as described 

in Rule 6.62–O(r). 

Proposed Rule 6.62P–O(c)(2) would 

define a ‘‘Market-on-Open Order (‘MOO 

Order’)’’ as a Market Order that is to be 

traded only in an Auction (whether a 

Core Open Auction or Trading Halt 

Auction, per proposed Rule 6.64P– 

O(a)(1)(A), (B)). This proposed rule uses 

Pillar terminology based on Rule 7.31– 

E(c)(2) to describe functionality for 

options that would be no different from 

current functionality, as described in 

Rule 6.62–O(r). 

Proposed Rule 6.62P–O(c)(3) would 

define an ‘‘Imbalance Offset Order (‘IO 

Order’).’’ The Exchange currently offers 

an IO Order for participation in Trading 

Halt Auctions on its cash equity market 

but does not offer this order type for 

options trading on the OX system. For 

cash equity trading, the IO Order is a 

conditional order type that is eligible to 

participate in a Trading Halt Auction 

only if it would offset the imbalance. To 

provide OTP Holders and OTP Firms 

with greater flexibility for options 

trading on Pillar, the Exchange proposes 

to offer more expansive functionality 

than is currently available for cash 

equity trading and to offer the IO Order 

for both Core Open Auctions and 

Trading Halt Auctions. 

As proposed, the IO Order would 

function no differently than how an IO 

Order currently functions on the 

Exchange’s cash equity market (except 

that it would be eligible to trade in all 

Auctions). Accordingly, proposed Rule 

6.62P–O(c)(3) would define an IO Order 

as a Limit Order that is to be traded only 

in an Auction, which is based on Rule 

7.31–E(c)(5), with a difference that for 

options trading, it would also be 

available for Core Open Auctions. 

• Proposed Rule 6.62P–O(c)(3)(A) 

would provide that an IO Order would 

participate in an Auction only if: (1) 

There is an Imbalance in the series on 

the opposite side of the market from the 

IO Order after taking into account all 

other orders and quotes eligible to trade 

at the Indicative Match Price; and (2) 

the limit price of the IO Order to buy 

(sell) would be at or above (below) the 

Indicative Match Price. This proposed 

text is based on Rule 7.31–E(c)(5)(B) 

except that it includes reference to 

quotes, which are unique to options 

trading, and does not limit the order 

type to Trading Halt Auctions. 

• Proposed Rule 6.62P–O(c)(3)(B) 

would provide that the working price of 

an IO Order to buy (sell) would be 

adjusted to be equal to the Indicative 

Match Price, provided that the working 

price of an IO Order would not be 

higher (lower) than its limit price. This 

proposed text is based on Rule 7.31– 

E(c)(5)(C) without any differences. 

Orders with a Conditional or 

Undisplayed Price and/or Size. 

Proposed Rule 6.62P–O(d) would set 

forth the orders with a conditional or 

undisplayed price and/or size that 

would be available for options trading 


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87As discussed, supra, regarding proposed Rule 

6.76P–O(g), the Exchange proposes to include 

details about ranking of orders and quotes with 

contingencies in this proposed Rule 6.62P–O(d) 

using the Pillar priority scheme. Also, as discussed 

infra, see e.g., note 44 [sic], the ranking and priority 

of quotes under Pillar is consistent with handling 

on the OX system unless otherwise noted herein. 

88For example, as described in more detail below, 

the proposed Non-Routable Limit Order would be 

eligible to be repriced only once after it is resting 

in the Consolidated Book (see proposed Rule 6.62P– 

O(e)(1)). If the display quantity of a Non-Routable 

Limit Order that is combined with a Reserve Order 

has already been repriced and is no longer eligible 

to be repriced, and the ABBO adjusts, the reserve 

quantity would not adjust to a price that would be 

more aggressive than the working price of the 

display quantity of the order. This functionality is 

not currently available on the Exchange’s cash 

equity market. 

on Pillar. On Pillar, the Exchange 

proposes to offer the same type of orders 

that are available in the OX system and 

that are currently described in Rule 

6.62–O(d) as a ‘‘Contingency Order or 

Working Order,’’ with changes as 

described below.87

Reserve Order. Reserve Orders are 

currently defined in Rule 6.62–O(d)(3). 

The Exchange proposes that for options 

traded on Pillar, Reserve Orders would 

function similarly to how Reserve 

Orders function on its cash equity 

market, as described in Rule 7.31– 

E(d)(1), with differences described 

below. Accordingly, the Exchange 

proposes that proposed Rule 6.62P– 

O(d)(1), which would define Reserve 

Orders for options trading on Pillar, 

would use Pillar terminology based on 

Rule 7.31–E(d)(1), with differences to 

reflect differences in options and cash 

equity trading. For example, options 

trading does not have a concept of 

‘‘round lot’’ or ‘‘odd lot’’ trading, and 

therefore the proposed options trading 

version of the Rule would not include 

a description of behavior that correlates 

to such functionality. 

Proposed Rule 6.62P–O(d)(1) would 

define a Reserve Order as a Limit Order 

with a quantity of the size displayed 

and with a reserve quantity of the size 

(‘‘reserve interest’’) that is not displayed 

and that the displayed quantity of a 

Reserve Order is ranked under the 

proposed category of ‘‘Priority 2— 

Display Orders’’ and the reserve interest 

is ranked under the proposed category 

of ‘‘Priority 3—Non-Display Orders.’’ 

This proposed rule text is based on Rule 

7.31–E(d)(1) without any differences. 

This proposed rule text is also 

consistent with Rule 6.76–O(a)(1)(B) 

and (a)(2), with orders ranked under the 

proposed category of ‘‘Priority 2— 

Display Orders’’ functioning the same as 

orders in the current ‘‘Display Order 

Process’’ and orders ranked under the 

proposed category of ‘‘Priority 3—NonDisplayed Orders’’ functioning the same 

as orders in the current ‘‘Working Order 

Process.’’ Proposed Rule 6.62P–O(d)(1) 

would further provide that both the 

display quantity and the reserve interest 

of an arriving marketable Reserve Order 

would be eligible to trade with resting 

interest in the Consolidated Book or 

route to Away Markets, unless 

designated as a Non-Routable Limit 

Order, which is based on the third 

sentence of Rule 7.31–E(d)(1) with a 

non-substantive difference to add 

reference to Non-Routable Limit Order. 

Proposed Rule 6.62P–O(d)(1) would 

further provide that the working price of 

the reserve interest of a resting Reserve 

Order to buy (sell) would be adjusted in 

the same manner as a Non-Displayed 

Limit Order, as provided for in 

paragraph (d)(2)(A) of this Rule, 

provided that it would never be priced 

higher (lower) than the working price of 

the display quantity of the Reserve 

Order. This proposed rule text is based 

on the last sentence of Rule 7.31–E(d)(1) 

with one difference to reference that the 

reserve interest could never have a 

working price that is more aggressive 

than the working price of the display 

quantity of the Reserve Order, which 

would be new functionality on Pillar for 

options trading (and not currently 

available for cash equity trading) 

designed to ensure that the reserve 

interest of a Reserve Order to buy (sell) 

would never trade at a price higher 

(lower) than the working price of the 

display quantity of the Reserve Order.88

• Proposed Rule 6.62P–O(d)(1)(A) 

would provide that the displayed 

portion of a Reserve Order would be 

replenished when the display quantity 

is decremented to zero and that the 

replenish quantity would be the 

minimum display size of the order or 

the remaining quantity of the reserve 

interest if it is less than the minimum 

display quantity. This proposed rule 

text is based on Rule 7.31–E(d)(1)(A) 

with differences to reflect that options 

are not traded in ‘‘round lots’’ or ‘‘odd 

lots.’’ Accordingly, the Exchange would 

not replenish a Reserve Order on the 

options trading platform until the 

display portion is fully decremented, 

which is consistent with current 

functionality as described in Rule 6.76– 

O(a)(1)(B). 

• Proposed Rule 6.62P–O(d)(1)(B) 

would provide that each time the 

display quantity of a Reserve Order is 

replenished from reserve interest, a new 

working time would be assigned to the 

replenished quantity, which is 

consistent with current Rule 6.76– 

O(a)(1)(B)(ii), which provides that when 

refreshed, the new display quantity will 

be ranked at the new time that the 

displayed portion of the order was 

refreshed. This proposed rule text is 

based in part on Rule 7.31–E(d)(1)(B) 

with differences to reflect that for 

options traded on Pillar, there would 

never be more than one display quantity 

of a Reserve Order, and therefore the 

Exchange would not have different 

‘‘child’’ display quantities of a Reserve 

Order with different working times, as 

could occur for a Reserve Order on the 

Exchange’s cash equity trading platform. 

• Proposed Rule 6.62P–O(d)(1)(C) 

would provide that a Reserve Order may 

be designated as a Non-Routable Limit 

Order and if so designated, the reserve 

interest that replenishes the display 

quantity would be assigned a display 

price and working price consistent with 

the instructions for the order. This 

proposed rule text is based on Rule 

7.31–E(d)(1)(B)(ii) without any 

substantive differences. The Exchange 

believes that the proposed rule would 

promote transparency and granularity in 

Exchange rules. 

• Proposed Rule 6.62P–O(d)(1)(D) 

would provide that a routable Reserve 

Order would be evaluated for routing 

both on arrival and each time the 

display quantity is replenished, which 

is consistent with Rule 6.76A– 

O(c)(1)(B), which provides that a 

Reserve Order may be routed serially as 

component orders. Proposed Rule 

6.62P–O(d)(1)(D)(i) would provide that 

if routing is required, the Exchange 

would route from reserve interest before 

publishing the display quantity. And 

proposed Rule 6.62P–O(d)(1)(D)(ii) 

would provide that any quantity of a 

Reserve Order that is returned 

unexecuted would join the working 

time of the reserve interest and that if 

there is no reserve interest to join, the 

returned quantity would be assigned a 

new working time. This proposed rule 

text is based on Rule 7.31–E(d)(1)(D) 

and subparagraphs (i) and (ii) with 

differences to reflect that there is no 

concept of round lots or multiple child 

display orders for options trading. The 

Exchange believes that the proposed 

rule would promote transparency and 

granularity in Exchange rules. 

• Proposed Rule 6.62P–O(d)(1)(E) 

would provide that a request to reduce 

the size of a Reserve Order would cancel 

the reserve interest before cancelling the 

display quantity. This proposed rule 

text is based on Rule 7.31–E(d)(1)(E) 

with differences only to reflect that 

there would not be more than one child 

display order for options trading of 

Reserve Orders on Pillar. The Exchange 

believes that the proposed rule would 

promote transparency and granularity in 

Exchange rules. 


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89The Exchange notes that a Non-Displayed Limit 

Order would function similarly to a PNP Blind 

Order that locks or crosses the contra-side NBBO. 

In such case, a PNP Blind Order is not displayed, 

as described in Rule 6.62–O(u) (‘‘if the PNP Blind 

Order would lock or cross the NBBO, the price and 

size of the order will not be disseminated’’). 

• Proposed Rule 6.62P–O(d)(1)(F) 

would provide that a Reserve Order may 

be designated Day or GTC, but it may 

not be designated as an ALO Order. This 

proposed rule text is based in part on 

Rule 7.31–E(d)(1)(C), with differences to 

reflect that the GTC Modifier would be 

available for Reserve Orders trading on 

the Pillar options trading platform 

(consistent with current functionality) 

and that Primary Pegged Orders would 

not be available for options traded on 

Pillar (also consistent with current 

functionality). The Exchange believes 

that the proposed rule would promote 

transparency and granularity in 

Exchange rules. 

Non-Displayed Limit Order. The 

Exchange proposes to offer the NonDisplayed Limit Order for options 

trading on Pillar, which would be new 

for options trading and would provide 

OTP Holders and OTP Firms with a 

non-displayed order type in lieu of nondisplayed PNP Blind Orders, which 

latter order type would not be available 

on Pillar.89 The proposed order type 

would function similarly to the existing 

Non-Displayed Limit Order as described 

in Rule 7.31–E(d)(2). Proposed Rule 

6.62P–O(d)(2) would define a NonDisplayed Limit Order as a Limit Order 

that is not displayed, does not route, 

and is ranked under the proposed 

category of ‘‘Priority 3—Non-Display 

Orders’’; and that a Non-Displayed 

Limit Order may be designated Day or 

GTC and would not participate in any 

Auctions. This proposed rule text uses 

the same Pillar terminology as used in 

Rule 7.31–E(d)(2) with differences to 

reflect that the GTC Time-in-Force 

Modifier is available for options trading 

on Pillar. 

• Proposed Rule 6.62P–O(d)(2)(A) 

would provide that the working price of 

a Non-Displayed Limit Order would be 

assigned on arrival and adjusted when 

resting on the Consolidated Book and 

that the working price of a NonDisplayed Limit Order to buy (sell) 

would be the lower (higher) of the limit 

price or the NBO (NBB). This proposed 

rule text is based on Rule 7.31– 

E(d)(2)(A) with non-substantive 

differences to reference the 

Consolidated Book instead of the NYSE 

Arca Book and to streamline the rule 

text without any substantive differences. 

All-or-None (‘‘AON’’) Order. AON 

Orders are currently defined in Rule 

6.62–O(d)(4). AON Orders are not 

available on the Exchange’s cash equity 

market, and for options trading on 

Pillar, would function similarly to how 

AON Orders currently function because 

such orders would only execute if they 

can be satisfied in their entirety. 

However, unlike the OX system, where 

AON Orders are not integrated in the 

Consolidated Book, on Pillar, the 

Exchange proposes that AON Orders 

would be ranked in the Consolidated 

Book and function as conditional orders 

that would trade only if their condition 

could be met, similar to how orders 

with a Minimum Trade Size (‘‘MTS’’) 

Modifier function on Pillar on the 

Exchange’s cash equity market. In 

addition, on Pillar, the Exchange would 

not support Market Orders designated as 

AON, which would be a change from 

current functionality. The Exchange 

does not believe it needs to continue 

offering AON Market Orders because 

such functionality was not used often 

on the OX system, indicating a lack of 

market participant interest in this 

functionality. Because of the new 

functionality that would be available for 

AON Orders on Pillar, the Exchange 

proposes to use Pillar terminology to 

describe this order type. 

Proposed Rule 6.62P–O(d)(3) would 

provide that an AON Order is a Limit 

Order that is to be traded in whole on 

the Exchange at the same time or not at 

all, which represents current 

functionality as described in the first 

sentence of Rule 6.62–O(d)(4). Proposed 

Rule 6.62P–O(d)(3) would further 

provide that an AON Order that does 

not trade on arrival would be ranked 

under the proposed category of ‘‘Priority 

3—Non-Display Orders’’ and that an 

AON Order may be designated Day or 

GTC, does not route, and would not 

participate in any Auctions. This 

proposed rule text uses Pillar 

terminology to describe the proposed 

new functionality that such orders 

would be ranked on the Consolidated 

Book. 

• Proposed Rule 6.62P–O(d)(3)(A) 

would provide that the working price of 

an AON Order would be assigned on 

arrival and adjusted when resting on the 

Consolidated Book and that the working 

price of an AON Order to buy (sell) 

would be the lower (higher) of the limit 

price or NBO (NBB). Because an AON 

Order is non-displayed, the Exchange 

proposes that its working price should 

be adjusted in the same manner as the 

proposed Non-Displayed Limit Order. 

• Proposed Rule 6.62P–O(d)(3)(B) 

would provide that an Aggressing AON 

Order to buy (sell) would trade with sell 

(buy) orders and quotes that in the 

aggregate can satisfy the AON Order in 

its entirety. This proposed rule text is 

new and promotes clarity in Exchange 

rules that an Aggressing AON Order 

(whether on arrival or as a resting order 

that becomes an Aggressing Order) 

would be eligible to trade with more 

than one contra-side order or quote, 

provided that multiple orders and 

quotes in the aggregate would satisfy the 

AON Order in its entirety. 

• Proposed Rule 6.62P–O(d)(3)(C) 

would provide that a resting AON Order 

to buy (sell) would trade with an 

Aggressing Order or Aggressing Quote to 

sell (buy) that individually can satisfy 

the whole AON Order. This is proposed 

new functionality, because currently, an 

AON Order can trade only against 

resting interest in the Consolidated 

Book. The Exchange believes this 

proposed change would provide an 

AON Order with additional execution 

opportunities. 

• Proposed Rule 6.62P–O(d)(3)(C)(i) 

would provide that if an Aggressing 

Order or Aggressing Quote to sell (buy) 

does not satisfy the resting AON Order 

to buy (sell), that Aggressing Order or 

Aggressing Quote would not trade with 

and may trade through such AON 

Order. Proposed Rule 6.62P– 

O(d)(3)(C)(ii) would further provide that 

if a resting non-displayed order to sell 

(buy) does not satisfy the quantity of a 

same-priced resting AON Order to buy 

(sell), a subsequently arriving order or 

quote to sell (buy) that satisfies the AON 

Order would trade before such resting 

non-displayed order or quote to sell 

(buy) at that price. Both of these 

proposed rules are similar to current 

Rule 6.62–O(d)(4), which provides that 

a resting AON Order can be ignored if 

its condition is not met. Similar to 

current functionality, even though an 

AON would be ranked in the 

Consolidated Book, it is still a 

conditional order type and therefore, by 

its terms, can be skipped over for an 

execution. This proposed rule text is 

also based on how the MTS Modifier 

functions on the cash equity market, as 

described in Rule 7.31–E(i)(3)(E)(i) and 

(ii). 

• Proposed Rule 6.62P–O(d)(3)(D) 

would provide that a resting AON Order 

to buy (sell) would not be eligible to 

trade against an Aggressing Order or 

Aggressing Quote to sell (buy): (i) At a 

price equal to or above (below) any 

orders or quotes to sell (buy) that are 

displayed at a price equal to or below 

(above) the working price of such AON 

Order; or (ii) at a price above (below) 

any orders or quotes to sell (buy) that 

are not displayed and that have a 

working price below (above) the 

working price of such AON Order. This 

proposed rule text is new functionality 

for AON Orders that is designed to 


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5614 Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 

90The current rule states that a Stop Order to buy 

(sell) will be triggered (i.e., elected) if ‘‘trades at a 

price equal to or greater (less) than the specified 

‘stop’ price on the Exchange or another Market 

Center.’’ See Rule 6.62–O(d)(1). 

91Rule 6.65A–O(a)(2) currently provides that the 

Exchange will not elect Stop Orders when the 

underlying NMS stock is either in a Limit State or 

a Straddle State, which would continue to be 

applicable on Pillar. The Exchange proposes a nonsubstantive amendment to Rule 6.65A–O(a)(2) to 

add a cross-reference to proposed Rule 6.62P– 

O(d)(4). 

92The term ‘‘Consolidated Last Sale’’ is defined 

in proposed Rule 6.62P–O(d)(4). 

93See discussion infra, regarding proposed Rule 

6.41P–O and Price Reasonability Checks. 

protect the priority of resting orders and 

quotes and is based on how the MTS 

Modifier functions on the cash equity 

market, as described in Rule 7.31– 

E(i)(3)(C) and its subparagraphs (i) and 

(ii). 

• Proposed Rule 6.62P–O(d)(3)(E) 

would provide that if a resting AON 

Order to buy (sell) becomes an 

Aggressing Order it would trade as 

provided in paragraph (d)(3)(B) of this 

Rule; however, other resting orders or 

quotes to buy (sell) ranked Priority 3— 

Non-Display Orders that become 

Aggressing Orders or Aggressing Quotes 

at the same time as the resting AON 

Order would be processed before the 

AON Order. This is proposed new 

functionality and is designed to promote 

clarity in Exchange rules that if multiple 

orders ranked Priority 3—Non-Display 

Orders, including AON and non-AON 

Orders, become Aggressing Orders or 

Aggressing Quotes at the same time, the 

AON Order would not be eligible trade 

until the other orders ranked Priority 

3—Non-Display Orders have been 

processed, even if they have later 

working times. The Exchange believes 

that it would be consistent with the 

conditional nature of AON Orders for 

other same-side non-displayed orders to 

have a trading opportunity before the 

AON Order. 

Stop Order. Stop Orders are currently 

defined in Rule 6.62–O(d)(1). The 

Exchange proposes to use Pillar 

terminology with more granularity to 

describe Stop Orders in proposed Rule 

6.62P–O(d)(4), as specified below. 

Proposed Rule 6.62P–O(d)(4) would 

provide that a Stop Order is an order to 

buy (sell) a particular option contract 

that becomes a Market Order (or is 

‘‘elected’’) when the Exchange BB (BO) 

or the most recent consolidated last sale 

price reported after the order was placed 

in the Consolidated Book (the 

‘‘Consolidated Last Sale’’) (either, the 

‘‘trigger’’) is equal to or higher (lower) 

than the specified ‘‘stop’’ price. The 

proposed functionality is consistent 

with existing functionality and provides 

more granularity of the circumstances 

when a Stop Order would be elected.90

Because a Stop Order becomes a Market 

Order when it is elected, the Exchange 

proposes that when it is elected, it 

would be cancelled if it does not meet 

the validations specified in proposed 

Rule 6.62P–O(a)(1)(A) and if not 

cancelled, it would be assigned a 

Trading Collar. This is consistent with 

current functionality, which is not 

described in the current rule describing 

Stop Orders, that once converted to a 

Market Order, such order is subject to 

the checks applicable in the current rule 

for Market Orders, i.e., cancelling such 

order if there is no NBBO. The proposed 

rule references the checks that would be 

applicable to a Market Order on Pillar 

and thus adds greater granularity and 

transparency to Exchange rules. 

Proposed Rule 6.62P–O(d)(4)(A) 

would provide that a Stop Order would 

be assigned a working time when it is 

received but would not be ranked or 

displayed in the Consolidated Book 

until it is elected and that once 

converted to a Market Order, the order 

would be assigned a new working time 

and be ranked Priority 1—Market 

Orders. The original working time 

assigned to a Stop Order would be used 

to rank multiple Stop Orders elected at 

the same time. This is consistent with 

the current rule, which provides that a 

Stop Order is not displayed and has no 

standing in any Order Process in the 

Consolidated Book, unless or until it is 

triggered. The proposed rule is designed 

to provide greater granularity and clarity 

regarding the treatment of Stop Orders, 

both when received and when elected. 

Proposed Rule 6.62P–O(d)(4)(B) 

would specify additional events that are 

designed to limit when a Stop Order 

may be elected so that a Market Order 

does not trade during a period of pricing 

uncertainty: 

• Proposed Rule 6.62P–O(d)(4)(B)(i) 

would provide that if not elected on 

arrival, a Stop Order that is resting 

would not be eligible to be elected based 

on a Consolidated Last Sale unless the 

Consolidated Last Sale is equal to or in 

between the NBBO. This proposed rule 

text provides additional transparency of 

when a resting Stop Order would be 

eligible to be elected. 

• Proposed Rule 6.62P–O(d)(4)(B)(ii) 

would provide that a Stop Order would 

not be elected if the NBBO is crossed. 

• Proposed Rule 6.62P–O(d)(4)(B)(iii) 

would provide that after a Limit State or 

Straddle State is lifted, the trigger to 

elect a Stop Order would be either the 

Consolidated Last Sale received after 

such state was lifted or the Exchange BB 

(BO).91

Stop Limit Order. Stop Limit Orders 

are currently defined in Rule 6.62– 

O(d)(2). The Exchange proposes to use 

Pillar terminology with more granularity 

to describe Stop Limit Orders in 

proposed Rule 6.62P–O(d)(5), as 

specified below. 

Proposed Rule 6.62P–O(d)(5) would 

provide that a Stop Limit Order is an 

order to buy (sell) a particular option 

contract that becomes a Limit Order (or 

is ‘‘elected’’) when the Exchange BB 

(BO) or the Consolidated Last Sale 

(either, the ‘‘trigger’’) is equal to or 

higher (lower) than the specified ‘‘stop’’ 

price.92 The proposed functionality is 

consistent with existing functionality 

and provides more granularity of when 

a Stop Limit Order would be elected 

than the current Rule 6.62–O(d)(2) 

definition of Stop Limit Order. As 

further proposed, a Stop Limit Order to 

buy (sell) would be rejected if the stop 

price is higher (lower) than its limit 

price, which rejection would be new 

functionality under Pillar and would 

prevent the Exchange from accepting 

potentially erroneously-priced orders. 

Because a Stop Limit Order becomes a 

Limit Order when it is elected, the 

Exchange proposes that when it is 

elected, it would be cancelled if it fails 

Limit Order Price Protection or a Price 

Reasonability Check and if not 

cancelled, it would be assigned a 

Trading Collar.93 This functionality is 

consistent with current functionality, 

though it is not explicitly stated in the 

current rule describing Stop Limit 

Orders. Specifically, both in the current 

OX System and as proposed on Pillar, 

once converted to a Limit Order, such 

order is subject to the checks applicable 

in the current rule for Limit Orders, i.e., 

Limit Order Filter on the OX System. 

The proposed rule references the checks 

that would be applicable to a Limit 

Order on Pillar and thus adds greater 

granularity and transparency to 

Exchange rules. 

Proposed Rule 6.62P–O(d)(5)(A) 

would provide that a Stop Limit Order 

would be assigned a working time when 

it is received but would not be ranked 

or displayed in the Consolidated Book 

until it is elected and that once 

converted to a Limit Order, the order 

would be assigned a new working time 

and be ranked under the proposed 

category of ‘‘Priority 2—Display 

Orders.’’ This functionality is consistent 

with the current rule, which provides 

that a Stop Limit Order is not displayed 

and has no standing in any Order 

Process in the Consolidated Book, 

unless or until it is triggered. The 

proposed rule is designed to provide 

greater granularity and clarity. 


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94See Rule 6.37A–O(a)(2) (providing that ‘‘[a] 

quotation will not route’’). 95As discussed, supra, regarding proposed Rule 

6.76P–O(g), the Exchange proposes to include 

details about ranking of orders and quotes with 

contingencies in this proposed Rule 6.62P–O)(e) 

using the Pillar priority scheme. Also, as discussed 

infra, see e.g., note 44, the ranking and priority of 

quotes under Pillar is consistent with handling on 

the OX system unless otherwise noted herein. 

96See discussion, infra, regarding Non-Displayed 

Limit Orders generally, per proposed Rule 6.62P– 

O(e). 

97Both RPNPs and MMRPs function similarly. 

Compare current Rule 6.37A–O(a)(4)(B) and 

subparagraphs (i) and (ii) with current Rule 6.62– 

O(p)(1)(A) and subparagraphs (i) and (ii). They are 

defined in separate rules only because the former 

is for quotes and the latter for orders. 

Proposed Rule 6.62P–O(d)(5)(B) 

would specify additional events that are 

designed to limit when a Stop Limit 

Order may be elected so that a Limit 

Order would not have a possibility of 

trading or being added to the 

Consolidated Book during a period of 

pricing uncertainty. 

• Proposed Rule 6.62P–O(d)(5)(B)(i) 

would provide that if not elected on 

arrival, a Stop Limit Order that is resting 

would not be eligible to be elected based 

on a Consolidated Last Sale unless the 

Consolidated Last Sale is equal to or in 

between the NBBO. 

• Proposed Rule 6.62P–O(d)(5)(B)(ii) 

would provide that a Stop Limit Order 

would not be elected if the NBBO is 

crossed. 

Orders with Instructions Not to Route. 

Currently, the Exchange defines nonroutable orders in Rule 6.62–O as a PNP 

Order (which includes a Repricing PNP 

Order (‘‘RPNP’’)) (current Rule 6.62– 

O(p)), a Liquidity Adding Order 

(‘‘ALO’’) (which includes a Repricing 

ALO (‘‘RALO’’) (current Rule 6.62–O(t)); 

a PNP-Blind Order (current Rule 6.62– 

O(u)); and a PNP-Light Order (Rule 

6.62–O(v)). The Exchange also defines 

Intermarket Sweep Orders (current Rule 

6.62–O(aa)), which are also nonroutable. 

The Exchange separately defines 

quotes—all of which are nonroutable 94—in Rule 6.37A–O and such 

quotes may be designated as a Market 

Maker—Light Only Quotation 

(‘‘MMLO’’) (current Rule 6.37A– 

O(a)(3)(A)); a Market Maker—Add 

Liquidity Only Quotation (‘‘MMALO’’) 

(current Rule 6.37A–O(a)(3)(B)); and a 

Market Maker—Repricing Quotation 

(‘‘MMRP’’) (current Rule 6.37A– 

O(a)(3)(C)). On the OX system, Market 

Maker quotes not designated as 

MMALO or MMRP will cancel (rather 

than reprice) if they would lock or cross 

the NBBO, per Rule 6. 37A–O(a)(4)(C). 

On Pillar, the Exchange proposes to 

streamline the non-routable order types 

and quotes that would be available for 

options trading, use terminology that is 

similar to how non-routable orders are 

described for cash equity trading as 

described in Rule 7.31–E(e), and 

describe the functionality that would be 

applicable to both orders and quotes in 

proposed Rule 6.62P–O(e).95 As 

described in greater detail below, 

proposed Rule 6.37AP–O governing 

Market Maker Quotations would no 

longer define how quotations would 

function. Instead, that rule would 

specify that a Market Maker may 

designate either a Non-Routable Limit 

Order or ALO Order as a Market Maker 

quote. Because the way in which nonroutable orders and quotes would 

function on Pillar would be virtually 

identical (with differences described 

below), and because Market Makers 

could enter a Non-Routable Limit Order 

or an ALO Order and then choose to 

designate it either as a quote or an order, 

the Exchange believes that it would 

promote transparency in Exchange rules 

to consolidate the description of the 

functionality in a single rule and 

eliminate duplication in Exchange rules. 

As described below, proposed Rule 

6.37A–O would cross reference 

proposed Rule 6.62P–O(e). 

On Pillar, the Exchange would no 

longer offer functionality based on the 

PNP-Blind Order, PNP-Light Order, or 

MMLO because it believes that the 

proposed orders/quotes with 

instructions not to route on Pillar would 

continue to provide OTP Firms and OTP 

Holders with the core functionality 

associated with these existing order and 

quotation types, including that the 

proposed rules would provide for nonroutable functionality and the ability to 

either reprice or cancel such orders/ 

quotes. In addition, as discussed above, 

the Exchange believes that the proposed 

Non-Displayed Limit Order would 

provide functionality similar to what is 

currently available with the PNP-Blind 

Order, thus obviating the need for the 

Exchange to offer PNP-Blind Orders 

under Pillar.96

Non-Routable Limit Order. Proposed 

Rule 6.62P–O(e)(1) would define the 

Non-Routable Limit Order. As explained 

further below, this proposed order type 

incorporates functionality currently 

available in both the existing PNP and 

RPNP order types, as defined in Rule 

6.62–O, and the existing MMRP 

quotation type, as defined in Rule 

6.37A–O(a)(3)(C),97 and uses Pillar 

terminology. As described below, a 

Market Maker can designate a NonRoutable Limit Order as either a quote 

or an order and such interest so 

designated would be handled the same 

except as specified below. Accordingly, 

references to the capitalized term ‘‘NonRoutable Limit Order’’ describes 

functionality for either a quote or an 

order, unless otherwise specified. 

Proposed Rule 6.62P–O(e)(1) would 

provide that a Non-Routable Limit 

Order is a Limit Order or quote that 

does not route and may be designated 

Day or GTC and would further provide 

that a Non-Routable Limit Order with a 

working price different from the display 

price would be ranked under the 

proposed category of ‘‘Priority 3—NonDisplay Orders’’ and a Non-Routable 

Limit Order with a working price equal 

to the display price would be ranked 

under the proposed category of ‘‘Priority 

2—Display Orders.’’ This proposed rule 

uses Pillar terminology and describes 

the same functionality as set forth in the 

Exchange’s cash equity market in Rules 

7.31–E(e)(1) and 7.31–E(e)(1)(B), 

including references to the Pillar 

concepts of ‘‘working’’ and ‘‘display’’ 

price as well to Priority rankings as 

proposed in Rule 6.76P–O(e)(2), (3). 

This proposed rule also describes 

functionality similar to that described in 

the first clause of current Rule 6.62– 

O(p) relating to a PNP Order, which 

states that the portion of such order not 

executed on arrival is ranked in the 

Consolidated Book without routing any 

portion of the order to another Market 

Center (although the current rule does 

not include Pillar concepts of 

‘‘working’’ and ‘‘display’’ price or Pillar 

Priority rankings). 

Proposed Rule 6.62P–O(e)(1)(A) 

would provide that a Non-Routable 

Limit Order would not be displayed at 

a price that would lock or cross the 

ABBO and that a Non-Routable Limit 

Order to buy (sell) would trade with 

orders or quotes to sell (buy) in the 

Consolidated Book priced at or below 

(above) the ABO (ABB). This proposed 

text is designed to provide granularity 

that a Non-Routable Limit Order would 

never be displayed at a price that would 

lock or cross the ABBO, which is 

consistent with current PNP and RPNP 

Order functionality and with current 

Market Maker quoting functionality, as 

described in Rules 6.62–O(p), (p)(1), and 

6.37A–O(a)(3)–(4), respectively. The 

Exchange proposes to use the term 

‘‘ABBO’’ to provide more granularity in 

Exchange rules. 

Proposed Rule 6.62P–O(e)(1)(A)(i) 

would provide that a Non-Routable 

Limit Order can be designated to be 

cancelled if it would be displayed at a 

price other than its limit price. This 

would be an optional designation and 

would provide OTP Holders and OTP 

Firms with functionality similar to how 

a PNP Order or a Market Maker quote 

not designated as MMALO or MMRP 


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5616 Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 

98A PNP Order cannot route, and any unexecuted 

portion is ranked in the Consolidated Book except 

that such order is canceled if it would lock or cross 

the NBBO. See Rule 6.62–O(p). A Market Maker 

quote not designated as MMALO or MMRP will 

cancel (rather than reprice) if such quote would 

lock or cross the NBBO. See Rule 6. 37A–O(a)(4)(C). 

99Current Rule 6.62–O(p)(1)(B) provides than an 

incoming RPNP order would cancel if its limit price 

is more than a configurable number of MPVs 

outside its initial display price (on arrival). Under 

Pillar, because Trading Collars would be applicable 

to Non-Routable Limit Orders (and such orders may 

be repriced or ‘‘collared’’ on arrival), the Exchange 

does not propose to cancel an incoming NonRoutable Limit Order if its limit price is more than 

a configurable number of MPVs outside its initial 

display price. As such, this aspect of RPNP 

functionality is not incorporated in the proposed 

Pillar rules and the Exchange instead proposes to 

incorporate Trading Collar functionality into the 

Non-Routable Limit Order. 

100For example, on arrival, a Non-Routable Limit 

Order to buy (sell) with a limit price higher (lower) 

than the ABO (ABB), would have a display price 

one MPV below (above) the ABO (ABB) and a 

working price equal to the ABO (ABB). If the ABO 

(ABB) reprices higher (lower), the resting NonRoutable Limit Order to buy (sell) would similarly 

be repriced higher (lower). If the ABO (ABB) adjusts 

higher (lower) again, the resting Non-Routable Limit 

Order would not be adjusted again. 

101The working time of a Non-Routable Limit 

Order would be adjusted as described in proposed 

Rule 6.76P–O(f)(2), which would be applicable to 

any scenario when the working time of an order 

may change, including a Non-Routable Limit Order. 

Similar to how the Pillar rules function on the 

Exchange’s cash equity market, the Exchange does 

not propose to separately describe how the working 

time of an order changes in proposed Rule 6.62P– 

O. 

102See, e.g., Rule 6.62–O(p)1(B) (providing that 

‘‘[a]n incoming RPNP will be cancelled if its limit 

price to buy (sell) is more than a configurable 

number of MPVs above (below) the initial display 

price (on arrival), after first trading with eligible 

interest, if any,’’ which configurable number of 

MPVs will be determined by the Exchange and be 

announced by Trader Update) and Rule 6.37A– 

O(a)(4)(C) (providing that, an MMRP to buy (sell) 

will be canceled after trading with marketable 

interest in the Consolidated Book up (down) to the 

NBO (NBB), if its limit price is more than a 

configurable number of MPVs above (below) the 

initial display price (on arrival)). 

103Proposed Rules 6.37AP–O(b) and (c) set forth 

the continuous quoting obligations of Lead Market 

Makers and Market Makers, respectively. 

104See discussion supra regarding proposed Rule 

6.76P–O(b)(3), which describes how the Exchange 

would not change the display price of any Limit 

Orders or quotes ranked under the proposed 

category of ‘‘Priority 2—Display Orders.’’ 

currently functions, which cancel if 

such order or quote locks or crosses the 

NBBO.98 The Exchange proposes a 

substantive difference from the current 

PNP Order functionality such that if an 

OTP Holder or OTP Firm opts to cancel 

instead of reprice a Non-Routable Limit 

Order, such order would be cancelled 

only if it could not be displayed at its 

limit price—which could be because the 

order would be repriced to display at a 

price that would not lock or cross the 

ABBO or because it would be repriced 

due to Trading Collars.99 Stated 

otherwise, if a Non-Routable Limit 

Order with a designation to cancel 

could be displayed at its original limit 

price and not lock or cross the ABBO, 

such order or quote would not be 

cancelled. The Exchange believes that 

the proposed rule provides granularity 

of the operation of a Non-Routable Limit 

Order and when such order or quote 

would be cancelled, if so designated, 

including specifying circumstances 

when such order could be repriced, 

such as to avoid locking or crossing the 

ABBO or because of Trading collars. 

