106888 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

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

2 17 CFR 240.19b–4. 

3Phlx Options 1, Section 1(b)(57) provides, [t]he 

term ‘‘System’’ shall mean the automated system for 

order execution and trade reporting owned and 

operated by the Exchange which comprises: (i) an 

order execution service that enables members to 

automatically execute transactions in option series; 

and provides members with sufficient monitoring 

and updating capability to participate in an 

automated execution environment; (ii) a trade 

reporting service that submits ‘‘locked-in’’ trades for 

clearing to a registered clearing agency for clearance 

and settlement; transmits last-sale reports of 

transactions automatically to the Options Price 

Reporting Authority (‘‘OPRA’’) for dissemination to 

the public and industry; and provides participants 

with monitoring and risk management capabilities 

to facilitate participation in a ‘‘locked-in’’ trading 

environment; and (iii) the data feeds described at 

Options 3, Section 23. 

4A ‘‘Market Maker’’ means a Streaming Quote 

Trader or a Remote Streaming Quote Trader who 

enters quotations for his own account electronically 

into the System. See Options 1, Section 1(b)(28). 

5A ‘‘Lead Market Maker’’ means a member who 

is registered as an options Lead Market Maker 

pursuant to Options 2, Section 12(a). A Lead Market 

Maker includes a Remote Lead Market Maker which 

is defined as a Lead Market Maker in one or more 

classes that does not have a physical presence on 

the Exchange’s Trading Floor and is approved by 

the Exchange pursuant to Options 2, Section 11. See 

Options 1, Section 1(b)(27). 

6A Market Order is an order to buy or sell a stated 

number of options contracts that is to be executed 

at the best price obtainable when the order reaches 

the Exchange. Lead Market Makers, Market Makers, 

and Off-Floor Broker-Dealers may not submit 

Market Orders. See Phlx Options 3, Section 7(b)(1). 

7A Stop Order is a Limit Order or Market Order 

to buy or sell at a limit price when interest on the 

Exchange for a particular option contract reaches a 

specified price. A Stop Order shall be cancelled if 

it is immediately electable upon receipt. A Stop 

Order shall not be elected by a trade that is reported 

late or out of sequence or by a Complex Order 

trading with another Complex Order. Lead Market 

Makers and Maker Makers may not submit a Stop 

Order. Off-Floor Broker-Dealers may not enter a 

Stop Market Order. See Phlx Options 3, Section 

7(b)(4). 

8An All-or-None Order is a Limit Order or Market 

Order that is to be executed in its entirety or not 

at all. An All-or None Order may only be submitted 

by a Public Customer as an Immediate-or-Cancel 

Order. The Acceptable Trade Range protection in 

Options 3, Section 15(a) is not applied to All-OrNone Orders. See Phlx Options 3, Section 7(b)(5). 

9The term ‘‘Directed Order’’ means any order to 

buy or sell which has been directed to a particular 

Lead Market Maker, RSQT, or SQT by an Order 

Flow Provider, as defined below. To qualify as a 

Directed Order, an order must be delivered to the 

Exchange via the System. See Phlx Options 2, 

Section 10. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101989; File No. SR–Phlx– 

2024–71] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Various Phlx 

Rules in Connection With a 

Technology Migration 

December 19, 2024. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

12, 2024, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 2, Section 6, Market Maker 

Orders. The Exchange also proposes to 

amend the following Options 3 Rules: 

Section 4, Entry and Display of Quotes; 

Section 6, Firm Quotations; Section 7, 

Types of Orders and Order and Quote 

Protocols; Section 8, Opening Process; 

Section 9, Trading Halts; Section 10, 

Electronic Execution Priority and 

Processing in the System; Section 15, 

Simple Order Risk Protections; Section 

23, Data Feeds and Trade Information; 

and Section 28, Optional Risk 

Protections. The Exchange also proposes 

to amend Options 5, Section 4, Order 

Routing; Options 6, Section 1, 

Authorization to Give-Up; Options 7, 

Section 9, B, Port Fees; and Options 8, 

Section 32, Types of Floor-Based (NonSystem) Orders. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In connection with a technology 

migration to an enhanced Nasdaq, Inc. 

(‘‘Nasdaq’’) functionality which will 

result in higher performance, scalability, 

and more robust architecture, the 

Exchange intends to adopt certain 

trading functionality currently utilized 

at Nasdaq affiliate exchanges. As further 

discussed below, the Exchange is 

proposing to adopt such functionality 

substantially in the same form as 

currently on the Nasdaq affiliated 

options exchanges, while retaining 

certain intended differences between it 

and its affiliates. The Exchange also 

proposes a number of changes to 

memorialize existing functionality, add 

more granularity in its rules to describe 

how existing functionality operates 

today, and to harmonize the Exchange’s 

rules where appropriate with the rules 

of its affiliated options exchanges by 

using consistent language to describe 

identical functionality. 

Specifically, the Exchange proposes to 

amend Options 2, Section 6, Market 

Maker Orders and the following Options 

3 Rules: Section 4, Entry and Display of 

Quotes; Section 6, Firm Quotations; 

Section 7, Types of Orders and Order 

and Quote Protocols; Section 8, Opening 

Process; Section 9, Trading Halts; and 

Section 10, Electronic Execution 

Priority and Processing in the System; 3

Section 15, Simple Order Risk 

Protections; Section 23, Data Feeds and 

Trade Information; and Section 28, 

Optional Risk Protections. The 

Exchange also proposes to amend 

Options 5, Section 4, Order Routing; 

Options 7, Section 9, B, Port Fees; and 

Options 8, Section 32, Types of FloorBased (Non-System) Orders. Each rule 

change is described below. 

Options 2, Section 6 

Options 2, Section 6(a) currently 

states that Market Makers 4 and Lead 

Market Makers 5 may enter all order 

types defined in Options 3, Section 7(b) 

in the options classes to which they are 

appointed and non-appointed, except 

for Market Orders as provided in 

Options 3, Section 7(b)(1), Stop Orders 

as provided in Options 3, Section 

7(b)(4), All-or-None Orders as provided 

in Options 3, Section 7(b)(5), Directed 

Orders as provided for in Options 2, 

Section 10, and Public Customer-toPublic Customer Cross Orders subject to 

Options 3, Section 13(a) and (f). 

The Exchange proposes to remove the 

Market Maker restrictions related to 

Market Orders,6 Stop Orders,7 All-orNone Orders 8 and Directed Orders 9 so 

as not to restrict the ability of a Lead 

Market Maker or Market Maker from 

entering orders they may enter today on 


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10The Exchange proposes to delete the term 

‘‘Lead Market Makers’’ in Options 2, Section 6(a) as 

the term ‘‘Market Makers’’ includes ‘‘Lead Market 

Makers.’’ Both terms are not necessary. 

Additionally, removing the term ‘‘Lead Market 

Makers’’ harmonizes the rule text in Phlx Options 

2, Section 6(a) to ISE, GEMX, MRX and BX Options 

2, Section 6(a). 11Today, Options 3, Section 14 includes all 

Complex Order Types that may be traded by any 

market participant. 12Phlx Options 1, Section 1(b)(33) provides, [t]he 

term ‘‘Off-Floor Broker-Dealer Order’’ means an 

order delivered from off the floor of the Exchange 

by or on behalf of a broker-dealer for the proprietary 

account(s) of such broker-dealer, including an order 

for a market maker located on an exchange or 

trading floor other than the Exchange’s trading floor 

delivered electronically for the proprietary 

account(s) of such market maker. 

13See Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq GEMX, 

LLC (‘‘GEMX’’) and Nasdaq MRX, LLC (‘‘MRX) 

Options 2, Section 6 and NYSE Arca, Inc. Rule 

6.37B–O and NYSE American LLC Rule 925.2NY. 14See Securities Exchange Act Release No. 87691 

(December 9, 2019), 85 FR 68197 (December 13, 

2019) (SR–Phlx–2019–52) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

To Amend Order Types and Remove and Relocate 

Certain Rule Text Currently Located Within Rule 

1080). 

15 Id. 

16Pursuant to Phlx Options 2, Section 6, the total 

number of contracts executed during a quarter by 

a Market Maker and Lead Market Maker in options 

series to which it is not appointed may not exceed 

twenty-five percent (25%) of the total number of 

contracts executed by the Market Maker and Lead 

Market Maker in options series. 

17Current Phlx Options 3, Section 7(e) provides 

that, an off-floor broker-dealer order may be entered 

for a minimum size of one contract. Off-floor 

broker-dealers may enter all order types defined in 

Options 3, Section 7(b) except for All-or-None 

Orders, Market Orders, Stop Market Orders, and 

public customer-to-public customer cross orders 

subject to Options 3, Section 13(a) and (f). 

18This includes Off-Floor Broker Dealers as noted 

in current Options 3, Section 7(e). 

19See Securities Exchange Act Release No. 85262 

(March 7, 2019), 84 FR 9192 (March 13, 2019) (SR– 

Phlx–2019–03) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change To Amend 

Option Floor Procedure Advice A–9 and Phlx Rules 

1000 and 1066 and To Adopt a New Phlx Rule 

1078). Prior to this rule change, All-or-None Orders 

were available to Public Customers and 

Professionals, (‘‘2019 AON Rule Change’’). 

20See Securities Exchange Act Release No. 98142 

(August 16, 2023), 88 FR 57140 August 22, 2023) 

(SR–Phlx–2023–34) (Notice of Filing and Immediate 

Effectiveness of Proposed Rule Change To Amend 

Phlx’s All-or-None Order) (‘‘2023 AON Rule 

Change’’). 

other options markets.10 With this 

proposed change, Market Makers would 

be permitted to enter Market Orders, 

Stop Orders and All-or-None Orders 

similar to other market participants, and 

similar to market makers on ISE, GEMX 

and MRX, as explained below in greater 

detail. Also, today, Market Makers may 

enter all Complex Order types. To make 

this clear in the rule text, the Exchange 

proposes to reference Options 3, Section 

14, which governs Complex Orders, in 

addition to referencing Options 3, 

Section 7(b), which governs simple 

orders.11

Additionally, as currently noted in 

Options 3, Section 7(e), Off-Floor 

Broker-Dealers may not enter All-orNone Orders, Market Orders, Stop 

Market Orders, and public customer-topublic customer cross orders subject to 

Options 3, Section 13(a) and (f). The 

Exchange is also proposing to remove 

the restrictions applicable to Off-Floor 

Broker-Dealers. Today, Nasdaq ISE, LLC 

(‘‘ISE’’), Nasdaq GEMX, LLC (‘‘GEMX’’) 

and Nasdaq MRX, LLC (‘‘MRX’’) 

Options 2, Section 6 do not provide 

similar restrictions as Phlx for Market 

Orders, Stop Orders and All-or-None 

Orders. 

The Exchange proposes to permit 

Lead Market Makers, Market Makers, 

and Off-Floor Broker Dealers to enter 

Market Orders and Stop Orders similar 

to all other market participants on Phlx. 

Today, all market participants, 

including Lead Market Makers, Market 

Makers and Off-Floor Broker Dealers 12

may transact Market Orders and Stop 

Orders on other options markets.13 The 

Exchange does not believe there is any 

reason to restrict Lead Market Makers, 

Market Makers and Off-Floor Broker 

Dealers from entering Market Orders or 

Stop Orders. Previously, in a 2019 rule 

change 14 Phlx noted that it believed 

that prohibiting Market Makers from 

entering Market Orders was consistent 

with the Act because Market Orders are 

designed to remove liquidity from the 

Order Book. Further, that rule change 

noted that Stop Orders are nondisplayed order types until they are 

triggered which does not benefit the role 

of a Market Makers in displaying 

liquidity on the Order Book.15 Stop 

Orders are triggered by either the 

occurrence of a transaction or posting 

on the order book. Once triggered, the 

order becomes displayed as either a 

Market Order or Limit Order as 

described in greater detail below in the 

discussion of Stop Orders in Options 3, 

Section 7. At this time, the Exchange 

proposes to permit Lead Market Makers, 

Market Makers, and Off-Floor Broker 

Dealers to enter both Market Orders and 

Stop Orders. Today, ISE, GEMX and 

MRX do not prohibit Lead Market 

Makers, Market Makers, and Off-Floor 

Broker Dealers from entering a Market 

Order and Stop Order on those markets, 

and those markets have not observed 

any adverse consequences. Also, current 

Phlx Options 2, Section 6 restricts the 

number of contracts that a Market Maker 

may enter in a quarter,16 thereby 

preventing Market Makers from entering 

an unlimited quantity of orders. In 

addition, the Exchange would no longer 

prohibit an Off-Floor Broker Dealer from 

entering a Market Order for the same 

reasons.17 All Market Makers, including 

away market makers, are restricted to a 

total number of contracts executed 

during a quarter in options series to 

which it is not appointed of twenty-five 

percent (25%) of the total number of 

contracts executed by the Market Maker 

and Lead Market Maker in options 

series as all options markets impose this 

restriction on market makers. The 

Exchange does not believe there is any 

reason to restrict Off-Floor Broker 

Dealers from entering Market Orders in 

options classes, rather, the Exchange 

proposes to permit all member 

organizations to be able to enter Market 

Orders. Finally, the Exchange believes 

that harmonizing the ability for Lead 

Market Makers, Market Makers, and OffFloor Broker Dealers to enter both 

Market Orders and Stop Orders across 

ISE, GEMX, MRX and Phlx will allow 

market participants to enter equivalent 

order types on all these markets. For 

these reasons, Phlx believes Lead 

Market Makers, Market Makers and OffFloor Broker Dealers should be 

permitted to utilize Market Orders and 

Stop Orders to remove liquidity from its 

order book without impacting their 

ability to provide liquidity. 

Today, Phlx restricts all market 

participants from entering All-or-None 

Orders except Public Customers.18

Similar to other options markets, the 

Exchange proposes to permit all market 

participants to enter All-or-None 

Orders. The Exchange is proposing to 

amend the All-or-None Order type in 

Options 3, Section 7 to reflect this 

proposed change as explained further 

below. By way of background, in 2019, 

the Exchange amended its All-or-None 

Order to no longer offer the order type 

to Professionals.19 At the time, the 

Exchange noted that permitting Public 

Customers to enter All-or-None Orders 

with specific size limitations that rest 

on the Order Book would continue to 

allow Public Customers the opportunity 

to obtain fills for their orders when the 

market moves even if the All-Or-None 

Order was not immediately executable 

upon entry. The Exchange notes that in 

2023, it amended All-or-None Orders so 

that they would no longer rest on the 

order book, rather the order type would 

be executed in its entirety, or it will 

cancel if it cannot execute.20 With this 

change, the prior reasoning is no longer 

a reason to restrict the order type to 

Public Customer use only. The 

Exchange proposes to remove the 

restriction that only permits Public 

Customers to enter the order type and 

allow all market participants to utilize 

the All-or-None Order which now does 

not rest on the order book. The 


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21While Stop Orders are not displayed until 

triggered, the Exchange notes that once triggered a 

Stop Order would be displayed as either a Market 

or Limit Order. 

22See Securities Exchange Act Release No. 59721 

(April 9, 2009), 74 FR 17245 (April 14, 2009) (SR– 

Phlx–2009–32) (Notice of Filing of Proposed Rule 

Change Relating to the Exchange’s Enhanced 

Electronic Trading Platform for Options, Phlx XL 

II). 

23See Phlx Options 3, Section 6(a)(2)(B)(2). 

24 Id. 

25 Id. 

26See Phlx Options 3, Section 6(a)(2)(B)(2)(a). 

27See Phlx Options 3, Section 6(a)(2)(B)(2)(b). 

Exchange proposes to reflect the 

removal of the restriction in Options 2, 

Section 6 to reflect the fact that Market 

Makers would be able to trade All-orNone Orders. The Exchange also 

explains this change below in Options 

3, Section 7 with respect to the order 

type amendments for All-or-None 

Orders. Permitting all market 

participants to enter an AON Order will 

harmonize the order type to ISE, GEMX 

and MRX Options 3, Section 7(c) which 

also permit all market participants to 

utilize this order type. 

The Exchange notes that Directed 

Orders are orders directed to a Market 

Maker by an Order Flow Provider. An 

order becomes a Directed Order when it 

interacts with a Market Maker quote that 

is at the NBBO at the time of receipt of 

the Directed Order. The Exchange 

believes it is misleading to include a 

Directed Order in this list because a 

Directed Order may be executed by a 

Market Maker. 

Third, the Exchange proposes to 

amend ‘‘Public Customer-to-Public 

Customer Cross Orders’’ to ‘‘Customer 

Cross Orders’’ to align with the name of 

this order type on ISE, GEMX and MRX 

Options 3, Section 7(i). The Exchange 

proposes to relocate the definition of 

Public Customer-to-Public Customer 

Cross Orders’’ from Options 3, Section 

13 to proposed Options 3, Section 7(i). 

A Customer Cross Order cannot be 

entered by a Market Maker. The 

Exchange believes noting this exception 

in this order type will bring greater 

transparency to Options 2, Section 6. 

Additionally, the Exchange proposes to 

adopt a Reserve Order at Options 3, 

Section 7(g). A Reserve Order is a limit 

order with a displayed and nondisplayed portion. 

The Exchange believes that Market 

Maker liquidity should be displayed 

liquidity.21 For these reasons, and to 

remain competitive with other markets, 

the Exchange proposes to permit Market 

Makers to enter all orders they are 

eligible to submit, with the exception of 

Reserve Orders, and restrict Reserve 

Orders in the non-appointed classes 

similar to ISE, GEMX and MRX Options 

2, Section 6. As noted above, Market 

Makers are not able to enter Reserve 

Orders. 

The Exchange also proposes to amend 

the rule citations to align with the 

relocated rule text. Finally, the 

Exchange proposes to renumber the 

remainder of the text within Options 2, 

Section 6, related to total number of 

contracts that may be executed in a 

quarter, as new ‘‘b.’’ The proposed rule 

text of Options 2, Section 6 will align 

with ISE, GEMX and MRX Options 2, 

Section 6. 

Options 3, Section 4 

With respect to quotes, today, as set 

forth in Options 3, Section 4(b)(6), if, at 

the time of entry, a quote would cause 

a locked or crossed market violation or 

would cause a trade-through violation, 

it will either be re-priced to the current 

national best offer (for bids) or the 

current national best bid (for offers) as 

non-displayed and displayed at one 

minimum price variance above (for 

offers) or below (for bids) the national 

best price. 

The Exchange now proposes to amend 

the quote re-pricing mechanism 

currently described in Phlx Options 3, 

Section 4(b)(6) by harmonizing it with 

ISE, GEMX and MRX Options 3, Section 

4(b)(6). As amended, the quote repricing language in Options 3, Section 

4(b)(6) would be amended to provide: 

‘‘If, at the time of entry, a quote would 

cause a locked or crossed market 

violation or would cause a tradethrough violation, it will be re-priced to 

the current national best offer (for bids) 

or the current national best bid (for 

offers) as non-displayed, and displayed 

at one minimum price variance above 

(for offers) or below (for bids) the 

national best price, or immediately 

cancelled, as configured by the member 

organization.’’ With this amendment, 

Phlx would permit member 

organizations to configure their ports to 

instruct the Exchange to immediately 

cancel a quote that would otherwise 

cause a locked or crossed market 

violation in lieu of re-pricing the quote. 

The Exchange believes this functionality 

will provide member organizations with 

more flexibility in handling their 

quotes. 

Further, the Exchange proposes to 

remove the Quote Exhaust functionality 

which is explained further below. In 

connection with the removal of that 

functionality, the Exchange proposes to 

amend Options 2, Section 6(b)(8) to 

remove a reference to the Quote 

Exhaust. 

Options 3, Section 6 

Currently, Options 3, Section 6, Firm 

Quotations, describes the Exchange’s 

Quote Exhaust functionality that was 

adopted in 2009.22 Quote Exhaust 

occurs when the Exchange’s 

disseminated market at a particular 

price level includes a quote, and such 

market is exhausted by an inbound 

contra-side quote or order (‘‘initiating 

quote or order’’), and following such 

exhaustion, contracts remain to be 

executed from the initiating quote or 

order through the initial execution 

price.23 The initial execution price that 

gives rise to Quote Exhaust is known as 

the ‘‘reference price.’’ 24 Under Quote 

Exhaust, any order volume that is 

routed to away markets will be marked 

as an ISO.25 When a Quote Exhaust 

occurs, the System will initiate a ‘‘Quote 

Exhaust Timer’’ that applies to all 

options traded on the System, not to 

exceed one second, during which any 

participant (including any participant(s) 

whose size was exhausted) may submit 

quotes, sweeps or orders at any price 

level.26 Today, during the Quote 

Exhaust Timer, the Exchange will 

disseminate the reference price for the 

remaining size, provided that such price 

does not lock an away market, in which 

case, the Exchange will disseminate a 

bid and offer that is one MPV from the 

away market price. Today, the Exchange 

will disseminate, on the opposite side of 

the market from remaining unexecuted 

contracts: (i) a non-firm bid for the price 

and size of the next available bid(s) on 

the Exchange if the remaining size is a 

seller, or (ii) a non-firm offer for the 

price and size of the next available 

offer(s) on the Exchange if the remaining 

size is a buyer. If the remaining 

contracts in the initiating quote or order 

are either traded or cancelled during the 

Quote Exhaust Timer, the Quote 

Exhaust Timer will be terminated, and 

normal trading will resume.27

Today, if the Exchange receives an 

order, quote or sweep on the opposite 

side of the market from the initiating 

quote or order during the Quote Exhaust 

Timer that locks or crosses the reference 

price at any time during the Quote 

Exhaust Timer, it will execute 

immediately against the initiating quote 

or order at the reference price. If the 

initiating quote or order that caused the 

Quote Exhaust is exhausted, the Quote 

Exhaust Timer will be terminated. 

Today, with respect to any order, quote 

or sweep received on the opposite side 

of the market from the initiating quote 

or order during the Quote Exhaust 

Timer that is inferior to the reference 

price, the system will place any nonIOC order onto the book. Such non-IOC 


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28See Phlx Options 3, Section 6(a)(2)(B)(2)(c). 

29See Phlx Options 3, Section 6(a)(2)(B)(2)(d). 

30See Phlx Options 3, Section 6(a)(2)(B)(2)(e). 

31See Phlx Options 3, Section 6(a)(2)(B)(2)(f). 

32See Phlx Options 3, Section 6(a)(2)(B)(2)(g). 

33See Phlx Options 3, Section 6(a)(2)(B)(2)(g)(1)– 

(6). 

34See Phlx Options 3, Section 6(a)(2)(B)(3). 

35See Phlx Options 3, Section 6(a)(2)(C). 

36Phlx Supplementary .01 to Options 3, Section 

6 provides, ‘‘Broker-dealer orders’’ includes orders 

for the account(s) of market makers on another 

exchange and Market Makers on the Exchange. 

37Phlx Options 3, Section 6(b)(1) provides in 

pertinent part that, except as provided in paragraph 

(c) of this Rule, all quotations made available by the 

Exchange and displayed by quotation vendors shall 

be firm for customer and broker-dealer orders at the 

disseminated price in an amount up to the 

disseminated size. If the responsible broker or 

dealer is representing (as agent) a Limit Order, such 

responsible broker or dealer shall be responsible (as 

agent) up to the size of such Limit Order, but may 

be responsible as principal for all or a portion of 

the excess of the disseminated size over the size of 

such Limit Order to the extent provided in General 

2, Section 17. Phlx Options 2, Section 6(b)(2) 

provides in pertinent part that, in the event an SQT, 

RSQT or Lead Market Maker in a Streaming Quote 

Option has electronically submitted on the 

Exchange bids or offers for a Streaming Quote 

Option, each such SQT, RSQT or Lead Market 

Maker member shall be considered a ‘‘responsible 

broker or dealer’’ for that bid or offer, up to the size 

associated with such responsible broker or dealer’s 

bid or offer. 

38Phlx Options 2, Section 6(c) provides in 

pertinent part that, the requirements of paragraph 

(b) or (d) of this Rule shall not apply to displayed 

quotations: (i) when the level of trading activities 

or the existence of unusual market conditions is 

such that the Exchange is incapable of collecting, 

processing, and making available to quotation 

vendors the data for a subject security required to 

be made available pursuant to the SEC Quote Rule 

in a manner that accurately reflects the current 

market on the Exchange as determined by an 

Options Exchange Official; (ii) during a trading 

rotation; (iii) if any of the circumstances provided 

in paragraph (c)(3) of the SEC Quote Rule exist; or 

(iv) on a case by case basis where it is determined 

that an exemption is warranted for an obvious error 

in the posting of the disseminated price or 

disseminated size due to reporter error or system 

malfunction. The Exchange shall immediately 

notify all specified persons of such a determination. 

Regular trading procedures shall be resumed when 

an Options Exchange Official determines that the 

conditions supporting that declaration no longer 

exist. The Exchange shall immediately notify all 

specified persons of such a determination. 39See Phlx Options 2, Section 6(d). 

order on the book will be included in 

the first PBBO calculation following the 

end of the Quote Exhaust Timer. All 

non-marketable sweeps and IOC orders 

will be cancelled immediately if not 

executed and will not participate in the 

Quote Exhaust process.28 Today, if the 

Exchange receives an order, quote or 

sweep on the same side of the market as 

the initiating quote or order during the 

Quote Exhaust Timer, the System will 

cancel any such sweep or IOC order. If 

such new quote or order, other than an 

IOC order, is a market or marketable 

Limit Order or marketable quote (i.e., 

priced at or through the reference price) 

the System will display it at the 

reference price, with a disseminated 

size that is the sum of such order and/ 

or quote plus the remaining contracts in 

the initiating order or quote.29

Today, at the end of the Quote 

Exhaust Timer, if there are still 

unexecuted contracts remaining in the 

initiating quote or order or any new 

interest on the same side of the market, 

the System will calculate a new Phlx 

Best Bid/Offer (‘‘PBBO’’). The PBBO 

includes the remaining unexecuted 

portion of the initiating quote or order 

plus any new interest received on the 

same side of the market at the reference 

price, or if locking or crossing the 

ABBO, at one minimum trading 

increment away from the ABBO, for the 

full available size. The other side of the 

PBBO will be the actual Exchange 

interest at the best price.30

Today, the System will conduct an 

Acceptable Range Test to determine if 

the next available price on the Exchange 

is within an Acceptable Range.31 The 

System will first determine whether to 

trade at the next available Phlx price by 

comparing it to the Acceptable Range 

price (defined as, with respect to an 

initiating buy order, the highest price of 

the Acceptable Range, and, with respect 

to an initiating sell order, the lowest 

price of the Acceptable Range) and the 

Away Best Bid/Offer (‘‘ABBO’’) price to 

establish a ‘‘Best Price’’.32 Current 

Options 3, Section 6(g)(1) describes the 

Best Price. The current rules review the 

various potential scenarios including 

where the initiating quote or order does 

not lock the Best Price, locks the Best 

Price, crosses the Best Price, the order 

is not routable, and remainders.33 The 

current rule also considers scenarios 

where there are no offers on the 

Exchange and on away markets in the 

affected series, or no bids or a zero 

priced bid on Exchange.34

Today, with Quote Exhaust, the 

Exchange disseminates an updated bid 

and offer prices together with the size 

associated with such bid and offer in 

certain cases.35 All quotations made 

available by the Exchange and displayed 

by quotation vendors shall be firm for 

customer and broker-dealer orders 36 at 

the disseminated price in an amount up 

to the disseminated size,37 except in 

certain cases.38 Finally, today, 

responsible brokers or dealers that 

receive an order to buy or sell a listed 

option at the disseminated price in an 

amount greater than the disseminated 

size shall, within thirty (30) seconds of 

receipt of the order, (i) execute the 

entire order at the disseminated price 

(or better), or (ii) execute that portion of 

the order equal to the disseminated size 

at the disseminated price (or better), and 

revise its bid or offer.39

Quote Exhaust was designed to 

enhance the process for refreshing a 

Market Maker’s quote that has been 

fully exhausted by an incoming quote or 

order that has, after exhausting the Phlx 

quote at a particular price level, 

remaining size to be executed at a price 

through the reference price. The Quote 

Exhaust functionality was intended to 

provide an opportunity for remaining 

portions of incoming quotes or orders to 

be executed on the Exchange at prices 

that are equal to or better than away 

markets by allowing Market Makers to 

refresh their quotes before routing away, 

thus potentially providing better prices 

at which to execute such remaining 

portions. Quote Exhaust is intended to 

provide an opportunity for such quote 

or order to receive a price for that order 

better than the next price that would 

otherwise be available on Phlx whether 

by executing on the Phlx or by routing 

to applicable away markets. This 

functionality implements price checks 

to limit executions at far away prices. 

At this time, Phlx proposes to 

discontinue Quote Exhaust. Today, the 

Exchange offers various risk protections 

in its System to limit executions at far 

away prices. Phlx offers an Acceptable 

Trade Range protection at Options 3, 

Section 15(b)(1) and an Automated 

Quotation Adjustments protection at 

Options 3, Section 15(c)(2). In light of 

these additional protections and other 

risk protections that the Exchange is 

adding with this proposal within 

Options 3, Section 15, the Exchange 

does not believe that the Quote Exhaust 

protection is required any longer. Other 

Nasdaq affiliated exchanges do not offer 

Quote Exhaust. Once discontinued, the 

Exchange’s quoting functionalities will 

continue to abide by Phlx’s Options 3, 

Section 4 rules governing the entry and 

display of orders and the allocation 

methodology in Options 3, Section 10. 

By way of example, 

Market Maker quotes 1.00 (100) × 1.10 

(100) 

FIX Order to Sell 101 @0.95 arrives 

Order trades 100 @1.00 with the quote 

The quote purges as its entire bid side 

volume were exhausted 

The remaining 1 contract books 

Today, the Quote Exhaust timer 

begins—the reference price is 

displayed for the remaining 1 contract 

of the initiating sell order, and the 

displayed bid is disseminated to 

OPRA with a ‘non-firm’ indicator; 

Dissemination is 0.00 (0) × 1.00 (1), 

bid not firm 

Quote Exhaust timer concludes 


ddrumheller on DSK120RN23PROD with NOTICES2
106892 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

40See Phlx Options 3, Section 15(b)(1) which 

describes the Acceptable Trade Range. 

41See proposed Phlx Options 3, Section 6(a). 

42See proposed Phlx Options 3, Section 6(b). 

43The Exchange also proposes to separately file 

rule changes related to Complex Orders, Qualified 

Contingent Cross Orders and auctions. The 

Exchange notes that those filing will also add order 

types to Options 3, Section 7 to mirror ISE, GEMX 

and MRX Options 3, Section 7 order types. 

Today, a firm quote is now 

disseminated to OPRA; dissemination 

is 0.00 (0) × 0.95 (1) 

As proposed, without Quote Exhaust, 

there will be no period during which 

the order is disseminated at the Quote 

Exhaust Reference Price; instead, the 

order’s remainder will book and display 

at its limit price right away. The 

Exchange will continue to purge the 

other side of the quote due to one side 

being exhausted, as is the case today on 

ISE, GEMX, MRX that do not have a 

similar quote exhaust mechanism. 

Without Quote Exhaust: 

Market Maker quotes 1.00 (100) × 1.10 

(100) 

FIX Order to Sell 101 @0.95 arrives 

Order trades 100 @1.00 with the quote 

The quote purges as its entire bid side 

volume were exhausted 

The remaining 1 contract books 

A firm quote is disseminated to OPRA; 

dissemination is 0.00 (0) × 0.95 (1) 

With respect to the interaction 

between the Quote Exhaust and risk 

protections, the Exchange notes that 

instead of first being posted at the Quote 

Exhaust Reference Price, aggressively 

priced orders can instead post right 

away at the Acceptable Trade Range 

Threshold 40, allowing for quicker order 

execution while still providing order 

exposure and pauses between price 

bands, which continues to allow for risk 

mitigation. By way of example, 

Note that the configured Acceptable 

Trade Range (ATR) price band is 

$0.07 in the price range used in this 

example. 

Market Maker1 quotes 2.00 (10) × 2.12 

(10) 

Firm enters FIX Order to Buy 10 @1.80 

Public Customer enters FIX Market 

Order to Sell 20 @MKT 

Trades 10 @2.00 with Market Maker1’s 

quote 

Market Maker 1’s quote is purged as its 

entire bid side volume has been 

exhausted 

Quote exhaust commences and displays 

the remainder of the Public 

Customer’s market order at the quote 

exhaust reference price, disseminating 

to OPRA: 1.80 (10) × 2.00 (10), bid not 

firm 

Quote exhaust timer passes 

The remainder of the Public Customer’s 

market order now posts at the 

Acceptable Trade Range (ATR) 

Threshold of 1.93, disseminating to 

OPRA: 1.80 (10) × 1.93 (10), bid not 

firm 

ATR Posting Period (iteration #1) passes 

The remainder of the Public Customer’s 

market order now posts at the new 

ATR Threshold of 1.86, disseminating 

to OPRA: 1.80 (10) × 1.86 (10), bid not 

firm 

ATR Posting Period (iteration #2) passes 

The remainder of the Public Customer’s 

market order now trades with the 

Firm FIX order on the book, 10 @1.80 

With this proposal, Quote Exhaust 

will no longer occur; after trading with 

Market Maker 1’s quote, the remainder 

of the Public Customer Market Order 

will go straight into its first ATR Posting 

Period, displaying at the ATR Threshold 

of 1.93—it will no longer first display at 

the Quote Exhaust reference price of 

2.00, but the remainder of the behavior 

will remain the same due to 

applicability of ATR. 

