[Federal Register Volume 79, Number 223 (Wednesday, November 19, 2014)]
[Notices]
[Pages 68937-68951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27312]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73592; File No. SR-EDGA-2014-20]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing of Amendment Nos. 1 and 2 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 
2, To Amend EDGA Rule 1.5 and Chapter XI Regarding Current System 
Functionality Including the Operation of Order Types and Order 
Instructions

November 13, 2014.

I. Introduction

    On August 1, 2014, EDGA Exchange, Inc. (``Exchange'' or ``EDGA'') 
filed with the Securities and Exchange

[[Page 68938]]

Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Rule 1.5 and Chapter XI 
of its rule book relating to the operation of order types and order 
instructions on the Exchange, trading sessions and openings and re-
openings. The proposed rule change was published for comment in the 
Federal Register on August 18, 2014.\3\ On September 25, 2014, the 
Commission extended the time period for Commission action on the 
proposal to November 14, 2014.\4\ The Commission received no comment 
letters on the proposed rule change. On November 4, 2014, the Exchange 
filed Amendment No. 1 to the proposed rule change.\5\ On November 12, 
2014, the Exchange filed Amendment No. 2 to the proposed rule 
change.\6\ The Commission is publishing this Notice and Order to 
solicit comment on Amendment Nos. 1 and 2 and to approve the proposed 
rule change, as modified by Amendment Nos. 1 and 2, on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72812 (August 11, 
2014), 79 FR 48824 (``Notice'').
    \4\ See Securities Exchange Act Release No. 73217 (September 25, 
2014), 79 FR 59336 (October 1, 2014).
    \5\ In Amendment No. 1, the Exchange: (1) Removed the proposed 
rule text related to Single Re-Price and Short Sale Single Re-Price 
pricing instruction to indicate that the Exchange will no longer 
offer such functionality; (2) added language to the Post Only 
instruction definition to provide that the highest possible rebate 
paid and the highest possible fee will be used to determine whether 
an order with a Post Only instruction will execute against orders on 
the EDGA Book; (3) added rationale to the statutory basis section 
for suspending the discretion of an order with a Hide Not Slide 
instruction to execute at the Locking Price when a contra-side order 
that equals the Locking Price is displayed by the System on the EDGA 
Book in order to avoid an apparent violation of that contra-side 
displayed order's priority; (4) added further rationale for giving 
priority to Hide Not Slide orders upon the clearance of the Locking 
Price; (5) specified that upon return to the Exchange, an order with 
the Routed and Returned Re-Pricing instruction will execute against 
marketable contra-side liquidity displayed on the EDGA Book unless 
there is no marketable contra-side liquidity displayed on the EDGA 
book upon return and such Routed and Returned Order would be 
displayed at a price that would be a Locking or Crossing Quotation, 
in which case such order will be displayed at a price that is one 
Minimum Price Variation lower (higher) than the Locking Price for 
orders to buy (sell) and will be ranked at the mid-point of the NBBO 
with discretion to execute at the Locking Price (though a 
subsequently arriving contra-side order could suspend the Routed and 
Returned Order's discretion to execute at the Locking Price); and 
(6) made a series of non-substantive, corrective changes to the 
Notice and rule text, including the priority of MidPoint Peg Orders 
and the suspension of the ability of orders with a Hide Not Slide 
instruction to execute at the Locking Price due to a contra-side 
order that equals the Locking Price. Amendment No. 1 has been placed 
in the public comment file for SR-EDGA-2014-20 at http://www.sec.gov/comments/sr-edga-2014-20/edga201420.shtml (see letter 
from Christopher Solgan, Regulatory Counsel, DirectEdge, to 
Secretary, Commission, dated November 4, 2014) and also is available 
on the Exchange's Web site.
    \6\ In Amendment No. 2, the Exchange: (1) Added rationale for 
the priority of MidPoint Peg Orders; (2) added rationale for the 
suspension of the ability of orders with a Hide Not Slide 
Instruction to execute at the Locking Price due to a contra-side 
order that equals the Locking Price. Amendment No. 2 has been placed 
in the public comment file for SR-EDGA-2014-20 at http://www.sec.gov/comments/sr-edga-2014-20/edga201420.shtml (see letter 
from Christopher Solgan, Regulatory Counsel, DirectEdge, to 
Secretary, Commission, dated November 12, 2014) and also is 
available on the Exchange's Web site.
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II. Background

    The proposed rule change, as described in more detail below and in 
the Notice, amends Rule 1.5 and Chapter XI of the EDGA rule book, 
relating to: (1) The Exchange's trading sessions and hours of 
operation; (2) the process for initial opening and re-opening after a 
trading halt by adding proposed Exchange Rule 11.7, Opening Process; 
(3) order type, order type instructions and System \7\ functionality; 
(4) the execution priority of orders; and (5) organizational and 
conforming amendments. According to the Exchange, these changes are 
designed to update its rule book to reflect current system 
functionality and to propose four new System functionalities, as 
described in more detail below.\8\
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    \7\ Exchange Rule 1.5(cc) defines ``System'' as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.''
    \8\ See also Notice, supra note 3. The four new System 
functionalities are as follows: (1) Proposed Rule 11.7(c). 
Alternatively set the price of the Opening Process for securities 
listed on either the New York Stock Exchange, Inc. (``NYSE'') or 
NYSE MKT LLC (``NYSE MKT'') at the midpoint of the then prevailing 
National Best Bid and Offer (``NBBO'') when the first two-sided 
quotation published by the listing exchange after 9:30:00 a.m. 
Eastern Time, but before 9:45:00 a.m. Eastern Time if no first trade 
is reported by the listing exchange within one second of publication 
of the first two-sided quotation by the listing exchange; (2) 
Proposed Rule 11.7(e). Alternatively set the price of a re-opening 
at the midpoint of the then prevailing NBBO when the first two-sided 
quotation is published by the listing exchange following the 
resumption of trading after a halt, suspension, or pause if no first 
trade is reported within one second of publication of the first two-
sided quotation by the listing exchange; (3) Proposed Rule 
11.6(j)(1). Require that an order with a Market Peg instruction that 
is to be displayed by the System on the EDGA Book include an offset 
equal to or greater than one Minimum Price Variation; and (4) 
Proposed Rule 11.6(n)(4). Permit an order with a Post Only 
instruction to execute against an order resting on the EDGA Book 
where it is eligible to receive price improvement as described under 
the proposed rule.
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III. Discussion and Commission Findings

    After careful review of the proposed rule change and the comments 
received, the Commission finds that the proposed rule change, as 
modified by Amendment Nos. 1 and 2, is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\9\ In particular, as described in more 
detail below, the Commission finds that the proposed rule change, as 
modified by Amendment Nos. 1 and 2, is consistent with Section 6(b)(5) 
of the Act,\10\ which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, 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. This order 
approves the proposed rule change in its entirety, although only 
certain more significant aspects of the proposed rules are discussed 
below.\11\
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    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ The Commission notes that it recently approved a proposed 
rule change, submitted by EDGX Exchange, Inc. (``EDGX'') relating to 
EDGX's: (1) Trading sessions and hours of operation; (2) initial 
opening and reopening processes; (3) order types, order instructions 
and system functionality; and (4) other miscellaneous rule changes. 
See Securities Exchange Act Release No. 73468 (October 29, 2014); 79 
FR 65450 (November 4, 2014) (File No. SR-EDGX-2014-18).
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A. Exchange Trading Sessions and Hours of Operation

    Currently, Exchange Rule 11.1(a) provides that orders may be 
entered, executed or routed away during Regular Trading Hours, the Pre-
Opening Session, and the Post-Closing Session, but does not define 
those terms. The Exchange proposes to add the term ``Session 
Indicator'' to codify the manner that a User \12\ may elect the trading 
sessions for which its orders are eligible for execution. The Exchange 
also proposes to describe the terms Regular Trading Hours, Pre-Opening 
Session and Post Closing Session as Session Indicators, and specify the 
time frames that orders with such indicators would be eligible for 
execution. Similarly, the Exchange proposes to add and describe the 
terms ``Regular Session'' and ``All Sessions'' as Session

[[Page 68939]]

Indicators to codify additional options that a User may elect to 
establish the trading sessions and time frames that an order may be 
eligible for execution.
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    \12\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
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    Proposed Exchange Rule 11.1(a)(1), describing the term Session 
Indicator, specifies that all orders are eligible for execution during 
the Regular Session, and that orders not designated for a particular 
session or session would default to the Regular Session. The proposed 
rule also specifies that orders may be entered from 6:00 a.m. until 
8:00 p.m. Eastern Time but are not eligible for execution until the 
start of the session selected by the User.
    Proposed Exchange Rule 11.1(a)(1)(A) specifies that orders 
designated as Pre-Opening Session would be eligible for execution 
between 8:00 a.m. Eastern Time and 4:00 p.m. Eastern Time. Proposed 
Exchange Rule 11.1(a)(1)(B) specifies that orders designated as Regular 
Session would be eligible for execution between the completion of the 
Opening Process or a Contingent Open,\13\ whichever occurs first, and 
4:00 p.m. Eastern Time. Proposed Exchange Rule 11.1(a)(1)(C) specifies 
that orders designated as Post-Closing Session would be eligible for 
execution between the start of the Regular Session and 8:00 p.m. 
Eastern Time. Proposed Exchange Rule 11.1(a)(1)(D) specifies that 
orders designated as All Sessions would be eligible for execution 
between 8:00 a.m. Eastern Time and 8:00 p.m. Eastern Time.
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    \13\ See proposed Exchange Rule 11.7(d).
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    The Commission believes that the proposed rules relating to the 
Exchange trading sessions and hours of trading are consistent with the 
Act. The proposed rule makes the operation of the Exchange more 
transparent which should benefit Members, Users, and the general 
investing public. The Commission also notes that the proposed rule is 
substantially similar to that of other exchanges.\14\
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    \14\ See Nasdaq Rules 4751(h) and 4617; see also International 
Securities Exchange (``ISE'') Rule 2102, BATS Rules 1.5(c), (r), 
(w), 11.1 and 11.9(b).
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B. Process for Initial Opening and Re-Opening

    The Exchange's current rules make various references to, but do not 
describe, an Opening Process. Accordingly, the Exchange proposes 
Exchange Rule 11.7 to codify and describe its current Opening and Re-
Opening processes, with two changes, which are described below.
    Proposed Exchange Rule 11.7(a) describes the entry and cancellation 
of orders before the Opening Process. Specifically, prior to the 
Regular Session, Users may enter orders to participate in the Opening 
Process. All orders are eligible to participate during the Opening 
Process, except: (1) Orders with a Stop Price \15\ or Stop Limit 
instruction; \16\ (2) Limit Orders with a Post Only,\17\ Fill-or-Kill 
(``FOK'') or Immediate or Cancel (``IOC'') instruction; (3) Intermarket 
Sweep Orders (``ISOs''); or (4) orders cancelled before the Opening 
Process. Orders ineligible to participate in the Opening Process, but 
designated for the Regular Session, would not be accepted by the System 
on the EDGA Book \18\ until the completion of the Opening Process or 
the initiation of a Contingent Open as set forth by proposed Exchange 
Rule 11.7.
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    \15\ See proposed Exchange Rule 11.8(a)(1) discussed below in 
Section III.C.2.a.
    \16\ See proposed Exchange Rule 11.8(b)(1) discussed below in 
Section III.C.2.b.
    \17\ See proposed Exchange Rule 11.6(n)(4) discussed below in 
Section III.C.1.m.
    \18\ The term ``EDGA Book'' is defined as ``the System's 
electronic file of orders.'' See Exchange Rule 1.5(d).
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    Proposed Exchange Rule 11.7(b) describes the execution of orders 
during the Opening Process. Specifically, during the Opening Process 
the Exchange would attempt to execute all eligible orders by matching 
buy and sell orders, in time sequence, at the midpoint of the NBBO, and 
would continue until either there were no orders to be matched or there 
was a remaining imbalance of orders. If the Opening Process resulted in 
no orders being matched, or a remaining imbalance of orders, the 
unexecuted orders would then be posted on the EDGA Book, canceled, 
executed, or routed to an away Trading Center pursuant to proposed 
Exchange Rule 11.11.
    Proposed Exchange Rule 11.7(c) describes how the opening price is 
determined during the Opening Process. Specifically, for securities 
listed on either the NYSE or NYSE MKT, the Opening Process would set 
the opening price at the midpoint based on the (1) first NBBO 
subsequent to the first reported trade on the listing exchange after 
9:30:00 a.m. Eastern Time; or (2) the prevailing NBBO when the first 
two-sided quotation published by the listing exchange after 9:30:00 
a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no first 
trade is reported by the listing exchange within one second of 
publication of the first two-sided quotation by the listing 
exchange.\19\ For any other listing market, the Opening Process would 
be priced at the midpoint of the first NBBO disseminated after 9:30:00 
a.m. Eastern Time.
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    \19\ Currently for NYSE and NYSE MKT listed securities the 
Opening Process sets the opening price based on the midpoint of the 
first NBBO subsequent to the first-reported trade on the listing 
exchange after 9:30:00 a.m. Eastern Time.
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    Proposed Exchange Rule 11.7(d) describes the Contingent Open. A 
Contingent Open would result if the Opening Process did not yield an 
opening price by 9:45:00 a.m. Eastern Time. In such an instance, the 
order would be posted to the EDGA Book, routed, cancelled, or executed 
consistent with its order type instruction.
    Proposed Exchange Rule 11.7(e) describes Re-Openings. A Re-Opening 
would occur after a trading halt, suspension or pause. The Re-Opening 
price would be the midpoint of the (1) first NBBO subsequent to the 
first reported trade on the listing exchange following the resumption 
of trading after a halt, suspension, or pause; or (ii) then prevailing 
NBBO when the first two-sided quotation published by the listing 
exchange following the resumption of trading after a halt, suspension, 
or pause if no first trade is reported by the listing exchange within 
one second of publication of the first two-sided quotation by the 
listing exchange.\20\
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    \20\ Currently, the Re-Opening price of a security is determined 
by the midpoint of the first NBBO subsequent to the first-reported 
trade on the listing exchange following the resumption of trading 
after a halt, suspension, or pause.
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    The Commission finds that the proposed rule to codify the Exchange 
Opening Process, Contingent Open and Re-Openings is consistent with the 
Act. The Commission believes that the proposed rule is reasonably 
designed to facilitate an orderly transition between the Pre-Opening 
Session and Regular Trading Hours, as well as the resumption of trading 
after a trading halt, suspension or pause. Finally, the Commission 
notes that the Exchange rule is based on ISE Rule 2106.\21\
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    \21\ Unlike ISE Rule 2106, proposed Exchange Rule 11.7 provides 
for late openings under certain conditions and permits the opening 
price for securities listed on either the NYSE or NYSE MKT to be 
priced at the midpoint of either the first NBBO subsequent to the 
first reported trade on the listing exchange after 9:30:00 a.m. 
Eastern Time; or the prevailing NBBO when the first two-sided 
quotation published by the listing exchange after 9:30:00 a.m. 
Eastern Time, but before 9:45:00 a.m. Eastern Time if no first trade 
is reported by the listing exchange within one second of publication 
of the first two-sided quotation by the listing exchange. See 
Securities Exchange Act Release No. 54287 (August 8, 2006), 71 FR 
46947 (August 15, 2006).