This proposed functionality is not 

currently available for cash equity 

trading. 

Proposed Rule 6.62P–O(e)(1)(A)(ii) 

would provide that if not designated to 

cancel, if the limit price of a NonRoutable Limit Order to buy (sell) 

would lock or cross the ABO (ABB), it 

would be repriced to have a working 

price equal to the ABO (ABB) and a 

display price one MPV below (above) 

that ABO (ABB). Accordingly, the 

proposed Non-Routable Limit Order, if 

not designated to cancel, would reprice 

in the same manner as an RPNP order 

or MMRP quotation reprices on arrival 

per Rules 6.62–O(p)(1)(A) and 6.37A– 

O(a)(4)(B), which both offer similar 

functionality. The Exchange proposes 

functionality on Pillar for the NonRoutable Limit Order that is consistent 

with but different in application to the 

RPNP Order or MMRP on OX. 

Specifically, proposed Rule 6.62P– 

O(e)(1)(B) would provide that the 

display price of a resting Non-Routable 

Limit Order to buy (sell) that has been 

repriced would be repriced higher 

(lower) only one additional time.100 If 

after that second repricing, the display 

price could be repriced higher (lower) 

again, the order can be designated to 

either remain at its last working price 

and display price or be cancelled, 

provided that a resting Non-Routable 

Limit Order that is designated as a quote 

cannot be designated to be cancelled.101

As compared to the proposal on Pillar 

to limit the number of times that NonRoutable Limit Orders may be repriced, 

the OX system restricts repricing of 

RPNPs and MMRPs based on the limit 

price of the interest being a configurable 

number of MPVs away from its initial 

display price.102 The Exchange therefore 

believes that the proposed functionality 

is consistent with current functionality 

because in either case, there will be 

limited repricing of resting interest, and 

adds determinism to order execution 

based on the explicit restriction on the 

number of times resting interest may be 

repriced. 

The Exchange notes that a designation 

to cancel after an order has been 

repriced once is separate from the 

designation to cancel if a Non-Routable 

Limit Order cannot be displayed at its 

limit price. When a Non-Routable Limit 

Order is designated to cancel if it cannot 

be displayed at its limit price, there is 

no repricing and therefore the option of 

a second cancellation designation is 

moot. Rather, this second cancellation 

designation is applicable only to a 

resting Non-Routable Limit Order that 

has been designated to reprice on arrival 

and was repriced before it was 

displayed on the Consolidated Book. 

This functionality provides OTP 

Holders and OTP Firms with an option 

to cancel a resting order if market 

conditions are such that a resting order 

could be repriced again, e.g., the contraside ABBO changes. The Exchange 

proposes that this second cancellation 

option would not be available for any 

Non-Routable Limit Orders designated 

by a Market Maker as a quote. The 

Exchange believes that this proposed 

difference would assist Market Makers 

in maintaining quotes in their assigned 

series by reducing the potential to 

interfere with a Market Maker’s ability 

to maintain their continuous quoting 

obligations.103

Proposed Rule 6.62P–O(e)(1)(B)(i) 

would provide that if the limit price of 

the resting Non-Routable Limit Order to 

buy (sell) that has been repriced no 

longer locks or crosses the ABO (ABB), 

it would be assigned a working price 

and display price equal to its limit 

price. This proposed rule text is based 

on the way in which Non-Routable 

Limit Orders function on the Exchange’s 

cash equity market, as described in Rule 

7.31–E(e)(1)(A)(iv), with a difference 

that the proposed rule does not include 

text describing that, in such 

circumstances, the order ‘‘will not be 

assigned a new working price or display 

price based on changes to the PBO 

(PBB).’’ The Exchange does not propose 

to include this text because it is 

redundant of proposed Rule 6.76P– 

O(b)(3), which describes that once an 

order is displayed, it can stand its 

ground if it is locked or crossed by the 

Away Market PBBO, which is consistent 

with current functionality as described 

immediately below.104

Proposed Rule 6.62P–O(e)(1)(B)(ii) 

would provide that the working price of 

a resting Non-Routable Limit Order to 

buy (sell) that has been repriced would 

be adjusted to be equal to its display 

price if the ABO (ABB) is equal to or 

lower (higher) than its display price 

This proposed rule is based in part on 

how an RPNP or MMRP reprices when 

the NBO (NBB) updates to lock or cross 

its display price (as described in Rules 


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105Rule 6.62–O(p)(1)(A)(i) provides that ‘‘if the 

NBO (NBB) updates to lock or cross the RPNP’s 

display price, such RPNP will trade at its display 

price in time priority behind other eligible interest 

already displayed at that price.’’ Rule 6.37A– 

O(a)(4)(B)(i) provides that ‘‘if the NBO (NBB) 

updates to lock or cross the MMRP’s display price, 

such MMRP will trade at its display price in time 

priority behind other eligible interest already 

displayed at that price.’’ On Pillar, however, if the 

NBO (NBB) updates to lock or cross the display 

price of a Non-Routable Order, and the working 

price is adjusted to be equal to the display price, 

the order will not receive a new working time. See 

discussion supra regarding proposed Rule 6.76P– 

O(f)(2)(B). 

106For example, if the ABO is 1.05 and the 

Exchange receives a Non-Routable Limit Order to 

buy priced at 1.10, it would be assigned a display 

price of 1.00 and a working price of 1.05. If the ABO 

adjusts to 1.00, the working price of the NonRoutable Limit Order to buy would be adjusted to 

1.00 to be equal to its display price. However, if the 

Away Market BO moves back to 1.05, the NonRoutable Limit Order’s working price would not 

adjust again to 1.05 and would stay at 1.00. 

107See discussion, infra, regarding proposed Rule 

6.64P–O(g)(1), which provides that ‘‘all resting 

Market Maker quotations’’—including NonRoutable Limit Orders designated as quotations— 

will be canceled in the event of a Trading Halt, 

which functionality is consistent with current Rule 

6.37A–O(a)(5), which likewise provides that ‘‘[a]ll 

resting quotations will be cancelled in the event of 

a trading halt’’). 

108This functionality is consistent with the 

current rule, which states that an ALO Order is 

accepted only if it is ‘‘not executable at the time of 

receipt’’ (emphasis added). See Rule 6.62–O(t). 

109Currently, an order designated as a RALO to 

buy (sell) that would trade with any undisplayed 

sell (buy) interest will be displayed at a price one 

MPV below (above) that undisplayed sell interest. 

See Rule 6.62–O(t)(1)(A). See also Rule 6.37A– 

O(a)(4)(A)(i) (describing similar functionality for a 

quote designated as a MMALO). 

110See, e.g., Rule 7.31–E(e)(2)(B)(iv). 

6.62–O(p)(1)(A)(i) and 6.37A– 

O(a)(4)(B)(i)) and uses Pillar 

terminology (i.e., ABBO and concepts of 

working price and display price).105 The 

proposed rule would further provide 

that once the working price and display 

price of a Non-Routable Limit Order to 

buy (sell) are the same, the working 

price would be adjusted higher (lower) 

only if the display price of the order is 

adjusted.106

Finally, proposed Rule 6.62P– 

O(e)(1)(C) would provide that the 

designation to cancel a Non-Routable 

Limit Order (including those designated 

as quotations 107) would not be 

applicable in an Auction and, per 

proposed Rule 6.64P–O(g)(2) (described 

below) such order would participate in 

an Auction at its limit price. This 

proposed rule text promotes clarity and 

transparency that a Non-Routable Limit 

Order would be eligible to participate in 

an Auction, but that it would be 

repriced to its limit price for 

participation in such Auction, which is 

consistent with current RPNP 

functionality, as described in the last 

sentence of Rule 6.62–O(p) and 

providing that an RPNP would be 

processed as a Limit Order and would 

not be repriced for purposes of 

participating in an opening or reopening 

auction. This proposal is also consistent 

with Rule 6.37A–O(a)(5), which 

provides that MMRPs received when a 

series is not open for trading will be 

eligible to participate in the opening 

auction and re-opening auction (as 

applicable) at the limit price of the 

MMRP. 

ALO Order. Proposed Rule 6.62P– 

O(e)(2) would define an ALO Order as 

a Limit Order or quote that is a NonRoutable Limit Order that would not 

remove liquidity from the Consolidated 

Book. This proposed order type 

incorporates functionality currently 

available with ALO and RALO order 

types, as defined in Rule 6.62–O(t), and 

with the MMALO quotation type, as 

defined in Rule 6.37A–O(a)(3)(B), with 

differences described below, including 

an option to cancel or reprice an ALO 

Order if such non-routable interest 

would trade as a liquidity taker. Unless 

otherwise specified in proposed Rule 

6.62P–O(e)(2), an ALO Order would 

function the same as a Non-Routable 

Limit Order, including that it would 

participate in an Auction at its limit 

price. As described below, per proposed 

Rule 6.37AP–O, a Market Maker can 

designate an ALO Order as either a 

quote or an order and such interest 

would be handled the same, except as 

specified below. Accordingly, references 

to the capitalized term ‘‘ALO Order’’ 

describe functionality for both quotes 

and orders. 

Proposed Rule 6.62P–O(e)(2)(A) 

would provide that an ALO Order 

would not be displayed at a price that 

would lock or cross the ABBO, would 

lock or cross displayed interest in the 

Consolidated Book, or would cross nondisplayed interest in the Consolidated 

Book.108 Because an ALO Order would 

never remove liquidity, this proposed 

rule text ensures that such ALO Order 

would not be displayed at a price that 

would lock or cross displayed interest 

either on the Exchange or an Away 

Market, and would not be displayed at 

a price that crosses non-displayed 

interest in the Consolidated Book. This 

proposed rule text is consistent with 

current functionality, as described for 

MMALO in Rule 6.37A–O(a)(3)(B) and 

for Liquidity Adding Order in Rule 

6.62–O(t), that such quotes or orders 

would not trade as takers. 

Proposed Rule 6.62P–O(e)(2)(A)(i) 

would provide that an ALO Order can 

be designated to be cancelled if it would 

be displayed at a price other than its 

limit price. This proposed designation 

to cancel would be optional and an ALO 

Order so designated would function 

similarly to a Liquidity Adding Order, 

as defined in Rule 6.62–O(t), which is 

rejected if it would be marketable 

against the NBBO. While the Exchange 

does not currently offer a cancellation 

option for a quote designated as 

MMALO, the default behavior for any 

Market Maker quote on the OX system 

is to cancel if such quote locks or 

crosses the NBBO and is not designated 

as MMALO (or MMRP). 

Proposed Rule 6.62P–O(e)(2)(A)(ii) 

would provide that an ALO Order to 

buy (sell) would be displayed at its limit 

price if it locks non-displayed orders or 

quotes to sell (buy) on the Consolidated 

Book. This proposed functionality 

would be new for options trading on 

Pillar.109 Allowing a conditional order 

to lock interest in the Consolidated 

Book is consistent with current 

functionality for other non-displayed 

orders. For example, an AON is a nondisplayed conditional order type that 

could be priced to trade at a price that 

locks contra-side interest, but the 

interest would not interact if the AON 

condition could not be satisfied, in 

which case, two orders with locking 

prices, one that is non-displayed, would 

both be accepted by the Exchange. The 

proposed ALO Order is also a 

conditional order type because it can 

never be a liquidity taker. The Exchange 

believes that allowing an ALO Order to 

lock non-displayed interest would 

reduce potential repricing or 

cancellation events for an incoming 

ALO Order and would likewise reduce 

potential information leakage about 

non-displayed interest in the 

Consolidated Book. This behavior is 

also consistent with how ALO Orders 

function on the Exchange’s cash equity 

platform.110 Because an ALO Order 

would not be repriced in this scenario, 

this functionality would be the same 

regardless of whether the ALO Order 

includes the optional designation to 

cancel. 

Proposed Rule 6.62P–O(e)(2)(A)(iii) 

would provide that an ALO Order to 

buy (sell) would not consider an AON 

Order or an order with an MTS Modifier 

to sell (buy) for purposes of determining 

whether it needs to be repriced or 

cancelled. This proposed rule would be 

new functionality and is designed to 

promote transparency that a resting 

contra-side order with conditional 

instructions, i.e., an AON Order or an 

order with an MTS Modifier, would not 

have any bearing on whether an 

Aggressing ALO Order would need to be 

repriced. Accordingly, an ALO Order 


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111Current Rule 6.62–O(t)(1) provides that a 

RALO will be repriced instead of rejected if it 

would trade as a liquidity taker or display at a price 

that locks or crosses any interest on the Exchange 

or the NBBO. Current Rule 6.62–O(t)(1)(A) further 

provides that if an RALO would trade with any 

displayed or undisplayed contra-side interest on the 

Consolidated Book, it would be displayed at a price 

one MPV inside such interest. See also Rule 6.37– 

O(a)(4)(A)(i). 

112See Rules 6.62–O(t)(1)(A) and 6.37A– 

O(a)(4)(A)(i). 

113For example, a contra-side Market Maker 

quote designated as a Non-Routable Limit Order 

could have a non-displayed working price. 

114See Rule 7.31–E(e)(2)(B)(ii). 

115This proposed feature to limit the number of 

times an ALO Order may be repriced differs from 

the treatment of RALOs, which may be 

continuously repriced (both the displayed and 

undisplayed price) as interest in the Consolidated 

Book or NBBO moves. See Rule 6.62–O(t)(1)(A). 

116Proposed Rules 6.37AP–O(b) and (c) set forth 

the continuous quoting obligations of Lead Market 

Makers and Market Makers, respectively. 

117The proposed rule is similar to RALO 

functionality currently described in Rule 6.62– 

O(t)(1)(A)(ii) (if the NBO (NBB) updates to lock or 

cross the RALO’s display price, such RALO will 

trade at its display price’’). See also Rule 6.37A– 

O(a)(4)(A)(i)(b) (describing similar functionality for 

MMALO). 

would not trade as the liquidity taker 

with such orders (even if it could satisfy 

their size condition) and could be 

displayed at a price that would lock or 

cross the price of such orders. Once the 

ALO Order is resting on the 

Consolidated Book, the Exchange would 

reevaluate the orders on the 

Consolidated Book. For example, if the 

ALO Order could satisfy the size 

condition of the resting AON Order, the 

resting AON Order would become the 

Aggressing Order and would trade as 

the liquidity taker with such resting 

ALO Order. 

Proposed Rule 6.62P–O(e)(2)(B) 

would describe how an ALO Order 

would be processed if it is not 

designated to cancel, as follows: 

• If the limit price of an ALO Order 

to buy (sell) would lock or cross 

displayed orders or quotes to sell (buy) 

on the Consolidated Book, it would be 

repriced to have a working price and 

display price one MPV below (above) 

the lowest (highest) priced displayed 

order or quote to sell (buy) on the 

Consolidated Book (proposed Rule 

6.62P–O(e)(2)(B)(i)). This proposed rule 

is consistent with how both RALO and 

MMALO reprice under current rules.111

• If the limit price of an ALO Order 

to buy (sell) would lock or cross the 

ABO (ABB), it would be repriced to 

have a working price equal to the ABO 

(ABB) and a display price one MPV 

below (above) the ABO (ABB) (proposed 

Rule 6.62P–O(e)(2)(B)(ii)). This 

proposed functionality is consistent 

with how both RALO and MMALO 

reprice under current rules.112

• If the limit price of an ALO Order 

to buy (sell) would cross non-displayed 

orders or quotes 113 on the Consolidated 

Book, it would be repriced to have a 

working price and display price equal to 

the lowest (highest) priced nondisplayed order or quote to sell (buy) on 

the Consolidated Book (proposed Rule 

6.62P–O(e)(2)(B)(iii). This functionality 

would be new on Pillar for options 

trading and would provide that an ALO 

Order would never take liquidity 

thereby eliminating the potential for an 

ALO to cross non-displayed interest in 

the Consolidated Book. This proposed 

functionality is therefore different not 

only from how RALOs and MMALOs 

currently function, but is also different 

from how ALO Orders currently 

function on the Exchange’s cash equity 

market.114 For the reasons discussed 

above, the Exchange believes that 

displaying ALO Orders at a price that 

locks the best-priced non-displayed 

interest would reduce potential 

information leakage about the nondisplayed orders on the Consolidated 

Book. 

Because an ALO would never be a 

liquidity-taking order, the abovedescribed repricing scenarios provide 

clarity and transparency regarding how 

an ALO Order would be repriced (or 

cancelled, if this optional designation is 

selected) to prevent either trading with 

interest on the Consolidated Book or 

routing to an Away Market. 

Accordingly, with the exception of how 

an ALO Order that locks or crosses nondisplayed interest would be processed, 

the proposed ALO Order would be 

consistent with the current functionality 

available for RALO, as described in Rule 

6.62–O(t)(1)(A) and for MMALO, as 

described in Rule 6.37–O(a)(4)(A). 

Proposed Rule 6.62P–O(e)(2)(C) 

would provide that the display price of 

a resting ALO Order to buy (sell) that 

has been repriced would be repriced 

higher (lower) only one additional time 

and that if, after that repricing, the 

display price could be repriced higher 

(lower) again, the order can be 

designated to either remain at its last 

working price and display price or be 

cancelled, provided that a resting ALO 

Order that is a quote cannot be 

designated to be cancelled. This 

proposed functionality would be new to 

Pillar and is based on how the proposed 

Non-Routable Limit Order would 

function, as described above.115

Consistent with the treatment of NonRoutable Limit Orders designated as 

Market Maker quotations, the Exchange 

likewise proposes that this second 

cancellation designation would not be 

available for an ALO Order designated 

by a Market Maker as a quote. The 

purpose of this proposed functionality 

is to assist Market Makers in 

maintaining quotes in their assigned 

series and to avoid any interference 

with Market Makers’ ability to maintain 

their continuous quoting obligations.116

Proposed Rule 6.62P–O(e)(2)(C)(i) 

would provide that if the limit price of 

an ALO Order to buy (sell) that has been 

repriced no longer locks or crosses 

displayed orders or quotes in the 

Consolidated Book, locks or crosses the 

ABBO, or crosses non-displayed orders 

or quotes in the Consolidated Book, it 

would be assigned a working price and 

display price equal to its limit price. 

This proposed rule text is similar to 

proposed Rule 6.62P–O(e)(1)(B)(i) for 

Non-Routable Limit Orders, with 

differences to reflect the additional 

circumstances when an ALO Order 

would be repriced based off of contraside displayed or non-displayed interest 

in the Consolidated Book because, 

unlike a Non-Routable Limit Order, an 

ALO Order would not trade as a 

liquidity taker. The proposed rule is 

designed to provide granularity and 

clarity regarding when a resting ALO 

Order would be assigned a working 

price and display price equal to its limit 

price.117

Proposed Rule 6.62P–O(e)(2)(D) 

would provide that the working price of 

a resting ALO Order to buy (sell) that 

has been repriced would be adjusted to 

be equal to its display price (and would 

not be adjusted again unless the display 

price of the order is adjusted) if: 

• The ABO (ABB) re-prices to be 

equal to or lower (higher) than the 

display price of the resting ALO Order 

to buy (sell) (proposed Rule 6.62P– 

O(e)(2)(D)(i)); or 

• an ALO Order or Day ISO ALO to 

sell (buy) is displayed on the 

Consolidated Book at a price equal to 

the working price of the resting ALO 

Order to buy (sell) (proposed Rule 

6.62P–O(e)(2)(D)(ii)). 

This proposed rule text is similar to 

proposed Rule 6.62P–O(e)(1)(C) for NonRoutable Limit Orders, with differences 

to reflect the additional circumstances 

when an ALO Order would be repriced 

as a result of contra-side interest on the 

Consolidated Book so that the ALO 

Order would not be a liquidity taker. 

Specifically, the Exchange proposes that 

for an ALO Order that has been repriced 

and has a non-displayed working price, 

if the Exchange receives a contra-side 

ALO Order (or Day ISO ALO) with a 


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118See discussion, infra regarding proposed Rule 

6.64P–O(g)(1), which provides that ‘‘all resting 

Market Maker quotations’’—including ALO Orders 

designated as quotations—will be canceled in the 

event of a Trading Halt, which functionality is 

consistent with current Rule 6.37A–O(a)(5), which 

likewise provides that ‘‘[a]ll resting quotations will 

be cancelled in the event of a trading halt’’). 

119See Rules 6.62–O(t) and 6.37A–O(a)(3)(B), for 

ALO Orders and MMALOs, respectively. 

120The terms ‘‘Protected Bid,’’ ‘‘Protected Offer,’’ 

and ‘‘Quotation’’ are defined in Rule 6.92–O(a)(15) 

and (16) and the term ‘‘Away Market’’ is defined in 

Rule 1.1. Accordingly, Away Market Protected 

Quotations refer to Protected Bids and Protected 

Offers that are disseminated pursuant to the OPRA 

Plan and are the Best Bid and Best Offer displayed 

by an Eligible Exchange, as those terms are defined 

in Rule 6.92–O. 

121See Nasdaq Options 3, Section 7(a)(7) (‘‘ISOs 

may have any time-in-force designation . . . .’’) 

and Cboe Rules 5.30(a)(2) and (3). See also Cboe US 

Options Fix Specifications, dated June 15, 2021, 

Section 4.4.7, available here: http://cdn.cboe.com/ 

resources/membership/US_Options_FIX_

Specification.pdf, which references how a Day ISO 

would be processed under specified circumstances. 

122The Commission has previously stated that the 

requirements in the Options Linkage Plan relating 

to Locked and Crossed Markets are ‘‘virtually 

identical to those applicable to market centers for 

NMS stock under Regulation NMS.’’ See also 

Securities Exchange Act Release No. 60405 (July 30, 

2009), 74 FR 39362, 39368 (August 6, 2009) (Order 

approving Options Linkage Plan). Accordingly, 

guidance relating to the ISO exception for locked 

and crossed markets for NMS stocks that 

specifically contemplate use of Day ISOs is also 

applicable to options trading. See Responses to 

Frequently Asked Questions Concerning Rule 611 

and Rule 610 of Regulation NMS, FAQ 5.02 (‘‘The 

ISO exception to the SRO lock/cross rules, in 

contrast, requires that ISOs be routed to execute 

against all protected quotations with a price that is 

equal to the display price (i.e., those protected 

quotations that would be locked by the displayed 

quotation), as well as all protected quotations with 

prices that are better than the display price (i.e., 

those protected quotations that would be crossed by 

the displayed quotation).’’ Consistent with this 

guidance, the Exchange implemented Rule 6.95– 

O(b)(3). See also Cboe Rule 5.67(b)(3), and Nasdaq 

Options 5, Section 3(b)(3). 

limit price that is equal to or crosses the 

working price of the resting ALO Order, 

the working price of the resting ALO 

Order would be adjusted to be equal to 

its display price. This proposed 

functionality would reduce the potential 

for two contra-side ALO Orders to have 

working prices that are locked on the 

Consolidated Book. The proposed rule 

text is designed to provide more 

granularity than the current Rule 

regarding circumstances when an ALO 

Order would be repriced. 

Proposed Rule 6.62P–O(e)(2)(E) 

would provide that when the working 

price and display price of an ALO Order 

to buy (sell) are the same, the working 

price would be adjusted higher (lower) 

only if the display price of the order is 

adjusted. This proposed functionality 

would be new for Pillar and is not 

currently available on the Exchange’s 

cash equity platform. 

Proposed Rule 6.62P–O(e)(2)(F) 

would provide that the ALO designation 

would be ignored for ALO Orders that 

participate in an Auction, including 

those designated as quotations.118 This 

proposed rule is based on Rule 7.31– 

E(e)(2)(A), which similarly provides that 

an ALO Order can participate in an 

auction and that its ALO designation 

would be ignored. This is also new 

functionality for options because 

currently, the Exchange rejects ALOs 

and MMALOs if entered outside of Core 

Trading Hours or during a trading halt 

and if resting, are cancelled during a 

trading halt.119 The Exchange proposes 

this new functionality to provide such 

ALO Orders with an execution 

opportunity in an Auction. 

Intermarket Sweep Order (‘‘ISO’’). 

ISOs are currently defined in Rule 6.62– 

O as a Limit Order for an options series 

that instructs the Exchange to execute 

the order up to the price of its limit, 

regardless of the Away Market Protected 

Quotations 120 and that ISOs may only 

be entered with a time-in-force of IOC, 

and the entering OTP Holder must 

comply with the provisions of Rule 

6.92–O(a)(8). The Exchange proposes to 

offer identical functionality on Pillar 

and to describe such functionality in 

proposed Rule 6.62P–O(e)(3) using 

Pillar terminology, including that an 

ISO is a Limit Order that does not route 

and meets the requirements of Rule 

6.92–O(a)(8). 

Currently, an ISO must be entered 

with a time-in-force of IOC. On Pillar, 

the Exchange proposes to add the ability 

for an OTP Holder or OTP Firm to 

designate an ISO either as IOC, which 

is current functionality, or with a Day 

time-in-force designation, which would 

be new for options trading. The 

Exchange also proposes to offer new 

functionality for options trading to 

designate a Day ISO as ALO. Both the 

proposed Day ISO and Day ISO ALO 

functionality are available on the 

Exchange’s cash equity market as 

described in Rule 7.31–E(e)(3). The 

Exchange proposes to describe the 

functionality for each type of ISO 

separately, as follows: 

• IOC ISO. Proposed Rule 6.62P– 

O(e)(3)(A) would define an IOC ISO as 

an ISO designated IOC to buy (sell) that 

would be immediately traded with 

orders and quotes to sell (buy) in the 

Consolidated Book up to its full size and 

limit price and may trade through Away 

Market Protected Quotations and any 

untraded quantity of an IOC ISO would 

be immediately and automatically 

cancelled. This proposed rule uses the 

same Pillar terminology as used in Rule 

7.31–E(e)(3)(B) to describe functionality 

that would be offered on Pillar without 

any differences from how ISOs currently 

function. The Exchange proposes a nonsubstantive difference in the proposed 

Pillar options rule to reference that an 

IOC ISO may trade through Away 

Market Protected Quotations, which is 

consistent with both current options 

and cash equity platform functionality. 

• Day ISO. Proposed Rule 6.62– 

O(e)(3)(B) would define a Day ISO as an 

ISO designated Day to buy (sell) that, if 

marketable on arrival, would be 

immediately traded with orders and 

quotes to sell (buy) in the Consolidated 

Book up to its full size and limit price 

and may trade through Away Market 

Protected Quotations and that any 

untraded quantity of a Day ISO would 

be displayed at its limit price and may 

lock or cross Away Market Protected 

Quotations at the time the Day ISO is 

received by the Exchange. As noted 

above, this proposed functionality 

(allowing Day designation for ISOs) 

would be new on the Exchange for 

options trading and would offer market 

participants additional control over 

their trading interest. The proposed rule 

is substantively identical to the Day ISO 

functionality available on the 

Exchange’s cash equity market, as 

described in Rule 7.31–E(e)(3)(C), with 

a non-substantive difference to use the 

phrase ‘‘may lock or cross Away Market 

Protected Quotations at the time the Day 

ISO is received by the Exchange’’ 

instead of ‘‘may lock or cross a 

protected quotation that was displayed 

at the time of arrival of the Day ISO.’’ 

These proposed textual differences are 

designed to promote clarity and 

transparency without any substantive 

differences. The availability of the Day 

time-in-force designation for ISOs 

would not be new for options trading, 

however, as such orders are currently 

available on other options exchanges.121

The proposed Day ISO is also consistent 

with current Rule 6.95–O(b)(3), which 

describes an exception to the 

prohibition on locking or crossing a 

Protected Quotation if the Member 

simultaneously routed an ISO to execute 

against the full displayed size of any 

locked or crossed Protected Bid or 

Protected Offer.122 Although the 

Exchange has not previously availed 

itself of this exception, this exception to 

locking and crossing Protected Bids and 

Protected Offers would only be needed 

if an ISO is designated as Day and 

therefore would be displayed at a price 

that would lock or cross a Protected 

Quotation; an IOC ISO would never be 

displayed and therefore this existing 

exception would not be applicable to 

such orders. 

• Day ISO ALO. Proposed Rule 

6.62P–O(e)(3)(C) would define a Day 


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123By contrast, the Rule 7.31–E(e)(3)(D) 

description of Day ISO ALO for cash equity trading 

incorporates cash equity functionality that an order 

with an ALO would trade if it crosses the working 

price of any displayed or non-displayed orders. 

124See also Complex Pillar Notice, supra note 16, 

(describing proposed Rule 6.91P–O regarding 

complex order trading on Pillar). 125See, e.g., Cboe Rule 5.6(c) (setting forth 

operation of Complex QCC Orders) and MIAX Rule 

515(h)(4) (same). 

126Allowing QCC Orders to trade in pennies 

under Pillar is consistent with current functionality. 

See Rule 6.90–O(2) (providing that QCC Orders may 

only be entered in the regular trading increments 

applicable to the options class under Rule 6.72– 

O(b)). Rule 6.72–O(b) provides that minimum 

trading increment for option contracts traded on 

NYSE Arca will be one cent ($0.01) for all series. 

127Commentary .03 to Rule 6.90–O provides that 

‘‘NYSE Arca Rule 6.47A–O does not apply to 

Qualified Contingent Cross Orders.’’ As noted 

above, at this time, the Exchange would only be 

offering QCC Cross Orders and therefore the 

proposed rule is substantively the same as this 

current Commentary. 

ISO ALO as a Day ISO with an ALO 

modifier. This proposed order type 

would be new for options trading and is 

based on the Day ISO ALO currently 

available on the Exchange’s cash equity 

market, as described in Rule 7.31– 

E(e)(3)(D), with differences to reflect 

how the order type would function on 

the Exchange’s options market. 

Specifically, similar to the differences 

between the proposed ALO Order for 

options trading on Pillar, as compared 

to the cash equity version of the ALO 

Order, for options trading, a Day ISO 

with an ALO designation would not 

trade as liquidity taker. As proposed, on 

arrival, a Day ISO ALO to buy (sell) may 

lock or cross Away Market Protected 

Quotations, but would not remove 

liquidity from the Consolidated Book, 

which is how the Exchange proposes 

that ALO Orders would function on 

Pillar and consistent with current 

options functionality for RALO as 

described herein.123 A Day ISO ALO to 

buy (sell) can be designated to be 

cancelled if it would be displayed at a 

price other than its limit price, which is 

similar to the proposed cancellation 

instruction for ALO Orders for options 

trading on Pillar, described above. 

Proposed Rule 6.62P–O(e)(3)(C)(i) 

would provide that if not designated to 

cancel, a Day ISO ALO that would lock 

or cross orders and quotes on the 

Consolidated Book would be repriced as 

specified in proposed Rule 6.62P– 

O(e)(2)(B). This proposed rule therefore 

incorporates the proposed repricing 

functionality for ALO Orders for options 

trading on Pillar with the proposed Day 

ISO ALO. Proposed Rule 6.62P– 

O(e)(3)(C)(ii) would provide that, once 

resting, a DAY ISO ALO would be 

processed as an ALO Order as specified 

in proposed Rule 6.62P–O(e)(2)(C)–(G). 

Complex Orders. Complex Orders are 

defined in Rule 6.62–O(e). The 

Exchange proposes to define Complex 

Orders for Pillar in proposed Rule 

6.62P–O(f) based on Rule 6.62–O(e) and 

its sub-paragraphs (1) and (2) without 

any substantive differences. The 

Exchange proposes to add clarifying text 

that the different options series in a 

Complex Order are also referred to as 

the ‘‘legs’’ or ‘‘components’’ of the 

Complex Order. The Exchange also 

proposes that proposed Rule 6.62P–O(f) 

would provide that a Complex Order 

would be any order involving the 

simultaneous purchase and/or sale of 

‘‘two or more options series in the same 

underlying security,’’ and not use the 

modifier ‘‘different’’ before the phrase 

‘‘more option series.’’ The Exchange 

believes that the word ‘‘different’’ is 

redundant and unnecessary in this 

context. In addition, proposed Rule 

6.62P–O(f)(1) and (2) would not 

reference mini-options contracts, which 

no longer trade on the Exchange. 

Cross Orders. Currently, the only 

electronically-entered cross orders 

available on the Exchange are Qualified 

Contingent Cross Orders, which are 

defined in Rule 6.62–O(bb) and 

Commentary .02 to Rule 6.62–O. In 

addition, Rule 6.90–O describes how 

Qualified Contingent Cross Orders are 

processed. The Exchange proposes to 

define the term ‘‘Cross Orders’’ on Pillar 

as being a Qualified Contingent Cross 

(‘‘QCC’’) Order in proposed Rule 6.62P– 

O(g). As proposed, QCC Orders on Pillar 

would function identically to how 

Qualified Contingent Cross Orders 

function on the OX system, and for 

purposes of the rules governing trading 

on Pillar, the Exchange proposes to 

merge language from two rules relating 

to QCC Orders into a single rule, 

proposed Rule 6.62P–O(g), using Pillar 

terminology and functionality as 

described below. Proposed Rule 6.62P– 

O(g)(1) would describe rules applicable 

to electronically-entered QCC Orders 

and Complex QCC Orders. In addition, 

the Exchange proposes to adopt new 

Rule 6.62P–O(g)(1)(D) to provide for the 

trading of Complex QCC Orders.124

Proposed Rule 6.62P–O(g)(1)(A) 

would provide that a QCC Order must 

be comprised of an originating order to 

buy or sell at least 1,000 contracts that 

is identified as being part of a qualified 

contingent trade coupled with a contraside order or orders totaling an equal 

number of contracts. This proposed rule 

text is based on Rule 6.62–O(bb) with a 

non-substantive difference that the 

Pillar rule would not reference minioptions contracts, which no longer trade 

on the Exchange. Proposed Rule 6.62P– 

O(g)(1)(A) would also specify that if a 

QCC has more than one option leg (a 

‘‘Complex QCC Order’’), each option leg 

must have at least 1,000 contracts, 

which is consistent with existing 

functionality that is not described in the 

current rule. Complex QCCs which are 

described below, are available for 

options trading on other options 

exchanges, and therefore are not 

novel.125 The proposed rule would 

further provide that a QCC Order that is 

not rejected per proposed Rule 6.62P– 

O(g)(1)(C) or (D) would immediately 

trade in full at its price, would not 

route, and may be entered with an MPV 

of $0.01 regardless of the MPV of the 

options series 126 and that QCC Orders 

may be entered by Floor Brokers from 

the Trading Floor or routed to the 

Exchange from off-Floor. This proposed 

rule is consistent with current Rule 

6.90–O, which provides that QCC 

Orders are automatically executed upon 

entry provided that they meet specified 

criteria. On Pillar, the Exchange 

proposes to specify those criteria in 

proposed Rule 6.62P–O(g)(1)(C), 

described below. In addition, the 

proposed Rule would provide that Rule 

6.47A–O (related to exposure of orders 

on the Exchange) does not apply to 

Cross Orders, which text is 

substantively identical to Commentary 

.03 to current Rule 6.90–O.127

Proposed Rule 6.62P–O(g)(1)(B) and 

subparagraphs (i)–(vi) would define a 

‘‘qualified contingent trade’’ as a 

transaction consisting of two or more 

component orders, executed as agent or 

principal, where specified requirements 

are also met and uses the same text as 

currently set forth in Commentary .02 

and sub-paragraphs (a)–(f) to Rule 6.62– 

O without any differences. 

Proposed Rule 6.62P–O(g)(1)(C) 

would describe general rules relating to 

execution of QCC Orders and would 

provide that a QCC Order with one 

option leg would be rejected if received 

when the NBBO is crossed or if it would 

be traded at a price that (i) is at the same 

price as a displayed Customer order on 

the Consolidated Book and (ii) is not at 

or between the NBBO and would 

provide that the QCC Order would 

never trade at a price worse than the 

Exchange BBO. This proposed rule is 

based on Rule 6.90–O without any 

substantive differences but adds detail 

about pricing of a QCC Order vis a vis 

the Exchange BBO. The Exchange 

believes that specifying that a QCC 

Order would be rejected when the 

NBBO is crossed, which is new text, 

provides greater granularity than current 

Rule 6.90–O(1), which provides that 


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128See, e.g., MIAX Rule 515(h)(4) (which 

provides that each Complex QCC or ‘‘cQCC’’ is 

‘‘automatically executed upon entry provided that, 

with respect to each option leg of the cQCC Order, 

the execution (i) is not at the same price as a 

Priority Customer Order on the Exchange’s Book; 

and (ii) is at or between the NBBO’’). 

129See, e.g., Cboe Rule 5.6(c)(2)(B)(iii) (requiring 

that the ‘‘execution price is better than the price of 

any complex order resting in the [Cboe Complex 

Order Book], unless the Complex QCC Order is a 

Priority Customer Order and the resting complex 

order is a non-Priority Customer Order, in which 

case the execution price may be the same as or 

better than the price of the resting complex order’’). 

130An options Floor Broker is ‘‘an individual 

(either an OTP Holder or OTP Firm or a nominee 

of an OTP Holder or OTP Firm) who is registered 

with the Exchange for the purpose, while on the 

Exchange Floor, of accepting and executing option 

orders.’’ See Rule 6.43–O(a). 