Similar to ISE, GEMX and MRX, the 

Exchange proposes to amend Options 3, 

Section 6 to rename it ‘‘Collection and 

Dissemination of Quotes’’ and adopt a 

rule identical to ISE, GEMX and MRX 

Options 3, Section 6. The proposed new 

rule will specify, as is the case today, 

that each Market Maker shall 

communicate to the Exchange its bid 

and offers in accordance with the 

requirements of Rule 602 of Regulation 

NMS under the Exchange Act and the 

Rules of the Exchange.41 Further, as is 

the case today, the Exchange will 

disseminate to quotation vendors the 

highest bid and the lowest offer, and the 

aggregate quotation size associated 

therewith that is available to Public 

Customer Orders, in accordance with 

the requirements of Rule 602 of 

Regulation NMS under the Exchange 

Act.42

The Exchange proposes in Options 3, 

Section 6(c) to adopt rules around 

unusual market conditions. Today, 

Options 3, Section 6(c) notes that ‘‘when 

the level of trading activities or the 

existence of unusual market conditions 

is such that the Exchange is incapable 

of collecting, processing, and making 

available to quotation vendors the data 

for a subject security required to be 

made available pursuant to the SEC 

Quote Rule in a manner that accurately 

reflects the current market on the 

Exchange as determined by an Options 

Exchange Official.’’ The Exchange 

proposes to continue to provide that in 

proposed Options 3, Section 6(c)(1), 

An Exchange official designated by the 

Board shall have the power to determine that 

the level of trading activities or the existence 

of unusual market conditions is such that the 

Exchange is incapable of collecting, 

processing, and making available to 

quotation vendors the data for the option in 

a manner that accurately reflects the current 

state of the market on the Exchange. Upon 

making such a determination, the Exchange 

shall designate the market in such option to 

be ‘‘fast.’’ When a market for an option is 

declared fast, the Exchange will provide 

notice that its quotations are not firm by 

appending an appropriate indicator to its 

quotations. 

Further, the Exchange proposes to 

state in proposed Options 3, Section 

6(c)(2) that if a market is declared fast, 

designated Exchange officials shall have 

the power to: (i) direct that one or more 

trading rotations be employed pursuant 

to Options 3, Section 8; (ii) suspend the 

minimum size requirement of Options 

2, Section 5(c)(1); or (iii) take such other 

actions as are deemed in the interest of 

maintaining a fair and orderly market. 

Today, Options 3, Section 9(b) provides 

certain manual trading halt authority 

deemed necessary in the interests of 

maintaining a fair and orderly market in 

such class or series of options and to 

protect investors. 

Proposed Options 3, Section 6(c)(3) 

provides that the Exchange will monitor 

the activity or conditions that caused a 

fast market to be declared, and a 

designated Exchange official shall 

review the condition of such market at 

least every thirty (30) minutes. Regular 

trading procedures shall be resumed by 

the Exchange when a designated 

Exchange official determines that the 

conditions supporting a fast market 

declaration no longer exist. The 

Exchange will provide notice that its 

quotations are once again firm by 

removing the indicator from its 

quotations. Finally, the Exchange 

proposes to state in Options 3, Section 

6(c)(4) that if the conditions supporting 

a fast market declaration cannot be 

managed utilizing one or more of the 

procedures described above, then a 

designated Exchange official shall halt 

trading in a class, or classes so affected. 

Today, ISE, GEMX and MRX have the 

same authority in Options 3, Section 

6(c)(3) to protect those markets in the 

event of unusual market conditions. The 

Exchange believes that it should be able 

to manage trading on Phlx in the same 

manner as ISE, GEMX and MRX in the 

event of unusual market conditions. 

Options 3, Section 7 

Phlx proposes to align its order types 

to those of ISE, GEMX and MRX 

Options 3, Section 7 and utilize the 

same numbering as those markets.43


ddrumheller on DSK120RN23PROD with NOTICES2
Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 106893 

44Current Phlx Options 3, Section 7(f) states, 

Orders may not be unbundled, nor may a firm 

solicit a customer to unbundle an order for this 

purpose. 

45The Exchange will initially set the preestablished period of time at 4 seconds, identical to 

BX. This specification will be set out in the ISE 

System settings document on a publicly available 

website. The Exchange would issue an Options 

Trader Alert notifying all member organizations if 

it determined to amend that timeframe. 

46See BX Options 3, Section 7(a)(5). 

47See Phlx Options 3, Section 8 for the Opening 

Process. 

48See Phlx Options 3, Section 8(k). 

49Member organizations may make the 

designation to cancel their Market Orders through 

their FIX and port settings. 

50See ISE, GEMX and MRX Options 3, Section 

7(a) and BX Options 3, Section 7(a)(5). 

51As explained above, Market Makers is a broad 

term that covers Lead Market Makers so both terms 

are not needed. 

52Phlx Options 1, Section 1(b)(33) provides, [t]he 

term ‘‘Off-Floor Broker-Dealer Order’’ means an 

order delivered from off the floor of the Exchange 

by or on behalf of a broker-dealer for the proprietary 

account(s) of such broker-dealer, including an order 

for a market maker located on an exchange or 

trading floor other than the Exchange’s trading floor 

delivered electronically for the proprietary 

account(s) of such market maker. 

53Current Phlx Options 3, Section 7(e) provides 

that An off-floor broker-dealer order may be entered 

for a minimum size of one contract. Off-floor 

broker-dealers may enter all order types defined in 

Options 3, Section 7(b) except for All-or-None 

Orders, Market Orders, Stop Market Orders, and 

public customer-to-public customer cross orders 

subject to Options 3, Section 13(a) and (f). 

54Phlx Options 3, Section 7(b)(2) states, A Limit 

Order is an order to buy or sell a stated number of 

options contracts at a specified price or better. 

Phlx proposes to relocate Options 3, 

Section 7(f) 44 to the first paragraph of 

Options 3, Section 7. 

Market Orders 

The Exchange proposes to amend the 

description of Market Orders. Today, 

Options 3, Section 7(b)(1) states, ‘‘A 

Market Order is an order to buy or sell 

a stated number of options contracts 

that is to be executed at the best price 

obtainable when the order reaches the 

Exchange. Lead Market Makers, Market 

Makers and Off-Floor Broker-Dealers 

may not submit Market Orders.’’ The 

Exchange proposes to amend the 

definition of Market Orders to introduce 

a cancel timer feature, which will allow 

member organizations to designate 

Market Orders that do not execute after 

a certain period of time to be cancelled 

back to the member organization. 

Specifically, the Exchange proposes to 

add that member organizations can 

designate their Market Orders not 

executed after a pre-established period 

of time, as established by the 

Exchange,45 will be cancelled back to 

the member organization once an 

options series has opened for trading. 

Nasdaq BX, Inc. currently has an 

identical timer feature for BX Market 

Orders.46 Similar to BX, the proposed 

timer would be available once the intraday trading session begins for an 

options series, as the Exchange already 

has a separate opening delay timer that 

provides protection to the market during 

the Opening Process.47 In particular, the 

Exchange would cancel orders (if 

consistent with the member 

organization’s instructions) if an options 

series has not opened before the 

conclusion of the opening delay timer.48

As such, the Exchange is proposing that 

the pre-established period of time for 

the proposed timer feature would 

commence once the intra-day trading 

session begins for that options series. In 

other words, while the Opening Process 

is on-going, and the intra-day trading 

session has not commenced, the preestablished period of time for the 

proposed timer feature would not 

commence. Further, the Exchange 

proposes to note that Market Orders on 

the order book would be immediately 

cancelled if an options series is halted, 

provided the member organization 

designated the cancellation of Market 

Orders.49 The proposed changes are 

intended to make clear that in the event 

there is a Market Order in a zero bid 

market while the Market Order was 

resting on the order book, the Member 

has an option to designate the 

cancellation of that Market Order 

pursuant to the proposed cancel timer 

feature. In this case, those Market 

Orders to sell, which were resting on the 

order book, would immediately cancel 

upon a trading halt instead of waiting 

until the end of the pre-established 

timer period. ISE, GEMX, MRX and BX 

also has identical language governing its 

Market Orders today.50 Like ISE, GEMX, 

MRX and BX, the Exchange believes 

that the proposed intra-day timer feature 

will provide additional flexibility for 

member organizations that wish to 

cancel unexecuted Market Orders after a 

certain period of time. 

As noted above in Options 2, Section 

6, the Exchange would no longer 

prohibit Market Makers (and Lead 

Market Makers) 51 from entering Market 

Orders. In addition, the Exchange would 

no longer prohibit an Off-Floor Broker 

Dealer 52 from entering a Market Order 

for the same reasons as expressed above 

in Options 2, Section 6.53 All Market 

Makers, including away market makers, 

are restricted to a total number of 

contracts executed during a quarter in 

options series to which it is not 

appointed of twenty-five percent (25%) 

of the total number of contracts 

executed by the Market Maker and Lead 

Market Maker in options series as all 

options markets impose this restriction 

on market makers. The Exchange does 

not believe there is any reason to restrict 

Off-Floor Broker Dealers from entering 

Market Orders in options classes, rather, 

the Exchange proposes to permit all 

member organizations to be able to enter 

Market Orders as is the case on The 

Nasdaq Options Market LLC (‘‘NOM’’), 

BX, ISE, GEMX and MRX. 

Limit Orders 

The Exchange proposes to relocate 

‘‘Limit Orders’’ from current Options 3, 

Section 7(b)(2) to proposed Options 3, 

Section 7(b) without change.54 The 

Exchange proposes to define three types 

of Limit Orders similar to ISE, GEMX 

and MRX. First, the Exchange proposes 

to define a ‘‘Marketable Limit Order’’ as 

a Limit Order to buy (sell) at or above 

(below) the best offer (bid) on the 

Exchange. Next, the Exchange proposes 

to define a Fill-or-Kill Orders as a Limit 

Order that is to be executed in its 

entirety as soon as it is received and, if 

not so executed, treated as cancelled. 

Finally, the Exchange proposes to 

relocate an Intermarket Sweep Order 

from current Options 3, Section 7(b)(3) 

to proposed Options 3, Section 7(b)(3) 

with some additions. The Exchange 

proposes to reorder some sentences to 

closely resemble ISE, GEMX and MRX 

Options 3, Section 7(b)(3). The 

Exchange proposes to add an additional 

sentence to make clear that ISOs must 

have a TIF designation of IOC. 

Additionally, the Exchange proposes to 

define the ‘‘regular order book’’ as the 

‘‘single-leg order book.’’ 

All-or-None Orders 

The Exchange proposes to relocate the 

All-or-None Orders from current 

Options 3, Section 7(b)(5) to proposed 

Options 3, Section 7(c) and amend it. 

Today, Phlx restricts All-or-None Orders 

to be entered only by Public Customers. 

At this time, the Exchange proposes to 

permit any member organization to 

submit an All-or-None Order similar to 

ISE, GEMX, and MRX Options 3, 

Section 7(c). The Exchange would not 

apply the Acceptable Trade Range 

protection in Options 3, Section 15(a) to 

All-Or-None Orders, similar to other 

orders. Finally, similar to ISE, GEMX 

and MRX, the Exchange proposes to 

modify All-or-None Orders so that they 

would execute against multiple, 

aggregated orders if the executions 

would occur simultaneously. 

Additionally, as is the case today, an 

All-or-None Order would not be 

submitted during the Opening Process 

similar to any other order that does not 


ddrumheller on DSK120RN23PROD with NOTICES2
106894 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

55Phlx Options 3, Section 7(b)(4), states, A Stop 

Order is a Limit Order or Market Order to buy or 

sell at a limit price when interest on the Exchange 

for a particular option contract reaches a specified 

price. A Stop Order shall be cancelled if it is 

immediately electable upon receipt. A Stop Order 

shall not be elected by a trade that is reported late 

or out of sequence or by a Complex Order trading 

with another Complex Order. Lead Market Makers 

and Maker Makers may not submit a Stop Order. 

Off-Floor Broker-Dealers may not enter a Stop 

Market Order. (A) A Stop-Limit Order to buy 

becomes a Limit Order executable at the limit price 

or better when the option contract trades or is bid 

on the Exchange at or above the stop-limit price. A 

Stop-Limit Order to sell becomes a Limit Order 

executable at the limit price or better when the 

option contract trades or is offered on the Exchange 

at or below the stop-limit price. (B) A Stop Market 

Order is similar to a stop-limit except it becomes 

a Market Order when the option contract reaches 

a specified price. (C) A Stop Order is a nondisplayed, contingency order until elected. 

56Phlx Options 3, Section 7(b)(7) provides, A 

Cancel-Replacement Order is a single message for 

the immediate cancellation of a previously received 

order and the replacement of that order with a new 

order with new terms and conditions. If the 

previously placed order is already filled partially or 

in its entirety, the replacement order is 

automatically canceled or reduced by the number 

of contracts that were executed. The replacement 

order will result in a loss of priority. 

rest as the there is no order book during 

the Opening Process. 

Stop Orders 

The Exchange proposes to relocate the 

Stop Order description from Options 3, 

Section 7(b)(4) 55 to proposed Options 3, 

Section 7(d) and (e). Today, Phlx’s Stop 

Order may be a Limit or Market Order. 

Also, the Stop Order may not be elected 

by a trade that is reported late or out of 

sequence or by a Complex Order trading 

with another Complex Order. Phlx 

restricts Lead Market Makers, Maker 

Makers, and Off-Floor Broker-Dealers 

from entering Stop Market Orders. At 

this time, the Exchange proposes to 

amend its Stop Order to mirror the order 

type that is in use on ISE, GEMX and 

MRX at Options 3, Section 7(d) and (e). 

First, Phlx will permit all member 

organizations to utilize a Stop Order and 

Stop Limit Order and not restrict Maker 

Makers (including Lead Market Makers) 

as noted in the discussion of Options 2, 

Section 6 above. Further, the category of 

‘‘Off-Floor Broker-Dealer Orders’’ is 

being eliminated as described below 

with this rule change. Second, the 

Exchange will not separately specify a 

Stop Market Limit Order, rather it will 

describe an elected Stop Order as a 

Market Order. The Exchange proposes 

to describe a Stop Order as an order that 

becomes a Market Order when the stop 

price is elected. A Stop Order to buy is 

elected when the option is bid or trades 

on the Exchange at, or above, the 

specified stop price. A Stop Order to 

sell is elected when the option is offered 

or trades on the Exchange at, or below, 

the specified stop price. A Stop Order 

shall be cancelled if it is immediately 

electable upon receipt. Stop Orders may 

only be entered through FIX. The rule 

text that currently provides, ‘‘A Stop 

Order shall not be elected by a trade that 

is reported late or out of sequence or by 

a Complex Order trading with another 

Complex Order’’ will be relocated to the 

ended of the sentence. The Exchange 

proposes to provide that a Stop Limit 

Order is an order that becomes a Limit 

Order when the stop price is elected. A 

Stop Limit Order to buy is elected when 

the option is bid or trades on the 

Exchange at, or above, the specified stop 

price. A Stop Limit Order to sell 

becomes a sell limit order when the 

option is offered or trades on the 

Exchange at, or below, the specified 

stop price. A Stop Limit Order shall be 

cancelled if it is immediately electable 

upon receipt. The Exchange is removing 

the rule text that states that a Stop Order 

is a non-displayed, contingency order 

until elected because the proposed rule 

text makes clear that the Stop Order 

does not become a Market or Limit 

Order until it is elected. Finally, similar 

to a Stop Order, a Stop Limit Order shall 

not be elected by a trade that is reported 

late or out of sequence or by a Complex 

Order trading with another Complex 

Order. 

Cancel or Replace Orders 

The Exchange proposes to relocate the 

Cancel and Replace Order description 

from Options 3, Section 7(b)(7) 56 to 

proposed Options 3, Section 7(f). The 

Exchange proposes to modify the Cancel 

and Replace Order so that it mirrors the 

functionality on ISE, GEMX and MRX at 

Options 3, Section 7(f). The Exchange 

would state at the beginning that 

‘‘Cancel and Replace Orders shall 

mean’’ to conform the text to the other 

changes to the order types. The 

Exchange would remove the phrase 

‘‘with new terms and conditions’’ and 

instead note that the replacement order 

will retain the priority of the cancelled 

order, if the order posts to the Order 

Book, provided the price is not 

amended or size is not increased. In the 

case of Reserve Orders, which the 

Exchange is adopting as noted further 

below, the replacement order will retain 

the priority of the cancelled order, if the 

order posts to the Order Book, provided 

the price is not amended or size 

(displayed and non-displayed) is not 

changed. This new text specifically 

notes that amending the price or 

increasing the size will result in a loss 

of priority. Further the Exchange 

proposes to state that if the replacement 

portion of a Cancel and Replace Order 

does not satisfy the System’s price or 

other reasonability checks (e.g., Options 

3, Section 15(a)(1) and Options 3, 

Section 15(a)(2)) the existing order shall 

be cancelled and not replaced. Today, 

the Exchange utilizes the simple order 

checks in Options 3, Section 15(a)(1), 

Order Price Protection, and Options 3, 

Section 15(b)(1), Acceptable Trade 

Range, for each order entered into the 

System, including replacement orders. 

This additional language brings more 

clarity to the rule text. 

Reserve Orders 

The Exchange proposes to adopt a 

Reserve Order at Options 3, Section 7(g) 

that is identical to the order type in ISE, 

GEMX and MRX Options 3, Section 7(g). 

As proposed, a Reserve Order would be 

a limit order that contains both a 

displayed portion and a non-displayed 

portion. Both the displayed and nondisplayed portions of a Reserve Order 

would be available for potential 

execution against incoming marketable 

orders. A non-marketable Reserve Order 

would rest on the order book. The 

displayed portion of a Reserve Order 

would be ranked at the specified limit 

price and the time of order entry. The 

displayed portion of a Reserve Order 

would trade in accordance with Options 

3, Section 10(a)(1)(A) for Public 

Customer Orders, and Options 3, 

Section 10(a)(1)(F) for non-Public 

Customer Orders. Reserve Orders would 

be entered with an instruction for the 

displayed portion of the order to be 

refreshed: (A) upon full execution of the 

displayed portion or upon any partial 

execution; and (B) up to the initial size 

of the displayed portion or with a 

random refresh quantity within a range 

determined by the member organization. 

When the displayed portion of a Reserve 

Order is decremented, either in full or 

in part, it would be refreshed from the 

non-displayed portion of the resting 

Reserve Order. If the displayed portion 

is refreshed in part, the new displayed 

portion would include the previously 

displayed portion. Upon any refresh, the 

entire displayed portion would be 

ranked at the specified limit price and 

obtain a new time stamp, i.e., the time 

that the new displayed portion of the 

order was refreshed. The new displayed 

portion would trade in accordance with 

Options 3, Section 10(a)(1)(A) for Public 

Customer Orders, and Options 3, 

Section 10(a)(1)(F) for non-Public 

Customer Orders. The initial nondisplayed portion of a Reserve Order 

rests on the order book and would be 

ranked based on the specified limit 

price and time of order entry. 

Thereafter, non-displayed portions, if 

any, always obtain the same time stamp 


ddrumheller on DSK120RN23PROD with NOTICES2
Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 106895 

57The Exchange is skipping certain letters in this 

rule to account for other rule changes that will be 

filed that impact Options 3, Section 7(i), (j), (k), (t) 

and (v). Where the Exchange is reserving letters, it 

is to align to the lettering in ISE, GEMX and MRX 

Options 3, Section 7. 58Phlx Options 3, Section 7(b)(11) provides, A 

Directed Order is as described in Options 2, Section 

10. 

59Phlx Options 3, Section 5(d) provides, An order 

will not be executed at a price that trades through 

another market or displayed at a price that would 

lock or cross another market. An order that is 

designated by the member as routable will be 

routed in compliance with applicable TradeThrough and Locked and Crossed Markets 

restrictions. An order that is designated by a 

member as non-routable will be re-priced in order 

to comply with applicable Trade-Through and 

Locked and Crossed Markets restrictions. If, at the 

time of entry, an order that the entering party has 

elected not to make eligible for routing would cause 

a locked or crossed market violation or would cause 

a trade-through violation, it will be re-priced to the 

current national best offer (for bids) or the current 

national best bid (for offers) as non-displayed, and 

displayed at one minimum price variance above (for 

offers) or below (for bids) the national best price. 

60Phlx Options 3, Section 7(b)(6) provides, An 

Opening Sweep is a one-sided order entered by a 

Lead Market Maker or Market Maker through SQF 

for execution against eligible interest in the System 

during the Opening Process. This order type is not 

subject to any protections listed in Options 3, 

Section 15, except for Automated Quotation 

Adjustments. The Opening Sweep will only 

participate in the Opening Process pursuant to 

Options 3, Section 8 and will be cancelled upon the 

open if not executed. 

61See Phlx Options 1, Section 1(b)(28) which 

defines a Market Maker as a Streaming Quote 

Trader or a Remote Streaming Quote Trader who 

enters quotations for his own account electronically 

into the System. 

62Phlx Options 3, Section 7(b)(9) provides, A 

PIXL Order is as described in Options 3, Section 13. 

as that of the new displayed portion as 

described in proposed Options 3, 

Section 7(g)(5). The non-displayed 

portion of any Reserve Order would be 

available for execution only after all 

displayed interest has been executed. 

The non-displayed portion of any 

Reserve Order would trade in 

accordance with Options 3, Section 

10(a)(1)(A) for Public Customer Orders, 

and Options 3, Section 10(a)(1)(F) for 

non-Public Customer Orders. The 

Exchange believes that the adoption of 

this new order type will allow all 

member organizations the ability to 

trade their orders with displayed and 

non-displayed portions similar to ISE, 

GEMX and MRX Options 3, Section 7(g). 

Attributable Orders 

The Exchange proposes to adopt 

Attributable Orders at Options 3, 

Section 7(h) that is identical to the order 

type in ISE, GEMX and MRX Options 3, 

Section 7(h). An Attributable Order 

would be a market or limit order which 

displays the user firm ID for purposes of 

electronic trading on the Exchange. Use 

of Attributable Orders is voluntary. 

Attributable Orders may not be available 

for all Exchange Systems. The Exchange 

will issue an Options Regulatory Alert 

specifying the Systems for which the 

Attributable Order type shall be 

available. The Exchange believes that 

the availability of this order type will 

allow member organizations the ability 

to display their firm identification if 

they elect to do so. 

Directed Orders 57

The Exchange proposes to relocate the 

reference to Directed Orders currently in 

Options 3, Section 7(b)(11) 58 to Options 

3, Section 7(l) without change. The 

Exchange proposes to reserve Options 3, 

Section 7(m). 

Add Liquidity Orders 

The Exchange proposes to adopt an 

Add Liquidity Order (‘‘ALO’’) at 

Options 3, Section 7(n) that is identical 

to ISE, GEMX and MRX Options 3, 

Section 7(n). ALOs are limit orders that 

will only be executed as a ‘‘maker’’ on 

the Exchange. An Add Liquidity Order 

is a limit order that is to be executed in 

whole or in part on the Exchange (i) 

only after being displayed on the 

Exchange’s limit order book; and (ii) 

without routing any portion of the order 

to another market center. Member 

organizations may specify whether an 

Add Liquidity Order shall be cancelled 

or re-priced to the minimum price 

variation above the national best bid 

price (for sell orders) or below the 

national best offer price (for buy orders) 

if, at the time of entry, the order (i) is 

executable on the Exchange; or (ii) the 

order is not executable on the Exchange, 

but would lock or cross the national best 

bid or offer. If at the time of entry, an 

Add Liquidity Order would lock or 

cross one or more non-displayed orders 

or quotes on the Exchange, the Add 

Liquidity Order shall be cancelled or repriced to the minimum price variation 

above the best non-displayed bid price 

(for sell orders) or below the best nondisplayed offer price (for buy orders). 

Notwithstanding the aforementioned, if 

an Add Liquidity Order would not lock 

or cross an order or quote on the System 

but would lock or cross the NBBO, the 

order will be handled pursuant to 

Options 3, Section 5(d).59 An Add 

Liquidity Order will be ranked in the 

Exchange’s limit order book in 

accordance with Options 3, Section 10 

which governs priority and allocation. 

Add Liquidity Orders may only be 

submitted when an options series is 

open for trading. This order type would 

give market participants greater control 

over the circumstances in which their 

orders are executed. 

Below are some examples of the Add 

Liquidity Order. 

Add Liquidity Only Order Re-Price 

Example 

• Non-Penny Program MPV Option in 

open trading state 

• Market Maker A quote $0.90 (10) × 

$1.00 (10) 

• ABBO $0.85 × $1.05 

• Firm A sends Add Liquidity Only 

Order to buy 5 arrives at $1.00 

Æ Reprices on book to $0.95 

Æ Displays on $0.95 bid, which is 

National Best displayed bid with a 

quantity of 5 

• Order to sell 10 arrives at $0.90 

Æ 5 execute with Firm A @$0.95 

Æ 5 execute with Market Maker A @

$0.90 

Æ NBBO updates back to $0.90 × $1.00 

Add Liquidity Only Reject Example 

• Non-Penny Program MPV Option in 

open trading state 

• Market Maker A quote $0.90 (10) × 

$1.00 (10) 

• ABBO $0.85 × $1.05 

• Firm A sends Add Liquidity Only 

Order to buy 5 arrives at $1.00 

Æ Order is rejected back to sender 

because the sender configured the 

order for reject instead of re-price 

The Exchange notes that it proposes 

to reserve Options 3, Section 7(o), (p), 

(q), (r), (s) and (t). 

Opening Sweep 

The Exchange proposes to relocate the 

Opening Sweep order type at Options 3, 

Section 7(b)(6) 60 to Options 3, Section 

7(u) and amend it. The Exchange 

proposes to replace references to ‘‘Lead 

Market Makers’’ and ‘‘Market Makers’’ 

to simply ‘‘Market Makers’’ as all Lead 

Market Makers are also Market 

Makers.61 Additionally, the Exchange 

proposes to note that with the 

technology migration, that Opening 

Sweeps would be subject to the new 

Market Wide Risk Protection proposed 

in Options 3, Section 15. The Exchange 

is proposing to add a Market Wide Risk 

Protection to its rules with this proposal 

as described below. Finally, the 

Exchange proposes to add a precise 

citation to the Opening Process in the 

last sentence of Options 3, Section 7(u) 

by including ‘‘(b)(i)’’ after Options 3, 

Section 8. 

The Exchange proposes to reserve 

Options 3, Section 7(x) and (y). 

PIXL Order 

The Exchange proposes to relocate the 

description of a PIXL Order from 

Options 3, Section 7(b)(9) 62 to Options 

3, Section 7(y) without substantive 


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63The Exchange proposes to remove ‘‘A’’ before 

the words ‘‘PIXL Order.’’ 

64Phlx Options 3, Section 7(c)(1) provides, If not 

executed, an order entered with a TIF of ‘‘Day’’ 

expires at the end of the day on which it was 

entered. All orders by their terms are Day Orders 

unless otherwise specified. Day orders may be 

entered through FIX. 

65Phlx Options 3, Section 7(c)(4) provides, A 

Good Til Cancelled (‘‘GTC’’) Order entered with a 

TIF of GTC, if not fully executed, will remain 

available for potential display and/or execution 

unless cancelled by the entering party, or until the 

option expires, whichever comes first. GTC Orders 

shall be available for entry from the time prior to 

market open specified by the Exchange until market 

close. 

66Phlx Options 3, Section 7(c)(2) provides, An 

Immediate-or-Cancel (‘‘IOC’’) Order entered with a 

TIF of ‘‘IOC’’ is a Market Order or Limit Order to 

be executed in whole or in part upon receipt. Any 

portion not so executed is cancelled. (A) Orders 

entered with a TIF of IOC are not eligible for 

routing. (B) IOC orders may be entered through FIX 

or SQF, provided that an IOC Order entered by a 

Market Maker or Lead Market Maker through SQF 

is not subject to the Order Price Protection, the 

Market Order Spread Protection, or Size Limitation 

in Options 3, Section 15(a)(1), (a)(2), and (b)(2), 

respectively, or Size Limitation within Options 3, 

Section 16(e). (C) Orders entered into the Price 

Improvement XL (‘‘PIXL’’) Mechanism and 

Qualified Contingent Cross (‘‘QCC’’) Mechanism are 

considered to have a TIF of IOC. By their terms, 

these orders will be: (1) executed either on entry or 

after an exposure period, or (2) cancelled. 

67See Phlx Options 1, Section 1(b)(28) which 

defines a Market Maker as a Streaming Quote 

Trader or a Remote Streaming Quote Trader who 

enters quotations for his own account electronically 

into the System. 

68Phlx Options 3, Section 7(c)(3) provides, An 

Opening Only (‘‘OPG’’) order is entered with a TIF 

of ‘‘OPG’’. This order can only be executed in the 

Opening Process pursuant to Options 3, Section 8. 

change.63 The Exchange proposes to 

populate Supplementary Material .01 to 

Options 3, Section 7 in a separate rule 

change. 

Time in Force Provisions 

The Exchange proposes to relocate the 

rule text concerning Time in Force from 

current Options 3, Section 7(c) to 

Supplementary Material .02 to Options 

3, Section 7 without change. Phlx 

Options 3, Section 7(c) provides, ‘‘Time 

in Force or ‘‘TIF.’’ The term ‘‘Time in 

Force’’ shall mean [sic] the period of 

time that the System will hold an order 

for potential execution, and shall 

include:’’ 

Day Order 

The Exchange proposes to relocate 

Day Order from current Options 3, 

Section 7(c)(1) 64 to Supplementary 

Material .02(a) to Options 3, Section 7 

and make minor amendments to the 

description. The Exchange proposes to 

amend the first sentence which states, 

‘‘If not executed, an order entered with 

a TIF of ‘‘Day’’ expires at the end of the 

day on which it was entered.’’ The 

Exchange proposes to instead provide, 

‘‘An order to buy or sell entered with a 

TIF of ‘‘DAY,’’ which, if not executed, 

expires at the end of the day on which 

it was entered.’’ The Exchange is 

rewording the rule text of Day Order to 

mirror the text in ISE, GEMX and MRX 

Supplementary Material .02(a) to 

Options 3, Section 7. The Exchange 

notes that Phlx does not have the 

Precise or OTTO protocols today. 

Good-Till-Cancelled 

The Exchange proposes to relocate 

Good Till Cancelled from Options 3, 

Section 7(c)(4) 65 to Supplementary 

Material .02(b) to Options 3, Section 7 

and amend the description. Currently, 

Supplementary Material .02(b) to 

Options 3, Section 7 provides that a 

Good Til Cancelled (‘‘GTC’’) Order 

entered with a TIF of GTC, if not fully 

executed, will remain available for 

potential display and/or execution 

unless cancelled by the entering party, 

or until the option expires, whichever 

comes first. GTC Orders shall be 

available for entry from the time prior 

to market open specified by the 

Exchange until market close. The 

Exchange proposes to instead provide 

that an order to buy or sell entered with 

a TIF of ‘‘GTC’’ remains in force until 

the order is filled, canceled or the 

option contract expires; provided, 

however, that GTC orders will be 

canceled in the event of a corporate 

action that results in an adjustment to 

the terms of an option contract. The first 

sentence of the current text is simply 

worded differently. Also, all order types 

are available throughout the trading day 

unless specified otherwise. The 

Exchange proposes to add language 

concerning a corporate event, noting 

that GTC orders are canceled in the 

event of a corporate action that results 

in an adjustment to the terms of an 

option contract. This is also true today. 

The Exchange is adding this rule text to 

clarify the current System behavior. The 

proposed GTC description is identical to 

the rule text in ISE, GEMX and MRX 

Supplementary Material .02(b) to 

Options 3, Section 7. There is no System 

change as a result of the change to the 

description of the GTC order. 

Good-Till-Date 

The Exchange proposes to adopt a 

new TIF designation, Good-Till-Date or 

‘‘GTD’’ at Supplementary Material .02(c) 

to Options 3, Section 7 which is 

identical to ISE, GEMX and MRX’s 

Good-Till-Date TIF at Supplementary 

Material .02(c) to Options 3, Section 7. 

A Good-Till-Date TIF is an order to buy 

or sell entered with a TIF of ‘‘GTD,’’ 

which, if not executed, would be 

cancelled at the sooner of the end of the 

expiration date assigned to the order, or 

the expiration of the series; provided, 

however, that GTD orders would be 

canceled in the event of a corporate 

action that results in an adjustment to 

the terms of an option contract. The 

Exchange believes this additional TIF 

will provide member organizations with 

additional opportunities when trading 

on Phlx. 

Immediate-or-Cancel 

The Exchange proposes to relocate 

Immediate-or-Cancel from Options 3, 

Section 7(c)(2) 66 to Supplementary 

Material .02(d) to Options 3, Section 7 

and amend the description. 

Supplementary Material .02(d) to 

Options 3, Section 7 currently states, 

‘‘An Immediate-or-Cancel (‘‘IOC’’) Order 

entered with a TIF of ‘‘IOC’’ is a Market 

Order or Limit Order to be executed in 

whole or in part upon receipt. Any 

portion not so executed is cancelled.’’ 

The Exchange proposes a nonsubstantive amendment to instead 

provide, ‘‘Immediate-or-Cancel. An 

order entered with a TIF of ‘‘IOC’’ that 

is to be executed in whole or in part 

upon receipt. Any portion not so 

executed is to be treated as cancelled.’’ 

The Exchange proposes to relocate the 

rule text in Options 3, Section 7(c)(A) to 

Supplementary Material .02(d)(1) to 

Options 3, Section 7 without change. 

The Exchange proposes to relocate the 

rule text in Options 3, Section 7(c)(B) to 

Supplementary Material .02(d)(2) to 

Options 3, Section 7 and remove the 

reference to ‘‘Lead Market Maker’’ to 

simply ‘‘Market Makers’’ as all Lead 

Market Makers are also Market 

Makers.67 The Exchange proposes to 

amend ‘‘SQF is not subject to’’ to ‘‘the 

SQF protocol will not be subject to’’. 