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[[Page 68940]]

C. Order Types, Order Type Instructions and System Functionality Under 
Chapter XI

1. Definitions--Proposed Exchange Rule 11.6
    As discussed in more detail below, proposed Exchange Rule 11.6 
would relocate and reclassify various terms currently defined in the 
Exchange rulebook, as well as add certain other defined terms. The 
Exchange proposes to classify certain existing order types as 
``instructions'' to be attached to one or more standalone order 
types.\22\
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    \22\ Under the proposal, the only standalone order types would 
be Market Orders, Limit Orders, ISOs, MidPoint Peg Orders, MidPoint 
Discretionary Orders, NBBO Offset Peg Orders, and Route Peg Orders. 
See infra Sections III.C.2.a-III.C.2.g, regarding proposed Exchange 
Rule 11.8, Order Types.
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    The Commission notes that several proposed modifications to 
existing definitions are substantively similar to the current rule 
text, with added specificity, including: Attributable, Non-
Attributable, Crossing Quotation, Locking Quotation, Minimum Price 
Variation,\23\ Pegged, Permitted Price, Reserve Quantity, certain 
routing (Destination Specified and Destination-on-Open) and time-in-
force (Immediate or Cancel and Fill-or-Kill) instructions.\24\ Although 
the Exchange did not previously define Cancel Back or Displayed, the 
Commission notes that these terms are consistent with existing rule 
text.
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    \23\ See Notice, supra note 3, at 48828, note 27 regarding one 
non-substantive edit to remove the phrase indications of interest.
    \24\ The Exchange also proposes to delete two additional time-
in-force instructions, Good-`til-Cancel and Good-`til-Day, that are 
not currently offered by the Exchange.
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    Certain other proposed modifications to existing Exchange 
definitions are consistent with the rules of other exchanges, 
including: Discretionary Range,\25\ Non-Displayed,\26\ certain routing 
instructions (Book Only and Post Only),\27\ and units of trading (Round 
Lot, Odd Lot and Mixed Lot).\28\ Similarly, a number of proposed new 
definitions/terms are consistent with the rules of exchanges, 
including: Locking Price,\29\ Minimum Execution Quantity,\30\ pegging 
instructions (Market Peg and Primary Peg),\31\ Replenishment 
Amount,\32\ time-in-force instruction of Good-`til-Time.\33\ Finally, 
several proposed new definitions/terms are consistent with the 
definitions contained in Commission rules Regulation SHO and Regulation 
NMS, including: Short Sale, Short Exempt and Trading Center. 
Accordingly, the Commission believes that the proposed rule changes 
related to these definitions/terms are consistent with the Act.
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    \25\ See Nasdaq Rule 4751(f)(1), and NYSE Arca Rule 7.31(h)(2).
    \26\ See Nasdaq Rule 4751(e)(3), and BATS Rule 11.9(c)(11); see 
also EDGA Rule 11.5(c)(8).
    \27\ See BATS Rule 11.9(c)(4) (BATS Only Order), BATS-Y Rule 
11.9(c)(4) (BATS Only Order), NSX Rule 11.11(c)(6) (NSX Only Order); 
BATS Rule 11.9(c)(6) (BATS Post Only Order) and BATS-Y Rule 
11.9(c)(6); see also NYSE Rule 13 (Add Liquidity Only Modifier) and 
NYSE Arca Rule 7.31(nn) (Adding Liquidity Only Order).
    \28\ See Nasdaq Rule 4751(g) (definition of ``Order Size'').
    \29\ See, e.g., BATS Rule 11.13(a)(1).
    \30\ See, e.g., Nasdaq Rule 4751(f)(5), and NSX Rule 
11.11(c)(2)(B).
    \31\ See, e.g., NYSE Rule 13 (defining Pegging Interest), and 
Nasdaq Rule 4751(f)(4).
    \32\ See, e.g., Nasdaq Rule 4751(f)(2) (Reserve Orders) and NYSE 
Rule 13 (Reserve Order Types).
    \33\ See Chicago Stock Exchange, Inc. (``CHX'') Rules Art. 1, 
Rule 2(d)(3) (Good `Til Date), BATS Rule 11.9(b)(4) (Good `til Day), 
BATS-Y Rule 11.9(b)(4) (Good `til Day), and Nasdaq Rule 4751(h)(4) 
(System Hours Expire Time).
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a. Attributable and Non-Attributable
    The Exchange currently defines the terms ``Attributable Order'' and 
``Non-Attributable Order'' in Exchange Rules 11.5(c)(18) and (19). The 
Exchange proposes to reclassify these terms as order type instructions 
and relocate them to proposed Exchange Rule 11.6(a). In addition, the 
Exchange proposes to amend the terms to provide that: (1) Unless the 
User elects otherwise, all orders will be automatically defaulted by 
the System to Non-Attributable; and (2) a User may elect an order to be 
Attributable on an order-by-order basis or instruct the Exchange to 
default all its orders as Attributable on a port-by-port basis, except 
if a User instructs the Exchange to default all its orders as 
Attributable on a particular port, such User would not be able to 
designate any order from that port as Non-Attributable. The Exchange 
also proposes to provide that a User's MPID will be visible via the 
Exchange's Book Feed if an Attributable instruction is attached to an 
order and not visible if an order Non-Attributable is attached to an 
order.
b. Cancel Back
    The Exchange proposes to add the defined term ``Cancel Back'' to 
codify the existing function where a User may opt to have the System 
cancel the order at the time of receipt, in lieu of a re-pricing 
instruction \34\ to comply with Regulation NMS, Regulation SHO, or the 
National Market System Plan to address extraordinary market volatility 
(the ``LULD Plan'').\35\
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    \34\ The re-pricing instructions are defined in proposed 
Exchange Rule 11.6(l) discussed infra Section III.C.1.k.
    \35\ See Appendix A to Securities Exchange Act Release No. 67091 
(May 31, 2012), 77 FR 33498 (June 6, 2012).
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c. Discretionary Range
    The Exchange currently defines a ``Discretionary Order'' in 
Exchange Rule 11.5(c)(13). The Exchange proposes to reclassify this 
function as an order type instruction and relocate the term 
``Discretionary Range'' to proposed Exchange Rule 11.6(d). In addition, 
the Exchange proposes to modify the definition of Discretionary Range 
to specify which order types \36\ may include a Discretionary Range 
instruction, and how the Discretionary Range operates. Specifically, 
the term Discretionary Range would be defined as an instruction that 
may accompany an order to buy (sell) a stated amount of a security at a 
specified, displayed price with discretion to execute up (down) to a 
specified, non-displayed price.\37\ The proposal also codifies that the 
Discretionary Range of an order to buy (sell) cannot be more than $0.99 
higher (lower) than the order's displayed price, and that a resting 
order with a Discretionary Range instruction would execute at its least 
aggressive price when matched for execution against an incoming order 
with a Discretionary Range instruction, as permitted by the terms of 
both the incoming and resting order
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    \36\ Under proposed Exchange Rules 11.8(b)(8) and 11.8(e), Limit 
Orders and Mid-Point Discretionary Orders can include a 
Discretionary Range instruction.
    \37\ The Exchange proposes to modify the existing rule text to 
state that an order with a Discretionary Range maintains the ability 
to execute at its displayed price with discretion to execute at 
prices to and including a specified, non-displayed price, and not 
exclusively at those prices. The Discretionary Range may include 
prices to and more aggressive than the midpoint of the NBBO.
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d. Display Options
    The Exchange proposes to include definitions of ``Displayed'' and 
``Non-Displayed'' in proposed Exchange Rule 11.6(e). Currently the term 
``Displayed'' is not defined within the Exchange rules. The Exchange 
would codify that Displayed is the default instruction for all display-
eligible orders on the EDGA Book.
    Currently, the term Non-Displayed Order is defined in Exchange Rule 
11.5(c)(8). The Exchange proposes to reclassify this term as an order 
type instruction, and relocate the amended term to proposed Exchange 
Rule 11.6(e). The proposed definition of Non-Displayed also differs 
from the current definition in that it deletes rule text regarding the 
priority and ranking of

[[Page 68941]]