131Commentary .01 to Rule 6.90–O provides: 

‘‘Qualified Contingent Cross Orders can be entered 

into the NYSE Arca System from on the Floor of 

the Exchange only by Floor Brokers. Floor Brokers 

shall not enter such orders for their own account, 

the account of an associated person, or an account 

with respect to which it or an associated person 

thereof exercises investment discretion (each a 

‘prohibited account’). When executing such orders, 

Floor Brokers shall not be subject to NYSE Arca 

Rule 6.47–O. Floor Brokers must maintain books 

and records demonstrating that each Qualified 

Contingent Cross Order entered from the Floor was 

not entered for a prohibited account. Any Qualified 

Contingent Cross Order entered from the Floor that 

does not have a corresponding record required by 

this Commentary .01 shall be deemed to have been 

entered for a prohibited account in violation of this 

Rule.’’ 

132Commentary .02 to Rule 6.90–O provides: 

‘‘With respect to a Qualified Contingent Cross Order 

that was routed to the NYSE Arca System from off 

of the Floor, OTP Holders must maintain books and 

records demonstrating that each such order was 

routed to the system from off of the Floor. This 

provision would not apply to a Qualified 

Contingent Cross Order covered by Commentary .01 

to this NYSE Arca Rule 6.90–O (i.e., a Qualified 

Contingent Cross Order routed to a Floor Broker for 

entry into the NYSE Arca System).’’ The Exchange 

does not propose to include the last sentence of this 

Commentary in the proposed Pillar rule because the 

Exchange does not believe it is necessary to specify 

that Floor Brokers that enter orders electronically 

are subject to rules relating to electronic order entry 

as opposed to rules governing open outcry. 

133See NYSE Arca Options RB–16–04, dated 

February 19, 2016 (Rules of Priority and Order 

Protection in Open Outcry), available here: https:// 

www.nyse.com/publicdocs/nyse/markets/arcaoptions/rule-interpretations/2016/NYSE%20

Arca%20Options%20RB%2016-04.pdf. 

‘‘Qualified Contingent Cross Orders will 

be automatically cancelled if they 

cannot be executed.’’ The other two 

proposed conditions are identical to the 

current functionality, as specified in 

Rule 6.90–O: That Qualified Contingent 

Cross Orders are automatically executed 

‘‘provided that the execution (i) is not 

at the same price as a Customer Order 

in the Consolidated Book and (ii) is at 

or between the NBBO.’’ 

Proposed Rule 6.62P–O(g)(1)(D) 

would describe how Complex QCC 

Orders would be executed on the 

Exchange. As proposed, a Complex QCC 

Order must include a limit price, no 

option leg would trade at a price worse 

than the Exchange BBO, and would be 

rejected if: 

• Any option leg cannot execute in 

compliance with proposed paragraph 

(g)(1)(C) of this Rule (described above), 

which is consistent with Complex QCC 

handling on other options exchanges; 128

• the best-priced Complex Order(s) 

on the Exchange contain(s) displayed 

Customer interest and the Complex QCC 

Order price does not improve such 

displayed Customer interest by $0.01 

(proposed Rule 6.62P–O(g)(1)(D)(ii)), 

which is consistent with Complex QCC 

handling on other options exchanges; 129

• the price of the QCC Order is worse 

than the best-priced Complex Orders in 

the Consolidated Book or the prices of 

the best-priced Complex Orders in the 

Consolidated Book are crossed 

(proposed Rule 6.62P–O(g)(1)(D)(iii)), 

which detail provides additional 

protections against potentially 

erroneous executions and adds 

transparency and granularity to the 

proposed rule; or 

• there is no NBO for a given leg 

(proposed Rule 6.62P–O(g)(1)(D)(iv)), 

which detail provides additional 

protections against potentially 

erroneous executions and adds 

transparency and granularity to the 

proposed rule. 

This proposed rule text is designed to 

promote clarity and transparency in 

Exchange rules regarding the price 

requirements for a Complex QCC Order, 

which requirements to protect priority 

of resting interest are consistent with 

the rules of other options exchanges, as 

described above, and to provide 

additional safeguards against potentially 

erroneous executions of Complex QCCs. 

Proposed Rule 6.62P–O(g)(1)(E) 

would specify rules governing QCC 

Orders entered from the Trading Floor, 

which can be entered only by Floor 

Brokers,130 and is based on Commentary 

.01 to Rule 6.90–O without any 

substantive differences.131 The 

Exchange proposes textual changes as 

compared to the current Rule that are 

not designed to change the substance of 

the Rule, but to instead promote clarity 

and transparency. The proposed rule 

would provide that while on the 

Trading Floor, only Floor Brokers can 

enter QCC Orders, and that Floor 

Brokers may not enter QCC Orders for 

their own account, the account of an 

associated person, or an account with 

respect to which it or an associated 

person thereof exercises investment 

discretion (each a ‘‘prohibited 

account’’). As further proposed, when 

executing such orders, Floor Brokers 

would not be subject to Rule 6.47–O 

regarding ‘‘Crossing’’ orders. Floor 

Brokers must maintain books and 

records demonstrating that each QCC 

Order entered from the Floor was not 

entered for a prohibited account. Any 

QCC Order entered from the Floor that 

does not have a corresponding record 

required by this paragraph would be 

deemed to have been entered for a 

prohibited account in violation of this 

Rule. 

Proposed Rule 6.62P–O(g)(1)(F) 

would specify rules governing QCC 

Orders entered off-Floor and that OTP 

Holders must maintain books and 

records demonstrating that each such 

order was so routed. This proposed rule 

is based on Commentary .02 to Rule 

6.90–O without any substantive 

differences.132 The Exchange proposes 

textual differences as compared to the 

current Rule that are not designed to 

change the substance of the Rule, but 

instead promote clarity and 

transparency. 

In connection with adding QCC to 

proposed Rule 6.62P–O, the Exchange 

proposes to add the following preamble 

to Rule 6.90–O: ‘‘This Rule is not 

applicable to trading on Pillar.’’ This 

proposed preamble is designed to 

promote clarity and transparency in 

Exchange rules that Rule 6.90–O would 

not be applicable to trading on Pillar. 

Orders Available Only in Open 

Outcry. The Exchange proposes to add 

to Rule 6.62P–O(h) orders that are 

available only in open outcry, most of 

which are currently defined in Rule 

6.62–O. 

First, proposed Rule 6.62P–O(h)(1) 

would codify an existing order type, the 

Clear-the-Book (‘‘CTB’’) Order, which is 

currently described only in a Regulatory 

Bulletin.133 The proposed definition 

would describe the CTB Order, which 

would be an order type available in 

open outcry that would interface with 

the Consolidated Book, and therefore 

with Pillar. As proposed, a CTB Order 

would be a Limit IOC Order that may be 

entered only by a Floor Broker, 

contemporaneous with executing an 

order in open outcry, that is approved 

by a Trading Official (the ‘‘TO 

Approval’’). The CTB Order would be 

eligible to trade only with contra-side 

orders and quotes that were resting in 

the Consolidated Book prior to the TO 

Approval. In addition, proposed Rule 

6.62P–O(h)(1)(A)–(C) would provide 

that: 

• A CTB Order to buy (sell) would 

trade with contra-side orders and quotes 

with a display price below (above) the 

limit price of the CTB Order (proposed 

Rule 6.62P–O(h)(1)(A)); 


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134See id. at p. 2–3 (describing regulatory 

responsibilities related to CTB Orders, including 

that it is the Floor Broker’s responsibility to comply 

with the terms of the Options Order Protection and 

Locked/Crossed Market Plan, including by sending 

ISOs to trade with Protected Quotes). 

• A CTB Order to buy (sell) would 

trade with contra-side orders and quotes 

that have a display price and working 

price equal to the limit price of the CTB 

Order only if there is displayed 

Customer sell (buy) interest at that 

price, in which case, the CTB Order to 

buy (sell) would trade with the 

displayed Customer interest to sell (buy) 

and any non-Customer interest to sell 

(buy) with a working time earlier than 

the latest-arriving displayed Customer 

interest to sell (buy) (proposed Rule 

6.62P–O(h)(1)(B)); and 

• Any unexecuted portion of the CTB 

Order would cancel after trading with 

all better-priced interest and eligible 

same-priced interest on the 

Consolidated Book (proposed Rule 

6.62P–O(h)(1)(C)). 

Currently, CTB Orders only trade with 

displayed Customer interest and any 

same-priced displayed non-Customer 

interest ranked ahead of such interest in 

time priority, but do not trade with 

better-priced displayed non-Customer 

interest. In Pillar, per Rule 6.62P– 

O(h)(1)(B), CTB Orders would trade 

with displayed non-Customer interest 

priced better than the latest-arriving 

displayed Customer interest (i.e., a CTB 

order buying with a $1.00 limit would 

now trade with any displayed interest 

offered at $0.99). Because Floor Brokers 

have an obligation to satisfy betterpriced interest on the Consolidated 

Book, the Exchange believes this 

proposed change to automate such 

priority would make it easier for Floor 

Brokers to comply with Exchange 

priority rules. In addition, the Exchange 

believes that this proposed change 

would increase execution opportunities 

and achieve the goal of a CTB Order, 

which is to clear priority on the 

Consolidated Book at the time of the TO 

Approval. 

In addition, proposed Rule 6.62P– 

O(h)(1)(D) would codify existing 

regulatory responsibilities of Floor 

Brokers utilizing CTB Orders to submit 

such orders in a timely manner after 

receiving TO Approval and would also 

provide that because CTB Orders are 

non-routable (and thus ineligible to 

clear Protected Quotations), Floor 

Brokers would still be obligated to route 

any other eligible orders (i.e., not the 

CTB Order) to better-priced interest on 

Away Markets per Rule 6.94–O.134

The Exchange also proposes to 

include in Rule 6.62P–O additional 

open outcry order types that are 

currently defined in Rule 6.62–O: 

• Proposed Rule 6.62P–O(h)(2) would 

define ‘‘Facilitation Order’’ and is based 

on the Rule 6.62–O(j) definition of 

Facilitation Order without any 

differences. 

• Proposed Rule 6.62P–O(h)(3) would 

define ‘‘Mid-Point Crossing Order’’ and 

is based on the Rule 6.62–O(q) 

definition of Mid-Point Crossing Order 

without any differences. 

• Proposed Rule 6.62P–O(h)(4) would 

define ‘‘Not Held Order’’ and is based 

on the Rule 6.62–O(f) definition of Not 

Held Order without any differences. 

• Proposed Rule 6.62P–O(h)(5) would 

define ‘‘Single Stock Future (‘‘SSF’’)/ 

Option Order’’ and is based on the Rule 

6.62–O(i) definition of Single Stock 

Future (‘‘SSF’’)/Option Order without 

any differences. 

• Proposed Rule 6.62P–O(h)(6)(A) 

would define a ‘‘Stock/Option Order’’ 

and is based on the Rule 6.62–O(h)(1) 

definition of Stock/Option Order 

without any differences. 

• Proposed Rule 6.62P–O(h)(6)(B) and 

subparagraphs (i) and (ii) would define 

a ‘‘Stock/Complex Order’’ and is based 

on the Rule 6.62–O(h)(2) definition of 

Stock/Complex Order with its subparagraphs without any differences. 

The Exchange proposes that after the 

transition to Pillar, the following open 

outcry order types, which are currently 

described in Rule 6.62–O but are not 

used by Floor Brokers, would not be 

added to proposed Rule 6.62P–O 

governing orders and modifiers: One 

cancels the other (OCO) Order and 

Stock Contingency Order. 

Additional Order Instructions and 

Modifiers. The Exchange proposes to 

specify the additional order instructions 

and modifiers that would be available in 

Pillar in proposed Rule 6.62P–O(i). 

Proactive if Locked/Crossed Modifier. 

Proposed Rule 6.62P–O(i)(1) would 

provide that a Limit Order that is 

displayed and eligible to route and 

designated with a Proactive if Locked/ 

Crossed Modifier would route to an 

Away Market if the Away Market locks 

or crosses the display price of the order 

and that if any quantity of the routed 

order is returned unexecuted, the order 

would be displayed in the Consolidated 

Book. This would be new functionality 

for options trading on the Exchange and 

is based on the Proactive if Locked/ 

Crossed Modifier available on the 

Exchange’s cash equity platform, as 

described in Rule 7.31–E(i)(1) without 

any differences. The Exchange believes 

that offering this as an optional modifier 

for Limit Orders would provide OTP 

Holders and OTP Firms with additional 

flexibility to designate a resting 

displayed order to route if it becomes 

locked or crossed by an Away Market. 

Self-Trade Prevention (‘‘STP’’) 

Modifier. Self-Trade Prevention (‘‘STP’’) 

Modifiers are currently defined in 

Commentary .01 to Rule 6.76A–O and 

are available only for Market Maker 

orders and quotes. On Pillar, the 

Exchange proposes to expand the 

availability of STP to all orders and 

quotes to offer this protection to trading 

interest of all OTP Holders and OTP 

Firms, not just Market Makers. The 

Exchange believes this expansion is 

appropriate because it would facilitate 

market participants’ compliance and 

risk management by assisting them in 

avoiding unintentional wash-sale 

trading. Because STP Modifiers are an 

instruction that can be added to an 

order or quote, the Exchange proposes 

that for Pillar, STP Modifiers would be 

described in proposed Rule 6.62P– 

O(i)(2). This is based on the structure of 

the Exchange’s cash equity rules, which 

also describe the STP Modifier in Rule 

7.31–E(i), which is available to all 

market participants. 

Proposed Rule 6.62P–O(i)(2) would 

provide that an Aggressing Order or 

Aggressing Quote to buy (sell) 

designated with one of the STP 

modifiers in proposed Rule 6.62P– 

O(i)(2) would be prevented from trading 

with a resting order or quote to sell 

(buy) also designated with an STP 

modifier from the same MPID, and, if 

specified, any sub-identifier of that 

MPID and that the STP modifier on the 

Aggressing Order or Aggressing Quote 

would control the interaction between 

two orders and/or quotes marked with 

STP modifiers. In addition, STP would 

not be applicable during an Auction or 

to Cross Orders or when a Complex 

Order legs out. This proposed rule text 

is based on Commentary .01 to Rule 

6.76A with non-substantive differences 

to use Pillar terminology. 

Proposed Rule 6.62P–O(i)(2) would 

further provide that if the condition for 

a Limit Order designated FOK, an AON 

Order, or an arriving order with an MTS 

modifier designated under proposed 

Rule 6.62P–O(i)(3)(B)(i) (described 

below) cannot be met because of STP 

modifiers, such order would either be 

cancelled or placed on the Consolidated 

Book, as applicable. This functionality 

would be new on Pillar and reflects that 

for order types that must trade a 

specified quantity (either in full or a 

specified minimum quantity) and could 

trade with multiple contra-side orders to 

meet that size requirement, such order 

types would not be compatible with 

applying STP, which examines a oneon-one relationship between two 

interacting orders. This proposed rule 


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135See, e.g., Nasdaq Options 3, Section 7(a)(3)(B) 

(describing ‘‘Minimum Quantity Order’’ as ‘‘an 

order that requires that a specified minimum 

quantity of contracts be obtained, or the order is 

cancelled’’). 

136For cash equity trading, the MTS Modifier is 

also available for an MPL Order or Tracking Order, 

which are non-displayed order types available on 

the Exchange’s cash equity trading platform that 

would not be available for options trading on Pillar. 

See Rule 7.31–E(i)(3). 

text provides clarity that if a condition 

of an order cannot be met because of 

STP modifiers, the order would either 

cancel (i.e., a Limit Order designated 

FOK), or be added to the Consolidated 

Book (i.e., an AON Order or an order 

with an MTS modifier), and then such 

resting orders would function as 

described in Rule 6.62P–O. 

The proposed rule would further 

provide that Aggressing Orders or 

Aggressing Quotes would be processed 

as follows: 

• Proposed Rule 6.62P–O(i)(2)(A) 

would describe STP Cancel Newest 

(‘‘STPN’’) and provide that an 

Aggressing Order or Aggressing Quote to 

buy (sell) marked with the STPN 

modifier would not trade with resting 

interest to sell (buy) marked with any 

STP modifier from the same MPID; that 

the Aggressing Order or Aggressing 

Quote marked with the STPN modifier 

would be cancelled; and that the resting 

order or quote marked with one of the 

STP modifiers would remain on the 

Consolidated Book. This proposed rule 

is based on Commentary .01(a) to Rule 

6.76A–O with non-substantive 

differences to use Pillar terminology. 

• Proposed Rule 6.62P–O(i)(2)(B) 

would describe STP Cancel Oldest 

(‘‘STPO’’) and provide that an 

Aggressing Order or Aggressing Quote to 

buy (sell) marked with the STPO 

modifier would not trade with resting 

interest to sell (buy) marked with any 

STP modifier from the same MPID; that 

the resting order or quote marked with 

the STP modifier would be cancelled; 

and that the Aggressing Order or 

Aggressing Quote marked with the 

STPO modifier would be placed on the 

Consolidated Book. This proposed rule 

is based on Commentary .01(b) to Rule 

6.76A–O with non-substantive 

differences to use Pillar terminology. 

• Proposed Rule 6.62P–O(i)(2)(C) 

would describe STP Cancel Both 

(‘‘STPC’’) and provide that an 

Aggressing Order or Aggressing Quote to 

buy (sell) marked with the STPC 

modifier would not trade with resting 

interest to sell (buy) marked with any 

STP modifier from the same MPID and 

that the entire size of both orders and/ 

or quotes would be cancelled. This 

proposed rule is based on Commentary 

.01(c) to Rule 6.76A–O with nonsubstantive differences to use Pillar 

terminology. 

Minimum Trade Size Modifier. The 

Exchange proposes to add the Minimum 

Trade Size (‘‘MTS’’) Modifier, which 

would be new functionality for options 

trading on Pillar that is based on the 

same functionality currently available 

for cash equity securities trading on 

Pillar, as described in Rule 7.31–E(i)(3). 

The Exchange proposes to provide this 

modifier for options trading to provide 

OTP Firms and OTP Holders with more 

features with respect to order handling. 

The proposed MTS Modifier is similar 

in concept to both FOK and AON, 

which are currently available for 

options trading. With the MTS Modifier, 

an OTP Holder or OTP Firm would have 

greater flexibility to designate a size 

smaller than the entire quantity (which 

is current FOK and AON functionality) 

as a condition for execution. The 

Exchange notes that the use of an MTS 

Modifier is not new or novel to options 

trading.135

As with the MTS Modifier for cash 

equity trading, the proposed MTS 

Modifier for options traded on Pillar 

would be available only for nondisplayed orders. Accordingly, 

proposed Rule 6.62P–O(i)(3) would 

provide that a Limit IOC Order or NonDisplayed Limit Order may be 

designated with an MTS Modifier.136

Proposed Rule 6.62P–O(i)(3)(A) 

would provide that the quantity of the 

MTS Modifier may be less than the 

order quantity; however, an order would 

be rejected if it has an MTS Modifier 

quantity that is larger than the size of 

the order. This proposed rule is based 

on Rule 7.31–E(i)(3)(A) with differences 

only to reflect that the concept of a 

round lot is not applicable for options 

trading. 

Proposed Rule 6.62P–O(i)(3)(B) would 

provide that one of the following 

instructions must be specified with 

respect to whether an order to buy (sell) 

with an MTS Modifier would trade on 

arrival with: (i) Orders or quotes to sell 

(buy) in the Consolidated Book that in 

the aggregate meet such order’s MTS; or 

(ii) only individual order(s) or quote(s) 

to sell (buy) in the Consolidated Book 

that each meets such order’s MTS. This 

proposed rule is based on Rule 7.31– 

E(i)(3)(B) and sub-paragraphs (i) and (ii) 

with only non-substantive differences to 

use options trading terminology (e.g., 

Consolidated Book instead of NYSE 

Arca Book and reference to quotes). 

Otherwise, the functionality would be 

identical on both the options and cash 

equity trading platforms. 

Proposed Rule 6.62P–O(i)(3)(C) would 

provide that an order with an MTS 

Modifier that is designated Day or GTC 

that cannot be executed immediately on 

arrival would not trade and would be 

ranked in the Consolidated Book. In 

such case, the order to buy (sell) with 

an MTS Modifier to buy (sell) that is 

ranked in the Consolidated Book would 

not be eligible to trade: (i) At a price 

equal to or above (below) any orders or 

quotes to sell (buy) that are displayed at 

a price equal to or below (above) the 

working price of such order with an 

MTS Modifier; or (ii) at a price above 

(below) any orders or quotes to sell 

(buy) that are not displayed and that 

have a working price below (above) the 

working price of such order with an 

MTS Modifier. This proposed rule is 

based on Rule 7.31–E(i)(3)(C) and subparagraphs (i) and (ii) with only nonsubstantive differences to use options 

trading terminology and to reflect the 

availability of the GTC time-in-force 

modifier for Non-Displayed Limit 

Orders. Otherwise, the functionality 

would be identical on both the options 

and cash equity trading platforms. 

Proposed Rule 6.62P–O(i)(3)(D) would 

provide that an order with an MTS 

Modifier that is designated IOC and 

cannot be immediately executed would 

be cancelled. This proposed rule is 

based on Rule 7.31–E(i)(3)(D) without 

any differences and the functionality 

would be identical on both the options 

and cash equity trading platforms. 

Proposed Rule 6.62P–O(i)(3)(E) would 

provide that a resting order to buy (sell) 

with an MTS Modifier would trade with 

individual orders and quotes to sell 

(buy) that each meet the MTS and that 

(i) if an Aggressing Order or Aggressing 

Quote to sell (buy) does not meet the 

MTS of the resting order to buy (sell) 

with an MTS Modifier, that Aggressing 

Order or Aggressing Quote would not 

trade with, and may trade, through such 

resting order with an MTS Modifier; and 

(ii) if a resting non-displayed order or 

quote to sell (buy) did not meet the MTS 

of a same-priced resting order or quote 

to buy (sell) with an MTS Modifier, a 

subsequently arriving order or quote to 

sell (buy) that meets the MTS would 

trade before such resting non-displayed 

order or quote to sell (buy) at that price. 

This proposed rule is based on Rule 

7.31–E(i)(3)(E) and sub-paragraphs (i) 

and (ii) with only non-substantive 

differences to use options trading 

terminology (i.e., refers to an order 

trading with contra-side quotes). 

Otherwise, the proposed functionality 

would be identical on both the options 

and cash equity trading platforms. 

Proposed Rule 6.62P–O(i)(3)(F) would 

provide that a resting order with an 

MTS Modifier would be cancelled if it 

is traded in part or reduced in size and 

the remaining quantity is less than such 


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137As described in Rule 6.37A–O(a)(3)(A)–(C), a 

Market Maker may designate a quote as Market 

Maker-Light Only Quotation (‘‘MMLO’’), Market 

Maker—Add Liquidity Only Quotation 

(‘‘MMALO’’), and Market Maker—Repricing 

Quotation (‘‘MMRP’’). 

138For example, a Market Maker could choose to 

designate a Non-Routable Limit Order as either a 

quote or as an order, which is consistent with 

current Rule 6.37B–O, which provides that a Market 

Maker may enter all order types permitted to be 

entered by Users under the Rules to buy or sell 

options in all classes of options listed on the 

Exchange. Accordingly, the functionality set forth 

in proposed Rule 6.37AP–O(a)(2) herein is not 

materially different for Market Makers because, 

under current functionality, they can choose to 

send as Market Maker orders any order type 

described in current Rule 6.62–O, including, for 

example, RPNP, RALO, PNP-Blind Order, and PNP 

Light Order. 

139See NYSE Arca Fee Schedule, Port Fees 

(setting forth fees for order/quote entry ports, which 

fees are currently $450 per port per month for the 

first forty such ports and $150 per port per month 

for each port in excess of forty (i.e., 41 and greater), 

available here: https://www.nyse.com/publicdocs/ 

nyse/markets/arca-options/NYSE_Arca_Options_

Fee_Schedule.pdf. 

140On the OX system, a Market Maker’s sameside quote is updated when a Market Maker uses 

the same OTP for quote entry. Therefore, on the OX 

system, a Market Maker (not acting as an LMM) that 

uses multiple OTPs could have more than one 

same-side quote in a series. As discussed supra, 

because the OX system utilizes a unique identifier 

for each LMM to send quotes, under current 

functionality, an LMM cannot have more than one 

same-side quote in an assigned series. See supra 

note 60. 

141See proposed Rule 1.1 definition of Market 

Maker, which provides that for purposes of 

Exchange rules, the term Market Maker includes 

Lead Market Makers, unless the context otherwise 

indicates. 

142See discussion supra regarding proposed Rule 

6.62P–O(e)(1) and (2), Non-Routable Limit Order 

and ALO Orders, respectively, being available as 

quote types and how such orders compare to the 

existing MMLO, MMRP, and MMALO quotation 

functionality. 

143The Exchange notes that it is not proposing 

the functionality set forth in current Rule 6.37A– 

O(a)(4)(C) that provides for the cancellation of a 

Market Maker’s quote on the opposite side of the 

market whenever that Market Maker’s same-side 

quotation is cancelled because such quotation 

would lock or cross another options exchange is not 

designated to reprice (i.e., as an MMRP). This 

current functionality is based on a system limitation 

that would not exist under Pillar. 

order’s MTS. This proposed rule is 

based on Rule 7.31–E(i)(3)(F) without 

any differences and the functionality 

would be identical on both the options 

and cash equity trading platforms. 

In connection with proposed Rule 

6.62P–O, the Exchange proposes to add 

the following preamble to Rule 6.62–O: 

‘‘This Rule is not applicable to trading 

on Pillar.’’ This proposed preamble is 

designed to promote clarity and 

transparency in Exchange rules that 

Rule 6.62–O would not be applicable to 

trading on Pillar. 

Proposed Rule 6.37AP–O: Market Maker 

Quotations 

Current Rule 6.37A–O describes 

Market Maker quoting obligations, 

including defining ‘‘quotations,’’ 

describing the treatment of such 

quotations, and specifying Market 

Maker and LMM quoting obligations. 

Proposed Rule 6.37AP–O would set 

forth Market Maker quoting obligations 

under Pillar. 

As with current functionality, on 

Pillar, the Exchange would provide 

Market Makers with the ability to 

designate bids and offers as quotations, 

which is unique to options trading and 

not applicable to cash equity trading. 

Currently, the Exchange offers 

designated ‘‘quotation’’ types to Market 

Makers, which are described in Rule 

6.37A–O(a)(3).137 On Pillar, as described 

above in connection with proposed 

Rules 6.62P–O(e)(1) and (2), the 

Exchange is proposing to offer quotation 

functionality for Market Makers that 

would be displayed, traded, repriced, or 

cancelled in the same manner as NonRoutable Limit Orders and ALO Orders. 

As such, Market Makers may designate 

these two ‘‘order’’ types as quotations 

and, if designated as a quotation, such 

bids and offers would be displayed, 

traded, repriced, or cancelled as 

described in proposed Rule 6.62P– 

O(e)(1) and (2), as discussed in detail 

above. In addition, such quotations 

would be ranked and executed as 

described in proposed Rules 6.76P–O 

and 6.76AP–O, described above. 

Moreover, if designated as a quotation, 

such bids or offers would be identifiable 

to the Exchange as ‘‘quotations,’’ subject 

to the Market Maker and LMM 

requirements relating to quotations and 

the Exchange would be able to monitor 

a Market Maker’s compliance with 

quoting obligations because its bids or 

offers would be designated as 

quotations. If a Market Maker does not 

choose to designate a bid or offer as a 

quotation, such bid or offer would be 

processed as an ‘‘order’’ and would not 

count towards a Market Maker’s quoting 

obligations.138

• Rule 6.37AP–O(a) would be based 

on current Rule 6.37A–O(a) and would 

provide that a Market Maker may send 

quotations only in the issues included 

in its appointment. This functionality 

would not be new, and the Exchange 

proposes one terminology difference 

from the current Rule to use the term 

‘‘send’’ rather than ‘‘enter,’’ which is a 

stylistic preference that does not alter 

the functionality. 

• Proposed Rule 6.37AP–O(a)(1) 

would provide that the term ‘‘quote’’ or 

‘‘quotation’’ means ‘‘a bid or offer sent 

by a Market Maker that is not sent as an 

order,’’ and that ‘‘[a] quotation sent by 

a Market Maker will replace a 

previously displayed same-side 

quotation that was sent from the same 

order/quote entry port of that Market 

Maker.’’ 139 This proposed Rule is 

similar to current Rule 6.37A–O(a)(1), 

which provides that ‘‘[t]he term ‘quote’ 

or ‘quotation’ means a bid or offer 

entered by a Market Maker that updates 

the Market Maker’s previous bid or 

offer, if any,’’ with two distinctions. 

First, the Exchange proposes textual 

differences to use the terms ‘‘sent’’ and 

‘‘received’’ instead of ‘‘entered,’’ which 

is a stylistic preference that does not 

alter the functionality. Second, the 

Exchange proposes additional detail 

(consistent with current functionality) 

to make clear that quotations sent by a 

Market Maker would be replaced, i.e., 

‘‘updated,’’ as the term is used in the 

current rule, when a new same-side 

quote is sent via the same order/quote 

entry port.140 Because LMMs would be 

Market Makers on Pillar, this 

functionality would also be available to 

LMMs.141

The NYSE Arca Fee Schedule makes 

clear that Market Makers can obtain 

upwards of forty ports for quote entry. 

Thus, the Exchange believes that 

establishing when a Market Maker’s 

previously displayed same-side 

quotation would be replaced (i.e., when 

sent via the same order/quote entry 

port) would add clarity and 

transparency to Exchange rules. In 

addition, because the Exchange 

proposes that a Market Maker may 

designate Non-Routable Limit Orders or 

ALO Orders as quotes, the Exchange 

proposes a difference from the current 

Rule to provide that a quote is a bid or 

offer not designated as an order. 

• Proposed Rule 6.37AP–O(a)(2) 

would provide that a Market Maker may 

designate either a Non-Routable Limit 

Order or an ALO Order as a quote and 

such quotes would be processed as 

described in proposed Rule 6.62P– 

O(e).142 The similarities and differences 

between the proposed Non-Routable 

Limit Orders and ALO Orders on Pillar 

compared to the existing quote types 

(i.e., MMLO, MMALO and MMRP) are 

described in more detail above.143

Because proposed Rule 6.62P–O(e)(1) 

and (2), described above, would set 

forth the treatment of a Non-Routable 

Limit Order or an ALO Order designated 

as a quote, the Exchange is not 

proposing to include a (duplicative) 

section in proposed Rule 6.37AP–O 

regarding the treatment of such quotes. 

• Proposed Rule 6.37AP–O(b)–(e) 

would be substantively identical to 

current Rule 6.37A–O(b)–(e) with nonsubstantive differences to change the 

term ‘‘shall’’ to ‘‘will,’’ which is a 


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stylistic preference that would add 

consistency to Exchange rules. Proposed 

Commentary .01 to Rule 6.37AP–O 

would be substantively identical to 

Commentary .01 to Rule 6.37A–O, with 

non-substantive differences to 

streamline the rule text. 

The Exchange also proposes a nonsubstantive change to paragraph (b) of 

Rule 6.65A–O (Limit-Up and LimitDown During Extraordinary Market 

Volatility) to correct a cross reference to 

Market Maker quoting obligations as set 

forth in Rule 6.37AP–O(b) and (c). 

Current Rule 6.65A(b) erroneously 

cross-references Rule 6.37B–O(b) and 

(c). 

In connection with proposed Rule 

6.37AP–O, the Exchange proposes to 

add the following preamble to Rule 

6.37A–O: ‘‘This Rule is not applicable to 

trading on Pillar.’’ This proposed 

preamble is designed to promote clarity 

and transparency in Exchange rules that 

Rule 6.37A–O would not be applicable 

to trading on Pillar. 

Proposed Rule 6.40P–O: Pre-Trade and 

Activity-Based Risk Controls 

For the OX system, current Rule 6.40– 

O sets forth the activity-based Risk 

Limitation Mechanisms for orders and 

quotes, which are designed to help OTP 

Holders and OTP Firms effectively 

manage risk during periods of increased 

and significant trading activity. With the 

transition to Pillar, the Exchange 

proposes to incorporate new risk control 

functionality that is based on both 

existing activity-based risk controls for 

options and pre-trade risk controls that 

are available on the Exchange’s cash 

equity platform. Proposed Rule 6.40P–O 

would describe the activity-based 

controls with updated functionality 

under Pillar and would also describe 

new optional pre-trade risk controls that 

are based on pre-trade risk controls 

available on the Exchange’s cash equity 

platform, as described in Rule 7.19–E, 

with proposed differences to reference 

quotes and proposed new Pillar 

functionality. The Exchange believes 

that adding pre-trade risk controls 

(together with the enhanced activitybased controls) for options trading, as 

described below, would provide greater 

flexibility to OTP Holders and OTP 

Firms in establishing risk controls to 

align with their risk tolerance for both 

orders and quotes. 

Proposed Rule 6.40P–O(a) would set 

forth the following definitions that 

would be used for purposes of the Rule: 

• The term ‘‘Entering Firm’’ would 

mean an OTP Holder or OTP Firm 

(including those acting as Market 

Makers) (proposed Rule 6.40P–O(a)(1)). 

This proposed definition is based in 

part on the definition of ‘‘Entering 

Firm’’ in Rule 7.19–E(a)(1) and the 

Exchange believes that the addition of 

this term would add clarity to the 

proposed rule by using a single, defined 

term to describe which entities, 

including Market Makers, could avail 

themselves of the proposed pre-trade 

risk controls. 

• The term ‘‘Pre-Trade Risk Controls’’ 

would refer to two optional limits that 

an Entering Firm may utilize with 

respect to its trading activity on the 

Exchange (excluding interest 

represented in open outcry except CTB 

Orders (proposed Rule 6.40P–O(a)(2)). 

These controls would be the ‘‘Single 

Order Maximum Notional Value Risk 

Limit’’ and the ‘‘Single Order Maximum 

Quantity Risk Limit.’’ The proposed PreTrade Controls are based on the 

substantially identical risk controls 

available on the Exchange’s cash equity 

market, as described in Rules 7.19– 

E(a)(3) and (4), respectively, but differ in 

that the proposed rule would also apply 

to quotes, which are unique to options 

trading, and specifies the exclusion of 

interest represented in open outcry, 

excluding CTB Orders, as well as the 

treatment of orders designated GTC, 

which orders are available for options 

trading but are not offered on the 

Exchange’s cash equity market. 

Æ The term ‘‘Single Order Maximum 

Notional Value Risk Limit’’ would refer 

to a pre-established maximum dollar 

amount for a single order or quote to be 

applied one time (proposed Rule 6.40P– 

O(a)(2)(A)). This definition would also 

provide that orders designated GTC 

would be subject to this pre-trade risk 

control only once. 

Æ The term ‘‘Single Order Maximum 

Quantity Risk Limit’’ would refer to a 

pre-established maximum number of 

contracts that may be included in a 

single order or quote before it can be 

traded (proposed Rule 6.40P– 

O(a)(2)(B)). This definition would also 

provide that orders designated GTC 

would be subject to this pre-trade risk 

control only once. 

• The term ‘‘Activity-Based Risk 

Controls’’ would refer to three activitybased risk limits that an Entering Firm 

may apply to its orders and quotes in an 

options class (excluding those 

represented in open outcry except CTB 

Orders) based on specified thresholds 

measured over the course of an Interval 

(to be defined below) (proposed Rule 

6.40P–O(a)(3)). The proposed ActivityBased Risk Controls are based on the 

substantially identical risk controls set 

forth in current Rule 6.40–O(b)–(d), 

except that on Pillar, a Market Maker’s 

orders and quotes would be aggregated 

and applied towards each risk limit (as 

opposed to current functionality, where 

a Market Maker’s orders and quotes are 

counted separately). The Exchange 

believes that aggregating a Market 

Maker’s quotes and orders for purposes 

of calculating activity-based risk 

controls would better reflect the 

aggregate risk that a Market Maker has 

with respect to its quotes and orders. 

The proposed rule would also add detail 

to make clear that orders and quotes 

represented in open outcry, except CTB 

Orders, would not be subject to these 

controls, which is consistent with 

current functionality. 

Æ The term ‘‘Transaction-Based Risk 

Limit’’ would refer to a pre-established 

limit on the number of an Entering 

Firm’s orders and quotes executed in a 

specified class of options per Interval 

(proposed Rule 6.40P–O(a)(3)(A)). This 

risk control is based on the substantially 

identical risk control set forth in current 

Rule 6.40–O(b), with the difference 

described above that a Market Maker’s 

orders and quotes would be aggregated. 

Æ The term ‘‘Volume-Based Risk 

Limit’’ would refer to a pre-established 

limit on the number of contracts of an 

Entering Firm’s orders and quotes that 

could be executed in a specified class of 

options per Interval (proposed Rule 

6.40P–O(a)(3)(B)). This risk control is 

based on the substantially identical risk 

control set forth in current Rule 6.40– 

O(c), with the difference described 

above that a Market Maker’s orders and 

quotes would be aggregated. 