The Exchange proposes to add an ‘‘(A)’’ 

before Order Price Protection, and 

change ‘‘or Size Limitation in Options 3, 

Section 15(a)(1), (a)(2), and (b)(2), 

respectively, or Size Limitation within 

Options 3, Section 16(e)’’ to ‘‘and Size 

Limitation Protection as defined in 

Options 3, Section 15(a)(1), (a)(2), and 

(b)(2) respectively, for single leg 

orders.’’ These modifications are nonsubstantive and simply bring more 

clarity to the rule text. The Exchange 

proposes to relocate the rule text in 

current Phlx Options 3, Section 

7(c)(2)(C) in a separate rule change. 

These changes align with rule text in 

ISE, GEMX and MRX Supplementary 

Material .02(d) to Options 3, Section 7. 

Opening Only 

The Exchange proposes to relocate 

Opening Only from Options 3, Section 

7(c)(3) 68 to proposed Supplementary 


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This order type is not subject to any protections 

listed in Options 3, Section 15, except Size 

Limitation. Any portion of the order that is not 

executed during the Opening Process is cancelled. 

OPG orders may not route. 69Phlx Supplementary Material .03(A) of Options 

3, Section 7 provides, ‘‘Financial Information 

eXchange’’ or ‘‘FIX’’ is an interface that allows 

members and their Sponsored Customers to 

connect, send, and receive messages related to 

orders and auction orders and responses to and 

from the Exchange. Features include the following: 

(1) execution messages; (2) order messages; and (3) 

risk protection triggers and cancel notifications.’’ 

70For example, a member may specify the 

account(s) and their respective order quantities 

which make up the order. 71See ISE, GEMX and MRX Supplementary 

Material .03(a)(i) of Options 3, Section 7. 72Phlx Supplementary Material .03(A) of Options 

3, Section 7 provides, ‘‘Specialized Quote Feed’’ or 

‘‘SQF’’ is an interface that allows Lead Market 

Makers, Streaming Quote Traders (‘‘SQTs’’) and 

Remote Streaming Quote Traders (‘‘RSQTs’’) to 

connect, send, and receive messages related to 

quotes, Immediate-or-Cancel Orders, and auction 

responses into and from the Exchange. Features 

include the following: (1) options symbol directory 

messages (e.g., underlying and complex 

instruments); (2) system event messages (e.g., start 

of trading hours messages and start of opening); (3) 

trading action messages (e.g., halts and resumes); (4) 

execution messages; (5) quote messages; (6) 

Immediate-or-Cancel Order messages; (7) risk 

protection triggers and purge notifications; (8) 

opening imbalance messages; (9) auction 

notifications; and (10) auction responses. The SQF 

Purge Interface only receives and notifies of purge 

requests from the Lead Market Maker, SQT or 

RSQT. Lead Market Makers, SQTs and RSQTs may 

only enter interest into SQF in their assigned 

options series. Immediate-or-Cancel Orders entered 

into SQF are not subject to the Order Price 

Protection, the Market Order Spread Protection, or 

Size Limitation in Options 3, Section 15(a)(1), (a)(2) 

and (b)(2), respectively. 

73Phlx Supplementary Material .03(C) of Options 

3, Section 7 provides, Options Floor Based 

Management System or (‘‘FBMS’’) is a component 

of the System designed to enable members and/or 

their employees to enter, route and report 

transactions stemming from options orders received 

on the Exchange. The FBMS also is designed to 

establish an electronic audit trail for options orders 

negotiated, represented and executed by members 

on the Exchange, to the extent permissible pursuant 

to Options 8, Section 22(a), such that the audit trail 

provides an accurate, time-sequenced record of 

electronic and other orders, quotations and 

transactions on the Exchange, beginning with the 

receipt of an order by the Exchange, and further 

documenting the life of the order through the 

process of execution, partial execution, or 

cancellation of that order. The features of FBMS are 

described in Options 8, Sections 28(e) and 29. In 

addition, a non-member or member may utilize an 

FBMS FIX interface to create and send an order into 

FBMS to be represented by a Floor Broker for 

execution. 

74Phlx Options 3, Section 7(d) provides, Routing 

Strategies. Orders may be entered on the Exchange 

with a routing strategy of FIND, SRCH or Do-NotRoute (‘‘DNR’’) as provided in Options 5, Section 

4 through FIX only. 

75Today, Opening Only Orders are eligible for the 

Opening Process but not Immediate or Cancel 

Orders. 

76The Potential Opening Price indicates a price 

where the System may open once all other Opening 

Process criteria is met. 

Material .02(e) of Options 3, Section 7. 

The Exchange is proposing to add Phlx’s 

new Market Wide Risk Protection to the 

list of risk protections that would apply 

to Opening Only. The Exchange 

proposes a new Market Wide Risk 

Protection as explained below in this 

proposal. Also, the Exchange proposes 

to capitalize ‘‘orders’’ in the last 

sentence. 

Order Entry Protocols 

The Exchange proposes to amend the 

rule text currently in Supplementary 

Material .03(a)(i) of Options 3, Section 

7. With respect to the FIX protocol, 

within proposed Supplementary 

Material .03(A) of Options 3, Section 

7,69 the Exchange proposes to add ‘‘post 

trade allocation messages’’ to the list of 

features that will be included in FIX. A 

post trade allocation message allows 

market participants to specify how an 

order should be subdivided among one 

or more accounts.70 Today, ISE, GEMX 

and MRX provide post trade allocation 

messages through FIX.71 The Exchange 

does not propose to amend the SQF 

protocol within Supplementary Material 

.03(B) of Options 3, Section 7 72 or the 

FBMS protocol within Supplementary 

Material .03(C) of Options 3, Section 

7.73

Routing 

The Exchange proposes to relocate the 

rule text at Options 3, Section 7(d) 74 to 

Supplementary Material .04 of Options 

3, Section 7 without change. 

Options 3, Section 8 

The Exchange proposes to amend 

Options 3, Section 8, Options Opening 

Process, at Options 3, Section 8(b) to 

note the eligible interest that will be 

included in the Opening Process. The 

Exchange currently provides at Options 

3, Section 8(b) that, ‘‘Eligible interest 

during the Opening Process includes 

Valid Width Quotes, Opening Sweeps, 

and orders. Quotes, other than Valid 

Width Quotes, will not be included in 

the Opening Process. Non-SQT Market 

Makers may submit orders.’’ The 

Exchange proposes to note that ‘‘Eligible 

interest during the Opening Process 

includes Valid Width Quotes, Opening 

Sweeps, and orders, including Opening 

Only Orders, but excluding orders with 

a Time-In-Force of ‘‘Immediate or 

Cancel’’ and Add Liquidity Orders. 

Quotes, other than Valid Width Quotes, 

will not be included in the Opening 

Process. The displayed and nondisplayed portions of the Reserve Orders 

are considered for execution and in 

determining the Opening Price 

throughout the Opening Process. NonSQT Market Makers may submit 

orders.’’ 75 The Exchange would exclude 

Add Liquidity Orders and consider 

Reserve Orders (displayed and nondisplayed portions) for execution in the 

Opening Process as well as when 

considering the Opening Price. The 

Exchange proposes to amend the rule 

text to note how those order types are 

accepted by the System for processing 

during the Opening Process. The 

proposed eligibility of these orders 

mirror ISE, GEMX and MRX Options 3, 

Section 8(b). 

Also, similar to ISE, GEMX and MRX 

Options 3, Section 8(g), the Exchange 

proposes to account for the addition of 

Reserve Orders with respect to the 

Potential Opening Price 76 in Phlx 

Options 3, Section 8(h). The Exchange 

notes that to calculate the Potential 

Opening Price, the System will take into 

consideration all Valid Width Quotes 

and orders (including Opening Sweeps 

and displayed and non-displayed 

portions of Reserve Orders) for the 

option series and identify the price at 

which the maximum number of 

contracts can trade (‘‘maximum quantity 

criterion’’). The addition of this rule text 

will make clear the manner in which the 

System will handle a Reserve Order 

during the Opening Process. 

The Exchange proposes to amend 

Options 3, Section 8(h)(A), which 

currently describes how the Potential 

Opening Price would be calculated 

when there is more than one Potential 

Opening Price. Today, Phlx Options 3, 

Section 8(h)(A) provides that when two 

or more Potential Opening Prices would 

satisfy the maximum quantity criterion 

and leave no contracts unexecuted, the 

System takes the highest and lowest of 

those prices and takes the mid-point; if 

such mid-point is not expressed as a 

permitted minimum price variation, it 

will be rounded to the minimum price 

variation that is closest to the closing 

price for the affected series from the 

immediately prior trading session. If 

there is no closing price from the 

immediately prior trading session, the 

System will round up to the minimum 

price variation to determine the 

Opening Price. The Exchange proposes 

to no longer round in the direction of 

the previous trading day’s closing price, 

rather it would round up to the 

minimum price variation if the midpoint of the high/low is not expressed 

as a permitted minimum price variation 

with this technology migration. The 

proposed changes are intended to 

simplify and bring greater transparency 

to the Opening Process, as market 

participants can now have a better sense 

of how the Potential Opening Price will 

be calculated without having to account 

for the closing price of each options 

series. This proposed change will mirror 


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77See ISE, GEMX and MRX Options 3, Section 

8(g). 

78OQR is an additional type of boundary used in 

the Opening Process, and is intended to limit the 

opening price to a reasonable, middle ground price, 

thus reducing the potential for erroneous trades 

during the Opening Process. 

79The term ‘‘Public Customer’’ means a person or 

entity that is not a broker or dealer in securities and 

is not a Professional as defined within Options 1, 

Section (b)(45). See Option 1, Section 1(b)(46). 

80The term ‘‘Professional’’ means any person or 

entity that (i) is not a broker or dealer in securities, 

and (ii) places more than 390 orders in listed 

options per day on average during a calendar month 

for its own beneficial account(s). Member 

organizations must indicate whether orders are for 

Professionals. See Option 1, Section 1(b)(45). 

81As proposed in Options 3, Section 7(d) a Stop 

Order becomes a Market Order when the stop price 

is elected. A Stop Order to buy is elected when the 

option is bid or trades on the Exchange at, or above, 

the specified stop price. A Stop Order to sell is 

elected when the option is offered or trades on the 

Exchange at, or below, the specified stop price. 

the functionality on ISE, GEMX and 

MRX.77

The Exchange further proposes to 

amend Phlx Options 3, Section 8(j)(7), 

which currently describes the 

determination of Opening Quote Range 

(‘‘OQR’’) boundaries in certain 

scenarios.78 Specifically, the Exchange 

proposes to amend the last sentence of 

Options 3, Section 8(j)(7) which 

currently states, ‘‘The System will route 

routable Public Customer and 

Professional interest pursuant to 

Options 3, Section 10(a)(1)(A).’’ The 

Exchange proposes to remove the 

current limitation that only allows 

routable Public Customer 79 and 

Professional 80 interest to route during 

the Opening Process. Instead, all 

routable market participant interest will 

be allowed to route to align the 

Exchange’s opening functionality with 

ISE, GEMX and MRX Options 3, Section 

8, which does not limit orders that may 

route in the Opening Process. 

Specifically, the Exchange proposes to 

remove the reference to Public Customer 

and Professional to allow all routable 

interest to route in the Opening Process. 

The Exchange proposes to update the 

cross-cite to Phlx Options 3, Section 

10(a)(1)(A), that currently points to the 

Public Customer priority overlay. 

Instead, the Exchange would amend the 

citation to point to the more general 

priority rule in Phlx Options 3, Section 

10(a). 

Similar to other changes noted herein, 

the Exchange proposes to amend Phlx 

Options 3, Section 8(k)(C)(6) to note 

how Reserve Orders will be handled in 

the Opening Process for purposes of 

execution. The Exchange proposes to 

state, ‘‘The System will execute orders 

at the Opening Process that have 

contingencies (such as without 

limitation, Reserve Orders) and nonroutable orders, such as a ‘‘Do Not 

Route’’ or ‘‘DNR’’ Orders, to the extent 

possible. This rule text will add 

transparency to Phlx’s rule text, and 

mirror rule text in ISE, GEMX and MRX 

Options 3, Section 8(j)(6). Additionally, 

the Exchange proposes an amendment 

to the last sentence of Phlx Options 3, 

Section 8(k)(C)(6) which currently 

states, ‘‘The System will only route noncontingency Public Customer and 

Professional orders.’’ In line with 

proposed amendments to permit the 

System to route all market participant 

interest, thereby removing the limitation 

that only allows routable Public 

Customer and Professional interest to 

route, and in line with the addition of 

rule text related to the handling of 

Reserve Orders, the Exchange proposes 

to instead provide, ‘‘The System will 

only route non-contingency orders, 

except Reserve Orders may route up to 

their full volume.’’ With this proposal, 

Phlx would have the following 

contingency orders that will not route: 

a Stop Order, an All-or-None Order and 

a Fill-or-Kill Order. 

The Exchange proposes to amend 

current Phlx Options 3, Section 8(k)(D) 

to mirror rule text in ISE, GEMX and 

MRX Options 3, Section 8(j)(6)(A) 

which states, ‘‘The System will cancel 

any order or quote that is priced through 

the Opening Price. All other interest 

will be eligible for trading after 

opening.’’ Today, the Phlx System will 

cancel any order or quote priced 

through the Opening Price. Also, today, 

all other interest will be eligible for 

trading after the Opening Process and 

will remain on the order book. The 

Exchange believes that this rule text will 

bring greater transparency to Phlx’s 

Opening Process. 

Finally, the Exchange proposes to 

amend rule text in the Opening Process 

Cancel Timer at Phlx Options 3, Section 

8(l). With the retention of the ‘‘GoodTill-Cancel Order’’ and adoption of the 

‘‘Good-Till-Date Order,’’ the Exchange 

proposes to amend the order types in 

the last sentence of Options 3, Section 

8(l) for consistency. 

Options 3, Section 9 

The Exchange proposes to amend 

Phlx Options 3, Section 9, Trading 

Halts. Specifically, the Exchange 

proposes to amend Options 3, Section 

9(d)(3) to amend the manner in which 

a Stop Order will be treated during a 

trading halt. The Exchange proposes to 

mirror the treatment of Stop Orders in 

ISE, GEMX and MRX Options 3, Section 

9(d)(3). Today, the rule text notes that 

‘‘[a]fter the opening, the Exchange shall 

elect Stop Orders, as defined in Options 

8, Section 32(c)(2), and, because they 

become Market Orders, shall cancel 

them back and notify member 

organizations of the reason for such 

rejection.’’ The Exchange proposes to 

amend the rule text to instead provide, 

‘‘After the Opening Process, if a Stop 

Order is elected, as defined in Options 

3, Section 7(d) because they become 

Market Orders, the System shall cancel 

them back and notify market 

participants of the reason for such 

cancellation.’’ Stop Orders would 

become elected as provided for in 

proposed Options 3, Section 7(d).81 The 

Exchange currently cites Phlx Options 

8, Section 32 erroneously, as those rules 

refer to Stop Order types on the trading 

floor. The Exchange proposes to instead 

cite proposed new Options 3, Section 

7(d) which describes the electronic Stop 

Order type. The Exchange proposes to 

note that the System cancels orders. 

Also, the Exchange proposes to change 

the word rejection to cancellation 

because the order would be cancelled 

not rejected. The Exchange also 

proposes to amend Phlx Options 3, 

Section 9(f) which currently states, 

‘‘During a halt, the Exchange will 

maintain existing orders on the book 

(but not existing quotes), except as 

noted in Options 5, Section 4, accept 

orders and quotes, and process cancels. 

During a halt, existing quotes are 

cancelled and auction orders and 

auction responses, as well as Crossing 

Orders, are rejected.’’ The Exchange 

notes that this exception in Phlx 

Options 3, Section 9(f) to potential 

exceptions to this rule within Options 5, 

Section 4 is not necessary as the 

Exchange follows the trading halt 

processes in Options 3, Section 9. 

Options 5, Section 4 does not change 

the manner in which Options 3, Section 

9 operates. 

Options 3, Section 10 

The Exchange proposes to amend 

Phlx Options 3, Section 10, Electronic 

Execution Priority and Processing in the 

System. Today, generally, Phlx’s System 

rounds down. With this technology 

migration, the Exchange proposes to 

amend Phlx’s rounding methodology to 

round up to the nearest integer. Today, 

ISE, GEMX and MRX Options 3, Section 

10(c) provide for a Size Pro-Rata 

allocation with the same rounding 

methodology as proposed for Phlx. The 

Exchange is opting to round up and not 

down, uniformly, and disclose that 

rounding methodology directly within 

Options 3, Section 10, so that all 

member organizations are aware of the 

rounding methodology that would be 

utilized by the System. In addition, if 

the result of an allocation is not a whole 


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82BX also utilizes 40%. See Options 3, Sections 

10(a)(1)(C)(1)(c) and 10(a)(2)(iii). 

number, it will now be rounded up to 

the nearest whole number instead of 

down. Finally, with respect to rounding, 

because the System is rounding up, the 

provisions which describe allocations 

for remainders of less than one contract 

are being deleted because they cannot 

mathematically occur. The Exchange 

believes that rounding up uniformly is 

consistent with the Act because it 

provides for the equitable allocation of 

contracts among the Exchange’s market 

participants. The Exchange proposes to 

provide market participants with 

transparency as to the number of 

contracts that they are entitled to 

receive as the result of rounding. 

Further, the Exchange believes that this 

methodology produces an equitable 

outcome during allocation that is 

consistent with the protection of 

investors and the public interest 

because all market participants are 

aware of the methodology that will be 

utilized to calculate outcomes for 

allocation purposes. By way of example, 

Broker/Dealer Order to Buy 20 @1.00 

Firm Order to Buy 10 @1.00 

Customer Order to Sell 7 @1.00 

Today, this order would allocate as 

follows: 4 contracts to the Broker/ 

Dealer Order (BD receives 20/30 of the 

incoming 7 = 4.667, rounds down to 

4 contracts) 

Today, this order allocates 2 contracts 

to the Firm Order (Firm receives 10/ 

30 of the incoming 7 = 2.33, rounds 

down to 2 contracts) 

Today, this order allocates 1 contract 

(the odd lot) to the Broker/Dealer 

Order 

With this proposal, allocation will 

round up instead of down, meaning the 

Broker/Dealer order would instead be 

allocated 5 contracts and the Firm order 

would receive the remaining 2 

contracts. 

To that end, the Exchange proposes to 

amend Options 3, Section 10(a) to 

instead provide that ‘‘If the result is not 

a whole number, it will be rounded up 

to the nearest whole number. Size ProRata Priority shall mean that resting 

orders and quotes in the order book are 

prioritized according to price. If there 

are two or more resting orders or quotes 

at the same price, the System allocates 

contracts from an incoming order or 

quote to resting orders and quotes 

beginning with the resting order or 

quote displaying the largest size 

proportionally according to displayed 

size, based on the total number of 

contracts displayed at that price. 

Pursuant to Size Pro-Rata, if there are 

still contracts to be allocated after the 

displayed size of all orders at that price 

has been executed, the remaining size 

from the incoming order will be 

allocated proportionally against nondisplayed interest according to 

remaining total size of each resting 

order at such price, beginning with the 

order which has the largest total size 

remaining. The Exchange is proposing 

to allocate similar to ISE, GEMX and 

MRX Options 3, Section 10(c). The Size 

Pro-Rata allocation divides the 

remainder proportionally among the 

non-displayed interest. Both the 

displayed and non-displayed portions of 

a Reserve Order are available for 

potential execution against incoming 

marketable orders or quotes. The nondisplayed portion of any Reserve Order 

is available for execution only after all 

displayed interest on the single-leg 

order book has been executed. The Odd 

Lot Allocation within Phlx Options 3, 

Section 10(a)(1)(F) is also being 

removed because the Exchange would 

no longer utilize the random assignment 

discussed in that paragraph, rather the 

Exchange would simply round up any 

allocation which does not result in a 

whole number, and thus would have no 

Odd Lot contracts remaining to be 

allocated. 

The Exchange proposes to amend 

Phlx Options 3, Section 10(a)(1)(B) to 

change a reference to ‘‘DROT’’ to 

‘‘Directed Market Maker’’ for 

consistency. 

The Exchange proposes to amend 

Phlx Options 3, Section 10(a)(1)(C) to 

provide that ‘‘After all Public Customer 

orders have been fully executed, upon 

receipt of a Directed Order pursuant to 

Options 2, Section 10, provided the 

Directed Market Maker’s quote is at the 

better of the internal PBBO or the 

NBBO, the Directed Market Maker will 

be afforded a participation entitlement. 

This participation entitlement will be 

considered after the Opening Process.’’ 

Today, a Directed Market Maker’s quote 

or market maker order must be at the 

better of the internal PBBO or NBBO. 

The Exchange believes that similar to 

ISE, GEMX and MRX Options 3, Section 

10(c)(1)(C), that Market Maker orders 

should not be considered when offering 

Directed Market Maker priority 

enhancements. Phlx Options 2, Section 

10 provides that when the Exchange’s 

disseminated price is the NBBO at the 

time of receipt of the Directed Order, 

and the Directed Lead Market Maker, 

SQT or RSQT is quoting at the better of 

the internal PBBO or the NBBO, the 

Directed Order shall be automatically 

executed and allocated in accordance 

with Options 3, Section 10(a)(1)(C). The 

Exchange proposes to only offer the 

Directed Market Maker enhanced 

allocation if a Directed Market Maker’s 

quote is at the better of the internal 

PBBO or the NBBO and not its order. 

Consistent with this change, the 

Exchange proposes to remove ‘‘or 

order(s)’’ after quote throughout Options 

3, Section 10(a)(1)(C). Consistent with 

its proposal to round up, the Exchange 

proposes to remove the last sentence of 

Options 3, Section 10(a)(1)(C) that 

provides, ‘‘If rounding would result in 

an allocation of less than one contract, 

the Directed Market Maker shall receive 

one contract.’’ 

The Exchange proposes to amend the 

Phlx’s Entitlement for Orders of 5 

contracts or fewer at Options 3, Section 

10(a)(1)(D) to align with ISE, GEMX and 

MRX Options 3, Section 10(a)(1)(D). The 

Exchange proposes to amend the last 

sentence to provide, ‘‘On a quarterly 

basis, the Exchange will evaluate what 

percentage of the volume executed on 

the Exchange is comprised of orders for 

5 contracts or fewer allocated to Lead 

Market Makers, and will reduce the size 

of the orders included in this provision 

if such percentage is over 40%.’’ Today, 

Phlx’s percentage for the reduction is 

25%. The Exchange believes that 

utilizing the higher percentage 

continues to restrict Lead Market 

Makers with respect to the percentage of 

the volume executed on Phlx that is 

comprised of orders for 5 contracts or 

fewer allocated to Lead Market Makers. 

The Exchange will continue to evaluate 

the percentage on a quarterly basis. The 

Exchange monitors ISE, GEMX and 

MRX Lead Markets’ orders for 5 

contracts or fewer based on this 

percentage today and this has not raised 

any concerns. Finally, this proposal will 

align this percentage to 40% identical to 

ISE, GEMX and MRX Options 3, Section 

10(a)(1)(D) so that Market Makers have 

the same compliance across the Nasdaq 

affiliated exchanges.82 Phlx notes that 

currently Lead Market Makers are not 

approaching the 25% threshold noted in 

Options 3, Section 10(a)(1)(D)(ii) related 

to the quarterly review of 5 contracts or 

fewer by the Exchange, which 

percentage is based on total volume 

executed. With this proposal, Phlx will 

monitor the frequency in which Lead 

Market Makers receive orders for 5 

contracts or fewer. Specifically, the 

Exchange will review the proposed 

provision quarterly and will maintain 

the orders for 5 contracts or fewer at a 

level that will not allow these small size 

orders executed by Lead Market Makers 

to account for more than 40% of the 

volume executed on the Exchange. The 

Exchange does not believe the proposal 

raises any new or novel issues as other 

options exchanges also offer the same 


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106900 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

83See ISE, GEMX and MRX Options 3, Section 

10(a)(1)(D). 

84Phlx Options 3, Section 10(a)(1)(F) provides, 

[i]f there are contracts remaining after Market Maker 

Priority is applied, such contracts shall be allocated 

by randomly assigning all Market Makers (including 

the Lead Market Maker or Directed Market Maker) 

an order of allocation each trading day, and 

allocating orders, quotes and sweeps in accordance 

with the trading day’s order assignment, provided 

the Market Maker, is at the best price at which the 

order, quote or sweep is being traded. 

allocation for orders for 5 contracts or 

fewer.83 The Exchange believes that 

providing this benefit offers Lead 

Market Makers an incentive for vigorous 

quoting since a Lead Market Maker must 

be quoting at the NBBO in order to 

receive the allocation. Incentivizing 

Lead Market Makers to provide liquidity 

on Phlx, in turn, provides greater 

opportunity for executions, tighter 

spreads, and better pricing for all 

member organizations. While the 

Commission has, in the past, been 

concerned about locking up larger 

portions of order flow from intra-market 

price competition, the Exchange 

believes that the enhancement would 

remain adequately balanced by the 

increased 40% threshold that limits the 

volume of orders of five contracts or 

fewer that are executed by Lead Market 

Makers to account for no more than 

40% of the volume executed on the 

Exchange. The proposed increased 

limitation of 40% continues to strike a 

reasonable balance between encouraging 

vigorous price competition by Lead 

Market Makers and rewarding those 

Lead Market Makers for their unique 

duties. Lead Market Maker are also 

subject to the heightened quoting 

requirements specified in Options 2, 

Section 5(c)(2)(B). As noted above, 

consistent with proposed rounding, the 

Exchange proposes to remove the Phlx 

Odd Lot Allocation in Phlx Options 3, 

Section 10(a)(1)(F) 84 because Phlx will 

round up which would not result in 

remaining contracts to be allocated after 

rounding. There is no net benefit or 

negative to electing to round up versus 

utilizing any other method of rounding 

(down, banker’s rounding, etc.) 

provided the rounding is handling 

uniformly and applied in the same 

manner to each trade executed by the 

System. The Exchange will uniformly 

apply its proposed rounding 

methodology, rounding up, to all 

transactions executed on Phlx. The 

Exchange also proposes to remove the 

reference to this paragraph at the end of 

Phlx Options 3, Section 10(a)(1)(D)(ii). 

Similar to ISE, GEMX and MRX 

Options 3, Section 10(c)(1)(E), the 

Exchange proposes to account for 

Reserve Orders in proposed Phlx 

Options 3, Section 7(g)(3). The 

Exchange proposes to state that, ‘‘If 

there are contracts remaining after all 

Market Maker interest has been fully 

executed, notwithstanding Options 3, 

Section 7(g)(3), such contracts shall be 

executed based on the Size Pro-Rata 

execution algorithm as described in 

Options 3, Section 10(a).’’ The Exchange 

proposes to cite to proposed Phlx 

Options 3, Section 7(g)(3) which 

provides that the displayed portion of a 

Reserve Order will trade in accordance 

with Options 3, Section 10(a)(1)(A) for 

Public Customer Orders and this 

subparagraph (F) for non-Public 

Customer Orders. The displayed portion 

of a Reserve Order will be allocated the 

same as other order types. Both the 

displayed and non-displayed portions of 

a Reserve Order are available for 

potential execution against incoming 

marketable orders or quotes. The nondisplayed portion of any Reserve Order 

is available for execution only after all 

displayed interest on the single-leg 

order book has been executed. The 

proposed rule text related to allocation 

of a Reserve Order is identical to ISE, 

GEMX and MRX at Options 3, Section 

10(g). The Exchange also proposes to 

add a citation to Options 3, Section 

10(a) in this paragraph for clarity. 

Finally, the Exchange proposes to 

amend Phlx Options 3, Section 10(a)(2) 

to capitalize ‘‘market maker’’ and 

remove the Market Maker order at the 

end of this paragraph because, as 

proposed above, the Exchange proposes 

to only offer the Directed Market Maker 

allocation if a Directed Market Maker’s 

quote is at the better of the internal 

PBBO or the NBBO and not an order. 

Options 3, Section 15 

The Exchange proposes to amend 

Options 3, Section 15, Simple Order 

Risk Protections. 

Order Price Protection 

The Exchange proposes to amend its 

Order Price Protection (‘‘OPP,’’ also 

known as the fat finger check) in Phlx 

Options 3, Section 15(a)(1) to align 

certain features with the OPP 

functionality currently offered by its 

affiliate, NOM and BX. The Exchange’s 

proposal will introduce an alternative 

method to determine parameters for this 

risk protection. The Exchange notes that 

OPP is intended to prevent erroneous 

executions of orders on Phlx. This 

proposal seeks to further this objective 

by introducing a fixed dollar threshold 

that, in combination with the existing 

percentage threshold, will provide a 

modified approach to order rejection 

based on the price of the order. 

The Exchange’s current OPP feature 

prevents certain day limit, good til 

cancelled, and immediate or cancel 

orders at prices outside of pre-set 

standard limits from being accepted by 

the System. OPP applies to all options 

but currently does not apply to StopLimit Orders, Intermarket Sweep Orders 

or Complex Orders. Today, OPP is 

operational each trading day after the 

opening until the close of trading, 

except during trading halts. OPP assists 

member organizations in controlling 

risk by checking each order, before it is 

accepted into the System, against 

certain parameters. Today, as set forth 

in Phlx Options 3, Section 15(a)(1)(B), 

OPP rejects incoming orders that exceed 

certain parameters according to the 

following algorithm: 

(i) If the better of the NBBO or the internal 

market BBO (the ‘‘Reference BBO’’) on the 

contra-side of an incoming order is greater 

than $1.00, orders with a limit more than 

50% through such contra-side Reference BBO 

will be rejected by the System upon receipt. 

(ii) If the Reference BBO on the contra-side 

of an incoming order is less than or equal to 

$1.00, orders with a limit more than 100% 

through such contra-side Reference BBO will 

be rejected by the System upon receipt. 

With this technology migration, the 

Exchange proposes to expand the 

algorithm for OPP to introduce a fixed 

dollar threshold as an alternative to the 

percentage specified within the current 

rule. To effect this change, the Exchange 

proposes to amend Phlx Options 3, 

Section 15(a)(1)(B) to provide that OPP 

will reject incoming orders that exceed 

certain parameters according to the 

following algorithm: 

(i) If the better of the NBBO or the internal 

market BBO (the ‘‘Reference BBO’’) on the 

contra-side of an incoming order is greater 

than $1.00, orders with a limit more than the 

greater of the below will cause the order to 

be rejected by the System upon receipt. 

(A) 50% through such contra-side 

Reference BBO; or 

(B) a configurable dollar amount not to 

exceed $1.00 through such contra-side 

Reference BBO as specified by the Exchange 

announced via an Options Trader Alert. 

(ii) If the Reference BBO on the contra-side 

of an incoming order is less than or equal to 

$1.00, orders with a limit more than the 

greater of the below will cause the order to 

be rejected by the System upon receipt. 

(A) 100% through such contra-side 

Reference BBO; or 

(B) a configurable dollar amount not to 

exceed $1.00 through such contra-side 

Reference BBO as specified by the Exchange 

announced via an Options Trader Alert. 

The proposed alternative would 

permit for a range of prices to be 

executed where the incoming order is 

up to $1.00 from the Reference BBO. 

The parameters are identical to NOM 

and BX Options 3, Section 15(a)(1)(B). 

Similar to NOM and BX, the Exchange 


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85The Exchange currently provides members 

organizations with price protections for orders such 

as the OPP and the Market Order Spread Protection, 

which prevent limit orders and market orders from 

being executed at far away and potentially 

erroneous prices. 

86Phlx will also provide Market Wide Risk 

Protections for Complex Orders in a separate rule 

change. 

believes that utilizing the greater of a 

fixed dollar amount or percentage 

would expand the applicability of OPP 

while still providing a reasonable limit 

to the range where orders will be 

accepted. By implementing a 

functionality that applies the greater of 

a fixed dollar amount not to exceed 

$1.00 or a percentage, the Exchange 

would ensure that this protection would 

be able to accommodate all orders based 

on a determination of how far from the 

Reference BBO the order is priced. 

The Exchange notes that certain 

securities in lower price ranges would 

not benefit from the application of a 

percentage as would securities with 

higher prices. For instance, the 

application of a 50% threshold to a $50 

security would provide a rejection if a 

limit order was priced $75 or greater 

compared to a 100% threshold for a 

$0.02 security which would be rejected 

if a limit order was priced $0.04 or 

greater. As such, certain orders could be 

rejected under the current framework 

because the percentage threshold is 

applied to the contra-side of an 

incoming order, including in cases 

where the order is not erroneously 

priced. Below are additional examples 

to illustrate the application of the 

current and proposed rule: 

Example: An Option Priced Less Than $1.00 

For a penny MPV option with a BBO on 

Phlx of $0.01 × $0.02, consider that the 

configurable dollar amount is set to $0.05. 

Current Rule: Reject buy orders of more 

than $0.04 bid if incoming order was less 

than $1.00, and it was more than 100% 

through the contra-side of the Reference 

BBO. 

Proposed Rule: A buy order priced up to 

$0.07 ($0.02 offer + $0.05 configuration) 

would not be rejected because a configurable 

dollar amount from $0.00 to $0.05 would 

allow the order to be entered into the System 

for execution. 

This order was marketable upon entry and 

was not priced far from the current bid. The 

Exchange believes in this example, the order 

should be permitted to trade instead of being 

rejected. 

Example: An Option Priced Greater Than 

$1.00 

For a penny MPV option with a BBO on 

Phlx of $1.01 x $1.02, consider that the 

configurable dollar amount is set to $0.60. 

Current Rule: Reject buy orders 50% 

through $1.02—orders priced greater than 

$1.53 ($1.02 + $0.51). 

Proposed Rule: A buy order priced up to 

$1.62 would not be rejected (this would be 

greater than 50% through 1.02). 