Non-Displayed Orders because proposed Exchange Rule 11.9 sets forth the 
priority and ranking of all orders.
e. Locking Price
    Under current Exchange Rule 11.5(c)(4), a re-pricing instruction to 
comply with Regulation NMS may be triggered if an incoming order, if 
displayed at its limit price, would be a Locking Quotation.\38\ In 
order to specify the price that triggers a Regulation NMS re-pricing 
instruction the Exchange proposes to define the term, ``Locking 
Price,'' as the ``price of an order to buy (sell) that, if, upon entry 
into the System, or upon return to the System after being routed away, 
and displayed by the System on the EDGA Book, it would be a Locking 
Quotation.'' \39\
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    \38\ The term Locking Quotation is proposed to be defined in 
Exchange Rule 11.6(g), and is further discussed below.
    \39\ The term, ``Locking Price'' is similarly defined in the 
rules of other exchanges. See, e.g., BATS Rule 11.13(a)(1), which 
defines ``locking price'' as ``. . . prices equal to displayed 
orders on the other side of the market.''
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f. Locking Quotation and Crossing Quotations
    Currently, Exchange Rule 11.16 defines the terms ``Locking 
Quotation'' \40\ and ``Crossing Quotation.'' \41\ The Exchange proposes 
to relocate the amended terms, respectively, to proposed Exchange Rule 
11.6(c) and (g). The amended definitions specify that the display of 
either a Locking or Crossing Quotation would violate Rule 610(d) of 
Regulation NMS and that Regulation NMS re-pricing instructions are 
applicable outside of Regular Trading Hours.
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    \40\ Locking Quotation is defined as ``[t]he display of a bid 
for an NMS stock during regular trading hours at a price that equals 
the price of an offer for such NMS stock previously disseminated 
pursuant to an effective national market system plan, or the display 
of an offer for an NMS stock during regular trading hours at a price 
that equals the price of a bid for such NMS stock previously 
disseminated pursuant to an effective national market system plan.''
    \41\ A Crossing Quotation is defined as ``[t]he display of a bid 
(offer) for an NMS stock during Regular Trading Hours at a price 
that is higher (lower) than the price of an offer (bid) for such NMS 
stock previously disseminated pursuant to an effective national 
market system plan.''
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g. Minimum Execution Quantity
    The Exchange proposes to define the term ``Minimum Execution 
Quantity'' as an order type instruction.\42\ Although it is currently 
available, the Minimum Execution Quantity function is not currently 
defined by Exchange rules. The Minimum Execution Quantity would be an 
order type instruction, combined with a Non-Displayed instruction, 
which would only execute the order to the extent that a minimum 
quantity could be satisfied by an execution against a single order or 
multiple aggregated orders simultaneously. An order with a Minimum 
Execution Quantity instruction could partially execute if the execution 
size equaled or exceeded the quantity provided in the instruction. The 
Exchange also proposes that any shares remaining after a partial 
execution would continue to be executed at a size equal to or exceeding 
the quantity provided with the instruction, unless the User elects 
otherwise. The Minimum Execution Quantity instruction would not be 
applicable if after a partial execution the remaining shares were less 
than the quantity provided in the instruction.
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    \42\ The minimum execution quantity instruction is available on 
other exchanges. See, e.g., Nasdaq Rule 4751(f)(5), and National 
Stock Exchange, Inc. (``NSX'') Rule 11.11(c)(2)(B).
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h. Minimum Price Variation
    Exchange Rule 11.7, Price Variation, currently defines the term 
``Price Variation.'' \43\ The Exchange proposes to relocate the term 
``Minimum Price Variation'' to proposed Exchange Rule 11.6(i) and amend 
the term to remove the obsolete term, ``indications of interest'' \44\
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    \43\ The Exchange's existing definition of Price Variation in 
Exchange Rule 11.7 sets forth that bids, offers, or orders in 
securities traded on the Exchange shall not be made in an increment 
smaller than: (1) $0.01 if those bids, offers, or orders are priced 
equal to or greater than $1.00 per share; or (2) $0.0001 if those 
bids, offers, or orders are priced less than $1.00 per share; or (3) 
any other increment established by the Commission for any security 
which has been granted an exemption from the minimum price increment 
requirements of Rule 612(a) or 612(b) of Regulation NMS. See current 
Exchange Rule 11.7
    \44\ See Securities Exchange Act Release No. 64094 (March 18, 
2011), 76 FR 16468 (March 23, 2011) (SR-EDGA-2011-07).
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i. Pegged
    Currently the term ``Pegged Order'' is defined under Exchange Rule 
11.5(c)(6). The Exchange proposes to reclassify the term as an 
instruction and relocate the term to proposed Exchange Rule 11.6(j). 
The amended definition of a Pegged instruction would continue to 
indicate that: (1) A User may specify that the order's price will peg 
to a price a certain amount away from the NBB or NBO (offset); (2) if 
an order with a Pegged instruction displayed on the Exchange would lock 
the market, the price of the order will be automatically adjusted by 
the System to one Minimum Price Variation below the current NBO (for 
bids) or to one Minimum Price Variation above the current NBB (for 
offers); (3) a new time stamp is created for the order each time it is 
automatically adjusted; and (4) orders with a Pegged instruction are 
not eligible for routing pursuant to proposed Exchange Rule 11.11.
    The Exchange also proposes to codify that orders with Pegged 
instructions would not be used to calculate the NBBO, and buy/sell 
orders with a Pegged instruction would be cancelled when the NBB/NBO is 
unavailable. In addition, the Exchange would codify the terms--Primary 
Peg and Market Peg.\45\ Proposed Exchange Rule 11.6(j) would specify 
that a Pegged instruction may be a Market Peg, which would track NBB, 
for a sell order, or the NBO, for a buy order; or a Primary Peg, which 
would track the NBB, for a buy order, or the NBO, for a sell order. The 
Exchange would also sets forth that a buy (sell) order with a Market 
Peg instruction and a Displayed instruction must have an offset that is 
equal to or greater than one Minimum Price Variation below (above) the 
NBO (NBB) that the order is pegged to.\46\ The amended term would also 
specify that if a User does not select an offset, the System would 
automatically include an offset that is equal to one Minimum Price 
Variation below (above) the NBO (NBB) that the order is pegged to. For 
an order with a Non-Displayed instruction, a User could, but would not 
be required to, select an offset for an order to buy (sell) that is 
equal to or greater than one Minimum Price Variation below (above) the 
NBO (NBB) to which the order is pegged.
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    \45\ The Primary Peg and Market Peg order instructions are 
available on other exchanges. See, e.g., NYSE Rule 13 (defining 
Pegging Interest), and Nasdaq Rule 4751(f)(4).
    \46\ Previously, the System permitted a displayable Market Peg 
instruction to include a zero-offset.
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    Proposed Exchange Rule 11.6(j) also sets forth that a buy (sell) 
order with a Primary Peg instruction could, but would not be required 
to, select an offset equal to or greater than one Minimum Price 
Variation\47\ above or below the NBB or NBO that the order is pegged 
to. As proposed, an order with a Primary Peg instruction would be 
eligible to join the Exchange's BBO if the EDGA Book was locked or 
crossed by another market, but if an order with a Primary Peg 
instruction would create a Locking Quotation or Crossing Quotation, the 
price of the order would be automatically adjusted by the System to one 
Minimum Price Variation below/above the current NBO/NBB.\48\
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    \47\ As discussed supra in Section III.C.1.h, the term Minimum 
Price Variation is defined in proposed Exchange Rule 11.6(i).
    \48\ The Exchange provides examples of the operation of Limit 
Orders with a Pegged Instruction. See Notice, supra note 3, at 
48828-29.

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[[Page 68942]]

j. Permitted Price
    The Exchange currently defines the term ``Permitted Price'' in 
Exchange Rule 11.5(c)(4)(B).\49\ The Exchange proposes to relocate the 
term, without amendment, to proposed Exchange Rule 11.6(k)
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    \49\ The current definition provides that a short sale order, 
subject to the Exchange's short sale price sliding process, will 
``be re-priced to display at one Minimum Price Variation above the 
current NBB.''
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k. Re-Pricing Instructions
    The terms ``displayed price sliding''\50\ and ``short sale price 
sliding process''\51\ are currently defined in Exchange Rule 
11.5(c)(4)(A) and (B), respectively. However, the Exchange currently 
offers multiple re-pricing instructions designed to permit Users to 
comply, separately and respectively, with Rule 610(d) of Regulation NMS 
or Rule 201 of Regulation SHO. The Exchange proposes to replace the 
definitions for displayed price sliding process and the short sale 
price sliding process with proposed Exchange Rule 11.6(l), which would 
rename and codify ``displayed price sliding'' as Hide Not Slide and 
codify the two other re-pricing options for Regulation NMS (Price 
Adjust and Routed and Returned Re-Pricing) and the two re-pricing 
options for Regulation SHO (Short Sale Price Adjust and Short Sale 
Price Sliding), all of which are currently available on the System.\52\ 
The Exchange also proposes to codify the re-pricing instruction for 
orders with a Non-Displayed instruction, which also is currently 
available on the System but not reflected in the current rules.
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    \50\ The ``displayed price sliding process'' is currently 
described under Exchange Rule 11.5(c)(4)(A) as follows: ``An EDGA 
Only Order that, at the time of entry, would cross a Protected 
Quotation will be re-priced to the locking price and ranked at such 
price in the EDGA Book. An EDGA Only Order that, if at the time of 
entry, would create a violation of Rule 610(d) of Regulation NMS by 
locking or crossing a Protected Quotation will be displayed by the 
System at one minimum price variation (``MPV'') below the current 
NBO (for bids) or to one MPV above the current NBB (for offers) 
(collectively, the ``displayed price sliding process''). In the 
event the NBBO changes such that the EDGA Only Order at the original 
locking price would not lock or cross a Protected Quotation, the 
order will receive a new timestamp, and will be displayed at the 
original locking price.''
    \51\ The ``short sale price sliding process'' is currently 
described under Exchange Rule 11.5(c)(4)(B)--(C) as follows: ``An 
EDGA Only Order that, at the time of entry, could not be executed or 
displayed pursuant to Rule 201 of Regulation SHO will be re-priced 
by the System to prevent execution or display at or below the 
current NBB (such entire process called the ``short sale price 
sliding process''). Any EDGA Only order subject to such re-pricing 
by the System will be re-priced to display at one MPV above the 
current NBB (``Permitted Price''). Following the initial adjustment 
provided for in this paragraph (B), the EDGA Only Order will, to 
reflect declines in the NBB, continue to be re-priced at the lowest 
Permitted Price down to the order's original limit price, or if a 
market order, until the order is filled. The order will receive a 
new timestamp each time it is re-priced. Alternatively, following 
the initial adjustment provided for in paragraph (B), the EDGA Only 
Order may, in accordance with the User's instructions, provided that 
in all cases the display or execution of such lower prices does not 
violate Rule 201 of Regulation SHO: (i) be re-priced one additional 
time to a price that is above the current NBB but equal to the NBB 
at the time the EDGA Only Order was received and receive a new 
timestamp; or (ii) not be adjusted further. In the event the NBB 
changes such that the price of a Non-Displayed Order subject to 
short sale price sliding would lock or cross the NBB, the Non-
Displayed Order will receive a new timestamp, and will be re-priced 
by the System to a Permitted Price. EDGA Only Orders marked ``short 
exempt'' shall not be subject to the short sale price sliding 
process.''
    \52\ Other exchanges utilize re-pricing processes. See e.g., CHX 
Art. I, Rule 2(b)(1)(C), BATS Rules 11.9(c)(4), (6) and 11.9(g)(2), 
BATS-Y Exchange, Inc. (``BATS Y'') Rules 11.9(c)(4), (6) and 
11.9(g)(2), and Nasdaq's ``Re-pricing of Orders during Short Sale 
Period'' described in Nasdaq Rule 4763(e). In Amendment No. 1, the 
Exchange removed the proposed Single Re-Price and Short Sale Single 
Re-Price pricing instructions. See supra note 5.
---------------------------------------------------------------------------

i. Re-Pricing Instructions to Comply with Rule 610(d) of Regulation NMS
    Proposed Exchange Rule 11.6(l)(1)(A) would codify the Price Adjust 
instruction. Specifically, under the proposed rule, a User may select 
the Price Adjust instruction where an incoming order that would be a 
Locking Quotation or Crossing Quotation would be displayed and 
ranked\53\ at a price that is one Minimum Price Variation lower 
(higher) than the Locking Price.\54\ Subsequently, the order would be 
displayed and ranked by the System on the EDGA Book at the Locking 
Price if the NBBO changed such that the order, if displayed at the 
Locking Price, would not be a Locking Quotation or Crossing Quotation, 
including where an ISO with a time-in-force (``TIF'') instruction of 
Day is entered into the System and displayed on the EDGA Book on the 
same side of the market as the order at a price that is equal to or 
more aggressive than the Locking Price.\55\ The order would not be 
subject to further re-ranking and would be displayed by the System on 
the EDGA Book at the Locking Price until executed or cancelled by the 
User. The order would receive a new time stamp at the time an order is 
re-ranked.\56\ Pursuant to proposed Exchange Rule 11.9, all orders that 
are re-ranked and re-displayed pursuant to the Price Adjust instruction 
would retain their comparative priority based on the time of initial 
receipt by the System.\57\
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    \53\ For purposes of the description of the re-pricing 
instructions under proposed Rule 11.6(l), the terms ``ranked'' and 
``priced'' are synonymous and used interchangeably.
    \54\ Other exchanges offer similar functionality. See Nasdaq 
Rule 4751(f)(7) (Price to Comply Order), BATS Rule 11.9(g)(2) (Price 
Adjust), BATS Rule 11.9(g)(1) (Display-Price Sliding), BATS-Y 
11.9(g)(1) (Display-Price Sliding), and CHX Rule Art. I, Rule 
2(b)(1)(C)(i) (NMS Price Sliding).
    \55\ See Division of Trading and Markets: Response to Frequently 
Asked Questions Concerning Rule 611 and Rule 610 of Regulation NMS, 
Question 5.02, available at http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm (last visited October 28, 2014).
    \56\ See proposed Exchange Rule 11.9 in Section III.D, infra, 
for discussion on priority.
    \57\ The Exchange provides examples of the operation of a Price 
Adjust Instruction with the assumption that there were no orders 
resting on the EDGA Book. See Notice, supra note 3, at 48830.
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    Proposed Exchange Rule 11.6(l)(1)(B) would rename and codify the 
Hide Not Slide instruction. Specifically, under the proposed rule, if a 
User selects, or be defaulted by the System to,\58\ the Hide Not Slide 
instruction, an incoming order that would be a Locking Quotation or 
Crossing Quotation would be displayed at a price that is one Minimum 
Price Variation lower (higher) than the Locking Price and ranked/be 
executable at the Locking Price. However, if at the time of entry the 
System is displaying a contra-side order equal to the Locking Price, 
the order's ability to execute to the Locking Price would be 
suspended\59\ until the contra-side displayed order equal to the 
Locking Price is cleared. That order, however, would be executable 
against other orders at its displayed price.
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    \58\ Pursuant to proposed Exchange Rule 11.8, discussed below, 
an order that would be a Locking Quotation or Crossing Quotation at 
the time of entry will be automatically defaulted by the System to 
the Hide Not Slide instruction, unless the User affirmatively 
elects: (1) The Cancel Back instruction; or (2) the Price Adjust 
instruction.
    \59\ See infra note 62.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(l)(1)(B) would state that, where the 
NBBO changes such that the order, if displayed at the Locking Price 
would not be a Locking Quotation, the System would rank and display the 
order at the Locking Price. Thereafter, the order would not be subject 
to further re-ranking and would be displayed by the System at the 
Locking Price until it is executed or cancelled by the User. The 
Exchange proposes to state that the order would only receive a new time 
stamp when it is ranked at the Locking Price upon clearance of a 
Locking Quotation due to the receipt of an ISO with a TIF instruction 
of Day that establishes a new NBBO at the Locked Price. Pursuant to 
proposed Exchange Rule 11.9, all orders that are re-ranked and re-
displayed by the System pursuant to the Hide Not Slide instruction 
would retain its comparative

