Document ID: SEC-2023-0732-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2023-07-17T04:00Z

[Federal Register Volume 88, Number 135 (Monday, July 17, 2023)]
[Notices]
[Pages 45730-45772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14912]

[[Page 45729]]

Vol. 88

Monday,

No. 135

July 17, 2023

Part III

Securities and Exchange Commission

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Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and 
Immediate Effectiveness of Proposed New Rules 900.3NYP, 925.1NYP, 
928NYP, 928.1NYP, and 952NYP and Amendments to Rules 900.3NY, 925NY, 
925.1NY, 928NY, 952NY, 953.1NY, 967NY, 967.1NY, and 985NY; Notice

  Federal Register / Vol. 88 , No. 135 / Monday, July 17, 2023 / 
Notices  

[[Page 45730]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97869; File No. SR-NYSEAMER-2023-34]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed New Rules 900.3NYP, 
925.1NYP, 928NYP, 928.1NYP, and 952NYP and Amendments to Rules 900.3NY, 
925NY, 925.1NY, 928NY, 952NY, 953.1NY, 967NY, 967.1NY, and 985NY

July 10, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on, June 27, 2023, NYSE American LLC (``NYSE American'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to [sic] new Rules 900.3NYP (Orders and 
Modifiers), 925.1NYP (Market Maker Quotations), 928NYP (Pre-Trade and 
Activity-Based Risk Controls), 928.1NYP (Price Reasonability Checks--
Orders and Quotes), and 952NYP (Auction Process) and proposes 
amendments to Rules 900.3NY (Orders Defined), 925NY (Obligations of 
Market Makers), 925.1NY (Market Maker Quotes), 928NY (Risk Limitation 
Mechanism), 952NY (Opening Process), 953.1NY (Limit-Up and Limit-Down 
During Extraordinary Market Volatility), 967NY (Price Protection--
Orders), 967.1NY (Price Protection--Quotes), and 985NY (Qualified 
Contingent Cross Trade) to reflect the implementation of the Exchange's 
Pillar trading technology on its options market. The proposed rule 
change is available on the Exchange's website at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
Background
    The Exchange plans to transition its options trading platform to 
its Pillar technology platform. The Exchange's affiliated options 
exchange, NYSE Arca, Inc. (``NYSE Arca'' or ``Arca Options'') is 
currently operating on Pillar, as are the Exchange's cash equity market 
and those of its national securities exchange affiliates' cash equity 
markets.\4\ For this transition, the Exchange proposes to use the same 
Pillar technology already in operation on Arca Options.\5\ In doing so, 
the Exchange will be able to offer not only common specifications for 
connecting to both of its equity and options markets, but also common 
trading functions across the Exchange and its affiliated options 
exchange, NYSE Arca Options. In this regard, the Exchange recently 
adopted new rules to reflect the priority, ranking, and allocation of 
single-leg interest on Pillar.\6\
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    \4\ The Exchange's national securities exchange affiliates' cash 
equity markets include: the New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE National, Inc., and NYSE 
Chicago, Inc.
    \5\ See Securities Exchange Act Release No. 94072 (January 26, 
2022), 87 FR 5592 (February 1, 2022) (SR-NYSEArca-2021-47) (the 
``Arca Options Approval Order''). See also, e.g., Arca Options Rules 
6.76P-O (Order Ranking and Display) and 6.76AP-O (Order Execution 
and Routing) (together, the ``Arca Options Priority Rules''); Arca 
Options Rules 6.37AP-O (Market Maker Quotations), 6.40P-O (Pre-Trade 
and Activity-Based Risk Controls), 6.41P-O (Price Reasonability 
Checks--Orders and Quotes), 6.62P-O (Orders and Modifiers), and 
6.64P-O (Auction Process) (collectively, the ``Arca Options non-
Priority Rules''). See also NYSE Arca Rule 1.1 (Definitions) (which 
includes definitions that describe terms applicable to options 
trading on Pillar).
    \6\ See Rules 964NYP (Order Ranking, Display, and Allocation), 
964.1NYP (Directed Orders and DOMM Quoting Obligations) and 964.2NYP 
(Participation Entitlement of Specialists and e-Specialists) 
(collectively, the ``American Pillar Priority Rules''). See also 
Securities Exchange Act Release No. 97297 (April 13, 2023), 88 FR 
24225 (April 19, 2023) (SR-NYSEAmer-2023-16) (adopting new the 
American Pillar Priority Rules on an immediately effective basis, 
which rules utilize the Pillar concepts introduced in the Priority 
Arca rules and incorporate the Exchange's current Customer priority 
and pro rata allocation model) (the ``American Pillar Priority 
Filing''). The American Pillar Priority Rules (like the rules 
proposed herein) will not be implemented until all other Pillar-
related rule filings are either effective or approved, as 
applicable. See id.
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    The Exchange plans to roll out the new technology platform over a 
period of time based on a range of underlying symbols beginning on 
October 23, 2023.\7\ As was the case for Arca Options when it 
transitioned to Pillar, the Exchange will announce by Trader Update \8\ 
when underlying symbols will be transitioning to the Pillar trading 
platform. With this transition, certain rules would continue to be 
applicable to options overlying symbols trading on the current trading 
platform--the ``Exchange System,'' \9\ but would not be applicable to 
options overlying symbols that have transitioned to trading on Pillar.
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    \7\ See Trader Update, January 30, 2023 (announcing Pillar 
Migration Launch date of October 23, 2023, for the Exchange), 
available here: https://www.nyse.com/trader-update/history#110000530919. The Exchange would not begin to migrate 
underlying symbols to the Pillar platform until all Pillar-related 
rule filings (i.e., proposed rules with a ``P'' modifier) are either 
approved or operative, as applicable.
    \8\ Trader Updates are available here: https://www.nyse.com/trader-update/history. Anyone can subscribe to email updates of 
Trader Updates, available here: https://www.nyse.com/subscriptions.
    \9\ As noted in the American Pillar Priority Filing, on Pillar, 
the Exchange will no longer use the terms ``Exchange System'' or 
``System,'' which are defined in Rule 900.2NY as referring to the 
Exchange's current ``electronic order delivery, execution, and 
reporting system for designated option issues through which orders 
and quotes of Users are consolidated for execution and/or display,'' 
and will file a subsequent proposed rule change to delete these 
defined terms and any references thereto after the migration to 
Pillar is completed.
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    Instead, the Exchange proposes new rules to reflect how options 
would trade on the Exchange once Pillar is implemented. These proposed 
rule changes will (1) use Pillar terminology that is identical to 
Pillar terminology governing options trading on NYSE Arca, except as 
otherwise noted; and (2) provide for common functionality on both its 
options markets.\10\
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    \10\ The current proposal seeks to adopt rules based on the Arca 
Options non-Priority Rules, as well as certain definitions that 
describe terms applicable to options trading on Pillar set forth in 
NYSE Arca Rule 1.1. See supra note 5.
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Proposed Use of ``P'' Modifier
    As proposed, and consistent with the American Pillar Priority 
Filing, new rules governing options trading on Pillar would have the 
same numbering as

[[Page 45731]]

current rules that address the same functionality, but with the 
modifier ``P'' appended to the rule number. All other current rules 
that have not had a version added with a ``P'' modifier will be 
applicable to how trading functions on both the Exchange System and 
Pillar. Once options overlying all symbols have migrated to the Pillar 
platform, the Exchange will file a separate rule proposal to delete 
rules that are no longer operative because they apply only to trading 
on the Exchange System.\11\ As further proposed, and consistent with 
the handling of the transition to Pillar by Arca Options, if a symbol 
(and the option overlying such symbol) is trading on the Pillar trading 
platform, a rule with the same number as a rule with a ``P'' modifier 
would no longer be operative for that symbol.\12\
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    \11\ See American Pillar Priority Filing (adopting, among other 
rules, new Rule 964NYP, which would be operative instead of current 
Rule 964NY). See id.
    \12\ The Exchange believes that this explanation regarding the 
``P'' modifier in Exchange rules provides transparency regarding 
which rules would be operative during the symbol migration to 
Pillar. See id. NYSE Arca used the same ``P'' modifier when it 
transitioned its options platform to Pillar. See Arca Options 
Approval Order.
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    The Exchange will not implement the ``P'' rules proposed herein 
until all other Pillar-related rule filings (i.e., with a ``P'' 
modifier) are either approved or operative, as applicable, and the 
Exchange announces the rollout of underlying symbols to Pillar by 
Trader Update.
Summary of Proposed Rule Changes
    In this filing, the Exchange proposes the following new Pillar 
rules: Rules 900.3NYP (Orders and Modifiers), 925.1NYP (Market Maker 
Quotations), 928NY (Pre-Trade and Activity-Based Risk Controls), 
928.1NYP (Price Reasonability Checks--Orders and Quotes), and 952NYP 
(Auction Process). Because certain proposed rules have definitions and 
functions that carry forward to other proposed rules, the Exchange 
proposes to describe the new rules in the following order (rather than 
by rule number order): orders and modifiers, market maker quotations, 
pre-trade and activity-based risk controls, price reasonability checks, 
and auctions.
    These proposed rules would describe the Exchange's options trading 
model on Pillar and, among other things, would use existing Pillar 
terminology and functionality currently in effect on Arca Options. 
However, because the Exchange has (and will continue to have) a 
priority and allocation scheme that differs from the price-time model 
on Arca Options, certain of the proposed rules differ from Arca Options 
insofar as they reflect the Exchange's existing (Customer priority and 
pro rata allocation) model.\13\ As discussed in greater detail below, 
except as noted herein, the Exchange is not proposing fundamentally 
different functionality applicable to options trading on Pillar than on 
the Exchange System. However, with Pillar, the Exchange would introduce 
new terminology, and as applicable, new or updated functionality that 
would be available for options trading on the Pillar platform, which 
functionality is (unless otherwise specified) identical to--or nearly 
identical to--functionality and rules already in place on Arca 
Options.\14\
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    \13\ See, e.g., Rule 964NYP. See also the American Pillar 
Priority Filing.
    \14\ The Exchange notes that certain differences between the two 
options markets will permeate the proposed rules, including that 
each exchange uses different terms to describes their permit 
holders--the Exchange refers to American Trading Permit (``ATP'') 
Holders, whereas Arca Options refers to Options Trading Permit 
(``OTP'') Holders or OTP Firms. See, e.g., Rule 900.2NY and NYSE 
Arca Rule 1.1, respectively. In addition, the Exchange utilizes 
Market Makers that act as Specialists whereas Arca Options has 
Market Makers that act as Lead Market Makers or LMMs. See, e.g., 
Rule 927NY and Arca Options Rule 6.37-O, respectively. Also, because 
the rule numbering differs on each options exchange, there will be 
differences in the Exchange's proposed rule as compared to its 
analogous Arca Options Rule to the extent that a proposed Exchange 
rule includes a cross-reference to another Exchange rule. The 
Exchange has not identified every such instance where these 
specified differences occur as it believes the differences are 
immaterial because they do not relate to the functionality proposed 
herein.
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    To promote clarity and transparency, the Exchange further proposes 
to add a preamble to the following current rules specifying that they 
would not be applicable to trading on Pillar: 900.3NY (Orders Defined), 
925.1NY (Market Maker Quotes), 928NY (Risk Limitation Mechanism), 952NY 
(Opening Process), 967NY (Price Protection-Orders), 967.1NY (Price 
Protection-Quotes), and 985NY (Qualified Contingent Crosses). In 
addition, the Exchange also proposes conforming changes to current 
Rules 925NY (Obligations of Market Makers), 953.1NY (Limit-Up and 
Limit-Down During Extraordinary Market Volatility), and 994NY 
(Broadcast Order Liquidity Delivery Mechanism) (the ``BOLD Mechanism'') 
to add cross-references to certain of the new Pillar rules, including 
those proposed in this filing.\15\
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    \15\ The proposed conforming changes to Rule 994NY regarding the 
BOLD mechanism would include adding cross-references to new Rule 
964NYP (in addition to existing references to current Rule 964NY) 
and to paragraph (k) of this Rule, which latter reference would 
state, in relevant part, that ``[f]ollowing the exposure period, 
consistent with Rule 964NYP(k), the Exchange will route the 
remaining portion of the exposed order to other exchanges'' and that 
``[a]ny portion of a routed order that returns unfilled will trade 
against the Exchange's best bid/offer unless another exchange is 
quoting at a better price in which case new orders will be generated 
and routed to trade against such better prices, consistent with Rule 
964NYP(k).''). See proposed Rule 994NY(c)(1) and (c)(4), 
respectively.
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Proposed Rule Changes
Proposed Rule 900.3NYP: Orders and Modifiers
    Current Rule 900.3NY (Orders Defined) defines the order types that 
are currently available for options trading both on the Exchange System 
and for open outcry trading on the Exchange. The Exchange proposes that 
new Rule 900.3NYP would set forth the order types and modifiers that 
would be available for options trading both on Pillar (i.e., electronic 
order entry) and in open outcry trading. The Exchange proposes to 
specify that Rule 900.3NY would not be applicable to trading on Pillar.
    Because the Exchange would have the same orders and modifiers as 
Arca Options, the Exchange proposes to structure proposed Rule 900.3NYP 
to be identical to Arca Options Rule 6.62P-O and use the same 
terminology. The Exchange also proposes to title proposed Rule 900.3NYP 
as ``Orders and Modifiers,'' which title is identical to Arca Options 
Rule 6.62P-O. In addition, as was done on Arca Options, the Exchange 
proposes to include in the description of each order type the ``Pillar 
Priority Category'' within which such order would be ranked for 
priority, display, and allocation purposes. However, on the Exchange, 
the Pillar Priority Categories assigned to each order type would be 
handled in accordance with the Exchange's Customer priority/pro rata 
allocation model, per Rule 964NYP.\16\
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    \16\ See Rule 964NYP(e) (which provides that ``[a]t each price, 
all orders and quotes are assigned a priority category, and, within 
each priority category, Customer orders are ranked ahead of non-
Customer. If, at a price, there are no remaining orders or quotes in 
a priority category, then same-priced interest in the next priority 
category has priority.'').
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    Primary Order Types. Proposed Rule 900.3NYP(a) is identical Arca 
Options Rule 6.62P-O(a) and would specify the Exchange's primary order 
types, which would be Market Orders and Limit Orders. Proposed Rule 
900.3NYP(a) would also set forth the Exchange's proposed Limit Order 
Price Protection functionality and Trading Collars, which proposed 
functionality would likewise be identical to Arca Options Rule 6.62P-
O(a).
    Market Orders. Proposed Rule 900.3NYP(a)(1) is identical to Arca 
Options Rule 6.62P-O(a)(1) and would define a Market Order. As 
proposed, a Market Order would be an unpriced

[[Page 45732]]

order message to buy or sell a stated number of option contracts at the 
best price obtainable, subject to the Trading Collar assigned to the 
order, and would further specify that unexecuted Market Orders may be 
designated Day or GTC, which represents current functionality, and that 
unexecuted Market Orders would be ranked Priority 1--Market Orders.\17\ 
Similarly, the Exchange proposes to reference that trading of a Market 
Order would be subject to the Trading Collar assigned to the order, 
which is similar to the third paragraph of the current definition of 
Market Order in Rule 900.3NY(a). As described in greater detail below, 
the Exchange proposes changes to its Trading Collar functionality on 
Pillar.
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    \17\ Market Orders are currently defined in Rule 900.3NY(a) as 
follows: ``A Market Order is an order to buy or sell a stated number 
of option contracts and is to be executed at the best price 
obtainable when the order reaches the Exchange. Market Orders 
entered before the opening of trading will be eligible for trading 
during the Opening Auction Process. The system will reject a Market 
Order entered during Core Trading Hours if at the time the order is 
received there is not an NBB and an NBO (``collectively NBBO'') for 
that series as disseminated by OPRA. If the Exchange receives a 
Market Order to buy (sell) and there is an NBB (NBO) but no NBO 
(NBB) as disseminated by OPRA at the time the order is received, the 
order will be processed pursuant to Rule 967NY(a)-Trade Collar 
Protection.''
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    Proposed Rule 900.3NYP(a)(1) would further provide that for 
purposes of processing Market Orders, the Exchange would not use an 
adjusted NBBO.\18\ The Exchange proposes to not use an adjusted NBBO 
when processing Market Orders, which processing is identical to Arca 
Options Rule 6.62P-O(a)(1). The Exchange believes that because Market 
Orders trade immediately on arrival, using an unadjusted NBBO would 
provide a price protection mechanism by using a more conservative view 
of the NBBO.
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    \18\ See American Pillar Priority Filing (amplifying the 
definition of ``NBBO'' per Rule 900.2NY to provide that when using 
an unadjusted NBBO, the NBBO would not be adjusted based on 
information about orders the Exchange sends to Away Markets, 
execution reports received from those Away Markets, and certain 
orders received by the Exchange). As noted in the American Pillar 
Filing, the Exchange believes that the unadjusted NBBO is a more 
conservative view of the NBBO because the Exchange waits for an 
update from OPRA rather than updating it based on its view of the 
NBBO, which is identical to NYSE Arca Rule 1.1, as relates to 
options trading.
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    Proposed Rule 900.3NYP(a)(1)(A) is identical to Arca Options Rule 
6.62P-O(a)(1)(A) and would provide that a Market Order that arrives 
during continuous trading would be rejected, or that was routed, 
returns unexecuted, and has no resting quantity to join would be 
cancelled if it fails the validations specified in proposed Rules 
900.3NYP(a)(1)(A)(i)--(iv). This proposed rule is based in part on Rule 
900.3NY(a), which specifies that a Market Order will be rejected during 
Core Trading Hours if, when received, there is no NBBO for the 
applicable option series as disseminated by OPRA, with differences to 
use Pillar terminology and to expand the circumstances when a Market 
Order would be rejected beyond the absence of an NBBO. As proposed, and 
identical to Arca Options Rule 6.62P-O(a)(1)(A)(i)-(iv), a Market Order 
would be rejected (or cancelled if routed first) if: \19\
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    \19\ The Exchange will also reject a Market Order if it is 
entered when the underlying NMS stock is either in a Limit State or 
a Straddle State, which is current functionality. See Rule 
953.1NY(a)(1). The Exchange proposes a non-substantive amendment to 
Rule 953.1NY(a)(1) to add a cross reference to proposed Rule 
900.3NYP(a). The Exchange also proposes to amend the second sentence 
of Rule 953.1NY(a)(1) to remove references to trading collars, and 
instead specify that the Exchange would cancel any resting Market 
Orders if the underlying NMS stock enters a Limit State or a 
Straddle State and would notify ATP Holders of the reason for such 
cancellation. This proposed change is identical to Arca Options Rule 
6.65A-O(a)(1) and would describe both how Market Orders function 
today on the Exchange System and how they would be processed on 
Pillar.
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     There is no NBO (proposed Rule 900.3NYP(a)(1)(A)(i)). This 
criterion is similar to the current rule, which provides that a Market 
Order will be rejected if there is no NBO and is identical to Arca 
Options Rule 6.62P-O(a)(1)(A)(i). The Exchange believes that in the 
absence of an NBO, Market Orders should not trade as there is no market 
for the option.
     There is no NBB and the NBO is higher than $0.50 (for sell 
Market Orders only). The Exchange further proposes that if there is no 
NBB and the NBO is $0.50 or below, a Market Order to sell would not be 
rejected and would have a working price and display price one MPV above 
zero and would not be subject to a Trading Collar (proposed Rule 
900.3NYP(a)(1)(A)(ii)).\20\ The Exchange believes that if there is no 
NBB, but an NBO $0.50 or below, the Exchange would be able to price 
that Market Order to sell at one MPV above zero. The functionality 
described in this proposed rule is identical to Arca Options Rule 
6.62P-O(a)(1)(A)(ii) and is designed to provide an opportunity for an 
arriving sell Market Order to trade when the NBO is below $0.50. The 
proposed rule would further provide that a Market Order to sell would 
be cancelled if it was assigned a Trading Collar, routed, and when it 
returns unexecuted, it has no resting portion to join and there is no 
NBB, regardless of the price of the NBO. Accordingly, in this scenario, 
if there is no NBB and there is an NBO that is $0.50 or below, the 
returned, unexecuted Market Order would be cancelled rather than 
displayed at one MPV above zero.
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    \20\ See Rules 964NYP(a)(3) (defining ``working price'' as the 
price at which an order or quote is eligible to trade at any given 
time, which may be different from the limit price or display price 
of the order) and (a)(1) (defining ``display price'' as the price at 
which an order or quote ranked Priority 2-Display Orders or Market 
Order is displayed, which may be different from the limit price or 
working price of the order).
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     There are no contra-side Market Maker quotes on the 
Exchange or contra-side ABBO, provided that a Market Order to sell 
would be accepted as provided for in proposed Rule 
900.3NYP(a)(1)(A)(ii) (proposed Rule 900.3NYP(a)(1)(A)(iii)). This 
functionality is identical to Arca Options Rule 6.62P-O(a)(1)(A)(iii) 
and is designed to prevent a Market Order from trading at prices that 
may not be current for that series in the absence of Market Maker 
quotations or an ABBO.
     The NBBO is not locked or crossed, and the spread is equal 
to or greater than a minimum amount based on the midpoint of the NBBO 
(proposed Rule 900.3NYP(a)(1)(A)(iv), which is identical to Arca 
Options Rule 6.62P-O (a)(1)(A)(iv)). The proposed ``wide-spread'' 
parameter for purposes of determining whether to reject a Market Order 
is similar to the wide-spread parameter applied when determining 
whether a trade is a Catastrophic Error, as set forth in Rule 
975NY(d)(3), with two differences. First, as shown below, the lowest 
bucket would be $0.00 up to and including $2.00, instead of $0.00 to 
$1.99, which means the $2.00 price point would be included in this 
bucket. Second, the wide-spread calculation would be based off of the 
midpoint of the NBBO, rather than off of the bid price, as follows:

------------------------------------------------------------------------
                                                              Spread
                The midpoint of the NBBO                     parameter
------------------------------------------------------------------------
$0.00 to $2.00..........................................           $0.75
Above $2.00 to and including $5.00......................            1.25
Above $5.00 to and including $10.00.....................            1.50
Above $10.00 to and including $20.00....................            2.50
Above $20.00 to and including $50.00....................            3.00
Above $50.00 to and including $100.00...................            4.50
Above $100.00...........................................            6.00
------------------------------------------------------------------------

    The Exchange notes that this proposed protection for Market Orders 
is identical to the protection afforded Market Orders per Arca Options 
Rule 6.62P-O(a)(1)(A)(iv) and would provide a new risk control for 
options trading on the Exchange that is designed to protect against 
erroneous executions using the

[[Page 45733]]

midpoint of the NBBO as a basis for a price protection mechanism.\21\
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    \21\ The Exchange notes that using the midpoint of the NBBO as a 
basis for a price protection mechanism is also consistent with 
similar functionality on other options markets. See, e.g., Cboe Rule 
5.34(a)(2) (setting forth the ``Market Order NBBO Width Protection'' 
wherein Cboe cancels or rejects market orders submitted ``when the 
NBBO width is greater than x% of the midpoint of the NBBO,'' subject 
to minimum and maximum dollar values determined by Cboe).
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    Proposed Rule 900.3NYP(a)(1)(B) is identical to Arca Options Rule 
6.62P-O(a)(1)(B) and would provide that an Aggressing Market Order to 
buy (sell) would trade with all orders or quotes to sell (buy) on the 
Consolidated Book priced at or below (above) the Trading Collar before 
routing to Away Market(s) at each price.\22\ Proposed Rule 
900.3NYP(a)(1)(B) would further provide that after trading or routing, 
or both, a Market Order would be displayed at the Trading Collar, 
subject to proposed Rule 900.3NYP(a)(1)(C) (described immediately 
below), which is consistent with current functionality that each Market 
Order is displayed at a Trading Collar, per Rule 967NY(a)(5).
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    \22\ See Rule 964NYP(a)(5) (adopting the definition of an 
Aggressing Order). For purposes of this proposed rule, an Aggressing 
Market Order is a Market Order that is an Aggressing Order.
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    Proposed Rule 900.3NYP(a)(1)(C) is identical to Arca Options Rule 
6.62P-O(a)(1)(C) and would provide that a Market Order would be 
cancelled before being displayed if there are no remaining contra-side 
Market Maker quotes on the Exchange or contra-side ABBO. Proposed Rule 
900.3NYP(a)(1)(D) is identical to Arca Options Rule 6.62P-O(a)(1)(D) 
and would provide that a Market Order would be cancelled after being 
displayed at its Trading Collar if there ceases to be a contra-side 
NBBO. These proposed cancellation events are similar to functionality 
described in current Rule 967NY(a)(4)(E), which provides that ``[t]he 
Exchange will cancel a Market Order, or the balance thereof, that has 
been collared pursuant to paragraph (a)(1)(A) or (B) [of that Rule] 
above, if after exhausting trading opportunities within the Collar 
Range, the Exchange determines there are no quotes on the Exchange and/
or no interest on another market in the affected option series.'' As 
proposed, in Pillar, the Exchange would cancel a Market Order in 
similar circumstances, with proposed modifications that a Market Order 
would be cancelled only if there are no remaining contra-side Market 
Maker quotes on the Exchange or if there is no contra-side ABBO. The 
Exchange believes that, as is the case on Arca Options, the proposal to 
cancel a Market Order either before or after it is displayed in these 
circumstances would help to prevent such order from being displayed 
when there is no real market in a series.
    Finally, proposed Rule 900.3NYP(a)(1)(E) is identical to Arca 
Options Rule 6.62P-O(a)(1)(E) and would provide that a resting, 
displayed Market Order that is locked or crossed by an Away Market 
would be routed to that Away Market. Because Market Orders are intended 
to trade at the best price obtainable, the Exchange proposes to route 
displayed Market Orders if they are locked or crossed by an Away 
Market.\23\ This proposed Rule is based on current functionality, which 
is not described in the current rule. Therefore, the proposed rule is 
designed to promote clarity and transparency in Exchange rules.
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    \23\ Per Rule 964NYP(b)(2), displayed interest other than 
displayed Market Orders would stand their ground if locked or 
crossed by an Away Market. The Exchange would provide an option for 
Limit Orders to instead be routed, see discussion infra, regarding 
proposed Rule 6.62P-O(i)(1) and the proposed Proactive if Locked/
Crossed Modifier.
---------------------------------------------------------------------------

    Limit Orders. Proposed Rule 900.3NYP(a)(2) is identical to Arca 
Options Rule 6.62P-O(a)(2) and would define a Limit Order as an order 
message to buy or sell a stated number of option contracts at a 
specified price or better, subject to Limit Order Price Protection and 
the Trading Collar assigned to the order, and that a Limit Order may be 
designated Day, IOC, or GTC. In addition, unless otherwise specified, 
the working price and the display price of a Limit Order would be equal 
to the limit price of the order, it is eligible to be routed, and it 
would be ranked under the proposed category of ``Priority 2--Display 
Orders.'' \24\ The ability for a Limit Order to be designated IOC, Day, 
or GTC is also based on current Rules 900.3NY(k), (m) and (n), 
respectively, and is consistent with current options trading 
functionality. In addition, consistent with current options trading 
functionality, Limit Orders would be subject to trading collars, and, 
as described in more detail below, the Exchange proposes trading collar 
functionality that will operate in the same manner as on Arca Options.
---------------------------------------------------------------------------

    \24\ See Rule 964NYP(a)(2) (defining ``limit price'' as the 
highest (lowest) specified price at which a Limit Order or quote to 
buy (sell) is eligible to trade).
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(a)(2)(A) is identical to Arca Options Rule 
6.62P-O(a)(2)(A) and would provide that a marketable Limit Order to buy 
(sell) received by the Exchange would trade with all orders and quotes 
to sell (buy) on the Consolidated Book priced at or below (above) the 
NBO (NBB) before routing to the ABO (ABB) and may route to prices 
higher (lower) than the NBO (NBB) only after trading with orders and 
quotes to sell (buy) on the Consolidated Book at each price point, and 
once no longer marketable, the Limit Order would be ranked and 
displayed on the Consolidated Book. This proposed rule text is based on 
Rule 900.3NY(b), which provides that a `` `marketable' limit order is a 
Limit Order to buy (sell) at or above (below) the NBBO.''
    Limit Order Price Protection. The Exchange proposes to describe its 
proposed Limit Order Price Protection functionality in proposed Rule 
900.3NYP(a)(3), which functionality would operate in a manner identical 
to Arca Options Rule 6.62P-O(a)(3). On the Exchange System, the concept 
of ``Limit Order Price Protection'' for orders is set forth in Rule 
967NY(b). For quotes, price protection filters are described in Rule 
967.1NY. The proposed ``Limit Order Price Protection'' on Pillar would 
be applicable to both Limit Orders and quotes and, at a high level, 
would work similarly to how the current price protection mechanisms 
function on the Exchange System because a Limit Order or quote would be 
rejected if it is priced at a specified threshold away from the contra-
side NBB or NBO.\25\ The Exchange proposes to enhance the functionality 
for options trading on Pillar by using new thresholds and reference 
prices (as discussed further below) that would be applicable to both 
orders and quotes. The concept of a ``Reference Price'' as used in 
connection with risk controls is identical to the same concept used in 
Arca Options Rule 6.62P-O(a)(3)(B) and would be consistent how this 
term is used on other options exchanges.\26\ Thus, this term is not new 
or novel.
---------------------------------------------------------------------------

    \25\ Current Rule 967NY(b) provides that unless otherwise 
determined by the Exchange, the specified threshold percentage for 
orders is 100% when the contra-side NBB or NBO is priced at or below 
$1.00 and 50% when the contra-side NBB or NBO is priced above $1.00. 
Current Rule 967.1NY(a)(1)(A) provides that unless otherwise 
determined by the Exchange, the specified threshold for Market Maker 
bids is $1.00 if the contra-side NBO is priced at or below $1.00 and 
for Market Maker offers no limit if the NBB is priced at or below 
$1.00. Current Rule 967.1NY(a)(1)(B) provides that unless otherwise 
determined by the Exchange, the specified threshold for Market Maker 
bids (offers) is 50% if the contra-side NBO (NBB) is priced above 
$1.00.
    \26\ See, e.g., Cboe Rule 5.6(c) (setting forth the ``reference 
price'' applicable to orders for which Cboe delta-adjusts the 
execution price after the market close). As discussed infra, the 
Exchange likewise proposes to use the term Reference Price in 
connection with Trading Collars (proposed Rule 900.3NYP(a)(4)).

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

[[Page 45734]]

    Proposed Rule 900.3NYP(a)(3)(A) is identical to Arca Options Rule 
6.62P-O(a)(3)(A) and would provide that each trading day, a Limit Order 
or quote to buy (sell) would be rejected or cancelled (if resting) if 
it is priced at a ``Specified Threshold'' (described below), equal to 
or above (below) the Reference Price, rounded down to the nearest price 
within the MPV for the Series (``Limit Order Price Protection''). In 
other words, a Limit Order designated GTC would be re-evaluated for 
Limit Order Price Protection on each day that it is eligible to trade 
and would be cancelled if the limit price is through the Specified 
Threshold. In addition, the proposed rounding down is standard on 
Pillar for price protection mechanisms and is identical to how Limit 
Order Price Protection is calculated on Arca Options if it is not 
within the MPV for the security. The proposed text would therefore 
promote granularity in Exchange rules. The proposed rule would further 
provide that Cross Orders and Limit-on-Open (``LOO'') Orders (described 
below), as well as orders represented in open outcry (except CTB 
Orders), would not be subject to Limit Order Price Protection and that 
Limit Order Price Protection would not be applied to a Limit Order or 
quote if there is no Reference Price, which is consistent with current 
functionality.
     Proposed Rule 900.3NYP(a)(3)(A)(i) is identical to Arca 
Options Rule 6.62P-O(a)(3)(A)(i) and would provide that a Limit Order 
or quote that arrives when a series is open would be evaluated for 
Limit Order Price Protection on arrival.
     Proposed Rule 900.3NYP(a)(3)(A)(ii) is identical to Arca 
Options Rule 6.62P-O(a)(3)(A)(ii) and would provide that a Limit Order 
or quote received during a pre-open state would be evaluated for Limit 
Order Price Protection after an Auction concludes.\27\
---------------------------------------------------------------------------

    \27\ See discussion infra, regarding proposed Rule 952NYP(a) and 
proposed definitions for the terms ``Auction,'' ``Auction Price,'' 
Auction Collar,'' ``pre-open state,'' and ``Trading Halt Auction.''
---------------------------------------------------------------------------

     Proposed Rule 900.3NYP(a)(3)(A)(iii) is identical to Arca 
Options Rule 6.62P-O(a)(3)(A)(iii) would provide that a Limit Order or 
quote that was resting on the Consolidated Book before a trading halt 
would be evaluated for Limit Order Price Protection again after the 
Trading Halt Auction concludes.
    As noted above, these proposed rules are identical to Arca Options 
Rules 6.62P-O(a)(3)(A)(i)-(iii), and the Exchange believes that these 
proposed rules would add clarity and transparency to when the Exchange 
would evaluate a Limit Order or quote for Limit Order Price Protection.
    Proposed Rule 900.3NYP(a)(3)(B) is identical to Arca Options Rule 
6.62P-O(a)(3)(B) and would specify that the Reference Price for 
calculating Limit Order Price Protection for an order or quote to buy 
(sell) would be the NBO (NBB), provided that, immediately following an 
Auction, the Reference Price would be the Auction Price, or if none, 
the upper (lower) Auction Collar price, or, if none, the NBO (NBB). The 
Exchange believes that adjusting the Reference Price for Limit Order 
Price Protection immediately following an Auction would ensure that the 
most up-to-date price would be used to assess whether to cancel a Limit 
Order that was received during a pre-open state or would be reevaluated 
after a Trading Halt Auction. The Exchange further proposes that for 
purposes of calculating Limit Order Price Protection, the Exchange 
would not use an adjusted NBBO, which use of an unadjusted NBBO is 
identical to how Limit Order Price Protection currently functions per 
Arca Options Rule 6.62P-O(a)(3)(B).\28\ The Exchange believes that 
using an unadjusted NBBO for risk protection mechanisms is consistent 
with the goal of such mechanisms to prevent erroneous executions by 
using a more conservative view of the NBBO.
---------------------------------------------------------------------------

    \28\ References to the NBBO, NBB, and NBO in proposed Rule 
900.3NYP (which are identical to Arca Options Rule 6.62P-O) refer to 
using a determination of the national best bid and offer that has 
not been adjusted.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(a)(3)(C) is identical to Arca Options Rule 
6.62P-O(a)(3)(C) and would specify the Specified Threshold and would 
provide that unless determined otherwise by the Exchange and announced 
to American Trading Permit Holders or ``ATP Holders'' \29\ by Trader 
Update, the Specified Threshold applicable to Limit Order Price 
Protection would be:
---------------------------------------------------------------------------

    \29\ An ATP Holder is a natural person, sole proprietorship, 
partnership, corporation, limited liability company or other 
organization, in good standing, which has been issued an ATP, and 
references to ``member'', and ``member organization'' as those terms 
are used in the Rules of the Exchange should be deemed to be 
references to ATP Holders. See Rule 900.2NY. An ATP is an American 
Trading Permit issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities. See 
id.