This order was marketable upon entry and 

was not priced far from the current bid. The 

Exchange believes in this example, the order 

should be permitted to trade instead of being 

rejected. 

As the above examples illustrate, the 

Exchange believes that securities in the 

lower price range could benefit by the 

proposed alternative method because 

the fixed amount provides for additional 

executions in certain situations where a 

percentage would reject an order that 

was intentional and not erroneous. This 

approach has been successful for NOM 

and BX in limiting erroneous executions 

while permitting intentional executions 

at reasonable prices, and the Exchange 

therefore proposes to adopt this 

approach for its options market as well. 

Similar to NOM and BX, the Exchange 

will post the configurable amount on its 

website and announce any changes to 

the amount in an Options Trader Alert. 

The Exchange also proposes to add 

language similar to NOM and BX, which 

would provide the Exchange with 

discretion to temporarily deactivate OPP 

from time to time on an intra-day basis 

if it determined that unusual market 

conditions warranted deactivation in 

the interest of a fair and orderly market. 

Like NOM and BX, the Exchange 

believes that it will be useful to have the 

flexibility to temporarily disable OPP 

intra-day in response to an unusual 

market event (for example, if 

dissemination of data was delayed and 

resulted in unreliable underlying values 

needed for the Reference BBO). Member 

organizations would be notified of intraday OPP deactivation and any 

subsequent reactivation by the Exchange 

through the issuance of System status 

messages. Specifically, the Exchange 

proposes to add in Phlx Options 3, 

Section 15(a)(1)(A) that OPP may be 

temporarily deactivated on an intra-day 

basis at the Exchange’s discretion. 

Lastly, the Exchange proposes to 

amend Options 3, Section 15(a)(1) to 

remove the current exclusion of 

Intermarket Sweep Orders (‘‘ISOs’’) and 

Complex Orders from the OPP rule. 

With the proposed amendment, OPP 

will apply to ISOs. With respect to ISOs, 

the intent of an ISO is to sweep as many 

prices as possible at the top of the book, 

so market participants need to cast as 

wide a net as possible to get those prices 

and fill the ISO. With the current OPP 

functionality, lower priced ISOs are 

more likely to get rejected for the 

reasons discussed above, and the 

Exchange determined at the time to 

exclude ISOs when adopting OPP. The 

proposal to add a fixed dollar threshold 

as an alternative OPP parameter, 

however, would provide more flexibility 

for more lower-priced options 

(including lower-priced ISOs) to get 

executed, and the Exchange therefore 

believes it is no longer necessary to 

exclude ISOs from OPP going forward. 

The Exchange further believes 

extending the protection to ISOs will 

promote the goal of limiting erroneous 

executions on the Exchange while 

permitting intentional executions at 

reasonable prices, and in general, 

extend more protections to ISOs. The 

Exchange is removing Complex Orders 

from the list of order types noted in 

Options 3, Section 15(a) because Section 

15 applies to single-leg orders. The 

Exchange notes Complex Order risk 

protections in Options 3, Section 16. 

Finally, the Exchange proposes to add 

‘‘until elected’’ after Stop-Limit Orders. 

Once the Stop-Limit Order is elected, 

the Exchange checks the Limit Order 

against the OPP bounds and will cancel 

the order back to the entering member 

if the order falls outside of the OPP 

bounds at the time of its election. 

Market Wide Risk Protection 

The Exchange proposes to introduce 

new order entry and execution rate 

checks identical to those on BX at 

Options 3, Section 15(a)(3) for Market 

Wide Risk Protection. These new risk 

protections are designed to aid member 

organizations in their order risk 

management by supplementing current 

price reasonability checks with activity 

based order protections.85 The Exchange 

proposes to detail these risk protections 

in proposed Options 3, Section 15(a)(3), 

entitled ‘‘Market Wide Risk Protection’’ 

or ‘‘MWRP’’. As proposed, the System 

will maintain one or more counting 

programs for each member organization 

that count orders entered and contracts 

traded on Phlx. Member organizations 

may use multiple counting programs to 

separate risk protections for different 

groups established within the member 

organization. The counting programs 

will maintain separate counts, over 

rolling time periods specified by the 

member organization for each count, of: 

(1) the total number of orders entered in 

the order book; and (2) the total number 

of contracts traded.86

All member organizations must 

provide parameters for the order entry 

and execution rate protections as 

described in (1) and (2) above. While the 

MWRP is mandatory for all member 

organizations, the Exchange is not 

proposing to establish minimum or 

maximum values for the order entry and 

execution parameters described above. 

The Exchange believes that this 


ddrumheller on DSK120RN23PROD with NOTICES2
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87See proposed Options 3, Section 15(a)(3). See 

also BX Options 3, Section 15(a)(3). 

88See Securities Exchange Act Release No. 79677 

(December 22, 2016), 81 FR 96114 (December 29, 

2016) (SR–ISEGemini–2016–17) (Notice of Filing of 

Proposed Rule Change To Amend Various Rules in 

Connection With a System Migration to Nasdaq 

INET Technology). 

89See Securities Exchange Act Release No. 98142 

(August 16, 2023), 88 FR 57140 (August 22, 2023) 

(SR–Phlx–2023–34) (Nasdaq PHLX LLC; Notice of 

Filing and Immediate Effectiveness of Proposed 

Rule Change To Amend Phlx’s All-or-None Order) 

(‘‘SR–Phlx–2023–34’’). 

90 Id. 

91Similar to Phlx, ISE, GEMX and MRX All-orNone Orders are immediate or cancel. See ISE, 

GEMX and MRX Options 3, Section 7(c). 

approach will give member 

organizations the flexibility needed to 

appropriately tailor the MWRP to their 

respective risk management needs. In 

this regard, the Exchange notes that 

each member organization is in the best 

position to determine risk settings 

appropriate for their firm based on the 

member organization’s trading activity 

and business needs. In the interest of 

maintaining a fair and orderly market, 

however, the Exchange will also 

establish default values for each of these 

parameters that apply to member 

organizations that do not submit their 

own parameters for the MWRP, and will 

announce these default values in an 

Options Trader Alert to be distributed to 

member organizations. The Exchange 

notes that this approach is consistent 

with BX’s current functionality and 

would provide Phlx member 

organizations with the flexibility to 

establish their own MWRP order entry 

and execution rate parameters. The 

Exchanges also notes that similar to BX, 

Phlx member organizations will have 

the discretion to establish the applicable 

time period for each of the counts 

maintained under the proposed MWRP, 

provided that the selected time period 

must be within the minimum and 

maximum duration of the applicable 

time period established by the Exchange 

and announced via an Options Trader 

Alert.87

Pursuant to proposed Phlx Options 3, 

Section 15(a)(3)(A)–(C), if, during the 

applicable time period, the member 

organization exceeds the thresholds that 

it has set for any of the order entry or 

execution counts described above on 

Phlx, the System will automatically 

reject all subsequent incoming orders 

entered by the member organization. 

Member organizations may also choose 

to have the System automatically cancel 

all of their existing orders on Phlx when 

the MWRP is triggered. The MWRP will 

remain engaged until the member 

organization manually notifies the 

Exchange to enable the acceptance of 

new orders. For member organizations 

that still have open orders on the order 

book that have not been cancelled 

pursuant to proposed subparagraph (B), 

the System will continue to allow those 

member organizations to interact with 

existing orders entered before the 

protection was triggered, including 

sending cancel order messages and 

receiving trade executions for those 

orders. The action taken in proposed 

subparagraphs (A)–(C) is substantially 

similar to BX Options 3, Section 

15(a)(3)(C), except that BX does not 

have complex order functionality. 

The Exchange believes that the 

proposed MWRP will assist member 

organizations in better managing their 

risk when trading on Phlx. In particular, 

the proposed rule change provides 

functionality that allows member 

organizations to set risk management 

thresholds for the number of orders or 

contracts executed on the Exchange 

during a specified period. As discussed 

above, this is similar to how BX has 

implemented the MWRP, and the 

Exchange believes this functionality 

will likewise be beneficial for Phlx 

member organizations. 

The examples below illustrate how 

the MWRP would work both for order 

entry and order execution protections: 

Example: Order Entry Rate Protection 

Broker Dealer 1 (‘‘BD1’’) designates an 

allowable order rate of 499 orders/1 

second. 

@0 milliseconds, BD1 enters 200 

orders. (Order total: 200 orders). 

@450 milliseconds, BD1 enters 250 

orders. (Order total: 450 orders). 

@950 milliseconds, BD1 enters 50 

orders. (Order total: 500 orders). 

Market Wide Risk Protection is 

triggered on Phlx due to exceeding 499 

orders in 1 second. All subsequent 

orders are rejected, and if BD1 has opted 

in to this functionality, all existing 

orders are cancelled. BD1 must contact 

the Exchange to resume trading. 

Example: Order Execution Rate 

Protection 

BD1 designates an allowable 

execution rate of 15,000 contracts/2 

seconds. 

@0 milliseconds, BD1 receives 

executions for 5,000 contracts. 

(Execution total: 5,000 contracts). 

@600 milliseconds, BD1 receives 

executions for 10,000 contracts. 

(Execution total: 15,000 contracts). 

@1550 milliseconds, BD1 receives 

executions for 2,000 contracts. 

(Execution total: 17,000 contracts). 

Market Wide Risk Protection is 

triggered on Phlx due to exceeding 

15,000 contracts in 2 seconds. All 

subsequent orders are rejected, and if 

BD1 has opted in to this functionality, 

all existing orders are cancelled. BD1 

must contact the Exchange to resume 

trading. 

Acceptable Trade Range 

The Exchange proposes to amend the 

Acceptable Trade Range or ‘‘ATR’’ at 

Phlx Options 3, Section 15(b)(1) to note 

that ATR will not be available for Allor-None Orders. The Exchange notes 

that it would be difficult, from a 

technical standpoint, to apply this 

feature to those orders because their 

particular contingency makes it difficult 

to automate their handling.88 In 2023, 

the Exchange filed a rule change 89 to 

amend Phlx’s All-or-None Orders so 

that they may only be submitted as an 

Immediate-or-Cancel Order. As a result 

of the 2023 rule change, All-or-None 

Orders no longer rest on the order book 

and instead execute in their entirety or 

are cancelled if it cannot execute.90 The 

Exchange should have noted at that time 

that because of that change that ATR 

would not be available for All-or-None 

Orders. The Exchange is proposing this 

rule text to note similar to, ISE, GEMX 

and MRX Options 3, Section 

15(a)(2)(A)(i) that the Acceptable Trade 

Range is not available for All-or-None 

Orders.91

Additionally, the Exchange proposes 

to account for quotes, in addition to 

orders in Options 3, Section 15(b)(1)(B) 

in the sentence that provides, ‘‘If the 

order/quote remains unexecuted after 

the Posting Period, a New Acceptable 

Trade Range will be calculated and the 

order/quote will execute, route, or post 

up to the new Acceptable Trade Range 

Threshold Price, unless a member 

organization has requested that their 

orders be returned if posted at the outer 

limit of the Acceptable Trade Range (in 

which case, the order will be returned).’’ 

In addition to orders, quotes are also 

subject to a request to be returned if 

posted at the outer limit of the 

Acceptable Trade Range. The addition 

of quotes clarifies the current System 

functionality. 

The Exchange also proposes to 

remove the following phrase in Options 

3, Section 15(b)(1)(B), ‘‘. . . unless a 

Quote Exhaust has occurred, in which 

case the Quote Exhaust process in 

Options 3, Section 6(a)(ii)(B)(3) will 

ensue, triggering a new Reference 

Price.’’ As noted above in this proposal, 

the Exchange would no longer have the 

Quote Exhaust functionality. Therefore, 

the Exchange notes that a Quote Exhaust 

would not impact the ATR functionality 

as a result of its removal. 


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Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 106903 

92As presently set forth in Phlx Options 3, 

Section 15(c)(2)(C), the Exchange’s Multi-Trigger 

functionality removes Market Maker quotes in all 

options series in all underlying issues when a 

specified number of Rapid Fire thresholds are 

triggered over a chosen interval. 

93Today, the exchange’s SQF protocol permits 

Market Makers to submit both quotes and 

Immediate-or-Cancel or ‘‘IOC’’ Orders to the 

Exchange. Phlx Supplementary Material .03(A) of 

Options 3, Section 7 provides, ‘‘Specialized Quote 

Feed’’ or ‘‘SQF’’ is an interface that allows Lead 

Market Makers, Streaming Quote Traders (‘‘SQTs’’) 

and Remote Streaming Quote Traders (‘‘RSQTs’’) to 

connect, send, and receive messages related to 

quotes, Immediate-or-Cancel Orders, and auction 

responses into and from the Exchange. Features 

include the following: (1) options symbol directory 

messages (e.g., underlying and complex 

instruments); (2) system event messages (e.g., start 

of trading hours messages and start of opening); (3) 

trading action messages (e.g., halts and resumes); (4) 

execution messages; (5) quote messages; (6) 

Immediate-or-Cancel Order messages; (7) risk 

protection triggers and purge notifications; (8) 

opening imbalance messages; (9) auction 

notifications; and (10) auction responses. The SQF 

Continued 

Anti-Internalization 

The Exchange proposes to enhance 

the anti-internalization (‘‘AIQ’’) 

functionality at Phlx Options 3, Section 

15(c)(1), provided to Market Makers on 

the Exchange by giving member 

organizations the flexibility to choose to 

have this protection apply at the market 

participant identifier (i.e., existing 

functionality), at the Exchange account 

level, or at the firm level. The Exchange 

believes that this enhancement will 

provide helpful flexibility for Market 

Makers that wish to prevent trading 

against all quotes and orders entered by 

their firm, or Exchange account, instead 

of just quotes and orders that are 

entered under the same market 

participant identifier. Similar 

functionality is currently available on 

ISE, MRX and GEMX at Options 3, 

Section 15(a)(3)(A). 

Currently, as provided in Phlx 

Options 3, Section 15(c)(1), the 

Exchange provides mandatory AIQ 

functionality that prevents Market 

Makers from trading against their own 

quotes and orders. In particular, quotes 

and orders entered by Market Makers 

using the same market participant 

identifier will not be executed against 

quotes and orders entered on the 

opposite side of the market by the same 

Market Maker using the same identifier. 

In such a case, the System cancels the 

oldest of the quotes or orders back to the 

entering party prior to execution. This 

functionality does not apply in any 

auction. 

Today, this protection prevents 

Market Makers from trading against 

their own quotes and orders at the 

market participant identifier level. The 

proposed enhancement to this 

functionality would allow member 

organizations to choose to have this 

protection applied at the Market Maker 

identifier level (existing functionality), 

at the Exchange account level, or at the 

firm level. If member organizations 

choose to have this protection applied at 

the Exchange account level, AIQ would 

prevent quotes and orders from different 

market participant identifiers associated 

with the same Exchange account from 

trading against one another. Similarly, if 

the member organizations choose to 

have this protection applied at the 

member organization firm level, AIQ 

would prohibit quotes and orders from 

different market participant identifiers 

within the member organization firm 

from trading against one another. The 

Exchange believes that the proposed 

AIQ enhancement will provide member 

organizations with more tailored 

functionality that allows them to 

manage their trading as appropriate 

based on the member organizations’ 

business needs. While the Exchange 

believes that some firms may want to 

restrict AIQ to trading against interest 

from the same Market Maker identifier 

(i.e., as implemented today), other firms 

may find it helpful to be able to 

configure AIQ to apply at the Exchange 

account level or at the firm level so that 

they are protected regardless of which 

Market Maker identifier the order or 

quote originated from. ISE, GEMX and 

MRX Options 3, Section 15(a)(3)(A) 

offer identical flexibility. 

The examples below illustrate how 

AIQ would operate based on the market 

participant identifier level protection, 

the Exchange account level, or for 

member organizations that choose to 

apply AIQ at the firm level: 

Example: Market Participant Identifier 

Level 

ABC (market participant identifiers 

123A & 555B) with AIQ configured at 

the market participant identifier level. 

123A Quote: $1.00 (5) × $1.10 (20). 

555B Buy Order entered for 10 

contracts at $1.10. 

555B Buy Order executes 10 contracts 

against 123A Quote. 123A and 555B are 

not prevented by the System from 

trading against one another because 

member organization ABC has 

configured AIQ to apply at the market 

participant identifier level. This is the 

same as existing functionality. 

Example: Exchange Account Level 

ABC (Account 999 with market 

participant identifiers 123A and 555B, 

and Account 888 with market 

participant identifier 789A) with AIQ 

configured at the Exchange account 

level. 

123A Quote: $1.00 (5) × $1.10 (20). 

789A Quote: $1.05 (10) × $1.10 (20). 

555B Buy Order entered for 30 

contracts at $1.10. 

555B Buy Order executes against 

789A Quote but 555B Buy Order does 

not execute against 123A Quote. AIQ 

purges the 123A Quote and the 

remaining contracts of the 555B Buy 

Order rests on the book at $1.10. 123A 

and 555B are not permitted trade against 

one another because member 

organization ABC has configured AIQ to 

apply at the Exchange account level. 

This is new functionality as the member 

organization has opted to have AIQ 

operate at the Exchange account level. 

Example: Firm Level 

ABC (Account 999 with market 

participant identifiers 123A and 555B, 

and Account 888 with market 

participant identifier 789A) with AIQ 

configured at the firm level. 

123A Quote: $1.00 (5) × $1.10 (20). 

789A Quote: $1.05 (10) × $1.10 (20). 

555B Buy Order entered for 30 

contracts at $1.10. 

AIQ purges the 123A Quote and the 

789A Quote and the 555B Buy Order 

rests on the book at $1.10. This is new 

functionality as the member 

organization has opted to have AIQ 

operate at the member organization firm 

level. 

Quotation Adjustments 

The Exchange proposes to amend 

Phlx Options 3, Section 15(c)(2), which 

sets forth the Exchange’s ‘‘Rapid Fire’’ 

risk protection for quotes, to expand 

existing functionality by introducing 

optional Delta and Vega (as defined 

below) curtailment measures in addition 

to the current percentage-based and 

volume-based curtailments. The new 

curtailment measures will be 

functionally similar to the Delta and 

Vega thresholds currently offered by BX 

pursuant to Options 3, Section 15(c)(2). 

The proposed new Delta and Vega 

thresholds are optional risk protections. 

In connection with this change, the 

Exchange also proposes to restructure 

its rules regarding Rapid Fire and 

‘‘Multi-Trigger’’ risk protections to more 

closely align with the BX’s rule 

structure which has identical language 

to the proposed Phlx rule text.92 With 

the proposed changes, Rapid Fire and 

Multi-Trigger will be triggered only 

when a Market Maker exceeds its 

designated thresholds similar to BX’s 

approach, instead of when the 

thresholds are met or exceeded (as is 

currently the case). 

Today, Rapid Fire is a risk protection 

that removes a Market Maker’s quotes 

and SQF interest 93 in all options series 


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106904 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

Purge Interface only receives and notifies of purge 

requests from the Lead Market Maker, SQT or 

RSQT. Lead Market Makers, SQTs and RSQTs may 

only enter interest into SQF in their assigned 

options series. Immediate-or-Cancel Orders entered 

into SQF are not subject to the Order Price 

Protection, the Market Order Spread Protection, or 

Size Limitation in Options 3, Section 15(a)(1), (a)(2) 

and (b)(2), respectively. 

94See Phlx Options 3, Section 15(c)(2)(G). In 

contrast, the Multi-Trigger threshold is optional. 

95See ISE, GEMX and MRX Options 3, Section 

15(a)(3)(B)(i). See also BX Options 3, Section 

15(c)(2)(A). 

96See Phlx Options 3, Section 15(c)(2)(A) and (B). 

97See Phlx Options 3, Section 15(c)(2)(A) and (B). 

98See id. for similar features in the current 

Percentage and Volume Thresholds. 

of an underlying security from the 

marketplace when certain designated 

percentage-based or volume-based 

thresholds are met or exceeded. Market 

Makers are required to utilize either the 

percentage-based threshold or the 

volume-based threshold.94 The 

Exchange proposes to amend the current 

Rapid Fire functionality to no longer 

remove IOC Orders submitted through 

SQF and continue to remove quotes. 

Today, ISE, GEMX, MRX and BX only 

remove quotes through SQF and do not 

remove IOC Orders submitted through 

SQF.95 The Exchange believes that 

preserving an IOC Order submitted 

through SQF is consistent with the Act 

as Market Makers quote to provide 

liquidity on the Exchange and the risk 

protection is intended to provide a 

protection to those participants when 

acting as liquidity providers. Market 

Makers utilizing IOC Orders may also 

provide liquidity but to a lesser extent. 

The Exchange believes that limiting the 

risk protection to quotes, similar to 

other Nasdaq affiliated markets, 

continues to protect investors while not 

also purging IOC orders which may 

interact against other interest on the 

Exchange. 

The Exchange now proposes to 

introduce two optional thresholds 

which, in addition to the existing 

percentage-based and volume-based 

thresholds, will make up the suite of 

Rapid Fire thresholds that will be 

offered to Market Makers upon the 

technology migration. First, in new 

subparagraph (c)(2)(A)(iii) of Phlx 

Options 3, Section 15, the Exchange 

proposes to add: 

(iii) Delta Threshold. A Market Maker may 

provide a Delta Threshold by which the 

System will automatically remove a Market 

Maker’s quotes in all series of an options 

class. For each class of options, the System 

will maintain a Delta counter, which tracks 

the absolute value of the difference between 

(1) purchased call contracts plus sold put 

contracts and (2) sold call contracts plus 

purchased put contracts. If the Delta counter 

exceeds the Delta Threshold established by 

the member organization, the System will 

automatically remove a Market Maker’s 

quotes in all series of the options class. 

The proposed rule text for Delta 

Threshold is identical to BX Options 3, 

Section 15(c)(2)(A)(iii). 

Second, in new subparagraph 

(c)(2)(A)(iv) of Phlx Options 3, Section 

15, the Exchange proposes to add: 

Vega Threshold. A Market Maker may 

provide a Vega Threshold by which the 

System will automatically remove a Market 

Maker’s quotes in all series of an options 

class. For each class of options, the System 

will maintain a Vega counter, which tracks 

the absolute value of purchased contracts 

minus sold contracts. If the Vega counter 

exceeds the Vega Threshold established by 

the Member, the System will automatically 

remove a Market Maker’s quotes in all series 

of the options class. 

The proposed rule text for Vega 

Threshold is identical to BX Options 3, 

Section 15(c)(2)(A)(iv). 

With the proposed changes to add the 

Delta and Vega Thresholds described 

above, the Exchange also proposes to 

amend its Rapid Fire and Multi-Trigger 

rules to align the rule structure with BX 

Options 3, Section 15(a)(2)(C). In 

restructuring these rules, the existing 

Phlx functionality will remain 

unchanged except with respect to when 

the Rapid Fire and Multi-Trigger 

thresholds will be triggered, and a 

minor change to the specified time 

period. Each will be discussed in more 

detail below. The Exchange will 

separately describe the Active Quote 

Protection amendment proposed in 

Options 3, Section 15(c)(2)(B) below. 

To effect this change, the Exchange 

proposes to adopt new rule text in Phlx 

Options 3, Section 15(c)(2)(A), which 

will provide that Market Makers are 

required to utilize the Percentage 

Threshold or Volume Threshold. The 

Exchange will also replace each 

instance of ‘‘Percentage-Based 

Threshold’’ and ‘‘Volume-Based 

Threshold’’ with ‘‘Percentage 

Threshold’’ and ‘‘Volume Threshold’’ 

throughout Options 3, Section 15(c)(2) 

to align with BX terminology. The 

Exchange further proposes to add that 

Market Makers may utilize the new 

Delta and Vega Thresholds to make 

clear that these thresholds are optional 

for Market Makers. The Exchange has 

determined not to make the new Delta 

and Vega Thresholds mandatory under 

this proposal, and will continue to 

require Market Makers to utilize either 

the Percentage or Volume Threshold, for 

Market Makers who do not elect to use 

the Active Quote Protection discussed 

below in lieu of the Rapid Fire 

protections. 

For each of these features, the System 

will automatically remove a Market 

Maker’s quotes in all series in an 

options class when any of the 

Percentage Threshold, Volume 

Threshold, Delta Threshold or Vega 

Threshold has been exceeded. As noted 

above, this is a change from current 

functionality where as amended, Rapid 

Fire will be triggered only when the 

Market Maker exceeds any of the 

designated thresholds. Currently, Rapid 

Fire is triggered when the designated 

thresholds are met or exceeded.96 In 

addition, a Market Maker is required to 

specify a period of time not to exceed 

30 seconds (‘‘Specified Time Period’’) 

during which the System will 

automatically remove a Market Maker’s 

quotes in all series of an options class. 

This is another change from current 

functionality where today, the Specified 

Time Period established by the Market 

Maker for the Percentage and Volume 

Thresholds must not exceed 15 

seconds.97 The proposed changes on 

Phlx relating to when Rapid Fire will be 

triggered and the Specified Time 

Periods will align with BX Options 3, 

Section 15(c)(2)(A). By harmonizing 

Phlx’s Rapid Fire rule to BX’s rule in 

this manner, the Exchange seeks to 

simplify the regulatory requirements 

and increase the understanding of the 

Exchange’s operations related to Rapid 

Fire for market participants on Phlx and 

on BX. The Exchange believes more 

consistent rules with its affiliated 

exchange will contribute to less 

complexity for market participants and 

more efficient regulatory compliance. 

Otherwise, the new rule text in Phlx 

Options 3, Section 15(c)(2)(A) will not 

change existing Rapid Fire 

functionality. In particular, the 

Specified Time Period will commence 

for an options class every time an 

execution occurs in any series in such 

option class and will continue until the 

System removes quotes as described in 

the Rule or the Specified Time Period 

expires. The Specified Time Period 

operates on a rolling basis among all 

series in an options class in that there 

may be Specified Time Periods 

occurring simultaneously for each 

Threshold and such Specified Time 

Periods may overlap. The Specified 

Time Periods will be the same value for 

each of the Percentage Threshold, 

Volume Threshold, Delta Threshold, 

and Vega Threshold.98

The Exchange also proposes to 

replace the description of the existing 

Percentage Threshold in Phlx Options 3, 

Section 15(c)(2)(A) with new rule text in 

Options 3, Section 15(c)(2)(A)(i) as 

follows: 


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99The Exchange will describe the amendments to 

proposed Options 3, Section 15(c)(2)(D)(i) and (ii) 

further below. 

100The Specified Time Period(s) will also be 

automatically reset if Rapid Fire is triggered (and 

the System automatically removes quotes). 

101As described below, the Exchange will 

specifically define this passive risk counter 

functionality as ‘‘Rapid Fire’’ within this Rule. 

Percentage Threshold. A Market Maker 

must provide a specified percentage 

(‘‘Percentage Threshold’’), of not less than 

1%, by which the System will automatically 

remove a Market Maker’s quotes in all series 

of an options class. For each series in an 

options class, the System will determine (1) 

during a Specified Time Period and for each 

side in a given series, a percentage calculated 

by dividing the size of a Market Maker’s 

quote size executed in a particular series (the 

numerator) by the Marker Maker’s quote size 

available at the time of execution plus the 

total number of the Market Marker’s quote 

size previously executed during the 

unexpired Specified Time Period (the 

denominator) (‘‘Series Percentage’’); and (2) 

the sum of the Series Percentage in the 

options class (‘‘Issue Percentage’’) during a 

Specified Time Period. The System tracks 

and calculates the net impact of positions in 

the same options class; long call percentages 

are offset by short call percentages, and long 

put percentages are offset by short put 

percentages in the Issue Percentage. If the 

Issue Percentage exceeds the Percentage 

Threshold the System will automatically 

remove a Market Maker’s quotes in all series 

of the options class during the Specified 

Time Period. 

With the proposed changes, the 

Percentage Threshold will be applied in 

the same manner as today, except with 

respect to the differences discussed 

above (i.e., when the Percentage 

Threshold will be triggered and the 

threshold’s Specified Time Period). The 

proposed rule text is identical to BX 

Options 3, Section 15(c)(2)(A)(i). 

The Exchange also proposes to 

replace the description of the existing 

Volume Threshold in Phlx Options 3, 

Section 15(c)(2)(A)(ii) with new rule 

text in Options 3, Section 15(c)(2)(A)(ii) 

as follows: 

Volume Threshold. A Market Maker must 

provide a Volume Threshold by which the 

System will automatically remove a Market 

Maker’s quotes in all series of an options 

class when the Market Maker executes a 

number of contracts which exceeds the 

designated number of contracts in all series 

in an options class. 

With the proposed changes, the 

Volume Threshold will be applied in 

the same manner as today, except with 

respect to the differences discussed 

above (i.e., when the Volume Threshold 

will be triggered and the threshold’s 

Specified Time Period). The proposed 

rule text is identical to BX Options 3, 

Section 15(c)(2)(A)(ii). 

In connection with the foregoing 

changes, current Phlx Options 3, 

Section 15(c)(2)(C), which describes the 

Exchange’s Multi-Trigger risk 

protection, will be amended throughout 

to add the Delta and Vega Thresholds 

wherever the Rule references Percentage 

and Volume Thresholds. In addition, 

the Exchange proposes to amend the 

Multi-Trigger Specified Time Period 

from 15 seconds to 30 seconds to align 

with the Specified Time Periods 

proposed above. The Exchange further 

proposes in the Multi-Trigger rule to 

amend when Multi-Trigger will be 

triggered to align with the Rapid Fire 

changes proposed above. Specifically, 

the Exchange proposes to amend the 

provision, ‘‘[o]nce the System 

determines that the number of triggers 

equals or exceeds a number. . .’’ to 

instead state, ‘‘[o]nce the System 

determines that the number of triggers 

exceeds a number. . .’’ to make clear 

that Multi-Trigger will no longer remove 

Market Maker quotes when the MultiTrigger threshold is met (and not 

exceeded). 

Phlx Options 3, Section 15(c)(2)(D), 

which explains how the System purges 

quotes once the Rapid Fire and MultiTrigger thresholds are triggered, will be 

amended to conform with the changes 

proposed above. In particular, the 

Exchange proposes conforming changes 

to add the Delta and Vega Thresholds 

wherever these provisions reference 

Percentage and Volume Thresholds, and 

to replace ‘‘reached’’ with ‘‘exceeded’’ 

in each instance where the language 

indicates that the Rapid Fire and MultiTrigger thresholds have been reached.99

Phlx Options 3, Section 15(c)(2)(E) 

will likewise be amended to add 

references to the Delta and Vega 

Thresholds, and will state that if a 

Market Maker requests the System to 

remove quotes in all options series in an 

underlying issue, the System will 

automatically reset the Specified Time 

Period(s) for the Percentage, Volume, 

Delta, or Vega Threshold.100 As is the 

case today, the Multi-Trigger Specified 

Time Period(s) will not automatically 

reset for the Multi-Trigger Threshold. 

Phlx Options 3, Section 15(c)(2)(F), 

which sets forth the re-entry process 

once Rapid Fire and Multi-Trigger are 

triggered, the Exchange will likewise 

add references to the Delta and Vega 

Thresholds wherever the provision 

refers to the Percentage and Volume 

Thresholds. The Exchange also proposes 

a clarifying change in the first sentence 

to add, ‘‘[w]hen the System removes 

quotes as a result of exceeding . . .’’ in 

order to align with BX Options 3, 

Section 15(c)(2)(F). The Exchange 

further proposes a non-substantive 

change in the first sentence to amend 

‘‘reentry’’ to ‘‘re-entry’’ 

Lastly, Options 3, Section 15(c)(2)(G), 

will be amended to specify that the 

Exchange will require Phlx Market 

Makers to utilize either the Percentage 

Threshold, the Volume Threshold, or 

the Contract Limit. For Market Makers 

that elect to utilize the Contract Limit, 

the Percentage Threshold, Volume 

Threshold, Delta Threshold, and Vega 

Threshold will not be available for use 

on the Market Maker’s badge. The Delta, 

Vega, and Multi-Trigger Thresholds are 

optional. The Exchange is adding 

‘‘Contract Limit’’ to the required risk 

protections that must be utilized by a 

Phlx Market Maker. 

The following are examples to 

illustrate how the proposed Delta and 

Vega Thresholds would apply: 

Example: Delta Threshold 

MM1 has Delta Threshold set to 10 

contracts 

MM1 quotes IBM Call Option 2.55 (100) 

x 3.00 (1000) 

FIX Order to Sell 11 @MKT trades with 

MM quote 

Trade occurs for 11 @2.55, triggers 

Rapid Fire for MM1 since 11 calls 

purchased for MM1 > MM1’s Delta 

Threshold of 10 

Example: Vega Threshold 

MM1 has Vega Threshold set to 10 

contracts 

MM1 quotes IBM Call Option 2.55 (100) 

x 3.00 (1000) 

FIX Order to Sell 11 @MKT trades with 

MM quote 

Trade occurs for 11 @2.55, triggers 

Rapid Fire for MM1 since 11 calls 

purchased for MM1 > MM1’s Vega 

Threshold of 10 

Active Quote Protection 

The Exchange proposes to adopt an 

active risk counter functionality called 

active quote protection (‘‘Active Quote 

Protection’’), at Phlx Options 3, Section 

15(c)(2)(B), which will be available to 

Market Makers as an alternative to 

existing passive risk counter 

functionality described in Options 3, 

Section 15(c)(2)(A) (i.e., ‘‘Automated 

Quotation Adjustments’’ or Rapid 

Fire).101 The proposed Active Quote 

Protection functionality will be 

identical to BX Options 3, Section 

15(c)(2)(B). Today, the Exchange 

requires Market Makers to configure risk 

exposure thresholds based on either 

percentage of executed quotes 

(‘‘Percentage Threshold’’) or total 

number of executed contracts (‘‘Volume 

Threshold’’). Also, as proposed herein, 


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102The proposed Thresholds are described in 

detail in Phlx Options 3, Section 15(c)(2)(A)(i)— 

(iv). If a Market Maker does not provide a parameter 

for each Threshold, the Exchange will apply default 

parameters announced to member organizations. 