[[Page 68943]]

priority based upon the time of initial receipt by the System.\60\
---------------------------------------------------------------------------

    \60\ Orders that are re-ranked and re-displayed pursuant to the 
Hide Not Slide instruction maintain the same priority as orders that 
are re-ranked and re-displayed pursuant to the Routed and Returned 
Re-Pricing instruction at the same price. See proposed Exchange 
Rules 11.9(a)(2)(B)(ii). The Exchange provides examples of the 
operation of a Hide Not Slide Instruction with the assumption that 
there were no orders resting on the EDGA Book. See Notice, supra 
note 3, at 48830-31. See also Amendment No. 1, supra note 5, for 
corrections to Example Nos. 1 and 4.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(l)(1)(B)(i) would codify the Routed and 
Returned Re-Pricing instruction. Specifically, under the proposed rule, 
if a Limit Order was routed away but not fully executed, the returning 
remainder of the order, if it would be a Locking Quotation or Crossing 
Quotation of a quotation displayed by another Trading Center upon re-
entry to the System, would default to a Routed and Returned Re-Pricing 
instruction, unless the User selected either the Cancel Back, Price 
Adjust or Hide Not Slide instruction.\61\ The Routed and Returned Re-
Pricing instruction would cause the returning order, that would 
otherwise be a Locking Quotation or Crossing Quotation based on an away 
market, to re-price one Minimum Price Variation away from the Locking 
Price, be ranked/be executable at the Locking Price. However, if a 
contra-side order with a Post Only instruction that equals the Locking 
Price is subsequently entered, the order subject to the Routed and 
Returned Re-Pricing instruction's ability to execute at the Locking 
Price would be suspended until there is no contra-side order displayed 
by the System equals the Locking Price.\62\ That order, however, would 
be executable against other orders at its displayed price.
---------------------------------------------------------------------------

    \61\ See Amendment No. 1, supra note 5. See also Amendment No. 
2, supra note 6.
    \62\ Id. See Amendment No. 1, supra note 5. In Amendment No. 1, 
the Exchange stated it was reasonable to grant priority to a Limit 
Order subject to the Hide Not Slide instruction ahead of a Limit 
Order subject to the Price Adjust instruction even where the Limit 
Order subject to the Hide Not Slide instruction's ability to execute 
at the Locking Price was previously suspended. Id. The Exchange 
noted that Hide Not Slide orders are typically ranked at more 
aggressive prices and the Exchange seeks to encourage aggressively 
priced orders that could provide price improvement. Id. The Exchange 
also noted its current fee structure would cause the orders to 
remove liquidity upon entry, so this situation would only occur in 
the event that the Exchange changed its fee structure. Id. The 
Exchange noted: (1) a User submitting a Limit Order subject to a 
Hide Not Slide instruction cannot control whether its ability to 
execute at the Locking Price will be suspended; (2) that User does 
not know and cannot control whether the contra-side order at the 
Locking Price will be cancelled or executed at the same time as all 
other Locking Quotations are cleared; and (3) that User does not 
know and cannot control whether the contra-side order at the Locking 
Price will be cancelled or executed at the same time as all other 
Locking Quotations are cleared. Id. Lastly, the Exchange noted that 
a Limit Order will be automatically defaulted by the System to the 
Hide Not Slide instruction. As a result, a User must proactively 
elect the Price Adjust instruction resulting in their order being 
granted priority behind an order subject to the Hide Not Slide 
instruction in such circumstances. Id. See also Amendment No. 2, 
supra note 6.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(l)(1)(B)(i) would state that, 
thereafter, in response to changes in the NBBO, an order subject to the 
Routed and Returned Re-Pricing instruction would be adjusted and 
displayed by the System at one Minimum Price Variation below (above) 
the NBO (NBB) and ranked at the Locking Price with the ability to 
execute at the Locking Price until the price of such order reached its 
limit price; at which point the order would be displayed at the limit 
price by the System without further adjustment. Upon return to the EDGA 
Book after being routed away, the order will execute against any 
marketable contra-side liquidity on the EDGA Book and any remainder 
will be subject to the Routed and Returned Re-Pricing instruction.\63\ 
The order would receive a new time stamp upon returning to the EDGA 
Book and upon each subsequently re-ranking. Pursuant to proposed 
Exchange Rule 11.9, all orders that are re-ranked and re-displayed 
pursuant to the Routed and Returned Re-Pricing instruction would retain 
their comparative time priority at a price level based upon the time of 
initial re-entry to the System.\64\
---------------------------------------------------------------------------

    \63\ Id.
    \64\ Orders that are re-ranked and re-displayed pursuant to the 
Routed and Returned Re-Pricing instruction maintain the same 
priority as orders that are re-ranked and re-displayed pursuant to 
the Hide Not Slide instruction at the same price. See proposed 
Exchange Rules 11.9(a)(2)(B)(ii). The Exchange provides an example 
of the operation of a Routed and Returned Re-Pricing Instruction 
with the assumption that there were no orders resting on the EDGA 
Book. See Notice, supra note 3, at 48831. See also Amendment No. 1, 
supra note 5.
---------------------------------------------------------------------------

    The Commission finds that the proposed rules related to Regulation 
NMS re-pricing are consistent with Section 6(b)(5) of the Act,\65\ and 
the rules and regulation thereunder, including Rule 610 of Regulation 
NMS.'' \66\ The operation of Price Adjust, Hide Not Slide and Routed 
and Returned Re-Pricing are consistent with Rule 610(d) of Regulation 
NMS as they should prevent members from displaying orders that lock or 
cross any protected quotation in an NMS stock.\67\ In addition, the 
Commission notes that other exchanges offer price-sliding functionality 
to comply with Regulation NMS.\68\
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78f(b)(5).
    \66\ 17 CFR 242.610.
    \67\ Rule 610(d) of Regulation NMS requires exchanges to 
establish, maintain, and enforce rules that require members 
reasonably to avoid ``[d]isplaying quotations that lock or cross any 
protected quotation in an NMS stock.'' See 17 CFR 242.610(d).
    \68\ See Nasdaq Rule 4751(f)(7) (Price to Comply Order), BATS 
Rule 11.9(g)(2) (Price Adjust), BATS Rule 11.9(g)(1) (Display-Price 
Sliding), BATS-Y 11.9(g)(1) (Display-Price Sliding), CHX Rule Art. 
I, Rule 2(b)(1)(C)(i) (NMS Price Sliding).
---------------------------------------------------------------------------

ii. Re-Pricing Instructions To Comply With Rule 201 of Regulation SHO
    Proposed Exchange Rule 11.6(l)(2) sets forth the following re-
pricing instructions for an order with a Short Sale instruction to 
comply with Rule 201 of Regulation SHO: (1) Short Sale Price Adjust and 
(2) Short Sale Price Sliding. Under the proposal, a Limit Order to sell 
with a Short Sale instruction that cannot display or execute at its 
limit price at the time of entry because of a short sale price 
restriction pursuant to Rule 201 of Regulation SHO (``Short Sale 
Circuit Breaker''),\69\ would automatically default to the Short Sale 
Price Adjust instruction, unless the User affirmatively elects: (1) The 
Cancel Back instruction; or (2) the Short Sale Price Sliding 
instruction. Like current Exchange Rule 11.5(c)(4)(E), orders to sell 
with both a Short Sale and a Short Exempt instruction would not be 
eligible for any of the Regulation SHO re-pricing instructions and 
instead would execute, display and/or route without regard to whether 
the order is at a Permitted Price or if a Short Sale Circuit Breaker in 
effect. In addition, when a Short Sale Circuit Breaker is in effect and 
the incoming order has a Short Sale instruction, Regulation SHO re-
pricing instructions would supersede Regulation NMS re-pricing 
instructions.
---------------------------------------------------------------------------

    \69\ 17 CFR 242.200(g); 17 CFR 242.201. On February 26, 2010, 
the Commission adopted amendments to Regulation SHO under the Act in 
the form of Rule 201, pursuant to which, among other things, short 
sale orders in covered securities generally cannot be executed or 
displayed by a trading center at a price that is at or below the 
current NBB when a Short Sale Circuit Breaker is in effect for the 
covered security. See Securities Exchange Act Release No. 61595 
(February 26, 2010), 75 FR 11232 (March 10, 2010). In connection 
with the adoption of Rule 201, Rule 200(g) of Regulation SHO was 
also amended to include a ``short exempt'' marking requirement. See 
also Securities Exchange Act Release No. 63247 (November 4, 2010), 
75 FR 68702 (November 9, 2010) (extending the compliance date for 
Rules 201 and 200(g) to February 28, 2011). See also Division of 
Trading & Markets: Responses to Frequently Asked Questions 
Concerning Rule 201 of Regulation SHO, http://www.sec.gov/divisions/marketreg/rule201faq.htm.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(l)(2)(A) would codify the Short Sale 
Price Adjust instruction. If selected by a User and a Short Sale 
Circuit Breaker was in effect, the sell order with a Short Sale 
instruction would be ranked and

[[Page 68944]]

displayed at the Permitted Price.\70\ Following the initial ranking, 
the order, to the extent the NBB declines, would continue to be re-
ranked and displayed at the Permitted Price down to the order's limit 
price. The order would receive a new time stamp each time it is re-
ranked. All orders with Short Sale Price Adjust instructions that are 
re-ranked and re-displayed by the System would retain their comparative 
time priority based on their initial receipt by the System.\71\
---------------------------------------------------------------------------

    \70\ Other exchanges offer similar functionality. See Nasdaq 
Rule 4763(e) (Re-Pricing of Orders During Short Sale Period), BATS 
Rule 11.9(g)(2) (Short Sale Price Sliding), BATS-Y 11.9(g)(2) (Short 
Sale Price Sliding), and CHX Rule Art. I, Rule 2(b)(1)(C)(ii) (Short 
Sale Price Sliding).
    \71\ The Exchange provides an example of the operation of a 
Short Sale Price Adjust instruction with the assumption that there 
were no orders resting on the EDGA Book. See Notice, supra note 3, 
at 48832.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(l)(2)(B) would codify the Short Sale 
Price Sliding instruction. If selected by a User and a Short Sale 
Circuit Breaker was in effect, the sell order with a Short Sale 
instruction would be displayed at the Permitted Price and ranked at the 
midpoint of the NBBO. Following the initial ranking, the order would, 
to the extent the NBB declined, be re-ranked and re-displayed with a 
new time stamp one additional time at a price equal to the NBB at the 
time of the order's original entry.\72\
---------------------------------------------------------------------------

    \72\ The Exchange provides an example of the operation of a 
Short Sale Price Sliding instruction with the assumption that there 
were no orders resting on the EDGA Book. See Notice, supra note 3, 
at 48832.
---------------------------------------------------------------------------

    The Commission finds that the proposed rules related to Regulation 
SHO re-pricing are consistent with Section 6(b)(5) of the Act,\73\ as 
well as Rule 201 of Regulation SHO.\74\ Rule 201 of Regulation SHO 
requires trading centers to establish, maintain, and enforce written 
policies and procedures reasonably designed to prevent the execution or 
display of a short sale order at a price at or below the current NBB 
when a Short Sale Circuit Breaker is in effect, subject to certain 
exceptions.\75\ Pursuant to the Exchange's rules relating to Short Sale 
Price Adjust and Short Sale Price Sliding, sell orders with a Short 
Sale instruction that cannot be executed or displayed in compliance 
with Rule 201 of Regulation SHO would be displayed at the Permitted 
Price (i.e., above the current NBB). In addition, the Commission notes 
that Short Sale Price Adjust \76\ and Short Sale Price Sliding \77\ 
operate in a manner that is substantially similar to other exchanges.
---------------------------------------------------------------------------