------------------------------------------------------------------------
                                                             Specified
                     Reference price                         threshold
------------------------------------------------------------------------
$0.00 to $1.00..........................................           $0.30
$1.01 to $10.00.........................................             50%
$10.01 to $20.00........................................             40%
$20.01 to $50.00........................................             30%
$50.01 to $100.00.......................................             20%
$100.01 and higher......................................             10%
------------------------------------------------------------------------

    The Exchange believes that it would provide a more reasonable and 
deterministic trading outcome to use a fixed dollar amount (of $0.30) 
rather than a percentage calculation when the Reference Price is $1.00 
or less. The Exchange believes that the balance of the proposed 
thresholds, which are percentages tied to the amount of the Reference 
Price that decrease as that Price increases, are more granular than 
those currently specified in Rules 967NY(b) (for orders) and 
967.1NY(a)(1)(A) and (B) (for quotes) and therefore determining whether 
to reject a Limit Order or quote will be more tailored to the 
applicable Reference Price.\30\ In addition, consistent with Rules 
967NY(b) and 967.1NY(a)(1), the Exchange proposes that these thresholds 
could change, subject to announcing the changes by Trader Update. 
Providing flexibility in Exchange rules regarding how the Specified 
Thresholds would be set is not only identical to the flexibility 
afforded per Arca Options Rule 6.62P-O(a)(3)(C) but is also consistent 
with the rules of other options exchanges.\31\
---------------------------------------------------------------------------

    \30\ On the Exchange System, the thresholds for price protection 
on orders and quotes (per Rules 967NY(b) and 967.1NY(a)(1), 
respectively), depend solely on whether the contra-side NBBO (i.e., 
the reference price) is more or less than $1.00. The Exchange 
believes the additional Reference Price levels--and corresponding 
Specified Thresholds--would make the application of the Limit Order 
Price Protection more precise to the benefit of all market 
participants.
    \31\ See, e.g., Cboe Rule 5.34(a)(4) (describing the ``Drill-
Through Protection'' and that Cboe ``determines the buffer amount on 
a class and premium basis'' without specifying the amount of such 
buffers); and the Nasdaq Stock Market LLC (``Nasdaq'') Options 3, 
Section 15(a)(1)(B) (specifying that ``Order Price Protection'' can 
be a configurable dollar amount not to exceed $1.00 through such 
contra-side Reference BBO as specified by Nasdaq and announced via 
an Options Trader Alert).
---------------------------------------------------------------------------

    Trading Collar. Trading Collars on the Exchange System are 
currently described in Rule 967NY(a). Under the current rules, incoming 
Market Orders and marketable Limit Orders are limited in having an 
immediate execution if they would trade at a price greater than one 
``Trading Collar.'' A collared order is displayed at that price and 
then can be repriced to new collars as the NBBO updates. On Pillar, the 
Exchange proposes Trading Collar functionality that would be identical 
to Trading Collar functionality on Arca Options as described below.
    As proposed, a Market Order or Limit Order would be assigned a 
single Trading Collar that would be applicable to that order until it 
is fully executed or cancelled (unless the series is halted). The new 
proposed Trading Collar would function as a ceiling (for buy

[[Page 45735]]

orders) or floor (for sell orders) of the price at which such order 
could be traded, displayed, or routed. The Exchange further proposes 
that when an order is working at its assigned Trading Collar, it would 
cancel if not executed within a specified time period.
    More specifically, proposed Rule 900.3NYP(a)(4) is identical to 
Arca Options Rule 6.62P-O(a)(4) and would provide that a Market Order 
or Limit Order to buy (sell) would not trade or route to an Away Market 
at a price above (below) the Trading Collar assigned to that order. As 
further proposed, Auction-Only Orders, Limit Orders designated IOC or 
FOK, Cross Orders, ISOs, and Market Maker quotes would not be subject 
to Trading Collars, which interest is excluded under current 
functionality.\32\ The proposed rule would also be the same as Arca 
Options Rule 6.62P-O(a)(4) because it would explicitly add reference to 
Auction-Only Orders, Cross Orders, ISOs, and Market Maker quotes being 
excluded from Trading Collars, which new detail would add granularity 
to the proposed rule and would also address that the proposed Day ISOs, 
described below, would not be subject to Trading Collars. In addition, 
Trading Collars would not be applicable during Auctions but (as 
described below) would be calculated after such Auction concludes.
---------------------------------------------------------------------------

    \32\ See Rule 967NY(a)(3) (``Trade Collar Protection does not 
apply to quotes, IOC Orders, AON Orders, FOK Orders and NOW 
Orders.'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(a)(4)(A) is identical to Arca Options Rule 
6.62P-O(a)(4)(A) and would provide that a Trading Collar assigned to an 
order would be calculated once per trading day and would be updated 
only if the series is halted. Accordingly, an order designated GTC 
would receive a new Trading Collar each day, but that Trading Collar 
would not be updated intraday unless the series is halted. Proposed 
Rule 900.3NYP(a)(4)(A)(i) is identical to Arca Options Rule 6.62P-
O(a)(4)(A)(i) and would provide that an order that is received during 
continuous trading would be assigned a Trading Collar before being 
processed for either trading, repricing, or routing and that an order 
that is routed on arrival and returned unexecuted would use the Trading 
Collar previously assigned to it. Proposed Rule 900.3NYP(a)(4)(A)(ii) 
is identical to Arca Options Rule 6.62P-O(a)(4)(A)(ii) and would 
provide that an order received during a pre-open state would be 
assigned a Trading Collar after an Auction concludes. Finally, proposed 
Rule 900.3NYP(a)(4)(A)(iii) is identical to Arca Options Rule 6.62P-
O(a)(4)(A)(iii) and would provide that the Trading Collar for an order 
resting on the Consolidated Book before a trading halt would be 
calculated again after the Trading Halt Auction concludes. The Exchange 
believes that because Trading Collars are intended as a price 
protection mechanism, updating the Trading Collar after a series has 
reopened would allow for the Trading Collar assigned to an order to 
reflect more updated pricing. As noted above, proposed Rules 
900.3NYP(a)(4)(A)(i)-(iii) are identical to Arca Options Rules 6.62P-
O(a)(4)(A)(i)-(iii).
    Proposed Rule 900.3NYP(a)(4)(B) is identical to Arca Options Rule 
6.62P-O(a)(4)(B) and would provide that the Reference Price for 
calculating the Trading Collar for an order to buy (sell) would be the 
NBO (NBB), which is consistent with how trading collars are currently 
determined for Limit Orders, with differences to use this Reference 
Price for all orders and for how the Reference Price would be 
determined after an Auction.\33\ As is the case per Arca Options Rule 
6.62P-O(a)(4)(B), the Exchange likewise proposes to use the Pillar term 
``Reference Price'' to describe what would be used for Trading Collar 
calculations.\34\ The proposed rule, like the Arca Options Rule, would 
further provide that for Auction-eligible orders to buy (sell) that 
were received during a pre-open state or orders that were re-assigned a 
Trading Collar after a trading halt, the Reference Price would be the 
Auction Price or, if none, the upper (lower) Auction Collar price or, 
if none, the NBO (NBB). For reasons similar to those described above, 
the Exchange proposes to use a more conservative view of the NBBO for 
purposes of risk protection mechanisms. Therefore, the Exchange 
proposes that for purposes of calculating a Trading Collar, the 
Exchange would not use an adjusted NBBO. Proposed Rule 
900.3NYP(a)(4)(B)(i) is identical to Arca Options Rule 6.62P-
O(a)(4)(B)(i) and would further provide that a Trading Collar would not 
be assigned to a Limit Order if there is no Reference Price at the time 
of calculation, which is consistent with current functionality and the 
proposed rule would add granularity to Exchange rules.
---------------------------------------------------------------------------

    \33\ Under current rules, trading collars are calculated based 
off of the contra-side NBBO. See Rule 967NY(a)(1)(A)(ii).
    \34\ See also discussion regarding Cboe Rule 5.34(a)(4) and 
Nasdaq Options 3, Section 15(a)(1)(B), supra note 31.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(a)(4)(C) is identical to Arca Options Rule 
6.62P-O(a)(4)(C) and would describe how the Trading Collar would be 
calculated and would provide that the Trading Collar for an order to 
buy (sell) would be a specified amount above (below) the Reference 
Price, as follows: (1) for orders with a Reference Price of $1.00 or 
lower, $0.20; or (2) for orders with a Reference Price above $1.00, the 
lesser of an amount specified in the table in proposed Rule 
900.3NYP(a)(4)(C) (ranging from $0.20 for orders with a Reference Price 
of $1.01 to $2.00 to $1.90 for orders with a Reference Price of $100.01 
and above) or 25% of the Reference Price. Trading Collars under the 
current rule are based on a specified dollar amount (set forth in ten 
tranches).\35\ As is the case with Trading Collars on Arca Options, the 
proposed functionality would tailor the Trading Collar calculations 
with either a specified dollar amount or percentage, depending on the 
Reference Price, and would align the specified thresholds with the 
current parameters for determining whether a trade is an Obvious Error 
or Catastrophic Error.\36\ Proposed Rule 900.3NYP(a)(4)(C)(i) is 
identical to Arca Options Rule 6.62P-O(a)(4)(C)(i) and would further 
provide that if the calculation of a Trading Collar would not be in the 
MPV for the series, it would be rounded down to the nearest price 
within the applicable MPV. Proposed Rule 900.3NYP(a)(4)(C)(ii) is 
identical to Arca Options Rule 6.62P-O(a)(4)(C)(ii) and would further 
provide that for orders to sell, if subtracting the Trading Collar from 
the Reference Price would result in a negative number, the Trading 
Collar for Limit Orders would be the limit price and the Trading Collar 
for Market Orders would be one MPV above zero, which would provide more 
granularity in Exchange rules and would ensure that there will be a 
Trading Collar calculated for low-priced orders to sell. As noted 
above, this proposed rule is identical to Arca Options Rule 6.62P-
O(a)(4)(C) and its subparagraphs (i)-(ii).
---------------------------------------------------------------------------

    \35\ Under current Rule 967NY(a)(2)(A)(i)-(v), the Trading 
Collar for buy (sell) orders is as follows: $0.25 for each option 
contract for which the NBB (NBO) is less than $2.00; $0.40 where the 
NBB (NBO) is between $2.00-$5.00; $0.50 where the NBB (NBO) is 
between $5.01-$10.00; $0.80 where the NBB (NBO) is more than $10.00 
but does not exceed $20.00; and $1.00 when the NBB (NBO) is $20.01 
or more.
    \36\ See Rules 975NY(c)(1) (thresholds for Obvious Errors) and 
975NY(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(a)(4)(D) is identical to Arca Options Rule 
6.62P-O(a)(4)(D) and would describe how the Trading Collar would be 
applied and would provide that if an order to buy (sell) would trade or 
route above (below) the Trading Collar or would have its working price 
repriced to a Trading Collar that is below (above) its limit

[[Page 45736]]

price, the order would be added to the Consolidated Book at the Trading 
Collar for 500 milliseconds and if not traded within that period, would 
be cancelled. In addition, once the 500-millisecond timer begins for an 
order, the order would be cancelled at the end of the timer even if it 
repriced or has been routed to an Away Market during that period, in 
which case any portion of the order that is returned unexecuted would 
be cancelled.
    The Exchange believes that the proposed Trading Collar 
functionality is designed to provide a similar type of order protection 
as is currently available (as described in Rule 967NY(a)) because it 
would limit the price at which a marketable order could be traded, 
routed, or displayed. The proposed differences from the current rule, 
which are identical to Arca Options Rule 6.62P-O(a)(4), would simplify 
the functionality by applying a static ceiling price (for a buy order) 
or floor price (for a sell order) at which such order could be traded 
or routed, which price would be determined at the time of entry (or 
after a series opens or reopens) and would be applicable to the order 
until it is traded or cancelled. The Exchange believes that the 
proposed functionality would provide greater determinism to an ATP 
Holder of the Trading Collar that would be applicable to a Market Order 
or Limit Order and when such order may be cancelled if it reaches its 
Trading Collar.
    Time in Force Modifiers. Proposed Rule 900.3NYP(b) is identical to 
Arca Options Rule 6.62P-O(b) and would set forth the time-in-force 
modifiers that would be available for options trading on Pillar. The 
Exchange proposes to offer the same time-in-force modifiers that are 
currently available for options trading on the Exchange and use Pillar 
terminology to describe the functionality. As noted above, the Exchange 
proposes to describe the Time in Force Modifiers in proposed Rule 
900.3NYP(b), and then specify for each order type which Time in Force 
Modifiers would be available for such orders or quotes, which mirrors 
Arca Options Rule 6.62P-O(b).
    Day Modifier. Proposed Rule 900.3NYP(b)(1) would be identical to 
Arca Options Rule 6.62P-O(b)(1) and would provide that any order or 
quote to buy or sell designated Day, if not traded, would expire at the 
end of the trading day on which it was entered and that a Day Modifier 
cannot be combined with any other Time in Force Modifier. This proposed 
functionality would operate no differently than how a ``Day Order,'' as 
described in Rule 900.3NY(m), currently functions.
    Immediate-or-Cancel (``IOC'') Modifier. Proposed Rule 
900.3NYP(b)(2) is identical to Arca Options Rule 6.62P-O(b)(2) and 
would provide that a Limit Order may be designated IOC or Routable IOC, 
as described in proposed Rules 900.3NYP(b)(2)(A) and (B) and that a 
Limit Order designated IOC would not be eligible to participate in any 
Auctions.
    Proposed Rule 900.3NYP(b)(2)(A) is identical to Arca Options Rule 
6.62P-O(b)(2)(A) and would define a ``Limit IOC Order'' as a Limit 
Order designated IOC that would be traded in whole or in part on the 
Exchange as soon as such order is received, and the unexecuted quantity 
would be cancelled and that a Limit IOC Order does not route. The 
proposed Pillar Limit IOC Order would function the same as an 
``Immediate-or-Cancel Order (IOC Order),'' as currently described in 
Rule 900.3NY(k), without any differences.
    Proposed Rule 900.3NYP(b)(2)(B) is identical to Arca Options Rule 
6.62P-O(b)(2)(B) and would define a ``Limit Routable IOC Order'' as a 
Limit Order designated Routable IOC that would be traded in whole or in 
part on the Exchange as soon as such order is received, and the 
unexecuted quantity routed to Away Market(s) and that any quantity not 
immediately traded either on the Exchange or an Away Market would be 
cancelled. The proposed Pillar Limit Routable IOC Order is also based 
on (and would replace) the ``NOW Order,'' as currently described in 
Rule 900.3NY(o).
    Fill-or-Kill (``FOK'') Modifier. Proposed Rule 900.3NYP(b)(3) is 
identical to Arca Options Rule 6.62P-O(b)(3) and would provide that a 
Limit Order designated FOK would be traded in whole on the Exchange as 
soon as such order is received, and if not so traded is to be cancelled 
and that a Limit Order designated FOK does not route and does not 
participate in any Auctions. This proposed rule uses Pillar terminology 
and would offer the same functionality that is currently described in 
Rule 900.3NY(l) as the ``Fill-or-Kill Order (FOK Order)'' without any 
substantive differences.
    Good-`Til-Cancelled (``GTC'') Modifier. Proposed Rule 
900.3NYP(b)(4) is identical to Arca Options Rule 6.62P-O(b)(4) and 
would provide that a Limit Order or Market Order designated GTC remains 
in force until the order is filled, cancelled, the MPV in the series 
changes overnight, the option contract expires, or a corporate action 
results in an adjustment to the terms of the option contract. This 
proposed rule uses Pillar terminology and would offer the same 
functionality that is currently described in 900.3NY(n) as the ``Good-
Till-Cancelled (GTC Order),'' with the substantive difference that the 
proposed text makes clear (consistent with current functionality) that 
such orders may be cancelled if the MPV changes overnight. Otherwise, 
the proposed rule describes the same functionality that is currently 
described in 900.3NY(n) as the ``Good-Till-Cancelled (GTC Order).''
    Auction-Only Orders. Proposed Rule 900.3NYP(c) is identical to Arca 
Options Rule 6.62P-O(c) and would define an ``Auction-Only Order'' as a 
Limit Order or Market Order that is to be traded only in an Auction 
pursuant to Rule 952NYP.\37\ This proposed rule which uses Pillar 
terminology in lieu of the current description of an ``Opening Only 
Order'' set forth in Rule 900.3NY(q), without any functional 
differences to how such orders trade on Pillar.\38\ The proposed rule 
would further provide that an Auction-Only Order would not be accepted 
when a series is opened for trading (i.e., would be accepted only 
during a pre-open state, which includes a trading halt) and any portion 
of an Auction-Only Order that is not traded in a Core Open Auction or 
Trading Halt Auction would be cancelled. This represents current 
functionality, which is not described in the current rule, and would 
provide clarity, transparency, and consistency to Exchange rules.
---------------------------------------------------------------------------

    \37\ See discussion infra, regarding proposed Rule 952NYP and 
definitions relating to Auctions. As proposed, an ``Auction'' 
includes the opening or reopening of a series for trading either 
with or without a trade. See proposed Rule 952NYP(a)(1).
    \38\ Rule 900.3NY(q) defines an ``Opening Only Order'' as ``a 
Market Order or Limit Order which is to be executed in whole or in 
part during the Opening Auction of an options series or not at 
all.'' Per Rule 952NY(e), the Exchange utilizes the same process for 
orders eligible to participate in the opening or reopening 
(following a trading halt) of a series.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(c)(1) would be identical to Arca Options 
Rule 6.62P-O(c)(1) and would define a ``Limit-on-Open Order (`LOO 
Order')'' as a Limit Order that is to be traded only in an Auction. 
This proposed rule describes functionality that would be no different 
from current functionality, as described in Rule 900.3NY(q).
    Proposed Rule 900.3NYP(c)(2) would be identical to Arca Options 
Rule 6.62P-O(c)(2) and would define a ``Market-on-Open Order (`MOO 
Order')'' as a Market Order that is to be traded only in an Auction. 
This proposed rule describes functionality that would be no different 
from current functionality, as described in Rule 900.3NY(q).
    Proposed Rule 900.3NYP(c)(3) would be identical to Arca Options 
Rule 6.62P-O(c)(3) and would define an

[[Page 45737]]

``Imbalance Offset Order (`IO Order')'' using Pillar terminology. To 
provide ATP Holders with greater flexibility for options trading on 
Pillar based on functionality offered on Arca Options, the Exchange 
proposes to offer the IO Order for both Core Open Auctions and Trading 
Halt Auctions.
    As proposed, the IO Order functionality is identical to IO Order 
functionality on Arca Options Rule 6.62P-O(c)(3). Accordingly, proposed 
Rule 900.3NYP(c)(3) would define an IO Order as a Limit Order that is 
to be traded only in an Auction.
     Proposed Rule 900.3NYP(c)(3)(A) is identical to Arca 
Options Rule 6.62P-O(c)(3)(A) and would provide that an IO Order would 
participate in an Auction only if: (1) there is an Imbalance in the 
series on the opposite side of the market from the IO Order after 
taking into account all other orders and quotes eligible to trade at 
the Indicative Match Price; and (2) the limit price of the IO Order to 
buy (sell) would be at or above (below) the Indicative Match Price.
     Proposed Rule 900.3NYP(c)(3)(B) is identical to Arca 
Options Rule 6.62P-O(c)(3)(B) and would provide that the working price 
of an IO Order to buy (sell) would be adjusted to be equal to the 
Indicative Match Price, provided that the working price of an IO Order 
would not be higher (lower) than its limit price.
    Orders with a Conditional or Undisplayed Price and/or Size. 
Proposed Rule 900.3NYP(d) is identical to Arca Options Rule 6.62P-O(d) 
and would set forth the orders with a conditional or undisplayed price 
and/or size that would be available for options trading on Pillar. On 
Pillar, the Exchange proposes to offer the same type of orders that are 
available in the Exchange System and that are currently described in 
Rule 900.3NY(d) as a ``Contingency Order or Working Order,'' with 
changes as described below.\39\
---------------------------------------------------------------------------

    \39\ See American Pillar Priority Filing (explaining that the 
term ``Working Order File'' will not be used on Pillar and proposing 
to include details about ranking of orders and quotes with 
contingencies in this proposed Rule 900.3NYP(d) using the Pillar 
priority scheme). Also, as discussed in the American Pillar Priority 
Filing, the ranking and priority of quotes under Pillar is 
consistent with handling on the Exchange System unless otherwise 
noted therein. See id.
---------------------------------------------------------------------------

    Reserve Order. The Exchange proposes to introduce Reserve Orders 
for options traded on Pillar in proposed Rule 900.3NYP(d)(1). On the 
Exchange, the proposed Reserve Order functionality would be identical 
to the handling of Reserve Orders per Arca Options Rule 6.62P-O(d)(1). 
As proposed, a Reserve Order would be defined as a Limit Order with a 
quantity of the size displayed and with a reserve quantity of the size 
(``reserve interest'') that is not displayed and that the displayed 
quantity of a Reserve Order is ranked under the proposed category of 
``Priority 2--Display Orders'' and the reserve interest is ranked under 
the proposed category of ``Priority 3--Non-Display Orders.'' Proposed 
Rule 900.3NYP(d)(1) would further provide that both the display 
quantity and the reserve interest of an arriving marketable Reserve 
Order would be eligible to trade with resting interest in the 
Consolidated Book or route to Away Markets, unless designated as a Non-
Routable Limit Order. Finally, proposed Rule 900.3NYP(d)(1) would 
further provide that the working price of the reserve interest of a 
resting Reserve Order to buy (sell) would be adjusted to be the lower 
(higher) of the limit price or the NBO (NBB), provided that it would 
never be priced higher (lower) than the working price of the display 
quantity of the Reserve Order, which text differs from Arca Options 
Rule 6.62P-O(d)(1) insofar as it does not reference the working price 
being adjusted in the same manner as a Non-Displayed Limit Order but 
instead states precisely how such price would be adjusted.\40\ Other 
than this nuance regarding the rule text used to describe how the 
working price of a resting Reserve Order would be adjusted, the 
operation of Reserve Orders on the Exchange would be identical to how 
such orders are handled per Arca Options Rule 6.62P-O(d)(1).
---------------------------------------------------------------------------

    \40\ Per Arca Options Rule 6.62P-O(d)(1), ``[t]he working price 
of the reserve interest of a resting Reserve Order to buy (sell) 
will be adjusted in the same manner as a Non-Displayed Limit Order, 
as provided for in paragraph (d)(2)(A) of this Rule.'' Per Arca 
Options Rule 6.62P-O(d)(2)(A), ``[t]he working price of a Non-
Displayed Limit Order to buy (sell) will be the lower (higher) of 
the limit price or the NBO (NBB).'' Because the Exchange is not 
proposing to adopt the Non-Displayed Limit Order type, proposed Rule 
900.3NYP(d)(1) simply restates the relevant text from Arca Options 
Rule 6.62P-O(d)(2)(A) regarding how the working price of the reserve 
interest of a resting Reserve Order would be adjusted. The Exchange 
believes that this distinction is immaterial because the Reserve 
Order functionality being proposed would be identical to Reserve 
Order functionality on Arca Options.
---------------------------------------------------------------------------

     Proposed Rule 900.3NYP(d)(1)(A) is identical to Arca 
Options Rule 6.62P-O(d)(1)(A) and would provide that the displayed 
portion of a Reserve Order would be replenished when the display 
quantity is decremented to zero and that the replenish quantity would 
be the minimum display size of the order or the remaining quantity of 
the reserve interest if it is less than the minimum display quantity.
     Proposed Rule 900.3NYP(d)(1)(B) is identical to Arca 
Options Rule 6.62P-O(d)(1)(B) and would provide that each time the 
display quantity of a Reserve Order is replenished from reserve 
interest, a new working time would be assigned to the replenished 
quantity.
     Proposed Rule 900.3NYP(d)(1)(C) is identical to Arca 
Options Rule 6.62P-O(d)(1)(C) and would provide that a Reserve Order 
may be designated as a Non-Routable Limit Order and if so designated, 
the reserve interest that replenishes the display quantity would be 
assigned a display price and working price consistent with the 
instructions for the order. The Exchange believes that the proposed 
rule would promote transparency and granularity in Exchange rules.
     Proposed Rule 900.3NYP(d)(1)(D) is identical to Arca 
Options Rule 6.62P-O(d)(1)(D) and would provide that a routable Reserve 
Order would be evaluated for routing both on arrival and each time the 
display quantity is replenished. Proposed Rule 900.3NYP(d)(1)(D)(i) is 
identical to Arca Options Rule 6.62P-O(d)(1)(D)(i) and would provide 
that if routing is required, the Exchange would route from reserve 
interest before publishing the display quantity. And proposed Rule 
900.3NYP(d)(1)(D)(ii) is identical to Arca Options Rule 6.62P-
O(d)(1)(D)(ii) and would provide that any quantity of a Reserve Order 
that is returned unexecuted would join the working time of the reserve 
interest and that if there is no reserve interest to join, the returned 
quantity would be assigned a new working time. As noted above, proposed 
Rules 900.3NYP(d)(1)(D)(i)-(ii) are identical to Arca Options Rule 
6.62P-O(d)(1)(D)(i)-(ii) and would promote transparency and granularity 
in Exchange rules.
     Proposed Rule 900.3NYP(d)(1)(E) is identical to Arca 
Options Rule 6.62P-O(d)(1)(E) and would provide that a request to 
reduce the size of a Reserve Order would cancel the reserve interest 
before cancelling the display quantity. The Exchange believes that the 
proposed rule would promote transparency and granularity in Exchange 
rules.
     Proposed Rule 900.3NYP(d)(1)(F) is identical to Arca 
Options Rule 6.62P-O(d)(1)(F) and would provide that a Reserve Order 
may be designated Day or GTC, except that the proposed rule does not 
reference ALO Orders, which order type is not offered by the Exchange 
today nor will the order type be offered on Pillar. The Exchange 
believes this difference is immaterial because the omitted text refers 
to an order modifier (i.e., ALO) that the Exchange does not propose to 
offer on Pillar and therefore has no bearing on the proposed

[[Page 45738]]

functionality. The Exchange believes that the proposed rule would 
promote transparency and granularity in Exchange rules.
    All-or-None (``AON'') Order. Proposed Rule 900.3NYP(d)(3) would be 
identical to Arca Options Rule 6.62P-O(d)(3) and would describe the 
handling of AON Orders on Pillar.\41\ AON Orders are currently defined 
in Rule 900.3NY(d)(4) and, consistent with current functionality, AON 
Orders on Pillar would only execute if such orders can be satisfied in 
their entirety. However, unlike the Exchange System, where AON Orders 
are not integrated in the Consolidated Book, on Pillar, the Exchange 
proposes that AON Orders would be ranked in the Consolidated Book and 
function as conditional orders that would trade only if their condition 
could be met. In addition, on Pillar, the Exchange would not support 
Market Orders designated as AON, which would be a change from current 
functionality. The Exchange does not believe it needs to continue 
offering AON Market Orders because such functionality was not used 
often on the Exchange System, indicating a lack of market participant 
interest in this functionality.
---------------------------------------------------------------------------

    \41\ The Exchange proposes to hold Rule 900.3NYP(d)(2) as 
``Reserved'' to keep the numbering of this rule consistent with Arca 
Options Rule 6.62P-O(d), to account for the fact that the Exchange 
does not propose to offer Non-Displayed Limit Orders, which are 
described in Arca Options Rule 6.62P-O(d)(2). See id.
---------------------------------------------------------------------------

    Specifically, proposed Rule 900.3NYP(d)(3) would provide that an 
AON Order is a Limit Order that is to be traded in whole on the 
Exchange at the same time or not at all, which represents current 
functionality as described in the first sentence of Rule 900.3NY(d)(4). 
Proposed Rule 900.3NYP(d)(3) uses Pillar terminology and would further 
provide that an AON Order that does not trade on arrival would be 
ranked under the proposed category of ``Priority 3--Non-Display 
Orders'' and that an AON Order may be designated Day or GTC, does not 
route, and would not participate in any Auctions. As noted above, this 
proposed new functionality, including that AON Orders would be ranked 
on the Consolidated Book, is identical to the handling of AON Order per 
Arca Options Rule 6.62P-O(d)(3) and the subsections thereunder.
     Proposed Rule 900.3NYP(d)(3)(A) is identical to Arca 
Options Rule 6.62P-O(d)(3)(A) and would provide that the working price 
of an AON Order would be assigned on arrival and adjusted when resting 
on the Consolidated Book and that the working price of an AON Order to 
buy (sell) would be the lower (higher) of the limit price or NBO (NBB).
     Proposed Rule 900.3NYP(d)(3)(B) is identical to Arca 
Options Rule 6.62P-O(d)(3)(B) and would provide that an Aggressing AON 
Order to buy (sell) would trade with sell (buy) orders and quotes that 
in the aggregate can satisfy the AON Order in its entirety. This 
proposed rule would promote clarity in Exchange rules that an 
Aggressing AON Order (whether on arrival or as a resting order that 
becomes an Aggressing Order) would be eligible to trade with more than 
one contra-side order or quote, provided that multiple orders and 
quotes in the aggregate would satisfy the AON Order in its entirety.
     Proposed Rule 900.3NYP(d)(3)(C) is identical to Arca 
Options Rule 6.62P-O(d)(3)(C) and would provide that a resting AON 
Order to buy (sell) would trade with an Aggressing Order or Aggressing 
Quote to sell (buy) that individually can satisfy the whole AON Order. 
The Exchange believes this proposed change would provide an AON Order 
with additional execution opportunities.
     Proposed Rule 900.3NYP(d)(3)(C)(i) is identical to Arca 
Options Rule 6.62P-O(d)(3)(C)(i) and would provide that if an 
Aggressing Order or Aggressing Quote to sell (buy) does not satisfy the 
resting AON Order to buy (sell), that Aggressing Order or Aggressing 
Quote would not trade with and may trade through such AON Order. 
Proposed Rule 900.3NYP(d)(3)(C)(ii) is identical to Arca Options Rule 
6.62P-O(d)(3)(C)(ii) and would further provide that if a resting non-
displayed order to sell (buy) does not satisfy the quantity of a same-
priced resting AON Order to buy (sell), a subsequently arriving order 
or quote to sell (buy) that satisfies the AON Order would trade before 
such resting non-displayed order or quote to sell (buy) at that price. 
Both of these proposed rules are similar to current Rule 900.3NY(d)(4), 
which provides that a resting AON Order can be ignored if its condition 
is not met. Similar to current functionality, even though an AON would 
be ranked in the Consolidated Book, it is still a conditional order 
type and therefore, by its terms, can be skipped over for an execution. 
As noted above, this proposed rule text is identical to Arca Options 
Rules 6.62P-O(d)(3)(C)(i) and (ii).
     Proposed Rule 900.3NYP(d)(3)(D) is identical to Arca 
Options Rule 6.62P-O(d)(3)(D) and would provide that a resting AON 
Order to buy (sell) would not be eligible to trade against an 
Aggressing Order or Aggressing Quote to sell (buy): (i) at a price 
equal to or above (below) any orders or quotes to sell (buy) that are 
displayed at a price equal to or below (above) the working price of 
such AON Order; or (ii) at a price above (below) any orders or quotes 
to sell (buy) that are not displayed and that have a working price 
below (above) the working price of such AON Order.
     Proposed Rule 900.3NYP(d)(3)(E) is identical to Arca 
Options Rule 6.62P-O(d)(3)(E) and would provide that if a resting AON 
Order to buy (sell) becomes an Aggressing Order it would trade as 
provided in paragraph (d)(3)(B) of this proposed Rule (described 
above); however, other resting orders or quotes to buy (sell) ranked 
Priority 3--Non-Display Orders that become Aggressing Orders or 
Aggressing Quotes at the same time as the resting AON Order would be 
processed before the AON Order. This proposed rule text is designed to 
promote clarity in Exchange rules that if multiple orders ranked 
Priority 3--Non-Display Orders, including AON and non-AON Orders, 
become Aggressing Orders or Aggressing Quotes at the same time, the AON 
Order would not be eligible to trade until the other orders ranked 
Priority 3- Non-Display Orders have been processed, even if they have 
later working times. The Exchange believes that it would be consistent 
with the conditional nature of AON Orders for other same-side non-
displayed orders to have a trading opportunity before the AON Order.
    Stop Order. Stop Orders are currently defined in Rule 
900.3NY(d)(1). The Exchange proposes to use Pillar terminology with 
more granularity to describe Stop Orders in proposed Rule 
900.3NYP(d)(4), as specified below and identical to Arca Options Rule 
6.62P-O(d)(4). Proposed Rule 900.3NYP(d)(4) would provide that a Stop 
Order is an order to buy (sell) a particular option contract that 
becomes a Market Order (or is ``elected'') when the Exchange BB (BO) or 
the most recent consolidated last sale price reported after the order 
was placed in the Consolidated Book (the ``Consolidated Last Sale'') 
(either, the ``trigger'') is equal to or higher (lower) than the 
specified ``stop'' price. The proposed functionality is consistent with 
existing functionality and provides more granularity of the 
circumstances when a Stop Order would be elected.\42\ Because a Stop 
Order becomes a Market Order when it is elected, the Exchange proposes 
that when it is elected, it would be cancelled if it does not meet the 
validations specified in proposed