103 If the Market Maker opting to use Active 

Quote Protection does not provide a Contract Limit 

at the outset, the Exchange will apply a default 

parameter for the Active Quote Protection Contract 

Limit (which would be announced to member 

organizations). The Exchange will initially set the 

default Contract Limit at 100 contracts. 

104Specialized Quote Feed or ‘‘SQF’’ is an 

interface that only Market Makers may use to 

submit quotes to the Exchange at renumbered 

Supplementary Material .03(B) to Options 3, 

Section 7. 

105See Options 3, Section 15(c)(2)(C). 

106The time of receipt for an order or quote is the 

time such message is processed by the Exchange’s 

order book. 

107See proposed Phlx Options 3, Section 

15(c)(2)(D)(ii). 

108The time of receipt for an order or quote is the 

time such message is processed by the Exchange’s 

order book. 

109For both the current Quotation Adjustments 

and proposed Active Quote Protection, the System 

will execute marketable interest up to the size of the 

Market Maker’s quote, but cannot guarantee interest 

will be fully executed, as is the case with any 

execution in the Exchange’s order book. There is 

always the possibility that the Market Maker’s quote 

size (and/or Market Maker’s quote plus other 

interest on the order book) may not be sufficient 

volume to fill the incoming interest. 

110As discussed later in this rule change, in order 

to re-enter the System after their quotes are purged 

pursuant to the Active Quote Protection, Market 

Makers will need to submit the same request to 

fully decrement their Limit Counter to zero. 

111Phlx Options 1, Section 1(b)(6) provides that 

the term ‘‘badge’’ means an account number, which 

may contain letters and/or numbers, assigned to 

Lead Market Makers and Market Makers. A Lead 

Market Maker or Market Maker account may be 

associated with multiple badges. 

the Exchange proposes two optional risk 

exposure thresholds based on the 

absolute value of the difference between 

long and short positions (‘‘Delta 

Threshold’’), and absolute value of the 

difference between contracts bought and 

contracts sold (‘‘Vega Threshold’’) 

(collectively, ‘‘Thresholds’’).102 As set 

forth in Options 3, proposed Section 

15(c)(2)(A), the System tracks each 

Threshold with a corresponding risk 

counter over a Market Maker-specified 

rolling time period not to exceed 30 

seconds. Furthermore, Section 

15(c)(2)(A) describes that when a risk 

counter exceeds the corresponding 

Threshold during the specified time 

period, the System would automatically 

remove the Market Maker’s quotes in all 

series of the applicable options class 

(each, a ‘‘Purge Event’’). As a result of 

a Purge Event, the corresponding risk 

counter and Threshold would reset 

upon such removal. The Exchange also 

notes that pursuant to Section 

15(c)(2)(E) today, the Thresholds and 

risk counters can be completely reset if 

the Market Maker specifically requests 

the System to remove quotes in all 

options series in an underlying issue. 

This risk protection is passive in that 

the risk counters wait to reset until the 

expiry of a specified time period, a 

Purge Event, or when the Market Maker 

otherwise sends a specific instruction to 

the Exchange to remove quotes to 

completely reset the counters. 

The Exchange now proposes to 

introduce a new risk protection, which 

is an alternative to Rapid Fire, called 

Active Quote Protection that would 

enable Market Makers to actively 

manage their executed contract limit 

(‘‘Contract Limit’’) by sending an 

electronic instruction to the Exchange to 

decrement their executed contract limit 

counter (‘‘Limit Counter’’) by a specified 

amount at any time, rather than waiting 

until the expiry of a defined time 

period, when the risk limit is exceeded 

(like a Purge Event), or when the Market 

Maker otherwise sends a specific 

instruction to purge quotes to 

completely reset the risk counter.103

The Contract Limit, as set by the 

Market Maker, would apply for the 

duration of the trading day. Once the 

Market Maker’s Limit Counter exceeds 

the Contract Limit set by the Market 

Maker, the System would automatically 

remove quotes in all series of the 

applicable options class submitted 

through the Exchange’s Specialized 

Quote Feed protocol,104 identical to 

how the quote removal mechanism 

works for a Purge Event today.105

Today, Purge Events are triggered under 

the existing Quotation Adjustments on 

the first execution that exceeds the 

applicable Threshold. Once an 

execution occurs, the System checks all 

Thresholds to see if they have been 

exceeded. If exceeded, the Market 

Maker’s quote would be purged 

pursuant to Phlx Options 3, Section 

15(c)(2)(C). In order to remain consistent 

with the firm quote obligations of a 

broker-dealer pursuant to Rule 602 of 

Regulation NMS, any marketable orders 

or quotes that are executable against a 

Market Maker’s quotes that are 

received 106 prior to the time the 

applicable Threshold is triggered will be 

automatically executed up to the size of 

the Market Maker’s quote, regardless of 

whether the execution would cause the 

Market Maker to exceed their pre-set 

Percentage Threshold, Volume 

Threshold, Delta Threshold, or Vega 

Threshold.107

Under Active Quote Protection, the 

System would similarly handle the 

Market Maker’s quote in that the quote 

could be filled one execution over the 

Contract Limit before the Market 

Maker’s remaining quotes are cancelled 

by the System in order to be consistent 

with the firm quote obligations under 

Rule 602 of Regulation NMS. 

Specifically, the Exchange notes that 

any marketable orders or quotes that are 

executable against a Market Maker’s 

quotes that are received 108 prior to the 

time the Contract Limit is triggered will 

be automatically executed up to the size 

of the Market Maker’s quote, regardless 

of whether the execution would cause 

the Market Maker to exceed the Contract 

Limit.109

Additionally, under Active Quote 

Protection, Market Makers will be able 

to submit a request (i) to decrement 

their Limit Counter by a specified 

number of contracts, or (ii) to fully 

decrement their Limit Counter to 

zero.110 Market Makers that elect to use 

the proposed Active Quote Protection 

on a badge 111 will not be able to use the 

existing Threshold risk protections 

described above on the same badge (i.e., 

the active and passive risk counter 

functionality would be mutually 

exclusive per badge) given that it would 

be unnecessarily complex to implement 

from a technology standpoint. Market 

Makers may be associated with multiple 

badges today, so if they want to use both 

risk protections for their activity on the 

Exchange, they will be able to set either 

the active or passive risk counter 

functionality on each badge. 

To effectuate the foregoing changes, 

the Exchange proposes to set forth the 

new risk protection in paragraph (B) of 

Phlx Options 3, Section 15(c)(2), as 

follows: 

In lieu of Rapid Fire, a Market Maker may 

provide an executed contract limit (‘‘Contract 

Limit’’) that, if exceeded, the System will 

automatically remove the Market Maker’s 

quotes in all series of an options class 

submitted through SQF. The System will 

apply the Contract Limit for the duration of 

the trading day. For each class of options, the 

System will maintain an active limit counter 

that will track the current number of 

contracts executed through the Market 

Maker’s quotes (‘‘Limit Counter’’). If the 

Limit Counter exceeds the Contract Limit 

established by the Market Maker, the System 

will automatically remove the Market 

Maker’s quotes as described in Section 

15(c)(2)(D). Market Makers may submit a 

request (i) to decrement their Limit Counter 

by a specified number of contracts, or (ii) to 

fully decrement their Limit Counter to zero, 

including to re-enter the System as described 

in Section 15(c)(2)(E). For Market Makers that 

elect to utilize the Contract Limit, the 

Percentage Threshold, Volume Threshold, 

Delta Threshold, and Vega Threshold will 

not be available for use on the Market 

Maker’s badge. 

The Exchange also proposes to amend 

proposed paragraph (G) of Phlx Options 

3, Section 15(c)(2) to specify that the 


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112Multi-Trigger Threshold is defined in current 

paragraph (C) of Section 15(c)(2) as the number of 

allowable triggers by which the Exchange will 

automatically remove quotes in all options series in 

all underlying issues submitted through designated 

Phlx protocols as specified by the Exchange. This 

threshold is part of the Exchange’s Multi-Trigger 

risk protection. 

113The time of receipt for an order or quote is the 

time such message is processed by the Exchange’s 

order book. 

114This would be more than one Phlx Market 

Maker, but does not require the aggregation of all 

of the member organization’s Market Makers. A 

Group would be comprised of Phlx Market Makers 

affiliated with one member organization (i.e., one 

options member firm). The member organization 

would be required to define a Group by providing 

a list of such affiliated Phlx Market Makers to the 

Exchange. 

active and passive risk counter 

functionality will be mutually exclusive 

per badge). As amended, proposed 

paragraph (G) will provide: 

The Exchange will require Phlx Market 

Makers to utilize either the Percentage 

Threshold, the Volume Threshold, or the 

Contract Limit. For Market Makers that elect 

to utilize the Contract Limit, the Percentage 

Threshold, Volume Threshold, Delta 

Threshold, and Vega Threshold will not be 

available for use on the Market Maker’s 

badge. The Delta, Vega, and Multi-Trigger 

Thresholds are optional. 

As described above, once the Limit 

Counter exceeds the Contract Limit set 

by the Market Maker under the 

proposed Active Quote Protection, the 

System would automatically remove 

quotes in the same manner as currently 

specified for a Purge Event in proposed 

paragraph (D) of Phlx Options 3, Section 

15(c)(2). Accordingly, the Exchange 

proposes to add Active Quote 

Protection’s Contract Limit throughout 

the proposed Rule as noted herein. 

Specifically, proposed paragraph (D) 

will provide that the System will 

automatically remove quotes in all 

series of an options class in an 

underlying security when the 

Percentage Threshold, Volume 

Threshold, Delta Threshold, Vega 

Threshold, or the Contract Limit has 

been exceeded. The System will 

automatically remove quotes in all 

series of an option class in all 

underlying securities when the MultiTrigger Threshold 112 has been 

exceeded. The System will send a Purge 

Notification Message to the Market 

Maker for all affected options when the 

above thresholds have been exceeded. 

Proposed subparagraph (D)(i) will 

provide that the Percentage Threshold, 

Volume Threshold, Delta Threshold, 

Vega Threshold, Contract Limit, and 

Multi-Trigger Threshold are considered 

independently of each other. 

Further, as discussed above, any 

marketable orders or quotes that are 

executable against a Market Maker’s 

quotes that are received 113 prior to the 

time the applicable Threshold or 

Contract Limit is triggered will be 

automatically executed up to the size of 

the Market Maker’s quote, even if such 

execution would cause the Market 

Maker to exceed any of their pre-set risk 

limits with respect to any of the 

foregoing risk parameters. The Exchange 

notes that proposed sub-paragraph 

(D)(ii) only mentions that quotes will 

execute up to the Market Maker’s size, 

and is silent on marketable orders. In 

addition, the current Rule does not 

specify the time of receipt of such 

marketable interest that is executable 

against the size of the Market Maker’s 

quote. As such, the Exchange proposes 

to add this specificity in proposed subparagraph (D)(ii) to better describe how 

the System operates today for Quotation 

Adjustments and how the System will 

operate for proposed Active Quote 

Protection. In particular, sub-paragraph 

(D)(ii) will provide: 

The System will execute any marketable 

orders or quotes that are executable against 

a Market Maker’s quote and received prior to 

the time the Percentage Threshold, Volume 

Threshold, Delta Threshold, Vega Threshold, 

or Contract Limit is triggered up to the size 

of the Market Maker’s quote, even if such 

execution results in executions in excess of 

the Market Maker’s applicable Threshold or 

Contract Limit with respect to any parameter. 

In addition, when the System removes 

quotes as a result of exceeding the 

Contract Limit under Active Quote 

Protection, the Exchange proposes to 

require the Market Maker to submit a 

request to re-enter the System. This 

request will be the same type of message 

as the request described in proposed 

paragraph (B) where the Market Maker 

must request to fully decrement their 

Limit Counter back to zero in order to 

re-enter the System. This requirement 

will be added in proposed paragraph (F) 

of Phlx Options 3, Section 15(c)(2), and 

will be similar to how the existing quote 

purge mechanism works for the 

Thresholds today, except the Market 

Maker needs to send a separate message 

(i.e., a re-entry indicator) to re-enter the 

System when their quotes are purged as 

a result of exceeding any of the existing 

Thresholds. 

The Exchange also proposes that the 

new Active Quote Protection would 

leverage the existing and amended 

multi-trigger (‘‘Multi-Trigger’’) 

functionality proposed in Phlx Options 

3, Section 15(c)(2)(C). Today, MultiTrigger is a risk protection offered 

alongside the current Quotation 

Adjustments. A Market Maker or Market 

Maker Group, which is defined as 

multiple affiliated Phlx Market 

Makers,114 may provide the specified 

time period and number of allowable 

Purge Events by which the Exchange 

will automatically remove quotes in all 

options series in all underlying issues 

submitted through designated Phlx 

protocols as specified by the Exchange 

(‘‘Multi-Trigger Threshold’’). As 

proposed, Multi-Trigger is triggered 

when during a time period established 

by the Market Maker not to exceed 30 

seconds, the total number of Quotation 

Adjustment Purge Events exceeds the 

Multi-Trigger Threshold provided to the 

Exchange by the Phlx Market Maker or 

Phlx Market Maker Group. When MultiTrigger is triggered, the System 

automatically purges all of the Market 

Maker’s or Group’s quotes in all options 

series in an underlying issue. As set 

forth in proposed Phlx Options 3, 

Section 15(c)(2)(F), when the System 

removes quotes as a result of the MultiTrigger Threshold, the Market Maker 

must manually request re-entry to the 

System by contacting the Exchange. 

Exchange staff must then set a re-entry 

indicator in this case to enable re-entry, 

which will cause the System to send a 

Reentry Notification Message to the 

Phlx Market Maker or Group for all 

options series in all underlying issues. 

The Market Maker’s Clearing Firm will 

be notified regarding the trigger and reentry into the System after quotes are 

removed as a result of the Multi-Trigger 

Threshold, provided the Market Maker’s 

Clearing Firm has requested to receive 

such notification. 

Today, Multi-Trigger is meant to 

provide Market Makers or a Group with 

protection from the risk of multiple 

executions across multiple series of an 

option or across multiple options. This 

risk protection recognizes that risk to 

Market Makers is not limited to a single 

series in an option or even to all series 

in an option; Market Makers that quote 

in multiple series of multiple options 

have significant exposure, requiring 

them to offset or hedge their overall 

positions. Market Makers are required to 

continuously quote in assigned options, 

and quoting across many series in an 

option or multiple options creates the 

possibility of executions that can create 

large, unintended principal positions 

that could expose Market Makers to 

unnecessary risk. Multi-Trigger is 

therefore intended to assist Market 

Makers or Groups in managing their 

market risk by tracking the number of 

Purge Events relative to the MultiTrigger Threshold set by the Market 

Maker or Group. The Exchange believes 

that tracking the number of Active 

Quote Protection Purge Events for a 


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115This would include any re-priced orders 

pursuant to Phlx Options 3, Section 5(d), ALOs as 

described in proposed Options 3, Section 7(n), and 

any re-priced quotes as described in Phlx Options 

3, Section 4(b)(6). As described above, ALOs may 

re-price. 

116Phlx Options 3, Section 4(b)(6) provides that 

a quote will not be executed at a price that trades 

through another market or displayed at a price that 

would lock or cross another market. If, at the time 

of entry, a quote would cause a locked or crossed 

market violation or would cause a trade-through 

violation, it will either be re-priced and displayed 

at one minimum price variance above (for offers) or 

below (for bids) the national best price, or 

immediately cancelled, as configured by the 

Member. 

Market Maker or Group against its 

Multi-Trigger Threshold would be 

similarly useful for managing market 

risk. 

To that end, the Exchange proposes to 

further update Multi-Trigger to add 

purge events under Active Quote 

Protection to the Multi-Trigger counter 

such that Active Quote Protection purge 

events and Purge Events under the 

current Quotation Adjustments will be 

aggregated together as counting toward 

the specified Multi-Trigger Threshold. 

Accordingly, the Exchange proposes to 

add references to the Active Quote 

Protection rule (i.e., proposed paragraph 

(B) of Options 3, Section 15(c)(2)) 

throughout the Multi-Trigger rule in 

proposed paragraph (C), specifically: 

A Market Maker or Market Maker Group 

(multiple affiliated Market Makers is a 

‘‘Group’’ as defined by a Phlx member and 

provided by such member to the Exchange) 

may provide a Specified Time Period and 

number of allowable triggers by which the 

Exchange will automatically remove quotes 

in all options series in all underlying issues 

submitted through designated Phlx protocols, 

as specified by the Exchange (‘‘Multi-Trigger 

Threshold’’). During a specified time period 

established by the Phlx Market Maker not to 

exceed 30 seconds (‘‘Multi- Trigger Specified 

Time Period’’), the number of times the 

System automatically removes the Phlx 

Market Maker’s or Group’s quotes in all 

options series will be based on the number 

of triggers of the Percentage Threshold 

described in paragraph (A)(i) above, the 

Volume Threshold described in paragraph 

(A)(ii) above, the Delta Threshold described 

in paragraph (A)(iii) above, the Vega 

Threshold described in paragraph (A)(iv) 

above, and the Contract Limit described in 

paragraph (B) above. Once the System 

determines that the number of triggers 

exceeds a number established by either the 

Phlx Market Maker or Group, during a MultiTrigger Specified Time Period, the System 

will automatically remove all quotes in all 

options series in all underlying issues for that 

Phlx Market Maker or Group, during a MultiTrigger Specified Time Period, the System 

will automatically remove all quotes in all 

options series in all underlying issues for that 

Phlx Market Maker or Group. A trigger is 

defined as the event which causes the System 

to automatically remove quotes in all options 

series in an underlying issue. A Multi-Trigger 

Specified Time Period will commence after 

every trigger of the Percentage Threshold, 

Volume Threshold, Delta Threshold, Vega 

Threshold, or Contract Limit and will 

continue until the System removes quotes as 

described in paragraph (D) below or the 

Multi-Trigger Specified Time Period expires. 

The System counts triggers within the MultiTrigger Specified Time Period across all 

triggers for the Phlx Market Maker or Group. 

A Multi-Trigger Specified Time Period 

operates on a rolling basis in that there may 

be multiple Multi-Trigger Specified Time 

Periods occurring simultaneously and such 

Multi-Trigger Specified Time Periods may 

overlap. 

The following example illustrates the 

proposed behavior of the Active Quote 

Protection risk protection: 

Active Quote Protection Example 

Market Maker AAPL 

Contract Limit: 100 

Market Maker trades a transaction for 

10 contracts in AAPL; Limit Counter 

goes from 0 to 10. 

Market Maker sends a request to 

decrement its Limit Counter in AAPL 

for 10 contracts; Limit Counter goes 

from 10 to 0. 

Market Maker trades a transaction for 

20 contracts in AAPL; Limit Counter 

goes from 0 to 20. 

Market Maker trades a transaction for 

50 contracts in AAPL; Limit Counter 

goes from 20 to 70. 

Market Maker sends a request to 

decrement its Limit Counter in AAPL 

for 20 contracts; Limit Counter goes 

from 70 to 50. 

Market Maker trades a transaction for 

60 contracts in AAPL; Limit Counter 

goes from 50 to 110 and all Market 

Maker quotes in AAPL are automatically 

purged after the execution because the 

Limit Counter exceeded the Market 

Maker’s Contract Limit of 100 executed 

contracts. 

At this point, the Market Maker must 

send a request to fully decrement its 

Limit Counter in AAPL back to zero in 

order to begin quoting again. 

Multi-Trigger Active Quote Protection 

Example 

Assume Market Maker in AAPL and 

SPY has Quotation Adjustments set for 

AAPL and Active QP set for SPY. 

Market Maker sets its Multi-Trigger 

Threshold so that it is triggered at 25 

purge events within a 20 second time 

period. 

On a given trading day, if an Active 

Quote Protection Purge Event is 

triggered 15 times in SPY and a 

Quotation Adjustment Purge Event is 

triggered 11 times in AAPL, all within 

20 seconds, then the Exchange will 

automatically remove all of the Market 

Maker’s quotes AAPL and SPY because 

26 purge events were triggered for the 

Market Maker. 

Lastly, the Exchange proposes to title 

paragraph (A) as ‘‘Rapid Fire’’ and 

paragraph (C) as ‘‘Multi-Trigger’’ to 

more clearly identify which rules apply 

to which risk protections. 

Post-Only Quoting Protection 

The Exchange proposes to adopt an 

optional quoting protection for Market 

Makers at Phlx Options 3, Section 

15(c)(3) that will be identical to BX 

Options 3, Section 15(c)(3). This 

optional risk protection would allow 

Market Makers to prevent their quotes 

from removing liquidity from the 

Exchange’s order book upon entry. As 

proposed, Market Makers may elect to 

configure their SQF protocols to prevent 

their quotes from removing liquidity 

(‘‘Post-Only Quote Configuration’’). A 

Post-Only Quote Configuration would 

re-price or cancel a Market Maker’s 

quote that would otherwise lock or cross 

any resting order or quote 115 on the 

order book upon entry. Market Makers 

may elect whether to re-price or cancel 

their quotes with this functionality. 

When configured for re-price, quotes 

would be re-priced and displayed by the 

System to one MPV below the current 

best offer (for bids) or above the current 

best bid (for offers). Notwithstanding the 

aforementioned, if a quote with a PostOnly Quote Configuration would not 

lock or cross an order or quote on the 

System but would lock or cross the 

NBBO, the quote will be handled 

pursuant to Options 3, Section 

4(b)(6).116 When configured for cancel, 

Market Makers will have their quotes 

cancelled whenever the quote would 

lock or cross the NBBO or be placed on 

the book at a price other than its limit 

price. Finally, the Exchange notes that 

similar to BX, this risk protection will 

not apply during an Opening Process 

because the order book is established 

once options series are open for trading. 

Below are some Post-Only Quote 

Configuration examples. 

Re-Priced Post-Only Quote 

Configuration—Penny Interval Program 

Display and Execution Example 

Penny Interval Program MPV in open 

trading state 

Market Makers A and C do not have 

Post-Only Quote Configuration risk 

protection configured 

Market Maker B is configured for PostOnly Quote Configuration re-price 

Market Maker A quote $0.98 (10) × 

$1.00 (10) 

ABBO $0.96 × $1.03 

Market Maker B quote $1.00 (10) × $1.01 

(10) arrives 


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117CTI is a real-time clearing trade update 

message that is sent to a member after an execution 

has occurred and contains trade details specific to 

that member. The information includes, among 

other things, the following: (i) The Clearing Member 

Trade Agreement or ‘‘CMTA’’ or ‘‘OCC’’ number; 

(ii) Exchange badge or house number; (iii) the 

Exchange internal firm identifier; (iv) an indicator 

which will distinguish electronic and nonelectronically delivered orders; (v) liquidity 

indicators and transaction type for billing purposes; 

and (vi) capacity. See Options 3, Section 23(b)(1). 

Æ Bid side of quote re-prices onto order 

book @0.99 and sets displayed NBBO 

to 10 quantity 

Æ Offer side rests at 1.01 without issue 

Market Maker C quote $0.97 (20) × $0.98 

(20) arrives 

Trades 10 with Market Maker B @$0.99 

and 10 with Market Maker A @$0.98 

Market Maker B avoids taking liquidity 

while Market Maker C, who chose not 

to be configured for such, removes 

liquidity by interacting with re-priced 

interest on Phlx’s order book. 

Re-Priced Post-Only Quote 

Configuration—Non-Penny Interval 

Program Display and Execution 

Example 

Non-Penny Interval Program MPV in 

open trading state 

Market Maker A quote $0.95 (10) × 

$1.00 (10) 

ABBO $0.85 × $1.05 

Market Maker B (configured for PostOnly Quote Configuration and 

selection of re-price upon quote) 

quote arrives $1.00 (5) × $1.05 (5) 

Æ Bid side quote re-prices on order book 

to $0.95 

Æ Displays on order book @$0.95 (bid), 

which now shows (15 quantity) 

Æ Offer side quote books and displays in 

Depth of Market Feed at $1.05 

Order to sell 10 contracts arrives @$0.95 

Æ 7 contracts execute with Market Maker 

A @$0.95 

Æ 3 contracts execute with Market Maker 

B @$0.95 

In this example, the Market Maker 

avoided taking liquidity by deploying 

the Post-Only Quote Configuration with 

re-price. 

Options 3, Section 23 

The Exchange proposes to amend 

Phlx Options 3, Section 23, Data Feeds 

and Trade Information. The Exchange 

proposes to rename various market data 

feeds in Phlx Options 3, Section 23(a) to 

harmonize the names of the feeds to ISE, 

GEMX and MRX market data feeds at 

Options 3 Section 23(a). Specifically, 

the Exchange proposes to rename ‘‘Top 

of PHLX Options’’ to ‘‘Nasdaq Phlx Top 

of Market’’ but continue to utilize 

‘‘TOPO’’ as the acronym. The Exchange 

proposes to rename ‘‘PHLX Orders’’ as 

‘‘Nasdaq Phlx Order Feed.’’ Finally, the 

Exchange proposes to rename ‘‘PHLX 

Depth of Market’’ as ‘‘Nasdaq Phlx 

Depth of Market.’’ The Exchange 

proposes similar amendments to the 

name of the feeds at Options 7, Section 

9, B. 

The Exchange proposes to no longer 

offer TradeInfo, which is a user interface 

set forth in Phlx Options 3, Section 

23(b)(2) that permits a member to: (i) 

search all orders submitted in a 

particular security or all orders of a 

particular type, regardless of their status 

(open, canceled, executed, etc.); (ii) 

view orders and executions; and (iii) 

download orders and executions for 

recordkeeping purposes. Due to the lack 

of demand for this interface by member 

organizations the Exchange is retiring 

the interface. The Exchange seeks to 

decommission the TradeInfo interface 

when the Exchange migrates over to the 

enhanced technology platform with the 

technology migration. The Exchange 

notes that FIX and the Clearing Trade 

Interface (‘‘CTI’’),117 which are available 

to all member organizations, can be 

used today to obtain order information 

that is currently available within 

TradeInfo, and FIX can be used to 

cancel orders today. 

Additionally, the Exchange proposes 

to remove the $95 per user, per month 

TradeInfo Interface Fee in the Pricing 

Schedule at Options 7, Section 9, B. The 

fee would not be necessary once 

TradeInfo is discontinued. 

Options 3, Section 28 

The Exchange proposes to introduce 

optional quantity and notional value 

checks in new Phlx Options 3, Section 

28, entitled ‘‘Optional Risk Protections.’’ 

The proposed optional order risk 

protections will be identical to the 

protections currently offered by ISE, 

GEMX and MRX Options 3, Section 28. 

Member organizations may use this 

voluntary functionality through their 

FIX protocol to limit the quantity and 

notional value they can send per order 

and on aggregate for the day. 

Specifically, member organizations may 

establish limits for the following 

parameters, as set forth in proposed 

subparagraphs (a)(1)–(4): 

(1) Notional dollar value per order, 

which will be calculated as quantity 

multiplied by limit price multiplied by 

number of underlying shares; 

(2) Daily aggregate notional dollar 

value; 

(3) Quantity per order; and 

(4) Daily aggregate quantity 

Proposed paragraph (b) will provide 

that member organizations may elect 

one or more of the above optional risk 

protections by contacting Market 

Operations and providing a per order 

value (for (a)(1) and (a)(3)) or daily 

aggregate value (for (a)(2) and (a)(4)) for 

each order protection. Member 

organizations may modify their settings 

through Market Operations. Proposed 

paragraph (c) will provide that the 

System will reject all incoming 

aggregated member organization orders 

for any of the (a)(2) and (a)(4) risk 

protections after the value configured by 

the member organization is exceeded. 

Proposed paragraph (d) will provide 

that the System will reject all incoming 

member organization orders for any of 

the (a)(1) and (a)(3) risk protections 

upon arrival if the value configured by 

the member organization is exceeded by 

the incoming order. The Exchange notes 

that the difference in handling between 

aggregate and individual order 

protections is necessary to allow for 

complete processing of the final order 

that puts a member organization’s 

configured value over the aggregate 

values configured. While individual 

orders can be directly measured against 

the configured values for (a)(1) and 

(a)(3), the aggregate values must be 

calculated after complete processing of 

an order and thus the rejection of orders 

begins upon the arrival of the next order 

after the aggregate values in (a)(2) or 

(a)(4) have been exceeded. 

The following example shows how 

the System will reject all subsequent 

incoming aggregated orders after the 

(a)(2) or (a)(4) values configured by the 

member organization have been 

exceeded. 

Optional Risk Protection Example 

Aggregate Quantity Limit = 800. 

Member organization enters an order 

to Buy 500—Accepted. 

Member organization enters an order 

to Buy 400—Accepted (member 

organization did not meet the 

configured limit of 800 with the first 

order of 500 at the time Member 

organization entered the second order). 

Member organization enters an order 

to Buy 1—Rejected (member 

organization already exceeded the 

configured limit of 800 with the second 

order of 400). 

The following example shows how 

the System will reject all incoming 

orders upon arrival if the (a)(1) or (a)(3) 

values configured by the member 

organization have been exceeded by the 

arriving order: 

Quantity per Order Limit = 800. 

Member organization enters an order 

to Buy 801—Rejected (member 

organization exceeded the Quantity per 

order limit upon arrival with the order 

to buy 801 contracts). 

Proposed paragraph (e) will provide 

that if a member organization sets a 

notional dollar value, a Market Order 


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118FIND Orders that are not marketable with the 

ABBO upon receipt are handled differently than 

FIND Orders that are marketable with the ABBO 

upon receipt. FIND Orders that are marketable with 

the ABBO upon receipt would be eligible for 

routing the next time the option series is subject to 

a new Opening Process, which may include a reopening after a trading halt. FIND Orders that are 

not marketable with the ABBO upon receipt will 

not be subject to routing even in the event that there 

is a new Opening Process after a trading halt. The 

handling of FIND Orders on Phlx is identical to ISE 

Options 5, Section 4(a)(iii)(B). 

119Orders that route during an Opening Process 

route at the end of the Opening Process, when the 

Exchange simultaneously opens an options series 

and routes. Thereafter, FIND Orders that were 

submitted after the Opening Process would attempt 

once to route until the FIND Order rests on the 

Order Book. Once it rests on the Order Book, the 

FIND Order would not route until the next Opening 

Process. Finally, an Opening Process may occur 

intra-day if there was a trading halt. After a trading 

halt BX would reopen with an Opening Process and 

the FIND Order would be eligible to route once 

again. 

would not be accepted from that 

member organization. This is because 

notional dollar value is calculated by 

using an order’s specified limit price, 

and Market Orders by definition are 

priced at the best available price upon 

execution. Lastly, proposed paragraph 

(f) will provide that the proposed risk 

protections are only available for orders 

entered through FIX. Additionally, all of 

the proposed settings will be firm level. 

Options 5, Section 4 

The Exchange proposes to amend 

Options 5, Section 4, Order Routing, to 

align Phlx’s routing to ISE Options 4, 

Section 5. 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a) to include 

Stop-Limit Orders in addition to Stop 

Orders in the list of order types that are 

not included in the PBBO because they 

have not been triggered. Today, Phlx’s 

Stop Order description refers to both a 

market and limit order. The Exchange’s 

proposal adopts the Stop Order at ISE 

Options 3, Section 7(d) and Stop Limit 

Order at ISE Options 3, Section 7(e). 

The Exchange proposes to reflect both 

order types. As is the case today, the 

Exchange proposes to note, similar to 

ISE Options 4, Section 5(a), that when 

checking the Order Book, the System 

will seek to execute at the price at 

which it would send the order to an 

away market. The Exchange believes 

that this sentence will bring greater 

clarity to the Exchange’s rule. Similarly, 

the Exchange proposes to add text to 

clarify its current System behavior for 

TIFs. Today, routing options may be 

combined with all available order types 

and times-in-force, with the exception 

of order types and times-in-force whose 

terms are inconsistent with the terms of 

a particular routing option. The 

Exchange also believes this sentence 

will clarify the current operation of the 

routing System. Finally, as is the case 

today, the Exchange proposes to note 

the time the routing System is available, 

the ability to list an order as nonroutable and cross-reference the locked 

and crossed rules. The Exchange would 

state, ‘‘The order routing process shall 

be available to members from 9:30 a.m. 

Eastern Time until market close and 

shall route orders as described below. 

Member organizations can designate 

orders as either available for routing or 

not available for routing. All routing of 

orders shall comply with Options 5, 

Options Order Protection and Locked 

and Crossed Market Rules.’’ This 

proposed rule text provides greater 

transparency to the Exchange’s current 

System operation and harmonizes 

Phlx’s rule text to ISE Options 4, 

Section 5(a). 

The Exchange proposes some 

modifications to its FIND Order in Phlx 

Options 5, Section 4(iii)(B) to conform 

to ISE Options 5, Section 4(iii)(B). By 

way of background, a FIND Order is an 

order that is: (i) routable at the 

conclusion of an Opening Process; and 

(ii) routable upon receipt during regular 

trading, after an option series is open. 