Æ The term ‘‘Percentage-Based Risk 

Limit’’ would refer to a pre-established 

limit on the percentage of contracts 

executed in a specified class of options 

as measured against the full size of such 

Entering Firm’s orders and quotes 

executed per Interval (proposed Rule 

6.40P–O(a)(3)(C)). The proposed 

definition would also provide that to 

determine whether an Entering Firm has 

breached the specified percentage limit, 

the Exchange would calculate the 

percent of each order or quote in a 

specified class of option that is executed 

during an Interval (each, a 

‘‘percentage’’), and sum up those 

percentages. As further proposed, this 

definition would state that this risk 

limit would be breached if the sum of 

the percentages exceeds the preestablished limit. This risk control is 

based on the substantially identical risk 

control set forth in current Rule 6.40– 

O(d), with the difference described 

above that a Market Maker’s orders and 

quotes would be aggregated. 

• The term ‘‘Global Risk Control’’ 

would refer to a pre-established limit on 

the number of times an Entering Firm 

may breach its Activity-Based Risk 

Controls per Interval (proposed Rule 


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144The term ‘‘Auction’’ is defined in proposed 

Rule 6.64P–O(a)(1), described below in the 

discussion of proposed Rule 6.64P–O, to mean the 

opening or reopening of a series for trading either 

on a trade or quote. 

145See Securities Exchange Act Release No. 

81717 (September 25, 2017), 82 FR 45631 

(September 29, 2017) (SR–NYSEArca–2017–96) 

(immediately effective filing to exclude IOC Orders 

from risk settings because such exclusion, among 

other things, would result in risk settings that may 

be better calibrated to suit the needs of certain 

market participants (i.e., those that routinely utilize 

IOC orders to access liquidity on the Exchange)). 

6.40P–O(a)(4)). This proposed definition 

is based on the substantially identical 

functionality set forth in current Rule 

6.40–O(f). 

• The term ‘‘Interval’’ would refer to 

the configurable time period during 

which the Exchange would determine if 

an Activity-Based Risk Control or the 

Global Risk Control has been breached 

(proposed Rule 6.40P–O(a)(5)). This 

proposed definition is consistent with 

current Rule 6.40–O, which contains 

references throughout to a ‘‘time 

period’’ during which the Exchange will 

determine whether a breach has 

occurred. The Exchange believes this 

proposed definition would add clarity 

and transparency to Exchange rules. 

Proposed Rule 6.40P–O(b) would set 

forth how the Pre-Trade, Activity-Based 

and Global Risk Controls could be set or 

adjusted. Proposed Rule 6.40P–O(b)(1) 

would provide that these risk controls 

may be set before the beginning of a 

trading day and may be adjusted during 

the trading day. Proposed Rule 6.40P– 

O(b)(2) would provide that Entering 

Firms may set these risk controls at the 

MPID level or at one or more sub-IDs 

associated with that MPID, or both. 

Proposed Rule 6.40P–O(b) is based on 

Rule 7.19–E(b)(3)(A)–(B) but differs in 

that the proposed rule would 

incorporate the existing options-based 

Activity-Based and Global Risk Controls 

in addition to the (new for options 

trading) Pre-Trade Risk Controls 

currently available on the Exchange’s 

cash equity platform. The Exchange 

notes that the Activity-Based and Global 

Risk Controls are unique to the options 

market and, at this time, the Exchange’s 

cash equities platform does not offer 

analogous controls. 

Proposed Rule 6.40P–O(c) would set 

forth the Automated Breach Actions that 

the Exchange would take if a designated 

risk limit is breached. Proposed Rule 

6.40P–O(c)(1)(A)(i)–(ii) would set forth 

the automated breach actions for the 

Pre-Trade Risk Controls. 

• Proposed Rule 6.40P–O(c)(1)(A)(i) 

would provide that a Limit Order or 

quote that breaches the designated limit 

of either a Single Order Maximum 

Notional Value Risk Limit or Single 

Order Maximum Quantity Risk Limit 

would be rejected. 

• Proposed Rule 6.40P–O(c)(1)(A)(ii) 

would provide that a Market Order that 

breaches the designated limit of a Single 

Order Maximum Quantity Risk Limit 

would be rejected. The proposed rule 

would also provide that a Market Order 

that breaches the designated limit of a 

Single Order Notional Value Risk Limit 

would be rejected if the order arrived 

during continuous trading or canceled if 

the order was received during a preopen state and the quantity remaining to 

trade after an Auction concludes 

breaches the designated limit.144

Proposed Rule 6.40P–O(c)(1)(A)(i)–(ii) 

is based on Rule 7.19–E(c)(2) but differs 

in that it specifies the treatment of Limit 

Orders and Market Orders (the latter 

having different treatment based on 

when such orders arrive at the 

Exchange) and expands application of 

the check to include quotes. The 

Exchange proposes to process Market 

Orders differently because, until a series 

is opened, the Exchange is not able to 

calculate the Single Order Notional 

Value Risk Limit for a Market Order. 

Accordingly, this risk limit would be 

applied only after a series opens, at 

which point, a Market Order would be 

cancelled if it fails the risk limit. 

Proposed Rule 6.40P–O(c)(2) would 

set forth the automated breach actions 

for the Activity-Based Risk Controls. 

• Proposed Rule 6.40P–O(c)(2)(A) 

would first specify that an Entering 

Firm acting as a Market Maker would be 

required to apply one of the ActivityBased Risk Controls to all of its orders 

and quotes; whereas an Entering Firm 

that is not acting as a Market Maker 

would have the option, but would not 

be required, to apply one of the 

Activity-Based Risk Controls to its 

orders. The requirement that Market 

Makers utilize Activity-Based Risk 

Controls for all quotes mirrors the 

requirements set forth in Rule 6.40–O, 

Commentary .04(a); however, the 

proposed rule differs in that it likewise 

requires Market Makers to apply one of 

the Activity-Based Risk Controls to all 

of its orders. The Exchange believes that 

requiring that both Market Maker quotes 

and Market Maker orders be subject to 

one of the Activity-Based Controls 

would enhance Market Makers’ ability 

to assess their total risk exposure on the 

Exchange. The proposed optionality of 

the Activity-Based Risk controls for 

orders sent by an Entering Firm not 

acting as a Market Maker mirrors 

current Rule 6.40–O, Commentary 

.04(b)). 

• Proposed Rule 6.40P–O(c)(2)(B) 

would provide that to determine when 

an Activity-Based Risk Control has been 

breached, the Exchange would maintain 

Trade Counters that would be 

incremented every time an order or 

quote trades, including any leg of a 

Complex Order, and would aggregate 

the number of contracts traded during 

each such execution. As further 

proposed, an Entering Firm may opt to 

exclude any orders designated IOC or 

FOK from being considered by a Trade 

Counter. This is consistent with existing 

functionality set forth in Rule 6.40–O(a) 

and Commentary .07, with a proposed 

difference to allow an Entering Firm to 

also exclude orders designated FOK, 

which, like orders designated IOC, 

cancel if not executed on arrival and is 

based on current functionality.145 The 

Exchange believes that specifying that 

orders designated FOK could be 

excluded from being considered for a 

Trade Counter would add granularity 

and clarity to Exchange rules. In 

addition, as noted above, a Market 

Maker’s quotes and orders in a given 

option class would be aggregated and 

therefore the Exchange proposes that 

there would not be separate Trade 

Counters for a Market Maker’s quotes 

and orders. 

• Proposed Rule 6.40P–O(c)(2)(C) 

would provide that each Entering Firm 

must select one of three Automated 

Breach Actions for the Exchange to take 

should the Entering Firm breach an 

Activity-Based Risk Control. 

Æ ‘‘Notification Only.’’ As set forth in 

proposed Rule 6.40P–O(c)(2)(C)(i), if 

this option is selected, the Exchange 

would continue to accept new order and 

quote messages and related instructions 

and would not cancel any unexecuted 

orders or quotes in the Consolidated 

Book. With the ‘‘Notification Only’’ 

action, the Exchange would provide 

such notifications, but would not take 

any other automated actions with 

respect to new or unexecuted orders. 

This proposed functionality is not 

currently available for options trading, 

but is available for breach of the Gross 

Credit Risk Limit on the Exchange’s 

cash equity platform, as set forth in Rule 

7.19–E(c)(3)(A)(i). The Exchange 

believes that making this Automated 

Breach Action available to ActivityBased Risk Controls, which are unique 

to options trading, would provide 

Entering Firms more control and 

flexibility over setting risk tolerance 

and, as such, over how Activity-Based 

Risk Controls are implemented. 

Æ ‘‘Block Only.’’ As set forth in 

proposed Rule 6.40P–O(c)(2)(C)(ii), if 

this option is selected, the Exchange 

would reject new order and quote 

messages and related instructions, 

provided that the Exchange would 


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continue to process instructions from 

the Entering Firm to cancel one or more 

orders or quotes (including AuctionOnly Orders) in full. The proposed rule 

would also provide that the Exchange 

would follow any instructions specified 

in paragraph (e) of the proposed Rule 

(and described below). This proposed 

functionality is not currently available 

for options trading under current Rule 

6.40–O, but is available for breach of the 

Gross Credit Risk Limit on the 

Exchange’s cash equity platform, as set 

forth in Rule 7.19–E(c)(3)(A)(ii). The 

Exchange believes that making this 

Automated Breach Action available to 

Activity-Based Risk Controls, which are 

unique to options trading, would 

provide Entering Firms more control 

and flexibility over setting risk tolerance 

and, as such, over how Activity-Based 

Risk Controls are implemented. 

Æ ‘‘Cancel and Block.’’ As set forth in 

proposed Rule 6.40P–O(c)(2)(C)(iii), if 

this option is selected, in addition to the 

Block Only actions described above, the 

Exchange would also cancel all 

unexecuted orders and quotes in the 

Consolidated Book other than AuctionOnly Orders and orders designated GTC. 

This proposed Cancel and Block 

functionality is substantially similar to 

the automated breach action taken by 

the Exchange per current Rule 6.40–O(e) 

and Commentaries .01 and .02 thereto, 

except that under the current rules, this 

is default (not optional) functionality. 

Additionally, this proposed 

functionality is substantially identical to 

the Cancel and Block option set forth in 

Rule 7.19–E(c)(3)(A)(iii), which is 

available for breach of the Gross Credit 

Risk Limit on the Exchange’s cash 

equity platform. The Exchange believes 

that making this Automated Breach 

Action available to respond to a breach 

of Activity-Based Risk Controls, which 

are unique to options trading, would 

provide Entering Firms more control 

and flexibility over setting risk tolerance 

and, as such, over how Activity-Based 

Risk Controls are implemented. 

• Finally, proposed Rule 6.40P– 

O(c)(2)(D) would provide that if an 

Entering Firm breaches an ActivityBased Risk Control, the Automated 

Breach Action selected would be 

applied to its orders and quotes in the 

affected class of options. This proposed 

action is consistent with current Rule 

6.40–O(e) and Commentaries .01 and .02 

thereto, which provide that, upon a 

breach, the Exchange will cancel 

existing and suspend new orders and 

quotes trading in the affected class. 

Proposed Rule 6.40P–O(c)(2)(E) 

would provide that the Exchange would 

specify by Trader Update any applicable 

minimum, maximum and/or default 

settings for the Activity-Based Risk 

Controls, subject to the following: 

• For the Transaction-Based Risk 

Limit, the minimum setting would not 

be less than one and the maximum 

setting would not be more than 2,000 

(proposed Rule 6.40P–O(c)(2)(E)(i)), 

which settings are identical to the 

Exchange-determined settings provided 

under current Rule 6.40–O, 

Commentary .03. 

• For the Volume-Based Risk Limit, 

the minimum setting would not be less 

than one and the maximum setting 

would not be more than 500,000 

(proposed Rule 6.40P–O(c)(2)(E)(ii)), 

which settings are identical to the 

Exchange-determined settings provided 

under current Rule 6.40–O, 

Commentary .03. 

• For the Percentage-Based Risk 

Limit, the minimum setting would not 

be less than 50 and the maximum 

setting would not be more than 200,000 

(proposed Rule 6.40P–O(c)(2)(E)(iii)), 

which maximum setting is the same as 

the minimum Exchange-determined 

setting set forth in current Rule 6.40–O, 

Commentary .03. The Exchange 

proposes to increase the minimum 

setting from less than one (in current 

rule) to not be less than 50 to better 

reflect actual practice, because under 

current Rules, there are no OTP Holders 

or OTP Firms that have set their 

Percentage-Based Risk Limits below 50. 

Proposed Rule 6.40P–O(c)(2)(F) 

would provide that the Exchange would 

specify by Trader Update the Interval 

for the Activity-Based Risk Controls, 

subject to the following: 

• The Interval would not be less than 

100 milliseconds and would not be 

greater than 300,000 milliseconds, 

inclusive of the duration of any trading 

halt occurring within that time 

(proposed Rule 6.40P–O(c)(2)(F)(i)), 

which minimum setting is identical to 

the Exchange-determined minimum set 

forth in current Rule 6.40–O, 

Commentary .03. Although the current 

rule does not include a maximum time 

period, the Exchange proposes to 

include a maximum allowable Interval 

to promote clarity in Exchange rules of 

the longest time an Interval could be. 

• For transactions occurring in the 

Core Open Auction, per Rule 6.64P–O, 

the applicable time period would be the 

lesser of (i) the time between the Core 

Open Auction of a series and the initial 

transaction or (ii) the Interval (proposed 

Rule 6.40P–O(c)(2)(F)(ii)), which 

proposed time period is identical to the 

timing provided under current Rule 

6.40–O, Commentary .03. 

Proposed Rule 6.40P–O(c)(3) would 

set forth the automated breach actions 

for the Global Risk Controls set by an 

Entering Firm. 

• Proposed Rule 6.40P–O(c)(3)(A) 

would provide that if the Global Risk 

Control limit is breached, the Exchange 

would Cancel and Block, per proposed 

Rule 6.40P–O(c)(2)(C)(iii), which 

proposed functionality is substantively 

the same as the functionality provided 

under current Rule 6.40–O, 

Commentaries .01 (regarding 

cancellation of existing orders) and .02 

(regarding block/rejection of new 

orders). 

• Proposed Rule 6.40P–O(c)(3)(B) 

would provide that if an Entering Firm 

breaches the Global Risk Control, the 

Automated Breach Action would be 

applied to all orders and quotes of the 

Entering Firm in all classes of options 

regardless of which class(es) of options 

caused the underlying breach of 

Activity-Based Risk Controls, which 

proposed functionality is substantively 

the same as the functionality provided 

(in the last sentence) of current Rule 

6.40–O, Commentary .02 in the event of 

a breach of current Rule 6.40–O(f) (i.e., 

breach of global risk setting). 

• Proposed Rule 6.40P–O(c)(3)(C) 

would provide that the Exchange would 

specify by Trader Update any applicable 

minimum, maximum and/or default 

settings for the Global Risk Controls, 

provided that the minimum setting 

would not be less than 25 and the 

maximum setting would not be more 

than 100. These proposed settings are 

based on the Exchange-determined 

setting provided under current rule 

6.40–O, Commentary .03, except that 

the current rule allows for a minimum 

setting of one (1) whereas the proposed 

rule is increasing that minimum to 

twenty-five (25), which the Exchange 

believes would better reflect actual 

practice, because under current Rules, 

there are no OTP Holders or OTP Firms 

that have set their Global Risk Controls 

below 25. 

• Proposed Rule 6.40P–O(c)(3)(D) 

would provide that the Exchange would 

specify by Trader Update the Interval 

for the Global Risk Controls, subject to 

the following: 

Æ The Interval would not be less than 

100 milliseconds and would not be 

greater than 300,000 milliseconds, 

inclusive of the duration of any trading 

halt occurring within that time, per 

proposed Rule 6.40P–O(c)(3)(D)(i), 

which minimum setting is identical to 

the Exchange-determined minimum set 

forth in current Rule 6.40–O, 

Commentary .03. Although the current 

rule does not include a maximum time 

period, the Exchange proposes to 

include a maximum allowable Interval 

to allow an outside parameter by which 


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146See, e.g., Cboe Rule 5.34(c)(6) (describing the 

optional ‘‘Kill Switch’’ functionality, which allows 

a Cboe participant to instruct Cboe to 

simultaneously cancel or reject all orders or quotes 

(or a subset thereof) as well as to instruct Cboe to 

block all orders or quotes (or a subset thereof), 

which block instructions will remain in effect until 

such participant contacts Cboe’s trade desk to 

remove the block). 

147 17 CFR 240.15c3–5. 

148Current Rule 6.41–O is held as Reserved. The 

Exchange proposes to renumber the proposed rule 

with the ‘‘P’’ modifier and remove reference to 

‘‘Reserved.’’ 

the counters would be reset, which 

would promote transparency in 

Exchange rules regarding the maximum 

allowable Interval. 

Æ For transactions occurring in the 

Core Open Auction, per Rule 6.64P–O, 

the applicable time period is the lesser 

of (i) the time between the Core Open 

Auction of a series and the initial 

transaction or (ii) the Interval, per 

proposed Rule 6.40P–O(c)(3)(D)(ii), 

which proposed time period is identical 

to the timing provided under current 

Rule 6.40–O, Commentary .03. 

Proposed Rule 6.40P–O(d) describes 

how an Entering Firm’s ability to enter 

orders, quotes, and related instructions 

would be reinstated after a ‘‘Block 

Only’’ or ‘‘Cancel and Block’’ 

Automated Breach Action has been 

triggered. In such case, proposed Rule 

6.40P–O(d) provides that the Exchange 

would not reinstate the Entering Firm’s 

ability to enter orders and quotes and 

related instructions on the Exchange 

(other than instructions to cancel one or 

more orders or quotes (including 

Auction-Only Orders and orders 

designated GTC) in full) without the 

consent of the Entering Firm, which 

may be provided via automated contact 

if it was a breach of an Activity-Based 

Risk Control. As further proposed, an 

Entering Firm that breaches the Global 

Risk Control would not be reinstated 

unless the Entering Firm provides 

consent via non-automated contact with 

the Exchange. This proposed 

functionality is consistent with current 

Rule 6.40–O, Commentary .02 regarding 

the need for an Entering Firm to make 

automated or non-automated contact 

with the Exchange, as applicable, prior 

to being reinstated. Proposed Rule 

6.40P–O(d) is also substantively the 

same as the more granular level of risk 

control under Pillar functionality 

available for cash equity trading per 

Rule 7.19–E(d), except that the proposed 

rule does not reference Clearing Firms, 

which feature would remain specific to 

cash-equity trading and not be applied 

to options trading. 

Proposed Rule 6.40P–O(e) would set 

forth new ‘‘Kill Switch Action’’ 

functionality, which would allow an 

Entering Firm to direct the Exchange to 

take certain bulk cancel or block actions 

with respect to orders and quotes. In 

contrast to the Automated Breach 

Actions described above, which the 

Exchange would take automatically after 

the breach of a risk limit, the Exchange 

would not take any of the Kill Switch 

Actions without express direction from 

an Entering Firm. The Exchange 

believes that the proposed Kill Switch 

Action functionality would also provide 

OTP Holders and OTP Firms with 

greater flexibility to provide bulk 

instructions to the Exchange with 

respect to cancelling existing orders and 

quotes and blocking new orders and 

quotes. 

Proposed Rule 6.40P–O(e) would 

specify that an Entering Firm could 

direct the Exchange to take one or more 

of the following actions with respect to 

orders and quotes (excluding those 

represented in open outcry except CTB 

Orders), at either an MPID, or if 

designated, sub-ID Level: (1) Cancel all 

Auction-Only Orders; (2) Cancel all 

orders designated GTC; (3) Cancel all 

unexecuted orders and quotes in the 

Consolidated Book other than AuctionOnly Orders and orders designated GTC; 

or (4) Block the entry of any new order 

and quote messages and related 

instructions, provided that the Exchange 

would continue to accept instructions 

from Entering Firms to cancel one or 

more orders or quotes (including 

Auction-Only Orders and orders 

designated GTC) in full, and later, 

reverse that block. The proposed posttrade Kill Switch Actions are not 

currently available for options trading 

per Rule 6.40–O and are substantially 

identical to the Kill Switch Action 

available on the Exchange’s cash equity 

platform pursuant to Rule 7.19–E(e), 

with a difference to address the 

handling of quotes as well as orders 

designated GTC, which are not available 

on the cash equity platform. The 

Exchange believes that offering this 

functionality for options trading under 

Pillar would give Entering Firms more 

flexibility in setting risk controls for 

options trading (as noted above) and 

add consistency with the Exchange’s 

risk control functionality available for 

cash equity trading. Providing ‘‘Kill 

Switch Action’’ functionality in 

Exchange rules is consistent with the 

rules of other options exchanges.146

Proposed Commentary .01 to Rule 

6.40P–O would provide that the PreTrade, Activity-Based, and Global Risk 

Controls described in the proposed Rule 

6.40P–O are meant to supplement, and 

not replace, the OTP Holder’s or OTP 

Firm’s own internal systems, 

monitoring, and procedures related to 

risk management and are not designed 

for compliance with Rule 15c3–5 under 

the Exchange Act.147 Responsibility for 

compliance with all Exchange and SEC 

rules remains with the OTP Holder or 

OTP Firm. This proposed language is 

not included in existing Rule 6.40–O, 

and is based on Commentary .01 to Rule 

7.19–E. The proposed rule makes clear 

that use of the proposed controls alone 

does not constitute compliance with 

Exchange rules or the Exchange Act. 

In connection with proposed Rule 

6.40P–O, the Exchange proposes to add 

the following preamble to Rule 6.40–O: 

‘‘This Rule is not applicable to trading 

on Pillar.’’ This proposed preamble is 

designed to promote clarity and 

transparency in Exchange rules that 

Rule 6.40–O would not be applicable to 

trading on Pillar. 

Proposed Rule 6.41P–O: Price 

Reasonability Checks—Orders and 

Quotes 

The Exchange proposes to describe its 

Price Reasonability Checks for orders 

and quotes in proposed Rule 6.41P– 

O.148 For the OX system, the concept of 

‘‘Price Reasonability Checks’’ for Limit 

Orders are described in Rule 6.60–O(c) 

and the concept of price protection 

filters for quotes are described in Rule 

6.61–O. The proposed ‘‘Price 

Reasonability Checks’’ on Pillar would 

be applicable to both orders and quotes 

and are designed to provide similar 

price protections as the current price 

checks for Limit Orders and price 

protection filters for quotes on the OX 

system, with differences as described in 

more detail below. The Exchange 

believes that applying the same Price 

Reasonability Checks to both orders and 

quotes and describing them in a single 

rule would make the Exchange’s rules 

easier to navigate, while continuing to 

provide price protection features for 

both orders and quotes. The Exchange 

proposes to locate the rule text for the 

proposed Price Reasonability Checks in 

Rule 6.41P–O to immediately follow 

Rule 6.40P–O regarding the Pre-Trade 

and Activity-Based Controls, as this 

placement would group the risk controls 

together and make Exchange rules easier 

to navigate. 

Proposed Rule 6.41P–O(a)(1)–(3) 

would set forth the circumstances under 

which the proposed Price Reasonability 

Checks would apply. Proposed Rule 

6.41P–O(a) would provide that the 

Exchange would apply the Price 

Reasonability Checks, as defined in 

proposed paragraphs (b) and (c), to all 

Limit Orders and quotes (excluding 

those represented in open outcry except 


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149Per proposed Rule 1.1., the term ‘‘Primary 

Market’’ with respect to options traded on the 

Exchange means the principal market in which the 

underlying security is traded. The Exchange also 

notes a difference in that the proposed Rule refers 

to a ‘‘specified threshold,’’ whereas current Rule 

6.60–O(c)(1)(B) refers to a ‘‘specified dollar 

amount,’’ which difference is designed to give the 

Exchange more flexibility in applying the Arbitrage 

Check to use a percentage-based threshold. 

CTB Orders), during continuous trading 

on each trading day, subject to the 

following: 

• Proposed Rule 6.41P–O(a)(1) would 

provide that a Limit Order or quote 

received during a pre-open state would 

be subject to the proposed Price 

Reasonability Checks after an Auction 

concludes; that a Limit Order or quote 

that was resting on the Consolidated 

Book before a trading halt would be 

subject to the proposed Price 

Reasonability Checks again after the 

Trading Halt Auction; and that a put 

option message to buy would be subject 

to the Arbitrage Check regardless of 

when it arrives. This proposed rule is 

based on current Rule 6.60–O(c), which 

provides that the Price Reasonability 

Checks (for orders) are applied when a 

series opens or reopens for trading, and 

is similar to Rule 6.61–O(a)(1), which 

provides that Market Maker quote 

protection will be applied when an 

NBBO is available. NBBO protection is 

available when a series is opened for 

trading. Proposed Rule 6.41P–O(a)(1) 

includes additional detail and 

granularity regarding when the 

proposed Price Reasonability Checks 

would be applied under Pillar. The 

proposed Rule also adds new 

functionality that a put option message 

to buy would be subject to the Arbitrage 

Check even if a series is not open for 

trading. The Exchange believes that it is 

appropriate to apply this check to put 

option messages to buy at any time 

because the check is not dependent on 

an external reference price. 

• Proposed Rule 6.41P–O(a)(2) would 

provide that if the calculation of the 

Price Reasonability Check is not 

consistent with the MPV for the series, 

it would be rounded down to the 

nearest price within the applicable 

MPV, which is consistent with current 

functionality. The Exchange believes 

this proposed rule would promote 

clarity and transparency in Exchange 

rules regarding how the Price 

Reasonability Check would be 

calculated. 

• Proposed Rule 6.41P–O(a)(3) would 

provide that the proposed Price 

Reasonability Checks would not apply 

to (i) any options series for which the 

underlying security has a non-standard 

cash or stock deliverable as part of a 

corporate action; (ii) any options series 

for which the underlying security is 

identified as over-the-counter (‘‘OTC’’); 

(iii) any option series on an index; and 

(iv) any option series for which the 

Exchange determines it is necessary to 

exclude underlying securities in the 

interests of maintaining a fair and 

orderly market, which the Exchange 

would announce by Trader Update. 

Proposed Rule 6.41P–O(a)(3) is based on 

current Commentary .01 to Rule 6.60–O 

(orders) and 6.61–O (quotes), with a 

non-substantive difference that the 

proposed rule no longer references 

Binary Return Derivatives (‘‘ByRDs’’) 

because ByRDs are no longer traded on 

the Exchange. 

Proposed Rule 6.41P–O(b) would set 

forth the ‘‘Arbitrage Checks’’ for buy 

orders or quotes, which subset of Price 

Reasonability Checks are based on the 

principle that an option order or quote 

is in error and should be rejected (or 

canceled) when the same result can be 

achieved on the market for the 

underlying equity security at a lesser 

cost. 

• Proposed Rule 6.41P–O(b)(1) relates 

to ‘‘puts’’ and would provide that order 

or quote messages to buy for put options 

would be rejected if the price of the 

order or quote is equal to or greater than 

the strike price of the option, which is 

substantively identical to current Rules 

6.60–O(c)(1)(A) (for orders) and 6.61– 

O(a)(3) (for quotes). 

• Proposed Rule 6.41P–O(b)(2) relates 

to ‘‘calls’’ and would provide that order 

or quote messages to buy for call options 

would be rejected or canceled (if 

resting) if the price of the order or quote 

is equal to or greater than the last sale 

price of the underlying security on the 

Primary Market, plus a specified 

threshold to be determined by the 

Exchange and announced by Trader 

Update. This proposed rule is 

substantially similar to current Rules 

6.60–O(c)(1)(B) (for orders) and 6.61– 

O(a)(2)(B) (for quotes), with several 

differences. First, because the Exchange 

is monitoring last sales from the Primary 

Market, the Exchange proposes that the 

Exchange-specified threshold for the 

Checks would be based on the last sale 

on the Primary Market rather than on 

the Consolidated Last Sale.149 The 

Exchange believes that the last sale on 

the Primary Market would be indicative 

of the price of the underlying security 

and that by using the last sale of the 

Primary Market rather than the 

Consolidated Last Sale, the Pillar system 

would need to ingest and process less 

data, thereby improving efficiency and 

performance of the system. The 

Exchange believes this proposed 

difference would not compromise the 

price protection feature of the proposed 

Arbitrage Checks. Second, current Rule 

6.61–O(a)(2)(A) and (C) specifies which 

price would be used for Market Maker 

bids made before the underlying 

security is open or during a trading halt, 

pause, or suspension of the underlying 

security. Because on Pillar the proposed 

Arbitrage Checks for calls (for orders 

and quotes) would be applied only once 

a series has opened or reopened for 

trading, the Exchange no longer needs to 

specify prices other than the last sale on 

the Primary Market for purposes of 

calculating the Arbitrage Check for calls. 

The Exchange proposes to reflect this 

difference from currently functionality 

in Rule 6.41P–O(b)(2). 

Proposed Rule 6.41P–O(c) would set 

forth the ‘‘Intrinsic Value Checks’’ for 

orders or quotes to sell, which are 

designed to protect sellers of calls and 

puts from presumptively erroneous 

executions based on the ‘‘Intrinsic 

Value’’ of an option. 

• Proposed Rule 6.41P–O(c)(1)–(2) 

would set forth how the Intrinsic Value 

of an option would be determined. 

Proposed Rule 6.41P–O(c)(1) would 

provide that the Intrinsic Value for a put 

option is equal to the strike price minus 

the last sale price of the underlying 

security on the Primary Market. 

Proposed Rule 6.41P–O(c)(2) would 

provide that the Intrinsic Value for a 

call option is equal to the last sale price 

of the underlying security on the 

Primary Market minus the strike price. 

Proposed Rule 6.41P–O(c)(1)–(2) is 

based on how the intrinsic value is 

calculated in current Rule 6.60–O(c)(2) 

for orders, with two differences. First, 

the proposed ‘‘Intrinsic Value Checks’’ 

would also apply to quotes, which 

would be new on Pillar and would 

provide Market Makers with additional 

protection for quotes to sell. Second, the 

Intrinsic Value of an option would be 

based on the last sale on the Primary 

Market rather than on the Consolidated 

Last Sale for the same reasons discussed 

above, that it would enhance 

performance without compromising the 

price protection feature of the Intrinsic 

Value Checks. 

• Proposed Rule 6.41P–O(c)(3) would 

provide that ISOs to sell would not be 

subject to the Intrinsic Value Check, 

which carve out is substantively 

identical to current Rule 6.60–O(c)(2). 

• Proposed Rule 6.41P–O(c)(4) would 

describe the application of the Intrinsic 

Value Checks to puts and calls to sell. 

Æ Proposed Rule 6.41P–O(c)(4)(A) 

would provide that orders or quotes to 

sell for both puts and calls would be 

rejected or canceled (if resting) if the 

price of the order or quote is equal to 

or lower than its Intrinsic Value, minus 

a specified threshold to be determined 


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150See discussion infra, regarding proposed Rule 

6.64P–O(a) and proposed definitions for the terms 

‘‘Auction,’’ ‘‘Auction Price,’’ ‘‘Auction Collar,’’ 

‘‘pre-open state,’’ and ‘‘Trading Halt Auction.’’ 

151 If the same number of contracts can trade at 

multiple prices, the opening price is the price at 

which the greatest number of contracts can trade 

that is at or nearest to the midpoint of the NBBO 

disseminated by OPRA; unless one such price is 

equal to the price of any resting Limit Order(s) in 

which case the opening price is the same price as 

the Limit Order(s) with the greatest size and, if the 

same size, the highest price and if there is a tie 

between price levels and no Limit Orders exist at 

either of the prices, the Exchange uses the higher 

price. See Rule 6.64–O(c). 

152Because Rule 6.64–O(b)(D) cross-references 

the bid-ask differential requirement of Rule 6.37–O 

(b)(4), which relates to the obligations of Market 

Makers in appointed classes, the Exchange will not 

open a series for trading if the NBBO disseminated 

by OPRA in a series is not within such bid-ask 

differentials. 

153The term ‘‘Marketable’’ is defined in proposed 

Rule 1.1 to mean for a Limit Order, an order that 

can be immediately executed or routed and Market 

Orders are always considered marketable.’’ 

by the Exchange and announced by 

Trader Update. 

Æ Proposed Rule 6.41P–O(c)(4)(B) 

would provide that the Exchangedetermined threshold percentage (per 

paragraph (c)(4)(A)) would be based on 

the NBB, provided that, immediately 

following an Auction, it would be based 

on the Auction Price, or, if none, the 

lower Auction Collar price, or, if none, 

the NBB.150 This proposed threshold 

percentage is similar to how the 

Reference Price would be determined 

for Trading Collars, as described above 

pursuant to proposed Rule 6.64P– 

O(a)(4). As further proposed, Rule 

6.41P–O(c)(4)(B) would provide that for 

purposes of determining the Intrinsic 

Value, the Exchange would not use an 

adjusted NBBO. The Exchange further 

proposes that the Intrinsic Value Check 

for sell orders and quotes would not be 

applied if the Intrinsic Value cannot be 

calculated. 

Proposed Rule 6.41P–O(c)(4)(A)–(B) is 

substantially similar to current Rule 

6.60–O(a)(2)(A), which describes the 

application of the Intrinsic Value check 

for orders, with the following 

differences: 

• The proposed rule would extend 

this price protection to quotes, 

providing Market Makers with 

additional protection mechanisms; 

• The proposed rule would provide 

additional detail regarding how the 

specified threshold percentage would be 

determined immediately following an 

Auction; 

• The proposed rule would establish 

that an unadjusted NBBO would not be 

used to calculate the Intrinsic Value; 

and 

• The proposed rule includes text 

providing that if the Intrinsic Value 

cannot be calculated, the Check would 

not be applied. 

The Exchange believes that these 

additions would both add granularity to 

the rule and enhance the functionality 

for calculating and applying the 

Intrinsic Value. For the same reasons 

described above in connection with 

Limit Order Price Protection and 

Trading Collars, the Exchange believes 

that using an unadjusted NBBO would 

serve price protection purposes by using 

a more conservative view of the NBBO. 

Proposed Rule 6.41P–O(d) would 

provide the Automated Breach Action to 

be applied when a Market Maker’s order 

or quote fails one of the Price 

Reasonability Checks. As proposed, if a 

Market Maker’s order or quote message 

is rejected or cancelled (if resting) 

pursuant to proposed paragraph (b) 

(Arbitrage Checks) or (c) (Intrinsic Value 

Checks) of proposed Rule 6.41P–O, the 

Exchange would Cancel and Block 

orders and quotes in the affected class 

of options as described in Rule 6.40P– 

O(c)(2)(C)(iii) (as described above in 

section ‘‘Proposed Rule 6.40P–O’’). 

Proposed Rule 6.41P–O(d)(1) would 

provide that a breach of proposed Rule 

6.41P–O(d) would count towards a 

Market Maker’s Global Risk Control 

limit per Rule 6.40P–O(a)(4) (as 

described above in section ‘‘Proposed 

Rule 6.40P–O’’). 

Proposed Rule 6.41P–O(d)(2) 

concerns how a Market Maker would be 

reinstated following an automated 

breach action. As proposed, the 

Exchange would not reinstate the 

Market Maker’s ability to enter orders 

and quotes and related instructions on 

the Exchange in that class of options 

(other than instructions to cancel one or 

more orders/quotes (including AuctionOnly Orders and orders designated 

GTC) in full) without the consent of the 

Market Maker, which may be provided 

via automated contact. 

Rule 6.41P–O(d) is substantially 

similar to current Rule 6.61–O(b), 

except that the proposed rule applies to 

both the orders and quotes of a Market 

Maker (not just quotes) and provides the 

additional functionality that a breach of 

the Price Reasonability Checks would 

count towards a Market Maker’s Global 

Risk Control limit under proposed Rule 

6.40P–O(c)(3), which functionality 

would be new under Pillar. The 

Exchange believes that the proposed 

new functionality would provide OTP 

Holders and OTP Firms greater control 

and flexibility over setting risk tolerance 

and exposure for both orders and 

quotes. In connection with proposed 

Rule 6.41P–O, the Exchange proposes to 

add the following preamble to Rules 

6.60–O and 6.61–O: ‘‘This Rule is not 

applicable to trading on Pillar.’’ This 

proposed preamble is designed to 

promote clarity and transparency in 

Exchange rules that Rules 6.60–O and 

6.61–O would not be applicable to 

trading on Pillar. 