    \73\ 15 U.S.C. 78f(b)(5).
    \74\ 17 CFR 242.201.
    \75\ 17 CFR 242.201.
    \76\ See BATS Rule 11.9(g)(2), BATS-Y Rule 11.9(g)(2) and Nasdaq 
Rule 4763(e).
    \77\ See BATS Rule 11.9(g)(2) and BATS-Y Rule 11.9(g)(2)
---------------------------------------------------------------------------

    The Commission notes that Short Sale Price Sliding permits sell 
orders with a Short Sale instruction to be ranked at the midpoint of 
the NBBO and displayed at the Permitted Price. The Commission finds 
that Regulation SHO re-pricing to permit an order with a Short Sale 
instruction to be executed at the midpoint of the NBBO, and displayed 
above the NBB, is consistent with Rule 201 of Regulation SHO.\78\
---------------------------------------------------------------------------

    \78\ 17 CFR 242.201.
---------------------------------------------------------------------------

iii. Re-Pricing of Orders With a Non-Displayed Instruction
    Proposed Exchange Rule 11.6(l)(3) would codify the re-pricing of 
non-routable orders with a Non-Displayed instruction to specify that an 
order with a Non-Displayed instruction that would be a Crossing 
Quotation of an external market, would be ranked at the Locking Price 
unless the User affirmatively elects that the Order Cancel Back. Each 
time the NBBO is updated and the order continues to be a Locking 
Quotation or Crossing Quotation of an external market, the order will 
be adjusted so that it continues to be ranked at the current Locking 
Price. Once an order with a Non-Displayed instruction has been ranked 
at its limit price it will only be adjusted in the event the NBBO is 
updated and the order would again be a Crossing Quotation of an 
external market. The order will receive a new time stamp each time it 
is subsequently re-ranked.\79\
---------------------------------------------------------------------------

    \79\ The Exchange provides an example of the operation of the 
re-pricing of Orders with a Non-Displayed Instruction. See Notice, 
supra note 3, at 48833.
---------------------------------------------------------------------------

l. Reserve Quantity and Replenishment Amounts
    Exchange Rule 11.5(c)(1) currently defines a ``Reserve Order'' as 
``[a] limit order with a portion of the quantity displayed (`display 
quantity') and with a reserve portion of the quantity (`reserve 
quantity') that is not displayed.'' The Exchange proposes to reclassify 
this function as an order type instruction and relocate the term 
``Reserve Quantity'' to proposed Exchange Rule 11.6(m). The term 
Reserve Quantity would be defined to mean the portion of an order with 
a Non-Displayed instruction in which a portion of that order is also 
displayed on the EDGA Book. The Exchange also would specify that both 
the portion of the order with a Displayed instruction and the Reserve 
Quantity of the order are available for execution against incoming 
orders. The Exchange also specifies that where the displayed quantity 
of an order is reduced to less than a Round Lot, the System, in 
accordance with the replenishment instruction selected by the User, 
would replenish the displayed quantity from the Reserve Quantity by at 
least a single Round Lot. A new time stamp would be created for the 
displayed portion of the order each time it is replenished from the 
Reserve Quantity, and the Reserve Quantity would retains its original 
time stamp of its original entry.\80\ In addition, the Exchange states 
that where the combined amount of the displayed quantity and Reserve 
Quantity of an order is less than one Round Lot, the order would be 
treated as an order with a Displayed instruction for purposes of 
execution priority under proposed Exchange Rule 11.9.
---------------------------------------------------------------------------

    \80\ Other exchanges maintain similar time stamp functionality 
when replenishing a displayed amount of an order from the order's 
undisplayed quantity. See Nasdaq Rule 4751(f)(2) (Reserve Orders), 
and NYSE Rule 13 (Reserve Order Types, Minimum Display Reserve 
Order).
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.6(m) also codifies the two replenishment 
instructions \81\ currently offered by the Exchange: (1) Fixed 
Replenishment; and (2) Random Replenishment. The Fixed Replenishment 
instruction sets forth that the displayed quantity of an order would be 
replenished by a fixed quantity designated by the User. The Fixed 
Replenishment quantity for the order would equal the initial displayed 
quantity designated by the User. The displayed replenishment quantity 
selected by the System could not be less than a single Round Lot or 
greater than the remaining Reserve Quantity. Under proposed Exchange 
Rule 11.8(b)(5), the System would automatically default the order to 
the Fixed Replenishment instruction with a replenishment value equal to 
the displayed quantity of the order.
---------------------------------------------------------------------------

    \81\ Other exchanges offer similar functionality for refreshing 
the displayed portion of an order from a Reserve Quantity. See, 
e.g., Nasdaq Rule 4751(f)(2) (Reserve Orders) and NYSE Rule 13 
(Reserve Order Types).
---------------------------------------------------------------------------

    Under the Random Replenishment instruction, the displayed quantity, 
both initial and replenished, would be randomly determined by the 
System within a replenishment range and replenishment value established 
by the User. The System would randomly select random display in Round 
Lots based on: (1) The quantity around which the replenishment range is 
established minus the replenishment value; and (2) the quantity around

[[Page 68945]]

which the replenishment range is established plus the replenishment 
value. The displayed replenishment quantity could not: (1) Exceed the 
remaining Reserve Quantity of the order; (2) be less than a single 
Round Lot; or (3) greater than the remaining Reserve Quantity.\82\
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    \82\ The Exchange provides examples of the operation of orders 
with replenishment amounts. See Notice, supra note 3, at 48834.
---------------------------------------------------------------------------

m. Routing/Posting Instructions
    In proposed Exchange Rule 11.6(n), the Exchange proposes to define 
the following routing and posting instructions that a User may select, 
depending on the order type: (1) Aggressive or Super Aggressive; (2) 
Book Only; (3) Post Only; (4) Destination Specified; and (5) 
Destination-on-Open.
    The Exchange proposes to codify the terms Aggressive and Super 
Aggressive. Aggressive is an order instruction that directs the System 
to route such order if an away Trading Center crosses the limit price 
of the order resting on the EDGA Book. Super Aggressive is an order 
instruction that directs the System to route such order if an away 
Trading Center locks or crosses the limit price of the order resting on 
the EDGA Book.
    Current Exchange Rule 11.5(c)(4) defines the term EDGA Only 
Order.\83\ The Exchange proposes to reclassify this function as an 
order type instruction and relocate the amended definition and term 
``Book Only'' to proposed Exchange Rule 11.6(n)(3). The proposed 
definition of Book Only would specify that it is: ``[a]n order 
instruction stating that an order will be matched against an order on 
the EDGA Book or posted to the EDGA Book, but will not route to an away 
Trading Center.'' \84\ References to the Exchange's ``display price 
sliding process and short sale price sliding process'' would be removed 
from the amended Book Only definition because, as noted above, proposed 
Exchange Rule 11.6(l) is proposed to now describe re-pricing 
instructions for Regulation NMS and Regulation SHO compliance.
---------------------------------------------------------------------------

    \83\ Currently, the term EDGA Only Order is defined as ``[a]n 
order that is to be ranked and executed on the Exchange pursuant to 
Rule 11.8 and Rule 11.9(a)(4) or cancelled, without routing away to 
another trading center. The System will default to the displayed 
price sliding process and short sale price sliding process for an 
EDGA Only Order unless the User has entered instructions not to use 
any of the processes.''
    \84\ The proposed definition of Book Only is similar to that of 
other exchanges. See BATS Rule 11.9(c)(4) (BATS Only Order), BATS-Y 
Rule 11.9(c)(4) (BATS-Y Only Order), NSX Rule 11.11(c)(6) (NSX Only 
Order).
---------------------------------------------------------------------------

    Current Exchange Rule 11.5(c)(5) defines the term ``Post Only 
Order.'' \85\ The Exchange proposes to reclassify this function as an 
order type instruction and relocate the amended definition and term 
``Post Only'' to proposed Exchange Rule 11.6(n)(4). Currently, the Post 
Only definition specifies that order would not remove liquidity from 
the EDGA Book unless ``the User enters an instruction to the 
contrary.'' The Exchange proposes amend the definition to specify that 
an order with a Post Only instruction may remove contra-side liquidity 
from the EDGA Book when combined with a Hide Not Slide or a Price 
Adjust instruction if the order is for a security priced below $1.00 or 
the value of such execution, including any fees charged or rebates 
provided, equals or exceeds the value of such execution if the order 
instead posted and provided liquidity.\86\ In addition, the Exchange 
proposes to remove references to Exchange's ``display price sliding 
process and short sale price sliding process'' from the amended Post 
Only definition because, as noted above, proposed Exchange Rule 11.6(l) 
is proposed to describe re-pricing instructions for Regulation NMS and 
Regulation SHO compliance.
---------------------------------------------------------------------------

    \85\ Currently, the term Post Only Order is defined as ``[a]n 
order that is to be ranked and executed on the Exchange pursuant to 
Rule 11.8 and Rule 11.9(a)(4) or cancelled, as appropriate, without 
routing away to another trading center except that the order will 
not remove liquidity from the EDGA Book absent an order instruction 
to the contrary. A EDGA Post Only Order will be subject to the 
displayed price sliding process and short sale price sliding process 
unless a User has entered instructions not to use the either or both 
processes. . . .''
    \86\ The Exchange notes that an order with a Post Only 
instruction will, in all cases, remove contra-side liquidity from 
the EDGA Book because under its current taker-maker pricing 
structure, the remover of liquidity is provided a rebate while the 
provider of liquidity is charged a fee. See Amendment No. 1, supra 
note 5. Therefore, in all cases, the value of the execution to 
remove liquidity will equal or exceed the value of such execution 
once posted to the EDGA Book, including the applicable fees charged 
or rebates received. Id. See also e.g., proposed Exchange Rule 
11.6(n)(4). The Exchange further states that to determine at the 
time of a potential execution whether the value of such execution 
when removing liquidity equals or exceeds the value of such 
execution if the order instead posted to the EDGA Book and 
subsequently provided liquidity, the Exchange will use the highest 
possible rebate paid and highest possible fee charged for such 
executions on the Exchange. See Amendment No. 1, supra note 5.
---------------------------------------------------------------------------

    Exchange Rule 11.5(c)(9) currently defines the term ``Destination 
Specific Order.''\87\ The Exchange proposes to reclassify this function 
as an order type instruction and relocate the amended definition and 
term ``Destination Specified'' to proposed Exchange Rule 11.6(n)(4). 
The amended definition would provide that an order with a Destination 
Specified instruction may be processed as described in proposed 
Exchange Rule 11.10(a)(4), returned to the User, or posted to the EDGA 
Book, unless the User instructs that the order reside on the book of 
the relevant away Trading Center.
---------------------------------------------------------------------------

    \87\ Currently, the term ``Destination Specified Order'' is 
defined as ``[a] market or limit order that instructs the System to 
route the order to a specified away trading center or centers, after 
exposing the order to the EDGA Book. Destination Specific Orders 
that are not executed in full after routing away are processed by 
the Exchange as described below in Rule 11.9(a)(4), save where the 
User has provided instructions that the order reside on the book of 
the relevant away trading center.''
---------------------------------------------------------------------------

    Exchange Rule 11.5(c)(10) currently defines the term ``Destination-
on-Open Order.'' The Exchange proposes to reclassify this function as 
an order type instruction and relocate the amended definition and term 
``Destination-on-Open'' to proposed Exchange Rule 11.6(n)(6). The 
amended definition would state that a Destination-on-Open instruction 
may be appended to a Market or a Limit Order and that an unfilled 
portion of an order with a Destination-on-Open instruction may be 
cancelled or re-routed.
n. Short Sale and Short Exempt
    Currently, certain current Exchange rules refer to the terms 
``short sale order'' and ``short exempt,'' \88\ but neither term is 
specifically defined. Proposed Exchange Rules 11.6(o) and 11.6(p) would 
respectively provide definition for the terms ``Short Sale'' and 
``Short Exempt.'' The proposed definitions for Short Sale instruction 
and Short Exempt instruction would be consistent with Rules 200(a) and 
201 of Regulation SHO.\89\
---------------------------------------------------------------------------

    \88\ See Exchange Rules 11.9(a)(1) and 11.15.
    \89\ See 17 CFR 242.200 et seq.
---------------------------------------------------------------------------

o. Time-In-Force
    Current Exchange Rule 11.5(b)(1)-(3) defines the terms ``IOC 
Order,'' ``Day Order'' and ``Fill-or-Kill Order.'' \90\ The Exchange 
proposes to reclassify these terms as time-in-force order type 
instructions and relocate the definitions, IOC, Day, FOK and Good-`til 
Time (``GTT''), to proposed Exchange Rule 11.6(n)(4). The proposed rule 
specifies that an order with a TIF instruction of Day entered into the 
System before the start of the specified trading session would be 
placed by the System in a pending state and activated for potential 
execution upon the start of that trading session.
---------------------------------------------------------------------------

    \90\ Current Exchange Rule 11.5(b) includes two additional TIF 
instructions of Good-`til-Cancel and Good-`til-Day, which the 
Exchange proposes to delete from its rules because they are not 
currently offered by the Exchange.