Phlx proposes to add the following 

language to the end of Options 5, 

Section 4(iii)(B) to reflect its current 

routing functionality, ‘‘FIND Orders that 

are not marketable with the ABBO upon 

receipt will be treated as DNR for the 

remainder of the trading day and post 

to the order book, even in the event that 

there is a new Opening Process after a 

trading halt.’’ Phlx also proposes to add 

rule text to the end of Phlx Options 5, 

Section 4(a)(iii)(B) which states, ‘‘. . . 

and post to the Order book, even in the 

event that there is a new Opening 

Process after a trading halt’’ to make 

clear that the FIND Order would post to 

the Order Book and not route again, 

even if there were a new Opening 

Process.118

The Exchange proposes to amend 

Phlx Options 5, Section 4(iii)(B)(1). The 

Exchange proposes to remove the 

following sentences, ‘‘With respect to an 

Opening Process, only a Public 

Customer and Professional FIND Order 

on the Order Book, whether it is 

received prior to the opening or it is a 

GTC FIND Order from a prior day, may 

be routed at the conclusion of an 

Opening Process. Non-Public Customer 

and non-Professional FIND Orders are 

not eligible for routing at the conclusion 

of an Opening Process.’’ Phlx proposes 

to amend its routing functionality to 

permit all market participants to route, 

not just Public Customer and 

Professional FIND Orders. To this end, 

Phlx proposes to remove this limitation. 

The Exchange proposes to amend the 

next sentence which state, ‘‘At the end 

of an Opening Process, any FIND Order 

that is priced through the Opening 

Price, pursuant to Phlx Options 3, 

Section 8(a)(iii), will be cancelled, and 

any FIND Order that is at or inferior to 

the Opening Price will be executed 

pursuant to Options 3, Section 8(k).’’ 

The Exchange proposes to instead 

provide, ‘‘At the end of an Opening 

Process, any FIND Order that is priced 

through the Opening Price, pursuant to 

Phlx Options 3, Section 8(a)(iii), will be 

cancelled, and any FIND Order that is 

at or inferior to the Opening Price will 

execute or book pursuant to Options 3, 

Section 8(k).’’ The Exchange noted in 

proposed Phlx Options 5, Section 

4(iii)(B) that a FIND Order may post to 

the order book in certain cases. This 

rule text adds clarity to the rules by 

naming all possible scenarios. Finally, 

the Exchange proposes to remove the 

last sentence of this paragraph which 

states, ‘‘Such FIND Order will not be 

eligible for routing until the next time 

the option series is subject to a new 

Opening Process.’’ The Exchange is 

removing this sentence because of the 

addition to the end of Options 5, 

Section 4(a)(iii)(B). The Opening 

Process at Phlx Options 3, Section 8(k), 

describes the manner in which orders 

route at the end of that process. This 

sentence is not necessary within this 

routing rule. FIND Orders that are not 

marketable with the ABBO upon receipt 

will be treated as DNR for the remainder 

of the trading day, and will not be 

subject to routing even in the event that 

there is a new Opening Process after a 

trading halt.119

Phlx Options 5, Section 4(iii)(B)(2) 

currently states, 

With respect to an Opening Process, if 

during a route timer at the conclusion of an 

Opening Process pursuant to Options 3, 

Section 8(k) markets move such that the 

FIND Order is executable against Exchange 

interest, the FIND Order will immediately 

execute. If during a route timer, ABBO 

markets move such that the FIND Order is no 

longer marketable against the ABBO nor 

marketable against the PBBO, the FIND Order 

will post at its limit price. If the FIND Order 

is locked or crossed by away quotes, it will 

route at the completion of the route timer. If 

the ABBO worsens but remains better than 

the PBBO, the FIND Order will reprice and 

be reexposed at the new price(s) without 

interrupting the route timer. 

In order to more efficiently display 

the various potential routing scenarios, 

without repeating certain rule text 

several times throughout the rule, the 

Exchange proposes to amend Phlx 

Options 5, Section 4(a)(iii)(B)(2), similar 


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120This sentence is currently located in Phlx 

Options 5, Section 4(iii)(B)(5). 

121This sentence is currently located in Phlx 

Options 5, Section 4(iii)(B)(5). 

122This sentence is currently located in Phlx 

Options 5, Section 4(iii)(B)(5). 

123A GTD SRCH Order may be routed as part of 

the Opening Process. 

to ISE Options 5, Section 4(a)(iii)(B)(2), 

to describe the potential scenarios that 

may occur for a FIND Order. The 

proposed paragraph provides, 

Generally, a FIND Order will be included 

in the displayed PBBO at its limit price, 

unless the FIND Order locks or crosses the 

ABBO, in which case it will be entered into 

the Order Book at the ABBO price and 

displayed one MPV inferior to the ABBO. If 

there exists a locked ABBO when the FIND 

Order is entered onto the Order Book, the 

FIND Order will be entered into the Order 

Book at the ABBO price and displayed one 

MPV inferior to the ABBO. If during a Route 

Timer, ABBO markets move such that the 

FIND Order is no longer marketable against 

the ABBO nor marketable against the BBO, 

the FIND Order will post at its limit price. 

If the FIND Order is locked or crossed by 

away quotes, it will route at the completion 

of the Route Timer. If the ABBO worsens but 

remains better than the BBO, the FIND Order 

will reprice and be re-exposed at the new 

price(s) without interrupting the Route 

Timer. If, during the Route Timer, any new 

interest arrives opposite the FIND Order that 

is equal to or better than the ABBO price, the 

FIND Order will trade against such new 

interest at the ABBO price, unless the ABBO 

is improved to a price which crosses the 

FIND Order’s already displayed price, in 

which case the incoming order will execute 

at the previous ABBO price as the away 

market crossed a displayed price. 

This paragraph utilizes the term 

‘‘generally’’ because it always applies to 

FIND Orders. The Exchange proposes to 

state that a FIND Order will be included 

in the displayed BBO at its limit price, 

unless the FIND Order locks or crosses 

the ABBO, in which case it will be 

entered into the Order Book at the 

ABBO price and displayed one MPV 

inferior to the ABBO.120 This statement 

will provide context to the FIND Order 

and would apply consistently to FIND 

Orders. The Exchange further proposes 

to provide that if there exists a locked 

ABBO when the FIND Order is entered 

onto the Order Book, the FIND Order 

will be entered into the Order Book at 

the ABBO price and displayed one MPV 

inferior to the ABBO.121 The Exchange 

further proposes to describe the possible 

scenarios that may occurring during a 

Route Timer, when ABBO markets move 

such that the FIND Order is no longer 

marketable against the ABBO nor 

marketable against the BBO, the FIND 

Order will always post at its limit price. 

If the FIND Order is locked or crossed 

by away quotes, it will route each time 

at the completion of the Route Timer. In 

the situation where an ABBO worsens, 

but remains better than the BBO, the 

FIND Order will reprice and be reexposed at the new price(s) without 

interrupting the Route Timer, each time. 

If, during the Route Timer, any new 

interest arrives opposite the FIND Order 

that is equal to or better than the ABBO 

price, the FIND Order will trade always 

against such new interest at the ABBO 

price, unless the ABBO is improved to 

a price which crosses the FIND Order’s 

already displayed price, in which case 

the incoming order will execute at the 

previous ABBO price as the away 

market crossed a displayed price.122 The 

Exchange believes that describing these 

scenarios in this introductory paragraph 

will provide a basis to understand 

certain FIND Order behaviors in certain 

circumstances and eliminate the need to 

have these circumstances repeated 

throughout the rule. The Exchange 

proposes to remove the first sentence of 

Phlx Options 5, Section 4(a)(iii)(B)(2) 

because it is covered within Phlx 

Options 3, Section 8(k), which describes 

the Opening Process. The Exchange 

believes that this paragraph, as 

amended, will provide greater clarity as 

to all the possible scenarios and will 

harmonize Phlx’s rule to ISE’s rule. 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(B)(3) to 

add ‘‘A FIND Order received after an 

Opening Process that is not marketable 

against the PBBO or the ABBO will be 

entered into the Order Book at its limit 

price. The FIND Order will be treated as 

DNR for the remainder of the trading 

day, even in the event that there is a 

new Opening Price after a trading halt’’ 

to the end of the paragraph. This text is 

similar to ISE Options 5, Section 

4(a)(iii)(B)(3). Phlx treats FIND Orders 

received after an Opening Process that 

are not marketable against the BBO or 

the ABBO in the same manner as ISE. 

Phlx is adding this rule text to make 

clear that the FIND Order will not route, 

even if there is a new Opening Process 

to reflect current System functionality. 

The Exchange will not allow a nonmarketable order to route. The same 

sentence is being added to Phlx Options 

5, Section 4(a)(iii)(B)(4) for clarity. 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(B)(5) to 

remove sentences that were relocated to 

Phlx Options 5, Section 4(a)(iii)(B)(2) as 

noted above. 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(B)(6) to 

amend the penultimate sentence to note 

that an Opening Process may occur after 

a trading halt. An Opening Process 

would occur intra-day if there was a 

trading halt. After a trading halt, Phlx 

would reopen with an Opening Process. 

This is the case today and this rule text 

accounts for this potential scenario. The 

Exchange is removing the final sentence 

which states, ‘‘The remaining size of a 

non-Public Customer and nonProfessional FIND Order will be 

cancelled upon an intra-day trading 

halt.’’ As noted above, Phlx proposes to 

amend its routing functionality to 

permit all market participants to route, 

not just Public Customer and 

Professional FIND Orders. The 

Exchange is removing this sentence 

which is unnecessary as orders of all 

market participants will route. The same 

amendments were also made to Phlx 

Options 5, Section 4(a)(iii)(B)(8). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(B)(7) to 

remove the final sentence as that 

concept was relocated to Phlx Options 

5, Section 4(a)(iii)(B)(2) in the section 

that generally describes routing. 

The Exchange proposes some 

modifications to its SRCH Order in Phlx 

Options 5, Section 4(iii)(C) to conform 

to ISE Options 5, Section 4(iii)(C). By 

way of background, a SRCH Order is 

routable at any time the option series is 

open for trading. Similar to the removal 

of restrictions related to Public 

Customer and Professional order for a 

FIND Order, the Exchange proposes to 

remove these limitations as to SRCH 

Order. The Exchange is adding a GoodTill-Date Order or GTD at proposed 

Supplementary Material .02(c) to Phlx 

Options 3, Section 7. Today, the 

Exchange does not offer a GTD Order. 

The GTD Order would be identical to 

ISE, GEMX and MRX’s Good-Till-Date 

TIF at Supplementary Material .02(c) to 

Options 3, Section 7. The Exchange 

proposes to add GTD to into Phlx 

Options 5, Section 4(iii)(C), similar to 

ISE Options 5, Section 4(iii)(C), to 

reflect how a GTD TIF would be 

handled by the System for a SRCH 

Order.123

The Exchange proposes to amend 

Phlx Options 5, Section 4(iii)(C)(1) to 

add a citation to the Opening Price at 

Options 3, Section 8(a)(iii). The 

Exchange also proposes to amend the 

rule text similar to the FIND Order to 

indicate that the SRCH Order would 

execute or book to account for all the 

scenarios that are possible today. The 

proposed rule text reflects current 

System functionality. 

Similar to the FIND Order proposal, 

the Exchange proposes to amend Phlx 

Options 5, Section 4(a)(iii)(C)(2) to 

provide general guidelines for the 

behavior of SRCH Orders which apply 

consistently. This proposed paragraph 


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will allow the Exchange to more 

efficiently display the various potential 

scenarios without repeating certain rule 

text several times. The Exchange 

believes that describing these scenarios 

in this introductory paragraph will 

provide a basis to understand certain 

SRCH Order behaviors in certain 

circumstances and eliminate the need to 

have these circumstances repeated 

throughout the rule. Proposed Phlx 

Options 5, Section 4(a)(iii)(C)(2) 

provides, 

Generally, a SRCH Order will be included 

in the displayed BBO at its limit price, unless 

the SRCH Order locks or crosses the ABBO, 

in which case it will be entered into the 

Order Book at the ABBO price and displayed 

one MPV inferior to the ABBO. If there exists 

a locked ABBO when the SRCH Order is 

entered onto the Order Book, the SRCH Order 

will be entered into the Order Book at the 

ABBO price and displayed one MPV inferior 

to the ABBO. Once on the Order Book, the 

SRCH Order is eligible for routing if it is 

locked or crossed by an away market. If 

during a Route Timer, ABBO markets move 

such that the SRCH Order is no longer 

marketable against the ABBO nor marketable 

against the PBBO, the SRCH Order will book 

at its limit price. If, during the Route Timer, 

any new interest arrives opposite the SRCH 

Order that is equal to or better than the 

ABBO price, the SRCH Order will trade 

against such new interest at the ABBO price, 

unless the ABBO is improved to a price 

which crosses the SRCH Order’s already 

displayed price, in which case the incoming 

order will execute at the previous ABBO 

price as the away market crossed a displayed 

price. If the ABBO worsens but remains 

better than the BBO, the SRCH Order will 

reprice and be re-exposed at the new price(s) 

without interrupting the Route Timer. If an 

ABBO locks or crosses the SRCH Order 

during a new Route Timer, which would 

subsequently initiate at the conclusion of any 

Route Timer if interest remains, the SRCH 

Order may route to the away market at the 

ABBO at the conclusion of such Route Timer. 

If the SRCH Order is locked or crossed by 

away quotes, it will route at the completion 

of the Route Timer. The System will route 

and execute contracts contemporaneously at 

the end of the Route Timer. 

Generally, a SRCH Order will be 

included in the displayed PBBO at its 

limit price, unless the SRCH Order locks 

or crosses the ABBO, in which case it 

will be entered into the Order Book at 

the ABBO price and displayed one MPV 

inferior to the ABBO, similar to other 

routing order types. Also, if there is a 

locked ABBO when the SRCH Order is 

entered onto the Order Book, the SRCH 

Order will be entered into the Order 

Book at the ABBO price and displayed 

one MPV inferior to the ABBO to avoid 

locking the away market. The Exchange 

proposes to generally state, ‘‘Once on 

the Order Book, the SRCH Order is 

eligible for routing if it is locked or 

crossed by an away market.’’ This 

provision is always true of SRCH 

Orders. 

Next, the Exchange provides scenarios 

that generally may occur during a Route 

Timer. The first scenario is if during a 

Route Timer, ABBO markets move such 

that the SRCH Order is no longer 

marketable against the ABBO nor 

marketable against the PBBO. In this 

case, the SRCH Order will book at its 

limit price. The next scenario is whether 

during the Route Timer, any new 

interest arrives opposite the SRCH 

Order that is equal to or better than the 

ABBO price, the SRCH Order will trade 

against such new interest at the ABBO 

price, unless the ABBO is improved to 

a price which crosses the SRCH Order’s 

already displayed price, in which case 

the incoming order will execute at the 

previous ABBO price as the away 

market crossed a displayed price. If new 

interest arrives that is equal to or better 

than the ABBO price, the SRCH Order 

will trade at the ABBO price. If new 

interest arrives that is marketable 

against the SRCH Order it will trade at 

the ABBO price unless the ABBO is 

improved to a price which crosses the 

SRCH Order’s already displayed price, 

in which case the incoming order will 

execute at the previous ABBO price as 

the away market crossed a displayed 

price. This last sentence makes clear 

that the SRCH Order would execute at 

the previous ABBO price as the away 

market crossed a displayed price. Better 

priced incoming interest will execute 

against the SRCH Order, unless the 

ABBO crosses the SRCH Order, in 

which case any new interest will 

execute at the SRCH Order price. In this 

scenario, Phlx’s price was already 

displayed when an away market 

subsequently crossed Phlx’s displayed 

price. If the ABBO worsens but remains 

better than the BBO, the SRCH Order 

will reprice and be re-exposed at the 

new price(s) without interrupting the 

Route Timer. Also, if an ABBO locks or 

crosses the SRCH Order during a new 

Route Timer, which would 

subsequently initiate at the conclusion 

of any Route Timer if interest remains, 

the SRCH Order may route to the away 

market at the ABBO at the conclusion of 

such Route Timer, each time. Finally, if 

the SRCH Order is locked or crossed by 

away quotes, it will route at the 

completion of the Route Timer. The 

Exchange notes that the System will 

route and execute contracts 

contemporaneously at the end of the 

Route Timer. The proposed rule text is 

identical to ISE Options 5, Section 

4(a)(iii)(C)(2). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(3), 

which is being renumbered, to add ‘‘at 

its limit price’’ to specify at which price 

the SRCH Order would be entered on 

the Order Book if not marketable. 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(4), 

which is being renumbered, to make a 

technical amendment to change ‘‘at’’ to 

‘‘on’’. The Exchange also proposes to 

remove ‘‘price equal to the’’ because it 

is unnecessary. Finally, the Exchange 

proposes to remove the last sentence, 

‘‘Once on the Order Book, the SRCH 

Order is eligible for routing if it is 

locked or crossed by an away market.’’ 

This sentence was relocated to Phlx 

Options 5, Section 4(a)(iii)(C)(2). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(5), 

which is being renumbered, to make a 

technical amendment to change ‘‘at’’ to 

‘‘on’’. The Exchange also proposes to 

add ‘‘the remainder of the’’ to make 

clear that this sentence is about size 

remaining on the order after exhausting 

the PBBO. Finally, the Exchange 

proposes to remove the last two 

sentences that were relocated to Phlx 

Options 5, Section 4(a)(iii)(C)(2). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(6), 

which is being renumbered, to add ‘‘to 

an away market’’ to more clearly state 

where the order is being routed to. The 

Exchange proposes to remove ‘‘locked 

or crossed by away quotes, it will route 

at the completion of the Route Timer. If 

the ABBO worsens but remains better 

than the PBBO, the SRCH Order will 

reprice and be re-exposed at the new 

price(s) without interrupting the Route 

Timer. If the SRCH Order’’ because this 

scenario was relocated to Phlx Options 

5, Section 4(a)(iii)(C)(2). The Exchange 

is updating citations and capitalizing 

book and adding Order before it. The 

Exchange proposes to remove the last 

sentence that was relocated to Phlx 

Options 5, Section 4(a)(iii)(C)(2). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(7), 

which is being renumbered, to remove 

the second, four, fifth and final sentence 

that were relocated to Phlx Options 5, 

Section 4(a)(iii)(C)(2). 

The Exchange proposes to amend 

Phlx Options 5, Section 4(a)(iii)(C)(8), 

which is being renumbered, to update 

citations and pluralize ‘‘price’’. The 

Exchange proposes to remove the last 

sentence that was relocated to Phlx 

Options 5, Section 4(a)(iii)(C)(2). The 

Exchange also proposes to remove 

current Phlx Options 5, Section 

4(a)(iii)(C)(8) and (9) which were 

relocated to Phlx Options 5, Section 

4(a)(iii)(C)(2). Finally, the Exchange 

proposes to renumber current relocated 


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124 15 U.S.C. 78f(b). 

125 15 U.S.C. 78f(b)(5). 

126 15 U.S.C. 78f(b). 127 15 U.S.C. 78f(b)(4) and (5). 

to Phlx Options 5, Section 

4(a)(iii)(C)(10) as ‘‘9’’. 

Options 6, Section 1 

The Exchange proposes to amend 

Options 6, Section 1, Authorization to 

Give Up, to align Phlx’s process to that 

of ISE, GEMX and MRX Options 6, 

Section 1. The Exchange proposes to 

remove ‘‘with respect to floor trading 

only’’ from Options 6, Section 1(a). With 

this technology migration, for each 

transaction in which a member 

organization participates, the member 

organization may indicate, at the time of 

the trade, or through post trade 

allocation, any Options Clearing 

Corporation number of a Clearing 

Member through which a transaction 

will be cleared (‘‘Give Up’’), provided 

the Clearing Member has not elected to 

Opt In, as defined and described in 

paragraph (b) below, and restrict one or 

more of its OCC number(s) (‘‘Restricted 

OCC Number’’). With this change, the 

provision for ‘‘at time of trade’’ will 

apply to both floor and electronic 

trading, therefore, electronic only 

members may indicate a Give-Up at the 

time of trade. Today, electronic trading 

members indicate a Give-Up in the post 

allocation process. The Exchange’s 

automation of the Give-Up process will 

permit it to prevent an unauthorized 

Give-Up of a Restricted OCC Number 

that is submitted to the System from 

being processed. The Exchange 

proposes to amend Options 6, Section 

1(c) to add the following sentence, ‘‘If 

an unauthorized Give Up with a 

Restricted OCC Number is submitted to 

the System, the System will process that 

transaction using the Member’s default 

OCC clearing number.’’ Because the 

Exchange is adding this automated 

feature, it proposes to remove the rule 

text in Options 6, Section 1(c)(ii) that 

provides, ‘‘For all other orders, the 

System will not allow an unauthorized 

Give Up with a Restricted OCC Number 

to be submitted at the firm mnemonic 

level at the point of order entry.’’ The 

Exchange will be able to prevent 

unauthorized Give Ups of Restricted 

OCC Numbers systematically, similar to 

ISE, GEMX and MRX Options 6, Section 

1, and would not need this restriction in 

Options 6, Section 1(c)(ii). 

Options 8, Section 32 

The Exchange proposes some minor 

numbering amendments to Options 8, 

Section 32, Types of Floor-Based (NonSystem) Orders. The Exchange proposes 

to renumber Options 8, Section 32(b), 

Contingency Order, as ‘‘5.’’ The 

Exchange proposes to renumber Options 

8, Section 32(b)(1), Stop-Limit Order as 

‘‘i’’. The Exchange proposes to 

renumber Options 8, Section 32(b)(2), 

Stop (stop-loss) Order as ‘‘ii.’’ The 

Exchange proposes to renumber Options 

8, Section 32(b)(3), All or None Order as 

‘‘iii.’’ The Exchange proposes to 

renumber Options 8, Section 32(b)(4), 

Cancel-Replacement Order as ‘‘iv.’’ The 

Exchange proposes to renumber Options 

8, Section 32(b)(5), Immediate or Cancel 

Order as ‘‘v.’’ The Exchange proposes to 

renumber Options 8, Section 32(c), 

Time in Force or ‘‘TIF’’ as ‘‘b’’. Finally, 

the Exchange proposes to re-letter 

current Options 8, Section 32(d), Not 

Held Orders, as ‘‘c’’ and reserve ‘‘d’’. 

The Exchange proposes to amend AllOr-None Orders at current Phlx Options 

8, Section 32(b)(3) to remove the 

restriction that only a Public Customer 

can only submit it. Consistent with the 

amendment to electronic All-or-None 

Orders, Phlx proposes to remove this 

restriction so that any market 

participant may enter an All-or-None 

Order. The Exchange also proposes to 

add an OPG TIF as an available TIF for 

the trading floor. Today, the TIF is 

available for floor participants. Any 

floor participant may enter the TIF of 

OPG on the trading floor. The 

Exchange’s proposal to add the OPG TIF 

will provide greater clarity to the 

Exchange’s rules. 

Implementation 

The Exchange will implement this 

rule change on or before December 20, 

2025. Phlx would commence its 

implementation with a limited symbol 

migration and continue to migrate 

symbols over several weeks. The 

Exchange will issue an Options Trader 

Alert to Members to provide notification 

of the symbols that will migrate and the 

relevant dates. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,124 in general, and furthers 

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

Act,125 in particular, in that it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest. As it relates to the 

elimination of fees for TradeInfo, the 

Exchange believes that its proposal is 

consistent with Section 6(b) of the 

Act,126 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,127 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees, and other charges 

among members and issuers and other 

persons using any facility, and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

Generally, the Exchange’s proposal is 

intended to add or align certain System 

functionality with functionality 

currently offered on ISE, GEMX, MRX, 

BX or NOM in order to provide a more 

consistent technology offering across 

affiliated Nasdaq options exchanges. A 

more harmonized technology offering, 

in turn, will simplify technology 

implementation, changes, and 

maintenance by market participants of 

the Exchange that are also participants 

on Nasdaq affiliated options exchanges. 

The Exchange’s proposal also seeks to 

provide greater harmonization between 

the rules of the Exchange and its 

affiliates, which would result in greater 

uniformity, and less burdensome and 

more efficient regulatory compliance by 

market participants. As such, the 

proposal would foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities and 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system. The Exchange believes that 

more consistent rules will increase the 

understanding of the Exchange’s 

operations for market participants that 

are also participants on the Nasdaq 

affiliated options exchanges, thereby 

contributing to the protection of 

investors and the public interest. The 

proposal also seeks to memorialize 

existing functionality and add more 

granularity in the Exchange’s rules to 

describe how existing functionality 

operates today. The Exchange believes 

that such changes would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system because 

the proposed changes would promote 

transparency in Exchange rules and 

reducing potential confusion, 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. 

Options 2, Section 6 

The Exchange believes that permitting 

Market Makers to enter all eligible order 

types, except Reserve Orders, in both 

appointed and non-appointed options 

classes is consistent with the Act. 

Today, ISE, GEMX and MRX Options 2, 


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128See Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq GEMX, 

LLC (‘‘GEMX’’) and Nasdaq MRX, LLC (‘‘MRX) 

Options 2, Section 6 and NYSE Arca, Inc. Rule 

6.37B–O and NYSE American LLC Rule 925.2NY. 129See Securities Exchange Act Release No. 

87691 (December 9, 2019), 85 FR 68197 (December 

13, 2019) (SR–Phlx–2019–52) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

To Amend Order Types and Remove and Relocate 

Certain Rule Text Currently Located Within Rule 

1080). 

130Pursuant to Phlx Options 2, Section 6, the 

total number of contracts executed during a quarter 

by a Market Maker and Lead Market Maker in 

options series to which it is not appointed may not 

exceed twenty-five percent (25%) of the total 

number of contracts executed by the Market Maker 

and Lead Market Maker in options series. 

131See Securities Exchange Act Release No. 

85262 (March 7, 2019), 84 FR 9192 (March 13, 

2019) (SR–Phlx–2019–03) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

To Amend Option Floor Procedure Advice A–9 and 

Phlx Rules 1000 and 1066 and To Adopt a New 

Phlx Rule 1078). Prior to this rule change, All-orNone Orders were available to Public 

Customers and Professionals. 

Section 6 only restricts Market Makers 

from entering Reserve Orders. The 

Exchange proposes to permit Market 

Makers to enter Market Orders and Stop 

Orders similar to all other market 

participants on Phlx. Today, all market 

participants, including Market Makers, 

may transact Market Orders and Stop 

Orders on other options markets.128 The 

Exchange does not believe there is any 

reason to restrict Market Makers from 

entering Market Orders or Stop Orders. 

In 2019, Phlx noted in its rule change 129

that it believes that continuing the 

practice of prohibiting Market Makers 

from entering Market Orders is 

consistent with the Act because Market 

Orders are designed to remove liquidity 

from the Order Book. Further, Stop 

Orders are non-displayed order types 

until they are triggered which does not 

benefit the role of a Market Makers in 

displaying liquidity on the Order Book. 

At this time, the Exchange believes that 

because there are restrictions on the 

number of contracts that a Market Maker 

may enter in a quarter,130 Market 

Makers should be permitted to utilize 

Market Orders and Stop Orders to 

remove liquidity from its order book 

without impacting their ability to 

provide liquidity. 

Today, Phlx restricts all market 

participants from entering All-or-None 

Orders except Public Customers. Similar 

to other options markets, the Exchange 

proposes to permit all market 

participants to enter All-or-None 

Orders. The Exchange is proposing to 

amend the All-or-None Order type in 

Options 3, Section 7 to reflect this 

proposed change. In 2019, the Exchange 

amended its All-or-None Order to no 

longer offer the order type to 

Professionals.131 At the time, the 

Exchange noted that permitting Public 

Customers to enter All-or-None Orders 

with specific size limitations that rest 

on the Order Book would continue to 

allow Public Customers the opportunity 

to obtain fills for their orders when the 

market moves even if the All-Or-None 

Order was not immediately executable 

upon entry. The Exchange notes since 

the 2019 rule change, the All-or-None 

Order was amended so that it would no 

longer rest on the order book, rather the 

order type would be executed in its 

entirety, or it will cancel if it cannot 

execute. The Exchange notes that with 

the change to an immediate-or-cancel 

order there is no longer a need to permit 

the All-or-None Orders to be limited to 

Public Customers. At this time, the 

Exchange also proposes to reflect in 

Phlx Options 2, Section 6 the ability of 

Market Makers to also trade All-or-None 

Orders. The Exchange notes that 

Directed Orders are orders directed to a 

Market Maker by an Order Flow 

Provider. An order becomes a Directed 

Order when it interacts with a Market 

Maker quote that is at the NBBO at the 

time of receipt of the Directed Order. 

The Exchange believes it is misleading 

to include a Directed Order in this list 

because a Directed Order may be 

executed by a Market Maker. 

Today, Market Makers execute certain 

orders directed to them pursuant to Phlx 

Options 2, Section 10, provided they 

were quoting at the NBBO at the time 

the order arrived. Upon execution, these 

orders are treated as Directed Orders 

pursuant to Phlx rules. A two-sided 

order with a Public Customer on both 

sides may by its own terms only be 

entered by a Public Customer. That 

restriction remains in the rules. The 

Exchange notes that there is no reason 

to restrict Market Makers in entering 

order types, except for the restriction 

related to Reserve Orders, in options 

classes in which they are appointed and 

non-appointed. Unlike other order 

types, the Reserve Order is a limit order 

that contains both a displayed portion 

and a non-displayed portion. Both the 

displayed and non-displayed portions of 

a Reserve Order are available for 

potential execution against incoming 

marketable orders. When the displayed 

portion of a Reserve Order is 

decremented, either in full or in part, it 

shall be refreshed from the nondisplayed portion of the resting Reserve 

Order. The Exchange believes that 

because a Reserve Order contains a nondisplayed portion, Market Makers 

should not be permitted to enter this 

order type. Market Makers are required 

to make markets that, absent changed 

market conditions, will be honored for 

the number of contracts entered into the 

Exchange’s System in all series of 

options classes to which the market 

maker is appointed. The Exchange 

believes that markets should be 

transparent. 

Market Makers continue to be 

obligated to add liquidity on the 

Exchange. Options 2, Section 6(b) 

restricts the number of contracts that a 

Market Maker may enter in an options 

class to which the Market Maker is not 

appointed. Options 2, Section 5 requires 

Market Makers to abide by certain 

quoting requirements, in the options 

classes in which they are appointed, in 

order to maintain the status of a Market 

Maker. The Exchange believes that 

permitting a Market Maker to enter 

additional eligible order types, except 

Reserve Orders, in their appointed 

options class will permit Market Makers 

additional latitude to conduct business 

on the Exchange and effectively 

compete with other market makers on 

other options exchanges. Quotes and 

orders entered by a Market Maker may 

not interact against quotes and orders 

entered on the opposite side of the 

market by the same Market Maker. 

Options 3, Section 4 

Phlx’s proposal to amend Options 3, 

Section 4(b)(6) to permit member 

organizations to configure their ports to 

instruct the Exchange to immediately 

cancel a quote that would otherwise 

cause a locked or crossed market 

violation in lieu of re-pricing the quote 

is consistent with the Act. This proposal 

would continue to protect investors and 

the public interest because the 

functionality would prevent a quote 

from locking and crossing an away 

market while also providing member 

organization with more flexibility in 

handling their quotes. 

Options 3, Section 6 

The Exchange’s proposal to 

discontinue Quote Exhaust is consistent 

with the Act because, today, Phlx offers 

various risk protections in its System 

limit executions at far away prices. Phlx 

offers an Acceptable Trade Range 

protection at Options 3, Section 

15(b)(1), an Anti-Internalization 

protection at Options 3, Section 15(c)(1), 

and an Automated Quotation 

Adjustments protection at Options 3, 

Section 15(b)(2). Phlx is also proposing 

additional risk protections with this 

proposal. Other Nasdaq affiliated 

exchanges do not offer Quote Exhaust. 

Once discontinued, the Exchange’s 

quoting functionalities will abide by 

Phlx’s Options 3, Section 4 rules 

governing the entry and display of 

orders and the allocation methodology 

in Phlx Options 3, Section 10. 


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132Pursuant to Phlx Options 2, Section 6, the 

total number of contracts executed during a quarter 

by a Market Maker and Lead Market Maker in 

options series to which it is not appointed may not 

exceed twenty-five percent (25%) of the total 

number of contracts executed by the Market Maker 

and Lead Market Maker in options series. 

The Exchange’s proposal to adopt a 

new rule in Phlx Options 3, Section 6 

that is identical to ISE, GEMX and MRX 

Options 3, Section 6 is consistent with 

the Act and will protect investors and 

the general public by stating in its rules 

the manner in which Phlx would 

comply with Rule 602 of Regulation 

NMS. Additionally, providing Phlx with 

the ability to act in the case of unusual 

market conditions to maintain fair and 

orderly markets is consistent with the 

Act and would allow Phlx to manage 

trading in the same manner as ISE, 

GEMX and MRX in the event of unusual 

market conditions. 

Options 3, Section 7 

The Exchange believes that the 

proposed changes to the rules governing 

Exchange order types are consistent 

with the Act. As discussed above, the 

proposed changes consist of several 

functional enhancements to align the 

Exchange’s order types to existing ISE, 

GEMX and MRX order types, and rule 

adjustments that add more specificity 

and clarity to existing order types. 

Market Orders 

The Exchange believes that the 

proposed changes to the definition of 

Market Orders in proposed Options 3, 

Section 7(a) are consistent with the Act. 

The proposed intra-day cancel timer 

feature mirrors existing ISE, GEMX and 

MRX functionality at Options 3, Section 

7(a)(5), and would provide member 

organizations with additional flexibility 

and control to bring the Market Order 

back to the member organization so they 

can get an execution on another venue 

by canceling unexecuted Market Orders 

after a certain period of time. The 

Exchange believes it is appropriate to 

offer this feature intra-day because the 

Exchange already has a separate 

opening delay timer that provides 

protection to the market during the 

Opening Process as discussed above. 

In addition to the amendments to the 

definition of Market Orders, the 

Exchange proposes to permit Lead 

Market Makers, Market Makers, and OffFloor Broker Dealers to enter Market 

Orders similar to all other market 

participants on Phlx. The Exchange’s 

proposal to no longer restrict Lead 

Market Makers, Market Makers, and OffFloor Broker Dealers from transacting 

Market Orders on Phlx is consistent 

with the Act because it would permit all 

market participants on the Exchange to 

enter Market Orders. Today, ISE, GEMX 

and MRX do not prohibit Lead Market 

Makers, Market Makers, and Off-Floor 

Broker Dealers from entering Market 

Orders and those markets have not 

observed any adverse consequences. 