Proposed Rule 6.64P–O: Auction 

Process 

Current Rule 6.64–O, OX Opening 

Process, sets forth the opening process 

currently used on the Exchange’s OX 

system for opening trading in a series 

each day and reopening trading in a 

series following a trading halt. Current 

Rule 6.64–O(a) defines the term 

‘‘Trading Auction’’ as the process by 

which trading is initiated in a specified 

options class that may be employed at 

the opening of the Exchange each 

business day or to re-open trading after 

a trading halt, and that Trading 

Auctions will be conducted 

automatically by the OX system. Current 

Rules 6.64–O (b) and (c) describe the 

manner for the automated Trading 

Auctions and provide that, once the 

primary market for the underlying 

security disseminates a quote and a 

trade that is at or within the quote, the 

OX System then conducts an Auction 

Process (‘‘current Auction Process’’) 

whereby the OX System determines a 

single price at which a series may be 

opened by looking to the price at which 

the greatest number of contracts can 

trade at or between the NBBO 

disseminated by OPRA.151

As described in Rule 6.64–O(b)(D), 

the Exchange will not conduct the 

current Auction Process to open a series 

if the bid-ask differential for that series 

is not within an acceptable range, i.e., is 

not within the bid-ask differential 

guidelines established in Rule 6.37– 

O(b)(4).152 If a series does not open for 

trading, market and limit orders entered 

in advance of the current Auction 

Process remain in the Consolidated 

Book and will not be routed, even if 

another exchange opens that series for 

trading and such resting orders become 

Marketable against the ABBO.153

The Exchange proposes that new Rule 

6.64P–O would set forth the automated 

process for both opening and reopening 

trading in a series on the Exchange on 

Pillar. The Exchange proposes to specify 

that current Rule 6.64–O would not be 

applicable to trading on Pillar. With the 

transition to Pillar, the fundamental 

process of how an option series would 

be opened (or reopened) on the 

Exchange would not materially change 

because the Exchange would continue 

to assess whether a series can be opened 

based on whether the bid-ask 

differential for a series is within a 


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154For example, Cboe recently amended Cboe 

Rule 5.31 relating to its opening process to provide 

for a ‘‘forced opening’’ process that is used if an 

option class is unable to open because it does not 

meet the applicable bid-ask differential. In such 

case, if the ‘‘Composite Market’’ is not crossed and 

there is no non-zero offer, within a specified time 

period, Cboe will open the series without a trade. 

See Securities Exchange Act Release No. 90967 

(January 22, 2021), 86 FR 7249 (January 28, 2021) 

(SR–Cboe–2021–005) (Notice of filing and 

immediate effectiveness of proposed rule change to 

amend Cboe’s opening process for simple orders). 

155With the transition to Pillar, the Exchange is 

not making any changes to how Flex Options trade. 

Rule 5.31–O provides that Flex Options 

transactions may be effected during normal 

Exchange options trading hours on any business 

day and there will be no trading rotations in Flex 

Options. Rule 5.33–O sets forth the procedures for 

trading Flex Options. The opening process for 

Electronic Complex Orders is set forth in Rule 

6.91–O. 

156See also Rule 6.64–O(d) (providing that a 

Trading Auction to reopen an option class after a 

trading halt is conducted in the same manner as a 

Trading Auction to open each option class at the 

start of each trading day, i.e., as described in Rule 

6.64–O(a)–(c)). 

157See Rule 6.64–O(b)(D) and (E). The Exchange 

notes that in common parlance bid-ask differentials 

are known as ‘‘legal-width quotes.’’ 

specified range. However, with the 

availability of Pillar technology, the 

Exchange proposes differences to the 

proposed auction process that are 

designed to provide additional 

opportunities for an options series to 

open or reopen for trading even if the 

bid-ask differential is wider than the 

specified guidelines. While this 

proposed functionality would be new 

for options trading on the Exchange, it 

is not novel for an options exchange to 

provide additional opportunities for a 

series to open after a specified period of 

time in a wide market.154 In addition, 

the Exchange proposes to specify 

minimum time periods to allow a 

Market Maker(s) to quote in an assigned 

series before the series is opened or 

reopened. With the proposed Auction 

Process, described further below, the 

Exchange endeavors to attract the 

highest quality quote for each series at 

the open to attract order flow for the 

auction. While the Exchange does not 

require Market Makers assigned to a 

series to quote before a series can be 

opened (or reopened), the Exchange 

believes that providing time for such 

Market Makers to do so would provide 

both better and more consistent prices 

on executions to OTP Holders and OTP 

Firms in an Auction and a smoother 

transition to continuous trading. In 

addition, the Exchange believes that the 

proposed changes would enhance the 

opening/reopening process on the 

Exchange by providing a transparent 

and deterministic process for the 

Exchange to open additional series for 

trading. 

Further, the Exchange proposes 

additional enhancements (and detail 

them in the rule) that are based on 

existing Pillar functionality for the 

Exchange’s cash equity platform’s 

electronic auctions relating to how 

orders and quotes would be processed if 

they arrive during the period when the 

Exchange is processing an Auction and 

how the Exchange would process orders 

and quotes when it transitions to 

continuous trading following an 

Auction. Because the Exchange would 

be using Pillar terminology, the 

Exchange proposes to structure 

proposed Rule 6.64P–O based in part on 

Rule 7.35–E, which is the Exchange’s 

cash equity rule governing auctions 

(relating to separate sections describing 

definitions, order processing during an 

Auction Processing Period, and 

transition to continuous trading) and 

NYSE Rule 7.35, which is NYSE’s rule 

governing auctions (relating to separate 

sections describing definitions, Auction 

Ranking, Auction Imbalance 

Information, order processing during an 

Auction Processing Period, and 

transition to continuous trading). In 

addition, the Exchange proposes to 

include in Rule 6.64P–O how the 

Exchange would process orders and 

quotes during a trading halt, which is 

structured based in part on Rule 7.18– 

E(b) and (c), which describe how the 

Exchange processes new and existing 

orders during a trading halt on its cash 

equity market. This text would be new 

and is designed to provide granularity 

and transparency in Exchange rules. 

Definitions. Proposed Rule 6.64P–O(a) 

would provide that the Rule would be 

applicable to all series that trade on the 

Exchange other than Flex Options.155

Proposed Rule 6.64P–O(a) would set 

forth the definitions that would be used 

for purposes of Rule 6–O Options 

Trading and applicable to trading on 

Pillar. Certain of the proposed 

definitions are the same as (or similar 

to) auction-related definitions used on 

the Exchange’s cash equity platform, per 

Rule 7.35–E (Auctions), with differences 

noted herein. To the extent that a 

definition from Rule 7.35–E is not 

utilized in proposed Rule 6.64P–O, the 

Exchange has determined that such 

definition(s) is either inapplicable to the 

opening process for options trading or 

that the relevant, analogous concept(s) 

is covered elsewhere in the proposed 

rule. 

• Proposed Rule 6.64P–O(a)(1) would 

define the term ‘‘Auction’’ to mean the 

opening or reopening of a series for 

trading either with or without a trade. 

This proposed definition is based in 

part on current Rule 6.64–O(a), which 

defines the term ‘‘Trading Auction’’ to 

be a process by which trading is 

initiated in a specified options class that 

may be employed at the opening of the 

Exchange each business day or to reopen trading after a trading halt.156 On 

Pillar, the Exchange proposes that the 

term ‘‘Auction’’ would refer to the point 

in the process where the Exchange 

determines that a series can be opened 

or reopened either with or without a 

trade. After an Auction concludes, the 

series then transitions to continuous 

trading. 

• Proposed Rule 6.64P–O(a)(1)(A) 

would provide that a ‘‘Core Open 

Auction’’ means the Auction that opens 

trading after the beginning of Core 

Trading Hours and proposed Rule 

6.64P–O(a)(1)(B) would provide that a 

‘‘Trading Halt Auction’’ means the 

Auction that reopens trading following 

a trading halt. These are Pillar terms 

that would be new to options trading 

and are based on the same terms 

currently used in Rule 7.35–E(c) and (e) 

for the same purposes. 

• Proposed Rule 6.64P–O(a)(2) would 

define the term ‘‘Auction Collar’’ to 

mean the price collar thresholds for the 

Indicative Match Price (defined below) 

for an Auction. As further proposed, the 

upper Auction Collar would be the offer 

of the Legal Width Quote (defined 

below) and the lower Auction Collar 

would be the bid of the Legal Width 

Quote, provided that if the bid of the 

Legal Width Quote is zero, the lower 

Auction Collar would be one MPV 

above zero for the series. The proposed 

rule would further provide that if there 

is no Legal Width Quote, the Auction 

Collars would be published in the 

Auction Imbalance Information (defined 

below) as zero. 

The proposed terminology of 

‘‘Auction Collar’’ would be new for 

options trading and is based on the 

same term used in Rule 7.35–E(a)(10) for 

trading cash equity securities. As 

proposed, the Auction Collars would be 

set at the Legal Width Quote (described 

below) and would prevent an Auction 

trade from occurring at a price outside 

of the Legal Width Quote. The Exchange 

believes that the concept of Auction 

Collars is similar to the current 

requirement that the Exchange will not 

open a series if the bid-ask differential 

is not within the bid-ask differential 

guidelines established under Rule 6.37– 

O(b)(4).157 Thus, the proposed Auction 

Collars (based on a Legal Width Quote) 

would use Pillar terminology to prevent 

an Auction that results in a trade from 

being priced outside the bid-ask 


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158See also Cboe Rule 5.31(a) (defining the 

‘‘Opening Collar’’ as the price range that establishes 

limits at or inside of which Cboe determines the 

opening trade price for a series). 159On the Exchange’s cash equity market, 

Auctions have an ‘‘Auction Imbalance Freeze,’’ 

which is a period in advance of the scheduled 

Auction. The Exchange does not currently provide 

for an analogous period to open or reopen options 

trading and does not propose to include such a 

period for options trading on Pillar. Accordingly, 

the Exchange does not propose terms based on 

‘‘Auction Imbalance Freeze,’’ as described in Rule 

7.35–E(a)(3), for options trading on Pillar. 

160This is consistent with the order information 

included in Auction Imbalance Information for cash 

equity trading. See Rule 7.35–E(a)(7) and 7.35– 

E(a)(8). The Exchange proposes to exclude IO 

Orders because they are conditional offsetting 

orders that would not contribute to price discovery 

in the Auction Process. 

161See Rule 7.35–E(a)(13). 

162Consistent with the proposed rule, Rule 6.64– 

O(b)(D) provides that the Exchange will not conduct 

the current Auction Process if the bid-ask 

differential for a series is not within an acceptable 

range. 

163See supra note 150 (regarding consistency of 

proposed Rule 6.64P–O(a)(3) regarding Auction 

Imbalance Information with Rule 7.35–E(a)(7) and 

7.35–E(a)(8)). 

differential applicable to Auctions on 

Pillar.158

Proposed Rule 6.64P–O(a)(3) would 

define the term ‘‘Auction Imbalance 

Information’’ to mean the information 

that the Exchange disseminates about an 

Auction via its proprietary data feeds 

and includes the Auction Collars, 

Auction Indicator, Book Clearing Price, 

Far Clearing Price, Indicative Match 

Price, Matched Volume, Market 

Imbalance, and Total Imbalance.159

With Pillar, the Exchange proposes to 

disseminate Auction Imbalance 

Information for its options market in the 

same manner that such information is 

disseminated for its cash equity market. 

The Exchange currently makes certain 

auction imbalance information available 

on its proprietary data feed and the 

Exchange believes that enhancing this 

information by disseminating the 

proposed Auction Collars, Auction 

Indicator, Book Clearing Price, and Far 

Clearing Price, which would be new for 

options trading on Pillar, would 

promote transparency. Accordingly, this 

proposed definition would be new and 

is based on the same term used in Rule 

7.35–E(a)(4), with differences to reflect 

the options-specific content that would 

be included in Auction Imbalance 

Information for options trading. In 

addition, the Exchange proposes that 

the Auction Imbalance Information 

would reflect the orders and quotes 

eligible to participate in an Auction, 

which contribute to price discovery. As 

such, proposed Rule 6.64P–O(a)(3) 

would further provide that Auction 

Imbalance Information would be based 

on all orders and quotes (including the 

non-displayed quantity of Reserve 

Orders) eligible to participate in an 

Auction, excluding IO Orders.160 The 

Exchange believes that specifying that 

non-displayed quantity of Reserve 

Orders would be included in the 

Auction Imbalance Information is 

consistent with current functionality 

that the full quantity of Reserve Orders 

are eligible to participate in the current 

Auction Process. 

Proposed Rule 6.64P–O(a)(3)(A) 

would define the term ‘‘Auction 

Indicator’’ to mean the indicator that 

provides a status update of whether an 

Auction cannot be conducted because 

either (i) there is no Legal Width Quote, 

or (ii) a Market Maker quote has not 

been received during the parameters of 

the Opening MMQ Timer(s) (defined 

below). The Exchange currently 

disseminates an Auction Indicator on its 

cash equity market and proposes similar 

functionality for options trading on the 

Exchange.161 This proposed definition 

would be new for options trading and 

uses Pillar terminology based on Rule 

7.35–E(a)(13) and would provide 

transparency of when an Auction could 

not be conducted.162 While the 

Exchange’s cash equity rule is written 

from the standpoint of when an auction 

can be conducted, the proposed rule is 

written from the standpoint of when an 

auction cannot be conducted. The 

Exchange believes this difference is 

appropriate because, for options trading, 

the proposed Auction (and its Auction 

Indicator) are impacted by the absence 

of necessary information (i.e., a Legal 

Width Quote or a Market Maker quote), 

rather than an auction in the cash equity 

market, where the determining factor of 

whether to conduct an auction is the 

quality (not the presence of) of 

information (i.e., the Imbalance). 

Proposed Rule 6.64P–O(a)(3)(B) 

would define the term ‘‘Book Clearing 

Price’’ to mean the price at which all 

contracts could be traded in an Auction 

if not subject to the Auction Collar and 

states that the Book Clearing Price 

would be zero if a sell (buy) Imbalance 

cannot be filled by any buy (sell) 

interest. The Exchange proposes that the 

manner that the Book Clearing Price 

would be calculated for options trading 

would be the same as how it is 

calculated for cash equity trading. 

Accordingly, this proposed definition 

and functionality would be new for 

options trading and is based on the 

definition of ‘‘Book Clearing Price’’ set 

forth in Rule 7.35–E(a)(11), with 

differences to reflect options trading 

terminology (i.e., reference contracts 

instead of buy (sell) orders). 

Proposed Rule 6.64P–O(a)(3)(C) 

would define the term ‘‘Far Clearing 

Price’’ to mean the price at which 

Auction-Only Orders could be traded in 

an Auction within the Auction Collar. 

The Exchange proposes that the manner 

that the Far Clearing Price would be 

calculated for options trading would be 

the same as how it is calculated for cash 

equity trading. Accordingly, this 

proposed definition and functionality 

would be new for options trading and is 

based on the definition of ‘‘Far Clearing 

Price’’ set forth in Rule 7.35–E(a)(12). 

Proposed Rule 6.64P–O(a)(3)(D) 

would define the term ‘‘Imbalance’’ to 

mean the number of buy (sell) contracts 

that cannot be matched with sell (buy) 

contracts at the Indicative Match Price 

at any given time. The Exchange 

proposes that the manner that the 

Imbalance would be calculated for 

options trading would be the same as 

how it is calculated for cash equity 

trading, which is consistent with 

current functionality that calculates the 

imbalance based on all interest eligible 

to participate in an auction. 

Accordingly, this proposed definition 

would be new rule text for options 

trading and is based on the definition of 

‘‘Imbalance’’ set forth in Rule 7.35– 

E(a)(7), except that, unlike for cash 

equities, the proposed definition would 

not reference the non-displayed 

quantity of Reserve Orders. As 

discussed above, the Exchange believes 

that providing an overarching 

description of how the non-displayed 

quantity of Reserve Orders would be 

included in Auction Imbalance 

Information is more appropriately 

included in the proposed (more 

expansive) definition of Auction 

Imbalance Information (per proposed 

Rule 6.64P–O(a)(3)) to reflect the 

Auction-eligible interest that contribute 

to price discovery.163 In addition, the 

proposed rule differs from Rule 7.35– 

E(a)(7) to reflect options trading 

terminology (i.e., contracts instead of 

shares). 

Proposed Rule 6.64P–O(a)(3)(D)(i) 

would define the term ‘‘Total 

Imbalance’’ to mean the Imbalance of all 

buy (sell) contracts at the Indicative 

Match Price for all orders and quotes 

eligible to trade in an Auction. The 

Exchange proposes that the manner that 

the Total Imbalance would be calculated 

for options trading would be the same 

as how it is calculated for cash equity 

trading and is consistent with current 

functionality. Accordingly, this 

proposed definition would be new and 

is based on the definition of ‘‘Total 

Imbalance’’ set forth in Rule 7.35– 

E(a)(7)(A), except that the proposed 

definition does not include the 


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164On the OX system, the market imbalance is the 

difference between quantities of buy and sell 

market orders. 165Rule 7.35–E(a)(7)(B) does not separately 

reference MOO Orders because Rule 7.35–E(a) 

provides that, unless otherwise specified, the term 

‘‘Market Orders’’ in Rule 7.35–E includes MOO 

Orders (for the Core Open Auction and Trading Halt 

Auction). The Exchange proposes that for options 

trading, the terms Market Order and MOO Order 

both be referenced in proposed Rule 6.64P–O. 166See also Cboe Rule 5.31(a) (defining the 

‘‘Opening Trade Price’’ as the price at which Cboe 

executes opening trades in a series). The Exchange 

notes that the term ‘‘Auction Price’’ is distinguished 

from the proposed term of ‘‘Indicative Match 

Price,’’ as the latter term is the content included in 

the Auction Imbalance Information in advance of an 

Auction, and the Auction Price is the price of an 

Auction that results in a trade. 

167Rule 6.64–O(b) provides, in relevant part, that 

the related option series will be opened 

automatically ‘‘once the primary market for the 

underlying security disseminates a quote and a 

trade that is at or within the quote.’’ 

168The Exchange notes that the information used 

to calculate the proposed Calculated NBBO is 

consistent with the information that the Exchange 

receives from OPRA in advance of the Exchange 

opening or reopening trading (i.e., Market Maker 

rotational quotes from the Exchange and ABBO) 

and is similar to Cboe’s definition of ‘‘Composite 

Market,’’ as described in Cboe Rule 5.31(a), which 

includes Cboe Market Maker quotes and BBOs of 

other options exchanges. 

169See Rule 6.64–O(b)(A), (c) (describing process 

for determining single opening price). 

superfluous modifier ‘‘net’’ in reference 

to Total Imbalance and includes options 

trading terminology (i.e., contracts 

instead of shares). 

Proposed Rule 6.64P–O(a)(3)(D)(ii) 

would define the term ‘‘Market 

Imbalance’’ to mean the Imbalance of 

any remaining buy (sell) Market Orders 

and MOO Orders that are not matched 

for trading in the Auction. The 

Exchange proposes that the manner that 

the Market Imbalance would be 

calculated for options trading would be 

the same as how it is calculated for cash 

equity trading, which differs from 

current options functionality.164

Accordingly, this proposed definition 

and functionality would be new and is 

based on the definition of ‘‘Market 

Imbalance’’ set forth in Rule 7.35– 

E(a)(7)(B), with a difference to add 

reference to MOO Orders (as defined in 

proposed Rule 6.62P–O(c)(2)).165

• Proposed Rule 6.64P–O(a)(4) would 

define the term ‘‘Auction Price’’ to mean 

the price at which an Auction that 

results in a trade is conducted. The 

Exchange proposes that this term would 

have the same meaning as the same term 

as used on NYSE, as described in NYSE 

Rule 7.35(a)(6), with a difference to add 

the phrase ‘‘that results in a trade’’ to be 

clear that an Auction Price is for an 

Auction that results in a trade. This 

would be a new term for options trading 

and is designed to add clarity and 

transparency to Exchange rules as this 

term would be used as a reference price 

in proposed Rules 6.62P–O(a)(3)(B) and 

6.41P–O(c)(4)(B).166

• Proposed Rule 6.64P–O(a)(5) would 

define the term ‘‘Auction Process’’ to 

mean the process that begins when the 

Exchange receives an Auction Trigger 

(defined below) for a series and ends 

when the Auction is conducted. This 

would be a new term for options trading 

and is designed to add clarity and 

transparency to Exchange rules and 

address all steps in the process that 

culminates in an Auction, as described 

in proposed Rule 6.64P–O(d). 

• Proposed Rule 6.64P–O(a)(6) would 

define the term ‘‘Auction Processing 

Period’’ to mean the period during 

which the Auction is being processed. 

The Exchange proposes that this new 

term would have the same meaning as 

the same term on its cash equity market. 

The Auction Processing Period is at the 

end of the Auction Process and is the 

period when the actual Auction is 

conducted and the Exchange transitions 

from a pre-open state (described below) 

to continuous trading. The end of the 

Auction Processing Period is the end of 

the Auction and, depending on the 

orders and quotes in the Consolidated 

Book, it concludes either with or 

without a trade. Accordingly, this 

proposed definition is substantively 

identical to the definition of ‘‘Auction 

Processing Period’’ set forth in Rule 

7.35–E(a)(2). 

• Proposed Rule 6.64P–O(a)(7) would 

define the term ‘‘Auction Trigger’’ to 

mean the information disseminated by 

the Primary Market in the underlying 

security that triggers the Auction 

Process for a series to begin. For a Core 

Open Auction, the proposed Auction 

Trigger would be when the Primary 

Market first disseminates at or after 9:30 

a.m. Eastern Time both a two-sided 

quote and a trade of any size that is at 

or within the quote per proposed Rule 

6.64P–O(a)(7)(A). For a Trading Halt 

Auction, the proposed Auction Trigger 

would be when the Primary Market 

disseminates at the end of a trading halt 

or pause a resume message, a two-sided 

quote, and a trade of any size that is at 

or within the quote, per proposed Rule 

6.64P–O(a)(7)(B). This proposed term is 

new and is not used on the cash equity 

platform. This proposed functionality, 

however, is not new and is based on 

how the Exchange currently opens or 

reopens a series for trading, as set forth 

in the last sentence of current Rule 

6.64–O(b).167 The proposed rule adds 

detail not found in the current rule by 

referring to a ‘‘two-sided quote’’ rather 

than a ‘‘quote,’’ without any changes to 

functionality. The Exchange also 

proposes a difference that an opening 

trade on the Primary Market may be ‘‘of 

any size,’’ which would make clear that 

an odd-lot transaction on the Primary 

Market could be used as an Auction 

Trigger, which would be new on Pillar. 

The Exchange believes that because it 

requires both a quote and a trade from 

the Primary Market before it can open/ 

reopen trading in the overlying option, 

and because a Primary Market that has 

disseminated a quote for an underlying 

security is open for trading, allowing 

odd-lot sized trades to be included in 

the trigger would increase the 

opportunities to open/reopen trading 

options that overlay low-volume 

securities that have opened for trading 

on the Primary Market and would 

reduce the circumstances needed to 

manually trigger an Auction for a series. 

• Proposed Rule 6.64P–O(a)(8) would 

define the term ‘‘Calculated NBBO’’ to 

mean the highest bid and lowest offer 

among all Market Maker quotes and the 

ABBO during the Auction Process. The 

Exchange proposes to use the term 

‘‘Calculated NBBO’’ to specify which 

bids and offers the Exchange would 

consider for purposes of determining 

whether to proceed with an Auction on 

Pillar, as described in greater detail 

below. The Exchange believes the 

proposed term provides more clarity 

than referencing an ‘‘NBBO 

disseminated by OPRA’’ and is 

consistent with the proposed definition 

of ABBO, which by its terms is 

disseminated by OPRA.168

• Proposed Rule 6.64P–O(a)(9) would 

define the term ‘‘Indicative Match 

Price’’ to mean the price at which the 

maximum number of contracts can be 

traded in an Auction, including the nondisplayed quantity of Reserve Orders, 

and excluding IO Orders, subject to the 

Auction Collars. This functionality is 

consistent with the current process for 

establishing a single opening price, as 

described in Rule 6.64–O(b)(A), but the 

proposed rule adds more granularity 

and uses Pillar terminology.169 In 

addition, the term ‘‘Indicative Match 

Price’’ refers to the same functionality as 

the OX system’s reference to the term 

‘‘reference price’’ in its imbalance 

information. This proposed definition is 

based on the Pillar definition of 

‘‘Indicative Match Price’’ set forth in 

Rule 7.35–E(a)(8), with differences to 

refer solely to ‘‘price’’ as opposed to 

‘‘best price’’ because proposed Rule 

6.64P–O(a)(9)(A), described below, 

would provide specificity of how such 

price would be determined, and to 

reflect options trading terminology (i.e., 

contracts instead of shares). Proposed 

Rule 6.64P–O(a)(9) would further 


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170This would be new functionality because 

currently, if there is no legal width NBBO, the 

Exchange does not disseminate imbalance 

information and does not calculate an indicative 

match price. 

171See Rule 6.37–O(c) (Unusual Conditions— 

Opening Auction) (providing that ‘‘[i[f the interest 

of maintaining a fair and orderly market so requires, 

a Trading Official may declare that unusual market 

conditions exist in a particular issue and allow 

Market Makers in that issue to make auction bids 

and offers with spread differentials of up to two 

times, or in exceptional circumstances, up to three 

times, the legal limits permitted under Rule 6.37– 

O’’). 

172The proposed calculation of a Legal Width 

Quote is also similar to how Cboe determines 

whether to perform a ‘‘Forced Opening,’’ because 

Cboe requires a Composite Market that is not 

crossed with a non-zero offer. See Cboe Rule 

5.31(e)(4). 

173See Rule 6.64–O(b)(D) (providing that ‘‘[t]he 

OX System will not conduct an Auction Process if 

the bid-ask differential for that series is not within 

an acceptable range,’’ which ‘‘acceptable range shall 

mean within the bid-ask differential guidelines 

established pursuant to Rule 6.37–O(b)(4)’’). 

provide that if there is no Legal Width 

Quote, the Indicative Match Price 

included in the Auction Imbalance 

Information would be calculated 

without Auction Collars. This would be 

a new feature applicable only to options 

trading and an Indicative Match Price 

without Auction Collars would be 

accompanied with an Auction Indicator 

that the Auction cannot be conducted 

because there is no Legal Width 

Quote.170

Proposed Rule 6.64P–O(a)(9)(A) 

would provide that if there is more than 

one price level at which the maximum 

number of contracts can be traded 

within the Auction Collars, the 

Indicative Match Price would be the 

price closest to the midpoint of the 

Legal Width Quote, rounded to the 

nearest MPV for the series, provided 

that the Indicative Match Price would 

not be lower (higher) than the highest 

(lowest) price of a Limit Order to buy 

(sell) ranked Priority 2—Display Orders 

that is eligible to participate in the 

Auction. This functionality is similar to 

the current process for establishing a 

single opening price, as described in 

Rule 6.64–O(c), which provides that 

when the same number of contracts can 

trade at multiple prices, the opening 

price is the price at which the greatest 

number of contracts can trade that is at 

or nearest to the midpoint of the NBBO 

disseminated by OPRA. The proposed 

rule text uses Pillar terminology based 

on Rule 7.35–E(a)(8)(A) and adds more 

granularity, such as describing that the 

Exchange would round to the nearest 

MPV in the series, which is consistent 

with current functionality. The 

Exchange also proposes a difference 

compared to the cash equity rules to 

reflect that when there is more than one 

price level at which the maximum 

number of contracts can trade, the 

Indicative Match Price for options 

trading would be the price closest to the 

midpoint of the Legal Width Quote 

rather than (for cash equities) the price 

closest to an auction reference price. 

The Exchange believes that reference to 

the term Legal Width Quote reflects the 

proposed use of this term in the Auction 

Process rather than referring to the 

NBBO disseminated by OPRA. 

Proposed Rule 6.64P–O(a)(9)(B) 

would provide that an Indicative Match 

Price that is higher (lower) than the 

upper (lower) Auction Collar would be 

adjusted to the upper (lower) Auction 

Collar and orders eligible to participate 

in the Auction would trade at the 

collared Indicative Match Price. 

Proposed Rule 6.64P–O(a)(9)(B)(i) 

would provide that Limit Orders to buy 

(sell) with a limit price above (below) 

the upper (lower) Auction Collar would 

be included in the Auction Imbalance 

Information at the collared Indicative 

Match Price and would be eligible to 

trade at the Indicative Match Price. This 

proposed rule text provides granularity 

that, consistent with current 

functionality, orders willing to buy (sell) 

at a higher (lower) price than the 

Auction Price would participate in an 

Auction trade, which, by definition, 

would be required to be at or between 

the Auction Collars. Proposed Rule 

6.64P–O(a)(9)(B)(ii) would provide that 

Limit Orders and quotes to buy (sell) 

with a limit price below (above) the 

lower (upper) Auction Collar would not 

be included in the Auction Imbalance 

Information and would not participate 

in an Auction. The Exchange proposes 

that the manner that orders and quotes 

priced outside of the Auction Collar 

would be included (or not) in the 

Indicative Match Price would be the 

same as how it is determined for cash 

equity trading. Accordingly, this 

proposed rule text is new for options 

trading (but the functionality is 

consistent with current functionality) 

and uses Pillar terminology based on 

Rules 7.35–E(a)(10)(A), (B), and (C) that 

is designed to add granularity to the 

proposed rule, and with a difference to 

reflect when the proposed rule would be 

applicable to quotes. 

Proposed Rule 6.64P–O(a)(9)(C) 

would provide that if the Matched 

Volume (defined below) for an Auction 

consists of only buy and sell Market 

Orders, the Indicative Match Price 

would be the midpoint of the Legal 

Width Quote, rounded to the MPV for 

the series, or, if, the Legal Width Quote 

is locked, then the locked price. This 

proposed rule text is new and uses 

Pillar terminology based on Rule 7.35– 

E(a)(8)(C), with differences to reflect 

that options trading on Pillar would be 

based on a Legal Width Quote (as 

defined herein) to determine the 

Indicative Match Price when there are 

only Market Orders eligible to trade in 

an Auction. This proposed rule is 

designed to provide granularity of how 

the Indicative Match Price would be 

calculated if there are only Market 

Orders. 

Proposed Rule 6.64P–O(a)(9)(D) 

would provide that if there is no 

Matched Volume, including if there are 

Market Orders on only one side of the 

Market, the Indicative Match Price and 

Total Imbalance for the Auction 

Imbalance Information would be zero. 

This proposed rule text is new and uses 

Pillar terminology based on Rule 7.35– 

E(a)(8)(D) and (E) with differences to 

reflect that on options, the Indicative 

Match Price would be zero in both 

circumstances. This proposed Rule is 

designed to provide granularity 

regarding how the Indicative Match 

Price and Total Imbalance for the 

Auction Imbalance Information would 

be calculated if there is no Matched 

Volume. 

• Proposed Rule 6.64P–O(a)(10) 

would define a ‘‘Legal Width Quote’’ as 

a Calculated NBBO that: (A) May be 

locked, but not crossed; (B) does not 

contain a zero offer; and (C) has a spread 

between the Calculated NBBO for each 

option contract that does not exceed a 

maximum differential that is 

determined by the Exchange on a class 

by class basis and announced by Trader 

Update (as discussed further below, 

provided that a Trading Official may 

establish differences other than the 

above for one or more series or classes 

of options.171

Requiring that the Legal Width Quote 

not be crossed is consistent with current 

Rule 6.64–O(b)(E), which requires an 

uncrossed NBBO disseminated by 

OPRA before a series can be opened (or 

reopened).172 The Exchange believes 

that the additional detail in proposed 

Rules 6.64P–O(a)(10)(A) and (B) 

regarding how to determine a Legal 

Width Quote provides clarity and 

granularity as to when a Calculated 

NBBO would be eligible to be 

considered a Legal Width Quote. In 

addition, requiring that the Calculated 

NBBO must not exceed a maximum 

differential before an Auction can 

proceed is based on the current OX 

Opening Process, which requires the 

bid-ask differential for a series to be in 

an acceptable range.173 However, rather 

than specify maximum bid-ask 

differentials in proposed Rule 6.64P–O, 

the Exchange believes it is appropriate 

to instead retain flexibility to set the 


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174For example, Cboe recently amended Cboe 

Rule 5.31 relating to its opening process to amend 

the definition of ‘‘Maximum Composite Width’’ 

(i.e., the amount that the ‘‘Composite Width’’ of a 

series may generally not be greater than for the 

series to open), which term is used similarly to how 

the Exchange proposes to use the term ‘‘Legal 

Width Quote,’’ to delete the specified amounts for 

the Maximum Composite Width and to instead 

provide that Cboe may determine such amounts ‘‘on 

a class and Composite bid basis, which amount 

[Cboe] may modify during the opening auction 

process’’ and disseminate ‘‘to all subscribers of 

[Cboe’s] data feeds that delivery opening auction 

updates’’). See Securities Exchange Act Release No. 

90967 (January 22, 2021), 86 FR 7249 (January 28, 

2021) (SR–Cboe–2021–005) (Notice of filing and 

immediate effectiveness of proposed rule change to 

remove specified spread differentials from Rule 

5.31). 

175See supra note 171 (regarding authority 

conferred on Trading Officials, per Rule 6.37–O(c), 

to make auction bids and offers with spread 

differentials of up to two times, or in exceptional 

circumstances, up to three times, the legal limits, 

‘‘[i[f the interest of maintaining a fair and orderly 

market so requires’’). 

176See, e.g., Cboe Rule 5.31(a) (definition of 

Maximum Composite Width); Cboe EDGX Options 

Exchange, Inc. (‘‘EDGX’’) Rule 21.7(a) (same); BZX 

Rule 21.7(a) (same)); Cboe C2 Exchange Inc. (‘‘C2’’) 

Rule 6.11(a) (same); see also Nasdaq Options Market 

(‘‘NOM’’) Options 3, Section 8(a)(6) (defining 

‘‘Valid Width NBBO’’ as ‘‘the combination of all 

away market quotes and any combination of NOMregistered Market Maker orders and quotes received 

over the QUO or SQF Protocols within a specified 

bid/ask differential as established and published by 

the Exchange’’ and allowing the Valid Width NBBO 

to be ‘‘configurable by underlying, and tables with 

valid width differentials will be posted by Nasdaq 

on its website’’) and MIAX Rule 503(f)(2) (which 

permits MIAX to determine by circular an 

acceptable range in which openings are permissible 

if there is no valid width national best bid or offer 

(‘‘NBBO’’)). 

177The Exchange notes that Cboe refers to a 

similar period as the ‘‘Queuing Period.’’ See Cboe 

Rule 5.31(b). Similar to Cboe’s Queuing Period, the 

proposed term of ‘‘pre-open state’’ means the period 

when the Exchange accepts orders and quotes but 

has not yet opened/reopened a series for continuous 

trading. The proposed ‘‘Auction Process,’’ defined 

above, is part of the pre-open state, but does not 

begin until the Exchange receives an Auction 

Trigger, as defined above. 

maximum differentials so that the 

Exchange may consider the different 

market models and characteristics of 

different classes, as well as modify 

amounts in response to then-current 

market conditions.174 The proposed 

Rule would allow the Exchange to 

modify these bid-ask differentials at any 

time as it deems necessary and 

appropriate, which discretion the 

Exchange has today on the OX 

system.175 In addition, allowing the 

Exchange to announce the maximum 

differentials by Trader Update (as 

opposed to by Rule) is consistent with 

the rules of several options exchanges 

that are able to change the amounts of 

valid opening widths by notice or 

circular and not by rule change.176

The Exchange believes that the 

proposed definition relating to ‘‘Legal 

Width Quote’’ would promote clarity 

and transparency in Exchange rules 

regarding which quotes—both Market 

Maker quotes on the Exchange and the 

ABBO, i.e., the Calculated NBBO—that 

the Exchange would use to determine if 

there is a Legal Width Quote and 

provide direction that to be a Legal 

Quote Width, a Calculated NBBO may 

not exceed a maximum differential. 

The Exchange also proposes to make 

a conforming change to Rule 6.37–O(c) 

to update the title from ‘‘Unusual 

Conditions—Opening Auction’’ to be 

‘‘Unusual Conditions—Auctions,’’ 

which would align with the proposed 

definition of ‘‘Auctions’’ in proposed 

Rule 6.64P–O(a), which includes both 

opening and reopening auctions. This 

proposed change also promotes clarity, 

consistent with current functionality 

that Rule 6.37–O(c) is also applicable to 

reopenings. In addition, the Exchange 

proposes to amend Rule 6.37–O(c), 

which authorizes a Trading Official to 

widen the bid-ask differentials in the 

event of unusual conditions, to add a 

cross-reference to extend such authority 

to proposed Rule 6.64P–O(a)(9) 

(regarding the Legal Width Quote 

spreads). This proposed amendment 

would ensure that the existing 

procedures for auctions in the event of 

unusual conditions, as specified in Rule 

6.37–O(c), would continue to be 

available for option symbols that have 

transitioned to Pillar (and subject to 

new Rule 6.64P–O(a)(10)). 

• Proposed Rule 6.64P–O(a)(11) 

would define the term ‘‘Matched 

Volume’’ to mean the number of buy 

and sell contracts that can be matched 

at the Indicative Match Price, excluding 

IO Orders. The concept of Matched 

Volume on Pillar is consistent with the 

OX system’s concept of ‘‘paired 

quantity’’ in its imbalance information. 

This proposed rule text uses Pillar 

terminology based on the definition of 

‘‘Matched Volume’’ set forth in Rule 

7.35–E(a)(9), with a non-substantive 

difference to reference (option) contracts 

instead of shares and to be clear that the 

Matched Volume would not include IO 

Orders. The Exchange believes this 

proposed definition promotes 

granularity in Exchange rules. 