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

[[Page 68946]]

    The Exchange proposes to include a new TIF instruction, GTT, which 
could be appended to an order in any trading session with instructions 
to cancel at a specified time of day. The proposed rule also sets forth 
that an order with a GTT instruction would not be eligible for 
execution over multiples days \91\ and that any unexecuted portion of 
such order with a GTT would be cancelled at: (1) The expiration of the 
User's specified time; (2) at the end of the User's specified trading 
session(s); or (3) the end of the trading day, as instructed by the 
User. As proposed, order with a GTT instruction would not be eligible 
for execution over multiple trading days.
---------------------------------------------------------------------------

    \91\ Other exchanges offer TIF instructions similar to GTT. See 
CHX Rules Art. 1, Rule 2(d)(3) (Good `Til Date), BATS Rule 
11.9(b)(4) (Good `til Day), BATS-Y Rule 11.9(b)(4) (Good `til Day), 
and Nasdaq Rule 4751(h)(4) (System Hours Expire Time).
---------------------------------------------------------------------------

p. Trading Center
    The Exchange proposes to add the term ``Trading Center'' to 
proposed Exchange Rule 11.6(r) to be defined as ``[o]ther securities 
exchanges, facilities of securities exchanges, automated trading 
systems, electronic communications networks or other brokers or 
dealers.'' \92\ The term would be consistent with the Trading Center 
definition of in Rule 600(a)(78) of Regulation NMS.\93\
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    \92\ The term Trading Center is defined in Exchange Rule 2.11(a) 
and appears within Chapter XI.
    \93\ Under Exchange Act Rule 600(a)(78), ``Trading Center'' is 
defined as ``a national securities exchange or national securities 
association that operates an SRO trading facility, an alternative 
trading system, an exchange market maker, an OTC market maker, or 
any other broker or dealer that executes orders internally by 
trading as principal or crossing orders as agent.'' See 242 CFR 
600(a)(78).
---------------------------------------------------------------------------

q. Units of Trading
    Current Exchange Rule 11.6 provides that ``[o]ne hundred (100) 
shares shall constitute a `round lot,' any amount less than 100 shares 
shall constitute an `odd lot,' and any amount greater than 100 shares 
that is not a multiple of a round lot shall constitute a `mixed lot.` 
'' The Exchange proposes to relocate the definition of ``Units of 
Trading'' to proposed Exchange Rule 11.6(s). The relocated and amended 
definition would provide that a Round Lot is 100 shares, unless an 
alternative number of shares is established as a Round Lot by the 
listing exchange for the security. Similarly, in proposed Exchange Rule 
11.9(a)(6), the Exchange proposes a conforming change to replace the 
term ``99 shares or fewer'' with ``less than a Round Lot.'' Proposed 
Exchange Rule 11.6(s) would also state that Round Lots are eligible to 
be Protected Quotations.
    Current Exchange Rule 11.5(c)(2) defines the term an ``Odd Lot 
Order'' as ``[a]n order to buy or sell an odd lot.'' The Exchange 
proposes to revise and relocate the term to proposed Exchange Rule 
11.6(s)(2). The definition would be amended to indicate that an Odd Lot 
is ``[a]ny amount less than a Round Lot,'' and that orders of Odd Lot 
size are only eligible to be Protected Quotations if aggregated to form 
a Round Lot.
    Current Exchange Rule 11.5(c)(3) defines the term a ``Mixed Lot 
Order.'' The Exchange proposes to revise and relocate the term to 
proposed Exchange Rule 11.6(s)(3). The definition would be amended to 
indicate that ``[a]ny amount greater than a Round Lot that is not an 
integer multiple of a Round Lot,'' and that the Odd Lot portions of an 
order of Mixed Lot size are only eligible to be Protected Quotations if 
aggregated to form a Round Lot.\94\
---------------------------------------------------------------------------

    \94\ The proposed definitions are similar to Nasdaq Rule 4751(g) 
(definition of ``Order Size'').
---------------------------------------------------------------------------

2. Order Types--Proposed Exchange Rule 11.8
    The Exchange has determined that the majority of the existing 
individual order types should be reclassified as order type 
instructions to be attached to specific, standalone order types.\95\ 
Accordingly, the Exchange proposes to delete and replace current 
Exchange Rule 11.5 with proposed Exchange Rule 11.8, Order Types,\96\ 
which would outline the characteristics of the seven order types that 
would be accepted by the System: (1) Market Orders, (2) Limit Orders, 
(3) ISOs, (4) MidPoint Peg Orders, (5) MidPoint Discretionary Orders: 
(6) NBBO Offset Peg Orders, and (7) Route Peg Orders.
---------------------------------------------------------------------------

    \95\ See Notice, supra note 3, at 48836.
    \96\ See id.
---------------------------------------------------------------------------

    The Commission finds that the proposed rules relating to the 
definitions and descriptions of order types are consistent with the 
Act. The Commission notes that the definitions and operations of Market 
Order, Limit Order, ISO, MidPoint Peg Order, and MidPoint Discretionary 
Order are substantively similar to the current rule text, with added 
specificity related to the operation of the standalone order type and 
the order type instructions that may be attached thereto. The NBBO 
Offset Peg Order and Route Peg Order are currently offered by the 
Exchange, and the related rule text has been relocated and reformatted 
to conform to the reorganization of the Exchange rule book without 
substantive amendment. Accordingly, the Commission believes that these 
proposed rule changes are consistent with the Act.
a. Market Order
    Current Exchange Rule 11.5(a)(2) defines the term ``Market Order.'' 
The Exchange proposed to relocate the term to proposed Exchange Rule 
11.8(a), and revise it to include additional language describing the 
operation of the order type and the order type instructions that may be 
attached thereto.
    Specifically, proposed Exchange Rule 11.8(a) would define a Market 
Order as ``[a]n order to buy or sell a stated amount of a security that 
is to be executed at the NBBO or better when the order reaches the 
Exchange.'' The proposed rule also specifies that Market Orders are 
eligible to execute during the Regular Session; ineligible to execute 
during the Pre-Opening or the Post-Closing Trading Sessions; may be an 
Odd Lot, Round Lot, or Mixed Lot; and may include a Stop Price 
instruction. Proposed Exchange Rule 11.8(a)(2) would specify that a 
Market Order would default to a TIF instruction of Day, unless 
otherwise instructed by the User; and that in addition to Day, a User 
could append a Market Order with an IOC or FOK instruction. The 
proposed rule also sets forth that a Market Order with a FOK 
instruction would cancel if not executed in full portion immediately 
after entry and that a Market Order with an IOC instruction would 
cancel any unexecuted portion of the order after checking the System 
for available shares, and, if applicable, upon return to the System 
after being routed to an away Trading Center. The proposed rule also 
specifies that a Market Order that does not include a Book Only, IOC or 
FOK instruction and cannot be executed in accordance with proposed 
Exchange Rule 11.10(a)(4) would be eligible for routing pursuant to 
proposed Exchange Rule 11.11.\97\
---------------------------------------------------------------------------

    \97\ The Exchange provides examples of the operation of Market 
Orders. See Notice, supra note 3, at 48837-38.
---------------------------------------------------------------------------

    Under the proposed rules, a Market Order would post to the book in 
certain instances. Under proposed Exchange Rule 11.10(a)(3)(A), where 
the NBO/NBB is greater/lesser than the Upper/Lower Price Band, an 
incoming non-routable buy/sell Market Order would post to the EDGA Book 
at a price equal to the Upper (Lower) Price Band, unless appended with 
a TIF instruction of IOC or FOK or a Cancel Back instruction.\98\

[[Page 68947]]

Under Proposed Exchange Rule 11.8(a)(4), a Market Order appended with 
both a Day and a Short Sale instruction that could not execute because 
of a Short Sale Restriction, would display pursuant to the Short Sale 
Price Sliding instruction.\99\
---------------------------------------------------------------------------

    \98\ Current Exchange Rule 11.9(a)(3)(A) states, ``[w]here a 
non-routable buy (sell) Market Order is entered into the System and 
the NBB (NBO) is greater (less) than to the Upper (Lower) Price 
Band, such order will be posted to the EDGA Book or executed, unless 
(1) the order is an IOC Order, in which case it will be cancelled if 
not executed, or (2) the User has entered instructions to cancel the 
order.'' See also Securities Exchange Act Release No. 69002 
(February 27, 2013), 78 FR 14394 (March 5, 2013) (SR-EDGA-2013-08).
    \99\ See proposed Exchange Rule 11.6(l)(2), supra Section 
III.C.1.k.ii.
---------------------------------------------------------------------------

    Under the proposed rules, there are also certain instances when a 
Market Order would cancel instead of execute. The proposed rule 
specifies that if a Market Order with a Book Only instruction is re-
priced when the NBO/NBB is greater/less than the Upper/Lower Price 
Band, the order would be cancelled pursuant to proposed Exchange Rule 
11.10(a)(4). The Exchange also specifies that, except for a Market 
Order that include a Destination-on-Open instruction, any portion of a 
Market Order that would execute at a price more than the greater of 
$0.50 or five percent worse than the consolidated last sale as 
published by the responsible single plan processor at the time the 
order is entered into the System, would be cancelled.
b. Limit Order
    Current Exchange Rule 11.5(a)(1) defines a Limit Order as, ``[a]n 
order to buy or sell a stated amount of a security at a specified price 
or better'' and a ``marketable'' Limit Order as a ``limit order to buy 
(sell) at or above (below) the lowest (highest) Protected Offer (Bid) 
for the security.'' The term would be relocated to proposed Exchange 
Rule 11.8(b), and be amended to include additional language describing 
the operation of the order type and the order type instructions that 
may be attached thereto. The proposed rule specifies that a Limit Order 
is eligible for execution during the Pre-Opening Session, Regular 
Session, and the Post-Closing Session, and could be an Odd Lot, Round 
Lot or Mixed Lot. A Limit Order could also be appended with the 
applicable combination of the following order type instructions: \100\ 
IOC, FOK, Day, GTT, Displayed, Non-Displayed, Attributable, Non-
Attributable, Post Only, Book Only, Discretionary Range, Reserve 
Quantity, Pegged, Minimum Execution Quantity, Stop Limit, Destination 
Specified, Destination-on-Open instruction, Aggressive or Super 
Aggressive.\101\
---------------------------------------------------------------------------

    \100\ See discussion of Order Type Instructions, supra Section 
III.C.1.
    \101\ A Limit Order that includes both a Post Only instruction 
and Non-Displayed Instruction will be rejected by the System. See 
proposed Exchange Rule 11.8(b)(4).
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.8(b)(7) specifies that a marketable Limit 
Order would be eligible to be routed pursuant to proposed Exchange Rule 
11.11, unless it was appended with a Post Only, Book Only or Pegged 
instruction.\102\
---------------------------------------------------------------------------

    \102\ In the Notice, the Exchange provides order handling 
examples of Limit Orders with various order type instructions under 
various book conditions. See Notice, supra note 3, at 48839-41. See 
also Amendment No. 1, supra note 5, for a discussion regarding: (1) 
the Exchange joining the NBO; (2) Displayed limit orders with Post 
Only or Book Only instructions; (3) order handling examples that 
previously included the Single Re-Price instruction; (4) 
circumstances where, if the Exchange were to change its fee 
structure to a maker-taker pricing model, an order with a Post Only 
instruction would not remove liquidity from the EDGA Book because 
the value of the execution would not provide price improvement; and 
(5) revisions concerning orders with Routed and Returned Re-Pricing 
instructions.
---------------------------------------------------------------------------

c. Intermarket Sweep Order
    Current Exchange Rule 11.5(d)(1), specifies that the System accepts 
incoming ISOs (as such term is defined in Regulation NMS) and that to 
be eligible for treatment as an ISO, the order must be: (1) a Limit 
Order; (2) marked ISO; and (3) the User entering the order must 
simultaneously route one or more additional Limit Orders marked ISO, if 
necessary, to away markets to execute against the full displayed size 
of any Protected Quotation for the security with a price that is 
superior to the limit price of the ISO entered in the System. Such 
orders, if they meet the requirements of the foregoing sentence, may be 
executed at one or multiple price levels in the System without regard 
to Protected Quotations at away Trading Centers consistent with 
Regulation NMS (i.e., may trade through such quotations). The term 
would be relocated to proposed Exchange Rule 11.8(c), and amended to 
include additional language describing the operation of the order type 
and the order type instructions that may be attached thereto.
    Proposed Exchange Rule 11.8(c) would continue to instruct Members 
that the Exchange relies on, and it is the Member's responsibility, to 
properly mark ISOs, to satisfy the compliance requirements of 
Regulation NMS.\103\ The proposed Rule also specifies that a User 
entering an ISO with a Day instruction is representing that it has 
simultaneously routed one or more additional ISOs, if necessary, to 
away Trading Centers to execute against the full displayed size of any 
Protected Quotation for the security with a price that is superior or 
equal to the limit price of the ISO entered in the System.\104\
---------------------------------------------------------------------------