[[Page 45739]]

Rule 900.3NYP(a)(1)(A)(above) and if not cancelled, it would be 
assigned a Trading Collar. This is consistent with current 
functionality, which is not described in the current rule describing 
Stop Orders, that once converted to a Market Order, such order is 
subject to the checks applicable in the current rule for Market Orders, 
i.e., cancelling such order if there is no NBBO. The proposed rule, 
which as noted above is identical to Arca Options Rule 6.62P-O(d)(4), 
references the checks that would be applicable to a Market Order on 
Pillar and thus adds greater granularity and transparency to Exchange 
rules.
---------------------------------------------------------------------------

    \42\ The current rule states that a Stop Order to buy (sell) 
will be triggered (i.e., elected) when the option contract ``trades 
at a price equal to or greater (less) than the specified `stop' 
price on the Exchange or another Market Center.'' See Rule 
900.3NY(d)(1).
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(d)(4)(A) is identical to Arca Options Rule 
6.62P-O(d)(4)(A) and would provide that a Stop Order would be assigned 
a working time when it is received but would not be ranked or displayed 
in the Consolidated Book until it is elected and that once converted to 
a Market Order, the order would be assigned a new working time and be 
ranked Priority 1--Market Orders. The original working time assigned to 
a Stop Order would be used to rank multiple Stop Orders elected at the 
same time. This is consistent with the current rule, which provides 
that a Stop Order is not displayed and has no standing in any Order 
Process in the Consolidated Book, unless or until it is triggered. The 
proposed rule is identical to Arca Options Rule 6.62P-O(d)(4)(A) and is 
designed to provide greater granularity and clarity regarding the 
treatment of Stop Orders, both when received and when elected.
    Proposed Rule 900.3NYP(d)(4)(B) is identical to Arca Options Rule 
6.62P-O(d)(4)(B) and would specify additional events that are designed 
to limit when a Stop Order may be elected so that a Market Order does 
not trade during a period of pricing uncertainty:
     Proposed Rule 900.3NYP(d)(4)(B)(i) is identical to Arca 
Options Rule 6.62P-O(d)(4)(B)(i) and would provide that if not elected 
on arrival, a Stop Order that is resting would not be eligible to be 
elected based on a Consolidated Last Sale unless the Consolidated Last 
Sale is equal to or in between the NBBO. This proposed rule text 
provides additional transparency of when a resting Stop Order would be 
eligible to be elected.
     Proposed Rule 900.3NYP(d)(4)(B)(ii) is identical to Arca 
Options Rule 6.62P-O(d)(4)(B)(ii) and would provide that a Stop Order 
would not be elected if the NBBO is crossed.
     Proposed Rule 900.3NYP(d)(4)(B)(iii) is identical to Arca 
Options Rule 6.62P-O(d)(4)(B)(iii) and would provide that after a Limit 
State or Straddle State is lifted, the trigger to elect a Stop Order 
would be either the Consolidated Last Sale received after such state 
was lifted or the Exchange BB (BO).\43\
---------------------------------------------------------------------------

    \43\ Rule 953.1NY(a)(2) currently provides that the Exchange 
will not elect Stop Orders when the underlying NMS stock is either 
in a Limit State or a Straddle State, which would continue to be 
applicable on Pillar. The Exchange proposes a non-substantive 
amendment to Rule 953.1NY(a)(2) to add a cross-reference to proposed 
Rule 900.3NYP(d)(4). The proposed rule is also identical to how Stop 
Orders are handled if the underlying NMS stock enters a Limit State 
or a Straddle State per Arca Options Rule 6.65A-O(a)(2).
---------------------------------------------------------------------------

    Stop Limit Order. Stop Limit Orders are currently defined in Rule 
900.3NY(d)(2).\44\ The Exchange proposes to use Pillar terminology with 
more granularity to describe Stop Limit Orders in proposed Rule 
900.3NYP(d)(5), as specified below and identical to Arca Options Rule 
6.62P-O(d)(5).
---------------------------------------------------------------------------

    \44\ The current rule states that a Stop Limit Order to buy 
(sell) will be triggered (i.e., elected) when the option contract 
``trades at a price equal to or greater (less) than the specified 
`stop' price on the Exchange or another Market Center.'' See Rule 
900.3NY(d)(2). Given the contingent nature of Stop Limit Orders, as 
is the case today, Stop Limit Orders submitted as IOC would be 
rejected on Pillar.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(d)(5) would provide that a Stop Limit Order 
is an order to buy (sell) a particular option contract that becomes a 
Limit Order (or is ``elected'') when the Exchange BB (BO) or the 
Consolidated Last Sale (either, the ``trigger'') is equal to or higher 
(lower) than the specified ``stop'' price.\45\ The proposed 
functionality is consistent with existing functionality and provides 
more granularity of when a Stop Limit Order would be elected than the 
current Rule 900.3NY(d)(2) definition of Stop Limit Order. As further 
proposed, a Stop Limit Order to buy (sell) would be rejected if the 
stop price is higher (lower) than its limit price, which rejection 
mirrors Arca Options Rule 6.62P-O(d)(5) and would prevent the Exchange 
from accepting potentially erroneously-priced orders. Because a Stop 
Limit Order becomes a Limit Order when it is elected, the Exchange 
proposes that when it is elected, it would be cancelled if it fails 
Limit Order Price Protection or a Price Reasonability Check and if not 
cancelled, it would be assigned a Trading Collar.\46\ This 
functionality is consistent with current functionality, though it is 
not explicitly stated in the current rule describing Stop Limit Orders. 
Specifically, both in the current Exchange System and as proposed on 
Pillar, once converted to a Limit Order, such order is subject to the 
checks applicable in the current rule for Limit Orders, i.e., Limit 
Order Filter on the Exchange System. The proposed rule, which as noted 
above is identical to Arca Options Rule 6.62P-O(d)(5), references the 
checks that would be applicable to a Limit Order on Pillar and thus 
adds greater granularity and transparency to Exchange rules.
---------------------------------------------------------------------------

    \45\ The term ``Consolidated Last Sale'' is defined in proposed 
Rule 900.3NYP(d)(4).
    \46\ See discussion infra, regarding proposed Rule 928.1NYP and 
Price Reasonability Checks.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(d)(5)(A) is identical to Arca Options Rule 
6.62P-O(d)(5)(A) and would provide that a Stop Limit Order would be 
assigned a working time when it is received but would not be ranked or 
displayed in the Consolidated Book until it is elected and that once 
converted to a Limit Order, the order would be assigned a new working 
time and be ranked under the proposed category of ``Priority 2--Display 
Orders.'' This functionality is consistent with the current rule, which 
provides that a Stop Limit Order is not displayed and has no standing 
in any Order Process in the Consolidated Book, unless or until it is 
triggered. The proposed rule is designed to provide greater granularity 
and clarity.
    Proposed Rule 900.3NYP(d)(5)(B) is identical to Arca Options Rule 
6.62P-O(d)(5)(B) and would specify additional events that are designed 
to limit when a Stop Limit Order may be elected so that a Limit Order 
would not have a possibility of trading or being added to the 
Consolidated Book during a period of pricing uncertainty.
     Proposed Rule 900.3NYP(d)(5)(B)(i) is identical to Arca 
Options Rule 6.62P-O(d)(5)(B)(i) and would provide that if not elected 
on arrival, a Stop Limit Order that is resting would not be eligible to 
be elected based on a Consolidated Last Sale unless the Consolidated 
Last Sale is equal to or in between the NBBO.
     Proposed Rule 900.3NYP(d)(5)(B)(ii) is identical to Arca 
Options Rule 6.62P-O(d)(5)(B)(ii) and would provide that a Stop Limit 
Order would not be elected if the NBBO is crossed.
    Orders with Instructions Not to Route. Currently, the Exchange 
defines non-routable orders in Rule 900.3NY as a PNP Order (which 
includes a Repricing PNP Order (``RPNP'')) (current Rule 900.3NY(p)) or 
a PNP-Blind Order (current Rule 900.3NY(x)). The Exchange also defines 
Intermarket Sweep Orders (current Rule 900.3NY(u)), which are also non-
routable.
    The Exchange separately defines quotes--all of which are non-

[[Page 45740]]

routable \47\--in Rule 925.1NY and such quotes may be designated as a 
Market Maker--Light Only Quotation (``MMLO'') (current Rule 
925.1NY(a)(3)(A)) and a Market Maker--Repricing Quotation (``MMRP'') 
(current Rule 925.1NY(a)(3)(B)). On the Exchange System, Market Maker 
quotes not designated as MMRP will cancel (rather than reprice) if they 
would lock or cross the NBBO, per Rule 925.1NY(a)(4)(C)(i).
---------------------------------------------------------------------------

    \47\ See Rule 925.1NY(a)(2) (providing that ``[a] quotation will 
not route'').
---------------------------------------------------------------------------

    On Pillar, proposed Rule 900.3NYP(e) is identical to Arca Options 
Rule 6.62P-O(e) and would streamline the non-routable order types and 
quotes that would be available on the Exchange.\48\ As described in 
greater detail below, proposed Rule 925.1NYP governing Market Maker 
Quotations would no longer define how quotations would function. 
Instead, that rule would specify that a Market Maker may designate a 
Non-Routable Limit Order as a Market Maker quote. Because the way in 
which non-routable orders and quotes would function on Pillar would be 
virtually identical (with differences described below), and because 
Market Makers could enter a Non-Routable Limit Order and then choose to 
designate it either as a quote or an order, the Exchange believes that 
it would promote transparency in Exchange rules to consolidate the 
description of the functionality in a single rule and eliminate 
duplication in Exchange rules. As described below, proposed Rule 
925.1NYP would cross reference proposed Rule 900.3NYP(e).
---------------------------------------------------------------------------

    \48\ The Exchange proposes to include details about ranking of 
orders and quotes with contingencies in this proposed Rule 
900.3NYP(e) using the Pillar priority scheme. See, e.g., Rule 
964NY(g) (providing that ``[t]he Exchange will apply ranking 
restrictions applicable to specific order, quote, or modifier 
instructions as provided for in [proposed] Rule 900.3NYP.''). Also, 
as discussed infra, see, e.g., note 39, the ranking and priority of 
quotes under Pillar is consistent with handling on the Exchange 
System unless otherwise noted herein.
---------------------------------------------------------------------------

    On Pillar, like Arca Options, the Exchange would no longer offer 
functionality based on the PNP-Blind Order or MMLO because it believes 
that the proposed orders/quotes with instructions not to route on 
Pillar (described below) would continue to provide ATP Holders with the 
core functionality associated with these existing order and quotation 
types, including that the proposed rules would provide for non-routable 
functionality and the ability to either reprice or cancel such orders/
quotes.
    Non-Routable Limit Order. Proposed Rule 900.3NYP(e)(1) is identical 
to the Arca Options Rule 6.62P-O(e)(1) and would define the Non-
Routable Limit Order. As explained further below, this proposed order 
type incorporates functionality currently available in both the 
existing PNP and RPNP order types, as defined in Rule 900.3NY, and the 
existing MMRP quotation type, as defined in Rule 925.1NYP(a)(3)(C).\49\ 
As described below, a Market Maker can designate a Non-Routable Limit 
Order as either a quote or an order and such interest so designated 
would be handled the same except as specified below. Accordingly, 
references to the capitalized term ``Non-Routable Limit Order'' 
describe functionality for either a quote or an order, unless otherwise 
specified.
---------------------------------------------------------------------------

    \49\ Both MMRPs and RPNPs function similarly. Compare current 
Rule 925.1NY(a)(4)(B) and subparagraphs (i) and (ii) with current 
Rule 900.3NY(p)(1)(A) and subparagraphs (i) and (ii). They are 
currently defined in separate rules only because the former rule 
addresses quotes and the latter rule addresses orders.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(e)(1) (like Arca Options Rule 6.62P-O(e)(1) 
would provide that a Non-Routable Limit Order is a Limit Order or quote 
that does not route and may be designated Day or GTC and would further 
provide that a Non-Routable Limit Order with a working price different 
from the display price would be ranked under the proposed category of 
``Priority 3--Non-Display Orders'' and a Non-Routable Limit Order with 
a working price equal to the display price would be ranked under the 
proposed category of ``Priority 2--Display Orders.'' This proposed 
rule, which as noted above is identical to the Arca Options Rule 6.62P-
O(e)(1), and uses Pillar terminology, including references to the 
Pillar concepts of ``working'' and ``display'' price as well to 
Priority rankings as proposed in Rules 964NYP(e)(2) and (3).\50\ This 
proposed rule also describes functionality similar to that described in 
the first clause of current Rule 900.3NY(p) relating to a PNP Order, 
which states that the portion of such order not executed on arrival is 
ranked in the Consolidated Book without routing any portion of the 
order to another Market Center (although the current rule does not 
include Pillar concepts of ``working'' and ``display'' price or Pillar 
Priority rankings).
---------------------------------------------------------------------------

    \50\ See supra note 20 (regarding definitions of ``display 
price'' and ``working price,'' set forth in Rules 964NYP(a)(1) and 
(a)(4), respectively.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(e)(1)(A) is identical to the Arca Options 
Rule 6.62P-O(e)(1)(A) and would provide that a Non-Routable Limit Order 
would not be displayed at a price that would lock or cross the ABBO and 
that a Non-Routable Limit Order to buy (sell) would trade with orders 
or quotes to sell (buy) in the Consolidated Book priced at or below 
(above) the ABO (ABB). This proposed text is designed to provide 
granularity that a Non-Routable Limit Order would never be displayed at 
a price that would lock or cross the ABBO, which is consistent with 
current PNP and RPNP Order functionality and with current Market Maker 
quoting functionality, as described in Rules 900.3NY(p), (p)(1), and 
925.1NY(a)(3)-(4), respectively. The Exchange proposes to use the new 
term ``ABBO'' (as proposed herein) to provide more granularity in 
Exchange rules.
    Proposed Rule 900.3NYP(e)(1)(A)(i) is identical to the Arca Options 
Rule 6.62P-O(e)(1)(A)(i) and would provide that a Non-Routable Limit 
Order can be designated to be cancelled if it would be displayed at a 
price other than its limit price. This would be an optional designation 
and would provide ATP Holders with functionality similar to how a PNP 
Order or a Market Maker quote not designated as MMRP currently 
functions, which cancels if such order or quote locks or crosses the 
NBBO.\51\ The Exchange proposes a substantive difference from the 
current PNP Order functionality such that if an ATP Holder opts to 
cancel instead of reprice a Non-Routable Limit Order, such order would 
be cancelled only if it could not be displayed at its limit price--
which could be because the order would be repriced to display at a 
price that would not lock or cross the ABBO or because it would be 
repriced due to Trading Collars.\52\ Stated otherwise, if a Non-
Routable Limit Order with a designation to cancel could be displayed at 
its original limit price and not lock or cross the ABBO, such order or 
quote would not be cancelled. The Exchange believes that the proposed 
rule provides granularity of the operation of a Non-Routable Limit 
Order and when such order or quote

[[Page 45741]]

would be cancelled, if so designated, including specifying 
circumstances when such order could be repriced, such as to avoid 
locking or crossing the ABBO or because of Trading collars.
---------------------------------------------------------------------------

    \51\ A PNP Order cannot route, and any unexecuted portion is 
ranked in the Consolidated Book except that such order is canceled 
if it would lock or cross the NBBO. See Rule 900.3NY(p). A Market 
Maker quote not designated as MMLO or MMRP will cancel (rather than 
reprice) if such quote would lock or cross the NBBO. See Rule 
925.1NY(a)(4)(C).
    \52\ Current Rule 900.3NY(p)(1)(B) provides than an incoming 
RPNP order would cancel if its limit price is more than a 
configurable number of MPVs outside its initial display price (on 
arrival). Under Pillar, because Trading Collars would be applicable 
to Non-Routable Limit Orders (and such orders may be repriced or 
``collared'' on arrival), the Exchange (like Arca Options) does not 
propose to cancel an incoming Non-Routable Limit Order if its limit 
price is more than a configurable number of MPVs outside its initial 
display price. As such, this aspect of RPNP functionality is not 
incorporated in the proposed Pillar rules and the Exchange instead 
proposes to incorporate Trading Collar functionality into the Non-
Routable Limit Order.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(e)(1)(A)(ii) is identical to Arca Options 
Rule 6.62P-O(e)(1)(A)(ii) and would provide that if not designated to 
cancel, if the limit price of a Non-Routable Limit Order to buy (sell) 
would lock or cross the ABO (ABB), it would be repriced to have a 
working price equal to the ABO (ABB) and a display price one MPV below 
(above) that ABO (ABB). Accordingly, the proposed Non-Routable Limit 
Order, if not designated to cancel, would reprice in the same manner as 
an RPNP order or MMRP quotation reprices on arrival per Rules 
900.3NY(p)(1)(A) and 925.1NY(a)(4)(B), which both offer similar 
functionality.
    The Exchange also proposes functionality on Pillar for the Non-
Routable Limit Order that is consistent with but different in 
application to the RPNP Order or MMRP on the Exchange System. 
Specifically, proposed Rule 900.3NYP(e)(1)(B), which is identical to 
Arca Options Rule 6.62P-O(e)(1)(B), would provide that the display 
price of a resting Non-Routable Limit Order to buy (sell) that has been 
repriced would be repriced higher (lower) only one additional time.\53\ 
If after that second repricing, the display price could be repriced 
higher (lower) again, the order can be designated to either remain at 
its last working price and display price or be cancelled, provided that 
a resting Non-Routable Limit Order that is designated as a quote cannot 
be designated to be cancelled.\54\ As compared to the proposal on 
Pillar to limit the number of times that Non-Routable Limit Orders may 
be repriced, the Exchange System restricts repricing of RPNPs and MMRPs 
based on the limit price of the interest being a configurable number of 
MPVs away from its initial display price.\55\ The Exchange therefore 
believes that the proposed functionality is consistent with current 
functionality because in either case, there will be limited repricing 
of resting interest, and would increase determinism in order execution 
based on the explicit restriction on the number of times resting 
interest may be repriced.
---------------------------------------------------------------------------

    \53\ For example, on arrival, a Non-Routable Limit Order to buy 
(sell) with a limit price higher (lower) than the ABO (ABB), would 
have a display price one MPV below (above) the ABO (ABB) and a 
working price equal to the ABO (ABB). If the ABO (ABB) reprices 
higher (lower), the resting Non-Routable Limit Order to buy (sell) 
would similarly be repriced higher (lower). If the ABO (ABB) adjusts 
higher (lower) again, the resting Non-Routable Limit Order would not 
be adjusted again.
    \54\ As described in the American Pillar Priority Filing, the 
working time of a Non-Routable Limit Order would be adjusted as 
described in Rule 964NYP(f)(2), which would be applicable to any 
scenario when the working time of an order may change, including a 
Non-Routable Limit Order. Similar to how the Pillar rules function 
on Arca Options, the Exchange does not propose to separately 
describe how the working time of an order changes in proposed Rule 
900.3NYP. See also Arca Options Rule 6.76P-O(f)(2) (describing when 
the working time of an order or quote may change and not repeating 
this information in Rule 6.62P-O).
    \55\ See, e.g., Rule 900.3NY(p)(1)(B) (providing that ``[a]n 
incoming RPNP will be cancelled if its limit price to buy (sell) is 
more than a configurable number of MPVs above (below) the initial 
display price (on arrival), after first trading with eligible 
interest, if any,'' which configurable number of MPVs will be 
determined by the Exchange and be announced by Trader Update) and 
Rule 925.1NY(a)(4)(C) (providing that, an MMRP to buy (sell) will be 
canceled after trading with marketable interest in the Consolidated 
Book up (down) to the NBO (NBB), if its limit price is more than a 
configurable number of MPVs above (below) the initial display price 
(on arrival)).
---------------------------------------------------------------------------

    The Exchange notes that, as is the case per Arca Options Rule 
6.62P-O(e)(1)(B), a designation to cancel after an order has been 
repriced once is separate from the designation to cancel if a Non-
Routable Limit Order cannot be displayed at its limit price. When a 
Non-Routable Limit Order is designated to cancel if it cannot be 
displayed at its limit price, there is no repricing and therefore the 
option of a second cancellation designation is moot. Rather, this 
second cancellation designation is applicable only to a resting Non-
Routable Limit Order that has been designated to reprice on arrival and 
was repriced before it was displayed on the Consolidated Book. This 
functionality provides ATP Holders with an option to cancel a resting 
order if market conditions are such that a resting order could be 
repriced again, e.g., the contra-side ABBO changes. The Exchange 
proposes that this second cancellation option would not be available 
for any Non-Routable Limit Orders designated by a Market Maker as a 
quote. The Exchange believes that this proposed difference would assist 
Market Makers in maintaining quotes in their assigned series by 
reducing the potential to interfere with a Market Maker's ability to 
maintain their continuous quoting obligations.\56\ As noted above, this 
proposed functionality is identical to Arca Options Rule 6.62P-
O(e)(1)(B).
---------------------------------------------------------------------------

    \56\ Proposed Rules 925.1NYP(b) and (c) set forth the continuous 
quoting obligations of Specialists and Market Makers, respectively.
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(e)(1)(B)(i) is identical to Arca Options 
Rule 6.62P-O(e)(1)(B)(i) and would provide that if the limit price of 
the resting Non-Routable Limit Order to buy (sell) that has been 
repriced no longer locks or crosses the ABO (ABB), it would be assigned 
a working price and display price equal to its limit price.\57\
---------------------------------------------------------------------------

    \57\ See American Pillar Priority Filing (regarding Rule 
964NYP(b)(2), which describes when the Exchange would not change the 
display price of any Limit Orders or quotes ranked under the 
proposed category of ``Priority 2--Display Orders'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(e)(1)(B)(ii) is identical to Arca Options 
Rule 6.62P-O(e)(1)(B)(ii) and would provide that the working price of a 
resting Non-Routable Limit Order to buy (sell) that has been repriced 
would be adjusted to be equal to its display price if the ABO (ABB) is 
equal to or lower (higher) than its display price. This proposed rule 
is based in part on how an RPNP or MMRP reprices when the NBO (NBB) 
updates to lock or cross its display price (as described in Rules 
900.3NY(p)(1)(A)(i) and 925.1NY(a)(4)(B)(i)) and uses Pillar 
terminology (i.e., ABBO and concepts of working price and display 
price).\58\ The proposed rule would further provide that once the 
working price and display price of a Non-Routable Limit Order to buy 
(sell) are the same, the working price would be adjusted higher (lower) 
only if the display price of the order is adjusted.\59\
---------------------------------------------------------------------------

    \58\ Rule 900.3NY(p)(1)(A)(i) provides that ``if the NBO (NBB) 
updates to lock or cross the RPNP's display price, such RPNP will 
trade at its display price.'' Rule 925.1NY(a)(4)(B)(i) provides that 
``if the NBO (NBB) updates to lock or cross the MMRP's display 
price, such MMRP will trade at its display price.'' On Pillar, if 
the NBO (NBB) updates to lock or cross the display price of a Non-
Routable Order, and the working price is adjusted to be equal to the 
display price, the order will not receive a new working time. See 
Rule 964NYP(f)(2)(B).
    \59\ For example, if the ABO is 1.05 and the Exchange receives a 
Non-Routable Limit Order to buy priced at 1.10, it would be assigned 
a display price of 1.00 and a working price of 1.05. If the ABO 
adjusts to 1.00, the working price of the Non-Routable Limit Order 
to buy would be adjusted to 1.00 to be equal to its display price. 
However, if the Away Market BO moves back to 1.05, the Non-Routable 
Limit Order's working price would not adjust again to 1.05 and would 
stay at 1.00.
---------------------------------------------------------------------------

    Finally, proposed Rule 900.3NYP(e)(1)(C) is identical to Arca 
Options Rule 6.62P-O(e)(1)(C) and would provide that the designation to 
cancel a Non-Routable Limit Order (including those designated as 
quotations) \60\ would not be applicable in an Auction and, per 
proposed Rule 952NYP(g)(2) (described below) such order would 
participate in an Auction at its limit price. This proposed rule text 
promotes clarity and transparency that a

[[Page 45742]]

Non-Routable Limit Order would be eligible to participate in an 
Auction, but that it would be repriced to its limit price for 
participation in such Auction, which is consistent with current RPNP 
functionality, as described in the last sentence of Rule 900.3NY(p) and 
providing that an RPNP would be processed as a Limit Order and would 
not be repriced for purposes of participating in an opening or 
reopening auction. This proposal is also consistent with Rule 
925.1NY(a)(5), which provides that MMRPs received when a series is not 
open for trading will be eligible to participate in the opening auction 
and re-opening auction (as applicable) at the limit price of the MMRP.
---------------------------------------------------------------------------

    \60\ See discussion, infra, regarding proposed Rule 
952NYP(g)(1), which provides that ``all resting Market Maker 
quotations''--including Non-Routable Limit Orders designated as 
quotations--will be canceled in the event of a Trading Halt, which 
functionality is consistent with current Rule 925.1NY(a)(5), which 
likewise provides that ``[a]ll resting quotations will be cancelled 
in the event of a trading halt'').
---------------------------------------------------------------------------

    Intermarket Sweep Order (``ISO''). ISOs are currently defined in 
Rule 900.3NY(u) as a Limit Order for an options series that instructs 
the Exchange to execute the order up to the price of its limit, 
regardless of the Away Market Protected Quotations.\61\ The Exchange 
proposes to offer identical functionality on Pillar, including that an 
ISO is a Limit Order that does not route and meets the requirements of 
Rule 990NY(8), in proposed Rule 900.3NYP(e)(3), which is identical to 
Arca Options Rule 6.62P-O(e)(3).\62\
---------------------------------------------------------------------------

    \61\ The terms ``Protected Bid,'' ``Protected Offer,'' and 
``Quotation'' are defined in Rules 990NY(15) and (16) and the term 
``Away Market'' is defined in Rule 900.2NY. Accordingly, Away Market 
Protected Quotations refer to Protected Bids and Protected Offers 
that are disseminated pursuant to the OPRA Plan and are the Best Bid 
and Best Offer displayed by an Eligible Exchange, as those terms are 
defined in Rule 990NY.
    \62\ The Exchange proposes to hold Rule 900.3NYP(e)(2) as 
``Reserved'' to keep the numbering of this rule consistent with Arca 
Options Rule 6.62P-O(e), to account for the fact that the Exchange 
does not propose to offer ALO Orders, which are described in Arca 
Options Rule 6.62P-O(e)(2). For avoidance of doubt (and if not 
otherwise specifically noted herein), the Exchange believes that the 
omission of reference to ALO Orders (or DAY ISO ALOs) in any 
proposed rule that is said to be ``identical'' to the analogous Arca 
Options rule (that does include such reference(s)), is an immaterial 
difference as it relates to an order type/modifier not being offered 
on the Exchange. As such, the omission(s) has no bearing on the 
proposed Pillar functionality.
---------------------------------------------------------------------------

    On Pillar, the Exchange proposes to add the ability for an ATP 
Holder to designate an ISO either as IOC or with a Day time-in-force 
designation. The Exchange proposes to describe the functionality for 
each type of ISO separately, as follows:
     IOC ISO. Proposed Rule 900.3NYP(e)(3)(A) is identical to 
Arca Options Rule 6.62P-O(e)(3)(A) and would define an IOC ISO as an 
ISO designated IOC to buy (sell) that would be immediately traded with 
orders and quotes to sell (buy) in the Consolidated Book up to its full 
size and limit price and may trade through Away Market Protected 
Quotations and any untraded quantity of an IOC ISO would be immediately 
and automatically cancelled. This proposed rule describes Pillar 
functionality that would be no different from how ISOs currently 
function on the Exchange.
     Day ISO. Proposed Rule 900.3NYP(e)(3)(B) is identical to 
Arca Options Rule 6.62P-O(e)(3)(B) and would define a Day ISO as an ISO 
designated Day to buy (sell) that, if marketable on arrival, would be 
immediately traded with orders and quotes to sell (buy) in the 
Consolidated Book up to its full size and limit price and may trade 
through Away Market Protected Quotations and that any untraded quantity 
of a Day ISO would be displayed at its limit price and may lock or 
cross Away Market Protected Quotations at the time the Day ISO is 
received by the Exchange. As noted above, this proposed functionality 
(allowing Day designation for ISOs) would be consistent with 
functionality offered on Arca Options and would offer ATP Holders 
additional control over their trading interest.\63\ In addition to the 
proposed functionality being identical to Arca Options Rule 6.62P-
O(e)(3)(B), this functionality is also available on other options 
exchanges.\64\ The proposed Day ISO is also consistent with current 
Rule 992NY(b)(3), which describes an exception to the prohibition on 
locking or crossing a Protected Quotation if the Member simultaneously 
routed an ISO to execute against the full displayed size of any locked 
or crossed Protected Bid or Protected Offer.\65\ Although the Exchange 
has not previously availed itself of this exception, this exception to 
locking and crossing Protected Bids and Protected Offers would only be 
needed if an ISO is designated as Day and therefore would be displayed 
at a price that would lock or cross a Protected Quotation; an IOC ISO 
would never be displayed and therefore this existing exception would 
not be applicable to such orders.
---------------------------------------------------------------------------

    \63\ Unlike on Arca Options, the Exchange will not allow a DAY 
ISO to be designated with an ALO Modifier (as is available per Arca 
Options Rule 6.62P-O(e)(3)(C)) because, as noted above, the Exchange 
does not propose to offer ALO Orders on Pillar. The Exchanges 
believes that this textual difference is immaterial as it does not 
impact the proposed Pillar functionality.
    \64\ See Nasdaq Options 3, Section 7(a)(7) (``ISOs may have any 
time-in-force designation . . . .'') and Cboe Rules 5.30(a)(2) and 
(3). See also Cboe US Options Fix Specifications, dated March 29, 
2023, Section 4.4.7, available here: http://cdn.cboe.com/resources/membership/US_Options_FIX_Specification.pdf, which references how a 
Day ISO would be processed under specified circumstances.
    \65\ The Commission has previously stated that the requirements 
in the Options Linkage Plan relating to Locked and Crossed Markets 
are ``virtually identical to those applicable to market centers for 
NMS stock under Regulation NMS.'' See also Securities Exchange Act 
Release No. 60405 (July 30, 2009), 74 FR 39362, 39368 (August 6, 
2009) (Order approving Options Linkage Plan). Accordingly, guidance 
relating to the ISO exception for locked and crossed markets for NMS 
stocks that specifically contemplate use of Day ISOs is also 
applicable to options trading. See Responses to Frequently Asked 
Questions Concerning Rule 611 and Rule 610 of Regulation NMS, FAQ 
5.02 (``The ISO exception to the SRO lock/cross rules, in contrast, 
requires that ISOs be routed to execute against all protected 
quotations with a price that is equal to the display price (i.e., 
those protected quotations that would be locked by the displayed 
quotation), as well as all protected quotations with prices that are 
better than the display price (i.e., those protected quotations that 
would be crossed by the displayed quotation).'' Consistent with this 
guidance, the Exchange implemented Rule 992NY(b)(3). See also Cboe 
Rule 5.67(b)(3) and Nasdaq Options 5, Section 3(b)(3).
---------------------------------------------------------------------------