• Proposed Rule 6.64P–O(a)(12) 

would define the term ‘‘pre-open state’’ 

to mean the period before a series is 

opened or reopened for trading and 

would provide that during the pre-open 

state, the Exchange would accept 

Auction-Only Orders, quotes, and 

orders designated Day or GTC, 

including orders ranked under the 

proposed category of ‘‘Priority 3—NonDisplay Orders’’ that are not eligible to 

participate in an Auction.177 This 

proposed text is consistent with current 

Rule 6.64–O(b), which provides that the 

Exchange will accept market and limit 

orders for inclusion in the opening 

auction process and would add further 

granularity regarding which interest 

would be accepted by the Exchange 

(even if not eligible for an Auction) 

prior to the opening or reopening of 

each option series and during which 

time period. The proposed rule would 

further provide that the pre-open state 

for the Core Open Auction would begin 

at 6:00 a.m. Eastern Time and would 

end when the Auction Processing 

Period begins, which is similar to 

current functionality, which allows 

order and quote entry to begin at 5:30 

a.m. Eastern Time. The Exchange 

believes that moving the start time to 

6:00 a.m. Eastern Time would not 

materially impact the ability of OTP 

Holders to enter orders or quotes during 

the pre-open state. As further proposed, 

at the beginning of the pre-open state 

before the Core Open Auction, orders 

designated GTC that remain from the 

prior trading day will be included in the 

Consolidated Book, which is consistent 

with current functionality. The 

proposed rule would also provide that 

the pre-open state for a Trading Halt 

Auction would begin at the beginning of 

the trading halt and would end when 

the Auction Processing Period begins. 

This proposed definition of a pre-open 

state would be new for Pillar and is 

designed to distinguish the pre-open 

state (for a Core Open Auction or a 

Trading Halt Auction) from both the 

Auction Processing Period and the 

period when a given series opens for 

trading, which would add granularity to 

Exchange rules. As noted above, this 

proposed definition of pre-open state 

would also be used in proposed Rules 

6.40P–O, 6.41P–O, and 6.62P–O. 

• Proposed Rule 6.64P–O(a)(13) 

would define the term ‘‘Rotational 

Quote’’ to mean the highest Market 

Maker bid and lowest Market Maker 

offer on the Exchange when the Auction 

Process begins and would provide that 

during the Auction Process, the 

Exchange would update the price and 

size of the Rotational Quote and that 

such Rotational Quote can be locked or 

crossed. The Exchange further proposes 

that, if there are no Market Maker 

quotes, the Rotational Quote would be 

published with a zero price and size. 

The Exchange notes that, although not 

specified in the current rule, it currently 

disseminates a ‘‘rotational quote’’ to 

OPRA when it is in the process of 

opening or reopening a series, i.e., a 

quote that is comprised only of Market 

Maker quotes and does not include 

orders. The Exchange proposes a 


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178Unlike the Exchange’s cash equity rules, the 

Exchange proposes to describe Auction Ranking in 

a separate section of proposed Rule 6.64P–O, which 

is a stylistic choice similar to NYSE Rule 7.35(b), 

which also separates the concept of Auction 

Ranking from definitions. 

179See Cboe Rule 5.31(e)(3)(i) (providing that 

Cboe ‘‘prioritizes orders and quotes in the following 

order: market orders, limit orders and quotes with 

prices better than the Opening Trade Price, and 

orders and quotes at the Opening Trade Price’’). 

180See discussion supra, regarding proposed Rule 

6.62P–O(c)(3) and how IO Orders would function. 

The Exchange notes that, unlike on the cash equity 

platform, IO Orders would not be limited to 

participating solely in Trading Halt Auctions and 

may likewise participate in Core Open Auctions as 

well. 

181See supra note 152 (describing Rule 6.64– 

O(b)(D), which provides that the Exchange will not 

conduct its current Auction Process if the bid-ask 

differential for a series is not ‘‘within an acceptable 

range’’). 

182See, e.g., Nasdaq PHLX (‘‘PHLX’’) Section 8(d), 

Options Opening Process (providing that the 

Opening Process begins when (a) a ‘‘valid width’’ 

(i.e., a bid/ask differential that is compliant with 

PHLX Rule 1014(c)(i)(A)(1)(a)) specialist quote is 

submitted, (b) valid width quotes from at least two 

PHLX market participants have been submitted 

within 30 seconds of the opening trade or quote in 

the underlying security from the primary exchange, 

or (c) after 30 seconds of the opening trade or quote 

in the underlying security from the primary 

exchange, one PHLX market participant has 

submitted a valid width quote). 

difference on Pillar because currently, if 

the Market Maker Quotes are crossed, 

the Exchange flips the bid and offer 

prices. In Pillar, the Exchange would 

publish a Rotational Quote with the 

actual bid and offer prices, even if 

crossed, which would provide OTP 

Firms and OTP Holders with a more 

accurate view of whether a Rotational 

Quote is crossed. This proposed 

definition is new, uses Pillar 

terminology, and adds granularity to 

Exchange rules by codifying existing 

(albeit slightly modified) functionality. 

Auction Ranking. Proposed Rule 

6.64P–O(b) would describe the ranking 

for Auctions and would provide that 

orders and quotes on the side of the 

Imbalance are not guaranteed to 

participate in the Auction and would be 

ranked in price-time priority under 

proposed Rule 6.76P–O, consistent with 

the priority ranking associated with 

each order or quote, provided that: (1) 

Limit Orders, quotes, and LOO Orders 

would be ranked based on their limit 

price and not the price at which they 

would participate in the Auction; (2) 

MOO Orders would be ranked under the 

proposed category of ‘‘Priority 1— 

Market Orders’’; (3) LOO Orders would 

be ranked under the proposed category 

of ‘‘Priority 2—Display Orders’’; and (4) 

IO Orders would be ranked based on 

time among IO Orders, subject to 

eligibility to participate at the Indicative 

Match Price based on their limit 

price.178

This proposed rule is based in part on 

current Rule 6.64–O(b)(B), which 

provides that ‘‘[o]rders and quotes in the 

system will be matched up with one 

another based on price-time priority, 

provided, however, that orders will 

have priority over Market Maker quotes 

at the same price.’’ The Exchange 

proposes a difference in Pillar that 

orders in the same priority category as 

quotes would not have priority over 

Market Maker quotes at the same price, 

which distinction is an artifact of the 

Exchange’s existing system limitation. 

Instead, the Exchange proposes that 

orders and Market Maker quotes in the 

same priority category would be ranked 

based on time, as proposed in Rule 

6.76P–O. This equal ranking of orders 

and quotes is consistent with how other 

options markets handle orders and 

quotes during the opening process.179

Because the Exchange proposes that 

orders and quotes in an options Auction 

would be processed in the same manner 

as on its cash equity platform, including 

that orders on the side of the Imbalance 

would not be guaranteed to participate 

in an Auction, the proposed rule text in 

this regard is based in part on Rule 

7.35–E(a)(6)(A)—(D), with differences to 

reflect that options trading includes 

quotes and to be clear that IO Orders 

would be ranked based on working time 

among IO Orders, subject to such orders’ 

eligibility to participate at the Indicative 

Match Price based on their limit 

price.180

Auction Imbalance Information. 

Proposed Rule 6.64P–O(c) would 

provide that Auction Imbalance 

Information would be updated at least 

every second until the Auction is 

conducted, unless there is no change to 

the information and would further 

provide that the Exchange would begin 

disseminating Auction Imbalance 

Information at the following times: (1) 

Core Open Auction Imbalance 

Information would begin at 8:00 a.m. 

Eastern Time; and (2) Trading Halt 

Auction Imbalance Information would 

begin at the beginning of the trading 

halt. Because the Exchange proposes to 

disseminate Auction Imbalance 

Information for its options market in the 

same manner that such information is 

disseminated for its cash equity market, 

this proposed rule text, which is new, 

is based in part on Rule 7.35–E(a)(4)(A) 

and (C). 

Auction Process. Proposed Rule 

6.64P–O(d) would set forth the 

Exchange’s proposed Auction Process 

on Pillar. Similar to current OX system 

functionality, which requires that the 

bid-ask differential for a given series be 

within an acceptable range before 

conducting an auction, under Pillar, a 

series would not be opened or reopened 

on a trade if there is no Legal Width 

Quote, which concept, as described 

above, incorporates (almost identical) 

bid-ask differentials.181 As described 

further below, the Exchange proposes 

that for Pillar, a series should (ideally) 

also have Market Maker quotes and, as 

such, proposes to provide time for 

Market Makers assigned to a series to 

quote within the specified bid-ask 

differentials, and if Market Makers do 

not quote within those time frames, 

determine whether to open or reopen a 

series based on the ABBO. The 

Exchange notes that this proposed 

process is consistent with that used on 

other options exchanges.182

Proposed Rule 6.64P–O(d)(1) 

describes the process for disseminating 

the Rotational Quote and would provide 

that when the Exchange receives the 

Auction Trigger for a series, the 

Exchange would send a Rotational 

Quote to both OPRA and proprietary 

data feeds indicating that the Exchange 

is in the process of transitioning from a 

pre-open state to continuous trading for 

that series. This proposed rule is 

consistent with current functionality 

and is designed to promote granularity. 

Proposed Rule 6.64P–O(d)(2) would 

provide that once a Rotational Quote 

has been sent, the Exchange would 

conduct an Auction provided there is 

both a Legal Width Quote and, if 

applicable, a Market Maker quote with 

a non-zero offer in the series (which 

would be subject to the proposed 

requirements relating to Market Maker 

quotes, including the proposed new 

Opening MMQ Timer(s), as discussed 

further below per proposed Rule 6.64P– 

O(d)(3)). The proposed rule would 

further provide that the Exchange would 

wait a minimum of two milliseconds 

after disseminating the Rotational Quote 

before an Auction could be conducted, 

which delay would be new and is 

designed to enhance market quality by 

promoting price-forming displayed 

liquidity to the benefit of all market 

participants. Because the Rotational 

Quote is intended to provide notice that 

the Exchange will begin transitioning 

from a pre-open state, the Exchange 

believes this short delay will provide 

market participants with an opportunity 

to participate in the Auction Process. 

This proposed rule text is designed to 

provide transparency and determinism 

in Exchange rules regarding the earliest 

potential time that a series could be 

opened (after the Exchange receives an 

Auction Trigger), and subject to the 


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183Although the Exchange does not require that 

Market Makers assigned to a series quote at the 

open, once a series is opened for trading, Market 

Makers are nonetheless required to continuously 

fulfill their obligations to engage in a course of 

dealings reasonably calculated to contribute to the 

maintenance of a fair and orderly market. 

184Currently, neither Market Makers nor LMMs 

are obligated to provide a quote before a series is 

opened or reopened, which is why the proposed 

Pillar options Auction rule is designed to provide 

Market Makers with time to submit their quotes so 

a series can be opened. 

185A Market Maker may send quotations only in 

the issues included in its appointment, i.e., in series 

to which such Market Maker is assigned. See 

proposed Rule 6.37AP–O(a). See also proposed 

Rule 6.37AP–O(b) and (c) (setting forth continuous 

quoting obligations of LMMs and Market Makers, 

respectively, which obligations are identical to 

those set forth in Rule 6.37A–O(b) and (c)). 

series meeting all other requirements for 

opening or reopening discussed herein. 

Subject to the requirements specified 

in proposed Rule 6.64P–O(d)(2), 

proposed Rule 6.64P–O(d)(2)(A) would 

provide that if there is Matched Volume 

that can trade at or within the Auction 

Collars, the Auction would result in a 

trade at the Indicative Match Price. 

Proposed Rule 6.64P–O(d)(2)(B) would 

provide that if there is no Matched 

Volume that can trade at or within the 

Auction Collars, the Auction would not 

result in a trade and the Exchange 

would transition to continuous trading 

as described in proposed Rule 6.64P– 

O(f) below. This proposed rule text is 

new, uses Pillar terminology, and is 

designed to provide transparency of 

when an Auction would result in a 

trade. 

Proposed Rule 6.64P–O(d)(3) would 

specify the parameters of the Opening 

MMQ Timers, which are designed to 

encourage (but would not require) 

Market Makers to submit Legal-Width 

Quotes in connection with the 

automated opening or reopening of a 

series. On the OX system, the Exchange 

does not impose on Market Makers 

assigned to a series any special 

obligations in connection with the 

opening process. On Pillar, the 

Exchange will likewise not impose on 

such Market Makers any additional 

obligations at the open.183 The 

Exchange believes that, rather than layer 

additional requirements on the Market 

Making community, it would be more 

beneficial to all market participants to 

employ alternative methods to help 

ensure an orderly transition to 

continuous trading. As such, the 

Exchange believes that the proposed socalled ‘‘waterfall’’ approach to opening, 

would offer a number of checks that are 

intended to provide adequate 

opportunity for a greater number of 

Market Makers to provide their liquidity 

interest and help ensure increased 

liquidity at a level commensurate with 

which the market is accustomed during 

continuous trading on the Exchange. In 

short, although the Exchange does not 

require a Market Maker assigned to a 

series to quote on the Exchange in order 

to open or reopen a series for trading, 

the Exchange believes that providing 

Market Makers assigned to a series the 

opportunity to do so would promote a 

fair and orderly Auction process and 

facilitate a fair and orderly transition to 

continuous trading.184 Accordingly, the 

Exchange proposes a new process for 

Auctions on Pillar that would provide 

time for Market Makers assigned to a 

series to quote within the specified bidask differentials before a series would be 

opened or reopened for trading. 

Overall, the Exchange believes that 

the proposed waterfall approach of 

setting minimum time periods for a 

Market Maker assigned to a series to 

quote within the specified bid-ask 

differential before opening a series, even 

if there is a Legal Width Quote, would 

appropriately balance the benefits of 

increasing the opportunities for Market 

Makers assigned to a series to enter 

quotations within the specified bid-ask 

differential, with a timely series opening 

or reopening when there is a Legal 

Width Quote even when it does not 

include Market Makers assigned to the 

series. 

In addition, the Exchange proposes to 

expand opportunities for its designated 

liquidity providers—i.e., Market 

Makers—to enter the market. As 

described in more detail below, the 

Exchange proposes different time 

lengths depending on the number of 

Market Makers assigned to a series. For 

example, if there are no Market Makers 

assigned to a series, there is no need to 

wait to open or reopen a series if there 

is a Legal Width Quote based upon the 

disseminated ABBO. If there is one 

Market Maker assigned to the series, the 

Exchange will delay opening (even if 

there is a Legal Width Quote based upon 

the ABBO) to give the Market Maker 

additional opportunity to provide 

liquidity. Furthermore, if there is more 

than one Market Maker assigned to a 

series, the Exchange designates longer 

periods to provide time for multiple 

Market Makers assigned to the series the 

chance to quote within the specified 

bid-ask differentials. The Exchange 

believes that providing additional 

opportunity for its liquidity providers to 

enter the market would result in deeper 

liquidity—which market participants 

have come to expect in options with 

multiple assigned Market Makers, and a 

more stable trading environment. 

The Exchange does not believe that 

the proposed waterfall approach would 

result in an undue burden on 

competition. Market Makers are 

encouraged but not required to quote in 

their assigned series at the open, thus 

they are not subject to additional 

obligations. The Exchange believes that 

encouraging, rather than requiring, 

participation of such Market Makers at 

the open, may increase the availability 

of Legal Width Quotes in more series, 

thereby allowing more series to open. 

Improving the validity of the opening 

price benefits all market participants 

and also benefits the reputation of the 

Exchange as being a venue that provides 

accurate price discovery. 

As part of the Auction Process the 

Exchange proposes to utilize ‘‘Opening 

MMQ Timers,’’ which will be 30 

seconds unless otherwise specified by 

Trader Update. As proposed, once the 

Auction Process begins, the Exchange 

would begin one or more Opening MMQ 

Timer for the Market Maker(s) assigned 

to a series to (opt to) submit a quote 

with a non-zero offer.185 The Opening 

MMQ Timers are designed to provide 

transparency in Exchange rules of the 

circumstances of when the Exchange 

would wait to open or reopen a series 

for trading if the assigned Market 

Maker(s) has not submitted a quote 

within the specified time periods, as 

follows: 

• Proposed Rule 6.64P–O(d)(3)(A) 

would provide that if there are no 

Market Makers assigned to a series, the 

Exchange would conduct an Auction in 

that series based solely on a Legal Width 

Quote, without waiting for the Opening 

MMQ Timer to end. As set forth in 

proposed Rule 6.64P–O(d)(2)(A) and (B), 

if there is Matched Volume, this 

Auction would result in a trade, 

otherwise, the series would transition to 

continuous trading as described in 

proposed Rule 6.64P–O(f) below. 

• Proposed Rule 6.64P–O(d)(3)(B) 

would provide that if there is only one 

Market Maker assigned to a series: 

Æ The Exchange would conduct the 

Auction, without waiting for the 

Opening MMQ Timer to end, as soon as 

there is both a Legal Width Quote and 

the assigned Market Maker has 

submitted a quote with a non-zero offer 

(proposed Rule 6.64P–O(d)(3)(B)(i)). As 

set forth in proposed Rule 6.64P– 

O(d)(2)(A) and (B), if there is Matched 

Volume, this Auction would result in a 

trade, otherwise, the series would 

transition to continuous trading as 

described in proposed Rule 6.64P–O(f) 

below. 

Æ If the Market Maker assigned to the 

series has not submitted a quote with a 

non-zero offer by the end of the Opening 


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186The Exchange expects this to be a rare race 

condition that would result when the Exchange 

receives orders and quotes at virtually the same 

time that it is evaluating whether it can open a 

series on a quote based on a wide Calculated NBBO 

(and before the Auction Processing Period begins) 

and that, as a result of that race condition, those 

new orders or quotes are marketable against contraside interest, i.e., results in Matched Volume for the 

Auction, at the same time that the Exchange 

concludes, based on interest that had previously 

been received, that it can proceed with an Auction 

in the absence of a Legal Width Quote. In such case, 

the Auction could result in a trade. 

187Such opening is similar to Cboe’s ‘‘Forced 

Opening’’ process because it allows a series to open 

without a trade after a specified time period when 

the market is wider than the specified bid-ask 

differentials. See Cboe Rule 5.31(e)(4). 

MMQ Timer and there is a Legal Width 

Quote, the Exchange would conduct the 

Auction (proposed Rule 6.64P– 

O(d)(3)(B)(ii)). As set forth in proposed 

Rule 6.64P–O(d)(2)(A) and (B), if there 

is Matched Volume, this Auction would 

result in a trade, otherwise, the series 

would transition to continuous trading 

as described in proposed Rule 6.64P– 

O(f) below. 

• Proposed Rule 6.64P–O(d)(3)(C) 

would provide that if there are two or 

more Market Makers assigned to a 

series: 

Æ The Exchange would conduct the 

Auction, without waiting for the 

Opening MMQ Timer to end, as soon as 

there is both a Legal Width Quote and 

at least two assigned Market Makers 

have submitted a quote with a non-zero 

offer (proposed Rule 6.64P– 

O(d)(3)(C)(i)). As set forth in proposed 

Rule 6.64P–O(d)(2)(A) and (B), if there 

is Matched Volume, this Auction would 

result in a trade, otherwise, the series 

would transition to continuous trading 

as described in proposed Rule 6.64P– 

O(f) below. 

Æ If at least two Market Makers 

assigned to a series have not submitted 

a quote with a non-zero offer by the end 

of the Opening MMQ Timer, the 

Exchange would begin a second 

Opening MMQ Timer (of the same 

length) and during the second Opening 

MMQ Timer, the Exchange would 

conduct the Auction, if there is both a 

Legal Width Quote and at least one 

Market Maker assigned to the series has 

submitted a quote with a non-zero offer 

(proposed Rule 6.64P–O(d)(3)(C)(ii)). In 

such case, the Exchange would not wait 

for the second Opening MMQ Timer to 

end. Because the Exchange does not 

require a Market Maker assigned to a 

series to quote before conducting an 

Auction, to reduce the potential delay in 

opening or reopening a series, the 

Exchange believes that during the 

second Opening MMQ Timer, it is 

appropriate to wait for only one Market 

Maker, instead of two, to quote. As set 

forth in proposed Rule 6.64P–O(d)(2)(A) 

and (B), if there is Matched Volume, this 

Auction would result in a trade, 

otherwise, the series would transition to 

continuous trading as described in 

proposed Rule 6.64P–O(f) below. 

Æ If no Market Maker assigned to a 

series has submitted a quote with a nonzero offer by the end of the second 

Opening MMQ Timer and there is a 

Legal Width Quote, the Exchange would 

conduct the Auction (proposed Rule 

6.64P–O(d)(3)(C)(iii). As set forth in 

proposed Rule 6.64P–O(d)(2)(A) and (B), 

if there is Matched Volume, this 

Auction would result in a trade, 

otherwise, the series would transition to 

continuous trading as described in 

proposed Rule 6.64P–O(f) below. 

As noted above, the proposed Auction 

Process is designed to attract the highest 

quality quote for each series at the open 

to attract order flow from any resting 

interest best quality quotes at the open 

of each series. As such, the Exchange 

believes it is reasonable to require more 

than one Opening MMQ Timer (with a 

maximum run time of one minute—30 

seconds × 2) to run when there are at 

least two Market Markers because it 

allows the Exchange time to attract the 

best quote from these market 

participants, which in turn should 

attract order flow to the Exchange at the 

open (i.e., the Exchange can leverage the 

highest bid and lowest offer from the 

various Marker Makers that submit 

quotes). The Exchange believes that if a 

Legal Width Quote is not obtained in 

the first 30-second Opening MMQ 

Timer, it is to the benefit of all market 

participants to begin a second Opening 

MMQ Timer to allow the bid-ask 

differential to tighten before a series is 

opened. 

Proposed Rule 6.64P–O(d)(4) would 

provide that, unless otherwise specified 

by Trader Update, that for the first 

ninety seconds of the Auction Process 

(inclusive of the 30-second Opening 

MMQ Timer(s)), if there is no Legal 

Width Quote, the Exchange would not 

conduct an Auction, even if there is 

Matched Volume, i.e., the series would 

not transition to continuous trading. 

This proposed rule text provides 

transparency that, in the absence of a 

Legal Width Quote, the Exchange would 

not conduct an Auction that results in 

a trade even if there is Matched Volume. 

In such case, because there is Matched 

Volume, the Exchange could not open 

that series and would wait for a Legal 

Width Quote before conducting the 

Auction. Consistent with proposed Rule 

6.64P–O(d)(3)(A), if at any time during 

this ninety-second period there is a 

Legal Width Quote, the Exchange would 

proceed immediately with an Auction 

and would not wait for the ninetysecond period to end (subject to any 

applicable Opening MMQ Timer(s)). In 

other words, if there is a Legal Width 

Quote available 20 seconds after the 

Auction Trigger (for example), the 

requirements specified in proposed Rule 

6.64P–O(d)(3) would need to be met 

before the series could be opened or 

reopened. 

The Exchange proposes new 

functionality for Pillar to allow the 

Exchange to open a series without a 

trade after ninety seconds have elapsed 

without a Legal Width Quote, i.e., 

transition to continuous trading as 

described in proposed Rule 6.64P–O(f), 

when there is a Calculated NBBO that 

is wider than the Legal Width Quote. 

This option to open or reopen a series 

would not be available if there is 

Matched Volume. As proposed, ninety 

seconds after the Auction Process 

begins: 

• Proposed Rule 6.64P–O(d)(4)(A) 

would provide that if there is no 

Matched Volume and the Calculated 

NBBO is wider than the Legal Width 

Quote, is not crossed, and does not 

contain a zero offer, the Exchange 

would transition to continuous trading 

as described below in paragraph (f) of 

this Rule (as described below, a trade 

could occur during the transition to 

continuous trading, but there would not 

be a trade resulting from Matched 

Volume in the Auction). As further 

proposed, in such case, the Auction 

would not be intended to end with a 

trade, but it may result in a trade (even 

if there is no Legal Width Quote) if 

orders or quotes arrive when the 

Exchange is evaluating the status of 

orders and quotes, but before the 

Auction Processing Period begins.186

The Exchange believes this proposed 

rule would facilitate the opening or 

reopening of a series so that it can begin 

continuous trading when there is a 

Calculated NBBO in a series that is 

wider than the Legal Width Quote and 

is not crossed and does not contain a 

zero offer.187

• Proposed Rule 6.64P–O(d)(4)(A)(i) 

would provide that any time a series is 

opened or reopened when there is no 

Legal Width Quote, i.e., the Auction 

would end without a trade, Market 

Orders and MOO Orders would not 

participate in the Auction and would be 

cancelled before the Exchange 

transitions to continuous trading, which 

would protect such orders from trading 

at unintended prices. 

• Proposed Rule 6.64P–O(d)(4)(B) 

would provide that if the Exchange still 

cannot conduct an Auction as provided 

under paragraph (A) (above), the 

Exchange would continue to evaluate 


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188See Rule 6.64–O(b)(F) (providing that ‘‘[t]he 

Exchange may deviate from the standard manner of 

the Auction Process, including adjusting the timing 

of the Auction Process in any option class, when 

it believes it is necessary in the interests of a fair 

and orderly market’’). 

189See, e.g., Cboe Rule 5.31(f) (describing Cboe’s 

process for orders and quotes not executed in its 

opening process). 

190See id. (unexecuted orders and quotes will be 

entered into the Cboe book in time sequence). 

both the Calculated NBBO and interest 

on the Consolidated Book until the 

earlier of: (i) A Legal Width Quote is 

established and an Auction can be 

conducted; (ii) the series can be opened 

as provided for in proposed Rule 6.64P– 

O(d)(4)(A); (iii) the series is halted; or 

(iv) the end of Core Trading Hours. The 

proposed rule provides transparency 

that the Exchange would continue to 

look for an opportunity to open or 

reopen a series based on changes to the 

Calculated NBBO or orders and quotes 

on the Consolidated Book. 

Proposed Rule 6.64P–O(d)(5) would 

provide that the Exchange may deviate 

from the standard manner of the 

Auction Process, including adjusting the 

timing of the Auction Process in any 

option series or opening or reopening a 

series when there is no Legal Width 

Quote, when it believes it is necessary 

in the interests of a fair and orderly 

market. This proposed rule is based on 

Rule 6.64–O(b)(F) and, consistent with 

current functionality, is designed to 

provide the Exchange with flexibility to 

open a series even if there is no Legal 

Width Quote.188 For example, a Floor 

Broker may have a two-sided open 

outcry order. If the series is not opened, 

that trade could not be consummated. 

Accordingly, this proposed rule would 

allow the Exchange to open a series for 

trading to facilitate open outcry trading. 

Order Processing during an Auction 

Processing Period. As described above, 

the Auction Processing Period is the 

abbreviated time period (i.e., generally 

measured in less than a second) when 

the Exchange conducts the Auction and 

therefore transitions a series from a preopen state to continuous trading. For 

example, if there is a Legal Width 

Quote, Market Maker quotes, and 

Matched Volume, the Auction 

Processing Period is when that Matched 

Volume will trade at the Indicative 

Match Price. New orders and quotes 

received during the Auction Processing 

Period would not be eligible to 

participate in that Auction trade. 

Because the Exchange would be using 

the same Pillar auction functionality for 

options trading that is used for its cash 

equity market, the Exchange proposes 

that proposed Rule 6.64P–O(e) would be 

based on Rule 7.35–E(g) and subparagraphs (1) and (2), with differences 

only to reference quotes in addition to 

orders. The proposed rule promotes 

granularity and transparency of how 

orders and quotes that arrive during the 

Auction Processing Period would be 

processed. 

Accordingly, as proposed, new order 

and quote messages received during the 

Auction Processing Period would be 

accepted but would not be processed 

until after such Auction Processing 

Period. As with Rule 7.35–E(g), for 

purposes of proposed Rule 6.64P–O(e) 

and (f), an ‘‘order instruction’’ would 

likewise refer to a request to cancel, 

cancel and replace, or modify an order 

or quote. 

As further proposed, during the 

Auction Processing Period, order 

instructions would be processed as 

follows: 

• An order instruction that arrives 

during the Auction Processing Period 

would not be processed until after the 

Auction Processing Period if it relates to 

an order or quote that was received 

before the Auction Processing Period. 

Any subsequent order instructions 

relating to such order would be rejected 

(proposed Rule 6.64P–O(e)(1)). 

• An order instruction that arrives 

during the Auction Processing Period 

would be processed on arrival if it 

relates to an order that was received 

during the Auction Processing Period 

(proposed Rule 6.64P–O(e)(2)). 

Transition to Continuous Trading. 

After the Auction Processing Period 

concludes, i.e., once the Auction 

concludes either with or without a 

trade, the Exchange transitions to 

continuous trading. During this 

transition, the way in which orders, 

quotes, and order instructions are 

processed would differ depending on 

when such messages arrived at the 

Exchange. Proposed Rule 6.64P–O(f) 

would describe how the Exchange 

would transition to continuous trading 

after the Auction Processing Period 

concludes, which would detail new 

functionality for options trading under 

Pillar, and is based on how the 

Exchange transitions to continuous 

trading on its cash equity market 

following an Auction, as described in 

Rule 7.35–E(h). The Exchange believes 

that the proposed rule provides 

granularity regarding how orders and 

quotes would be processed in 

connection with the transition to 

continuous trading for options 

trading.189 As proposed, the transition 

to continuous trading would proceed as 

follows. 

Proposed Rule 6.64P–O(f)(1) would 

provide that orders that are no longer 

eligible to trade would be cancelled. 

This proposed rule text is based on 

Pillar terminology used in Rule 7.35– 

E(h)(1). For options trading, the only 

orders that would no longer be eligible 

to trade after the Auction Processing 

Period concludes would be AuctionOnly Orders and such orders would 

cancel (rather than ‘‘expire’’). 

Proposed Rule 6.64P–O(f)(2) would 

provide that order instructions would be 

processed as follows: 

• An order instruction that relates to 

an order or quote that was received 

before the Auction Processing Period or 

that has already transitioned to 

continuous trading and that arrives 

during either the transition to 

continuous trading or the Auction 

Processing Period under paragraph 

(e)(1) of this Rule would be processed in 

time sequence with the processing of 

orders and quotes as specified in 

paragraphs (f)(3)(A) or (B) of this Rule. 

In addition, any subsequent order 

instructions relating to such order or 

quote would be rejected (proposed Rule 

6.64P–O(f)(2)(A)). This proposed rule 

text is based on Rule 7.35–E(h)(2)(A), 

except that it does not include reference 

to order instructions received during an 

Auction Imbalance Freeze, which, as 

discussed above, is a concept on the 

cash equity platform that is not 

applicable to options trading. This 

proposed rule text provides 

transparency regarding how order 

instructions that arrived during the 

Auction Processing Period would be 

processed if they relate to orders or 

quotes that were received before the 

Auction Processing Period.190

• An order instruction that arrives 

during the transition to continuous 

trading would be processed on arrival if 

it relates to an order or quote that was 

entered during either the Auction 

Processing Period or the transition to 

continuous trading and such order or 

quote has not yet transitioned to 

continuous trading (proposed Rule 

6.64P–O(f)(2)(B)). This proposed rule 

text is based on Rule 7.35–E(h)(2)(B) 

without any substantive differences. 

Proposed Rule 6.64P–O(f)(3) would 

set forth how orders and quotes would 

be processed during the transition to 

continuous trading following an 

Auction. The proposed process for 

transitioning to continuous trading is 

consistent with current functionality 

(with differences described below) 

relating to draining the queue of 

unexecuted orders and quotes following 

the current Auction Process. The 

Exchange believes that the proposed 

rule provides granularity of this process 

as compared to the current Rule. 


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191See supra note 112 (citing definitions of 

‘‘Protected Bid,’’ ‘‘Protected Offer,’’ and 

‘‘Quotation’’ set forth in Rule 6.92–O(a)(15) and (16) 

and of ‘‘Away Market’’ as set forth in proposed Rule 

1.1). 

192As described above, the Exchange proposes a 

difference on Pillar because ALO Orders would be 

eligible to participate in an Auction. Currently, 

ALOs will be rejected if entered outside of Core 

Trading Hours or during a trading halt or, if resting, 

will be cancelled in the event of a trading halt. See 

discussion supra regarding Rule 6.62–O(t). 

193For example, the Exchange may determine 

that, as described in proposed Rule 6.64P– 

O(d)(4)(A), if there is no Matched Volume but there 

is a Calculated NBBO that meets the requirements 

specified in that Rule, it can conduct an Auction 

without a trade and transition to continuous trading 

pursuant to proposed Rule 6.64P–O(f). In such case, 

there would not be an Auction that results in a 

trade, but a trade(s) could occur among orders and 

quotes that trade during the transition to 

continuous trading. 

194OPRA does not distinguish between a trade 

that results from an opening auction and a trade 

that occurs during the transition to continuous 

trading. By contrast, the Exchange’s proprietary 

data feed would distinguish a trade that resulted 

from an Auction from a trade that occurred during 

the transition to continuous trading. 

Specifically, the Exchange proposes that 

it would process Auction-eligible orders 

and quotes that were received before the 

Auction Processing Period and orders 

ranked under the proposed category of 

‘‘Priority 3—Non-Display Orders’’ 

(which interest was not eligible to 

participate in an Auction) received 

before a trading halt as follows: 

• Proposed Rule 6.64P–O(f)(3)(A)(i) 

would provide that Limit Orders and 

quotes would be subject to the Limit 

Order Price Check, Arbitrage Check, and 

Intrinsic Value Check, as applicable. 

This proposed rule differs from current 

functionality, whereby risk checks are 

applied before an Auction. This 

proposed rule text is consistent with the 

proposed rule changes, described above, 

regarding when the Limit Order Price 

Check, Arbitrage Check, and Intrinsic 

Value Check (per proposed Rules 6.62P– 

O(a)(3) and 6.41P–O, respectively) 

would be applied to orders and quotes 

that were received during a pre-open 

state. The Exchange proposes to apply 

these checks to orders and quotes before 

they become eligible for trading or 

routing during continuous trading. 

• Proposed Rule 6.64P–O(f)(3)(A)(ii) 

would provide that Limit Orders and 

Market Orders would be assigned a 

Trading Collar. This proposed rule is 

consistent with the proposed changes to 

Trading Collars on Pillar, described 

above (per Rule 6.62P–O(a)(4)), that an 

order received during a pre-open state 

would be assigned a Trading Collar after 

an Auction concludes, or that an order 

would be reassigned a Trading Collar 

after a halt. 

• Proposed Rule 6.64P–O(f)(3)(A)(iii) 

would provide that orders eligible to 

route that are marketable against Away 

Market Protected Quotations would 

route based on the ranking of such 

orders as set forth in Rule 6.76P–O(c). 

This proposed rule is consistent with 

current functionality and uses Pillar 

terminology based on Rule 7.35– 

E(h)(3)(A)(ii)(a), with differences to use 

the term ‘‘Away Market Protected 

Quotations’’ instead of ‘‘protected 

quotations on Away Markets’’ and to 

cross reference proposed Rule 6.76P– 

O(c).191 As with current functionality, 

routable orders would be routed to 

Away Markets to avoid either trading 

through or locking or crossing an Away 

Market Protected Quotation. 

• Proposed Rule 6.64P–O(f)(3)(A)(iv) 

would provide that after routing eligible 

orders, orders and quotes not eligible to 

route that are marketable against Away 

Market Protected Quotations would 

cancel. This functionality would be new 

for options trading (such orders and 

quotes would currently reprice) and this 

proposed rule is based on Rule 7.35– 

E(h)(3)(A)(ii)(b), with differences to use 

the term ‘‘Away Market Protected 

Quotations’’ instead of ‘‘protected 

quotations on Away Markets.’’ By 

cancelling non-routable orders and 

quotes marketable against Away Market 

Protected Quotations, the Exchange 

would avoid locking or crossing such 

Away Market Protected Quotations. 

• Proposed Rule 6.64P–O(f)(3)(A)(v) 

would provide that once there are no 

more unexecuted orders marketable 

against Away Market Protected 

Quotations, orders and quotes that are 

marketable against other orders and 

quotes in the Consolidated Book would 

trade or be repriced. This proposed rule 

is based on Rule 7.35–E(h)(3)(A)(ii)(c), 

with a difference that an order could be 

repriced based on this assessment, 

which would be unique to options 

trading because as described above, an 

ALO Order that would be marketable 

against a contra-side order or quote on 

the Consolidated Book cannot take 

liquidity and in such case, the Exchange 

would reprice an ALO Order that is 

marketable as provided for in proposed 

Rule 6.62P–O(e)(2).192 The Exchange 

further notes that, similar to the 

Exchange’s cash equity market, the 

Exchange could transition to continuous 

trading without the Auction resulting in 

a trade, but that a trade(s) may occur 

during the transition to continuous 

trading, which trade(s) would be 

published to OPRA before the Exchange 

publishes a quote to OPRA.193 The 

Exchange would not consider a trade 

that occurs during the transition to 

continuous trading to be an Auction that 

results in a trade.194

• Proposed Rule 6.64P–O(f)(3)(A)(vi) 

would provide that Market Orders 

received during a pre-open state would 

be subject to the validation specified in 

proposed Rule 6.62P–O(a)(1)(C). The 

Exchange notes that because such 

Market Orders would already have been 

received by the Exchange, if such orders 

fail one of those validations, they would 

be cancelled instead of rejected. This 

would be new rule text as compared to 

the Exchange’s cash equity rules to 

reflect the validations that would be 

applicable to Market Orders for options 

trading on Pillar and would add 

transparency and granularity to 

Exchange rules. 

• Proposed Rule 6.64P–O(f)(3)(A)(vii) 

would provide that the display quantity 

of Reserve Orders would be replenished. 