    \103\ See Notice, supra note 3, at 48841.
    \104\ The ISO exception under Exchange Rule 11.10(f) requires 
that ISOs be routed to execute against all protected quotations with 
a price that is better than or equal the display price, rather than 
solely to protected quotations for a security with a price that is 
superior to the ISO's limit price. See Question 5.02 in the Division 
of Trading and Markets, Responses to Frequently Asked Questions 
Concerning Rule 611 and Rule 610 of Regulation NMS (last updated 
April 4, 2008) available at http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.8(c)(4) would also specify that incoming 
ISOs may be submitted during the Pre-Opening Session, Regular Session, 
and Post-Closing Session. Proposed Exchange Rule 11.8(c)(1)-(4) would 
also state that an incoming ISO will have a default TIF instruction of 
Day, unless the User selects a TIF instruction of GTT or IOC. Incoming 
ISOs cannot include a TIF instruction of FOK. The proposed Rule also 
sets forth that an incoming ISO with a Post Only and TIF instruction of 
GTT or Day, but without a Price Adjust or Hide Not Slide instruction, 
would be rejected if, marketable against a resting order with a 
Displayed instruction. Any unfilled portion of an ISO with a TIF 
instruction of GTT or Day would be posted at the ISO's limit price on 
the EDGA Book.
    Proposed Exchange Rule 11.8(c) would specify that an ISO with a 
Post Only instruction and TIF instruction of GTT or Day may also be 
appended with Regulation NMS or Regulation SHO re-pricing instructions.
    Proposed Exchange Rule 11.8(c)(7) would permit a User to attach an 
instruction to an outbound ISO in order to permit that ISO to be 
immediately routed to an away Trading Center.\105\ However, pursuant to 
proposed Exchange Rule 11.11, inbound ISOs would not be eligible for 
routing under any circumstances.
---------------------------------------------------------------------------

    \105\ This Directed Intermarket Sweep Order functionality is 
currently provided pursuant to Exchange Rule 11.5(d)(2). See Notice, 
supra note 3, at 48841.
---------------------------------------------------------------------------

d. MidPoint Peg Order
    Exchange Rule 11.5(c)(7) currently defines a MidPoint Peg Order as 
``[a] limit order whose price is automatically adjusted by the System 
in response to changes in the NBBO to be pegged to the midpoint of the 
NBBO.'' The term would be relocated to proposed Exchange Rule 11.8(d), 
and amended to include additional language describing the operation of 
the order type and the order type instructions that may be attached 
thereto. The MidPoint Peg Order definition would be amended to specify 
that it could be a Market Order or a Limit Order, as well as to 
indicate

[[Page 68948]]

that a MidPoint Peg Order with a limit price that is more aggressive 
than the midpoint of the NBBO will execute at the midpoint of the NBBO 
or better, subject to its limit price, but when its limit price is less 
aggressive than the midpoint of the NBBO, it may only execute at its 
limit price or better. Where its limit price is equal to or more 
aggressive than the midpoint of the NBBO, a MidPoint Peg Order will be 
ranked at the midpoint of the NBBO, but it will be ranked at its limit 
price where its limit price is less aggressive than the midpoint of the 
NBBO.\106\ The proposed rule would also set forth that notwithstanding 
the co-designation as a Market or Limit Order, the operation of the 
MidPoint Peg Order would be governed by proposed Exchange Rule 11.8(d).
---------------------------------------------------------------------------

    \106\ See Notice, supra note 3, at 48842.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.8(d)(1) would also specify that a 
MidPoint Peg Order could be appended with a TIF instruction of Day, 
FOK, IOC, or GTT. Proposed Exchange Rule 11.8(d)(2) specifies that a 
MidPoint Peg Order could include a Minimum Execution Quantity 
instruction. Proposed Exchange Rule 11.8(d)(3) specifies that MidPoint 
Peg Orders would default to a Non-Displayed instruction and are not 
eligible to include a Displayed instruction. Proposed Exchange Rule 
11.8(d)(5) specifies that, pursuant to proposed Exchange Rule 11.11, 
MidPoint Peg Orders are ineligible for routing unless routed utilizing 
the RMPT \107\ routing strategy as defined in renumbered Rule 
11.11(g)(20).
---------------------------------------------------------------------------

    \107\ RMPT is a routing option under which a MidPoint Peg Order 
checks the System for available shares and any remaining shares are 
then sent to destinations on the System routing table that support 
midpoint eligible orders. If any shares remain unexecuted after 
routing, they are posted on the EDGA book as a MidPoint Peg Order, 
unless otherwise instructed by the User. See proposed Exchange Rule 
11.11(g)(20), which is being relocated from current Exchange Rule 
11.9(b)(2)(t).
---------------------------------------------------------------------------

    Pursuant to the proposed rule, MidPoint Peg Orders may only be 
executed during the Regular Session, and any unexecuted portion of a 
resting MidPoint Peg Order with a Day or GTT instruction would receive 
a new time stamp each time it is re-priced in response to changes to 
the midpoint of the NBBO. However, an incoming or resting MidPoint Peg 
Order would be ineligible for execution if there was a Locking 
Quotation or Crossing Quotation. The ability of the resting or incoming 
MidPoint Peg Order to execute would resume when the locked/crossed 
condition was resolved and a new midpoint relative to the NBBO was 
established. Similarly, MidPoint Peg Orders would be ineligible to 
execute at a price below the Lower Price Band or above the Upper Price 
Band. Pursuant to proposed Exchange Rule 11.9, all MidPoint Peg Orders 
would retain their comparative priority based upon order's initial 
receipt and ranking.
e. MidPoint Discretionary Order
    Exchange Rule 11.5(c)(17) currently defines a MidPoint 
Discretionary Order (``MDO'').\108\ The term would be relocated to 
proposed Exchange Rule 11(e) and reformatted, without substantive 
amendment. The MDO would continue to be defined in a manner similar to 
its current definition--an order to buy (sell) that is pegged to the 
NBB (NBO) with discretion to execute at prices up to (down to) and 
including the midpoint of the NBBO. The MDO definition would be amended 
to specify that it is a Limit Order, as well as to indicate that a 
MDO's displayed price and discretionary range are bound by its limit 
price. A MDO to buy or sell with a limit price that is less than the 
prevailing NBB or higher than the prevailing NBO, respectively, is 
posted to the EDGA Book at its limit price. The displayed prices of 
MDOs are derived from the NBB or NBO, and cannot independently 
establish the NBB or NBO. The proposed rule would specify that 
notwithstanding its co-designation as a Market Order or Limit Order, 
the operation and available modifiers of an MDO would be governed by 
and limited to Exchange Rule 11.8(e).\109\
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    \108\ See Securities Exchange Act Release No. 67226 (June 20, 
2012), 77 FR 38113 (June 26, 2012) (Notice of Filing and Immediate 
Effectiveness to Amend EDGA Rules to Add the MidPoint Discretionary 
Order).
    \109\ See Amendment No. 1, supra note 5.
---------------------------------------------------------------------------

    Proposed Exchange Rule 11.8(e)(1) would also specify that an MDO 
could be appended with a TIF instruction of Day or GTT. Proposed 
Exchange Rule 11.8(e)(2) would also specify that an MDO may be entered 
as a Round Lot or Mixed Lot only. A new time stamp is created for a MDO 
each time its displayed price is automatically adjusted based on a 
change in the NBB or NBO, respectively. Proposed Exchange Rule 
11.8(e)(4) would specify that, pursuant to proposed Exchange Rule 
11.11, MidPoint Peg Orders are ineligible for routing.
    Pursuant to the proposed rule, MDOs may only be submitted during 
the Regular Trading Hours. When the EDGA Book is locked or crossed by 
another market, an MDO will be eligible to join the Exchange BBO when 
the Exchange BBO equals the NBBO. If an MDO displayed on the Exchange 
would create a Locking Quotation or Crossing Quotation, the price of 
the order will be automatically adjusted by the System by one MPV with 
no discretion to execute to the midpoint of the NBBO. Similarly, MDOs 
would only execute at their displayed prices and not within their 
discretionary ranges when: (1) the price of the Upper Price Band equals 
or moves below an existing Protected Bid; or (2) the price of the Lower 
Price Band equals or moves above an existing Protected Offer.
f. NBBO Offset Peg Order
    Exchange Rule 11.5(c)(15) currently defines the NBBO Offset Peg 
Order. The term would be relocated to proposed Exchange Rule 11.8(f) 
and reformatted, without substantive amendment. The NBBO Offset Peg 
Order would continue to be defined as a Limit Order that, upon entry, 
is automatically priced by the System at the Designated Percentage 
\110\ away from the current NBB/NBO for a buy/sell order, or if there 
is no NBB/NBO, at the Designated Percentage away from the last reported 
sale from the responsible single plan processor. The proposed rule 
would specify that notwithstanding its co-designation as a Limit Order, 
the operation of an NBBO Offset Peg Order would be governed by proposed 
Exchange Rule 11.8(f).
---------------------------------------------------------------------------

    \110\ See proposed Exchange Rule 11.20(d)(2)(D).
---------------------------------------------------------------------------

    The proposed rule also sets forth that the price of an NBBO Offset 
Peg Order bid or offer would automatically adjust to the Designated 
Percentage away from the current NBB/NBO; or if there is no current 
NBB/NBO, to the Designated Percentage away from the last reported sale 
from the responsible single plan processor, upon reaching the Defined 
Limit.\111\ The proposed rule also sets forth that if an NBBO Offset 
Peg Order moves a specified number of percentage points away from the 
Designated Percentage toward the current NBB/NBO, the price of such 
bid/offer would automatically adjust the Designated Percentage away 
from the current NBB/NBO; or if there is no current NBB/NBO, the order 
would automatically adjust to the Designated Percentage away from the 
last reported sale from the responsible single plan processor. Pursuant 
to the proposed rule, cancellation or rejection would result if the 
order exceeded its limit price due to an NBBO Offset Peg Order being 
priced at the Designated Percentage away from the current NBB/NBO; or, 
if there is no current NBB/NBO, to the Designated Percentage away from 
the last reported sale from the responsible single plan processor. As 
proposed, the absence of

[[Page 68949]]

a current NBB/NBO and last sale reported by the responsible single plan 
processor would also cause the order to be cancelled or rejected.
---------------------------------------------------------------------------

    \111\ See proposed Exchange Rule 11.20(d)(2)(F).
---------------------------------------------------------------------------

    Under the proposed rule, if a resident NBBO Offset Peg Order was 
priced based on the last sale reported by the responsible single plan 
processor and such NBBO Offset Peg Order is established as the NBB/NBO, 
the NBBO Offset Peg Order would not adjust until either new last sale 
reported by the responsible single plan processor, or a new NBB/NBO was 
established by a national securities exchange. However, if a Crossing 
Quotation existed, the NBBO Peg Offset Order would automatically price 
at the Designated Percentage \112\ (away from the current NBO/NBB for a 
buy/sell order).
---------------------------------------------------------------------------

    \112\ See proposed Exchange Rule 11.20(d)(2)(D).
---------------------------------------------------------------------------