    Complex Orders. Complex Orders are defined in Rule 900.3NY(e). The 
Exchange proposes to define Complex Orders for Pillar in proposed Rule 
900.3NYP(f), which is identical to Arca Options Rule 6.62P-O(f). The 
proposed rule is based on current Rule 900.3NY(e)(1)-(2) without any 
substantive differences. However, like Arca Options Rule 6.62P-O(f), 
the proposed definition would add clarifying text that the different 
options series in a Complex Order are also referred to as the ``legs'' 
or ``components'' of the Complex Order and would provide that a Complex 
Order would be any order involving the simultaneous purchase and/or 
sale of ``two or more options series in the same underlying security,'' 
without including the superfluous and redundant modifier ``different'' 
before the phrase ``more option series.'' In addition, proposed Rule 
900.3NYP(f) (like Arca Options Rule 6.62P-O(f)) would not reference 
mini-options contracts, which no longer trade on the Exchange.
    Cross Orders. The Exchange proposes to describe the Cross Orders 
available on the Exchange in proposed Rule 900.3NYP(g). Proposed Rule 
900.3NYP(g)(1) would describe Qualified Contingent Cross Orders, which 
are defined in Rule 900.3NY(y) and Commentary .01 to Rule 900.3NY. In 
addition, current Rule 985NY (Qualified Contingent Cross Trade) 
describes how Qualified Contingent Cross Orders are processed. As 
proposed, QCC Orders on Pillar would function identically to how 
Qualified Contingent Cross Orders function on the Exchange System, and 
for purposes of the rules governing trading on Pillar, the Exchange 
proposes to merge language from two rules relating to QCC Orders

[[Page 45743]]

into a single rule, proposed Rule 900.3NYP(g)(1). Proposed Rule 
900.3NYP(g)(1) is identical to Arca Options Rule 6.62P-O(g)(1) and 
would describe rules applicable to electronically-entered QCC Orders 
and Complex QCC Orders. In addition, the Exchange proposes to adopt new 
Rule 900.3NYP(g)(1)(D) to provide for the trading of Complex QCC Orders 
(described below).\66\ In addition, the Exchange proposes to add, as a 
placeholder, Rule 900.3NYP(g)(2) to describe the new Customer-to-
Customer Cross Order type that will be available on Pillar and 
described in a separate rule filing. Further, for the sake of clarity, 
the Exchange proposes to adopt Rule 900.3NYP(g)(3) to include orders 
submitted to the Customer Best Execution (``CUBE'') Auction in the 
proposed definition of ``Cross Orders'' as describe below.
---------------------------------------------------------------------------

    \66\ See also Securities Exchange Act Release No. 97739 (June 
15, 2023), 88 FR 40893 (June 22, 2023) (SR-NYSEAMER-2023-17) (order 
approving new Rule 980NYP (Complex Order Trading)) (the ``Pillar 
Complex Approval Order'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(1)(A) is identical to Arca Options Rule 
6.62P-O(g)(1)(A) and would provide that a QCC Order must be comprised 
of an originating order to buy or sell at least 1,000 contracts that is 
identified as being part of a qualified contingent trade coupled with a 
contra-side order or orders totaling an equal number of contracts. This 
proposed rule text is based on Rule 900.3NY(y) with a non-substantive 
difference that the Pillar rule (like Arca Options Rule 6.62P-
O(g)(1)(A)) would not reference mini-options contracts, which no longer 
trade on the Exchange. Proposed Rule 900.3NYP(g)(1)(A) would also 
specify that if a QCC has more than one option leg (a ``Complex QCC 
Order''), each option leg must have at least 1,000 contracts, which is 
consistent with existing functionality that is not described in the 
current rule. Complex QCCs, which are described below, and function in 
the same manner as on Arca Options, are not novel.\67\ The proposed 
rule would further provide that a QCC Order that is not rejected per 
proposed Rules 900.3NYP(g)(1)(C) or (D) would immediately trade in full 
at its price, would not route, and may be entered with an MPV of $0.01 
regardless of the MPV of the options series \68\ and that QCC Orders 
may be entered by Floor Brokers from the Trading Floor or routed to the 
Exchange from off-Floor. This proposed rule is consistent with current 
Rule 985NY, which provides that QCC Orders are automatically executed 
upon entry provided that they meet specified criteria. On Pillar, the 
Exchange proposes to specify those criteria in proposed Rule 
900.3NYP(g)(1)(C), described below. In addition, the proposed Rule 
would provide that Rule 935NY (related to exposure of orders on the 
Exchange) does not apply to Cross Orders, which text is substantively 
identical to Commentary .03 to current Rule 935NY.\69\
---------------------------------------------------------------------------

    \67\ In addition to trading on Arca Options, other options 
exchanges also offer Complex QCCs. See, e.g., Cboe Rule 5.6(c) 
(setting forth operation of Complex QCC Orders) and MIAX Rule 
515(h)(4) (same).
    \68\ Allowing QCC Orders to trade in pennies under Pillar is 
consistent with current functionality. See Rule 985NY(2) (providing 
that QCC Orders may only be entered in the regular trading 
increments applicable to the options class under Rule 960NY(b)). 
Rule 960NY(b) provides that minimum trading increment for option 
contracts traded on the Exchange will be one cent ($0.01) for all 
series.
    \69\ Commentary .03 to Rule 985NY provides that ``Rule 935NY 
does not apply to Qualified Contingent Cross Orders.''
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(1)(B) and subparagraphs (i)-(vi) is 
identical to Arca Options Rule 6.62P-O(g)(1)(B)(i)-(vi) and would 
define a ``qualified contingent trade'' as a transaction consisting of 
two or more component orders, executed as agent or principal, where 
specified requirements are also met and uses the same text as currently 
set forth in Commentary .01 and its sub-paragraphs (a)-(f) to Rule 
900.3NY without any differences.
    Proposed Rule 900.3NYP(g)(1)(C) is identical to Arca Options Rule 
6.62P-O(g)(1)(C) would describe general rules relating to execution of 
QCC Orders and would provide that a QCC Order with one option leg would 
be rejected if received when the NBBO is crossed or if it would be 
traded at a price that (i) is at the same price as a displayed Customer 
order on the Consolidated Book and (ii) is not at or between the NBBO 
and would provide that the QCC Order would never trade at a price worse 
than the Exchange BBO. This proposed rule is based on Rule 985NY 
without any substantive differences but adds detail about pricing of a 
QCC Order vis a vis the Exchange BBO. The Exchange believes that 
specifying that a QCC Order would be rejected when the NBBO is crossed, 
which is new text, provides greater granularity than current 985NY(1), 
which provides that ``Qualified Contingent Cross Orders will be 
automatically cancelled if they cannot be executed.'' The other two 
proposed conditions are identical to the current functionality, as 
specified in Rule 985NY: that Qualified Contingent Cross Orders are 
automatically executed ``provided that the execution (i) is not at the 
same price as a Customer Order in the Consolidated Book and (ii) is at 
or between the NBBO.''
    Proposed Rule 900.3NYP(g)(1)(D) is identical to Arca Options Rule 
6.62P-O(g)(1)(D) would describe how Complex QCC Orders would be 
executed on the Exchange. As proposed, as is the case per Arca Options 
Rules 6.62P-O(g)(1)(D)(i)-(iv) (and described below), a Complex QCC 
Order must include a limit price, no option leg would trade at a price 
worse than the Exchange BBO, and would be rejected if:
     any option leg cannot execute in compliance with proposed 
paragraph (g)(1)(C) of this Rule as described above (proposed Rule 
900.3NYP(g)(1)(D)(i)), which mirrors Complex QCC handling on Arca 
Options and is consistent with other options exchanges; \70\
---------------------------------------------------------------------------

    \70\ See, e.g., MIAX Rule 515(h)(4) (which provides that each 
Complex QCC or ``cQCC'' is ``automatically executed upon entry 
provided that, with respect to each option leg of the cQCC Order, 
the execution (i) is not at the same price as a Priority Customer 
Order on the Exchange's Book; and (ii) is at or between the NBBO'').
---------------------------------------------------------------------------

     the best-priced Complex Order(s) on the Exchange 
contain(s) displayed Customer interest and the Complex QCC Order price 
does not improve such displayed Customer interest by $0.01 (proposed 
Rule 900.3NYP(g)(1)(D)(ii)), which mirrors Complex QCC handling on Arca 
Options and is consistent with other options exchanges; \71\
---------------------------------------------------------------------------

    \71\ See, e.g., Cboe Rule 5.6(c) (Order Instructions, QCC Orders 
(requiring for the ``Execution of QCC Orders'' that the ``execution 
price is better than the price of any complex order resting in the 
[Cboe Complex Order Book], unless the Complex QCC Order is a 
Priority Customer Order and the resting complex order is a non-
Priority Customer Order, in which case the execution price may be 
the same as or better than the price of the resting complex 
order'').
---------------------------------------------------------------------------

     the price of the QCC Order is worse than the best-priced 
Complex Orders in the Consolidated Book or the prices of the best-
priced Complex Orders in the Consolidated Book are crossed (proposed 
Rule 900.3NYP(g)(1)(D)(iii)), which mirrors Complex QCC handling on 
Arca Options, provides additional protections against potentially 
erroneous executions, and adds transparency and granularity to the 
proposed rule; or
     there is no NBO for a given leg (proposed Rule 
900.3NYP(g)(1)(D)(iv)), which mirrors Complex QCC handling on Arca 
Options, provides additional protections against potentially erroneous 
executions, and adds transparency and granularity to the proposed rule.
    As noted above, this proposed rule text is identical to Arca 
Options Rules 6.62P-O(g)(1)(D)(i)-(iv) and is designed to promote 
clarity and transparency in Exchange rules regarding the price

[[Page 45744]]

requirements for a Complex QCC Order, which requirements to protect 
priority of resting interest are consistent with the rules of other 
options exchanges, as described above, and to provide additional 
safeguards against potentially erroneous executions of Complex QCCs.
    Proposed Rule 900.3NYP(g)(1)(E) is identical to Arca Options Rule 
6.62P-O(g)(1)(E) and would specify rules governing QCC Orders entered 
from the Trading Floor, which can be entered only by Floor Brokers,\72\ 
and is based on Commentary .01 to Rule 985NY without any substantive 
differences.\73\ The Exchange proposes textual changes as compared to 
the current Rule that are not designed to change the substance of the 
Rule, but to instead promote clarity and transparency. The proposed 
rule would provide that while on the Trading Floor, only Floor Brokers 
can enter QCC Orders, and that Floor Brokers may not enter QCC Orders 
for their own account, the account of an associated person, or an 
account with respect to which it or an associated person thereof 
exercises investment discretion (each a ``prohibited account''). As 
further proposed, when executing such orders, Floor Brokers would not 
be subject to Rules 934NY, 934.1NY, 934.2NY, and 934.3NY regarding 
``Crossing'' orders. Floor Brokers must maintain books and records 
demonstrating that each QCC Order entered from the Floor was not 
entered for a prohibited account. Any QCC Order entered from the Floor 
that does not have a corresponding record required by this paragraph 
would be deemed to have been entered for a prohibited account in 
violation of this Rule.
---------------------------------------------------------------------------

    \72\ An options Floor Broker is ``a sole proprietor ATP Holder 
or a representative of an ATP Holder who is registered with the 
Exchange for the purpose, while on the Exchange Floor, of accepting 
and executing option orders.'' See Rule 930NY(a).
    \73\ Commentary .01 to Rule 985NY provides: ``Qualified 
Contingent Cross Orders can be entered into the System from on the 
Floor of the Exchange only by Floor Brokers. Floor Brokers shall not 
enter such orders for their own account, the account of an 
associated person, or an account with respect to which it or an 
associated person thereof exercises investment discretion (each a 
`prohibited account'). When executing such orders, Floor Brokers 
shall not be subject to Rules 934NY, 934.1NY, 934.2NY, and 934.3NY. 
Floor Brokers must maintain books and records demonstrating that 
each Qualified Contingent Cross Order entered from the Floor was not 
entered for a prohibited account. Any Qualified Contingent Cross 
Order entered from the Floor that does not have a corresponding 
record required by this Commentary .01 shall be deemed to have been 
entered for a prohibited account in violation of this Rule.''
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(1)(F) is identical to Arca Options Rule 
6.62P-O(g)(1)(F) and would specify rules governing QCC Orders entered 
off-Floor and that ATP Holders must maintain books and records 
demonstrating that each such order was so routed. This proposed rule is 
based on Commentary .02 to Rule 985NY without any substantive 
differences.\74\ The Exchange proposes textual differences as compared 
to the current Rule that are not designed to change the substance of 
the Rule, but instead promote clarity and transparency.
---------------------------------------------------------------------------

    \74\ Commentary .02 to Rule 985NY provides: ``With respect to a 
Qualified Contingent Cross Order that was routed to the System from 
off of the Floor, ATP Holders must maintain books and records 
demonstrating that each such order was routed to the system from off 
of the Floor. This provision would not apply to a Qualified 
Contingent Cross Order covered by Commentary .01 to this Rule 985NY 
(i.e., a Qualified Contingent Cross Order routed to a Floor Broker 
for entry into the System).'' The Exchange does not propose to 
include the last sentence of this Commentary in the proposed Pillar 
rule because the Exchange does not believe it is necessary to 
specify that Floor Brokers that enter orders electronically are 
subject to rules relating to electronic order entry as opposed to 
rules governing open outcry.
---------------------------------------------------------------------------

    In connection with adding QCC to proposed Rule 900.3NYP, the 
Exchange proposes to add the following preamble to Rule 985NY: ``This 
Rule is not applicable to trading on Pillar.'' This proposed preamble 
is designed to promote clarity and transparency in Exchange rules that 
Rule 985NY would not be applicable to trading on Pillar.
    The Exchange plans to file a separate rule filing to adopt 
``Customer-to-Customer Cross Orders.'' Because this would be a new 
cross order that does not exist on Arca Options, the Exchange proposes 
to simply adopt the name of this order type as proposed Rule 
900.3NYP(g)(2) and to hold the description of how such order would 
trade as ``Reserved.''
    The Exchange proposes to include CUBE Orders in the list of Cross 
Orders. Proposed Rule 900.3NYP(g)(3) would add clarity to Exchange 
rules that CUBE Orders are Cross Orders governed by separate Exchange 
rules.\75\ Specifically, proposed Rule 900.3NYP(g)(3) would provide 
that Single-Leg CUBE Orders submitted pursuant to proposed Rule 
971.1NYP and Complex CUBE Orders submitted pursuant proposed Rule 
971.2NYP would be considered Cross Orders.\76\
---------------------------------------------------------------------------

    \75\ See, e.g., Rules 971.1NY and 971.2NY describing Single-Leg 
and Complex CUBE Auctions, respectively.
    \76\ The Exchange plans to submit separate rule filings to adopt 
CUBE Auction functionality on Pillar, which will be set forth in 
proposed Rules 971.1NYP (for the single-leg CUBE Auction) and 
971.2NYP (for the Complex CUBE Auction), respectively. See, e.g., 
NYSEAMER-2023-21P (prefiling to adopt Rule 971.1NYP for single-leg 
CUBE Auctions on Pillar).
---------------------------------------------------------------------------

    Orders Available Only in Open Outcry. The Exchange proposes Rule 
900.3NYP(h) to describe orders that are available only in open outcry, 
most of which are currently defined in Rule 900.3NY.
    First, proposed Rule 900.3NYP(h)(1) would codify an existing order 
type, the Clear-the-Book (``CTB'') Order, which is currently described 
only in a Regulatory Bulletin.\77\ This proposed rule is substantially 
the same as Arca Options Rule 6.62P-O(h)(1), except that paragraph 
(h)(1)(B) of the proposed rule accounts for the Exchange's Customer-
centric trading model as described below. Proposed Rule 900.3NYP(h)(1) 
would describe the CTB Order in the same manner as it is described in 
Arca Options Rule 6.62P-O(h)(1), which would be an order type available 
in open outcry that would interface with the Consolidated Book, and 
therefore with Pillar. As proposed, a CTB Order would be a Limit IOC 
Order that may be entered only by a Floor Broker, contemporaneous with 
executing an order in open outcry, that is approved by a Trading 
Official (the ``TO Approval''). The CTB Order would be eligible to 
trade only with contra-side orders and quotes that were resting in the 
Consolidated Book prior to the TO Approval. In addition, proposed Rules 
900.3NYP(h)(1)(A)-(C) would provide that:
---------------------------------------------------------------------------

    \77\ See NYSE Amex Options RB-16-02, dated February 19, 2016 
(Rules of Priority and Order Protection in Open Outcry), available 
here: https://www.nyse.com/publicdocs/nyse/markets/american-options/rule-interpretations/2016/NYSE%20Amex%20Options%2016-02.pdf.
---------------------------------------------------------------------------

     A CTB Order to buy (sell) would trade with contra-side 
orders and quotes with a display price below (above) the limit price of 
the CTB Order (proposed Rule 900.3NYP(h)(1)(A), which is identical to 
Arca Options Rule 6.62P-O(h)(1)(A));
     A CTB Order to buy (sell) would trade with contra-side 
orders and quotes that have a display price and working price equal to 
the limit price of the CTB Order only if there is displayed Customer 
sell (buy) interest at that price, in which case, the CTB Order to buy 
(sell) would trade with the displayed Customer interest to sell (buy) 
(proposed Rule 900.3NYP(h)(1)(B)); \78\ and
---------------------------------------------------------------------------

    \78\ This proposed rule differs from Arca Options Rule 6.62P-
O(h)(1)(B) because it does not provide for the CTB Order to trade 
with ``any non-Customer interest to sell (buy) with a working time 
earlier than the latest-arriving displayed Customer interest to sell 
(buy),'' because Customer interest has priority of same-priced non-
Customer interest on the Exchange.
---------------------------------------------------------------------------

     Any unexecuted portion of the CTB Order would cancel after 
trading with all better-priced interest and eligible same-priced 
interest on the

[[Page 45745]]

Consolidated Book (proposed Rule 900.3NYP(h)(1)(C), which is identical 
to Arca Options Rule 6.62P-O(h)(1)(C)).
    Currently, CTB Orders only trade with displayed Customer interest, 
but do not trade with better-priced displayed non-Customer interest. In 
Pillar, as described above, CTB Orders would trade with displayed 
Customer interest at a price and would also trade with displayed non-
Customer interest priced better than displayed Customer interest (i.e., 
a CTB order buying with a $1.00 limit would now trade with displayed 
interest offered at $0.99, whether on behalf of a Customer or a non-
Customer). In addition to being similar to Arca Options Rule 6.62P-
O(h)(1), the Exchange believes that codifying CTB Order functionality, 
and thus automating priority would make it easier for Floor Brokers to 
comply with their obligation to satisfy better-priced interest on the 
Consolidated Book. In addition, the Exchange believes that this 
proposed change would increase execution opportunities and achieve the 
goal of a CTB Order, which is to clear priority on the Consolidated 
Book at the time of the TO Approval.
    In addition, proposed Rule 900.3NYP(h)(1)(D) is identical to Arca 
Options Rule 6.62P-O(h)(1)(D) and would codify existing regulatory 
responsibilities of Floor Brokers utilizing CTB Orders to submit such 
orders in a timely manner after receiving TO Approval and would also 
provide that because CTB Orders are non-routable (and thus ineligible 
to clear Protected Quotations), Floor Brokers would still be obligated 
to route any other eligible orders (i.e., not the CTB Order) to better-
priced interest on Away Markets per Rule 992NY.\79\
---------------------------------------------------------------------------

    \79\ See id. at pp. 2-3 (describing regulatory responsibilities 
related to CTB Orders, including that it is the Floor Broker's 
responsibility to comply with the terms of the Options Order 
Protection and Locked/Crossed Market Plan, including by sending ISOs 
to trade with Protected Quotes).
---------------------------------------------------------------------------

    The Exchange also proposes to include in Rule 900.3NYP additional 
open outcry order types that are currently defined in Rule 900.3NY:
     Proposed Rule 900.3NYP(h)(2) would define ``Facilitation 
Order'' to be identical to the definition of Facilitation Order set 
forth in Rule 900.3NY(j). The proposed definition is also identical to 
Arca Options Rule 6.62P-O(h)(2).
     Proposed Rule 900.3NYP(h)(3) would be designated as 
Reserved.\80\
---------------------------------------------------------------------------

    \80\ The Exchange proposes to hold Rule 900.3NYP(h)(3) as 
``Reserved'' to keep the numbering of this rule consistent with Arca 
Options Rule 6.62P-O(h), to account for the fact that the Exchange 
does not propose to offer (nor does the Exchange currently offer) 
Mid-Point Crossing Orders, which are described in Arca Options Rule 
6.62P-O(h)(3).
---------------------------------------------------------------------------

     Proposed Rule 900.3NYP(h)(4) would define ``Not Held 
Order'' to be identical to the definition of Not Held Order set forth 
in Rule 900.3NY(f). The proposed definition is also identical to Arca 
Options Rule 6.62P-O(h)(4).
     Proposed Rule 900.3NYP(h)(5) would define ``Single Stock 
Future (``SSF'')/Option Order'' to be identical to the definition of 
Single Stock Future (``SSF'')/Option Order set forth in Rule 
900.3NY(i). The proposed definition is also identical to Arca Options 
Rule 6.62P-O(h)(5).
     Proposed Rule 900.3NYP(h)(6)(A) would define a ``Stock/
Option Order'' to be identical to the definition of Stock/Option Order 
set forth in Rule 900.3NY(h)(1). The proposed definition is also 
identical to Arca Options Rule 6.62P-O(h)(6)(A).
     Proposed Rules 900.3NYP(h)(6)(B)(i)-(ii) would define a 
``Stock/Complex Order'' to be identical to the definition of Stock/
Complex Order set forth in Rule 900.3NY(h)(2)(A)-(B). The proposed 
definition is also identical to Arca Options Rule 6.62P-O(h)(6)(B)(i)-
(ii).
    The Exchange proposes that after the transition to Pillar, the One-
cancels-the-other (OCO) Order, which is currently described in Rule 
900.3NY(g) but is not used by Floor Brokers, would not be added to 
proposed Rule 900.3NYP governing orders and modifiers.
    Additional Order Instructions and Modifiers. The Exchange proposes 
to specify the additional order instructions and modifiers that would 
be available in Pillar in proposed Rule 900.3NYP(i), which are 
identical to the order instructions and modifiers set forth in Arca 
Options Rule 6.62P-O(i).
    Proactive if Locked/Crossed Modifier. Proposed Rule 900.3NYP(i)(1) 
is identical to Arca Options Rule 6.62P-O(i)(1) and would provide that 
a Limit Order that is displayed and eligible to route and designated 
with a Proactive if Locked/Crossed Modifier would route to an Away 
Market if the Away Market locks or crosses the display price of the 
order and that if any quantity of the routed order is returned 
unexecuted, the order would be displayed in the Consolidated Book. The 
Exchange believes that offering this as an optional modifier for Limit 
Orders would provide ATP Holders with additional flexibility to 
designate a resting displayed order to route if it becomes locked or 
crossed by an Away Market.
    Self-Trade Prevention (``STP'') Modifier. Self-Trade Prevention 
(``STP'') Modifiers are currently defined in Commentary .02 to Rule 
964NY and are available only for Market Maker orders and quotes. On 
Pillar, and identical to STP functionality on Arca Options Rule 6.62P-
O(i)(2), the Exchange proposes to expand the availability of STP to all 
orders and quotes to offer this protection to trading interest of all 
ATP Holders, not just Market Makers. The Exchange believes this 
expansion is appropriate because it would facilitate market 
participants' compliance and risk management by assisting them in 
avoiding unintentional wash-sale trading. Because STP Modifiers are an 
instruction that can be added to an order or quote, the Exchange 
proposes that for Pillar, STP Modifiers would be described in proposed 
Rule 900.3NYP(i)(2) and would be available to all market participants.
    Proposed Rule 900.3NYP(i)(2) is identical to Arca Options Rule 
6.62P-O(i)(2) and would provide that an Aggressing Order or Aggressing 
Quote to buy (sell) designated with one of the STP modifiers in 
proposed Rule 900.3NYP(i)(2) would be prevented from trading with a 
resting order or quote to sell (buy) also designated with an STP 
modifier and from the same Client ID; the same MPID, and, if specified, 
any sub-identifier of that MPID; or an Affiliate (as defined in Rule 
900.2NY) identifier, with any such identifier referred to as a ``Unique 
Identifier.'' Proposed Rule 900.3NYP(i)(2) would also provide that the 
STP modifier on the Aggressing Order or Aggressing Quote would control 
the interaction between two orders and/or quotes marked with STP 
modifiers. In addition, STP would not be applicable during an Auction 
or to Cross Orders or when a Complex Order legs out. This proposed rule 
text is based on Commentary .02 to Rule 964NY with non-substantive 
differences to use Pillar terminology.
    Proposed Rule 900.3NYP(i)(2) would further provide that if the 
condition for a Limit Order designated FOK, an AON Order, or an 
arriving order with an MTS modifier designated under proposed Rule 
900.3NYP(i)(3)(B)(i) (described below) cannot be met because of STP 
modifiers, such order would either be cancelled or placed on the 
Consolidated Book, as applicable. This functionality would be the same 
as on Arca Options Pillar and reflects that for order types that must 
trade a specified quantity (either in full or a specified minimum 
quantity) and could trade with multiple contra-side orders to meet that 
size requirement, such order types would not be compatible with 
applying STP, which examines a one-on-one relationship between two 
interacting orders. This proposed rule text provides clarity that if a 
condition of an order cannot be met because of STP modifiers,

[[Page 45746]]

the order would either cancel (i.e., a Limit Order designated FOK or an 
order with an MTS modifier), or be added to the Consolidated Book 
(i.e., an AON Order), and then such resting orders would function as 
described in Rule 900.3NYP.
    The proposed rule would further provide that Aggressing Orders or 
Aggressing Quotes would be processed as follows:
     Proposed Rule 900.3NYP(i)(2)(A) is identical to Arca 
Options Rule 6.62P-O(i)(2)(A) and would describe STP Cancel Newest 
(``STPN'') and provide that an Aggressing Order or Aggressing Quote to 
buy (sell) marked with the STPN modifier would not trade with resting 
interest to sell (buy) marked with any STP modifier from the same 
Unique Identifier; that the Aggressing Order or Aggressing Quote marked 
with the STPN modifier would be cancelled; and that the resting order 
or quote marked with one of the STP modifiers would remain on the 
Consolidated Book. This proposed rule is based on Commentary .02(a) to 
Rule 964NY with differences to use Pillar terminology and to extend STP 
functionality to orders with the same Unique Identifiers.
     Proposed Rule 900.3NYP(i)(2)(B) is identical to Arca 
Options Rule 6.62P-O(i)(2)(B) and would describe STP Cancel Oldest 
(``STPO'') and provide that an Aggressing Order or Aggressing Quote to 
buy (sell) marked with the STPO modifier would not trade with resting 
interest to sell (buy) marked with any STP modifier from the same 
Unique Identifier; that the resting order or quote marked with the STP 
modifier would be cancelled; and that the Aggressing Order or 
Aggressing Quote marked with the STPO modifier would be placed on the 
Consolidated Book. This proposed rule is based on Commentary .02(b) to 
Rule 964NY with differences to use Pillar terminology and to extend STP 
functionality to orders with the same Unique Identifiers.
     Proposed Rule 900.3NYP(i)(2)(C) is identical to Arca 
Options Rule 6.62P-O(i)(2)(C) and would describe STP Cancel Both 
(``STPC'') and provide that an Aggressing Order or Aggressing Quote to 
buy (sell) marked with the STPC modifier would not trade with resting 
interest to sell (buy) marked with any STP modifier from the same 
Unique Identifier and that the entire size of both orders and/or quotes 
would be cancelled. This proposed rule is based on Commentary .02(c) to 
Rule 964NY with differences to use Pillar terminology and to extend STP 
functionality to orders with the same Unique Identifiers.
    Minimum Trade Size Modifier. The Exchange proposes to add the 
Minimum Trade Size (``MTS'') Modifier, which is based on the same 
functionality described in Arca Options Rule 6.62P-O(i)(3), except that 
the MTS Modifier would only be available for Limit IOC Orders and, as 
such, the Exchange would not include rule text describing how the MTS 
Modifier would apply to resting orders.\81\ The Exchange proposes to 
provide this modifier for options trading to provide ATP Holders with 
more features with respect to order handling. The proposed MTS Modifier 
is similar in concept to both FOK and AON, which are currently 
available for options trading. With the MTS Modifier, an ATP Holder 
would have greater flexibility to designate a size smaller than the 
entire quantity (which is current FOK and AON functionality) as a 
condition for execution. In addition to Arca Options, other options 
exchanges also offer the use of an MTS Modifier.\82\
---------------------------------------------------------------------------

    \81\ On Arca Options, in addition to Limit IOC Orders, the MTS 
Modifier can apply to Non-Displayed Limit Orders. See Arca Options 
Rule 6.62P-O(i)(3). However, as discussed infra, the Exchange is not 
adopting Non-Displayed Limit Orders and therefore has no reason to 
discuss the application of MTS functionality to such order types. 
Similarly, because the MTS Modifier may only be applied to IOC 
Orders, the Exchange is not adopting rule text regarding how MTS 
functionality is applied to orders not executed immediately as such 
text would be inapplicable. See e.g., Arca Options Rules 6.62P-
O(i)(3)(C), (E) and (F). The Exchange believes this distinction is 
immaterial because the MTS Modifier operates in the same manner on 
both exchanges when applied to Limit IOC Orders.
    \82\ See, e.g., Nasdaq Options 3, Section 7(a)(3)(B) (describing 
``Minimum Quantity Order'' as ``an order that requires that a 
specified minimum quantity of contracts be obtained, or the order is 
cancelled'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(i)(3)(A) is identical to Arca Options Rule 
6.62P-O(3)(A) and would provide that the quantity of the MTS Modifier 
may be less than the order quantity; however, an order would be 
rejected if it has an MTS Modifier quantity that is larger than the 
size of the order.
    Proposed Rule 900.3NYP(i)(3)(B) is identical to Arca Options Rule 
6.62P-O(3)(B) and would provide that one of the following instructions 
must be specified with respect to whether an order to buy (sell) with 
an MTS Modifier would trade on arrival with: (i) orders or quotes to 
sell (buy) in the Consolidated Book that in the aggregate meet such 
order's MTS; or (ii) only individual order(s) or quote(s) to sell (buy) 
in the Consolidated Book that each meets such order's MTS. As noted 
above, this proposed rule is identical to Arca Options Rule 6.62P-
O(i)(3)(B) and sub-paragraphs (i) and (ii).
    Proposed Rule 900.3NYP(i)(3)(C) would provide that an order with an 
MTS Modifier cannot be immediately executed would be cancelled. This 
proposed rule is based on Arca Options Rule 6.62P-O(i)(3)(D).
    Finally, proposed Rule 900.3NYP(i)(4) would define a ``Directed 
Orders'' to be the same as the Rule 900.3NY(s) definition of Directed 
Order, except that the wording of the proposed definition is more 
streamlined with regard to the requirement that a Directed Order be 
submitted electronically.
    In connection with proposed Rule 900.3NYP, the Exchange proposes to 
add the following preamble to Rule 900.3NY: ``This Rule is not 
applicable to trading on Pillar.'' This proposed preamble is designed 
to promote clarity and transparency in Exchange rules that Rule 900.3NY 
would not be applicable to trading on Pillar.
Proposed Rule 925.1NYP: Market Maker Quotations
    Current Rule 925.1NY describes Market Maker quoting obligations, 
including defining ``quotations,'' describing the treatment of such 
quotations, and specifying Market Maker and Specialist quoting 
obligations. Proposed Rule 925.1NYP is identical to Arca Options Rule 
6.37AP-O and would set forth Market Maker quoting obligations under 
Pillar.
    Current Rule 925.1NY(a)(1) provides that ``[t]he term `quote' or 
`quotation' means a bid or offer entered by a Market Maker that updates 
the Market Maker's previous bid or offer, if any.'' Pursuant to this 
Rule, a Market Maker's same-side quote would be updated when a Market 
Maker uses the same ATP for quote entry.\83\ Although not specified in 
the current rule, the Exchange System utilizes a unique identifier for 
each Specialist to send quotes, and, as a result, a Specialist cannot 
have more than one same-side quote in an assigned series.\84\ 
Therefore, Specialist quotes are subject to the current Rule 
925.1NY(a)(1) requirement that a new same-side quote sent by that 
Specialist updates the previous bid or offer, if any.
---------------------------------------------------------------------------