This proposed rule is based on Rule 

7.35–E(h)(3)(A)(ii)(d), without any 

substantive differences. This proposed 

rule is based on current functionality 

and provides granularity in Exchange 

rules. 

• Proposed Rule 6.64P– 

O(f)(3)(A)(viii) would describe the last 

step in this process regarding Auctioneligible interest received before the 

Auction Processing Period and orders 

ranked under the proposed category of 

‘‘Priority 3—Non-Display Orders’’ 

received before a trading halt. 

Specifically, the Exchange would send a 

quote to OPRA and proprietary data 

feeds representing the highest-priced 

bid and lowest-priced offer of any 

remaining, unexecuted Auction-eligible 

orders and quotes that were received 

before the Auction Processing Period. 

This proposed rule is consistent with 

current options functionality and is also 

based on current cash equity 

functionality, as set forth in Rule 7.35– 

E(h)(3)(A)(ii). Although the 

functionality would be the same for 

both markets, for options traded on the 

Exchange, the Exchange proposes to 

describe this aspect of the process in 

sequence, and reference both orders and 

quotes. The Exchange notes that this 

quote sent to OPRA would be different 

than the Rotational Quote sent at the 

beginning of the Auction Process 

because it could be comprised of both 

orders and quotes. At a high level, this 

represents current functionality because 

after a series opens, the Exchange 

disseminates its best bid and offer of its 

quotes and orders to OPRA. 

Proposed Rule 6.64P–O(f)(3)(B) would 

provide that next, orders ranked under 

the proposed category of ‘‘Priority 3— 

Non-Display Orders’’ that were received 

during a pre-open state would be 

assigned a new working time, in time 

sequence relative to one another based 

on original entry time, and would be 


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195On its cash equities market, for trading halts 

in Exchange-listed securities, the Exchange reprices 

resting orders to their limit price. See Rule 7.18– 

E(c)(3). 

subject to the Limit Order Price Check, 

Arbitrage Check, and Intrinsic Value 

Check, as applicable, and if not 

cancelled, would be traded or repriced. 

This proposed functionality would be 

new for Pillar and applicable only for 

options traded on the Exchange. Even 

though orders ranked Priority 3—NonDisplay Orders would not be eligible to 

trade in an Auction (other than the 

reserve interest of Reserve Orders), the 

Exchange proposes to accept such 

orders during a pre-open state. These 

orders would transition to continuous 

trading after any unexecuted Auctioneligible interest transitions to 

continuous trading, as described above 

in proposed Rule 6.64P–O(f)(3)(A)(i)– 

(viii). The Exchange believes that 

waiting to process non-displayed orders 

in this sequence would ensure that there 

is an NBBO against which such orders 

could be priced, as described in 

proposed Rule 6.62P–O(d) (regarding 

Orders with a Conditional or 

Undisplayed Price and/or Size) above. 

Proposed Rule 6.64P–O(f)(3)(C) would 

provide that next, orders and quotes that 

were received during the Auction 

Processing Period would be assigned a 

new working time in time sequence 

relative to one another, based on 

original entry time and would be subject 

to the Limit Order Price Check, PreTrade Risk Controls, Arbitrage Check, 

Intrinsic Value Check, and validations 

specified in proposed Rule 6.62P– 

O(a)(1)(A), as applicable to certain 

Market Orders, and if not cancelled 

would be processed consistent with the 

terms of the order or quote. This 

proposed rule text is designed to reflect 

that orders and quotes received during 

the Auction Processing Period would 

not be subjected to these price/risk 

validations until after the Exchange has 

transitioned to continuous trading, and 

that if such interest fails these 

validations, those orders or quotes 

would be cancelled instead of rejected. 

This proposed rule text is based on Rule 

7.35–E(h)(3)(B), with differences to 

reflect the price/risk validations that 

would be applicable to orders and 

quotes for options trading. 

Proposed Rule 6.64P–O(f)(3)(D) would 

further provide that when transitioning 

to continuous trading: 

• The display price and working 

price of orders and quotes would be 

adjusted based on the contra-side 

interest in the Consolidated Book or 

ABBO, as provided for in Rule 6.62P– 

O (proposed Rule 6.64P–O(f)(3)(D)(i)). 

This proposed rule is based on Rule 

7.35–E(h)(3)(C), with differences to 

reflect that, for options trading, the 

display price or working price of an 

order may be adjusted based either on 

contra-side interest on the Consolidated 

Book (e.g., for ALO Orders) or the ABBO 

(as opposed to the PBBO or NBBO for 

cash equities trading). 

• The display price and working 

price of a Day ISO would be adjusted in 

the same manner as a Non-Routable 

Limit Order until the Day ISO is either 

traded in full or displayed at its limit 

price and the display price and working 

price of a Day ISO ALO would be 

adjusted in the same manner as an ALO 

Order until the Day ISO ALO is either 

traded in full or displayed at its limit 

price (proposed Rule 6.64P– 

O(f)(3)(D)(ii)). This proposed rule is new 

for options trading because, as described 

above, the Exchange would be offering 

Day ISO and Day ISO ALO for options 

trading for the first time with the 

transition to Pillar. The rule text is 

based in part on Rule 7.35–E(h)(3)(D), 

with differences to reflect how a Day 

ISO ALO would be processed on 

options as compared to how similarlynamed orders trade on the Exchange’s 

cash equity market, as described in 

more detail above in connection with 

proposed Rule 6.62P–O(e)(3). 

Proposed Rule 6.64P–O(g) would 

describe order processing during a 

trading halt. The proposed rule is based 

in part on Rule 7.18–E(c), with 

differences to reflect how options would 

trade on Pillar as described below. The 

proposed Rule is designed to provide 

granularity in Exchange rules about how 

new and existing orders, quotes, and 

order instructions would be processed 

during a trading halt. As proposed, the 

Exchange would process new and 

existing orders and quotes in a series 

during a trading halt as follows: 

• Cancel any unexecuted quantity of 

orders for which the 500-millisecond 

Trading Collar timer has started and all 

resting Market Maker quotes (proposed 

Rule 6.64P–O(g)(1)). This proposed rule 

would be unique for options traded on 

the Exchange. The Exchange proposes to 

cancel resting Market Maker quotes 

when a trading halt is triggered, which 

represents current functionality, and as 

noted below, would accept new Market 

Maker quotes during a trading halt, 

which would be the basis for the 

Rotational Quote that would be 

published for a Trading Halt Auction. 

The Exchange also proposes to cancel 

any unexecuted quantity of orders for 

which the 500-millisecond Trading 

Collar has started because such timer 

would have ended during a trading halt, 

and therefore such orders were subject 

to cancellation already. This would be 

new functionality on Pillar and reflects 

the proposed new Trading Collar 

behavior that orders would be priced at 

their collar for only 500 milliseconds 

and then would cancel. 

• Re-price all other resting orders on 

the Consolidated Book to their limit 

price. This would be new functionality 

on Pillar for options trading; currently, 

during a halt, resting orders do not 

reprice to their limit price.195 The 

repricing of a Non-Routable Limit 

Order, ALO Order, or Day ISO ALO to 

its limit price during a trading halt 

would not be counted toward the 

(limited) number of times such order 

may be repriced, and any subsequent 

repricing of such order during the 

transition to continuous trading would 

be permitted as the additional 

(uncounted) repricing event as provided 

for in proposed Rules 6.62P–O(e)(1)(B) 

and (e)(2)(C) (proposed Rule 6.64P– 

O(g)(2)). As described above, once 

resting, a Non-Routable Limit Order, 

ALO Order, or Day ISO ALO that was 

repriced on arrival is eligible to be 

repriced only one additional time. This 

proposed rule provides transparency 

that the repricing of such orders to their 

limit price during a trading halt would 

not count towards that ‘‘one’’ additional 

repricing, but that any subsequent 

repricing after the Auction concludes 

would count. 

• Accept and process all 

cancellations (proposed Rule 6.64P– 

O(g)(3)). This proposed rule is based on 

Rule 7.18–E(c)(4), without any 

differences, and is consistent with 

current functionality. 

• Reject incoming Limit Orders 

designated IOC or FOK (proposed Rule 

6.64P–O(g)(4)). This proposed rule is 

based on Rule 7.18–E(c)(5), with a 

difference to add orders designated FOK 

and not include non-displayed orders 

and is consistent with current 

functionality. 

• Accept all other incoming order and 

quote messages and instructions until 

the Auction Processing Period for the 

Trading Halt Auction ends, at which 

point, paragraph (e) of proposed Rule 

6.64P–O would govern the entry of 

incoming orders, quotes, and order 

instructions (proposed Rule 6.64P– 

O(g)(5)). This proposed rule is based on 

Rule 7.18–E(c)(6), with differences to 

cross reference the options rule relating 

to the transition to continuous trading 

and is consistent with current 

functionality. 

• Disseminate a zero bid and zero 

offer quote to OPRA and proprietary 

data feeds (proposed Rule 6.64P– 

O(g)(6)). This proposed rule is based on 


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196 15 U.S.C. 78f(b). 

197 15 U.S.C. 78f(b)(5). 

198See supra note 27 (regarding Cboe Rule 1.1. 

defined term ‘‘ABBO’’). 

current functionality and is designed to 

promote clarity and transparency in 

Exchange rules that when a trading halt 

begins, the Exchange will ‘‘zero’’ out the 

Exchange’s BBO. 

Finally, proposed Rule 6.64P–O(h) 

would provide that whenever, in the 

judgment of the Exchange, the interests 

of a fair and orderly market so require, 

the Exchange may adjust the timing of 

or suspend the Auctions set forth in this 

Rule with prior notice to OTP Holders 

and OTP Firms. This proposed rule is 

based on Rule 7.35–E(i), with a 

difference to reference OTP Holders 

instead of ETP Holders and also 

reference OTP Holders and OTP Firms. 

In connection with proposed Rule 

6.64P–O, the Exchange proposes to add 

the following preamble to Rule 6.64–O: 

‘‘This Rule is not applicable to trading 

on Pillar.’’ This proposed preamble is 

designed to promote clarity and 

transparency in Exchange rules that 

Rule 6.64–O would not be applicable to 

trading on Pillar. 

* * * * * 

As discussed above, because of the 

technology changes associated with the 

migration to the Pillar trading platform, 

subject to approval of this proposed rule 

change, the Exchange will announce by 

Trader Update when rules with a ‘‘P’’ 

modifier will become operative and for 

which symbols. The Exchange believes 

that keeping existing rules on the 

rulebook pending the full migration of 

Pillar will reduce confusion because it 

will ensure that the rules governing 

trading on the OX system will continue 

to be available pending the full 

migration to Pillar. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),196 in general, and furthers the 

objectives of Section 6(b)(5),197 in 

particular, because it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. The Exchange believes 

that the proposed rules to support Pillar 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because the proposed rules 

would promote transparency in 

Exchange rules by using consistent 

terminology governing trading on both 

the Exchange’s cash equity and options 

trading platforms, thereby ensuring that 

members, regulators, and the public can 

more easily navigate the Exchange’s 

rulebook and better understand how 

options trading is conducted on the 

Exchange. 

Generally, the Exchange believes that 

adding new rules with the modifier ‘‘P’’ 

to denote those rules that would be 

operative for the Pillar trading platform 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system by providing transparency of 

which rules would govern trading once 

a symbol has been migrated to the Pillar 

platform. The Exchange similarly 

believes that adding a preamble to those 

current rules that would not be 

applicable to trading on Pillar would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

would promote transparency regarding 

which rules would govern trading on 

the Exchange during and after the 

transition to Pillar. 

In addition, the Exchange believes 

that incorporating functionality 

currently available on the Exchange’s 

cash equity market for options trading 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because the Exchange would be 

able to offer consistent functionality 

across both its options and cash equity 

trading platforms, adapted as applicable 

for options trading. Accordingly, with 

the transition to Pillar, the Exchange 

will be able to offer additional features 

to its OTP Holders and OTP Firms that 

are currently available only on the 

Exchange’s cash equity platform. For 

similar reasons, the Exchange believes 

that using Pillar terminology for the 

proposed new rules would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

would promote consistency in the 

Exchange’s rules across both its options 

and cash equity platforms. 

Definitions and Applicability 

The Exchange believes that the 

proposed amendments to Rule 1.1, 

including copying certain definitions 

from Rule 6.1–O and Rule 6.1A–O to 

Rule 1.1, would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system because the proposed changes 

are designed to promote clarity and 

transparency in Exchange rules by 

consolidating into Rule 1.1 definitions 

relating to both cash equity and options 

trading and specifying, where 

applicable, the differences in definitions 

for each trading platform. The Exchange 

believes that the proposed changes to 

eliminate definitions no longer 

applicable to options trading and to 

modify the text of certain existing 

definitions relating to options trading 

that are being copied to Rule 1.1, would 

further remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it would ensure that the 

definitions used in Exchange rules are 

updated to accurately reflect 

functionality and are internally 

consistent. In particular, the Exchange 

believes that the proposed updates to 

definitions being copied to proposed 

Rule 1.1. from Rules 6.1–O(b) and 6.1A– 

O would add further granularity, clarity 

and transparency to Exchange rules 

making them easier for the investing 

public to navigate. The Exchange 

believes that new terms it proposes to 

include in Rule 1.1 for options trading 

(i.e., MPID, ABBO) would promote 

clarity and transparency in Exchange 

rules.198 Finally, the Exchange believes 

that organizing Rule 1.1 alphabetically 

and eliminating sub-paragraph 

numbering would make the proposed 

rules easier to navigate. 

The Exchange further believes that 

proposed new Rule 6.1P–O relating to 

applicability would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule would include those 

elements of current Rule 6.1–O that 

would remain applicable to options 

trading and eliminates duplicative text 

that would no longer be necessary after 

the transition to Pillar. The Exchange 

further notes that proposed Rule 6.1P– 

O is similar to NYSE American Rule 

900.1NY. 

Order Ranking and Display 

The Exchange believes that proposed 

new Rule 6.76P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the Exchange is not proposing 

substantive changes to how the 

Exchange would rank and display 

orders and quotes on Pillar as compared 

to the OX system. Rather, the proposed 

revisions to the Exchange’s options 

trading rules would remove 

impediments to and perfect the 

mechanism of a free and open market 


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199See supra note 54 (regarding existing handling 

of quotes with reduced size). 

200See supra note 69 (citing Cboe’s Market Order 

NBBO Width Protection, which similarly looks to 

the midpoint of the NBBO in applying this 

protection). 

and a national market system because 

the proposed changes are designed to 

simplify the structure of the Exchange’s 

options rules and use consistent Pillar 

terminology for both cash equity and 

options trading, without changing the 

underlying functionality for options 

trading. For example, the Exchange 

believes the proposed definitions set 

forth in Rule 6.76P–O, i.e., display 

price, limit price, working price, 

working time, and Aggressing Order/ 

Aggressing Quote, would promote 

transparency in Exchange rules and 

make them easier to navigate because 

these proposed definitions would be 

used in other proposed Pillar options 

trading rules. The Exchange notes that 

these proposed definitions are 

consistent with the definitions set forth 

in Rule 7.36–E for cash equity trading 

with terminology differences only as 

necessary to address functionality 

associated with options trading that are 

not applicable to cash equity trading, 

e.g., reference to quotes. 

The Exchange further believes that 

copying descriptions of order type 

behavior, which are currently set forth 

in Rule 6.76–O, to proposed Rule 6.62P– 

O, and therefore not include such detail 

in proposed Rule 6.76P–O, would make 

Exchange rules easier to navigate 

because information regarding how a 

specific order type would operate would 

be in a single location in the Exchange’s 

rulebook. The Exchange notes that this 

proposed structure is consistent with 

the Exchange’s cash equity rules, which 

similarly set forth information relating 

to an order type’s ranking in Rule 7.31– 

E. 

Moreover, the Exchange is not 

proposing any functional changes to 

how it would rank and display orders 

and quotes on Pillar as compared to the 

OX system, except (as noted herein) 

with regard to the treatment of reduced 

quote sizes which would be handled the 

same as orders with reduced size under 

Pillar, which would add consistency 

and transparency to Exchange rules.199

The Exchange believes that using new 

terminology to describe ranking and 

display, including the proposed priority 

categories of Priority 1—Market Orders, 

Priority 2—Display Orders, and Priority 

3—Non-Display Orders, would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule would provide more 

granularity and use Pillar terminology to 

describe functionality that is consistent 

with the OX system functionality 

currently referred to as the ‘‘Display 

Order Process’’ and the ‘‘Working Order 

Process’’ in Rule 6.76–O. 

Order Execution and Routing 

The Exchange believes that proposed 

new Rule 6.76AP–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule would set forth a 

price-time priority model for Pillar that 

is substantively the same as the 

Exchange’s current price-time priority 

model as set forth in Rule 6.76A–O. The 

proposed differences as compared to 

Rule 6.76A–O are designed to use Pillar 

terminology that is based in part on 

Rule 7.37–E, if applicable, without 

changing the functionality that is 

currently available for options trading. 

The Exchange believes that the 

proposed modifications to the LMM 

Guarantee would remove impediments 

to and perfect the mechanism of a free 

and open market and a national market 

system because it provides clarity of 

how multiple quotes from an LMM 

would be allocated (i.e., only the first 

quote in time priority would be eligible 

for the LMM Guarantee and trade at an 

execution price equal to the NBBO). The 

Exchange similarly believes that 

eliminating Directed Order Market 

Makers and Directed Orders would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

these features are not currently used on 

the Exchange, and therefore eliminating 

Directed Orders and Directed Order 

Market Makers would streamline the 

Exchange’s rules. The Exchange notes 

that the remaining differences in 

proposed Rule 6.76AP–O relating to the 

LMM Guarantee are designed to 

promote clarity and transparency in 

Exchange rules and would not introduce 

new functionality. 

The Exchange believes that the 

structure and content of the rule text in 

proposed Rule 6.76AP–O promotes 

transparency by using consistent Pillar 

terminology. The Exchange also believes 

that adding more detail regarding 

current functionality in new Rule 

6.76AP–O, as described above, would 

promote transparency by providing 

notice of when orders would be 

executed or routed by the Exchange. 

Orders and Modifiers 

The Exchange believes that proposed 

new Rule 6.62P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

would use existing Pillar terminology to 

describe the order types and modifiers 

that would be available on the 

Exchange’s options Pillar trading 

system. As noted above, the Exchange 

proposes to offer order types and 

modifiers that are either based on 

existing order types available on the OX 

system as described in Rule 6.62–O, or 

orders and modifiers available on the 

Exchange’s cash equity trading platform, 

as described in Rule 7.31–E, with 

differences as applicable to reflect 

differences in options trading from cash 

equity trading. The Exchange believes 

that structuring proposed Rule 6.62P–O 

based on the structure of Rule 7.31–E 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it would promote 

transparency and consistency in the 

Exchange’s rulebook. 

In addition to the terminology 

changes to describe the order types and 

modifiers that are currently available on 

the Exchange, the Exchange further 

believes that the order types and 

modifiers proposed for options trading 

on Pillar that either differ from order 

types and modifiers available on the OX 

system or that would be new would 

remove impediments to and perfect the 

mechanism of a free and open market 

and national market system because: 

• Market Orders on Pillar would 

function similarly to how Market Orders 

function under current options trading 

rules, including being subject to Trading 

Collars. However, the proposed 

functionality would expand the 

circumstances under which Market 

Orders may be rejected, which 

functionality is designed to ensure that 

Market Orders do not execute either 

when there is no prevailing market in a 

series, which can occur if there is no 

NBO, no NBB and an NBO higher than 

$0.50, or an absence of contra-side 

Market Maker quotations or the ABBO. 

In addition, the proposed functionality 

would provide that if the displayed 

prices are too wide to assure a fair and 

orderly execution of a Market Order, 

such Market Order would be rejected. 

The Exchange believes that the 

proposed ‘‘wide-spread’’ check for 

Market Orders is consistent with similar 

price protections on other options 

exchanges and is designed to prevent a 

Market Order trading at a price that 

could be considered a Catastrophic 

Error.200 The Exchange believes that the 

proposed rule describing Market Orders 

would promote transparency by 

providing notice of when a Market 


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Order would be subject to such 

validations. 

• The Exchange is not proposing any 

new or different behavior for Limit 

Orders than is currently available for 

options trading on the Exchange, other 

than the application of Limit Order 

Price Protection and Trading Collars, 

which would differ on Pillar. The 

Exchange believes using Pillar 

terminology based on Rule 7.31–E(a)(2) 

to describe Limit Orders would promote 

consistency and clarity in Exchange 

rules. 

• The proposed Limit Order Price 

Protection functionality is based in part 

on the existing ‘‘Limit Order Filter’’ for 

orders and price protection filters for 

quotes because an order or quote would 

be rejected if it is priced a specified 

percentage away from the contra-side 

NBB or NBO. The proposed Limit Order 

Price Protection functionality is also 

based in part on the functionality 

available on the Exchange’s cash equity 

trading platform, and therefore is not 

novel. The Exchange believes that using 

the same mechanism for both orders and 

quotes would simplify the operation of 

the Exchange and achieve similar 

results as the current rules, which is to 

reject an order or quote that is priced 

too far away from the prevailing market. 

The Exchange believes that re-applying 

Limit Order Price Protection after an 

Auction concludes would ensure that 

Limit Orders and quotes continue to be 

priced consistent with the prevailing 

market, and that using an Auction Price 

(if available, and if not available, 

Auction Collars, and if not available, the 

NBBO) to assess Limit Orders and 

quotes after an Auction concludes 

would ensure that the Exchange would 

be applying the most recent price in a 

series in assessing whether such orders 

or quotes should be cancelled. The 

Exchange further believes that the 

proposed Specified Thresholds for 

determining whether to reject a Limit 

Order or quote would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

they are designed to be tailored to the 

applicable Reference Price, and thus 

more granular than the current 

thresholds. 

The proposed Trading Collar 

functionality is based in part on how 

trading collars currently function on the 

Exchange because the proposed 

functionality would create a ceiling or 

floor price at which an order could be 

traded or routed. The Exchange believes 

that the proposed differences for 

Trading Collars on Pillar, including 

applying the same Trading Collar logic 

to both Limit Orders and Market Orders, 

applying them once per trading day 

(unless there is a trading halt), tailoring 

the specified thresholds to be within the 

current parameters for determining 

whether a trade would be an Obvious 

Error or Catastrophic Error, and 

canceling orders that have been 

displayed at their Trading Collar for 500 

milliseconds, would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

they are designed to provide a 

deterministic price protection 

mechanism for orders. In addition, the 

proposed Pillar Trading Collar 

functionality is designed to simplify the 

process by applying a static ceiling price 

(for buy orders) or floor price (for sell 

orders) at which such order could be 

traded or routed that would be 

applicable to the order until it is traded 

or cancelled. The Exchange believes that 

the proposal to explicitly add reference 

to Cross Orders being excluded from 

Trading Collars would add granularity 

to the proposed rule functionality. The 

Exchange believes that the proposed 

functionality would provide greater 

determinism to an OTP Holder or OTP 

Firm of the Trading Collar that would be 

applicable to its orders and when such 

orders may be cancelled if it reaches its 

Trading Collar. 

• The Exchange is not proposing any 

new or different Time-in-Force 

modifiers than are currently available 

for options trading on the Exchange. 

The Exchange believes using Pillar 

terminology based on Rule 7.31–E(b) to 

describe the time-in-force modifiers 

would promote consistency and clarity 

in Exchange rules. 

• Auction-Only Orders, and 

specifically, the proposed MOO and 

LOO Orders, would operate no 

differently than how ‘‘Opening-Only 

Orders’’ currently function on the OX 

system. However, rather than refer to 

Opening-Only Orders, the Exchange 

proposes to use Pillar terminology that 

is based on Rule 7.31–E(c) terminology. 

The Exchange further believes that 

offering its IO Order type for Auctions 

on the options trading platform—both 

for Core Open Auctions and Trading 

Halt Auctions—would provide OTP 

Holders and OTP Firms with new, 

optional functionality to offset an 

Imbalance in an Auction. The proposed 

availability of the IO Order on the 

options platform would be more 

expansive than is currently available on 

the Exchange’s cash equity platform, 

which (unlike options) does not account 

for quotes in determining an Imbalance 

and which limits the use of IO Orders 

solely to Trading Halt Auctions. The 

Exchange believes this proposed 

functionality would afford OTP Holders 

and OTP Firms with greater flexibility 

for all Auctions on Pillar. 

• The Exchange would continue to 

offer Reserve Orders, AON Orders, Stop 

Orders, and Stop Limit Orders, which 

are currently available on the OX 

system. The proposed differences to 

Reserve Orders for options trading 

would harmonize with how Reserve 

Orders function on the Exchange’s cash 

equity market, with changes as 

applicable to address options trading 

(e.g., no round lot/odd lot concept for 

options trading). The proposal that the 

reserve interest of a Reserve Order could 

never have a working price that is more 

aggressive than the working price of the 

display quantity of the Reserve Order 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it is designed to ensure 

that the reserve interest of a Reserve 

Order to buy (sell) would never trade at 

a price higher (lower) than the working 

price of the display quantity of the 

Reserve Order. The proposed changes to 

AON Orders would provide greater 

execution opportunities for such orders 

by allowing them to be integrated in the 

Consolidated Book and once resting, 

trade with incoming orders and quotes. 

The changes are also based on how 

orders with an MTS Modifier, which are 

also conditional orders, function on the 

Exchange’s cash equity market. The 

Exchange believes it is appropriate to 

opt not to support Market Orders 

designated as AON on Pillar because 

such functionality was not used often 

on the OX system, indicating a lack of 

market participant interest in this 

functionality. The proposed differences 

for Stop Orders and Stop Limit Orders 

are designed to promote transparency by 

providing clarity of circumstances when 

either order may be rejected on arrival 

(in the case of Stop Limit Orders) or 

elected and make clear that, once 

elected, such orders are subject to the 

price protection and risk checks 

applicable to Market Orders and Limit 

Orders, respectively. Finally, the 

Exchange believes that offering NonDisplayed Limit Orders for options 

trading on Pillar, which are available on 

the Exchange’s cash equity platform, 

would provide additional, optional 

trading functionality for OTP Holders 

and OTP Firms. The Exchange notes 

that the proposed Non-Displayed Limit 

Order would function similarly to how 

a PNP Blind Order that locks or crosses 

the contra-side NBBO would be 

processed because in such 

circumstances, a PNP Blind Order is not 

displayed. A Non-Displayed Limit 


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201As discussed supra, the proposed NonRoutable Limit Order functionality is also 

consistent with the treatment of Market Makers 

quotes not designated as MMRP (i.e., such quotes 

cancel if locking or crosses the NBBO). See supra 

note 9899. 

202As discussed supra, the proposed ALO Order 

functionality is also consistent with the treatment 

of Market Makers quotes not designated as MMALO 

(i.e., such quotes cancel if locking or crosses the 

NBBO). See supra note 98. 

203See supra notes 121, 122 (citing to availability 

of Day ISO orders on Nasdaq and Cboe). 

204See supra notes 124, 127, and 128 (citing 

Complex QCC Order type, as offered on MIAX and 

Cboe). 

Order would differ from a PNP Blind 

Order only because it would never be 

displayed, even if its limit price doesn’t 

lock or cross the contra-side NBBO. 

• The Exchange believes that the 

proposed orders (and quotes) with 

instructions not to route (i.e., NonRoutable Limit Order, ALO Order, and 

ISOs) would streamline the offerings 

available for options trading on the 

Exchange by making the functionality 

the same for both orders and quotes and 

consolidating the description of nonroutable orders and quotes in proposed 

Rule 6.62P–O(e), thereby adding clarity 

and transparency. The Exchange 

believes that using Pillar terminology, 

including order type names (for orders 

and quotes), based on the terminology 

used for cash equity trading would 

promote clarity and consistency across 

the Exchange’s cash equity and options 

trading platforms. 

• The Exchange believes that the 

proposed Non-Routable Limit Order is 

not novel because it is based on how the 

PNP, RPNP, and MMRP orders and 

quotes currently function on the OX 

system, including the continued 

availability of the option to designate a 

non-routable order either to cancel or 

reprice if it is marketable against an 

ABBO.201 As such, the Exchange 

believes that the proposed non-routable 

order/quote types would continue to 

provide OTP Holders and OTP Firms 

with the core functionality associated 

with existing non-routable order/quote 

types, including that the proposed rules 

would provide for the ability to either 

reprice or cancel such orders/quotes. 

The Exchange believes that providing 

additional options to cancel a resting 

Non-Routable Limit Order or ALO Order 

rather than reprice an additional time 

would provide additional choice to 

market participants. And the Exchange 

believes that not offering this second 

cancellation designation to Market 

Makers would assist Market Makers in 

maintaining quotes in their assigned 

series by reducing the potential to 

interfere with a Market Maker’s ability 

to maintain their continuous quoting 

obligations. 

Similarly, the proposed ALO Order is 

not novel because it is based in part on 

how the RALO and MMALO orders and 

quotes currently function on the OX 

system, including the continued 

availability of the option to cancel an 

ALO Order if it would lock or cross the 

ABBO.202 As such, the Exchange 

believes that the proposed non-routable 

order/quote types would continue to 

provide OTP Holders and OTP Firms 

with the core functionality associated 

with existing non-routable order/quote 

types that would not be offered under 

Pillar, including that the proposed rules 

would provide for non-routable 

functionality and the ability to either 

reprice or cancel such orders/quotes. 

The Exchange believes the proposed 

functionality to allow an ALO Order 

(which can never be a liquidity taker) to 

lock non-displayed interest (which is 

consistent with the treatment of ALO 

Orders on the Exchange’s cash equity 

platform) or to reprice if such order 

crosses non-displayed interest, would 

reduce potential repricing or 

cancellation events for an incoming 

ALO Order and would likewise reduce 

potential information leakage about 

non-displayed interest in the 

Consolidated Book. Further, the 

Exchange believes the proposed 

functionality to reprice an ALO Order 

when its limit price crosses nondisplayed interest on the Consolidated 

Book, to have a working price and 

display price equal to the best-priced 

non-displayed interest on the Exchange, 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it would ensure that an 

ALO Order never trades as a liquiditytaker, thereby eliminating the potential 

for an ALO Order to cross nondisplayed interest on the Consolidated 

Book. And the Exchange believes that 

not offering the second cancellation 

designation to Market Makers that 

designated an ALO Order as a quote 

would assist Market Makers in 

maintaining quotes in their assigned 

series by reducing the potential to 

interfere with a Market Maker’s ability 

to maintain their continuous quoting 

obligations. 

Finally, the proposed IOC ISO is not 

novel for options trading on the 

Exchange and the Exchange believes 

that the proposed Pillar terminology to 

describe the same functionality would 

promote transparency. The proposed 

Day ISO and Day ISO ALO functionality 

would be new for options trading and 

are based in part on how such order 

types function in the Exchange’s cash 

equity market. In addition, the proposed 

Day ISO functionality is consistent with 

existing Rule 6.95–O(b)(3), which 

currently provides an exception to 

locking or crossing an Away Market 

Protected Quotation if the OTP Holder 

or OTP Firm simultaneously routed an 

ISO to execute against the full displayed 

size of any locked or crossed Protected 

Bid or Protected Offer. The Exchange 

notes that this exception is not 

necessary for IOC ISOs because such 

orders would never be displayed at a 

price that would lock or cross a 

Protected Quotation; they cancel if they 

cannot trade. Accordingly, this existing 

exception in the Exchange’s rules 

contemplates an ISO that would be 

displayed, which would mean it would 

need a time-in-force modifier of ‘‘Day.’’ 

In addition, Day ISOs are available for 

options trading on other options 

exchanges, and therefore are not 

novel.203

• The Exchange believes that the 

proposed additional detail defining 

Complex Orders to define the ‘‘legs’’ 

and ‘‘components’’ of such orders 

would promote transparency in 

Exchange rules. 

• On Pillar, the only electronicallyentered crossing orders would be QCC 

Orders, which is consistent with current 

functionality. The Exchange believes 

that the proposed differences to how 

QCC Orders would function, including 

using Pillar terminology and 

consolidating rule text relating to QCC 

Orders in proposed Rule 6.62P–O, 

would promote transparency and clarity 

in Exchange rules. The proposed 

description of Complex QCC Orders is 

designed to distinguish such orders 

from single-leg QCC Orders and to 

promote clarity and transparency in 

Exchange rules regarding the price 

requirements for a Complex QCC Order. 

Further, Complex QCC are available for 

trading on other options exchanges, and 

therefore are not novel.204

• The Exchange believes that moving 

the descriptions of orders available only 

in open outcry from Rule 6.62–O to 

proposed Rule 6.62P–O(h) would ensure 

that these order types remain in the 

rulebook after the transition to Pillar is 

complete. For CTB Orders, the Exchange 

believes that, because Floor Brokers 

have an existing obligation to satisfy 

better-priced interest on the 

Consolidated Book, the proposed 

change to automate such priority on 

Pillar (i.e., to allow CTB Orders to 

satisfy any displayed interest (including 

non-Customer interest) at better prices 

than the latest-arriving displayed 


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205See supra note 139 (citing NYSE Arca Fee 

Schedule, Port Fees, and the ability for Market 

Makers to pay for upwards of forty order/quote 

entry ports per month). 

206See supra note 146 (citing optional ‘‘Kill 

Switch’’ functionality available on Cboe). 

Customer interest) would not only make 

it easier for Floor Brokers to comply 

with Exchange priority rules, but would 

also increase execution opportunities 

and achieve the goal of a CTB Order. 

The Exchange also believes that 

codifying this order type and the 

associated regulatory obligations would 

add clarity and transparency in 

Exchange rules. 

• The proposed Proactive if Locked/ 

Crossed Modifier, STP Modifier, and 

MTS Modifier are not novel and are 

based on the Exchange’s current cash 

equity modifiers of the same name. The 

Exchange believes that extending the 

availability of these existing modifiers 

to options trading would provide OTP 

Holders and OTP Firms with additional, 

optional functionality that is not novel 

and is based on existing Exchange rules. 

Further, such proposed optional 

functionality would afford OTP Holders 

and OTP Firms with greater flexibility 

in specifying how their trading interest 

should be handled. For example, the 

proposed MTS Modifier works similarly 

to the existing (and proposed) AON 

functionality, but provides the OTP 

Holder or OTP Firm with the alternative 

to designate a portion smaller than the 

full quantity as the minimum trade size. 

The Exchange further believes that 

extending the availability of STP 

Modifiers to all orders and quotes, and 

not just those of Market Makers, would 

provide additional protections for OTP 

Holders and OTP Firms and facilitate 

their compliance and risk management 

by assisting them in avoiding 

unintentional wash-sale trading. 

Market Maker Quotations 

The Exchange believes that proposed 

Rule 6.37AP–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

is based on current Rule 6.37A–O, with 

such changes as necessary to clarify 

functionality and to use Pillar 

terminology. The Exchange believes that 

the proposed detail (consistent with 

current functionality) to make clear that 

same-side quotations sent by a Market 

Maker over the same order/quote entry 

port would be replaced would add 

clarity and transparency to Exchange 

rules.205 The Exchange believes that 

consolidating into one rule functionality 

for orders and quotes, such that NonRoutable Limit Orders and ALO Orders 

may be designated as quotes per 

proposed Rule 6.37AP–O, would 

obviate the need to separately describe 

the same functionality in two rules and 

therefore streamline the Exchange’s 

rules and promote transparency and 

consistency. As noted above, the 

Exchange believes that the quoting 

functionality available in the proposed 

Non-Routable Limit Order and ALO 

Order would continue to provide 

Market Makers with the core 

functionality associated with existing 

quote types, including that the proposed 

rules would provide for the ability to 

either reprice or cancel such quotes. 

Pre-Trade and Activity-Based Risk 

Controls 

The Exchange believes that the 

proposed Rule 6.40P–O, setting forth 

pre-trade and activity-based risk 

controls, would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system and promote just and equitable 

principles of trade because the proposed 

functionality would incorporate existing 

activity-based risk controls, without any 

substantive differences, and augment 

them with additional pre-trade risk 

controls and related functionality that 

are based on the pre-trade risk controls 

currently available on the Exchange’s 

cash equity trading platform. The 

Exchange believes that the proposed 

differences are designed to provide 

greater flexibility to OTP Holders and 

OTP Firms in how to set risk controls 

for both orders and quotes. The 

Exchange believes that using Pillar 

terminology based on the cash equity 

rules, including using the term 

‘‘Entering Firm’’ to mean OTP Holders 

and OTP Firms, including Market 

Makers, would promote transparency in 

Exchange rules. In addition, the 

proposed Single Order Maximum 

Notional Value Risk Limit and Single 

Order Maximum Quantity Risk Limit 

checks would provide Entering Firms 

with additional risk protection 

mechanisms on an individual order or 

quote basis. Moreover, the Exchange 

believes that aggregating a Market 

Maker’s quotes and orders for purposes 

of calculating activity-based risk 

controls would better reflect the 

aggregate risk that a Market Maker has 

with respect to its quotes and orders. 