    The proposed rule sets forth that NBBO Offset Peg Orders may only 
include a TIF instruction of Day; may only be Round Lots or Mixed Lots; 
are defaulted by the System to a Displayed instruction and are not 
eligible to include a Non-Displayed instruction; and may be submitted 
at the beginning of the Pre-Opening Session, but are not executable or 
automatically priced until after the first regular way last sale on the 
relevant listing exchange for the security, as reported by the 
responsible single plan processor. In addition the rule sets forth that 
NBBO Offset Peg Orders would receive a new time stamp each time it re-
prices in response to changes in the NBB, NBO, or last reported sale; 
would be ineligible for routing pursuant to proposed Exchange Rule 
11.11; and would expire at the end of the Regular Session. Finally, 
pursuant to Exchange Rule 11.20(d), irrespective of the NBBO Offset Peg 
Order, and consistent with its obligations, Market Makers would 
continue to be responsible for entering, monitoring, and re-submitting, 
as applicable, quotations.
g. Route Peg Order
    Exchange Rule 11.5(c)(14) currently defines the term Route Peg 
Order. The term would be relocated to proposed Exchange Rule 11.8(g) 
and reformatted to conform to other rule changes, without substantive 
amendment. The Route Peg Order is a passive, resting order that does 
not remove liquidity or execute at a price inferior to a Protected 
Quotation. The Route Peg Order would be defined as a non-displayed 
Limit Order that is eligible for execution at the NBB for a buy order 
and NBO for a sell order against an order that is in the process of 
being routed to away Trading Centers with an order size equal to or 
less than the aggregate size of the Route Peg Order interest available 
at that price. The proposed rule would specify that notwithstanding its 
co-designation as a Limit Order, the operation of a Route Offset Peg 
Order would be governed by proposed Exchange Rule 11.8(g).
    The proposed rule would also set forth that Route Peg Orders may 
only have a TIF instruction of GTT or Day and would be ineligible to 
include a TIF instruction of IOC or FOK; may only be Round Lots or 
Mixed Lots; would default to, and could be appended with a Non-
Displayed instruction; but not with the Displayed instruction. In 
addition, the proposed rule sets forth that the Route Peg Order could 
include a Minimum Execution Quantity but is ineligible for routing 
pursuant to proposed Exchange Rule 11.11.
    The proposed rule also set forth that Route Peg Orders may be 
entered, cancelled, and cancelled/replaced prior to and during the 
Regular Session and all unexecuted portions thereof are cancelled at 
the end of the Regular Session. Route Peg Orders would only be eligible 
for execution in a given security during the Regular Session, except 
during the Opening Session and until orders in a given security can be 
posted on the EDGA Book during the Regular Session. Route Peg Orders 
would also be ineligible for execution if a Locking Quotation or 
Crossing Quotation existed; however the ability of the Route Peg Order 
to execute would resume once the locked/crossed condition was cleared.

D. Execution Priority of Orders

1. Priority--Proposed Exchange Rule 11.9
    Current Exchange Rule 11.8 sets forth the priority of order 
executions. The Exchange proposes to relocate the provision to proposed 
Exchange Rule 11.9 and to amend it to codify and state the following: 
(1) the priority of orders at certain price points; (2) the priority of 
Limit Orders with a Reserve Quantity; and (3) certain other conforming 
and clarifying changes. The Exchange states that its proposed 
amendments outline current System functionality in the Exchange's 
Rules.
    Under Exchange Rule 11.9(a), orders of Users are first ranked and 
maintained by the System on the EDGA Book according to their price. 
Orders at the same price and of the same type are then ranked by the 
System depending on the time they were entered into the System. The 
Exchange proposes to amend Exchange Rule 11.9 to specify how orders 
with certain order type instructions are ranked by the System.\113\ The 
Exchange also proposes to provide that, for purposes of priority under 
Exchange Rule 11.9(a)(2)(A): (1) an ISO,\114\ the displayed price of a 
MidPoint Discretionary Order,\115\ and NBBO Offset Peg Orders \116\ are 
to be treated as Limit Orders; \117\ and (2) orders subject to a re-
pricing instruction to comply with Rule 201 of Regulation SHO under 
proposed Exchange Rule 11.6(l)(2), including Market Orders that are 
displayed on the EDGA Book pursuant to proposed Exchange Rule 
11.8(a)(4) and proposed Exchange Rule 11.10(a)(3)(A), maintain the same 
priority as Limit Orders at that price.
---------------------------------------------------------------------------

    \113\ For purposes of priority under proposed Exchange Rule 
11.9(a)(2)(A) and (B), the Exchange notes that orders of Odd Lot, 
Round Lot, or Mixed Lot size are treated equally.
    \114\ See proposed Exchange Rule 11.8(c), discussed above in 
Section III.C.2.c.
    \115\ See proposed Exchange Rule 11.8(e), discussed above in 
Section III.C.2.e.
    \116\ See proposed Exchange Rule 11.8(f), discussed above in 
Section III.C.2.f.
    \117\ See proposed Exchange Rule 11.8(b), discussed above in 
Section III.C.2.b.
---------------------------------------------------------------------------

2. General Priority
    Current Exchange Rule 11.8(a)(2) states, in sum, that the System 
shall execute equally priced trading interest in time priority in the 
following order: (1) Displayed size of limit orders; (2) Non-displayed 
limit orders and reserve orders; (3) Discretionary ranges of 
Discretionary Orders and of Mid-Point Discretionary Orders as set forth 
in current Exchange Rules 11.5(c)(13) and (c)(17), respectively; and 
(4) Route Peg Orders as set forth in current Exchange Rule 11.5(c)(14). 
The Exchange proposes to amend the above priority to state that it 
applies to equally priced trading interest other than where orders are 
re-ranked at the Locking Price after a Locking Quotation clears.\118\ 
As amended, proposed Exchange Rule 11.9(a)(2)(A) would state that the 
System will execute equally priced trading interest within the System 
other than where orders are re-ranked at the Locking Price after a 
Locking Quotation clears in time priority in the following order: (1) 
the portion of a Limit Order with a Displayed instruction; (2) Limit 
Orders with a Non-Displayed instruction, the Reserve Quantity of Limit 
Orders and MidPoint Peg Orders; \119\ (3) MidPoint Discretionary

[[Page 68950]]

Orders executed within their Discretionary Range and Limit Orders 
executed within their Discretionary Range; and (4) Route Peg 
Orders.\120\
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    \118\ The Exchange also proposes to amend the description of 
order types under proposed Exchange Rules 11.9(a)(2)(A)(i)-(iv) to 
be consistent with proposed Exchange Rule 11.8, Order Types.
    \119\ See Amendment No. 1, supra note 5. See also Amendment No. 
2, supra note 6. The Exchange noted that MidPoint Peg Orders are 
covered by Rule 11.8(a)(2) category as ``non-displayed limit 
orders'', and their priority is not changing. Id. However, the 
Exchange believes that identifying MidPoint Peg Orders in proposed 
Rule 11.9(a)(2)(A) will eliminate any potential confusion. Id.
    \120\ See proposed Exchange Rule 11.9(a)(2)(A). See also Notice, 
supra note 3, at 48844 for an example illustrating the operation of 
these priority provisions.
---------------------------------------------------------------------------

3. Orders Re-Ranked Upon Clearance of a Locking Quotation
    The Exchange also proposes to outline a priority of orders for 
orders that utilize instructions that result in their being re-ranked 
upon clearance of a Locking Quotation. In such case, the System re-
ranks and displays such orders at the Locking Price. The Exchange 
proposes to include proposed Exchange Rule 11.9(a)(2)(B), which would 
state that, where an order is re-ranked to the Locking Price after a 
Locking Quotation clears, the System will re-rank and display such 
orders at the Locking Price in time priority in the following order: 
(1) ISO with a TIF instruction of Day that establishes a new NBBO at 
the Locked Price; (2) Limit Orders to which the Hide Not Slide or 
Routed and Returned Re-Pricing instruction has been applied; (3) Limit 
Orders to which the Price Adjust instruction has been applied; and (4) 
orders with a Pegged instruction.\121\ Orders not executed and 
remaining on the EDGA Book after being re-ranked upon clearance of the 
Locking Quotation will be executed in time priority under proposed 
Exchange Rule 11.9(a)(2)(A) described above.
---------------------------------------------------------------------------

    \121\ See proposed Exchange Rule 11.9(a)(2)(B). See also Notice, 
supra note 3, at 48844-45 for an example with two scenarios 
illustrating the operation of priority for orders re-ranked upon 
clearance of a locking quotation. See also Amendment No. 1, supra 
note 5, which, in the example, replaces the order with a Single Re-
Price instruction with an order with a Price Adjust instruction.
---------------------------------------------------------------------------

4. Reserve Quantity Priority
    The Exchange proposes to amend Exchange Rule 11.9(a)(6) to modify 
the description of the priority of an order with a Reserve Quantity and 
to amend certain terms to be consistent with the order type rules under 
proposed Exchange Rules 11.6 and 11.8.
    For both the Fixed Replenishment and Random Replenishment 
instruction, the displayed quantity receives a new time stamp each time 
it is replenished from the Reserve Quantity. The Reserve Quantity 
retains the time stamp of its original entry. Current Exchange Rule 
11.8(a)(6) discusses the priority of the Reserve Quantity of an order 
and states that ``[a] new time stamp is created both for the refreshed 
and reserved portion of the order each time it is refreshed from 
reserve.'' The Exchange proposes to amend this description to state 
that a new time stamp is created only for the displayed quantity of the 
order each time it is replenished from Reserve Quantity. In addition, 
as discussed above in Section III.C.1.l, proposed Exchange Rule 
11.8(m)(1) states that a new time stamp is created for the portion of 
the order with a Displayed instruction each time it is replenished from 
the Reserve Quantity, while the Reserve Quantity retains the time-stamp 
of its original entry.\122\
---------------------------------------------------------------------------

    \122\ See proposed Exchange Rule 11.9(a)(6). See also Notice, 
supra note 3, at 48845 for an example illustrating the operation of 
priority for an order with a Reserve Quantity.
---------------------------------------------------------------------------

    The Commission finds that proposed Exchange Rule 11.9 relating to 
priority is consistent with Section 6(b)(5) of the Act,\123\ 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. The proposed rule change codifies 
the order handling and execution priority of orders on the EDGA Book 
which in turn provides greater transparency for, and thereby benefit, 
Members, Users and the general investing public.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Accelerated Approval

    The Commission finds goods cause, pursuant to Section 19(b)(2) of 
the Exchange Act,\124\ for approving the proposed rule change, as 
modified by Amendment Nos. 1 and 2 thereto, prior to the 30th day after 
publication of notice of the filing of Amendment Nos. 1 and 2 in the 
Federal Register. Amendment No. 1 removes proposed rule text relating 
to the Single Re-Price and Short Sale Single Re-Price pricing 
instructions to indicate that the Exchange will no longer offer such 
functionality; adds language to the Post Only instruction definition to 
provide that the highest possible rebate paid and the highest possible 
fee will be used to determine whether the order with a Post Only 
instruction will execute against orders on the EDGA Book upon arrival; 
adds rationale to the statutory basis section for suspending the 
discretion of an order with a Hide Not Slide instruction to execute at 
the Locking Price when a contra-side order that equals the Locking 
Price is displayed by the System on the EDGA Book in order to avoid an 
apparent violation of that contra-side displayed order's priority; adds 
further rationale for giving priority to Hide Not Slide orders upon the 
clearance of the Locking Price; \125\ clarifies the operation of the 
Routed and Returned Re-Pricing instruction; and makes a series of non-
substantive, corrective changes to the Notice and rule text, including 
the priority of MidPoint Peg Orders and the suspension of the ability 
of orders with a Hide Not Slide instruction to execute at the Locking 
Price due to a contra-side order that equals the Locking Price. 
According to the Exchange, Amendment No. 1 reflects the Exchange's 
efforts to simplify its proposal and streamline System functionality, 
thereby benefiting Members, Users and the investing public by making 
the rules and functionality easier to understand. In Amendment No. 2, 
the Exchange: (1) added rationale for the priority of MidPoint Peg 
Orders; (2) added rationale for the suspension of the ability of orders 
with a Hide Not Slide Instruction to execute at the Locking Price due 
to a contra-side order that equals the Locking Price. According to the 
Exchange, Amendment No. 2 adds additional justification for a change 
that was included in Amendment No. 1 and otherwise provides a 
corrective change.
---------------------------------------------------------------------------

    \124\ 15 U.S.C. 78s(b)(2).
    \125\ See supra note 62 for a summary of the rationale.
---------------------------------------------------------------------------

    Accordingly, the Commission does not believe that Amendment Nos. 1 
and 2 raise any novel regulatory issues and therefore finds that good 
cause exists to approve the proposal, as modified by Amendment Nos. 1 
and 2, on an accelerated basis.

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment Nos. 1 
and 2 to the proposed rule change, is consistent with the Act. Comments 
may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#f280879e97df919d9f9f979c8681b2819791dc959d84"><span class="__cf_email__" data-cfemail="e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f">[email protected]</span></a>. Please include 
File Number SR-EDGA-2014-20 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-EDGA-2014-20. This file 
number should be included on the subject line if email is used.

[[Page 68951]]

    To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
EDGA-2014-20 and should be submitted on or before December 10, 2014.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\126\ that the proposed rule change (SR-EDGA-2014-20), as modified 
by Amendment Nos. 1 and 2, be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \126\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\127\
---------------------------------------------------------------------------

    \127\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27312 Filed 11-18-14; 8:45 am]
BILLING CODE 8011-01-P


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