    \83\ See NYSE American Options Fee Schedule, Section V.A. Port 
Fees (setting forth fees for order/quote entry ports, which fees are 
currently $450 per port per month for the first forty such ports and 
$150 per port per month for each port in excess of forty (i.e., 41 
and greater), available here: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \84\ On the Exchange System, Market Makers not acting as 
Specialists may opt to utilize multiple ATPs to send more than one 
same-side quote in the same assigned series.
---------------------------------------------------------------------------

    On Pillar, Specialists (like Market Markets not acting as 
Specialists) would

[[Page 45747]]

be able to send multiple same-side quotes associated with its ATP by 
utilizing different order/quote entry ports (i.e., in Pillar, 
Specialist 1 can send a bid for 1.00 in XYZ over order/quote entry port 
1 and another bid for 1.00 in XYZ over order/quote entry port 2 and the 
bid sent via order/quote entry port 2 would not replace the quote sent 
over order/quote entry port 1).\85\
---------------------------------------------------------------------------

    \85\ See, e.g., Rules 964NYP(h)(1)(A)(ii) and (h)(2)(B) 
(providing for the handling of multiple same-side quotes in an 
assigned series submitted by a Directed Order Market Makers or 
Specialist, respectively). See also Arca Options Rule 6.37AP-
O(a)(1)(A) (providing for the handling of multiple same-side 
quotations submitted via the same quote entry port).
---------------------------------------------------------------------------

    Consistent with current functionality, on Pillar, the Exchange 
would provide Market Makers with the ability to designate bids and 
offers as quotations. Currently, the Exchange offers designated 
``quotation'' types to Market Makers, which are described in Rule 
925.1NY(a)(3).\86\ On Pillar, as described above in connection with 
proposed Rule 900.3NYP(e)(1), the Exchange is proposing to offer 
quotation functionality for Market Makers that would be displayed, 
traded, repriced, or cancelled in the same manner as Non-Routable Limit 
Orders. As such, Market Makers may designate this ``order'' type as a 
quotation and, if designated as a quotation, such bids and offers would 
be displayed, traded, repriced, or cancelled as described in proposed 
Rule 900.3NYP(e)(1), as discussed in detail above. In addition, such 
quotations would be ranked and executed as described in Rule 
964NYP.\87\ Moreover, if designated as a quotation, such bids or offers 
would be identifiable to the Exchange as ``quotations,'' subject to the 
Market Maker and Specialist requirements relating to quotations and the 
Exchange would be able to monitor a Market Maker's compliance with 
quoting obligations because its bids or offers would be designated as 
quotations. If a Market Maker does not choose to designate a bid or 
offer as a quotation, such bid or offer would be processed as an 
``order'' and would not count towards a Market Maker's quoting 
obligations.\88\
---------------------------------------------------------------------------

    \86\ As described in Rule 925.1NY(a)(3)(A) and (B), 
respectively, a Market Maker may designate a quote as Market Maker-
Light Only Quotation (``MMLO'') or Market Maker--Repricing Quotation 
(``MMRP'').
    \87\ See Rule 964NYP.
    \88\ For example, a Market Maker could choose to designate a 
Non-Routable Limit Order as either a quote or as an order, which is 
consistent with current Rule 925.2NY, which provides that a Market 
Maker may enter all order types permitted to be entered by Users 
under the Rules to buy or sell options in all classes of options 
listed on the Exchange. Accordingly, the functionality set forth in 
proposed Rule 925.1NYP(a)(2) herein is not materially different for 
Market Makers because, under current functionality, they can choose 
to send as Market Maker orders any order type described in current 
Rule 900.3NY, including, for example, RPNP and PNP-Blind Order.
---------------------------------------------------------------------------

     Rule 925.1NYP(a) is identical to Arca Options Rule 6.37AP-
O(a) and would provide that a Market Maker may send quotations only in 
the issues included in its appointment. This functionality is based on 
current Rule 925.1NY(a) but differs in that the proposed rule would use 
the term ``send'' rather than ``enter,'' which is a stylistic 
preference that does not alter the functionality.
     Proposed Rule 925.1NYP(a)(1) is identical to Arca Options 
Rule 6.37AP-O(a)(1) and would provide that the term ``quote'' or 
``quotation'' means ``a bid or offer sent by a Market Maker that is not 
sent as an order,'' and that ``[a] quotation sent by a Market Maker 
will replace a previously displayed same-side quotation that was sent 
from the same order/quote entry port of that Market Maker'' and ``[i]f 
multiple same-side quotations are submitted via the same quote entry 
port, the Exchange will display the Market Maker's most recent same-
side quotation.'' The proposed Rule reflects that, on Pillar and as 
described above, Specialists would be able to send multiple same-side 
quotes associated with its ATP by utilizing different order/quote entry 
ports.\89\ Because Specialists would be Market Makers on Pillar, this 
functionality would also be available to Specialists.\90\
---------------------------------------------------------------------------

    \89\ See supra note 85 (regarding Rules 964NYP(h)(1)(A)(ii) and 
(h)(2)(B)).
    \90\ See Rule 920NY (Market Makers) (providing that for purposes 
of Exchange rules, the term Market Maker includes Specialists, 
unless the context otherwise indicates).
---------------------------------------------------------------------------

    The NYSE American Options Fee Schedule makes clear that Market 
Makers can obtain upwards of forty ports for quote entry. Thus, the 
Exchange believes that establishing when a Market Maker's previously 
displayed same-side quotation would be replaced (i.e., when sent via 
the same order/quote entry port) would add clarity and transparency to 
Exchange rules. This proposed rule text is also designed to clarify the 
Exchange's handling of successive Market Maker quotations (from the 
same quote entry port in the same side and series) should a Market 
Maker's quotations queue during a period of excessive message traffic. 
No system, including Pillar, has unlimited capacity. Accordingly, 
should the Exchange be in receipt of multiple same-side quotations in 
the same series from the same Market Maker, the Exchange proposed that 
it would display only the most recent quotation to ensure accurate 
representation of that Market Maker's quoting interest. In addition, 
because the Exchange proposes that a Market Maker may designate Non-
Routable Limit Orders as quotes, the Exchange proposes a difference 
from the current Rule to provide that a quote is a bid or offer not 
designated as an order.
     Proposed Rule 925.1NYP(a)(2) would provide that a Market 
Maker may designate a Non-Routable Limit Order as a quote and such 
quotes would be processed as described in proposed Rule 
900.3NYP(e)(1).\91\ Proposed Rule 925.1NYP(a)(2) is the same as Arca 
Options Rule 6.37AP-O(a)(2), except that the proposed rule does not 
reference ALO Orders, which order type is not offered by the Exchange 
today nor will the order type be offered on Pillar. The similarities 
and differences between the proposed Non-Routable Limit Orders on 
Pillar compared to the existing quote types (e.g., MMRP) are described 
in more detail above.\92\ Because proposed Rule 900.3NYP(e)(1)), 
described above, would set forth the treatment of a Non-Routable Limit 
Order designated as a quote, the Exchange is not proposing to include a 
(duplicative) section in proposed Rule 925.1NYP regarding the treatment 
of such quotes.
---------------------------------------------------------------------------

    \91\ See discussion supra regarding proposed Rule 
900.3NYP(e)(1), Non-Routable Limit Orders, being available as quote 
types and how such orders compare to the existing MMRP quotation 
functionality.
    \92\ The Exchange notes that it is not proposing the 
functionality set forth in current Rule 925.1NY(a)(4)(D) that 
provides for the cancellation of a Market Maker's quote on the 
opposite side of the market whenever that Market Maker's same-side 
quotation is cancelled because such quotation would lock or cross 
another options exchange is not designated to reprice (e.g., as an 
MMRP). This current functionality is based on a system limitation 
that would not exist under Pillar.
---------------------------------------------------------------------------

     Proposed Rules 925.1NYP(b)-(e) would be substantively 
identical to current Rules 925.1NY(b)-(e), with non-substantive 
differences to change the term ``shall'' to ``will,'' which is a 
stylistic preference that would add consistency to Exchange rules. 
These proposed rules would also be the same as Arca Options Rules 
6.37AP-O(b)-(e), except that Arca Options Rule 6.37AP-O(b) describes 
quoting obligations for Lead Market Makers or LMMs, whereas proposed 
Rule 925.1NYP(b) would describe quoting obligations for Specialists.
    Proposed Commentary .01 to Rule 925.1NYP is identical to Commentary 
.01 to Arca Options Rule 6.37AP-O and would also be substantively 
identical to Commentary .01 to Rule 925.1NY, with non-substantive 
differences to streamline the rule text.

[[Page 45748]]

    The Exchange also proposes a non-substantive change to paragraph 
(b) of Rule 953.1NY (Limit-Up and Limit-Down During Extraordinary 
Market Volatility) to update the cross reference to Market Maker 
quoting obligations as set forth in Rules 925.1NYP(b) and (c).
    In connection with proposed Rule 925.1NYP, the Exchange proposes to 
add the following preamble to Rule 925.1NY: ``This Rule is not 
applicable to trading on Pillar.'' This proposed preamble is designed 
to promote clarity and transparency in Exchange rules that Rule 925.1NY 
would not be applicable to trading on Pillar.
Proposed Rule 928NY: Pre-Trade and Activity-Based Risk Controls
    Current Rule 928NY sets forth the activity-based Risk Limitation 
Mechanisms for orders and quotes, which are designed to help ATP 
Holders effectively manage risk during periods of increased and 
significant trading activity. With the transition to Pillar, the 
Exchange proposes to incorporate new risk control functionality that is 
based on the Exchange's existing activity-based risk controls and on 
pre-trade risk controls that are available on Arca Options. 
Specifically, proposed Rule 928NYP is identical to Arca Options Rule 
6.40P-O and would describe the activity-based controls with updated 
functionality under Pillar and would also describe new optional pre-
trade risk controls. The Exchange believes that adding pre-trade risk 
controls (together with the enhanced activity-based controls), as 
described below, would provide greater flexibility to ATP Holders in 
establishing risk controls to align with their risk tolerance for both 
orders and quotes.
    Proposed Rule 928NYP(a) is identical to Arca Options Rule 6.40P-
O(a) and would set forth the following definitions that would be used 
for purposes of the Rule:
     The term ``Entering Firm'' would mean an ATP Holder 
(including those acting as Market Makers) (proposed Rule 928NYP(a)(1), 
which is identical to Arca Options Rule 6.40P-O(a)(1)). The Exchange 
believes that the addition of this term would add clarity to the 
proposed rule by using a single, defined term to describe which 
entities, including Market Makers, could avail themselves of the 
proposed pre-trade risk controls.
     The term ``Pre-Trade Risk Controls'' would refer to 
optional limits that an Entering Firm may utilize with respect to its 
trading activity on the Exchange (excluding interest represented in 
open outcry except CTB Orders (proposed Rule 928NYP(a)(2), which is 
identical to Arca Options Rule 6.40P-O(a)(2)). Proposed Rules 
928NYP(a)(2)(A)(i)-(v) would define the available ``Single-Order Risk 
Controls,'' which are identical to the checks offered per Arca Options 
Rules 6.40P-O(a)(2)(A)(i)-(v), as follows:
    [cir] controls related to the maximum dollar amount for a single 
order to be applied one time (``Single Order Maximum Notional Value 
Risk Limit'') and the maximum number of contracts that may be included 
in a single order before it can be traded (``Single Order Maximum 
Quantity Risk Limit'') and providing that GTC Orders would be subject 
to these checks only once (proposed Rule 928NYP(a)(2)(A)(i), which is 
identical to Arca Options Rule 6.40P-O(a)(2)(A)(i)).
    [cir] controls related to the price of an order or quote (including 
percentage-based and dollar-based controls) (proposed Rule 
928NYP(a)(2)(A)(ii), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(ii));
    [cir] controls related to the order types or modifiers that can be 
utilized (proposed Rule 928NYP(a)(2)(A)(iii), which is identical to 
Arca Options Rule 6.40P-O(a)(2)(A)(iii));
    [cir] controls to restrict the options class transacted (proposed 
Rule 928NYP(a)(2)(A)(iv), which is identical to Arca Options Rule 
6.40P-O(a)(2)(A)(iv)); and
    [cir] controls to prohibit duplicative orders (proposed Rule 
928NYP(a)(2)(A)(v), which is identical to Arca Options Rule 6.40P-
O(a)(2)(A)(v)).
    Like on Arca Options, use of the pre-trade risk controls proposed 
would be optional, but all orders and quotes on the Exchange would pass 
through these risk checks.\93\ As such, an Entering Firm that does not 
choose to set limits pursuant to the new proposed pre-trade risk 
controls would not achieve any latency advantage with respect to its 
trading activity on the Exchange.\94\ The Exchange understands that the 
risk checks of other exchanges, on which the proposed functionality is 
modeled, also apply symmetrically to all orders.\95\
---------------------------------------------------------------------------

    \93\ The Exchange notes that there is nothing unique about this 
approach as functionality on the Exchange is often applied uniformly 
to all orders and quotes, regardless of whether a particular client 
has opted to use that functionality for a particular order or quote. 
For example, the Exchange's limit order price protection applies 
generally to trading on the Exchange and orders or quotes with limit 
prices are not processed more slowly than those without. Similarly, 
the Exchange's trading systems check all orders and quotes for a 
variety of details and modifiers (e.g., duplicative client order 
check, order capacity check, and self-trade prevention). See, e.g., 
Securities Exchange Act Release Nos. 97147 (March 21, 2023), 88 FR 
17072, at 17073-76 (March 15, 2023) (SR-NYSEArca-2023-24).
    \94\ See id., 88 FR, at 17073-76 (discussing, among other 
things, that ``because all orders on the Exchange would pass through 
the pre-trade risk controls, there would be no difference in the 
latency experienced by [Arca Options] OTP Holders who have opted to 
use the additional `Pre-Trade Risk Controls' versus those who have 
not opted to use them.''). To the extent that any latency occurs in 
connection with the proposed pre-trade risk controls, the Exchange 
expects that (like on Arca Options) such latency would be 
significantly less than one microsecond. See id., 88 FR, at 17073.
    \95\ See, e.g., MEMX Risk FAQ, dated October 13, 2020, available 
at https://info.memxtrading.com/us-equities-faq/#Bookmark21 (``The 
risk checks are applied in a consistent manner to all participant 
orders in order to mitigate risk without incurring latency 
disadvantage.''); MIAX Pearl Equities Exchange User Manual, updated 
October 2022, available at https://www.miaxequities.com/sites/default/files/website_file-files/MIAX_Pearl_Equities_User_Manual_October_2022.pdf, at 29 (stating 
that all but two of the exchange's 14 risk checks ``are latency 
equalized i.e. there is no latency penalty for a member when opting 
into and leveraging a risk protection available on the exchange when 
entering an order as compared to a member not opting into the risk 
protection when entering an order'').
---------------------------------------------------------------------------

     The term ``Activity-Based Risk Controls'' would refer to 
three activity-based risk limits that an Entering Firm may apply to its 
orders and quotes in an options class (excluding those represented in 
open outcry except CTB Orders) based on specified thresholds measured 
over the course of an Interval (to be defined below) (proposed Rule 
928NYP(a)(3), which is identical to Arca Options Rule 6.40P-O(a)(3)). 
The proposed Activity-Based Risk Controls are based on the 
substantially identical risk controls set forth in current Rules 
928NY(b)-(d), except that, on Pillar (and identical to Arca Options), a 
Market Maker's orders and quotes would be aggregated and applied 
towards each risk limit (as opposed to current functionality, where a 
Market Maker's orders and quotes are counted separately). The Exchange 
believes that aggregating a Market Maker's quotes and orders for 
purposes of calculating activity-based risk controls, which mirrors the 
application of such controls on Arca Options, would better reflect the 
aggregate risk that a Market Maker has with respect to its quotes and 
orders. The proposed rule would also add detail to make clear that 
orders and quotes represented in open outcry, except CTB Orders, would 
not be subject to these controls, which is consistent with current 
functionality.
    [cir] The term ``Transaction-Based Risk Limit'' would refer to a 
pre-established limit on the number of an Entering Firm's orders and 
quotes executed in a specified class of options per Interval (proposed 
Rule 928NYP(a)(3)(A), which is identical to Arca Options Rule 6.40P-
O(a)(3)(A)). This risk control is based on

[[Page 45749]]

the substantially identical risk control set forth in current Rule 
928NY(b), with the difference described above that a Market Maker's 
orders and quotes would be aggregated.
    [cir] The term ``Volume-Based Risk Limit'' would refer to a pre-
established limit on the number of contracts of an Entering Firm's 
orders and quotes that could be executed in a specified class of 
options per Interval (proposed Rule 928NYP(a)(3)(B), which is identical 
to Arca Options Rule 6.40P-O(a)(3)(B)). This risk control is based on 
the substantially identical risk control set forth in current Rule 
928NY(c), with the difference described above that a Market Maker's 
orders and quotes would be aggregated.
    [cir] The term ``Percentage-Based Risk Limit'' would refer to a 
pre-established limit on the percentage of contracts executed in a 
specified class of options as measured against the full size of such 
Entering Firm's orders and quotes executed per Interval (proposed Rule 
928NYP(a)(3)(C), which is identical to Arca Options Rule 6.40P-
O(a)(3)(C)). The proposed definition, like the Arca Options definition, 
would also provide that to determine whether an Entering Firm has 
breached the specified percentage limit, the Exchange would calculate 
the percent of each order or quote in a specified class of option that 
is executed during an Interval (each, a ``percentage''), and sum up 
those percentages. As further proposed (and like on Arca Options), this 
proposed definition would state that this risk limit would be breached 
if the sum of the percentages exceeds the pre-established limit. This 
risk control is based on the substantially identical risk control set 
forth in current Rule 928NY(d), with the difference described above 
that a Market Maker's orders and quotes would be aggregated.
     The term ``Global Risk Control'' would refer to a pre-
established limit on the number of times an Entering Firm may breach 
its Activity-Based Risk Controls per Interval (proposed Rule 
928NYP(a)(4), which is identical to Arca Options Rule 6.40P-O(a)(4)). 
This proposed definition is also based on the substantially similar 
functionality set forth in current Rule 928NY(f). The Exchange believes 
this proposed definition would add clarity and transparency to Exchange 
rules.
     The term ``Interval'' would refer to the configurable time 
period during which the Exchange would determine if an Activity-Based 
Risk Control or the Global Risk Control has been breached (proposed 
Rule 928NYP(a)(5), which is identical to Arca Options Rule 6.40P-
O(a)(5)). This proposed definition is consistent with current Rule 
928NY, which contains references throughout to a ``time period'' during 
which the Exchange will determine whether a breach has occurred. The 
Exchange believes this proposed definition would add clarity and 
transparency to Exchange rules.
     The term ``Auction-Only Orders'' would refer to the order 
types set for in proposed Rule 900.3NYP(c), as described in detail 
above (proposed Rule 928NYP(a)(6), which is identical to Arca Options 
Rule 6.40P-O(a)(6)).
    Proposed Rules 928NYP(b)(1)-(2) are identical to Arca Options Rules 
6.40P-O(b)(1)-(2) and would set forth how the Pre-Trade, Activity-Based 
and Global Risk Controls could be set or adjusted. Proposed Rule 
928NYP(b)(1) would provide that these risk controls may be set before 
the beginning of a trading day and may be adjusted during the trading 
day. Proposed Rule 928NYP(b)(2) would provide that Entering Firms may 
set these risk controls at the MPID level or at one or more sub-IDs 
associated with that MPID, or both, and further provide that Pre-Trade 
Risk Controls to restrict the options class(es) transacted must be set 
per option class.
    Proposed Rule 928NYP(c) is identical to Arca Options Rule 6.40P-
O(c) and would set forth the Automated Breach Actions that the Exchange 
would take if a designated risk limit is breached. Proposed Rules 
928NYP(c)(1)(A)(i)-(iii) are identical to Arca Options Rules 6.40P-
O(c)(1)(A)(i)-(iii) and would set forth the automated breach actions 
for the Pre-Trade Risk Controls as described below.
     Proposed Rule 928NYP(c)(1)(A)(i) would provide that a 
Limit Order or quote that breaches any Single-Order Risk Control would 
be rejected.
     Proposed Rule 928NYP(c)(1)(A)(ii) would provide that a 
Market Order that arrives during a pre-open state will be cancelled if 
the quantity remaining to trade after an Auction breaches the Single 
Order Maximum Notional Value Risk Limit, and that at all other times, a 
Market Order that triggers or breaches any Single-Order Risk Control 
will be rejected.\96\
---------------------------------------------------------------------------

    \96\ The term ``Auction'' is defined in proposed Rule 
952NYP(a)(1), described below in the discussion of proposed Rule 
952NYP, to mean the opening or reopening of a series for trading 
either on a trade or quote.
---------------------------------------------------------------------------

     Proposed Rule 928NYP(c)(1)(A)(iii) would provide that a 
Limit Order or quote that would breach a price control under paragraph 
(a)(2)(A)(ii) above would be rejected or cancelled as specified in Rule 
900.3NYP(a)(3)(A) (Limit Order Price Protection).
    Consistent with Arca Options, the Exchange likewise proposes to 
process Market Orders differently from Limit Orders because, until a 
series is opened, the Exchange is not able to calculate the Single 
Order Notional Value Risk Limit for a Market Order.\97\ Accordingly, as 
is the case on Arca Options, this proposed risk limit would be applied 
only after a series opens, at which point, a Market Order would be 
cancelled if it fails the risk limit.
---------------------------------------------------------------------------

    \97\ Compare Arca Options Rules 6.40P-O(c)(1)(A)(ii) and (iii) 
with proposed Rules 928NYP(c)(1)(A)(ii) and (iii).
---------------------------------------------------------------------------

    Proposed Rule 928NYP(c)(2) is identical to Arca Options Rule 6.40P-
O(c)(2) and would set forth the automated breach actions for the 
Activity-Based Risk Controls.
     Proposed Rule 928NYP(c)(2)(A) is identical to Arca Options 
Rule 6.40P-O(c)(2)(A) and would first specify that an Entering Firm 
acting as a Market Maker would be required to apply one of the 
Activity-Based Risk Controls to all of its orders and quotes; whereas 
an Entering Firm that is not acting as a Market Maker would have the 
option, but would not be required, to apply one of the Activity-Based 
Risk Controls to its orders. The requirement that Market Makers utilize 
Activity-Based Risk Controls for all quotes mirrors the requirements 
set forth in Rule 928NY, Commentary .04(a); however, the proposed rule 
differs in that it likewise requires Market Makers to apply one of the 
Activity-Based Risk Controls to all of its orders. The Exchange 
believes that requiring that both Market Maker quotes and Market Maker 
orders be subject to one of the Activity-Based Controls would enhance 
Market Makers' ability to assess their total risk exposure on the 
Exchange. The proposed optionality of the Activity-Based Risk controls 
for orders sent by an Entering Firm not acting as a Market Maker 
mirrors current Rule 928NY, Commentary .04(b).
     Proposed Rule 928NYP(c)(2)(B) is identical to Arca Options 
Rule 6.40P-O(c)(2)(B) and would provide that to determine when an 
Activity-Based Risk Control has been breached, the Exchange would 
maintain Trade Counters that would be incremented every time an order 
or quote trades, including any leg of a Complex Order, and would 
aggregate the number of contracts traded during each such execution. As 
further proposed, an Entering Firm may opt to exclude any orders 
designated IOC or FOK from being considered by a Trade Counter. This is 
consistent with existing functionality set forth in Rule 928NY(a)

[[Page 45750]]

and Commentary .07, with a proposed difference to allow an Entering 
Firm to also exclude orders designated FOK, which, like orders 
designated IOC, cancel if not executed on arrival and is based on 
current functionality.\98\ The Exchange believes that specifying that 
orders designated FOK could be excluded from being considered for a 
Trade Counter would mirror handling of such orders on Arca Options and 
would add granularity and clarity to Exchange rules. In addition, as 
noted above, a Market Maker's quotes and orders in a given option class 
would be aggregated and therefore the Exchange proposes that there 
would not be separate Trade Counters for a Market Maker's quotes and 
orders.
---------------------------------------------------------------------------

    \98\ See Securities Exchange Act Release No. 81716 (September 
25, 2017), 82 FR 45653 (September 29, 2017) (SR-NYSEAMER-2017-10) 
(immediately effective filing to exclude IOC Orders from risk 
settings because such exclusion, among other things, would result in 
risk settings that may be better calibrated to suit the needs of 
certain market participants (i.e., those that routinely utilize IOC 
orders to access liquidity on the Exchange)).
---------------------------------------------------------------------------

     Proposed Rule 928NYP(c)(2)(C) is identical to Arca Options 
Rule 6.40P-O(c)(2)(C) and would provide that each Entering Firm must 
select one of three Automated Breach Actions for the Exchange to take 
should the Entering Firm breach an Activity-Based Risk Control.
    [cir] ``Notification Only.'' As set forth in proposed Rule 
928NYP(c)(2)(C)(i) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, the Exchange would continue 
to accept new order and quote messages and related instructions and 
would not cancel any unexecuted orders or quotes in the Consolidated 
Book. With the ``Notification Only'' action, the Exchange would provide 
such notifications, but would not take any other automated actions with 
respect to new or unexecuted orders. The Exchange believes that making 
this Automated Breach Action available to Activity-Based Risk Controls, 
which are unique to options trading, would provide Entering Firms more 
control and flexibility over setting risk tolerance and, as such, over 
how Activity-Based Risk Controls are implemented.
    [cir] ``Block Only.'' As set forth in proposed Rule 
928NYP(c)(2)(C)(ii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(ii)), if this option is selected, the Exchange would reject 
new order and quote messages and related instructions, provided that 
the Exchange would continue to process instructions from the Entering 
Firm to cancel one or more orders or quotes (including Auction-Only 
Orders) in full. The proposed rule would also provide that the Exchange 
would follow any instructions specified in paragraph (e) of the 
proposed Rule (and described below). The Exchange believes that making 
this Automated Breach Action available to Activity-Based Risk Controls, 
which are unique to options trading, would provide Entering Firms more 
control and flexibility over setting risk tolerance and, as such, over 
how Activity-Based Risk Controls are implemented.
    [cir] ``Cancel and Block.'' As set forth in proposed Rule 
928NYP(c)(2)(C)(iii) (which is identical to Arca Options Rule 6.40P-
O(c)(2)(C)(i)), if this option is selected, in addition to the Block 
Only actions described above, the Exchange would also cancel all 
unexecuted orders and quotes in the Consolidated Book other than 
Auction-Only Orders and orders designated GTC. This proposed Cancel and 
Block functionality is substantially similar to the automated breach 
action taken by the Exchange per current Rule 928NY(e) and Commentaries 
.01 and .02 thereto, except that under the current rules, this is 
default (not optional) functionality. The Exchange believes that making 
this Automated Breach Action available to respond to a breach of 
Activity-Based Risk Controls, which are unique to options trading, 
would provide Entering Firms more control and flexibility over setting 
risk tolerance and, as such, over how Activity-Based Risk Controls are 
implemented.
     Finally, proposed Rule 928NYP(c)(2)(D) is identical to 
Arca Options Rules 6.40P-O(c)(2)(D) and would provide that if an 
Entering Firm breaches an Activity-Based Risk Control, the Automated 
Breach Action selected would be applied to its orders and quotes in the 
affected class of options. This proposed action is consistent with 
current Rule 928NY(e) and Commentaries .01 and .02 thereto, which 
provide that, upon a breach, the Exchange will cancel existing and 
suspend new orders and quotes trading in the affected class.
    Proposed Rule 928NYP(c)(2)(E) is identical to Arca Options Rule 
6.40P-O(c)(2)(E) and would provide that the Exchange would specify by 
Trader Update any applicable minimum, maximum and/or default settings 
for the Activity-Based Risk Controls, subject to the following:
     For the Transaction-Based Risk Limit, the minimum setting 
would not be less than one and the maximum setting would not be more 
than 2,000 (proposed Rule 928NYP(c)(2)(E)(i)), which settings are 
identical to the Exchange-determined settings provided under current 
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(i).
     For the Volume-Based Risk Limit, the minimum setting would 
not be less than one and the maximum setting would not be more than 
500,000 (proposed Rule 928NYP(c)(2)(E)(ii)), which settings are 
identical to the Exchange-determined settings provided under current 
Rule 928NY, Commentary .03 and identical to Arca Options Rule 6.40P-
O(c)(2)(E)(ii).
     For the Percentage-Based Risk Limit, the minimum setting 
would not be less than 50 and the maximum setting would not be more 
than 200,000 (proposed Rule 928NYP(c)(2)(E)(iii)), which maximum 
setting is the same as the minimum Exchange-determined setting set 
forth in current Rule 928NY, Commentary .03 and identical to Arca 
Options Rule 6.40P-O(c)(2)(E)(iii). The Exchange proposes to increase 
the minimum setting from less than one (in current rule) to not be less 
than 50 to better reflect actual practice, because under current Rules, 
there are no ATP Holders that have set their Percentage-Based Risk 
Limits below 50.
    Proposed Rule 928NYP(c)(2)(F) is identical to Arca Options Rule 
6.40P-O(c)(2)(F) and would provide that the Exchange would specify by 
Trader Update the Interval for the Activity-Based Risk Controls, 
subject to the following:
     The Interval would not be less than 100 milliseconds and 
would not be greater than 300,000 milliseconds, inclusive of the 
duration of any trading halt occurring within that time (proposed Rule 
928NYP(c)(2)(F)(i)), which minimum setting is identical to the 
Exchange-determined minimum set forth in current Rule 928NY, Commentary 
.03 and identical to Arca Options Rule 6.40P-O(c)(2)(F)(i). Although 
the Exchange's current rule does not include a maximum time period, the 
Exchange proposes to include a maximum allowable Interval to promote 
clarity in Exchange rules of the longest time an Interval could be.
     For transactions occurring in the Core Open Auction, per 
proposed Rule 952NYP, the applicable time period would be the lesser of 
(i) the time between the Core Open Auction of a series and the initial 
transaction or (ii) the Interval (proposed Rule 928NYP(c)(2)(F)(ii)), 
which proposed time period is identical to the timing provided under 
current Rule 928NY, Commentary .03 and also identical to Arca Options 
Rule 6.40P-O(c)(2)(F)(ii).
    Proposed Rule 928NYP(c)(3) is identical to Arca Options Rule 6.40P-
O(c)(3) and would set forth the