The Exchange further believes that the 

proposed Automated Breach Actions 

would provide Entering Firms with 

additional flexibility in how they could 

set their risk mechanisms and the 

automated responses if a risk 

mechanism is breached. The proposed 

Kill Switch Action functionality would 

also provide OTP Holders and OTP 

Firms with greater flexibility to provide 

bulk instructions to the Exchange with 

respect to cancelling existing orders and 

quotes and blocking new orders and 

quotes. Further, as noted herein, 

providing ‘‘Kill Switch Action’’ 

functionality in Exchange rules is 

consistent with the rules of other 

options exchanges.206

Price Reasonability Checks—Orders and 

Quotes 

The Exchange believes that the 

proposed Rule 6.41P–O, setting forth 

Price Reasonability Checks, would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

they are based on existing functionality, 

with differences designed to use Pillar 

terminology and promote consistency 

and transparency in Exchange rules. 

Specifically, on Pillar, the Exchange 

proposes to apply the same types of 

Price Reasonability Checks to both 

orders and quotes, and therefore 

proposes to describe those checks in a 

single rule—proposed Rule 6.41P–O. 

The proposed rule would add an 

Intrinsic Value Check for quotes under 

Pillar (in addition to orders) and this 

check would enhance existing price 

protection features for quotes and 

provide Market Makers greater control 

and flexibility over setting risk tolerance 

and exposure for their quotes. The 

proposed rule also provides specificity 

regarding when the Price Reasonability 

Checks would be applied to an order or 

quote, which would promote 

transparency and clarity in Exchange 

rules. In addition, the Exchange believes 

that by utilizing the last sale on the 

Primary Market (rather than the 

Consolidated Last Sale) for the Price 

Reasonability Checks, the Pillar system 

would need to ingest and process less 

data, thereby improving efficiency and 

performance of the system without 

compromising the price protection 

features. 

Auction Process 

With the proposed Auction Process, 

the Exchange endeavors to attract the 

highest quality quote for each series at 

the open to attract order flow for the 

auction. While the Exchange does not 

require Market Makers assigned to a 

series to quote before a series can be 

opened (or reopened)—which is 

consistent with the current rule—the 

Exchange believes that providing time 

for such Market Makers to do so would 

promote a fair and orderly market by 

providing both better and more 

consistent prices on executions to OTP 

Holders and OTP Firms in an Auction 


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Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 5647 

207As noted herein, the concept of a Calculated 

NBBO is consistent with similar concepts utilized 

on other options exchanges and is therefore not new 

or novel. See, e.g., Cboe Rule 5.31(a) (regarding 

used of ‘‘Composite Market’’ concept). 

208See supra notes 174, 176. 

209See supra note 171. 

210As noted, infra, although the Exchange does 

not require that Market Makers assigned to a series 

quote at the open, once a series is opened for 

trading, Market Makers are nonetheless required to 

continuously fulfill their obligations to engage in a 

course of dealings reasonably calculated to 

contribute to the maintenance of a fair and orderly 

market. 

and facilitate a fair and orderly 

transition to continuous trading. 

The Exchange believes that proposed 

Rule 6.64P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule maintains the 

fundamentals of an auction process that 

is tailored for options trading while at 

the same time enhancing the process by 

incorporating certain Pillar auction 

functionality that is currently available 

on the Exchange’s cash equity platform, 

as described in Rule 7.35–E. For 

example, the Exchange proposes to 

augment the imbalance information that 

would be disseminated in advance of an 

Auction to include fields available on 

the Exchange’s cash equity market (e.g., 

Book Clearing Price, Far Clearing Price, 

Auction Collars, and Auction 

Indicators), yet tailor such information 

to be specific to options trading (e.g., 

Auction Collars based on a Legal Width 

Quote and how the Auction Indicator 

would be determined). The Exchange 

believes that the proposed additional 

Auction Imbalance Information would 

promote transparency to market 

participants in advance of an Auction. 

The Exchange also proposes to 

transition to continuous trading 

following an Auction in a manner 

similar to how the Exchange’s cash 

equity market transitions to continuous 

trading following a cash equity Trading 

Halt Auction, including how orders and 

quotes that are received during an 

Auction Processing Period would be 

processed, which the Exchange believes 

would promote consistency across the 

Exchange’s options and cash equity 

trading platforms. The proposed rule 

describing how orders and quotes that 

are received during the Auction 

Processing Period would be handled, 

and how unexecuted quotes and orders 

would be transitioned to continuous 

trading would provide granularity 

regarding the process, thereby providing 

transparency in Exchange rules. Because 

the Exchange would be harnessing Pillar 

technology to support Auctions for 

options trading, the Exchange believes 

that structuring proposed Rule 6.64P–O 

based on Rule 7.35–E (and NYSE Rule 

7.35, in part, as well) would promote 

transparency in the Exchange’s trading 

rules. 

The Exchange further believes that the 

proposed Auction Process for options 

trading on Pillar would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. The 

proposed process maintains the core 

functionality of the current options 

auction process, including that orders 

are matched based on price-time 

priority and that an Auction would not 

be conducted if the bid-ask differential 

is not within an acceptable range. As 

proposed, the Auction Process on Pillar 

would begin with the proposed 

Rotational Quote, which would provide 

notice not only of when the process 

would begin, but also whether Market 

Makers on the Exchange have quoted in 

a series. Similar to the current rule, the 

Exchange would require a ‘‘Calculated 

NBBO,’’ which is calculated using 

information consistent with the 

information the Exchange receives from 

OPRA before the Exchange opens a 

series, to meet specified requirements, 

including that it not be crossed, not 

have a zero offer, and that it not exceed 

a maximum differential that is 

determined by the Exchange on a class 

by class basis and announced by Trader 

Update, i.e., be a ‘‘Legal Width Quote’’ 

before a series can be opened with a 

trade.207 Allowing the Exchange the 

flexibility to determine the maximum 

differential for the Calculated NBBO for 

a Legal Width Quote is consistent with 

functionality and accompanying 

discretion available on other options 

exchanges and allows the Exchange to 

consider the different market models 

and characteristics of different classes, 

as well as modify amounts in response 

to then-current market conditions.208 In 

addition, the proposed discretion to 

modify acceptable bid-ask differential is 

also consistent with discretion 

Exchange has today on the OX 

system.209 In addition, the Exchange 

believes that the proposed Auction 

Trigger, which would begin the Auction 

Process, is consistent with the current 

trigger for starting an auction. The 

Exchange believes that the proposed 

difference to allow the trade on the 

Primary Market to be odd-lot sized (in 

addition to having a quote from the 

Primary Market, which means that the 

underlying security would be open on 

the Primary Market), would allow for 

series overlaying low-volume securities 

to open automatically and reduce the 

need to manually trigger an Auction in 

a series. 

As with the current rule, on Pillar, 

Market Makers are not obligated to 

quote in their assigned series for an 

Auction. However, the Exchange 

believes that providing Market Maker(s) 

assigned to a series the opportunity to 

quote within the bid-ask differential 

before opening a series for trading 

would promote fair and orderly 

Auctions and facilitate a fair and orderly 

transition to continuous trading. In 

particular, rather than layer additional 

quoting requirements on the Market 

Making community, the Exchange 

believes it would be more beneficial to 

all market participants to employ 

alternative methods to help ensure an 

orderly transition to continuous trading. 

As such, the Exchange believes that the 

proposed so-called ‘‘waterfall’’ approach 

to opening, would offer a number of 

checks that are intended to provide 

adequate opportunity for a greater 

number of Market Makers to provide 

their liquidity interest and help ensure 

increased liquidity at a level 

commensurate with which the market is 

accustomed during continuous trading 

on the Exchange. In short, although the 

Exchange does not require a Market 

Maker assigned to a series to quote on 

the Exchange in order to open or reopen 

a series for trading, the Exchange 

believes that providing Market Makers 

assigned to a series the opportunity to 

do so would promote a fair and orderly 

Auction process and facilitate a fair and 

orderly transition to continuous 

trading.210

Accordingly, the Exchange proposes a 

difference on Pillar to provide time for 

Market Maker(s) assigned to a series to 

enter quotes within the specified bidask differentials before a series could be 

opened or reopened for trading. The 

proposed Opening MMQ Timer(s) 

would each be 30 seconds. The 

proposed rule provides transparency of 

how many Market Makers assigned to a 

series would be required to quote in a 

series and in what time periods. As 

noted above, the proposed Auction 

Process is designed to attract the highest 

quality quote for each series at the open 

to attract order flow from any resting 

interest best quality quotes at the open 

of each series. As such, the Exchange 

believes it is reasonable to require more 

than one Opening MMQ Timer (with a 

maximum run time of one minute—30 

seconds × 2) to run when there are at 

least two Market Markers because it 

allows the Exchange time to attract the 

best quote from these market 

participants, which in turn should 

attract order flow to the Exchange at the 

open (i.e., the Exchange can leverage the 

highest bid and lowest offer from the 


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5648 Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 

211See, e.g., Cboe Rule 5.31. 

212See, e.g., Cboe and its affiliated exchanges. 

213 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

214 15 U.S.C. 78f(b)(5). 

various Marker Makers that submit 

quotes). The Exchange believes that if a 

Legal Width Quote is not obtained in 

the first 30-second Opening MMQ 

Timer, it is to the benefit of all market 

participants to begin a second Opening 

MMQ Timer to allow the bid-ask 

differential to tighten before a series is 

opened. If Market Makers do not quote 

within those specified time periods, but 

at the end of the Opening MMQ 

Timer(s) there is a Legal Width Quote 

based on the ABBO, the Exchange 

would open or reopen that series for 

trading. The Exchange believes that the 

proposed waterfall approach (i.e., 

setting minimum time periods for a 

Market Maker assigned to a series to 

quote within the specified bid-ask 

differential before opening a series, even 

if there is a Legal Width Quote) would 

appropriately balance the benefits of 

increasing the opportunities for Market 

Makers assigned to a series to enter 

quotations within the specified bid-ask 

differential, with a timely series opening 

or reopening when there is a Legal 

Width Quote even when it does not 

include quotes of Market Makers 

assigned to the series. In addition, the 

Exchange believes that expanding the 

opportunities for Market Makers to enter 

the market would result in deeper 

liquidity—which market participants 

have come to expect in options with 

multiple assigned Market Makers, and a 

more stable trading environment. 

The Exchange believes that the 

proposed rule would promote 

transparency in Exchange rules of when 

the Exchange could open or reopen a 

series, including circumstances of when 

the Exchange would wait to provide 

Market Makers time to submit a twosided quotation in a series and when the 

Exchange would proceed with opening 

or reopening a series based on a Legal 

Width Quote even if there are no Market 

Maker quotes in that series. 

The proposed rule would also provide 

transparency of when the Exchange 

would open or reopen a series for 

trading when the Calculated NBBO is 

wider than the Legal Width Quote for 

the series. The Exchange believes that 

the proposed process is designed to 

provide additional opportunities for a 

series to open or reopen not currently 

available on the OX system, while at the 

same time preserving the existing 

requirement that a series would not 

open on a trade if there is no Legal 

Width Quote. The proposed 

functionality to provide additional 

opportunities to open or reopen a series 

when the market is wider than the 

specified bid-ask differentials is not 

novel, and the Exchange believes that 

this proposed rule would allow for more 

automated Auctions on the Exchange for 

series that may already be opened on 

another exchange.211

Finally, the proposed rule describing 

how existing and new orders would be 

processed during a trading halt is 

designed to provide additional 

granularity in Exchange rules. Certain of 

the proposed functionality is based on 

current processes. The Exchange 

believes that the proposed differences in 

order/quote handling would remove 

impediments to and perfect the 

mechanism of a free and open market 

because they align with the proposed 

differences in behavior for specified 

orders and quotes on Pillar. For 

example, the Exchange believes that 

repricing resting non-routable orders 

and quotes during a trading halt to their 

limit price would be consistent with 

how such orders would be processed in 

an Auction if they arrived during a preopen state. The proposed differences 

also reflect that on Pillar, ALO Orders 

would be eligible to participate in an 

Auction. In addition, the Exchange 

believes that canceling orders that are 

subject to the Trading Collar 500 

millisecond timer would be consistent 

with the intent of such functionality, 

which is to cancel such collared orders 

after a specified time period. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange operates in a competitive 

market and regularly competes with 

other options exchanges for order flow. 

The Exchange believes that the 

transition to Pillar would promote 

competition among options exchanges 

by offering a low-latency, deterministic 

trading platform. The proposed rule 

changes would support that intermarket competition by allowing the 

Exchange to offer additional 

functionality to its OTP Holders and 

OTP Firms, thereby potentially 

attracting additional order flow to the 

Exchange. Otherwise, the proposed 

changes are not designed to address any 

competitive issues, but rather to amend 

the Exchange’s rules relating to options 

trading to support the transition to 

Pillar. As discussed in detail above, 

with this rule filing, the Exchange is not 

proposing to change its core 

functionality regarding its price-time 

priority model, and in particular, how it 

would rank, display, execute or route 

orders and quotes. Rather, the Exchange 

believes that the proposed rule changes 

would promote consistent use of 

terminology to support both options and 

cash equity trading on the Exchange, 

making the Exchange’s rules easier to 

navigate. The Exchange does not believe 

that the proposed rule changes would 

raise any intra-market competition as 

the proposed rule changes would be 

applicable to all OTP Holders and OTP 

Firms, and reflects the Exchange’s 

existing price-time priority model, 

including existing LMM Guarantee. 

The Exchange does not believe that 

the proposed waterfall approach would 

result in an undue burden on intramarket competition. It would apply 

equally to all similarly-situated Market 

Makers regarding their assigned series. 

Market Makers are encouraged but not 

required to quote in their assigned series 

at the open, thus they are not subject to 

additional obligations. The Exchange 

believes that encouraging, rather than 

requiring, participation of such Market 

Makers at the open, may increase the 

availability of Legal Width Quotes in 

more series, thereby allowing more 

series to open. Improving the validity of 

the opening price benefits all market 

participants and also benefits the 

reputation of the Exchange as being a 

venue that provides accurate price 

discovery. With respect to inter-market 

competition, the Exchange notes that 

most options markets do not require 

Market Makers to quote during the 

opening.212

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Discussion and Commission 

Findings 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change, as modified by Amendment 

No. 4, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.213 In 

particular, the Commission finds that 

the proposed rule change, as modified 

by Amendment No. 4, is consistent with 

Section 6(b)(5) of the Act,214 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 


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Federal Register / Vol. 87, No. 21 / Tuesday, February 1, 2022 / Notices 5649 

215See supra note 27 (regarding Cboe Rule 1.1. 

defined term ‘‘ABBO’’). 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest, and that the rules of a 

national securities exchange not be 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

To enable the transition of its options 

trading platform to its Pillar technology 

platform, the Exchange proposes several 

changes to relevant Exchange rules. The 

Exchange states its equity markets, as 

well as those of its national securities 

exchange affiliates’ cash equity markets 

are currently operating on Pillar, and 

that, for the transition of its options 

trading platform, the Exchange proposes 

to use the same Pillar technology 

already in operation for its cash equity 

market. The Exchange represents that by 

migrating its options trading to the 

Pillar trading platform, it will be able to 

offer not only common specifications for 

connecting to both of its cash equity and 

equity options markets, but also 

common trading functions. 

Definitions and Applicability 

The Exchange states that the proposed 

amendments to Rule 1.1, including 

copying certain definitions from Rule 

6.1–O and Rule 6.1A–O to Rule 1.1, 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because the proposed changes 

are designed to promote clarity and 

transparency in Exchange rules by 

consolidating into Rule 1.1 definitions 

relating to both cash equity and options 

trading and specifying, where 

applicable, the differences in definitions 

for each trading platform. The Exchange 

further represents that the proposed 

changes to eliminate definitions no 

longer applicable to options trading and 

to modify the text of certain existing 

definitions relating to options trading 

that are being copied to Rule 1.1 would 

further remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because it would ensure that the 

definitions used in Exchange rules are 

updated to accurately reflect 

functionality and would also ensure an 

internally consistent rulebook. In 

particular, the Exchange states that the 

proposed updates to definitions being 

copied to proposed Rule 1.1 from Rules 

6.1–O(b) and 6.1A–O would add further 

granularity, clarity and transparency to 

Exchange rules, which the Exchange 

believes would make them easier to 

navigate. The Exchange further states 

that the new terms it proposes to 

include in Rule 1.1 for options trading 

(e.g., MPID, ABBO) would promote 

clarity and transparency in Exchange 

rules.215 Finally, the Exchange believes 

that organizing Rule 1.1 alphabetically 

and eliminating sub-paragraph 

numbering would make the proposed 

rules easier to navigate. Based on the 

Exchange’s representations, the 

Commission believes that the proposed 

changes to the Exchange’s definitions 

are consistent with Act because they are 

designed to add clarity, transparency 

and consistency to the Exchange’s 

Rules. For these reasons, the 

Commission believes that the proposed 

changes to the Exchange’s definitions 

should remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and in general, protect investors 

and the public interest. 

The Exchange further represents that 

proposed new Rule 6.1P–O relating to 

applicability would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule would include those 

elements of current Rule 6.1–O that 

would remain applicable to options 

trading and eliminate duplicative text 

that would no longer be necessary after 

the transition to Pillar. The Exchange 

further notes that proposed Rule 6.1P– 

O is similar to NYSE American Rule 

900.1NY. For these reasons, the 

Commission believes that the adoption 

of proposed Rule 6.1P–O relating to the 

continued applicability of certain rules 

after the transition to the Pillar trading 

platform should remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and in general, protect investors 

and the public interest because it would 

streamline rule text and clarify the 

application of certain existing rules 

once options trading is transitioned to 

the Pillar trading platform. 

Order Ranking and Display 

The Exchange represents that changes 

proposed in Rule 6.76P–O are designed 

to simplify the structure of the 

Exchange’s options rules and use 

consistent Pillar terminology for both 

cash equity and options trading without 

substantively changing the underlying 

functionality for options trading, and 

that they therefore do not represent a 

substantive change from how the 

Exchange would rank and display 

orders and quotes on Pillar as compared 

to the OX system today. The Exchange 

represents that these proposed 

definitions are consistent with the 

definitions set forth in Rule 7.36–E for 

cash equity trading with terminology 

differences only as necessary to address 

functionality associated with options 

trading that are not applicable to cash 

equity trading, e.g., reference to quotes. 

Moreover, the Exchange represents 

that it is not proposing any functional 

changes to how it would rank and 

display orders and quotes on Pillar as 

compared to the OX system, except with 

regard to the treatment of reduced quote 

sizes which would be handled the same 

as orders with reduced size under Pillar, 

which the Exchange states would add 

consistency and transparency to 

Exchange rules. The Exchange states it 

believes that using new terminology to 

describe ranking and display, including 

the proposed priority categories of 

Priority 1—Market Orders, Priority 2— 

Display Orders, and Priority 3—NonDisplay Orders, would provide more 

granularity and use Pillar terminology to 

describe functionality that is consistent 

with the OX system functionality 

currently referred to as the ‘‘Display 

Order Process’’ and the ‘‘Working Order 

Process’’ in Rule 6.76–O. The 

Commission believes that proposed new 

Rule 6.76P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed rule would not introduce 

substantive changes to how the 

Exchange would rank and display 

orders and quotes on Pillar as compared 

to the OX system; rather, the proposed 

revisions would simplify the structure 

of the Exchange’s options rules and use 

consistent Pillar terminology for both 

cash equity and options trading, without 

changing the underlying functionality 

for options trading. 

Order Execution and Routing 

The Exchange represents that 

proposed new Rule 6.76AP–O would set 

forth a price-time priority model for 

Pillar that is substantively the same as 

the Exchange’s current price-time 

priority model as set forth in Rule 

6.76A–O, and that proposed differences 

as compared to Rule 6.76A–O are (1) 

designed to use Pillar terminology that 

is based in part on Rule 7.37–E, if 

applicable, without changing the 

functionality that is currently available 

for options trading, (2) eliminate 

features not currently used on the 

Exchange, and (3) promote clarity and 

transparency without introducing new 

functionality. The Exchange states it is 


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eliminating Directed Order Market 

Makers and Directed Orders because 

these features are not currently used on 

the Exchange, and therefore eliminating 

Directed Orders and Directed Order 

Market Makers would streamline the 

Exchange’s rules. The Exchange 

represents that the remaining 

differences in proposed Rule 6.76AP–O 

relating to the LMM Guarantee are 

designed to promote clarity and 

transparency in Exchange rules and 

would not introduce new functionality. 

The Commission believes that proposed 

new Rule 6.76AP–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the Exchange represents the proposed 

rule would set forth a price-time priority 

model for Pillar that is substantively the 

same as the Exchange’s current pricetime priority model as set forth in Rule 

6.76A–O, with proposed differences to 

use Pillar terminology that is based in 

part on Rule 7.37–E, if applicable, 

without changing the functionality that 

is currently available for options 

trading. 

Orders and Modifiers 

The Exchange proposes new Rule 

6.62P–O to set forth the order types and 

modifiers that would be available for 

options trading both on Pillar and in 

open outcry trading. The Exchange 

represents that proposed Rule 6.62P–O 

is based on existing order types 

available on the OX system as described 

in Rule 6.62–O, and the orders and 

modifiers on the Exchange’s cash equity 

trading platform, as described in Rule 

7.31–E, with differences as applicable to 

reflect differences in options trading 

from cash equity trading. The 

Commission believes that proposed 

Rule 6.62P–O removes impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system because it promotes 

transparency by using consistent 

terminology in the Exchange’s rulebook. 

In addition to the terminology 

changes to describe the order types and 

modifiers, proposed Rule 6.62P–O 

proposes changes that differ from order 

types and modifiers available on the OX 

system. The Exchange proposes changes 

discussed above to its rules regarding 

Market Orders, Limit Order Price 

Protection and Trading Collars, 

Auction-Only Orders, orders with 

instructions not to route, IOC ISOs, 

AON Orders, Stop Orders, Stop Limit 

Orders, and crossing orders that are 

designed to streamline, and promote 

transparency in, the Exchange’s rules, 

provide additional clarity, and provide 

greater flexibility and execution 

opportunities to market participants. 

The Commission believes that the 

proposed changes remove impediments 

to and perfect the mechanism of a free 

and open market and national market 

system by simplifying and promoting 

transparency and granularity in the 

Exchange’s rules, and by providing 

opportunities for execution to market 

participants that are consistent with the 

Act. In addition, the Commission 

believes that the proposal promotes 

clarity and transparency by codifying 

the functioning of Complex QCC in the 

Exchange’s rules. 

Market Maker Quotations 

Proposed Rule 6.37AP–O would set 

forth Market Makers’ quoting 

obligations on the Pillar trading 

platform. As discussed above, the 

Exchange proposes to consolidate into 

one rule functionality for orders and 

quotes such that Non-Routable Limit 

Orders and ALO Orders may be 

designated as quotes. The Exchange 

represents that the quoting functionality 

available in the proposed Non-Routable 

Limit Order and ALO Order would 

continue to provide Market Makers with 

the core functionality associated with its 

existing quote types, including that the 

proposed rules would provide for the 

ability to either reprice or cancel such 

quotes. In addition, the Exchange states 

that the ranking and priority of quotes 

on the Pillar trading platform is 

consistent with handling of such quotes 

on the current OX system, unless 

otherwise noted and as described above. 

Further, the Exchange states that 

proposed Rule 6.37AP–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because it 

is based on current Rule 6.37A–O, with 

such changes as necessary to clarify 

functionality and to use Pillar 

terminology. The Exchange further 

represents that the proposed rule 

provides an added level of granularity 

and therefore would add clarity and 

transparency to its rules by specifying 

that same-side quotations sent by a 

Market Maker over the same order/quote 

entry port would be replaced. For these 

reasons, the Commission believes the 

proposal would remove impediments to 

and perfect the mechanism of a free and 

open market and national market system 

by promoting transparency and 

granularity in the Exchange’s rules and 

is therefore consistent with the Act. 

Pre-Trade and Activity-Based Risk 

Controls 

The Exchange represents that 

proposed Rule 6.40P–O would set forth 

pre-trade and activity-based risk 

controls and incorporates existing 

activity-based risk controls, without any 

substantive differences, and augments 

them with additional pre-trade risk 

controls and related functionality that 

are based on the pre-trade risk controls 

currently available on the Exchange’s 

cash equity trading platform. 

Specifically, the proposed rule would: 

(i) Provide Single Order Maximum 

Notional Value Risk Limit and Single 

Order Maximum Quantity Risk Limit; 

(ii) aggregate a Market Maker’s quotes 

and orders for purposes of calculating 

activity-based risk controls; and (iii) 

provide a proposed Kill Switch 

Functionality. The Commission believes 

that the proposed rule would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and 

promote just and equitable principles of 

trade by providing greater flexibility to 

firms in setting risk controls for orders 

and quotes and would better reflect the 

aggregate risk that a Market Maker has 

with respect to its quotes and orders. 

The Commission also believes that the 

proposed Kill Switch Action 

functionality would provide OTP 

Holders and OTP Firms with greater 

flexibility to provide bulk instructions 

to the Exchange with respect to 

cancelling existing orders and quotes 

and blocking new orders and quotes. 

Price Reasonability Checks 

The Exchange represents that 

proposed Rule 6.41P–O would set forth 

Price Reasonability Checks for limit 

orders and quotes and is based on 

existing functionality, with differences 

designed to use Pillar terminology and 

promote consistency and transparency 

in Exchange rules, and to expand the 

functionality to include quotes. The 

Commission notes that proposed rule 

would add an Intrinsic Value Check for 

quotes under Pillar (in addition to 

orders), provides greater specificity 

regarding when the Price Reasonability 

Checks would be applied to an order or 

quote, and would utilize the last sale on 

the Primary Market (rather than the 

Consolidated Last Sale) for the Price 

Reasonability Checks. The Exchange 

represents that the proposal to utilize 

the last sale on the Primary Market 

would improve efficiency and 

performance of the system without 

compromising the price protection 

features because the Pillar system would 

need to ingest and process less data. The 

Commission believes that proposed 

Rule 6.41P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

providing specificity regarding when 


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the Price Reasonability Checks would be 

applied to an order or quote, and 

providing Market Makers greater control 

and flexibility over setting risk tolerance 

and exposure for their quotes. 

Auction Process 

The Exchange represents that 

proposed Rule 6.64P–O maintains the 

fundamentals of an auction process that 

is tailored for options trading while at 

the same time enhancing the process by 

incorporating certain Pillar auction 

functionality that is currently available 

on the Exchange’s cash equity platform, 

as described in Rule 7.35–E. The 

Exchange represents that the proposed 

Auction Process for options trading on 

Pillar would not materially change how 

an option series would be opened (or 

reopened) on the Exchange today 

because the Exchange would continue 

to assess whether a series can be opened 

based on whether the bid-ask 

differential for a series is within a 

specified range and orders would 

continue to be matched based on pricetime priority. The Exchange represents 

that many of its proposed changes are 

intended to provide greater detail about 

the Auction Process. In addition, the 

Exchange proposes certain changes to 

the existing Auction Process. The 

Exchange proposes providing additional 

opportunities for an options series to 

open or reopen for trading even if the 

bid-ask differential is wider than the 

specified guidelines. The Exchange 

represents it is not novel for an options 

exchange to provide additional 

opportunities for a series to open after 

a specified period of time in a wide 

market so as to promote fair and orderly 

Auctions and facilitate a fair and orderly 

transition to continuous trading. In 

addition, the Exchange proposes to 

augment the imbalance information 

currently disseminated in advance of an 

Auction to provider greater Auction 

transparency. The Exchange also 

proposes specifying minimum time 

periods to allow a Market Maker(s) to 

quote in an assigned series before the 

series is opened or reopened. The 

Exchange represents this offers checks 

that are intended to provide adequate 

opportunity for a greater number of 

Market Makers to provide their liquidity 

interest and help ensure increased 

liquidity on the Exchange thereby 

promoting a fair and orderly auction 

process and facilitating a fair and 

orderly transition to continuous trading. 

The Exchange also proposes introducing 

additional enhancements that are based 

on existing Pillar functionality for the 

Exchange’s cash equity platform’s 

electronic auctions relating to how 

orders and quotes would be processed if 

they arrive during the period when the 

Exchange is processing an Auction and 

how the Exchange would process orders 

and quotes when it transitions to 

continuous trading following an 

Auction. The Exchange represents these 

are structured based in part on Rule 

7.35–E, the Exchange’s cash equity rule 

governing auctions, and would promote 

consistency across exchange rules as 

well as provide greater granularity 

regarding the process, thereby providing 

transparency in Exchange rules. The 

Exchange also proposes including in 

Rule 6.64P–O how the Exchange would 

process orders and quotes during a 

trading halt, which the Exchange 

represents is structured based in part on 

Rule 7.18–E(b) and (c), with proposed 

differences in order/quote handling to 

align with the proposed differences in 

behavior for specified orders and quotes 

on Pillar, such as repricing resting nonroutable orders and quotes during a 

trading halt to their limit price. The 

proposed rule also would reflect that 

ALO Orders would be eligible to 

participate in an Auction and that 

orders subject to the Trading Collar 

would be canceled. The Exchange states 

this would provide granularity and 

transparency with respect to how the 

Exchange processes new and existing 

options orders during a trading halt on 

its cash equity market. The Exchange 

states that, because the Exchange would 

be harnessing Pillar technology to 

support Auctions for options trading, 

the Exchange believes that proposed 

Rule 6.64P–O would promote 

transparency in the Exchange’s trading 

rules. 

The Commission believes that 

proposed Rule 6.64P–O would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because, 

as the Exchange represents, the 

proposed rule maintains the 

fundamentals of an auction process that 

is tailored for options trading while at 

the same time enhancing the process by 

incorporating certain Pillar auction 

functionality that is currently available 

on the Exchange’s cash equity platform, 

as described in Rule 7.35–E, with 

certain differences which the Exchange 

represents are designed to enhance 

liquidity, promote transparency, as well 

as provide greater granularity in and 

consistency among Exchange rules, 

which should facilitate a fair and 

orderly auction process and transition to 

continuous trading. 

Based on the Exchange’s 

representations, the Commission 

believes that the proposed rule change 

does not raise any novel regulatory 

considerations, as they are either based 

on existing options functionality, 

equities markets functionality, other 

options market rules, or otherwise 

enhance transparency and provide 

greater specificity and determinism with 

respect to the functionality available on 

the Exchange, which should promote a 

fair and orderly auction process and 

transition to continuous trading. For 

these reasons, the Commission believes 

that the proposal should help to prevent 

fraudulent and manipulative acts and 

practices, promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. 

IV. Solicitation of Comments on 

Amendment No. 4 to the Proposed Rule 

Change 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether Amendment No. 4 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– 

NYSEArca–2021–47 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2021–47. 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 website (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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 


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216See supra note 11. 

217See Notice, supra note 3. 

218See, e.g., Cboe Rule 5.6(c) (setting forth 

operation of Complex QCC Orders) and MIAX Rule 

515(h)(4) (same). 

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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2021–47 and 

should be submitted on or before 

February 22, 2022. 

V. Accelerated Approval of 

Amendment No. 4 

As noted above,216 in Amendment 

No. 4, which supersedes and replaces 

each of Amendment Nos. 1, 2, and 3 in 

their entirety, as compared to the 

original proposal,217 the Exchange 

provides more background information 

regarding the proposed rule changes, 

makes clarifying changes to certain 

proposed rules without any substantive 

differences as compared to the original 

filing, and makes the following 

substantive changes from the original 

filing: (1) Adds a definition of Away 

Market BBO (ABBO) to replace the term 

Away Market NBBO; (2) revises the 

description of a Market Marker 

quotation, as described in proposed 

Rule 6.37A–O(a)(1); (3) revises how the 

Specified Threshold would be 

calculated for Limit Order Price 

Protection in proposed Rule 6.62P– 

O(a)(3)(A) to include prices equal to the 

Reference Price; (4) revises how a 

Trading Collar would be assigned, as 

described in proposed Rule 6.62P– 

O(4)(A) and (B), to provide that a 

Trading Collar would be reassigned to 

an order after a trading halt, and makes 

related changes to proposed Rule 6.64P– 

O(f)(3)(A)(ii); (5) revises proposed Rule 

6.62P–O(g) to reorganize and streamline 

the proposed rule to specify that a Cross 

Order is a Qualified Contingent Cross 

Order and to describe the order type in 

paragraph (g)(1)(A) and to add proposed 

Complex QCC Orders; (6) revises 

proposed Rule 6.62P–O(h)(1) to specify 

that a Clear-the-Book Order would be 

entered contemporaneous with 

executing an order in open outcry; (7) 

revises proposed Rule 6.62P–O(i)(2) to 

specify which order with a Minimum 

Trade Size modifier would not be 

subject to self-trade prevention 

modifiers; (8) revises proposed Rule 

6.62P–O to remove the proposed NonDisplay Remove Modifier; (9) revises 

proposed Rule 6.64P–O(a) to add a 

definition for the term ‘‘Auction Price’’ 

and to modify the definition of ‘‘Legal 

Quote Width’’; (10) revises proposed 

Rule 6.64P–O(g)(2) to provide that 

during a trading halt, any unexecuted 

quantity of an order for which the 500- 

millisecond Trading Collar timer has 

started would be cancelled; (11) revises 

proposed Rule 6.64P–O(d)(3) and (4) to 

reduce the length of the proposed 

Opening MMQ Timers (from one minute 

to 30 seconds) and reduce the time 

before commencing opening of a series 

when there is a Calculated NBBO that 

is wider than the Legal Width Quote in 

a series (from five minutes to 90 

seconds), both of which measures 

would shorten the time the Exchange 

would wait before automatically 

opening a series in the specified 

circumstances; and (12) revises 

proposed Rule 6.76AP–O(a)(1)(A) to 

provide that only the first LMM quote 

in time priority would be eligible for the 

LMM Guarantee. 

The Exchange states that the nonsubstantive changes set forth in 

Amendment No. 4, as enumerated 

above, are intended provide greater 

clarity, granularity, and specificity to 

the proposed rule text as well as 

additional information on the basis for 

and background of the proposal. The 

Exchange represents that these proposed 

changes are non-substantive in that they 

do not alter the functionality of the 

proposed rule changes yet would add 

granularity to the proposal. 

Similarly, with respect to the 

substantive changes in Amendment No. 

4, also as enumerated above, the 

Exchange states that such proposed 

changes would improve the original 

filing by including additional details 

about, or modifications to, functionality 

already described in the original filing 

(e.g., adding a definition of ‘‘ABBO’’ and 

‘‘Auction Price’’); revising the 

description of a Market Marker 

quotation; describing proposed Complex 

QCC Orders; specifying the treatment of 

unexecuted orders at the open during a 

trading halt; clarifying the procedures 

for entering CTB Orders; and specifying 

and clarifying the operation of: The 

Limit Order Protection Filter, Trading 

Collars, the LMM Guarantee, orders 

with the an MTS modifier vis a vis and 

the self-trade prevention modifier, and 

single-leg QCC Orders). The Exchange 

states it believes that the proposal to 

modify Rule 6.64P–O(d)(3) and (4) to 

reduce the length of both the MMQ 

Timers and the time before commencing 

opening of a series would promote a fair 

and orderly market as it would reduce 

the time the Exchange would wait 

before opening a series, but would also 

allow the Exchange time to attract the 

best quote from Market Makers assigned 

in the series, which in turn should 

attract orders to the Exchange at the 

open (i.e., the Exchange can leverage the 

highest bid and lowest offer from the 

various Marker Makers that submit 

quotes). The Exchange represented that 

the changes proposed in Amendment 

No. 4 would make it easier for market 

participants to navigate and 

comprehend the proposed rule changes 

for options trading under Pillar. Based 

on the representations of the Exchange, 

the Commission believes the changes 

proposed in Amendment No. 4 would 

make it easier for market participants to 

navigate and comprehend the proposed 

rule changes for options trading under 

Pillar. 

In addition, the Exchange states it 

believes that Amendment No. 4 is noncontroversial, does not pose an undue 

burden on competition, and does not 

raise any novel issues because the 

proposed changes (other than the added 

description of Complex QCC Orders) 

would add clarity and provide 

additional explanations related to the 

proposed rule changes. The Exchange 

believes that the proposed description 

of Complex QCC Orders, which orders 

it represents is not new or novel, is 

necessary to permit fair competition 

among the options exchanges and to 

establish more uniform auction rules on 

the various options exchanges.218

Based on the representations of the 

Exchange, the Commission believes that 

the changes proposed in Amendment 

No. 4 would not significantly affect the 

protection of investors or the public 

interest, but instead would provide 

greater clarity to the original filing and 

provide greater transparency about the 

application of the rule changes being 

adopted for options trading under Pillar. 


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219 15 U.S.C. 78s(b)(2). 220 15 U.S.C. 78s(b)(2). 221 17 CFR 200.30–3(a)(12). 

Therefore, the Commission finds that 

Amendment No. 4 to the proposal raises 

no novel regulatory issues, that it is 

reasonably designed to protect investors 

and the public interest, and that it is 

consistent with the requirements of the 

Act. Accordingly, the Commission finds 

good cause, pursuant to Section 19(b)(2) 

of the Act,219 to approve the proposed 

rule change, as modified by Amendment 

No. 4, on an accelerated basis. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,220 that the 

proposed rule change (SR–NYSEArca– 

2021–47), as modified by Amendment 

No. 4, be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.221

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01970 Filed 1–31–22; 8:45 am] 

BILLING CODE 8011–01–P 


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