Also, current Phlx Options 2, Section 6 

restricts the number of contracts that a 

Market Maker (or Lead Market Maker) 

may enter in a quarter,132 thereby 

preventing Market Makers from entering 

an unlimited quantity of orders. The 

Exchange does not believe there is any 

reason to restrict Lead Market Makers, 

Market Makers, or Off-Floor Broker 

Dealers from entering Market Orders. 

Limit Orders 

The Exchange’s proposal to relocate 

‘‘Limit Orders’’ from current Options 3, 

Section 7(b)(2) to proposed Options 3, 

Section 7(b) without change. The 

Exchange also proposes to break out 

Limit Order further to define a 

Marketable Limit Order at proposed 

Options 3, Section 7(b)(1) as a Limit 

Order to buy (sell) at or above (below) 

the best offer (bid) on the Exchange. 

Finally, the Exchange proposes to define 

a Fill-or-Kill Order at proposed Options 

3, Section 7(b)(2) as a Limit Order that 

is to be executed in its entirety as soon 

as it is received and, if not so executed, 

treated as cancelled. This proposed new 

rule text aligns this Phlx order type to 

ISE, GEMX and MRX Options 3, Section 

7(b)(2) and will provide Phlx member 

organizations the same ability to send 

this type of IOC order as ISE, GEMX and 

MRX Members. 

Intermarket Sweep Orders 

The Exchange’s proposal to relocate 

an Intermarket Sweep Order from 

current Options 3, Section 7(b)(3) to 

proposed Options 3, Section 7(b)(3) 

with some additions is consistent with 

the Act. The Exchange proposes to 

reorder some sentences to closely 

resemble ISE, GEMX and MRX Options 

3, Section 7(b)(3). The Exchange 

proposes to add an additional sentence 

to make clear that ISOs must have a TIF 

designation of IOC. Additionally, the 

Exchange proposes to define the 

‘‘regular order book’’ as the ‘‘single-leg 

order book.’’ The Exchange believes that 

its proposal will promote transparency 

in the Exchange’s rules and consistency 

across the rules of the Nasdaq affiliated 

options exchanges. Furthermore, the 

proposed changes do not amend current 

ISO functionality except for the 

proposed stipulation that ISOs must 

have a TIF designation of IOC. Today, 

Options 5, Section 1(h) provides that 

ISOs may be either an IOC or an order 

that expires on the day it is entered. The 

Exchange believes it is appropriate to no 

longer allow non-IOC ISOs, as an ISO is 

generally used when trying to sweep a 

price level across multiple exchanges in 

an effort to post the balance of an order 

without locking an away market. The 

Exchange therefore believes that ISOs 

have a limited purpose and should be 

cancelled if they do not execute or do 

not entirely execute. This is also 

consistent with how ISE, GEMX and 

MRX currently handle ISOs in that they 

only allow ISOs to be entered as IOC. 

All-or-None Orders 

The Exchange’s proposal to relocate 

and amend the All-or-None Orders from 

current Options 3, Section 7(b)(5) to 

proposed Options 3, Section 7(c) is 

consistent with the Act. Today, Phlx 

restricts All-or-None Orders to be 

entered only by Public Customers. At 

this time, the Exchange proposes to 

permit any member or member 

organization to submit an All-or-None 

Order similar to ISE, GEMX, and MRX 

Options 3, Section 7(c). The Exchange 

believes that allowing all member 

organizations to utilize an All-or-None 

Order removes impediments to and 

perfects the mechanism of a free and 

open market and a national market 

system. Similar to ISE, GEMX and MRX, 

the Exchange proposes to modify All-orNone Orders so that they would execute 

against multiple, aggregated orders if the 

executions would occur simultaneously. 

The proposed description of the 

handling of All-or-None Orders is 

consistent with the Exchange’s 

allocation methodology in Options 3, 

Section 10 by making clear that because 

of the size contingency of the All-orNone Order (i.e., executed in its entirety 

or not at all), those orders must be 

satisfied simultaneously to avoid any 

priority conflict on the order book, 

which considers current displayed 

NBBO prices to avoid locked and 

crossed markets as well as tradethroughs. Finally, the proposed changes 

to add that AON Orders may not be 

submitted during the Opening Process 

will better articulate current System 

behavior, and aligns to the level of 

detail currently in ISE, MRX, and GEMX 

Options 3, Section 7(c). 

Stop and Stop Limit Orders 

The Exchange believes that the 

proposed changes to the definition of 

Stop Orders and Stop Limit Orders in 

Options 3, Sections 7(d) and 7(e), 

respectively, are consistent with the 

Act. Today, Phlx’s Stop Order may be a 

Limit or Market Order. Also, the Stop 

Order may not be elected by a trade that 

is reported late or out of sequence or by 

a Complex Order trading with another 


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Complex Order. At this time, the 

Exchange proposes to amend its Stop 

Order to mirror the order type that is in 

use on ISE, GEMX and MRX at Options 

3, Section 7(d) and (e). Phlx will permit 

all member organizations to utilize a 

Stop Order and Stop Limit Order and 

not restrict Lead Market Makers, Maker 

Makers, and Off-Floor Broker-Dealers 

from using the order type which 

removes impediments to and perfects 

the mechanism of a free and open 

market and a national market system. 

Also, the Exchange will not separately 

specify a Stop Market Limit Order, 

rather it will describe an elected Stop 

Order as a Market Order. Therefore, the 

Exchange will describe a Stop Order 

and Stop Limit Order. Aligning Phlx’s 

current functionality for a Stop Order 

and Stop Market Order to that of ISE, 

GEMX and MRX will create consistent 

rules and will increase the 

understanding of the Exchange’s 

operations for market participants that 

are also participants on the Nasdaq 

affiliated options exchanges, thereby 

contributing to the protection of 

investors and the public interest. 

Cancel and Replace Orders 

The Exchange’s proposal to relocate 

the Cancel and Replace Order 

description from Options 3, Section 

7(b)(7) to proposed Options 3, Section 

7(f) and mirror the functionality on ISE, 

GEMX and MRX at Options 3, Section 

7(f). Aligning Phlx’s current 

functionality for a Cancel and Replace 

Order to that of ISE, GEMX and MRX 

will create consistent rules and will 

increase the understanding of the 

Exchange’s operations for market 

participants that are also participants on 

the Nasdaq affiliated options exchanges, 

thereby contributing to the protection of 

investors and the public interest. 

Reserve Orders 

The Exchange’s proposal to adopt a 

Reserve Order at Options 3, Section 7(g) 

that is identical to the order type in ISE, 

GEMX and MRX Options 3, Section 7(g) 

is consistent with the Act as it will align 

Phlx’s current functionality for a 

Reserve Order to that of ISE, GEMX and 

MRX will create consistent rules and 

will increase the understanding of the 

Exchange’s operations for market 

participants that are also participants on 

the Nasdaq affiliated options exchanges, 

thereby contributing to the protection of 

investors and the public interest. Both 

the displayed and non-displayed 

portions of a Reserve Order would be 

available for potential execution against 

incoming marketable orders. A nonmarketable Reserve Order would rest on 

the order book. The displayed portion of 

a Reserve Order would be ranked at the 

specified limit price and the time of 

order entry. This new order type will be 

available to all member organizations, 

except Market Makers as noted herein. 

The proposed rule change will promote 

competition as Reserve Orders will 

provide member organizations with 

additional flexibility to manage and 

display their orders and additional 

control over their executions on the 

Exchange. This may encourage market 

participants to bring additional liquidity 

to the market, which benefits all 

investors. 

Attributable Orders 

The Exchange’s proposal to adopt 

Attributable Orders at Options 3, 

Section 7(h) that is identical to the order 

type in ISE, GEMX and MRX Options 3, 

Section 7(h) is consistent with the Act. 

An Attributable Order would be a 

market or limit order which displays the 

user firm ID for purposes of electronic 

trading on the Exchange. Use of 

Attributable Orders is voluntary. 

Attributable Orders may not be available 

for all Exchange Systems. This new 

order type will be available to all 

member organizations and the proposed 

rule change will promote competition, 

as Attributable Orders will provide 

member organizations with additional 

flexibility to manage their orders on the 

Exchange. This new order type may 

encourage market participants to bring 

additional liquidity to the market, 

which benefits all investors. 

Directed Orders 

The Exchange proposes to relocate the 

reference to Directed Orders currently in 

Options 3, Section 7(b)(11) to Options 3, 

Section 7(l) without change aligns the 

Phlx order type to ISE, GEMX and MRX 

Options 3, Section 7(l). 

Add Liquidity Orders 

The Exchange’s proposal to adopt 

ALOs at Options 3, Section 7(n) that are 

identical to ISE, GEMX and MRX 

Options 3, Section 7(n) is consistent 

with the Act. ALOs are limit orders that 

will only be executed as a ‘‘maker’’ on 

the Exchange. An Add Liquidity Order 

is a limit order that is to be executed in 

whole or in part on the Exchange (i) 

only after being displayed on the 

Exchange’s limit order book; and (ii) 

without routing any portion of the order 

to another market center. The ALO 

order type would provide market 

participants greater control over the 

circumstances in which their orders are 

executed. The purpose of an ALO is to 

provide liquidity. For investors and 

market participants that elect only to 

provide liquidity in certain 

circumstances, such as to receive a 

maker fee (or rebate) upon execution of 

an order, the Exchange believes that 

ALOs will accommodate this strategy. 

This new order type will be available to 

all member organizations. This new 

order type may encourage market 

participants to bring additional liquidity 

to the market, which benefits all 

investors. 

PIXL Order 

The Exchange’s proposal to relocate 

the description of a PIXL Order from 

Options 3, Section 7(b)(9) to Options 3, 

Section 7(y) without change aligns the 

Phlx order type to ISE, GEMX and MRX 

Options 3, Section 7(y). 

Day Order 

The Exchange’s proposal to relocate 

Day Order from current Options 3, 

Section 7(c)(1) to Supplementary 

Material .02(a) to Options 3, Section 7 

with minor amendments is consistent 

with the Act. The Exchange is 

rewording the rule text of Day Order to 

mirror the text in ISE, GEMX and MRX 

Supplementary Material .02(a) to 

Options 3, Section 7. 

Good-Till-Cancelled 

The Exchange’s proposal to relocate 

Good Till Cancelled from Options 3, 

Section 7(c)(4) to Supplementary 

Material .02(b) to Options 3, Section 7 

and amend the description is consistent 

with the Act. The Exchange’s proposal 

to provide that a Good-Till-Canceled 

Order is an order to buy or sell entered 

with a TIF of ‘‘GTC’’ and remains in 

force until the order is filled, canceled 

or the option contract expires; provided, 

however, that GTC orders will be 

canceled in the event of a corporate 

action that results in an adjustment to 

the terms of an option contract would 

address a corporate event, noting that 

GTC orders are canceled in the event of 

a corporate action that results in an 

adjustment to the terms of an option 

contract. This rule text clarifies the 

current System behavior. The proposed 

GTC description is identical to the rule 

text in ISE, GEMX and MRX 

Supplementary Material .02(b) to 

Options 3, Section 7. There is no System 

change as a result of the change to the 

description of the GTC order. 

Good-Till-Date 

The Exchange’s proposal to adopt a 

new TIF designation, Good-Till-Date 

Supplementary Material .02(c) to 

Options 3, Section 7 which is identical 

to ISE, GEMX and MRX’s Good-TillDate TIF at Supplementary Material 

.02(c) to Options 3, Section 7 is 

consistent with the Act. A Good-TillVerDate Sep<11>2014 00:20 Dec 28, 2024 Jkt 265001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4703 E:\FR\FM\30DEN2.SGM 30DEN2

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133See Supplementary Material .03(a) of Options 

3, Section 7. 

134The Potential Opening Price indicates a price 

where the System may open once all other Opening 

Process criteria is met. 

Date TIF is an order to buy or sell 

entered with a TIF of ‘‘GTD,’’ which, if 

not executed, would be cancelled at the 

sooner of the end of the expiration date 

assigned to the order, or the expiration 

of the series; provided, however, that 

GTD orders would be canceled in the 

event of a corporate action that results 

in an adjustment to the terms of an 

option contract. GTD orders may be 

entered through FIX. The Exchange 

believes this additional TIF will provide 

member organizations with additional 

opportunities when trading on Phlx. 

Immediate-or-Cancel 

The Exchange’s proposal to relocate 

Immediate-or-Cancel from Options 3, 

Section 7(c)(2) to Supplementary 

Material .02(d) to Options 3, Section 7 

and amend the description is consistent 

with the Act. These modifications are 

non-substantive and simply bring more 

clarity to the text. These changes align 

with rule text in ISE, GEMX and MRX, 

as applicable. 

Opening Only 

The Exchange’s proposal to relocate 

Opening Only from Options 3, Section 

7(c)(3) to proposed Supplementary 

Material .02(e) of Options 3, Section 7 

is consistent with the Act. Opening 

Only Orders would be subject to the 

Size Limitation and Market Wide Risk 

Protections thereby protecting investors 

and the general public. Of note, the 

Market Wide Risk Protection is a new 

protection being adopted by this 

proposal. 

Order Entry Protocols 

The Exchange’s proposal to amend 

the rule text currently in Supplementary 

Material .03(a) of Options 3, Section 7 

is consistent with the Act. The addition 

of post trade allocation messages to the 

list of features that will be included in 

FIX will enhance that feature at no cost. 

Today, ISE, GEMX and MRX provides 

for post trade allocation messages 

through FIX.133

Routing 

The Exchange’s proposal to relocate 

the rule text at Options 3, Section 7(d) 

to Supplementary Material .04 of 

Options 3, Section 7 without change is 

a non-substantive amendment. 

Options 3, Section 8 

The Exchange’s proposal to amend 

Options 3, Section 8, Options Opening 

Process, at Options 3, Section 8(b) to 

note the eligible interest that will be 

included in the Opening Process, is 

consistent with the Act. The Exchange 

proposes to note that ‘‘Eligible interest 

during the Opening Process includes 

Valid Width Quotes, Opening Sweeps, 

and orders, including Opening Only 

Orders, but excluding orders with a 

Time-In-Force of ‘‘Immediate or Cancel’’ 

and Add Liquidity Orders. Quotes, other 

than Valid Width Quotes, will not be 

included in the Opening Process. The 

displayed and non-displayed portions of 

the Reserve Orders are considered for 

execution and in determining the 

Opening Price throughout the Opening 

Process. Non-SQT Market Makers may 

submit orders.’’ The Exchange notes that 

today, Opening Only Orders are eligible 

for the Opening Process but not 

Immediate or Cancel Orders. With the 

addition of the Add Liquidity Orders 

and the Reserve Orders, the Exchange is 

proposing to note how those order types 

are accepted by the System for the 

Opening Process. The proposed 

eligibility of these orders mirror ISE, 

GEMX and MRX Options 3, Section 

8(b). Also, similar to ISE, GEMX and 

MRX Options 3, Section 8(g), the 

Exchange proposes to account for the 

addition of Reserve Orders with respect 

to the Potential Opening Price 134 in 

Phlx Options 3, Section 8(h). The 

Exchange notes that to calculate the 

Potential Opening Price, the System will 

take into consideration all Valid Width 

Quotes and orders (including Opening 

Sweeps and displayed and nondisplayed portions of Reserve Orders) 

for the option series and identify the 

price at which the maximum number of 

contracts can trade (‘‘maximum quantity 

criterion’’). The Exchange believes that 

the addition of this rule text will make 

clear the manner in which the System 

will handle a Reserve Order during the 

Opening Process. 

The Exchange’s proposal to amend 

Options 3, Section 8(h)(A), which 

currently describes how the Potential 

Opening Price would be calculated 

when there is more than one Potential 

Opening Price is consistent with the 

Act. Today, Section 8(h)(A) provides 

that when two or more Potential 

Opening Prices would satisfy the 

maximum quantity criterion and leave 

no contracts unexecuted, the System 

takes the highest and lowest of those 

prices and takes the mid-point; if such 

mid-point is not expressed as a 

permitted minimum price variation, it 

will be rounded to the minimum price 

variation that is closest to the closing 

price for the affected series from the 

immediately prior trading session. If 

there is no closing price from the 

immediately prior trading session, the 

System will round up to the minimum 

price variation to determine the 

Opening Price. The Exchange now 

proposes to no longer round in the 

direction of the previous trading day’s 

closing price and simply round up to 

the minimum price variation if the midpoint of the high/low is not expressed 

as a permitted minimum price variation. 

The proposed changes are intended to 

simplify and bring greater transparency 

to the Opening Process, as market 

participants can now have a better sense 

of how the Potential Opening Price will 

be calculated without having to account 

for the closing price of each options 

series. 

Amending Options 3, Section 8(j)(7), 

which currently describes the 

determination of Opening Quote Range 

(‘‘OQR’’) boundaries, in certain 

scenarios is consistent with the Act. 

Specifically, the Exchange proposes to 

amend the last sentence of Options 3, 

Section 8(j)(7) which currently states, 

‘‘The System will route routable Public 

Customer and Professional interest 

pursuant to Options 3, Section 

10(a)(1)(A).’’ The Exchange proposes to 

remove the current limitation that only 

allows routable Public Customer and 

Professional interest to route during the 

Opening Process thereby permitting all 

market participants to route and 

removes the impediments to and 

perfects the mechanism of a free and 

open market and a national market 

system. All routable market participant 

interest will be allowed to route to align 

the Exchange’s opening functionality 

with ISE, GEMX and MRX which does 

not limit orders that may route in the 

Opening Process within Options 3, 

Section 8. The Exchange will also 

update the cross-cite to Options 3, 

Section 10(a)(1)(A), currently pointing 

to the Public Customer priority overlay, 

to the more general priority rule in 

Options 3, Section 10(a). 

Similar to other changes noted herein, 

the Exchange proposes to amend 

Options 3, Section 8(k)(C)(6) to note 

how Reserve Orders will be handled in 

the Opening Process for purposes of 

execution. This rule text will add 

transparency to Phlx’s rule text similar 

to ISE, GEMX and MRX Options 3, 

Section 8(j)(6). Additionally, the 

Exchange proposes an amendment to 

the last sentence of Options 3, Section 

8(k)(C)(6) which currently states, ‘‘The 

System will only route non-contingency 

Public Customer and Professional 

orders.’’ In line with proposed 

amendments to permit the System to 

route all market participant interest, 

thereby removing the limitation that 


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135As proposed in Phlx Options 3, Section 7(d) 

a Stop Order becomes a Market Order when the 

stop price is elected. A Stop Order to buy is elected 

when the option is bid or trades on the Exchange 

at, or above, the specified stop price. A Stop Order 

to sell is elected when the option is offered or trades 

on the Exchange at, or below, the specified stop 

price. 

136See Phlx Options 2, Section 10. 

137See ISE, GEMX and MRX Options 3, Section 

10(a)(1)(D). 

only allows routable Public Customer 

and Professional interest to route, and in 

line with the addition of rule text 

related to the handling of Reserve 

Orders. 

The Exchange proposes to amend 

Options 3, Section 8(k)(D) to mirror rule 

text in Options 3, Section 8(j)(6)(i) 

which states, ‘‘The System will cancel 

any order or quote that is priced through 

the Opening Price. All other interest 

will be eligible for trading after 

opening.’’ Today, the System will cancel 

any order or quote priced through the 

Opening Price on Phlx. Also, today, all 

other interest will be eligible for trading 

after the Opening Process and will 

remain on the order book. The Exchange 

believes that this rule text will bring 

greater transparency to Phlx’s Opening 

Process. 

Finally, the Exchange proposes to 

amend rule text in the Opening Process 

Cancel Timer in Options 3, Section 8(l). 

With the adoption of the Good-TilCancel Order and Good-Till-Date Order, 

the Exchange proposes to rename the 

order types in the last sentence of 

Options 3, Section 8(l) for consistency. 

Options 3, Section 9 

The Exchange’s proposal to amend 

Options 3, Section 9, Trading Halts, at 

(d)(3) to amend the manner in which a 

Stop Order will be treated during a 

trading halt is consistent with the Act. 

The Exchange proposes to mirror the 

treatment of Stop Orders in ISE, GEMX 

and MRX Options 3, Section 9(d)(3). 

Today, after the opening, the Exchange 

will elect Stop Orders, as defined in 

Options 8, Section 32(c)(2), and, 

because they become Market Orders, 

shall cancel them back and notify 

member organizations of the reason for 

such cancellation. The Exchange 

proposes to note that Stop Orders 

become elected as provided for in 

proposed Options 3, Section 7(d).135

The Exchange currently cites to Options 

8, Section 32 erroneously, as those rules 

refer to Stop Orders on the trading floor. 

The Exchange proposes to instead cite 

proposed new Options 3, Section 7(d) 

which describes electronic Stop Orders. 

The Exchange also proposes to note that 

the System cancels orders. Also, the 

Exchange proposes to change the word 

rejection to cancellation because the 

order would be cancelled not rejected. 

These proposed changes are intended to 

bring greater clarity to the Exchange’s 

rules. 

Options 3, Section 10 

The Exchange’s proposal to amend 

Options 3, Section 10, Electronic 

Execution Priority and Processing in the 

System, is consistent with the Act. Phlx 

proposes to amend its rounding 

methodologies to round up to the 

nearest integer throughout the Rule. The 

Exchange is opting to round up and not 

down, uniformly, and disclose that 

rounding methodology directly within 

Options 3, Section 10, so that all 

member organizations are aware of the 

rounding methodology that would be 

utilized by the System. In addition, if 

the result of an allocation is not a whole 

number, it will now be rounded up to 

the nearest whole number instead of 

down. Finally, with respect to rounding, 

because it is rounding up, the 

provisions which describe allocations 

for remainders of less than one contract 

cannot occur and therefore this rule text 

is being removed, as such remainders 

would not be mathematically possible. 

The Exchange believes that rounding up 

uniformly is consistent with the Act 

because it provides for the equitable 

allocation of contracts among the 

Exchange’s market participants. The 

Exchange proposes to provide market 

participants with transparency as to the 

number of contracts that they are 

entitled to receive as the result of 

rounding. Further, the Exchange 

believes that this methodology produces 

an equitable outcome during allocation 

that is consistent with the protection of 

investors and the public interest 

because all market participants are 

aware of the methodology that will be 

utilized to calculate outcomes for 

allocation purposes. The Exchange 

proposes to amend Options 3, Section 

10(a)(1)(B) to change a reference to 

‘‘DROT’’ to ‘‘Directed Market Maker’’ for 

consistency. 

The Exchange proposes to amend 

Options 3, Section 10(a)(1)(C) to provide 

that ‘‘After all Public Customer orders 

have been fully executed, upon receipt 

of a Directed Order pursuant to Options 

2, Section 10, provided the Directed 

Market Maker’s quote is at the better of 

the internal PBBO or the NBBO, the 

Directed Market Maker will be afforded 

a participation entitlement. This 

participation entitlement will be 

considered after the Opening Process.’’ 

Today, a Directed Market Maker’s quote 

or market maker order must be at the 

better of the internal PBBO or NBBO. 

The Exchange believes that similar to 

ISE, GEMX and MRX Options 3, Section 

10(c)(1)(C), that market maker orders 

should not be considered when offering 

Directed Market Maker Priority. The 

Exchange proposes to only offer the 

Directed Market Maker allocation if a 

Directed Market Maker’s quote is at the 

better of the internal PBBO or the NBBO 

and not an order. Consistent with this 

change, the Exchange proposes to 

remove ‘‘or order(s)’’ after quote 

throughout Options 3, Section 

10(a)(1)(C). Only offering a Directed 

Market Maker an enhanced allocation 

on quotes is consistent with the 

obligations of a Directed Market Maker, 

to be quoting at the better of the internal 

PBBO or the NBBO at the time of receipt 

of the Directed Order.136

The Exchange’s proposal to amend 

the Entitlement for Orders of 5 contracts 

or fewer to align with ISE, GEMX and 

MRX Options 3, Section 10(a)(1)(D) is 

consistent with the Act. The Exchange 

proposes to amend the last sentence to 

provide, ‘‘On a quarterly basis, the 

Exchange will evaluate what percentage 

of the volume executed on the Exchange 

is comprised of orders for 5 contracts or 

fewer allocated to Lead Market Makers, 

and will reduce the size of the orders 

included in this provision if such 

percentage is over 40%.’’ Today, the 

percentage is 25%. Phlx notes that 

currently Lead Market Makers are not 

approaching the 25% threshold noted in 

Options 3, Section 10(a)(1)(D)(ii) related 

to the quarterly review of 5 contracts or 

fewer by the Exchange, which 

percentage is based on total volume 

executed. With this proposal, Phlx will 

monitor the frequency in which Lead 

Market Makers receive orders for 5 

contracts or fewer. Specifically, the 

Exchange will review the proposed 

provision quarterly and will maintain 

the orders for 5 contracts or fewer at a 

level that will not allow these small size 

orders executed by Lead Market Makers 

to account for more than 40% of the 

volume executed on the Exchange. The 

Exchange does not believe the proposal 

raises any new or novel issues as other 

options exchanges also offer the same 

allocation for orders for 5 contracts or 

fewer.137 The Exchange believes that 

providing this benefit offers Lead 

Market Makers an incentive for vigorous 

quoting since a Lead Market Maker must 

be quoting at the NBBO in order to 

receive the allocation. Incentivizing 

Lead Market Makers to provide liquidity 

on Phlx, in turn, provides greater 

opportunity for executions, tighter 

spreads, and better pricing for all 

member organizations. While the 

Commission has, in the past, been 

concerned about locking up larger 


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138BX also utilizes 40%. See Options 3, Sections 

10(a)(1)(C)(1)(c) and 10(a)(2)(iii). 

portions of order flow from intra-market 

price competition, the Exchange 

believes that the enhancement would 

remain adequately balanced by the 

increased 40% threshold that limits the 

volume of orders of five contracts or 

fewer that are executed by Lead Market 

Makers to account for no more than 

40% of the volume executed on the 

Exchange. The proposed increased 

limitation of 40% continues to strike a 

reasonable balance between encouraging 

vigorous price competition by Lead 

Market Makers and rewarding those 

Lead Market Makers for their unique 

duties. Lead Market Maker are also 

subject to the heightened quoting 

requirements specified in Options 2, 

Section 5(c)(2)(B). Finally, changing the 

percentage from 25% to 40% will align 

Phlx with ISE, GEMX and MRX and 

permit market makers to have the same 

compliance across the Nasdaq 

exchanges.138

Similar to ISE, GEMX and MRX 

Options 3, Section 10(c)(1)(E), the 

Exchange proposes to account for 

Reserve Orders in proposed Options 3, 

Section 7(g)(3). The Exchange proposes 

to cite to proposed Section 7(g)(3) which 

provides that the displayed portion of a 

Reserve Order will trade in accordance 

with Options 3, Section 10(a)(1)(A) for 

Public Customer Orders and this 

subparagraph (F) for non-Public 

Customer Orders. The Exchange also 

proposes to add a citation to 10(a) in 

this paragraph for clarity. 

Options 3, Section 15 

Order Price Protection 

The Exchange’s proposal to amend its 

Order Price Protection or ‘‘OPP’’ (also 

known as the fat finger check) in 

Options 3, Section 15(a)(1) to align 

certain features with the OPP 

functionality currently offered by its 

affiliates, NOM and BX, is consistent 

with the Act. The Exchange believes 

that the proposed changes to OPP to 

introduce an alternative threshold that 

uses a configurable dollar amount, as 

discussed above, will allow Phlx to 

establish appropriate boundaries for 

rejecting potentially erroneous orders 

while continuing to allow member 

organizations to access liquidity. As 

discussed above, OPP is intended to 

prevent orders entered at clearly 

unintended prices from executing in the 

System to the detriment of market 

participants. OPP was not intended to 

reject legitimate orders which are 

otherwise capable of executing at a fair 

price. The Exchange’s proposal will 

establish a fixed dollar amount as an 

alternative threshold in addition to the 

current percentage-based threshold, 

similar to NOM and BX Options 3, 

Section 15(a)(1). The Exchange believes 

its proposal will continue to protect 

investors and the public interest against 

erroneous executions while also 

allowing orders, including lower-priced 

orders, to execute where appropriate. 

The Exchange believes that its 

proposal is consistent with the Act 

because the fixed amount provides for a 

larger range of executions that would 

otherwise be rejected by the application 

of a percentage which would not 

capture the potential incremental 

executions. As illustrated above, orders 

could be rejected that were intentional 

and not erroneous. Similar to NOM and 

BX, the Exchange believes that the 

proposed approach will accomplish the 

goal of limiting erroneous executions 

while permitting intentional executions 

at reasonable prices. 

The Exchange also believes that its 

proposal to add rule text relating to 

Exchange discretion to temporarily 

deactivate OPP on an intra-day basis is 

consistent with the Act. As noted above, 

NOM and BX have identical language in 

Options 3, Section 15(a)(1)(A), and 

similar to NOM and BX, the Exchange 

believes that having this discretion will 

be useful if the Exchange determined 

that unusual market conditions 

warranted deactivation in the interest of 

a fair and orderly market. Like NOM 

and BX, the Exchange believes that it 

will be useful to have the flexibility to 

temporarily disable OPP intra-day in 

response to an unusual market event 

(for example, if dissemination of data 

was delayed and resulted in unreliable 

underlying values needed for the 

Reference BBO) to maintain a fair and 

orderly market. This will promote just 

and equitable principles of trade and 

ultimately protect investors. 

Lastly, the Exchange’s proposal to 

amend Options 3, Section 15(a)(1) to 

remove the current exclusion of ISOs 

and Complex Orders from the OPP rule 

is consistent with the Act. The proposed 

changes to remove the exclusion of ISOs 

so that OPP would apply to them going 

forward is consistent with the Act as 

this will promote the goal of limiting 

erroneous executions on the Exchange 

and in general, extend more protections 

to ISOs. As discussed above, the 

Exchange believes this is appropriate 

given that the proposed alternative 

threshold will permit more lower-priced 

ISOs to execute at reasonable prices. 

Finally, the Exchange is removing 

Complex Orders as the simple risk 

protections do not apply to Complex 

Orders, rather the Complex Order risk 

protections in Options 3, Section 16 

would apply. 

Market Wide Risk Protection 

The Exchange believes that the 

proposed rule change to adopt MWRP 

would assist with the maintenance of a 

fair and orderly market by establishing 

new activity based risk protections for 

orders. The proposed MWRP is similar 

to risk management functionality 

provided in ISE, GEMX and MRX 

Options 3, Section 15(a)(1)(C). Similar 

to ISE, GEMX and MRX, the Exchange 

believes that the proposed rule change 

may reduce member organization risk 

by allowing them to effectively manage 

their exposure to excessive risk. In 

particular, the proposed rule change 

would implement two new risk 

protections based on the rate of order 

entry and order execution, respectively. 

The Exchange believes that both of these 

new protections, which together 

encompass the proposed MWRP, would 

enable member organizations to better 

manage their risk when trading options 

on the Exchange by limiting the member 

organization’s risk exposure when 

systems or other issues result in orders 

being entered or executed at a rate that 

exceeds predefined thresholds. In 

today’s market, the Exchange believes 

that robust risk management is 

becoming increasingly more important 

for all member organizations. The 

proposed rule change would provide an 

additional layer of risk protection for 

market participants that trade on the 

Exchange. 

In particular, the MWRP is designed 

to reduce risk associated with system 

errors or market events that may cause 

member organizations to send a large 

number of orders, or receive multiple, 

automatic executions, before they can 

adjust their exposure in the market. 

Without adequate risk management 

tools, such as those proposed in this 

filing, member organizations could 

reduce the amount of order flow and 

liquidity that they provide. Such actions 

may undermine the quality of the 

markets available to customers and 

other market participants. Accordingly, 

the proposed functionality is designed 

to encourage member organizations to 

submit additional order flow and 

liquidity to the Exchange, thereby 

removing impediments to and perfect 

the mechanisms of a free and open 

market and a national market system 

and, in general, protecting investors and 

the public interest. 

Anti-Internalization 

The Exchange believes that the 

proposed rule change to enhance AIQ is 

consistent with the protection of 


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139See ISE Options 3, Section 15(a)(3)(A). See 

also NOM and BX Options 3, Section 15(c)(1), 

which provide similar flexibility. 

investors and the public interest as it is 

designed to provide Market Makers with 

additional flexibility with respect to 

how to implement self-trade protections 

provided by AIQ. Currently, all Market 

Makers are provided functionality that 

prevents quotes and orders from one 

market participant identifier from 

trading with quotes and orders from the 

same market participant identifier. This 

allows Market Makers to better manage 

their order flow and prevent undesirable 

executions where the Market Maker, 

using the same market participant 

identifier, would be on both sides of the 

trade. While this functionality is helpful 

to member organizations, some member 

organizations may prefer not to trade 

with quotes and orders entered by 

different market participant identifiers 

within the same Exchange account or 

member organization firm. The 

Exchange is therefore proposing to 

provide member organizations with 

flexibility with respect to how AIQ is 

implemented. As such, member 

organizations can continue to use 

current functionality, or member 

organizations that prefer to prevent selftrades across different market 

participant identifiers within the same 

Exchange account or at the member 

organizations firm level will now be 

provided with the means to do so under 

this proposal. Similar flexibility is 

offered on ISE, GEMX and MRX.139

Similar to ISE, GEMX and MRX, the 

Exchange believes that flexibility to 

apply AIQ at the Exchange account or 

member organization firm level would 

be useful for the Exchange’s member 

organizations as well. The Exchange 

believes that the proposed rule change 

is designed to promote just and 

equitable principles of trade and will 

remove impediments to and perfect the 

mechanisms of a free and open market 

as it will further enhance self-trade 

protections provided to Market Makers 

similar to those protections provided on 

other markets. 