[[Page 45751]]

automated breach actions for the Global Risk Controls set by an 
Entering Firm.
     Proposed Rule 928NYP(c)(3)(A) is identical to Arca Options 
Rule 6.40P-O(c)(3)(A) and would provide that if the Global Risk Control 
limit is breached, the Exchange would Cancel and Block, per proposed 
Rule 928NYP(c)(2)(C)(iii), which proposed functionality is 
substantively the same as the functionality provided under current Rule 
928NY, Commentaries .01 (regarding cancellation of existing orders) and 
.02 (regarding block/rejection of new orders).
     Proposed Rule 928NYP(c)(3)(B) is identical to Arca Options 
Rule 6.40P-O(c)(3)(B) and would provide that if an Entering Firm 
breaches the Global Risk Control, the Automated Breach Action would be 
applied to all orders and quotes of the Entering Firm in all classes of 
options regardless of which class(es) of options caused the underlying 
breach of Activity-Based Risk Controls, which proposed functionality is 
substantively the same as the functionality provided (in the last 
sentence) of current Rule 928NY, Commentary .02 in the event of a 
breach of current Rule 928NY(f) (i.e., breach of global risk setting).
     Proposed Rule 928NYP(c)(3)(C) is identical to Arca Options 
Rule 6.40P-O(c)(3)(C) and would provide that the Exchange would specify 
by Trader Update any applicable minimum, maximum and/or default 
settings for the Global Risk Controls, provided that the minimum 
setting would not be less than 25 and the maximum setting would not be 
more than 100. These proposed settings are based on the Exchange-
determined setting provided under current Rule 928NY, Commentary .03, 
except that the current rule allows for a minimum setting of one (1) 
whereas the proposed rule (like Arca Options) is increasing that 
minimum to twenty-five (25), which the Exchange believes would better 
reflect actual practice, because under current Rules, there are no ATP 
Holders that have set their Global Risk Controls below 25.
     Proposed Rules 928NYP(c)(3)(D)(i)-(ii) are identical to 
Arca Options Rules 6.40P-O(c)(3)(D)(i)-(ii) and would provide that the 
Exchange would specify by Trader Update the Interval for the Global 
Risk Controls, subject to the following:
    [cir] The Interval would not be less than 100 milliseconds and 
would not be greater than 300,000 milliseconds, inclusive of the 
duration of any trading halt occurring within that time, per proposed 
Rule 928NYP(c)(3)(D)(i), which minimum setting is identical to the 
Exchange-determined minimum set forth in current Rule 928NY, Commentary 
.03. Although the Exchange's current rule does not include a maximum 
time period, the Exchange proposes to mimic Arca Options Rule 6.40P-
O(c)(3)(D)(i) by including a maximum allowable Interval to allow an 
outside parameter by which the counters would be reset, which would 
promote transparency in Exchange rules regarding the maximum allowable 
Interval.
    [cir] For transactions occurring in the Core Open Auction, per 
proposed Rule 952NYP, the applicable time period is the lesser of (i) 
the time between the Core Open Auction of a series and the initial 
transaction or (ii) the Interval, per proposed Rule 
928NYP(c)(3)(D)(ii), which proposed time period is identical to the 
timing provided under current Rule 928NY, Commentary .03 and is also 
identical to Arca Options Rule 6.40P-O(c)(3)(D)(ii).
    Proposed Rule 928NYP(d) is identical to Arca Options Rules 6.40P-
O(d) and would describe how an Entering Firm's ability to enter orders, 
quotes, and related instructions would be reinstated after a ``Block 
Only'' or ``Cancel and Block'' Automated Breach Action has been 
triggered. In such case, proposed Rule 928NYP(d) provides that the 
Exchange would not reinstate the Entering Firm's ability to enter 
orders and quotes and related instructions on the Exchange (other than 
instructions to cancel one or more orders or quotes in full (including 
Auction-Only Orders, and orders designated GTC)) without the consent of 
the Entering Firm, which may be provided via automated contact if it 
was a breach of an Activity-Based Risk Control. As further proposed, an 
Entering Firm that breaches the Global Risk Control would not be 
reinstated unless the Entering Firm provides consent via non-automated 
contact with the Exchange. This proposed functionality is consistent 
with current Rule 928NY, Commentary .02 regarding the need for an 
Entering Firm to make automated or non-automated contact with the 
Exchange, as applicable, prior to being reinstated.
    Proposed Rule 928NYP(e) is identical to Arca Options Rules 6.40P-
O(e) and would set forth new ``Kill Switch Action'' functionality, 
which would allow an Entering Firm to direct the Exchange to take 
certain bulk cancel or block actions with respect to orders and quotes. 
In contrast to the Automated Breach Actions described above, which the 
Exchange would take automatically after the breach of a risk limit, the 
Exchange would not take any of the Kill Switch Actions without express 
direction from an Entering Firm. The Exchange believes that the 
proposed Kill Switch Action functionality would also provide ATP 
Holders with greater flexibility to provide bulk instructions to the 
Exchange with respect to cancelling existing orders and quotes and 
blocking new orders and quotes.
    In particular, proposed Rule 928NYP(e) would specify that an 
Entering Firm could direct the Exchange to take one or more of the 
following actions with respect to orders and quotes (excluding those 
represented in open outcry except CTB Orders), at either an MPID, or if 
designated, sub-ID Level: (1) Cancel all Auction-Only Orders; (2) 
Cancel all orders designated GTC; (3) Cancel all unexecuted orders and 
quotes in the Consolidated Book other than Auction-Only Orders and 
orders designated GTC; or (4) Block the entry of any new order and 
quote messages and related instructions, provided that the Exchange 
would continue to accept instructions from Entering Firms to cancel one 
or more orders or quotes (including Auction-Only Orders, and orders 
designated GTC) in full, and later, reverse that block. The proposed 
post-trade Kill Switch Actions are not only identical to Arca Options 
Rule 6.40P-O(e) but are also consistent with the rules of other options 
exchanges.\99\ The Exchange believes that offering this functionality 
for options trading under Pillar would give Entering Firms more 
flexibility in setting risk controls for options trading (as noted 
above).
---------------------------------------------------------------------------

    \99\ See, e.g., Cboe Rule 5.34(c)(6) (describing the optional 
``Kill Switch'' functionality, which allows a Cboe participant to 
instruct Cboe to simultaneously cancel or reject all orders or 
quotes (or a subset thereof) as well as to instruct Cboe to block 
all orders or quotes (or a subset thereof), which block instructions 
will remain in effect until such participant contacts Cboe's trade 
desk to remove the block).
---------------------------------------------------------------------------

    Proposed Commentary .01 to Rule 928NYP is identical to Commentary 
.01 to Arca Options Rule 6.40P-O and would provide that the Pre-Trade, 
Activity-Based, and Global Risk Controls described in the proposed Rule 
98NYP are meant to supplement, and not replace, the ATP Holder's own 
internal systems, monitoring, and procedures related to risk management 
and are not designed for compliance with Rule 15c3-5 under the Exchange 
Act.\100\ Responsibility for compliance with all Exchange and SEC rules 
remains with the ATP Holder. The Exchange does not guarantee that these 
controls will be sufficiently comprehensive to meet all of an ATP 
Holder's needs, the controls are not designed to be the sole means of 
risk management, and using these controls

[[Page 45752]]

will not necessarily meet an ATP Holder's obligations required by the 
Exchange or federal rules including, without limitation, the Rule 15c3-
5. Use of the Exchange's proposed Pre-Trade Risk Controls will not 
automatically constitute compliance with Exchange or federal rules, and 
responsibility for compliance with all Exchange and SEC rules remains 
with the ATP Holder. The proposed rule, which is new text, makes clear 
that (like on Arca Options) use of the proposed controls alone does not 
constitute compliance with Exchange rules or the Exchange Act.
---------------------------------------------------------------------------

    \100\ 17 CFR 240.15c3-5.
---------------------------------------------------------------------------

    Proposed Commentary .02 to Rule 928NYP is identical to Commentary 
.02 to Arca Options Rule 6.40P-O and would provide that an Entering 
Firm may set price controls under proposed Rule 928NYP(a)(2)(A)(ii) 
(described above) that are equal to or more restrictive than the price 
level provided per the Exchange's Limit Order Price Protection feature, 
as set forth in proposed Rule 900.3NYP(a)(3)(A). This proposed 
commentary is intended to clarify the interplay between the Exchange's 
Limit Order Price Protection functionality and the price controls that 
may be set by an Entering Firm pursuant to proposed Rule 
928NYP(a)(2)(A)(ii).
    In connection with proposed Rule 928NYP, the Exchange proposes to 
add the following preamble to Rule 928NY: ``This Rule is not applicable 
to trading on Pillar.'' This proposed preamble is designed to promote 
clarity and transparency in Exchange rules that Rule 928NY would not be 
applicable to trading on Pillar.
Proposed Rule 928.1NYP: Price Reasonability Checks--Orders and Quotes
    The Exchange proposes to describe its Price Reasonability Checks 
for orders and quotes in proposed Rule 928.1NYP. For the Exchange 
System, the concept of ``Price Reasonability Checks'' for Limit Orders 
is described in Rule 967NY(c) and the concept of price protection 
filters for quotes are described in Rule 967.1NY. The proposed ``Price 
Reasonability Checks'' on Pillar are identical to those set forth in 
Arca Options Rule 6.41P-O. As is the case on Arca Options, the proposed 
``Price Reasonability Checks'' would be applicable to both orders and 
quotes and are designed to provide similar price protections as the 
current price checks for Limit Orders and price protection filters for 
quotes on the Exchange System, with differences from the current rule 
described in detail below. The Exchange believes that applying the same 
Price Reasonability Checks to both orders and quotes and describing 
them in a single rule would make the Exchange's rules easier to 
navigate, while continuing to provide price protection features for 
both orders and quotes. The Exchange proposes to locate the rule text 
for the proposed Price Reasonability Checks in proposed Rule 928.1NYP 
to immediately follow proposed Rule 928NYP regarding the Pre-Trade and 
Activity-Based Controls, as this placement would group the risk 
controls together and make Exchange rules easier to navigate.
    Proposed Rules 928.1NYP(a)(1)-(3) are identical to Arca Options 
Rules 6.41P-O(a)(1)-(3) and would set forth the circumstances under 
which the proposed Price Reasonability Checks would apply. Proposed 
Rule 928.1NY(a) would provide that the Exchange would apply the Price 
Reasonability Checks, as defined in proposed paragraphs (b) and (c), to 
all Limit Orders and quotes (excluding those represented in open 
outcry, except CTB Orders), during continuous trading on each trading 
day, subject to the following:
     Proposed Rule 928.1NYP(a)(1) is identical to Arca Options 
Rule 6.41P-O(a)(1) and would provide that a Limit Order or quote 
received during a pre-open state would be subject to the proposed Price 
Reasonability Checks after an Auction concludes; that a Limit Order or 
quote that was resting on the Consolidated Book before a trading halt 
would be subject to the proposed Price Reasonability Checks again after 
the Trading Halt Auction; and that a put option message to buy would be 
subject to the Arbitrage Check regardless of when it arrives. This 
proposed rule is based on current Rule 967NY(c), which provides that 
the Price Reasonability Checks (for orders) are applied when a series 
opens or reopens for trading and is similar to Rule 967.1NY(a)(1), 
which provides that Market Maker quote protection will be applied when 
an NBBO is available. NBBO protection is available when a series is 
opened for trading. Proposed Rule 928.1NYP(a)(1) includes additional 
detail and granularity regarding when the proposed Price Reasonability 
Checks would be applied under Pillar. The proposed Rule also adds new 
functionality that a put option message to buy would be subject to the 
Arbitrage Check even if a series is not open for trading. The Exchange 
believes that it is appropriate to apply this check to put option 
messages to buy at any time because the check is not dependent on an 
external reference price.
     Proposed Rule 928.1NYP(a)(2) is identical to Arca Options 
Rule 6.41P-O(a)(2) and would provide that if the calculation of the 
Price Reasonability Check is not consistent with the MPV for the 
series, it would be rounded down to the nearest price within the 
applicable MPV, which is consistent with current functionality. The 
Exchange believes this proposed rule would promote clarity and 
transparency in Exchange rules regarding how the Price Reasonability 
Check would be calculated.
     Proposed Rule 928.1NYP(a)(3) is identical to Arca Options 
Rule 6.41P-O(a)(3) and would provide that the proposed Price 
Reasonability Checks would not apply to (i) any options series for 
which the underlying security has a non-standard cash or stock 
deliverable as part of a corporate action; (ii) any options series for 
which the underlying security is identified as over-the-counter 
(``OTC''); (iii) any option series on an index; and (iv) any option 
series for which the Exchange determines it is necessary to exclude 
underlying securities in the interests of maintaining a fair and 
orderly market, which the Exchange would announce by Trader Update. 
Proposed Rule 928.1NYP(a)(3) is based on current Commentary .01 to 
Rules 967NY (orders) and 967.1NY (quotes), with a non-substantive 
difference that the proposed rule no longer references Binary Return 
Derivatives (``ByRDs'') because ByRDs are no longer traded on the 
Exchange.
    Proposed Rule 928.1NYP(b) is identical to Arca Options Rule 6.41P-
O(b) and would set forth the ``Arbitrage Checks'' for buy orders or 
quotes, which subset of Price Reasonability Checks are based on the 
principle that an option order or quote is in error and should be 
rejected (or canceled) when the same result can be achieved on the 
market for the underlying equity security at a lesser cost.
     Proposed Rule 928.1NYP(b)(1) is identical to Arca Options 
Rule 6.41P-O(b)(1) and relates to ``puts'' and would provide that order 
or quote messages to buy for put options would be rejected if the price 
of the order or quote is equal to or greater than the strike price of 
the option, which is substantively identical to current Rules 
967NY(c)(1)(A) (for orders) and 967.1NY(a)(3) (for quotes).
     Proposed Rule 928.1NYP(b)(2) is identical to Arca Options 
Rule 6.41P-O(b)(2) and relates to ``calls'' and would provide that 
order or quote messages to buy for call options would be rejected or 
canceled (if resting) if the price of the order or quote is equal to or 
greater than the price of the last trade (of any size) of the 
underlying security on the Primary Market, plus a specified threshold 
to be determined by the Exchange and announced by Trader Update. This 
proposed rule is

[[Page 45753]]

substantially similar to current Rules 967NY(c)(1)(B) (for orders) and 
967.1NY(a)(2)(B) (for quotes), with several differences.
    First, because the Exchange is monitoring last sales from the 
Primary Market, the Exchange proposes that the Exchange-specified 
threshold for the Checks would be based on the price of the last trade 
(of any size) on the Primary Market rather than on the Consolidated 
Last Sale.\101\ The Exchange believes that the last trade on the 
Primary Market would be indicative of the price of the underlying 
security and that by using the last trade of the Primary Market rather 
than the Consolidated Last Sale, the Pillar system would need to ingest 
and process less data, thereby improving efficiency and performance of 
the system. The Exchange also believes that applying the Checks to 
trades in underlying securities of any size, i.e., both round lots and 
odd lots, would enhance the efficacy of the Checks as this proposed 
functionality would provide a better representation of the trade prices 
occurring in the underlying market.\102\
---------------------------------------------------------------------------

    \101\ Per Rule 900.2NY, the term ``Primary Market'' with respect 
to options traded on the Exchange means the principal market in 
which the underlying security is traded. The Exchange also notes a 
difference in that proposed Rule 928.1NYP(b)(2) refers to a 
``specified threshold,'' whereas current Rule 967NY(c)(1)(B) refers 
to a ``specified dollar amount,'' which difference is designed to 
give the Exchange more flexibility in applying the Arbitrage Checks 
to use a percentage-based threshold.
    \102\ The Exchange notes that trades in higher-priced underlying 
securities tend to be odd lots, which highlights the importance of 
capturing such trades in the Checks.
---------------------------------------------------------------------------

    Second, current Rules 967.1NY(a)(2)(A) and (C) specify which price 
would be used for Market Maker bids made before the underlying security 
is open or during a trading halt, pause, or suspension of the 
underlying security. Because on Pillar the proposed Arbitrage Checks 
for calls (for orders and quotes) would be applied only once a series 
has opened or reopened for trading, the Exchange no longer needs to 
specify prices other than the last trade (of any size) on the Primary 
Market for purposes of calculating the Arbitrage Checks for calls. The 
Exchange believes the difference in proposed Rule 928.1NYP(b)(2) from 
current functionality (which is identical to Arca Options Rule 6.41P-
O(b)(2)) would not compromise the price protection feature of the 
proposed Arbitrage Checks.
    Proposed Rule 928.1NYP(c) is identical to Arca Options Rule 6.41P-
O(c) and would set forth the ``Intrinsic Value Checks'' for orders or 
quotes to sell, which are designed to protect sellers of calls and puts 
from presumptively erroneous executions based on the ``Intrinsic 
Value'' of an option.
     Proposed Rules 928.1NYP(c)(1)-(2) are identical to Arca 
Options Rules 6.41P-O(c)(1)-(2) and would set forth how the Intrinsic 
Value of an option would be determined. Proposed Rule 928.1NYP(c)(1) 
would provide that the Intrinsic Value for a put option is equal to the 
strike price minus the price of the last trade (of any size) of the 
underlying security on the Primary Market. Proposed Rule 928.1NYP(c)(2) 
would provide that the Intrinsic Value for a call option is equal to 
the price of the last trade (of any size) of the underlying security on 
the Primary Market minus the strike price. Proposed Rules 
928.1NYP(c)(1)-(2) are based on how the intrinsic value is calculated 
in current Rule 967NY(c)(2) for orders, with two differences. First, 
the proposed ``Intrinsic Value Checks'' would also apply to quotes, 
which would be new on Pillar (but would mimic Arca Options Rules 6.41P-
O(c)(1)-(2)) and would provide Market Makers with additional protection 
for quotes to sell. Second, the Intrinsic Value of an option would be 
based on the price of the last trade (of any size) on the Primary 
Market rather than on the Consolidated Last Sale for the same reasons 
discussed above, that it would enhance performance without compromising 
the price protection feature of the Intrinsic Value Checks.
     Proposed Rule 928.1NYP(c)(3) is identical to Arca Options 
Rule 6.41P-O(c)(3) and would provide that ISOs to sell would not be 
subject to the Intrinsic Value Check, which carve out is substantively 
identical to current Rule 967NY(c)(2).
     Proposed Rule 928.1NYP(c)(4) is identical to Arca Options 
Rule 6.41P-O(c)(4) and would describe the application of the Intrinsic 
Value Checks to puts and calls to sell.
    [cir] Proposed Rule 928.1NYP(c)(4)(A) is identical to Arca Options 
Rule 6.41P-O(c)(4)(A) and would provide that orders or quotes to sell 
for both puts and calls would be rejected or canceled (if resting) if 
the price of the order or quote is equal to or lower than its Intrinsic 
Value, minus a specified threshold to be determined by the Exchange and 
announced by Trader Update.
    [cir] Proposed Rule 928.1NYP(c)(4)(B) is identical to Arca Options 
Rule 6.41P-O(c)(4)(B) and would provide that the Exchange-determined 
threshold percentage (per proposed paragraph (c)(4)(A)) would be based 
on the NBB, provided that, immediately following an Auction, it would 
be based on the Auction Price, or, if none, the lower Auction Collar 
price, or, if none, the NBB.\103\ This proposed threshold percentage is 
similar to how the Reference Price would be determined for Trading 
Collars, as described above pursuant to proposed Rule 900.3NYP(a)(4). 
As further proposed, Rule 928.1NYP(c)(4)(B) would provide that for 
purposes of determining the Intrinsic Value, the Exchange would not use 
an adjusted NBBO. The Exchange further proposes that the Intrinsic 
Value Check for sell orders and quotes would not be applied if the 
Intrinsic Value cannot be calculated.
---------------------------------------------------------------------------

    \103\ See discussion infra, regarding proposed Rule 952NYP(a) 
and proposed definitions for the terms ``Auction,'' ``Auction 
Price,'' Auction Collar,'' ``pre-open state,'' and ``Trading Halt 
Auction.''
---------------------------------------------------------------------------

    Proposed Rules 928.1NYP(c)(4)(A)-(B) are substantially similar to 
current Rule 967NY(a)(2)(A), which describes the application of the 
Intrinsic Value check for orders, with the following differences:
     The proposed rule would extend this price protection to 
quotes, providing Market Makers with additional protection mechanisms;
     The proposed rule would provide additional detail 
regarding how the specified threshold percentage would be determined 
immediately following an Auction;
     The proposed rule would establish that an unadjusted NBBO 
(as opposed to an adjusted NBBO) would be used to calculate the 
Intrinsic Value; and
     The proposed rule includes text providing that if the 
Intrinsic Value cannot be calculated, the Check would not be applied.
    The Exchange believes that these additions, which mirror Arca 
Options Rules 6.41P-O(c)(4)(A)-(B), would both add granularity to the 
rule and enhance the functionality for calculating and applying the 
Intrinsic Value. For the same reasons described above in connection 
with Limit Order Price Protection and Trading Collars, the Exchange 
believes that using an unadjusted NBBO (as opposed to using an adjusted 
NBBO) would serve price protection purposes by using a more 
conservative view of the NBBO.
    Proposed Rule 928.1NYP(d) is identical to Arca Options Rule 6.41P-
O(d) and would provide the Automated Breach Action to be applied when a 
Market Maker's order or quote fails one of the Price Reasonability 
Checks. As proposed, if a Market Maker's order or quote message is 
rejected or cancelled (if resting) pursuant to proposed paragraph (b) 
(Arbitrage Checks) or (c) (Intrinsic Value Checks) of proposed

[[Page 45754]]

Rule 928.1NYP, the Exchange would Cancel and Block orders and quotes in 
the affected class of options as described in Rule 928NYP(c)(2)(C)(iii) 
(as described above in section ``Proposed Rule 928NYP'').
    Proposed Rule 928.1NYP(d)(1) is identical to Arca Options Rule 
6.41P-O(d)(1) and would provide that a breach of proposed Rule 
928.1NYP(d) would count towards a Market Maker's Global Risk Control 
limit per proposed Rule 928NYP(a)(4) (as described above in section 
``Proposed Rule 928NYP'').
    Proposed Rule 928.1NYP(d)(2) is identical to Arca Options Rule 
6.41P-O(d)(2) and concerns how a Market Maker would be reinstated 
following an automated breach action. As proposed, the Exchange would 
not reinstate the Market Maker's ability to enter orders and quotes and 
related instructions on the Exchange in that class of options (other 
than instructions to cancel one or more orders/quotes (including 
Auction-Only Orders and orders designated GTC) in full) without the 
consent of the Market Maker, which may be provided via automated 
contact.
    Rule 928.1NYP(d) is substantially similar to current Rule 
967.1NY(b), except that the proposed rule applies to both the orders 
and quotes of a Market Maker (not just quotes) and provides the 
additional functionality that a breach of the Price Reasonability 
Checks would count towards a Market Maker's Global Risk Control limit 
under proposed Rule 928NYP(c)(3), which functionality would be new 
under Pillar. The Exchange believes that the proposed new 
functionality, which mirrors Arca Options Rule 6.41P-O(d), would 
provide ATP Holders greater control and flexibility over setting risk 
tolerance and exposure for both orders and quotes. In connection with 
proposed Rule 928.1NYP, the Exchange proposes to add the following 
preamble to Rules 967NY and 967.1NY: ``This Rule is not applicable to 
trading on Pillar.'' This proposed preamble is designed to promote 
clarity and transparency in Exchange rules that Rules 967NY and 967.1NY 
would not be applicable to trading on Pillar.
Proposed Rule 952NYP: Auction Process
    Current Rule 952NY sets forth the opening process currently used on 
the Exchange System for opening trading in a series each day and 
reopening trading in a series following a trading halt. Current Rule 
952NY(a) defines the term ``Trading Auction'' as the process by which 
trading is initiated in a specified options class that may be employed 
at the opening of the Exchange each business day or to re-open trading 
after a trading halt, and that Trading Auctions will be conducted 
automatically by the Exchange System. Current Rules 952NY(b) and (c) 
describe the manner for the automated Trading Auctions and provide 
that, once the primary market for the underlying security disseminates 
a quote and a trade that is at or within the quote, the Exchange System 
then conducts an Auction Process (``current Auction Process'') whereby 
the Exchange System determines a single price at which a series may be 
opened by looking to the price at which the greatest number of 
contracts can trade at or between the NBBO disseminated by OPRA.\104\
---------------------------------------------------------------------------

    \104\ If the same number of contracts can trade at multiple 
prices, the opening price is the price at which the greatest number 
of contracts can trade that is at or nearest to the midpoint of the 
NBBO disseminated by OPRA; unless one such price is equal to the 
price of any resting Limit Order(s) in which case the opening price 
is the same price as the Limit Order(s) with the greatest size and, 
if the same size, the highest price and if there is a tie between 
price levels and no Limit Orders exist at either of the prices, the 
Exchange uses the higher price. See Rule 952NY(c).
---------------------------------------------------------------------------

    As described in Rule 952NY(b)(D), the Exchange will not conduct the 
current Auction Process to open a series if the bid-ask differential 
for that series is not within an acceptable range, i.e., is not within 
the bid-ask differential guidelines established in Rule 
925NY(b)(4).\105\ If a series does not open for trading, Market and 
Limit Orders entered in advance of the current Auction Process remain 
in the Consolidated Book and will not be routed, even if another 
exchange opens that series for trading and such resting orders become 
Marketable against the ABBO.\106\
---------------------------------------------------------------------------

    \105\ Because Rule 952NY(b)(D) cross-references the bid-ask 
differential requirement of Rule 925NY(b)(4), which relates to the 
obligations of Market Makers in appointed classes, the Exchange will 
not open a series for trading if the NBBO disseminated by OPRA in a 
series is not within such bid-ask differentials.
    \106\ The term ``Marketable'' is defined in Rule 900.2NY to 
mean, for a Limit Order, an order that can be immediately executed 
or routed and Market Orders are always considered marketable.
---------------------------------------------------------------------------

    The Exchange proposes that new Rule 952NYP which is identical to 
Arca Options Rule 6.64P-O would set forth the automated process for 
both opening and reopening trading in a series on the Exchange on 
Pillar. The Exchange proposes to specify that current Rule 952NY would 
not be applicable to trading on Pillar. With the transition to Pillar, 
the fundamental process of how an option series would be opened (or 
reopened) on the Exchange would not materially change because the 
Exchange would continue to assess whether a series can be opened based 
on whether the bid-ask differential for a series is within a specified 
range. However, with the availability of Pillar technology, the 
Exchange proposes differences to the proposed auction process that 
mirror Arca Options Rule 6.64P-O and are designed to provide additional 
opportunities for an options series to open or reopen for trading even 
if the bid-ask differential is wider than the specified guidelines. The 
Exchange notes that other options exchanges also provide additional 
opportunities for a series to open after a specified period of time in 
a wide market.\107\ In addition, the Exchange proposes to specify 
minimum time periods to allow a Market Maker(s) to quote in an assigned 
series before the series is opened or reopened. With the proposed 
Auction Process, described further below, the Exchange endeavors to 
attract the highest quality quote for each series at the open to 
attract order flow for the auction. While the Exchange does not require 
Market Makers assigned to a series to quote before a series can be 
opened (or reopened), the Exchange believes that providing time for 
such Market Makers to do so would provide both better and more 
consistent prices on executions to ATP Holders in an Auction and a 
smoother transition to continuous trading. In addition, the Exchange 
believes that the proposed changes would enhance the opening/reopening 
process on the Exchange by providing a transparent and deterministic 
process for the Exchange to open additional series for trading.
---------------------------------------------------------------------------

    \107\ For example, in 2021, Cboe amended its opening process set 
forth in Cboe Rule 5.31 to provide for a ``forced opening'' process 
that is used if an option class is unable to open because it does 
not meet the applicable bid-ask differential. In such case, if the 
``Composite Market'' is not crossed and there is no non-zero offer, 
within a specified time period, Cboe will open the series without a 
trade. See Securities Exchange Act Release No. 90967 (January 22, 
2021), 86 FR 7249 (January 28, 2021) (SR-Cboe-2021-005) (Notice of 
filing and immediate effectiveness of proposed rule change to amend 
Cboe's opening process for simple orders).
---------------------------------------------------------------------------

    Further, the Exchange proposes additional enhancements (and details 
them in the rule) that mirror Arca Options Rule 6.64P-O relating to how 
orders and quotes would be processed if they arrive during the period 
when the Exchange is processing an Auction and how the Exchange would 
process orders and quotes when it transitions to continuous trading 
following an Auction. Accordingly, the structure of proposed Rule 
952NYP is identical to Arca Options Rule 6.64P-O and includes a 
description of how the Exchange would process orders and quotes during 
a trading halt, which

[[Page 45755]]

would provide granularity and transparency in Exchange rules.
    Definitions. Proposed Rule 952NYP(a) contains proposed definitions 
for options trading on Pillar that are identical to those set forth in 
Arca Options Rule 6.64P-O(a) and would provide that the proposed Rule 
would be applicable to all series that trade on the Exchange other than 
Flex Options.\108\
---------------------------------------------------------------------------

    \108\ With the transition to Pillar, the Exchange is not making 
any changes to how Flex Options trade. Rule 901G provides that Flex 
Options transactions may be effected during normal Exchange options 
trading hours on any business day and Rule 902G provides that there 
will be no trading rotations in Flex Options. Rule 904G sets forth 
the procedures for trading Flex Options. The opening process for 
Electronic Complex Orders is set forth in Rule 980NY. The opening 
process for Electronic Complex Orders is set forth in Rule 980NY. In 
connection with the transition to Pillar, the Exchange has adopted 
new Rule 980NYP regarding complex trading on Pillar. See the Pillar 
Complex Approval Order, supra note 66.
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(1) is identical to Arca Options 
Rule 6.64P-O(a)(1) and would define the term ``Auction'' to mean the 
opening or reopening of a series for trading either with or without a 
trade. This proposed definition is based in part on current Rule 
952NY(a), which defines the term ``Trading Auction'' to be a process by 
which trading is initiated in a specified options class that may be 
employed at the opening of the Exchange each business day or to re-open 
trading after a trading halt.\109\ On Pillar, the Exchange proposes 
that the term ``Auction'' would refer to the point in the process where 
the Exchange determines that a series can be opened or reopened either 
with or without a trade. After an Auction concludes, the series then 
transitions to continuous trading. Proposed Rules 952NYP(a)(1)(A)-(B) 
are identical to Arca Options Rule 6.64P-O(a)(1)(A)-(B). Proposed Rule 
952NYP(a)(1)(A) would provide that a ``Core Open Auction'' means the 
Auction that opens trading after the beginning of Core Trading Hours 
and proposed Rule 952NYP(a)(1)(B) would provide that a ``Trading Halt 
Auction'' means the Auction that reopens trading following a trading 
halt. These are Pillar terms that would be new to options trading on 
the Exchange.
---------------------------------------------------------------------------

    \109\ See also Rule 952NY(e) (providing that a Trading Auction 
to reopen an option class after a trading halt is conducted in the 
same manner as a Trading Auction to open each option class at the 
start of each trading day, i.e., as described in Rule 952NY(a)-(d)).
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(2) is identical to Arca Options 
Rule 6.64P-O(a)(2) and would define the term ``Auction Collar'' to mean 
the price collar thresholds for the Indicative Match Price (defined 
below) for an Auction. As further proposed, the upper Auction Collar 
would be the offer of the Legal Width Quote (defined below) and the 
lower Auction Collar would be the bid of the Legal Width Quote, 
provided that if the bid of the Legal Width Quote is zero, the lower 
Auction Collar would be one MPV above zero for the series (per proposed 
Rule 952NYP(a)(2)(A), which is identical to Arca Options Rule 6.62P-
O(a)(2)(A)). In addition, as proposed, if there is no Legal Width 
Quote, the Auction Collars would be published in the Auction Imbalance 
Information (defined below) as zero (per proposed Rule 952NYP(a)(2)(B), 
which is identical to Arca Options Rule 6.62P-O(a)(2)(B)).
    As proposed, the Auction Collars would be set at the Legal Width 
Quote (described below) and would prevent an Auction trade from 
occurring at a price outside of the Legal Width Quote. The Exchange 
believes that the concept of Auction Collars is similar to the current 
requirement that the Exchange will not open a series if the bid-ask 
differential is not within the bid-ask differential guidelines 
established under Rule 925NY(b)(4).\110\ Thus, the proposed Auction 
Collars (based on a Legal Width Quote) would use Pillar terminology to 
prevent an Auction that results in a trade from being priced outside 
the bid-ask differential applicable to Auctions on Pillar.\111\
---------------------------------------------------------------------------

    \110\ See Rule 952NY(b)(D) and (E). The Exchange notes that in 
common parlance bid-ask differentials are known as ``legal-width 
quotes.''
    \111\ See also Cboe Rule 5.31(a) (defining the ``Opening 
Collar'' as the price range that establishes limits at or inside of 
which Cboe determines the opening trade price for a series).
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(3) is identical to Arca Options Rule 6.64P-
O(a)(3) and would define the term ``Auction Imbalance Information'' to 
mean the information that the Exchange disseminates about an Auction 
via its proprietary data feeds and includes the Auction Collars, 
Auction Indicator, Book Clearing Price, Far Clearing Price, Indicative 
Match Price, Matched Volume, Market Imbalance, and Total Imbalance. 
With Pillar, the Exchange proposes to disseminate Auction Imbalance 
Information in the same manner that such information is disseminated on 
Arca Options. The Exchange currently makes certain auction imbalance 
information available on its proprietary data feed and the Exchange 
believes that enhancing this information by disseminating the proposed 
Auction Collars, Auction Indicator, Book Clearing Price, and Far 
Clearing Price, which would be new for the Exchange, would promote 
transparency. In addition, the Exchange proposes that the Auction 
Imbalance Information would reflect the quotes and orders eligible to 
participate in an Auction, which contribute to price discovery. As 
such, proposed Rule 952NYP(a)(3) (like Arca Options Rule 6.64P-O(a)(3)) 
would further provide that Auction Imbalance Information would be based 
on all quotes and orders (including the non-displayed quantity of 
Reserve Orders) eligible to participate in an Auction, excluding IO 
Orders. The Exchange believes that specifying that the non-displayed 
quantity of Reserve Orders would be included in the Auction Imbalance 
Information is consistent with current functionality that the full 
quantity of Reserve Orders are eligible to participate in the current 
Auction Process.
    Proposed Rule 952NYP(a)(3)(A) is identical to Arca Options Rule 
6.64P-O(a)(3)(A) and would define the term ``Auction Indicator'' to 
mean the indicator that provides a status update of whether an Auction 
cannot be conducted because either (i) there is no Legal Width Quote, 
or (ii) a Market Maker quote has not been received during the 
parameters of the Opening MMQ Timer(s) (defined below). This proposed 
definition would be new for the Exchange and would provide transparency 
of when an Auction could not be conducted.\112\
---------------------------------------------------------------------------

    \112\ Consistent with the proposed rule, Rule 952NY(b)(D) 
provides that the Exchange will not conduct the current Auction 
Process if the bid-ask differential for a series is not within an 
acceptable range.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(3)(B) is identical to Arca Options Rule 
6.64P-O(a)(3)(B) and would define the term ``Book Clearing Price'' to 
mean the price at which all contracts could be traded in an Auction if 
not subject to the Auction Collar and states that the Book Clearing 
Price would be zero if a sell (buy) Imbalance cannot be filled by any 
buy (sell) interest. The Exchange proposes that the manner that the 
Book Clearing Price would be calculated would be identical to how it is 
calculated per Arca Options Rule 6.64P-O(a)(3)(B).
    Proposed Rule 952NYP(a)(3)(C) is identical to Arca Options Rule 
6.64P-O(a)(3)(C) and would define the term ``Far Clearing Price'' to 
mean the price at which Auction-Only Orders could be traded in an 
Auction within the Auction Collar. The Exchange proposes that the 
manner that the Far Clearing Price would be calculated would be 
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(C).
    Proposed Rule 952NYP(a)(3)(D) is identical to Arca Options Rule 
6.64P-O(a)(3)(D) and would define the term

[[Page 45756]]

``Imbalance'' to mean the number of buy (sell) contracts that cannot be 
matched with sell (buy) contracts at the Indicative Match Price at any 
given time. The Exchange proposes to calculate the Imbalance in a 
manner identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D).
    Proposed Rule 952NYP(a)(3)(D)(i) is identical to Arca Options Rule 
6.64P-O(a)(3)(D)(i) and would define the term ``Total Imbalance'' to 
mean the Imbalance of all buy (sell) contracts at the Indicative Match 
Price for all orders and quotes eligible to trade in an Auction. The 
Exchange proposes to calculate the Total Imbalance in a manner 
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D)(i). Proposed Rule 952NYP(a)(3)(D)(ii) is identical to Arca 
Options Rule 6.64P-O(a)(3)(D)(ii) and would define the term ``Market 
Imbalance'' to mean the Imbalance of any remaining buy (sell) Market 
Orders and MOO Orders that are not matched for trading in the Auction. 
The Exchange proposes to calculate the Market Imbalance in a manner 
identical to how it is calculated per Arca Options Rule 6.64P-
O(a)(3)(D)(ii).
     Proposed Rule 952NYP(a)(4) is identical to Arca Options 
Rule 6.64P-O(a)(4) and would define the term ``Auction Price'' to mean 
the price at which an Auction that results in a trade is conducted. 
This proposed definition is designed to add clarity and transparency to 
Exchange rules as this term would be used as a reference price in 
proposed Rules 900.3NYP(a)(3)(B), 900.3NYP(a)(4)(B), and 
928.1NYP(c)(4)(B).\113\
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    \113\ See also Cboe Rule 5.31(a) (defining the ``Opening Trade 
Price'' as the price at which Cboe executes opening trades in a 
series). The Exchange notes that the term ``Auction Price'' is 
distinguished from the proposed term of ``Indicative Match Price,'' 
as the latter term is the content included in the Auction Imbalance 
Information in advance of an Auction, and the Auction Price is the 
price of an Auction that results in a trade.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(5) is identical to Arca Options Rule 6.64P-
O(a)(5) and would define the term ``Auction Process'' to mean the 
process that begins when the Exchange receives an Auction Trigger 
(defined below) for a series and ends when the Auction is conducted. 
This proposed term is designed to add clarity and transparency to 
Exchange rules and address all steps in the process that culminates in 
an Auction, as described in proposed Rule 952NYP(d).
    [cir] Proposed Rule 952NYP(a)(5)(i) is identical to Arca Options 
Rule 6.64P-O(a)(5)(i) and would define the term ``initial Auction 
Process time period'' as an Exchange-determined time period after the 
commencement of the Auction Process as specified by Trader Update. This 
term describes the period after which the Exchange may transition an 
option series to continuous trading pursuant to proposed Rule 
952NYP(d)(4), as discussed below.
     Proposed Rule 952NYP(a)(6) is identical to Arca Options 
Rule 6.64P-O(a)(6) and would define the term ``Auction Processing 
Period'' to mean the period during which the Auction is being 
processed. The Auction Processing Period is at the end of the Auction 
Process and is the period when the actual Auction is conducted and the 
Exchange transitions from a pre-open state (described below) to 
continuous trading. The end of the Auction Processing Period is the end 
of the Auction and, depending on the orders and quotes in the 
Consolidated Book, it concludes either with or without a trade.
     Proposed Rule 952NYP(a)(7) is identical to Arca Options 
Rule 6.64P-O(a)(7) and would define the term ``Auction Trigger'' to 
mean the information disseminated by the Primary Market in the 
underlying security that triggers the Auction Process for a series to 
begin. For a Core Open Auction, the proposed Auction Trigger would be 
when the Primary Market first disseminates at or after 9:30 a.m. 
Eastern Time both a two-sided quote and a trade of any size that is at 
or within the quote per proposed Rule 952NYP(a)(7)(A), which is 
identical to Arca Options Rule 6.64P-O(a)(7)(A). For a Trading Halt 
Auction, the proposed Auction Trigger would be when the Primary Market 
disseminates at the end of a trading halt or pause a resume message, a 
two-sided quote, and a trade of any size that is at or within the 
quote, per proposed Rule 952NYP(a)(7)(B), which is identical to Arca 
Options Rule 6.64P-O(a)(7)(B).
    This proposed term is also based on how the Exchange currently 
opens or reopens a series for trading, as set forth in the last 
sentence of current Rule 952NY(b).\114\ The proposed rule adds detail 
not found in the current rule by referring to a ``two-sided quote'' 
rather than a ``quote,'' without any changes to functionality. The 
Exchange also proposes a difference that an opening trade on the 
Primary Market may be ``of any size,'' which would make clear that an 
odd-lot transaction on the Primary Market could be used as an Auction 
Trigger, which would be new on Pillar. The Exchange believes that 
because it requires both a quote and a trade from the Primary Market 
before it can open/reopen trading in the overlying option, and because 
a Primary Market that has disseminated a quote for an underlying 
security is open for trading, allowing odd-lot sized trades to be 
included in the trigger would increase the opportunities to open/reopen 
trading options that overlay low-volume securities that have opened for 
trading on the Primary Market and would reduce the circumstances needed 
to manually trigger an Auction for a series.
---------------------------------------------------------------------------

    \114\ Rule 952NY(b) provides, in relevant part, that the related 
option series will be opened automatically ``once the primary market 
for the underlying security disseminates a quote and a trade that is 
at or within the quote.''
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(8) is identical to Arca Options 
Rule 6.64P-O(a)(8) and would define the term ``Calculated NBBO'' to 
mean the highest bid and lowest offer among all Market Maker quotes and 
the ABBO during the Auction Process. The Exchange proposes to use the 
term ``Calculated NBBO'' to specify which bids and offers the Exchange 
would consider for purposes of determining whether to proceed with an 
Auction on Pillar, as described in greater detail below. The Exchange 
believes the proposed term provides more clarity than referencing an 
``NBBO disseminated by OPRA'' and is consistent with the proposed 
definition of ABBO, which by its terms is disseminated by OPRA.\115\
---------------------------------------------------------------------------

    \115\ The Exchange notes that the information used to calculate 
the proposed Calculated NBBO is consistent with the information that 
the Exchange receives from OPRA in advance of the Exchange opening 
or reopening trading (i.e., Market Maker rotational quotes from the 
Exchange and ABBO) and is similar to Cboe's definition of 
``Composite Market,'' as described in Cboe Rule 5.31(a), which 
includes Cboe Market Maker quotes and BBOs of other options 
exchanges.
---------------------------------------------------------------------------

     Proposed Rule 952NYP(a)(9) is identical to Arca Options 
Rule 6.64P-O(a)(9) and would define the term ``Indicative Match Price'' 
to mean the price at which the maximum number of contracts can be 
traded in an Auction, including the non-displayed quantity of Reserve 
Orders, and excluding IO Orders, subject to the Auction Collars. This 
functionality is consistent with the current process for establishing a 
single opening price, as described in Rule 952NY(b)(A), but the 
proposed rule adds more granularity and uses Pillar terminology.\116\ 
In addition, the term ``Indicative Match Price'' refers to the same 
functionality as the Exchange System's reference to the term 
``reference price'' in its imbalance information. Proposed Rule 
952NYP(a)(9) (like Arca Options Rule 6.64P-O(a)(9)) would further 
provide that if there is no Legal Width Quote,

[[Page 45757]]

the Indicative Match Price included in the Auction Imbalance 
Information would be calculated without Auction Collars. This would be 
a new feature applicable to options trading on the Exchange and an 
Indicative Match Price without Auction Collars would be accompanied 
with an Auction Indicator that the Auction cannot be conducted because 
there is no Legal Width Quote.\117\
---------------------------------------------------------------------------

    \116\ See Rules 952NY(b)(A) and (c) (describing process for 
determining single opening price).
    \117\ Currently, if there is no legal width NBBO, the Exchange 
does not disseminate imbalance information and does not calculate an 
indicative match price.
---------------------------------------------------------------------------

    Proposed Rule 952NYP(a)(9)(A) is identical to Arca Options Rule 
6.64P-O(a)(9)(A) and would provide that if there is more than one price 
level at which the maximum number of contracts can be traded within the 
Auction Collars, the Indicative Match Price would be the price closest 
to the midpoint of the Legal Width Quote, rounded to the nearest MPV 
for the series, provided that the Indicative Match Price would not be 
lower (higher) than the highest (lowest) price of a Limit Order to buy 
(sell) ranked Priority 2--Display Orders that is eligible to 
participate in the Auction. This functionality is similar to the 
current process for establishing a single opening price, as described 
in Rule 952NY(c), which provides that when the same number of contracts 
can trade at multiple prices, the opening price is the price at which 
the greatest number of contracts can trade that is at or nearest to the 
midpoint of the NBBO disseminated by OPRA. The proposed rule text 
provides more granularity, such as describing that the Exchange would 
round to the nearest MPV in the series, which is consistent with 
current functionality.
    Proposed Rule 952NYP(a)(9)(B) is identical to Arca Options Rule 
6.64P-O(a)(9)(B) and would provide that an Indicative Match Price that 
is higher (lower) than the upper (lower) Auction Collar would be 
adjusted to the upper (lower) Auction Collar and orders eligible to 
participate in the Auction would trade at the collared Indicative Match 
Price. Proposed Rule 952NYP(a)(9)(B)(i) is identical to Arca Options 
Rule 6.64P-O(a)(9)(B)(i) and would provide that Limit Orders to buy 
(sell) with a limit price above (below) the upper (lower) Auction 
Collar would be included in the Auction Imbalance Information at the 
collared Indicative Match Price and would be eligible to trade at the 
Indicative Match Price. This proposed rule text provides granularity 
that, consistent with current functionality, orders willing to buy 
(sell) at a higher (lower) price than the Auction Price would 
participate in an Auction trade, which, by definition, would be 
required to be at or between the Auction Collars. Proposed Rule 
952NYP(a)(9)(B)(ii) is identical to Arca Options Rule 6.64P-
O(a)(9)(B)(ii) and would provide that Limit Orders and quotes to buy 
(sell) with a limit price below (above) the lower (upper) Auction 
Collar would not be included in the Auction Imbalance Information and 
would not participate in an Auction. This proposed rule text provides 
granularity that is consistent with current functionality.
    Proposed Rule 952NYP(a)(9)(C) is identical to Arca Options Rule 
6.64P-O(a)(9)(C) and would provide that if the Matched Volume (defined 
below) for an Auction consists of only buy and sell Market Orders, the 
Indicative Match Price would be the midpoint of the Legal Width Quote, 
rounded to the MPV for the series, or, if, the Legal Width Quote is 
locked, then the locked price. This proposed rule text is designed to 
provide granularity of how the Indicative Match Price would be 
calculated if there are only Market Orders.
    Proposed Rule 952NYP(a)(9)(D) is identical to Arca Options Rule 
6.64P-O(a)(9)(D) and would provide that if there is no Matched Volume, 
including if there are Market Orders on only one side of the Market, 
the Indicative Match Price and Total Imbalance for the Auction 
Imbalance Information would be zero. This proposed rule text is 
designed to provide granularity regarding how the Indicative Match 
Price and Total Imbalance for the Auction Imbalance Information would 
be calculated if there is no Matched Volume.
     Proposed Rule 952NYP(a)(10) is identical to Arca Options 
Rule 6.64P-O(a)(10) and would define a ``Legal Width Quote'' as a 
Calculated NBBO that: (A) may be locked, but not crossed; (B) does not 
contain a zero offer; and (C) has a spread between the Calculated NBBO 
for each option contract that does not exceed a maximum differential 
that is determined by the Exchange on a class basis, which amount may 
be modified during the Auction Process, and such maximum differentials 
(and modifications thereto) would be announced by Trader Update (as 
discussed further below, provided that a Trading Official may establish 
differences other than the above for one or more series or classes of 
options).\118\ Requiring that the Legal Width Quote not be crossed is 
consistent with current Rule 952NY(b)(E) (and identical to Arca Options 
Rule 6.64P-O(a)(10)), both of which require an uncrossed NBBO 
disseminated by OPRA before a series can be opened (or reopened).\119\ 
The Exchange believes that the additional detail in proposed Rules 
952NYP(a)(10)(A) and (B) regarding how to determine a Legal Width Quote 
provides clarity and granularity as to when a Calculated NBBO would be 
eligible to be considered a Legal Width Quote. In addition, requiring 
that the Calculated NBBO must not exceed a maximum differential before 
an Auction can proceed is based on the current Exchange System Opening 
Process, which requires the bid-ask differential for a series to be in 
an acceptable range.\120\ However, rather than specify maximum bid-ask 
differentials in proposed Rule 952NYP, the Exchange believes it is 
appropriate to instead retain flexibility to set the maximum 
differentials so that the Exchange may consider the different market 
models and characteristics of different classes, as well as modify 
amounts in response to then-current market conditions.\121\ The 
proposed Rule would allow the Exchange to modify these bid-ask 
differentials at any time as it deems necessary and appropriate, which 
discretion the Exchange has today on the Exchange System.\122\ In 
addition,

[[Page 45758]]

allowing the Exchange to announce the maximum differentials by Trader 
Update (as opposed to by Rule) is identical to Options Rule 6.64P-
O(a)(10), and consistent with the rules of several options exchanges 
that likewise may change the amounts of valid opening widths by notice 
or circular rather than by Rule change.\123\
---------------------------------------------------------------------------

    \118\ See Rule 925NY(c) (Unusual Conditions--Opening Auction) 
(providing that ``[i[f the interest of maintaining a fair and 
orderly market so requires, a Trading Official may declare that 
unusual market conditions exist in a particular issue and allow 
Market Makers in that issue to make auction bids and offers with 
spread differentials of up to two times, or in exceptional 
circumstances, up to three times, the legal limits permitted under 
Rule 925NY'').
    \119\ The proposed calculation of a Legal Width Quote is also 
similar to how Cboe determines whether to perform a ``Forced 
Opening,'' because Cboe requires a Composite Market that is not 
crossed with a non-zero offer. See Cboe Rule 5.31(e)(4).
    \120\ See Rule 952NY(b)(D) (providing that ``[t]he System will 
not conduct an Auction Process if the bid-ask differential for that 
series is not within an acceptable range,'' which ``acceptable range 
shall mean within the bid-ask differential guidelines established 
pursuant to Rule 952NY(b)(4)'').
    \121\ See also Cboe Rule 5.31(a) (regarding the definition of 
``Maximum Composite Width'' (i.e., the amount that the ``Composite 
Width'' of a series may generally not be greater than for the series 
to open), which term is used similarly to how the Exchange proposes 
to use the term ``Legal Width Quote,'' which provides that Cboe may 
determine such amounts ``on a class and Composite bid basis, which 
amount [Cboe] may modify during the opening auction process'' and 
disseminate ``to all subscribers of [Cboe's] data feeds that deliver 
opening auction updates''). See id.
    \122\ See supra note 118 (regarding authority conferred on 
Trading Officials, per Rule 925NY(c), to make auction bids and 
offers with spread differentials of up to two times, or in 
exceptional circumstances, up to three times, the legal limits, 
``[i[f the interest of maintaining a fair and orderly market so 
requires'').
    \123\ See, e.g., Cboe Rule 5.31(a) (definition of Maximum 
Composite Width); Cboe EDGX Options Exchange, Inc. (``EDGX'') Rule 
21.7(a) (same); BZX Rule 21.7(a) (same)); Cboe C2 Exchange Inc. 
(``C2'') Rule 6.11(a) (same); see also Nasdaq Options Market 
(``NOM'') Options 3, Section 8(a)(6) (defining ``Valid Width NBBO'' 
as ``the combination of all away market quotes and any combination 
of NOM-registered Market Maker orders and quotes received over the 
QUO or SQF Protocols within a specified bid/ask differential as 
established and published by the Exchange'' and allowing the Valid 
Width NBBO to be ``configurable by underlying, and tables with valid 
width differentials will be posted by Nasdaq on its website'') and 
MIAX Rule 503(f)(2) (which permits MIAX to determine by circular an 
acceptable range in which openings are permissible if there is no 
valid width national best bid or offer (``NBBO'')).
---------------------------------------------------------------------------

    The Exchange believes that the proposed definition relating to 
``Legal Width Quote'' would promote clarity and transparency in 
Exchange rules regarding which quotes--both Market Maker quotes on the 
Exchange and the ABBO, i.e., the Calculated NBBO--that the Exchange 
would use to determine if there is a Legal Width Quote and provide 
direction that to be a Legal Width Quote, a Calculated NBBO may not 
exceed a maximum differential.
    The Exchange also proposes to make a conforming change to Rule 
925NY(c) to update the title from ``Unusual Conditions--Opening 
Auction'' to be ``Unusual Conditions--Auctions,'' which would align 
with the proposed definition of ``Auctions'' in proposed Rule 
952NYP(a), which includes both opening and reopening auctions, which 
change mirrors Arca Options Rule 6.37-O(c). This proposed change also 
promotes clarity, consistent with current functionality that Rule 
925NY(c) is also applicable to reopenings. In addition, the Exchange 
proposes to amend Rule 925NY(c), which authorizes a Trading Official to 
widen the bid-ask differentials in the event of unusual conditions, to 
add a cross-reference to extend such authority to proposed Rule 
952NYP(a)(10) (regarding the Legal Width Quote spreads). This proposed 
amendment would ensure that the existing procedures for auctions in the 
event of unusual conditions, as specified in Rule 925NY(c), would 
continue to be available for option symbols that have transitioned to 
Pillar (and subject to new Rule 952NYP(a)(10)).
     Proposed Rule 952NYP(a)(11) is identical to Arca Options 
Rule 6.64P-O(a)(11) and would define the term ``Matched Volume'' to 
mean the number of buy and sell contracts that can be matched at the 
Indicative Match Price, excluding IO Orders. The Exchange believes this 
proposed definition promotes granularity in Exchange rules.
     Proposed Rule 952NYP(a)(12) is identical to Arca Options 
Rule 6.64P-O(a)(12) and would define the term ``pre-open state'' to 
mean the period before a series is opened or reopened for trading and 
would provide that during the pre-open state, the Exchange would accept 
Auction-Only Orders, quotes, and orders designated Day or GTC, 
including orders ranked under the proposed category of ``Priority 3--
Non-Display Orders'' that are not eligible to participate in an 
Auction.\124\ This proposed text is consistent with current Rule 
952NY(b), which provides that the Exchange will accept market and limit 
orders for inclusion in the opening auction process and would add 
further granularity regarding which interest would be accepted by the 
Exchange (even if not eligible for an Auction) prior to the opening or 
reopening of each option series and during which time period.
---------------------------------------------------------------------------

    \124\ The Exchange notes that Cboe refers to a similar period as 
the ``Queuing Period.'' See Cboe Rule 5.31(b). Similar to Cboe's 
Queuing Period, the proposed term of ``pre-open state'' means the 
period when the Exchange accepts orders and quotes but has not yet 
opened/reopened a series for continuous trading. The proposed 
``Auction Process,'' defined above, is part of the pre-open state, 
but does not begin until the Exchange receives an Auction Trigger, 
as defined above.
---------------------------------------------------------------------------

    [cir] The proposed rule would further provide that the pre-open 
state for the Core Open Auction would begin at 6:00 a.m. Eastern Time 
and would end when the Auction Processing Period begins, which is 
similar to current functionality, which allows order and quote entry to 
begin at 5:30 a.m. Eastern Time (per proposed Rule 952NYP(a)(12)(A), 
which is identical to Arca Options Rule 6.64P-O(a)(12)(A)). The 
Exchange believes that moving the start time to 6:00 a.m. Eastern Time 
would not materially impact the ability of ATP Holders to enter orders 
or quotes during the pre-open state. As further proposed (and identical 
to Arca Options), at the beginning of the pre-open state before the 
Core Open Auction, orders designated GTC that remain from the prior 
trading day would be included in the Consolidated Book, which is 
consistent with current functionality.
    [cir] The proposed rule would also provide that the pre-open state 
for a Trading Halt Auction would begin at the beginning of the trading 
halt and would end when the Auction Processing Period begins (per 
proposed Rule 952NYP(a)(12)(B), which is identical to Arca Options Rule 
6.64P-O(a)(12)(B)).
    This proposed definition of a pre-open state is identical to Arca 
Options Rule 6.64P-O(a)(12) and is designed to distinguish the pre-open 
state (for a Core Open Auction or a Trading Halt Auction) from both the 
Auction Processing Period and the period when a given series opens for 
trading, thus adding granularity to Exchange rules. As noted above, 
this proposed definition of pre-open state would also be used in 
proposed Rules 928NYP, 928.1NYP, and 900.3NYP, which use is identical 
to how this term is used in the analogous Arca Options Rules 6.40P-O, 
6.41P-O, and 6.62P-O.
     Proposed Rule 952NYP(a)(13) is identical to Arca Options 
Rule 6.64P-O(a)(13) and would define the term ``Rotational Quote'' to 
mean the highest Market Maker bid and lowest Market Maker offer on the 
Exchange when the Auction Process begins and would provide that during 
the Auction Process, the Exchange would update the price and size of 
the Rotational Quote and that such Rotational Quote can be locked or 
crossed. The Exchange further proposes that, if there are no Market 
Maker quotes, the Rotational Quote would be published with a zero price 
and size. The Exchange notes that, although not specified in the 
current rule, it currently disseminates a ``rotational quote'' to OPRA 
when it is in the process of opening or reopening a series, i.e., a 
quote that is comprised only of Market Maker quotes and does not 
include orders. The Exchange proposes a difference on Pillar because 
currently, if the Market Maker quotes are crossed, the Exchange flips 
the bid and offer prices. In Pillar, the Exchange would publish a 
Rotational Quote with the actual bid and offer prices, even if crossed, 
which would provide ATP Holders with a more accurate view of whether a 
Rotational Quote is crossed. This proposed definition adds granularity 
to Exchange rules by codifying existing (albeit slightly modified) 
functionality.
    Auction Ranking and Allocation. Proposed Rule 952NYP(b) is 
identical to Arca Options Rule 6.64P-O(b) insofar as it would provide 
that orders and quotes on the side of the Imbalance are not guaranteed 
to participate in the Auction but would differ in that it would address 
allocation (discussed below) and would provide that orders and quotes 
would be ranked pursuant to Rule 964NYP(c)-(g). Further, with regard to 
ranking (and identical to Arca

[[Page 45759]]

Options Rule 6.64P-O(b)), proposed Rule 952NYP(b) would provide that: 
(1) Limit Orders, quotes, and LOO Orders would be ranked based on their 
limit price and not the price at which they would participate in the 
Auction; (2) MOO Orders would be ranked under the proposed category of 
``Priority 1--Market Orders''; (3) LOO Orders would be ranked under the 
proposed category of ``Priority 2--Display Orders''; and (4) IO Orders 
would be ranked based on time among IO Orders, subject to eligibility 
to participate at the Indicative Match Price based on their limit 
price.\125\
---------------------------------------------------------------------------

    \125\ See Rule 964NYP(e) (which provides that ``[a]t each price, 
all orders and quotes are assigned a priority category, and, within 
each priority category, Customer orders are ranked ahead of non-
Customer. If, at a price, there are no remaining orders or quotes in 
a priority category, then same-priced interest in the next priority 
category has priority.'').
---------------------------------------------------------------------------

    In addition, proposed Rules 952NYP(b)(5)(A)-(B), would specify how 
eligible orders and quotes would trade in the Auction, which would be 
based on whether such orders and quotes are priced better than, or 
equal to, the Auction Price.\126\ As proposed, orders and quotes priced 
better than the Auction Price would trade based on their ranking \127\ 
and orders and quotes priced at the Auction Price would trade in 
accordance with Rule 964NYP(j),\128\ provided that the participation 
entitlement to a Directed Order Market Maker (``DOMM'') or Specialist 
per Rule 964NYP(j)(4) is not available during the Auction.\129\ The 
distinction between how better-priced and at-priced interest trades is 
relevant to non-Customer interest because ``at-priced'' non-Customer 
interest would trade on a size pro rata basis, whereas ``better-
priced'' non-Customer interest would not be subject to a pro rata 
allocation. The Exchange proposes to make clear that participation 
entitlements that may be available to a DOMM or a Specialist when the 
execution price is the NBBO would not be available during the Auction 
(i.e., before an option series is open for trading on the Exchange) 
even though the execution price could be at the NBBO because such NBBO 
would not include quotes from the Exchange.\130\ The Exchange believes 
this proposed rule change would add clarity and transparency to 
Exchange rules and would not interfere with the purpose of 
participation entitlements--which is to encourage Market Makers to 
quote at the NBBO during continuous trading.
---------------------------------------------------------------------------

    \126\ For an Auction that results in a trade, the Auction Price 
is the price at which such Auction is conducted. See proposed Rule 
952NYP(a)(4).
    \127\ See proposed Rule 952NYP(b)(5)(A). See also Rule 964NYP(c) 
(providing that ``orders and quotes are ranked and maintained in the 
Consolidated Book according to price-time priority,'' with the best-
priced interest ranked first). See also Rule 964NY(b)(1)(Price 
Priority) (providing that ``[t]he highest bid has priority over all 
other bids; and the lowest offer has priority over all other 
offers.'').
    \128\ This proposed allocation of orders and quotes during the 
Auction Process is consistent with the recently approved allocation 
of Electronic Complex Orders (``ECOs'') during the ECO Opening (or 
Reopening) Auction Process on Pillar, which occurs after each leg of 
a complex strategy has opened for trading. Specifically, eligible 
ECOs are ranked per Rule 964NYP(c)-(g) and ECOs priced better than 
the ECO Auction Price trade based on ranking and ECOs priced at the 
ECO Auction Price trade per Rule 964NYP(j)). See Rule 
980NYP(d)(3)(B)((iii).
    \129\ See proposed Rule 952NYP(b)(5)(B). See also Rules 
964NYP(j) (Order Execution) (providing how orders and quotes, at 
each price, will be allocated against contra-side interest for 
option series that are open for trading) and (j)(4) (providing for 
fourth priority ``to interest ranked Priority 2--Display Limit 
Orders that is eligible for the DOMM Guarantee or the Specialist 
Pool Guarantee, as applicable, pursuant to paragraph (h) of this 
Rule, provided that the execution price is the NBBO.'').
    \130\ Rules 964NYP(h)(1) and (h)(2) describe participation 
entitlements available to a DOMM or a Specialist when the execution 
price is the NBBO.
---------------------------------------------------------------------------

    This proposed rule is based in part on current Rule 952NY(b)(B), 
which provides that ``[o]rders and quotes in the system will be matched 
up with one another based on price-time priority, provided, however, 
that orders will have priority over Market Maker quotes at the same 
price.'' The Exchange proposes a difference in Pillar (identical to 
Arca Options Rule 6.64P-O(b)), that orders in the same priority 
category as quotes would not have priority over Market Maker quotes at 
the same price, which distinction is an artifact of the Exchange's 
existing system limitation. Instead, the Exchange proposes that orders 
and Market Maker quotes in the same priority category would be ranked 
pursuant to Rule 964NYP, which rule is described in the American 
Priority Filing). In addition to mirroring the equal ranking of orders 
and quotes by Arca Options, this handling is also consistent with how 
other options markets handle orders and quotes during the opening 
process.\131\
---------------------------------------------------------------------------

    \131\ See Cboe Rule 5.31(e)(3)(i) (providing that Cboe 
``prioritizes orders and quotes in the following order: market 
orders, limit orders and quotes with prices better than the Opening 
Trade Price, and orders and quotes at the Opening Trade Price'').
---------------------------------------------------------------------------

    Auction Imbalance Information. Proposed Rule 952NYP(c) is identical 
to Arca Options Rule 6.64P-O(c) and would provide that, unless 
otherwise specified by Trader Update, Auction Imbalance Information 
would be updated at least every second until the Auction is conducted, 
unless there is no change to the information and would further provide 
that the Exchange would begin disseminating Auction Imbalance 
Information at the following times: (1) Core Open Auction Imbalance 
Information would begin at 8:00 a.m. Eastern Time; and (2) Trading Halt 
Auction Imbalance Information would begin at the beginning of the 
trading halt.
    Auction Process. Proposed Rule 952NYP(d) is identical to Arca 
Options Rule 6.64P-O(d) and would set forth the Exchange's proposed 
Auction Process on Pillar. Similar to current Exchange System 
functionality, which requires that the bid-ask differential for a given 
series be within an acceptable range before conducting an auction, 
under Pillar, a series would not be opened or reopened on a trade if 
there is no Legal Width Quote, which concept, as described above, 
incorporates (almost identical) bid-ask differentials.\132\ As 
described further below, the Exchange proposes that for Pillar, a 
series should (ideally) also have Market Maker quotes and, as such, 
proposes to provide time for Market Makers assigned to a series to 
quote within the specified bid-ask differentials, and if Market Makers 
do not quote within those time frames, determine whether to open or 
reopen a series based on the ABBO. In addition to mirroring the opening 
process described in Arca Options Rule 6.64P-O(d), this process is also 
consistent with that used on other options exchanges.\133\
---------------------------------------------------------------------------

    \132\ See supra note 120 (describing Rule 952NY(b)(D), which 
provides that the Exchange will not conduct its current Auction 
Process if the bid-ask differential for a series is not ``within an 
acceptable range'').
    \133\ See, e.g., Nasdaq PHLX (``PHLX'') Section 8(d), Options 
Opening Process (providing that the Opening Process begins when (a) 
a ``valid width'' (i.e., a bid/ask differential that is compliant 
with PHLX Rule 1014(c)(i)(A)(1)(a)) specialist quote is submitted, 
(b) valid width quotes from at least two PHLX market participants 
have been submitted within 30 seconds of the opening trade or quote 
in the underlying security from the primary exchange, or (c) after 
30 seconds of the opening trade or quote in the underlying security 
from the primary exchange, one PHLX market participant has submitted 
a valid width quote).
---------------------------------------------------------------------------

    Proposed Rule 952NYP(d)(1) is identical to Arca Options Rule 6.64P-
O(d)(1) and describes the process for disseminating the Rotational 
Quote and would provide that when the Exchange receives the Auction 
Trigger for a series, the Exchange would send a Rotational Quote to 
both OPRA and proprietary data feeds indicating that the Exchange is in 
the process of transitioning from a pre-open state to continuous 
trading for that series. This proposed rule is consistent with current 
functionality and is designed to promote granularity.
    Proposed Rule 952NYP(d)(2) is identical to Arca Options Rule 6.64P-
O(d)(2) and would provide that once a Rotational Quote has been sent, 
the Exchange would conduct an Auction provided there is both a Legal 
Width

[[Page 45760]]

Quote and, if applicable, a Market Maker quote with a non-zero offer in 
the series (which would be subject to the proposed requirements 
relating to Market Maker quotes, including the proposed new Opening MMQ 
Timer(s), as discussed further below per proposed Rule 952NYP(d)(3)). 
The proposed rule would further provide that the Exchange would wait a 
minimum of two milliseconds after disseminating the Rotational Quote 
before an Auction could be conducted, which delay would be new and is 
designed to enhance market quality by promoting price-forming displayed 
liquidity to the benefit of all market participants. Because the 
Rotational Quote is intended to provide notice that the Exchange will 
begin transitioning from a pre-open state, the Exchange believes this 
short delay will provide market participants with an opportunity to 
participate in the Auction Process. This proposed rule text is designed 
to provide transparency and determinism in Exchange rules regarding the 
earliest potential time that a series could be opened (after the 
Exchange receives an Auction Trigger), and subject to the series 
meeting all other requirements for opening or reopening discussed 
herein.
    Subject to the requirements specified in proposed Rule 
952NYP(d)(2), proposed Rule 952NYP(d)(2)(A) (which is identical to Arca 
Options Rule 6.64P-O(d)(2)(A)) and would provide that if there is 
Matched Volume that can trade at or within the Auction Collars, the 
Auction would result in a trade at the Indicative Match Price, except 
as specified in proposed Rule 952NYP(d)(4) below. Proposed Rule 
952NYP(d)(2)(B) is identical to Arca Options Rule 6.64P-O(d)(2)(B) and 
would provide that if there is no Matched Volume that can trade at or 
within the Auction Collars, the Auction would not result in a trade and 
the Exchange would transition to continuous trading as described in 
proposed Rule 952NYP(f) (below) and the Auction would result in a 
quote. This proposed rule is designed to provide transparency of when 
an Auction would result in a trade.
    Proposed Rule 952NYP(d)(3) is identical to Arca Options Rule 6.64P-
O(d)(3) and would specify the parameters of the Opening MMQ Timers, 
which are designed to encourage (but would not require) Market Makers 
to submit Legal-Width Quotes in connection with the automated opening 
or reopening of a series. On the Exchange System, the Exchange does not 
impose on Market Makers assigned to a series any special obligations in 
connection with the opening process. On Pillar, the Exchange will 
likewise not impose on such Market Makers any additional obligations at 
the open.\134\ The Exchange believes that, rather than layer additional 
requirements on the Market Making community, it would be more 
beneficial to all market participants to employ alternative methods to 
help ensure an orderly transition to continuous trading. As such, the 
Exchange believes that the proposed so-called ``waterfall'' approach to 
opening, which is identical to the process utilized on Arca Options, 
would offer a number of checks that are intended to provide adequate 
opportunity for a greater number of Market Makers to provide their 
liquidity interest and help ensure increased liquidity at a level 
commensurate with which the market is accustomed during continuous 
trading on the Exchange. In short, although the Exchange does not 
require a Market Maker assigned to a series to quote on the Exchange in 
order to open or reopen a series for trading, the Exchange believes 
that providing Market Makers assigned to a series the opportunity to do 
so would promote a fair and orderly Auction process and facilitate a 
fair and orderly transition to continuous trading.\135\ Accordingly, 
the Exchange proposes to mirror the auction process set forth in Arca 
Options Rule 6.64P-O and provide time for Market Makers assigned to a 
series to quote within the specified bid-ask differentials before a 
series would be opened or reopened for trading.
---------------------------------------------------------------------------