Quotation Adjustments 

The Exchange believes that the 

proposed rule change is consistent with 

the Act because it will enhance the risk 

protection tools available to Market 

Makers by introducing new Delta and 

Vega Thresholds that will be offered in 

conjunction with the current Percentage 

and Volume Thresholds, thereby 

strengthening a Market Maker’s ability 

to manage their risk on the Exchange. 

The proposed thresholds are 

functionally identical to the Delta and 

Vega Thresholds provided in ISE, 

GEMX and MRX Options 3, Section 

15(a)(3)(B). Similar to ISE, GEMX and 

MRX, the Exchange believes that the 

proposed rule change may reduce 

Market Maker risk by allowing them to 

effectively manage their exposure to 

excessive risk. Accordingly, the 

Exchange believes that the proposal 

removes impediments to, and perfects 

the mechanism of, a free and open 

market and a national market system, 

and protects investors and the public 

interest. 

The proposed changes to amend when 

Rapid Fire and Multi-Trigger will be 

triggered and the modification to the 

Specified Time Periods, as discussed 

above, will bring greater harmonization 

between the Exchange’s rules and ISE’s, 

GEMX’s and MRX’s rules. Amending 

the current Rapid Fire functionality to 

no longer remove IOC Orders submitted 

through SQF, identical to ISE, GEMX, 

MRX and BX, is consistent with the Act 

as Market Makers quote to provide 

liquidity on the Exchange and the risk 

protection is intended to provide a 

protection to those participants when 

acting as liquidity providers. Market 

Makers utilizing IOC Orders may also 

provide liquidity but to a lesser extent. 

The Exchange believes that limiting the 

risk protection to quotes, similar to 

other Nasdaq affiliated markets, 

continues to protect investors while not 

also purging IOC orders which may 

interact against other interest on the 

Exchange. With the proposed changes, 

Phlx’s Rapid Fire and Multi-Trigger will 

be triggered when their respective 

thresholds are exceeded (instead of 

when they are met or exceeded, as is 

currently the case) and the Specified 

Time Periods will be amended from 15 

to 30 seconds, all of which will be 

substantially similar to ISE’s, GEMX’s 

and MRX’s current approach. The 

Exchange believes that having more 

consistent rules will result in greater 

uniformity as well as less burdensome 

and more efficient regulatory 

compliance. In addition, offering more 

consistent functionality across Phlx, 

ISE, GEMX and MRX will contribute to 

less complexity and reduce potential 

confusion for market participants on 

Phlx that are also participants on ISE, 

GEMX and MRX. As such, the Exchange 

believes that the proposed changes 

would foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities and 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system. 

Active Quote Protection 

The Exchange believes that the 

proposed Active Quote Protection risk 

protection is consistent with the Act 

because it will enhance the risk 

protection tools available to Market 

Makers and Groups by introducing a 

new method of establishing and 

monitoring for risk parameters that will 

be offered as an alternative to existing 

Rapid Fire risk parameters, thereby 

supporting a Market Maker’s ability to 

manage their risk on the Exchange, and 

also providing them with flexibility to 

use additional tools to manage risk. As 

noted above, while the passive (Rapid 

Fire) and active (Active QP) risk counter 

functionality will be mutually exclusive 

on each badge, Market Makers will still 

be able to use both to cover their activity 

on the Exchange by getting multiple 

badges and setting each risk counter by 

badge. The Exchange believes that 

offering more risk management tools to 

Market Makers would mitigate their 

exposure to excessive risk. The 

Exchange further believes that having 

the new Active Quote Protection 

functionality leverage the existing 

Multi-Trigger functionality will 

similarly support a Market Maker’s 

ability to manage their risk on the 

Exchange by including Active Quote 

Protection purge events to the MultiTrigger counter. As noted above, the risk 

to Market Makers is not limited to a 

single series in an option or even 

multiple series in an option as Market 

Makers that quote in multiple series of 

multiple options have significant 

exposure, requiring them to offset or 

hedge their overall positions. Market 

Makers are required to continuously 

quote in assigned options, and quoting 

across many series in an option or 

multiple options creates the possibility 

of executions that can create large, 

unintended principal positions that 

could expose Market Makers to 

unnecessary risk. Today, Multi-Trigger 

is designed to assist Market Makers or 

a Group in managing their market risk 

by tracking the number of Purge Events 

relative to the market-wide parameter 

set by the Market Maker or the Group. 

The Exchange therefore believes that 

tracking the number of Active Quote 

Protection purge events for a Market 

Maker against its Multi-Trigger 

Threshold would be similarly useful for 

managing market risk so that they can 

provide deep and liquid markets to the 

benefit of all investors. Ultimately, the 

Exchange believes that providing 

Market Makers with additional tools in 

the manner described above to manage 

their risk parameters serves to perfect 

the mechanism of a free and open 


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140The time of receipt for an order or quote is the 

time such message is processed by the Exchange’s 

order book. 141See proposed subparagraph (D)(ii) of Phlx 

Options 3, Section 15(c)(2). 

142See Phlx Options 2, Section 5. 

143See Phlx Options 2, Section 4. 

144As noted above, the Exchange will provide 

prior notice of the decommission to all member 

organizations through an Options Trader Alert. 

market and a national market system, 

and, in general to protect investors and 

the public interest because Market 

Makers will be better able to manage 

risks with these tools. 

The Exchange further represents that 

its proposal will continue to operate 

consistently with the firm quote 

obligations of a broker-dealer pursuant 

to Rule 602 of Regulation NMS. 

Specifically, any marketable interest 

that is executable against a Market 

Maker’s quotes that are received 140 by 

the Exchange prior to the time this 

functionality is triggered will be 

automatically executed at the price up 

to the Market Maker’s size, regardless of 

whether such execution results in 

executions in excess of the Market 

Maker’s pre-set Contract Limit.141 As 

discussed above, this is also in line with 

how current Rapid Fire operates today. 

The Exchange believes that the 

proposed changes in proposed subparagraph (D)(ii) to specify that this 

Rule will apply to marketable orders 

and quotes (currently silent on 

marketable orders), and to specify the 

time of receipt of such marketable 

interest that is executable against the 

size of the Market Maker’s quote, will 

promote clarity in how the System 

currently operates for Rapid Fire and 

will operate for Active Quote Protection. 

As noted above, the proposed Active 

Quote Protection functionality is similar 

to existing active risk counter 

functionality on ISE, GEMX and MRX 

Options 3, Section 15(c)(2)(B). 

Post-Only Quoting Protection 

The Exchange’s proposal to amend 

Options 3, Section 15, Risk Protections, 

to codify new paragraph (c)(3) to permit 

Phlx Market Makers to prevent their 

quotes from removing liquidity from the 

Exchange’s order book promotes 

equitable principles of trade and 

protects investors and the public 

interest by enhancing the risk 

protections available to Phlx Market 

Makers. The proposal also promotes the 

policy goals of the Commission which 

has encouraged execution venues, 

exchanges, and non-exchanges alike, to 

enhance risk protection tools and other 

mechanisms to decrease risk and 

increase stability. While Market Makers 

may manage their risk by utilizing the 

Post-Only Quote Configuration to avoid 

removing liquidity from the Exchange’s 

order book if their quote would 

otherwise lock or cross any resting order 

or quote on the Phlx order book upon 

entry, there are also downstream 

benefits to market participants. 

Additionally, the benefits of enhanced 

risk protections flow downstream to 

counterparties both within and away 

from the Exchange, thereby increasing 

systemic protections as well. 

The proposed risk protection allows 

Market Makers the ability to avoid 

removing liquidity from the Exchange’s 

order book if their quote would 

otherwise lock or cross any resting order 

or quote on Phlx’s order book upon 

entry, thereby protecting investors and 

the general public as Phlx Market 

Makers transact a large number of orders 

on the Exchange and bring liquidity to 

the marketplace. Market Makers would 

utilize the proposed risk protection to 

avoid unexpectedly taking liquidity off 

of the order book. As a result of taking 

liquidity, Market Makers would incur a 

taker fee that may impact the Market 

Maker’s ability to provide liquidity and 

meet quoting obligations. Phlx Market 

Makers are required to add liquidity on 

the Exchange and, in turn, are rewarded 

with lower pricing and enhanced 

allocations. Specifically, the risk 

protection would permit Market Makers 

to add liquidity only and avoid 

removing interest on the order book 

thereby maximizing the benefit of their 

quoting to bring liquidity to Phlx by 

allowing Market Makers to provide as 

much liquidity as possible, thereby 

removing impediments to and 

perfecting the mechanism of a free and 

open market and a national market 

system and protecting investors and the 

public interest. There is no impact to 

other market participants by introducing 

this Post-Only Quote Configuration as 

other non-Market Makers may utilize 

the proposed Add Liquidity Only order 

type that will continue to benefit 

downstream counterparties, both within 

and away from the Exchange, who may 

interact with interest on Phlx’s order 

book and thereby interact with order 

flow that is priced better than the 

NBBO. Also, other market participants 

may interact with the liquidity provided 

by Market Makers. 

Unlike other market participants, 

Market Makers have certain obligations 

on the market. Market Makers are 

required to provide continuous twosided quotes on a daily basis 142 and are 

subject to various obligations associated 

with providing liquidity on the 

market.143 Market Makers are the sole 

liquidity providers on the Exchange 

and, therefore, are offered certain quote 

risk protections noted within Phlx 

Options 3, Section 15 to allow them to 

manage their risk more effectively. The 

proposed Post-Only Quote 

Configuration is another risk protection 

afforded to Market Makers to assist them 

in managing their risk while continuing 

to comply with their obligations. The 

Exchange notes that enhancing the 

ability of Market Makers to add liquidity 

and avoid taking liquidity from the 

order book promotes just and equitable 

principles of trade on the Exchange and 

protects investors and the public 

interest, thereby enhancing market 

structure by allowing Market Makers to 

add liquidity only. Greater liquidity 

benefits all market participants by 

providing more trading opportunities 

and attracting greater participation by 

Market Makers. Also, an increase in the 

activity of Market Makers in turn 

facilitates tighter spreads. 

Options 3, Section 23 

The Exchange’s proposal to amend 

Phlx Options 3, Section 23, Data Feeds 

and Trade Information, is consistent 

with the Act. Amending the name of 

various market data feeds in Phlx 

Options 3, Section 23(a) is a nonsubstantive amendment that will 

harmonize the names of the feeds to ISE, 

GEMX and MRX Options 3 Section 

23(a). 

The Exchange believes that it is 

consistent with the Act to no longer 

offer TradeInfo when the Exchange 

migrates over the enhanced Nasdaq 

functionality, as there is a lack of 

demand from member organizations.144

As noted above, member organizations 

use FIX and CTI to obtain order 

information currently available in 

TradeInfo, and to cancel orders through 

FIX. The Exchange further believes that 

the proposed decommission of 

TradeInfo will remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system by allowing the Exchange to 

reallocate System capacity and 

resources currently used to maintain 

this functionality to the development 

and maintenance of other business 

initiatives and risk management 

products. 

Further, the Exchange’s proposal to 

eliminate TradeInfo pricing from 

Options 7, Section 9B in its entirety is 

reasonable, equitable, and not unfairly 

discriminatory because TradeInfo would 

no longer be available to any member 

organization. It is reasonable to remove 

all references to TradeInfo pricing from 

the Exchange’s Pricing Schedule as the 

Exchange is removing this functionality 


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from its Rulebook. Additionally, it is 

equitable and not unfairly 

discriminatory to remove the references 

to TradeInfo pricing from the Pricing 

Schedule because no member 

organization would be able to utilize 

this functionality once it is removed 

from the System. 

Options 3, Section 28 

The Exchange believes that 

introducing the optional risk protections 

as described above will protect investors 

and the public interest, and maintain 

fair and orderly markets, by providing 

market participants with another tool to 

manage their order risk. In addition, 

providing member organizations with 

more tools for managing risk will 

facilitate transactions in securities 

because member organizations will have 

more confidence that risk protections 

are in place. As a result, the new 

functionality has the potential to 

promote just and equitable principles of 

trade. ISE, GEMX and MRX offer 

identical optional risk protections at 

Options 3, Section 28. 

Options 5, Section 4 

The Exchange’s proposal to amend 

Options 5, Section 4, Order Routing, to 

align Phlx’s routing to ISE Options 4, 

Section 5 is consistent with the Act. The 

Exchange’s proposal to align its rules 

with ISE will provide Phlx member 

organizations the same flexibility for 

routing orders that is afforded to ISE 

Members today. 

With respect to FIND and SRCH, the 

Exchange is adding more detail to its 

routing rule to provide market 

participants with greater transparency. 

The Exchange believes the added 

scenarios will provide more context to 

routing in general and for the specific 

routing strategies for the benefit of 

investors and the public interest. The 

Exchange continues to offer various 

choices to its market participants with 

respect to routing. A member 

organization may elect either (1) to not 

route their orders and mark those orders 

‘‘DNR’’; or (2) to route their orders. If a 

member organization elects to route 

their orders, then a member 

organization may select to mark their 

orders as ‘‘FIND’’ or ‘‘SRCH’’ Orders, as 

proposed herein. Once booked, a FIND 

Order that is not marketable with the 

ABBO upon receipt will be treated as 

DNR for the remainder of the trading 

day, even in the event that there is a 

new Opening Price after a trading halt. 

The FIND Order would route once 

and then post to the Order Book. A 

SRCH Order may route during and after 

an Opening Process. A SRCH Order on 

the Order Book may be routed to an 

away market if it is locked or crossed by 

an away market. With respect to the 

addition of FIND Orders, the Exchange 

proposes various scenarios related to 

FIND Orders to account for various 

routing scenarios, as is the case today 

with respect to SEEK Orders. Various 

scenarios are also proposed to explain 

System functionality in locked and 

crossed markets and organized in such 

a manner to make the rule text efficient 

and organized. The Exchange also 

accounts for scenarios both during and 

after the Opening Process. The 

Exchange notes that it is consistent with 

the Act to account for the behavior of 

FIND Orders with respect to locked and 

crossed markets. The Exchange will not 

trade-through an away market’s price. 

This behavior is consistent with the 

protection of investors and the general 

public because it affords member 

organizations the ability to obtain the 

best price offered among the various 

options markets. 

The Exchange’s proposal to amend 

Options 5, Section 4(a) to include StopLimit Orders in addition to Stop Orders 

in the list of order types that are not 

included in the PBBO because they have 

not been triggered is consistent with the 

Act as the Exchange’s proposal adopts 

the Stop Order at ISE Options 3, Section 

7(d) and Stop Limit Order at ISE 

Options 3, Section 7(e). The Exchange 

proposes to reflect both order types. As 

is the case today, the Exchange proposes 

to note, similar to ISE Options 4, 

Section 5(a) that when checking the 

order book, the System will seek to 

execute at the price at which it would 

send the order to an away market. The 

Exchange believes that this sentence 

will bring greater clarify to the 

Exchange’s rule. Similarly, the 

Exchange proposes to add text to clarify 

its current System behavior for TIFs. 

Today, routing options may be 

combined with all available order types 

and times-in-force, with the exception 

of order types and times-in-force whose 

terms are inconsistent with the terms of 

a particular routing option. The 

Exchange also believes this sentence 

will clarify the current operation of the 

routing System. Finally, as is the case 

today, the Exchange proposes to note 

the time the routing System is available, 

the ability to list an order as nonroutable and cross-reference the locked 

and crossed rules. The Exchange would 

state, ‘‘The order routing process shall 

be available to members from 9:30 a.m. 

Eastern Time until market close and 

shall route orders as described below. 

Member organizations can designate 

orders as either available for routing or 

not available for routing. All routing of 

orders shall comply with Options 5, 

Options Order Protection and Locked 

and Crossed Market Rules.’’ This 

proposed rule text merely provides 

greater transparency to the Exchange’s 

current System operation and 

harmonizes Phlx’s rule text to ISE 

Options 4, Section 5(a). 

Options 6, Section 1 

The Exchange’s proposal to amend 

Options 6, Section 1, Authorization to 

Give Up, to align Phlx’s process to that 

of ISE, GEMX and MRX Options 6, 

Section 1 by permitting electronic only 

members to systematically indicate a 

Give-Up at the time of trade, instead of 

in the post allocation process, is 

consistent with the Act as it will remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and align 

the process for electronic members to 

that of floor members while continuing 

to honor the Clearing Member’s 

instruction. The Exchange’s alignment 

of its process will continue to provide 

proper safeguards and protections for 

Clearing Members as well as controls for 

Clearing Members to restrict access to 

their OCC clearing numbers, allowing 

access only to those Authorized 

Members upon their request. The 

proposal will harmonize Phlx’s Options 

6, Section 1 rule to ISE, GEMX and MRX 

Options 6, Section 1. 

Options 8, Section 32 

The Exchange’s proposal to amend an 

All-Or None Order at current Options 8, 

Section 32(b)(3) to remove the 

restriction that only a Public Customer 

can submit it is consistent with the Act. 

The Exchange proposes to remove this 

restriction so that any market 

participant may enter this order type. 

The Exchange believes that making 

these order types available to all market 

participants removes impediments to 

and perfects the mechanism of a free 

and open market and a national market 

system. The Exchange’s proposal to add 

an OPG TIF as an available TIF for the 

trading floor will provide greater clarity 

to the Exchange’s rules as this TIF is 

available on the trading floor and was 

erroneously omitted from the list of 

order types. Today, the TIF is available 

for floor participants. Any floor 

participant may enter the TIF of OPG on 

the trading floor. The remainder of the 

proposed changes are non-substantive 

numbering amendments. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 


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necessary or appropriate in furtherance 

of the purposes of the Act. As discussed 

above, the Exchange is re-platforming its 

System in connection with the 

technology migration to enhanced 

Nasdaq functionality, which the 

Exchange believes would promote 

competition among options exchanges 

by potentially attracting additional 

order flow to the Exchange with the 

enhanced trading platform. The basis for 

the majority of the proposed rule 

changes are the rules of the Nasdaq 

affiliated options exchanges, which 

have been previously filed with the 

Commission as consistent with the Act. 

Options 2, Section 6 

The Exchange believes that this 

proposal does not impose an undue 

burden on inter-market competition 

because each options exchange 

generally determines permissible order 

types for market makers in its trading 

environment based on the exchange’s 

individual business policy, objectives, 

and trading system. 

The Exchange’s proposal reflects its 

policy and objectives, and does not 

impose an undue burden on intramarket competition because it treats all 

Market Makers uniformly with respect 

to permissible order types. Market 

Makers, unlike other market 

participants, are required to abide by 

certain quoting requirements in the 

options classes in which they are 

appointed pursuant to Options 2, 

Section 5, in order to maintain the 

status of a Market Maker. The Exchange 

also notes that Options 2, Section 6(b) 

restricts the number of orders that a 

Market Maker may enter in an options 

class to which the Market Maker is not 

appointed. The Exchange believes that 

permitting a Market Maker to enter 

additional eligible order types, except 

Customer Cross Orders and Reserve 

Orders, in their appointed options class 

will permit Market Makers additional 

latitude to conduct business on Phlx 

and effectively compete with other 

market makers on other options 

exchanges. 

Options 3, Section 4 

Phlx’s proposal to amend Options 3, 

Section 4(b)(6) to permit member 

organizations to configure their ports to 

instruct the Exchange to immediately 

cancel a quote that would otherwise 

cause a locked or crossed market 

violation in lieu of re-pricing the quote 

does not impose an undue burden on 

inter-market competition because other 

options exchanges may offer similar 

functionality. 

The proposal does not impose an 

undue burden on intra-market 

competition because all Market Makers 

may utilize the functionality when 

entering quotes into the System. 

Options 3, Section 6 

The Exchange’s proposal to 

discontinue Quote Exhaust does not 

impose an inter-market burden on 

competition as other exchanges may 

determine to adopt or discontinue a 

similar functionality. 

The Exchange’s proposal to 

discontinue Quote Exhaust does not 

impose an intra-market burden on 

competition as no member organization 

would be subject to the Quote Exhaust 

functionality. Further, with respect to 

the interaction between the Quote 

Exhaust and risk protections, the 

proposal does not impose an intramarket burden on competition because 

instead of first being posted at the Quote 

Exhaust Reference Price, aggressively 

priced orders would be able to post to 

the order book immediately at the ATR 

Threshold, which would allow for 

quicker order execution while still 

providing order exposure and pauses 

between price bands, which continues 

to allow for risk mitigation. Once 

discontinued, the Exchange’s quoting 

functionalities will abide by Phlx 

Options 3, Section 4 which governs the 

entry and display of orders and the 

allocation methodology in Options 3, 

Section 10. Finally, Phlx offers other 

risk protections to member 

organizations including an Acceptable 

Trade Range protection at Options 3, 

Section 15(b)(1), an Anti-Internalization 

protection at Options 3, Section 15(c)(1), 

and an Automated Quotation 

Adjustments protection at Options 3, 

Section 15(b)(2). 

The Exchange’s proposal to adopt a 

new rule in Options 3, Section 6 that is 

identical to ISE, GEMX and MRX 

Options 3, Section 6 does not impose an 

inter-market burden on competition as 

other exchanges may adopt a similar 

rule. 

The Exchange’s proposal to adopt a 

new rule in Options 3, Section 6 that is 

identical to ISE, GEMX and MRX 

Options 3, Section 6 does not impose an 

intra-market burden on competition as 

this rule will apply uniformly to all 

quotations entered on the Exchange. 

Options 3, Section 7 

The Exchange’s proposal to amend 

Phlx’s existing order types so that they 

are identical to order types available on 

ISE, GEMX and MRX Options 3, Section 

7 and to adopt new order types such as 

a Fill-or-Kill Order, Reserve Order, and 

Attributable Order does not impose an 

inter-market burden on competition as 

other exchanges may determine to adopt 

similar order types. 

The Exchange’s proposal to amend 

Phlx’s existing order types so that they 

are identical to order types available on 

ISE, GEMX and MRX Options 3, Section 

7 and to adopt new order types such as 

a Fill-or-Kill Order, Reserve Order, and 

Attributable Order does not impose an 

intra-market burden because all market 

participants would be able to utilize all 

of the order types, except Market 

Makers with respect to Reserve Orders. 

The Exchange’s proposal would permit 

Market Makers (and Lead Market 

Makers) to enter Market Orders and 

Stop Orders. All non-Public Customers 

would be permitted to enter AON 

Orders and Off-Floor Broker Dealers 

would not be restricted from entering 

AON Orders, Market Orders, Stop 

Market Orders, and public customer-topublic customer cross orders. 

Restricting Market Makers (and Lead 

Market Makers) from entering Reserve 

Orders does not impose an intra-market 

burden on competition because Market 

Maker (and Lead Market Maker) 

liquidity should be displayed, and 

Reserve Orders have non-displayed 

portions of liquidity. 

Finally, the Exchange would no 

longer classify a market participant as 

an Off-Floor Broker Dealer because it is 

eliminating that category. 

Options 3, Section 8 

The Exchange’s proposal to amend 

Options 3, Section 8, Options Opening 

Process, to make clarifying rule changes, 

add System detail concerning new order 

types, and adjust rounding does not 

impose an inter-market burden because 

other exchanges may adopt similar 

functionality. Today, ISE, GEMX and 

MRX Options 3, Section 8 contains 

similar functionality. 

The Exchange’s proposal to amend 

Options 3, Section 8, Options Opening 

Process, to make clarifying rule changes, 

add System detail concerning new order 

types, and adjust rounding does not 

impose an intra-market burden because 

all market participants would be subject 

to the Opening Process. The Exchange is 

removing limitations to routing Public 

Customer and Professional interest from 

the Opening Process. 

Options 3, Section 9 

The Exchange’s proposal to amend 

Options 3, Section 9, Trading Halts, to 

mirror the treatment of Stop Orders in 

ISE, GEMX and MRX Options 3, Section 

9(d)(3) and make other minor changes 

does not impose an inter-market burden 

because other exchanges may adopt 

similar functionality. 


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145See Phlx Options 2, Section 5. 

146See Phlx Options 2, Section 4. 

The Exchange’s proposal to amend 

Options 3, Section 9, Trading Halts, to 

mirror the treatment of Stop Orders in 

ISE, GEMX and MRX Options 3, Section 

9(d)(3) and make other minor changes 

does not impose an intra-market burden 

because all market participants would 

be subject to the Trading Halts rule. 

Options 3, Section 10 

The Exchange’s proposal to amend 

Options 3, Section 10, Electronic 

Execution Priority and Processing in the 

System, to round up does not impose an 

inter-market burden because other 

exchanges may adopt similar rounding. 

The Exchange’s proposal to amend 

Options 3, Section 10, to only offer the 

Directed Market Maker allocation if a 

Directed Market Maker’s quote is at the 

better of the internal PBBO or the NBBO 

and not an order does not impose an 

inter-market burden because ISE, GEMX 

and MRX Options 3, Section 10(c)(1)(C) 

also allocate the Directed Market Maker 

enhancement in this manner. The 

Exchange’s proposal to amend the 

Entitlement for Orders of 5 contracts or 

fewer to increase the percentage from 

25% to 40% does not impose an intermarket burden on competition because 

ISE, GEMX and MRX Options 3, Section 

10(a)(1)(D) provides for the same 

percentage. 

The Exchange’s proposal to amend 

Options 3, Section 10, Electronic 

Execution Priority and Processing in the 

System, to round up does not impose an 

intra-market burden because the 

Exchange is opting to round up and not 

down, uniformly and the proposed 

rounding methodology provides for the 

equitable allocation of contracts among 

the Exchange’s market participants. The 

Exchange’s proposal to amend Options 

3, Section 10, to only offer the Directed 

Market Maker allocation if a Directed 

Market Maker’s quote is at the better of 

the internal PBBO or the NBBO and not 

an order does not impose an intramarket burden because the Directed 

Market Maker only has corresponding 

obligations related to quoting. The 

Exchange’s proposal to amend the 

Entitlement for Orders of 5 contracts or 

fewer to increase the percentage from 

25% to 40% does not impose an intramarket burden on competition because 

the Exchange will continue to evaluate 

all Market Makers in accordance with 

the proposed new obligation which is 

the same obligation that exists on other 

options exchanges today such as ISE, 

GEMX and MRX Options 3, Section 

10(a)(1)(D). If Phlx were to continue to 

review its member organizations for 

compliance with the 25% threshold it 

would remain at a competitive 

disadvantage to other options markets 

that have a 40% threshold thereby 

making Phlx a less attractive venue for 

market making. 

Options 3, Section 15 

As it relates to inter-market 

competition, the Exchange notes that 

the basis for the majority of the 

proposed rule changes in this filing are 

aligning with the rules of BX, NOM, ISE, 

GEMX or MRX, which have been 

previously filed with the Commission, 

and therefore promotes fair competition 

among the options exchanges. As noted 

above, the proposed changes to the risk 

protections will provide more consistent 

technology offerings across the Nasdaq 

affiliated exchanges, and for this reason, 

the Exchange does not believe its 

proposal will impose an undue burden 

on intermarket competition. The 

Exchange also notes that market 

participants on other exchanges are 

welcome to become participants on the 

Exchange if they determine if this 

proposed rule change has made Phlx a 

more attractive or favorable venue. 

All of the proposed changes related to 

the risk protections (OPP, MWRP, 

Acceptable Trade Range, AntiInternalization, Quotation Adjustments, 

Post-Only Quoting Protection and 

Active Quote Protection) do not impose 

an undue burden on intra-market 

competition as they are all aimed at 

mitigating market participant risk 

associated with trading on the 

Exchange. The proposed changes are 

designed to benefit market participants 

in that they will provide a more 

consistent technology offering for 

market participants on Nasdaq affiliated 

exchanges. The Exchange also notes that 

some of the proposed risk controls (e.g., 

Delta and Vega Thresholds and Post 

Only Quoting Protection) are completely 

voluntary. The Post-Only Quoting 

Protection proposal does not impose a 

burden on inter-market competition, 

because member organizations may 

choose to become market makers on a 

number of other options exchanges, 

which may have similar but not 

identical features. The Exchange does 

not believe that the proposed Active 

Quote Protection functionality will 

impose any undue burden on intramarket competition as it is aimed at 

mitigating exposure to excessive risk 

when trading on the Exchange. While 

the Exchange will offer the proposed 

functionality to Market Makers only, the 

proposed risk protection is intended to 

provide Market Makers with an 

additional tool to manage their risk 

parameters in a manner they deem 

appropriate. As such, the Exchange 

believes that the proposed functionality 

may facilitate Market Makers’ provision 

of liquidity on the Exchange, thereby 

benefitting all market participants 

through additional execution 

opportunities at potentially improved 

prices. Offering Market Makers the 

ability to configure their quotes as PostOnly will allow all market participants 

on Phlx to add liquidity only if desired. 

Further, the proposed risk protection 

allows Market Makers the ability to 

avoid removing liquidity from the 

Exchange’s order book if their quote 

would otherwise lock or cross any 

resting order or quote on the order book 

upon entry, thereby protecting investors 

and the general public as Market Makers 

transact a large number of orders on the 

Exchange and bring liquidity to the 

marketplace. Market Makers are 

required to add liquidity on the 

Exchange and, in turn, are rewarded 

with lower pricing and enhanced 

allocations. Specifically, the risk 

protection would permit Market Makers 

to add liquidity only and avoid 

removing interest on the order book 

thereby maximizing the benefit of their 

quoting to bring liquidity to Phlx by 

allowing Market Makers to provide as 

much liquidity as possible. Unlike other 

market participants, Market Makers 

have certain obligations on the market. 

Market Makers are required to provide 

continuous two-sided quotes on a daily 

basis 145 and are subject to various 

obligations associated with providing 

liquidity on the market.146 Market 

Makers are the sole liquidity providers 

on the Exchange and, therefore, are 

offered certain quote risk protections 

noted within Options 3, Section 15 to 

allow them to manage their risk more 

effectively. 

Options 3, Section 23 

As it relates to the elimination of fees 

for TradeInfo from Options 7, the 

Exchange believes that its proposal does 

not impose an undue burden on 

competition because TradeInfo would 

no longer be available to any Members. 

The Exchange notes that members can 

continue to receive similar information 

through CTI, which is available to all 

member organizations, and FIX can be 

used to cancel orders today, which is 

also available to all members. 

Options 3, Section 28 

The Exchange believes that 

introducing the optional quantity and 

notional value risk protections does not 

impose an undue burden on intermarket competition as the identical 

functionality exists on ISE, GEMX and 

MRX at Options 3, Section 28. 


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147See ISE, GEMX and MRX Options 6, Section 

1. 

148 ISE, GEMX and MRX offer All-or-None Orders 

to all market participants. See ISE, GEMX and MRX 

Options 3, Section 7(c). 

149 15 U.S.C. 78s(b)(3)(A)(iii). 

150 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 151 17 CFR 200.30–3(a)(12). 

The Exchange believes that 

introducing the optional quantity and 

notional value risk protections does not 

impose an undue burden on intramarket competition as it will provide 

market participants with another tool to 

manage their order risk. 

Options 5, Section 4 

The Exchange’s proposal to amend its 

routing rule, similar to ISE Options 5, 

Section 4, with respect to FIND Orders 

and SRCH Orders, does not impose an 

undue burden on inter-market 

competition because the Exchange will 

provide Phlx member organizations the 

same choices with respect to routing 

that is afforded to ISE members today. 

The Exchange’s proposal to amend its 

routing rule, similar to ISE Options 5, 

Section 4, with respect to FIND Orders 

and SRCH Orders does not impose an 

undue burden on intra-market 

competition because the proposed 

routing rules apply to all market 

participants including routing during an 

Opening Process. The Exchange believes 

that adding greater detail to its rules 

does not impose an undue burden on 

intra-market competition, rather it 

provides greater transparency as to the 

potential outcomes when utilizing 

different routing strategies. As is the 

case today, market participants may 

elect not to route their orders. 

Options 6, Section 1 

The Exchange’s proposal to amend 

Options 6, Section 1, Authorization to 

Give Up, does not impose an undue 

burden on inter-market competition 

because other market today have the 

same Give-Up process.147

The Exchange’s proposal to amend 

Options 6, Section 1, Authorization to 

Give Up, does not impose an undue 

burden on intra-market competition, 

rather it will permit both floor and 

electronic members to indicate a GiveUp at the time of trade. Today, 

electronic trading members indicate a 

Give-Up in the post allocation process. 

The proposal will create a uniform 

process for Give-Up for all member 

organizations and harmonize Phlx’s 

Options 6, Section 1 rule to ISE, GEMX 

and MRX Options 6, Section 1. 

Options 8, Section 32 

The Exchange’s proposal to amend an 

All-Or None Order at current Options 8, 

Section 32(b)(3) to remove the 

restriction that it can only be submitted 

by a Public Customer does not impose 

an undue burden on inter-market 

competition because other markets 

today offer the All-or-None Order to all 

market participants.148

The Exchange’s proposal to amend an 

All-Or None Order at current Options 8, 

Section 32(b)(3) to remove the 

restriction that it can only be submitted 

by a Public Customer does not impose 

an undue burden on intra-market 

competition because all Phlx members 

will be able to utilize this order type. 

The Exchange’s proposal to add an OPG 

TIF as an available TIF for the trading 

floor does not impose an undue burden 

on intra-market competition because all 

Phlx members will be able to utilize this 

TIF. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 149 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.150

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

Phlx–2024–71 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–Phlx–2024–71. 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 (https://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 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–Phlx–2024–71 and should be 

submitted on or before January 21, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.151

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–30904 Filed 12–27–24; 8:45 am] 

BILLING CODE 8011–01–P 


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