    \134\ Although the Exchange does not require that Market Makers 
assigned to a series quote at the open, once a series is opened for 
trading, Market Makers are nonetheless required to continuously 
fulfill their obligations to engage in a course of dealings 
reasonably calculated to contribute to the maintenance of a fair and 
orderly market.
    \135\ Currently, neither Market Makers nor Specialists are 
obligated to provide a quote before a series is opened or reopened, 
which is why the proposed Pillar options Auction rule is designed to 
provide Market Makers with time to submit their quotes so a series 
can be opened.
---------------------------------------------------------------------------

    Overall, the Exchange believes that the proposed waterfall approach 
of setting minimum time periods for a Market Maker assigned to a series 
to quote within the specified bid-ask differential before opening a 
series, even if there is a Legal Width Quote, would appropriately 
balance the benefits of increasing the opportunities for Market Makers 
assigned to a series to enter quotations within the specified bid-ask 
differential, with a timely series opening or reopening when there is a 
Legal Width Quote even when it does not include Market Makers assigned 
to the series.
    In addition, the Exchange proposes to expand opportunities for its 
designated liquidity providers--i.e., Market Makers--to enter the 
market. As described in more detail below (and identical to Arca 
Options Rule 6.64P-O(d)(3)), the Exchange proposes different time 
lengths depending on the number of Market Makers assigned to a series. 
For example, if there are no Market Makers assigned to a series, there 
is no need to wait to open or reopen a series if there is a Legal Width 
Quote based upon the disseminated ABBO. If there is one Market Maker 
assigned to the series, the Exchange will delay opening (even if there 
is a Legal Width Quote based upon the ABBO) to give the Market Maker 
additional opportunity to provide liquidity. Furthermore, if there is 
more than one Market Maker assigned to a series, the Exchange 
designates longer periods to provide time for multiple Market Makers 
assigned to the series the chance to quote within the specified bid-ask 
differentials. The Exchange believes that providing additional 
opportunity for its liquidity providers to enter the market would 
result in deeper liquidity--which market participants have come to 
expect in options with multiple assigned Market Makers, and a more 
stable trading environment.
    The Exchange does not believe that the proposed waterfall approach 
would result in an undue burden on competition. As is the case per Arca 
Options Rule 6.64P-O, Market Makers are encouraged but not required to 
quote in their assigned series at the open, thus they are not subject 
to additional obligations. The Exchange believes that encouraging, 
rather than requiring, participation of such Market Makers at the open, 
may increase the availability of Legal Width Quotes in more series, 
thereby allowing more series to open. Improving the validity of the 
opening price benefits all market participants and benefits the 
reputation of the Exchange as being a venue that provides accurate 
price discovery.
    As part of the Auction Process, which is identical to the process 
used on Arca Options, the Exchange proposes to utilize ``Opening MMQ 
Timers,'' each of which would last for an Exchange-determined period, 
the duration of which would be announced by Trader Update. As proposed, 
once the Auction Process begins, the Exchange would begin one or more 
Opening MMQ Timers for the Market Maker(s) assigned to a series to (opt 
to) submit a quote with a non-zero offer.\136\ The proposed

[[Page 45761]]

rules describing Opening MMQ Timers are identical to Arca Options Rule 
6.64P-O(d)(3)(A)-(C) and are designed to provide transparency in 
Exchange rules of the circumstances of when the Exchange would wait to 
open or reopen a series for trading if the assigned Market Maker(s) has 
not submitted a quote within the specified time periods, as follows:
---------------------------------------------------------------------------

    \136\ A Market Maker may send quotations only in the issues 
included in its appointment, i.e., in series to which such Market 
Maker is assigned. See proposed Rule 925.1NYP(a). See also proposed 
Rules 925.1NYP(b) and (c) (setting forth continuous quoting 
obligations of Specialists and Market Makers, respectively, which 
obligations are identical to those set forth in Rule 925NY(b) and 
(c)).
---------------------------------------------------------------------------

     Proposed Rule 952NYP(d)(3)(A) is identical to Arca Options 
Rule 6.64P-O(d)(3)(A) and would provide that if there are no Market 
Makers assigned to a series, the Exchange would conduct an Auction in 
that series based solely on a Legal Width Quote, without waiting for 
the Opening MMQ Timer to end. As set forth in proposed Rules 
952NYP(d)(2)(A) and (B) (which are identical to Arca Options Rules 
6.64P-O(d)(2)(A) and (B)), if there is Matched Volume, this Auction 
would result in a trade, otherwise, the series would transition to 
continuous trading as described in proposed Rule 952NYP(f) below.
     Proposed Rule 952NYP(d)(3)(B) is identical to Arca Options 
Rule 6.64P-O(d)(3)(B) and would provide that if there is only one 
Market Maker assigned to a series:
    [cir] The Exchange would conduct the Auction, without waiting for 
the Opening MMQ Timer to end, as soon as there is both a Legal Width 
Quote and the assigned Market Maker has submitted a quote with a non-
zero offer (proposed Rule 952NYP(d)(3)(B)(i), which is identical to 
Arca Options Rule 6.64P-O(d)(3)(B)(i)). As set forth in proposed Rules 
952NYP(d)(2)(A) and (B), if there is Matched Volume, this Auction would 
result in a trade, otherwise, the series would transition to continuous 
trading as described in proposed Rule 952NYP(f) below.
    [cir] If the Market Maker assigned to the series has not submitted 
a quote with a non-zero offer by the end of the Opening MMQ Timer and 
there is a Legal Width Quote, the Exchange would conduct the Auction 
(proposed Rule 952NYP(d)(3)(B)(ii), which is identical to Arca Options 
Rule 6.64P-O(d)(3)(B)(ii)). As set forth in proposed Rules 
952NYP(d)(2)(A) and (B), if there is Matched Volume, this Auction would 
result in a trade, otherwise, the series would transition to continuous 
trading as described in proposed Rule 952NYP(f) below.
     Proposed Rule 952NYP(d)(3)(C) is identical to Arca Options 
Rule 6.64P-O(d)(3)(C) and would provide that if there are two or more 
Market Makers assigned to a series:
    [cir] The Exchange would conduct the Auction, without waiting for 
the Opening MMQ Timer to end, as soon as there is both a Legal Width 
Quote and at least two quotes with a non-zero offer have been submitted 
by assigned Market Maker(s) (proposed Rule 952NYP(d)(3)(C)(i), which is 
identical to Arca Options Rule 6.64P-O(d)(3)(C)(i)). As set forth in 
proposed Rules 952NYP(d)(2)(A) and (B), if there is Matched Volume, 
this Auction would result in a trade; otherwise, the series would 
transition to continuous trading as described in proposed Rule 
952NYP(f) below.
    [cir] If the Exchange has not received at least two quotes with a 
non-zero offer from any Market Maker(s) assigned to a series by the end 
of the Opening MMQ Timer, the Exchange would begin a second Opening MMQ 
Timer (of the same length) and during the second Opening MMQ Timer, the 
Exchange would conduct the Auction, without waiting for the second 
Opening MMQ Timer to end, if there is both a Legal Width Quote and at 
least one Market Maker assigned to the series has submitted a quote 
with a non-zero offer (proposed Rule 952NYP(d)(3)(C)(ii), which is 
identical to Arca Options Rule 6.64P-O(d)(3)(C)(ii)). In such case, the 
Exchange would not wait for the second Opening MMQ Timer to end. 
Because the Exchange does not require a Market Maker assigned to a 
series to quote before conducting an Auction, to reduce the potential 
delay in opening or reopening a series, the Exchange believes that 
during the second Opening MMQ Timer, it is appropriate to wait for only 
one Market Maker to quote. As set forth in proposed Rules 
952NYP(d)(2)(A) and (B), if there is Matched Volume, this Auction would 
result in a trade; otherwise, the series would transition to continuous 
trading as described in proposed Rule 952NYP(f) below.
    [cir] If no Market Maker assigned to a series has submitted a quote 
with a non-zero offer by the end of the second Opening MMQ Timer and 
there is a Legal Width Quote, the Exchange would conduct the Auction 
(proposed Rule 952NYP(d)(3)(C)(iii), which is identical to Arca Options 
Rule 6.64P-O(d)(3)(C)(iii). As set forth in proposed Rules 
952NYP(d)(2)(A) and (B), if there is Matched Volume, this Auction would 
result in a trade, otherwise, the series would transition to continuous 
trading as described in proposed Rule 952NYP(f) below.
    As noted above, the proposed Auction Process is designed to attract 
the highest quality quote for each series at the open to attract order 
flow to the Auction. As such, the Exchange believes it is reasonable to 
require more than one Opening MMQ Timer (with a maximum run time of one 
minute--30 seconds x 2) to run when there are at least two Market 
Makers because it allows the Exchange time to attract the best quote 
from these market participants, which in turn should attract order flow 
to the Exchange at the open (i.e., the Exchange can leverage the 
highest bid and lowest offer from the various Market Makers that submit 
quotes). The Exchange believes that if a Legal Width Quote is not 
obtained in the first 30-second Opening MMQ Timer, it is to the benefit 
of all market participants to begin a second Opening MMQ Timer to allow 
the bid-ask differential to tighten before a series is opened. The 
Exchange also believes that the process described in proposed Rule 
952NYP(d)(3) (which is identical to Arca Options Rule 6.64P-O(d)(3)) 
would continue to encourage Market Makers to participate at the open, 
which may increase the availability of Legal Width Quotes in more 
series, thereby allowing more series to open in a timely manner. The 
Exchange believes that expanding the opportunities for each Market 
Maker to enter the market--whether by each Market Maker submitting one 
quote or a single Market Maker submitting two quotes--could result in 
the depth of liquidity that market participants have come to expect in 
options with multiple assigned Market Makers, and a more stable trading 
environment. The Exchange also believes the proposed rule would provide 
more flexibility in terms of how market depth is achieved (i.e., based 
on quotes from a single Market Maker as opposed to two) and may result 
in a more timely and efficient opening process.
    Proposed Rule 952NYP(d)(4) is identical to Arca Options Rule 6.64P-
O(d)(4) and would provide that, for any option series that has not 
opened by the end of the initial Auction Process time period because 
the Calculated NBBO is wider than the Legal Width Quote, if the 
Calculated NBBO is not crossed and does not contain a zero offer, the 
Exchange would transition to continuous trading as described in 
proposed Rule 952NYP(f) below, after it first cancels Market Orders, 
MOO Orders, and Limit Orders to buy (sell) priced equal to or higher 
(lower) than the Indicative Match Price. In such case, the Auction 
Process is not intended to

[[Page 45762]]

end with a trade, but it may result in a trade even if there is no 
Legal Width Quote if orders or quotes arrive during the period when the 
Exchange is evaluating the status of orders and quotes.
    The Exchange proposes functionality for Pillar that is identical to 
Arca Options Rule 6.64P-O(d)(4) to allow the Exchange to open a series 
without a trade, i.e., transition to continuous trading as described in 
proposed Rule 952NYP(f), when there is a Calculated NBBO that is wider 
than the Legal Width Quote (a ``wide Calculated NBBO''). Specifically, 
proposed Rule 952NYP(d)(4) would provide that if the Calculated NBBO is 
not crossed and does not contain a zero offer, the Exchange would 
transition to continuous trading as described below in paragraph (f) of 
this Rule (as described below, a trade could occur during the 
transition to continuous trading, but there would not be a trade 
resulting from Matched Volume in the Auction), after first cancelling 
Market Orders, MOO Orders, and Limit Orders to buy (sell) priced equal 
to or higher (lower) than the Indicative Match Price. The Exchange 
believes that the cancellation of Market Orders and MOO Orders before 
opening a series would continue to protect Market Orders and MOO Orders 
from being executed at unintended prices before transitioning to 
continuous trading, per proposed paragraph (f) of the Pillar Rule when 
there is a wide Calculated NBBO. The Exchange also believes that 
cancelling Limit Orders to buy (sell) priced equal to or higher (lower) 
than the Indicative Match Price when the Calculated NBBO is wider than 
the Legal Width Quote would allow the Exchange to help ensure that 
potentially executable Limit Orders would be cancelled rather than 
execute at potentially extreme prices before the Exchange transitions 
to continuous trading. As further proposed, in such case, the Auction 
would not be intended to end with a trade, but it may result in a trade 
(even if there is no Legal Width Quote) if orders or quotes arrive when 
the Exchange is evaluating the status of orders and quotes, but before 
the Auction Processing Period begins.\137\ The Exchange believes this 
proposed rule would facilitate the opening or reopening of a series so 
that it can begin continuous trading when there is a Calculated NBBO in 
a series that is wider than the Legal Width Quote and is not crossed 
and does not contain a zero offer.\138\
---------------------------------------------------------------------------

    \137\ The Exchange expects this to be a rare race condition that 
would result when the Exchange receives orders and quotes at 
virtually the same time that it is evaluating whether it can open a 
series on a quote based on a wide Calculated NBBO (and before the 
Auction Processing Period begins) and that, as a result of that race 
condition, those new orders or quotes are marketable against contra-
side interest, i.e., results in Matched Volume for the Auction, at 
the same time that the Exchange concludes, based on interest that 
had previously been received, that it can proceed with an Auction in 
the absence of a Legal Width Quote. In such case, the Auction could 
result in a trade.
    \138\ Such opening is also similar to Cboe's ``Forced Opening'' 
process because it allows a series to open without a trade after a 
specified time period when the market is wider than the specified 
bid-ask differentials. See Cboe Rule 5.31(e)(4).
---------------------------------------------------------------------------

    Proposed Rule 952NYP(d)(5) is identical to Arca Options Rule 6.64P-
O(d)(5) and would provide that the Exchange may deviate from the 
standard manner of the Auction Process, including adjusting the timing 
of the Auction Process in any option series or opening or reopening a 
series when there is no Legal Width Quote, when it believes it is 
necessary in the interests of a fair and orderly market. This proposed 
rule is based on Rule 952NY(b)(F) and, consistent with current 
functionality, is designed to provide the Exchange with flexibility to 
open a series even if there is no Legal Width Quote.\139\ For example, 
a Floor Broker may have a two-sided open outcry order. If the series is 
not opened, that trade could not be consummated. Accordingly, this 
proposed rule would allow the Exchange to open a series for trading to 
facilitate open outcry trading.
---------------------------------------------------------------------------

    \139\ See Rule 952NY(b)(F) (providing that ``[t]he Exchange may 
deviate from the standard manner of the Auction Process, including 
adjusting the timing of the Auction Process in any option class, 
when it believes it is necessary in the interests of a fair and 
orderly market'').
---------------------------------------------------------------------------

    Order Processing during an Auction Processing Period. Proposed Rule 
952NYP(e) is identical to Arca Options Rule 6.64P-O(e) and would set 
forth how orders and quotes are processed during the Auction Processing 
Period. As described above, and identical to Arca Options, the Auction 
Processing Period is the abbreviated time period (i.e., generally 
measured in less than a second) when the Exchange conducts the Auction 
and therefore transitions a series from a pre-open state to continuous 
trading. For example, if there is a Legal Width Quote, Market Maker 
quotes, and Matched Volume, the Auction Processing Period is when that 
Matched Volume will trade at the Indicative Match Price. As is the case 
per Arca Options Rule 6.64P-O(e), new orders and quotes received during 
the Auction Processing Period would not be eligible to participate in 
that Auction trade. The proposed rule promotes granularity and 
transparency of how orders and quotes that arrive during the Auction 
Processing Period would be processed.
    As with Arca Options Rule 6.64P-O(e), for purposes of proposed 
Rules 952NYP(e) and (f), an ``order instruction'' would likewise refer 
to a request to cancel, cancel and replace, or modify an order or 
quote. As further proposed, during the Auction Processing Period, the 
Exchange will reject new quotes and, if the Exchange receives order 
instructions for existing quotes, the Exchange will cancel any same-
side quotes sent from the same order/quote entry port of that Market 
Maker. The Exchange believes that this proposed treatment (which is 
identical to the treatment of same-side quotes on Arca Options) would 
allow for more deterministic handling of order instructions for quotes 
and, by cancelling any same-side quotes of a Market Maker, the Exchange 
would eliminate potentially unexpected exposure (or executions) for 
that Market Maker.
    In addition, and identical with Arca Options, during the Auction 
Processing Period, new orders will be accepted but will not be 
processed until after the Auction Processing Period and order 
instructions for existing orders \140\ would be processed as follows:
---------------------------------------------------------------------------

    \140\ As noted in proposed Rule 952NYP(e), the Exchange will not 
accept order instructions related to quotes during the Auction 
Processing Period and therefore proposed paragraphs (e)(1) and 
(e)(2) to this proposed Rule only refers to orders and does not 
include reference to quotes.
---------------------------------------------------------------------------

     An order instruction that arrives during the Auction 
Processing Period would not be processed until after the Auction 
Processing Period if it relates to an order that was received before 
the Auction Processing Period. Any subsequent order instructions 
relating to such order would be rejected when a prior order instruction 
is pending (proposed Rule 952NYP(e)(1), which is identical to Arca 
Options Rule 6.64P-O(e)(1)).
     An order instruction that arrives during the Auction 
Processing Period would be processed on arrival if it relates to an 
order that was received during the Auction Processing Period (proposed 
Rule 952NYP(e)(2), which is identical to Arca Options Rule 6.64P-
O(e)(2)).
    Transition to Continuous Trading. Proposed Rule 952NYP(f) is 
identical to Arca Options Rule 6.64P-O(f) and would describe the 
transition to continuous trading. After the Auction Processing Period 
concludes, i.e., once the Auction concludes either with or without a 
trade, the Exchange transitions to continuous trading. During this 
transition, the way in which

[[Page 45763]]

orders, quotes, and order instructions are processed would differ 
depending on when such messages arrived at the Exchange. As with Arca 
Options, proposed Rule 952NYP(f) would describe how the Exchange would 
transition to continuous trading after the Auction Processing Period 
concludes. The Exchange believes that the proposed rule provides 
granularity regarding how orders and quotes would be processed in 
connection with the transition to continuous trading for options 
trading and is also consistent with the rules of other options 
exchanges.\141\ As proposed, the transition to continuous trading would 
proceed as follows.
---------------------------------------------------------------------------

    \141\ See, e.g., Cboe Rule 5.31(f) (describing Cboe's process 
for orders and quotes not executed in its opening process).
---------------------------------------------------------------------------

    Proposed Rule 952NYP(f)(1) is identical to Arca Options Rule 6.64P-
O(f)(1) and would provide that orders that are no longer eligible to 
trade would be cancelled. For options trading, the only orders that 
would no longer be eligible to trade after the Auction Processing 
Period concludes would be Auction-Only Orders and such orders would 
cancel at the end of the Auction Processing Period.
    Proposed Rule 952NYP(f)(2) is identical to Arca Options Rule 6.64P-
O(f)(2) and would provide that, during the transition to continuous 
trading, the Exchange will reject new quotes and, if the Exchange 
receives order instructions for existing quotes, the Exchange will 
cancel any same-side quotes sent from the same order/quote entry port 
of that Market Maker (for the same reasons as described above in 
connection with proposed Rule 952NYP(e), and order instructions would 
be processed as follows:
     An order instruction that relates to an order that was 
received before the Auction Processing Period or that has already 
transitioned to continuous trading and that arrives during either the 
transition to continuous trading or the Auction Processing Period would 
be processed in time sequence with the processing of orders and quotes 
as specified in paragraphs (f)(3)(A) or (B) of this Rule. In addition, 
any subsequent order instructions relating to such order would be 
rejected when a prior order instruction is pending (proposed Rule 
952NYP(f)(2)(A)), which is identical to Arca Options Rule 6.64P-
O(f)(2)(A)). This proposed rule text provides transparency regarding 
how order instructions that arrived during the Auction Processing 
Period would be processed if they relate to orders that were received 
before the Auction Processing Period.\142\
---------------------------------------------------------------------------

    \142\ See id. (unexecuted orders and quotes will be entered into 
the Cboe book in time sequence).
---------------------------------------------------------------------------

     An order instruction that arrives during the transition to 
continuous trading would be processed on arrival if it relates to an 
order that was entered during either the Auction Processing Period or 
the transition to continuous trading and such order has not yet 
transitioned to continuous trading (proposed Rule 952NYP(f)(2)(B), 
which is identical to Arca Options Rule 6.64P-O(f)(2)(B)).
    Proposed Rule 952NYP(f)(3) is identical to Arca Options Rule 6.64P-
O(f)(3) and would set forth how orders and quotes would be processed 
during the transition to continuous trading following an Auction. The 
proposed process for transitioning to continuous trading is consistent 
with current functionality (with differences described below) relating 
to draining the queue of unexecuted orders and quotes following the 
current Auction Process. The proposed rule text provides more 
granularity regarding this process than is set forth in the current 
Rule. Specifically, the Exchange proposes that it would process 
Auction-eligible orders and quotes that were received before the 
Auction Processing Period and orders ranked under the proposed category 
of ``Priority 3--Non-Display Orders'' (which interest was not eligible 
to participate in an Auction) received before a trading halt as follows 
(proposed Rule 925NYP(f)(3)(A), which is identical to Arca Options Rule 
6.64P-O(f)(3)(A)):
     Proposed Rule 952NYP(f)(3)(A)(i) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(i) and would provide that Limit Orders 
and quotes would be subject to the Limit Order Price Protection, 
Arbitrage Check, and Intrinsic Value Check, as applicable. This 
proposed rule differs from current functionality, whereby risk checks 
are applied before an Auction. This proposed rule text is consistent 
with the proposed rule changes, described above, regarding when the 
Limit Order Price Check, Arbitrage Check, and Intrinsic Value Check 
(per proposed Rules 900.3NYP(a)(3) and 928.1NYP, respectively) would be 
applied to orders and quotes that were received during a pre-open state 
and is based on Arca Options Rule 6.64P-O(f)(3)(A)(i). The Exchange 
proposes to apply these checks to orders and quotes before they become 
eligible for trading or routing during continuous trading.
     Proposed Rule 952NYP(f)(3)(A)(ii) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(ii) and would provide that Limit Orders 
and Market Orders would be assigned a Trading Collar. This proposed 
rule is based on Arca Options Rule 6.64P-O(f)(3)(A)(ii) and is 
consistent with the proposed changes to Trading Collars on Pillar, 
described above (per Rule 900.3NYP(a)(4)), that an order received 
during a pre-open state would be assigned a Trading Collar after an 
Auction concludes, or that an order would be reassigned a Trading 
Collar after a halt.
     Proposed Rule 952NYP(f)(3)(A)(iii) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(iii) and would provide that orders 
eligible to route that are marketable against Away Market Protected 
Quotations would route based on the ranking of such orders as set forth 
in Rule 964NY(c). This proposed rule is consistent with current 
functionality and uses Pillar terminology based on Arca Options Rule 
6.64P-O(f)(3)(A)(iii).\143\ As with current functionality, routable 
orders would be routed to Away Markets to avoid either trading through 
or locking or crossing an Away Market Protected Quotation.
---------------------------------------------------------------------------

    \143\ See supra note 61 (citing definitions of ``Protected 
Bid,'' ``Protected Offer,'' and ``Quotation'' set forth in Rules 
990NY(15) and (16) and of ``Away Market'' as set forth in Rule 
900.2NY).
---------------------------------------------------------------------------

     Proposed Rule 952NYP(f)(3)(A)(iv) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(iv) and would provide that after routing 
eligible orders, orders and quotes not eligible to route that are 
marketable against Away Market Protected Quotations would cancel. This 
functionality and proposed rule are based on Arca Options Rule 6.64P-
O(f)(3)(A)(iv). By cancelling non-routable orders and quotes marketable 
against Away Market Protected Quotations, the Exchange would avoid 
locking or crossing such Away Market Protected Quotations.
     Proposed Rule 952NYP(f)(3)(A)(v) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(v) and would provide that once there are 
no more unexecuted orders marketable against Away Market Protected 
Quotations, orders and quotes that are marketable against other orders 
and quotes in the Consolidated Book would trade or be repriced. This 
proposed rule is based on Arca Options Rule 6.64P-O(f)(3)(A)(v). The 
Exchange further notes that the Exchange could transition to continuous 
trading without the Auction resulting in a trade, but that a trade(s) 
may occur during the transition to continuous trading, which trade(s) 
would be published to OPRA before the Exchange publishes a quote

[[Page 45764]]

to OPRA.\144\ The Exchange would not consider a trade that occurs 
during the transition to continuous trading to be an Auction that 
results in a trade.\145\
---------------------------------------------------------------------------

    \144\ For example, the Exchange may determine that, as described 
in proposed Rule 952NYP(d)(4)(A), if there is a Calculated NBBO that 
meets the requirements specified in that Rule, it can conduct an 
Auction without a trade and transition to continuous trading 
pursuant to proposed Rule 952NYP(f). In such case, there would not 
be an Auction that results in a trade, but a trade(s) could occur 
among orders and quotes that trade during the transition to 
continuous trading.
    \145\ OPRA does not distinguish between a trade that results 
from an opening auction and a trade that occurs during the 
transition to continuous trading. By contrast, the Exchange's 
proprietary data feed would distinguish a trade that resulted from 
an Auction from a trade that occurred during the transition to 
continuous trading.
---------------------------------------------------------------------------

     Proposed Rule 952NYP(f)(3)(A)(vi) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(i) and would provide that Market Orders 
received during a pre-open state would be subject to the validation 
specified in proposed Rule 900.3NYP(a)(1)(C). The Exchange notes that 
because such Market Orders would already have been received by the 
Exchange, if such orders fail one of those validations, they would be 
cancelled instead of rejected. This rule text would add transparency 
and granularity to Exchange rules.
     Proposed Rule 952NYP(f)(3)(A)(vii) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(vii) and would provide that the display 
quantity of Reserve Orders would be replenished. This proposed rule is 
based on current functionality and provides granularity in Exchange 
rules.
     Proposed Rule 952NYP(f)(3)(A)(viii) is identical to Arca 
Options Rule 6.64P-O(f)(3)(A)(viii) and would describe the last step in 
this process regarding Auction-eligible interest received before the 
Auction Processing Period. Specifically, the Exchange would send a 
quote to OPRA and proprietary data feeds representing the highest-
priced bid and lowest-priced offer of any remaining, unexecuted 
Auction-eligible orders and quotes that were received before the 
Auction Processing Period. This proposed rule is consistent with 
current options functionality. The Exchange notes that this quote sent 
to OPRA would be different than the Rotational Quote sent at the 
beginning of the Auction Process because it could be comprised of both 
orders and quotes. At a high level, this represents current 
functionality because after a series opens, the Exchange disseminates 
its best bid and offer of its quotes and orders to OPRA.
    Proposed Rule 952NYP(f)(3)(B) is identical to Arca Options Rule 
6.64P-O(f)(3)(B) and would provide that next, orders ranked under the 
proposed category of ``Priority 3--Non-Display Orders'' that were 
received during a pre-open state would be assigned a new working time, 
in time sequence relative to one another based on original entry time, 
and would be subject to the Limit Order Price Check, Arbitrage Check, 
and Intrinsic Value Check, as applicable, and if not cancelled, would 
be traded or repriced. Even though orders ranked Priority 3--Non-
Display Orders would not be eligible to trade in an Auction (other than 
the reserve interest of Reserve Orders), the Exchange proposes to 
accept such orders during a pre-open state. These orders would 
transition to continuous trading after any unexecuted Auction-eligible 
interest transitions to continuous trading, as described above in 
proposed Rules 952NYP(f)(3)(A)(i)-(viii), which as stated above are 
identical to Arca Options Rules 6.64P-O(f)(3)(A)(i)-(viii). The 
Exchange believes that waiting to process non-displayed orders in this 
sequence would ensure that there is an NBBO against which such orders 
could be priced, as described in proposed Rule 900.3NYP(d) (regarding 
Orders with a Conditional or Undisplayed Price and/or Size) above.
    Proposed Rule 952NYP(f)(3)(C) is identical to Arca Options Rule 
6.64P-O(f)(3)(B) and would provide that next, orders and quotes that 
were received during the Auction Processing Period would be assigned a 
new working time in time sequence relative to one another, based on 
original entry time and would be subject to the Limit Order Price 
Protection, Pre-Trade Risk Controls, Arbitrage Check, Intrinsic Value 
Check, and validations specified in proposed Rule 900.3NYP(a)(1)(A), as 
applicable to certain Market Orders, and if not cancelled would be 
processed consistent with the terms of the order. This proposed rule 
text is designed to reflect that orders received during the Auction 
Processing Period would not be subjected to these price/risk 
validations until after the Exchange has transitioned to continuous 
trading, and that if such interest fails these validations, those 
orders would be cancelled instead of rejected.
    Proposed Rule 952NYP(f)(3)(D) is identical to Arca Options Rule 
6.64P-O(f)(3)(D) and would further provide that when transitioning to 
continuous trading:
     The display price and working price of orders and quotes 
would be adjusted based on the ABBO, as provided for in proposed Rule 
900.3NYP (proposed Rule 952NYP(f)(3)(D)(i)), which is the same as Arca 
Options Rule 6.64P-O(f)(3)(D)(i), except that it does not include 
reference to contra-side interest in the Consolidated Book in relation 
to adjustments to price because, unlike Arca Options, the Exchange does 
not offer ALO Orders, which non-routable order types are priced based 
solely on local interest in the Consolidated Book. The Exchange 
believes this difference is immaterial because the omitted text relates 
to functionality that applies to an order type (i.e., ALO Orders) that 
the Exchange does not propose to offer on Pillar and therefore has no 
bearing on the proposed functionality.
     The display price and working price of a Day ISO would be 
adjusted in the same manner as a Non-Routable Limit Order until the Day 
ISO is either traded in full or displayed at its limit price, as 
provided in proposed Rule 952NYP(f)(3)(D)(ii), which is the same as 
Arca Options Rule 6.64P-O(f)(3)(D)(ii), except that it does not include 
reference to Day ISO ALO Orders because the Exchange does not propose 
to offer this order type on Pillar. The Exchange believes this 
difference is immaterial because the omitted text relates to an order 
type (i.e., DAY ISO ALO Orders) that the Exchange does not propose to 
offer on Pillar and therefore has no bearing on the proposed 
functionality.
    Proposed Rule 952NYP(g) is identical to Arca Options Rule 6.64P-
O(g) and would describe order processing during a trading halt. The 
proposed rule is designed to provide granularity in Exchange rules 
about how new and existing orders, quotes, and order instructions would 
be processed during a trading halt. As proposed, the Exchange would 
process new and existing orders and quotes in a series during a trading 
halt as follows:
     Cancel any unexecuted quantity of orders for which the 
500-millisecond Trading Collar timer has started and all resting Market 
Maker quotes (proposed Rule 952NYP(g)(1), which is identical to Arca 
Options Rule 6.64P-O(g)(1)). As is the case on Arca Options, the 
Exchange proposes to cancel resting Market Maker quotes when a trading 
halt is triggered, which represents current functionality, and as noted 
below, would accept new Market Maker quotes during a trading halt, 
which would be the basis for the Rotational Quote that would be 
published for a Trading Halt Auction. In addition, and identical to 
functionality on Arca Options, the Exchange also proposes to cancel any 
unexecuted quantity of orders for which the 500-millisecond Trading 
Collar has started because such timer would have ended during a trading 
halt, and therefore such

[[Page 45765]]

orders were subject to cancellation already.
     Re-price all other resting orders on the Consolidated Book 
to their limit price (proposed Rule 952NYP(g)(2)), which is identical 
to Arca Options Rule 6.64P-O(g)(2), except that it does not include 
reference to ALO Orders or Day ISO ALO Orders, which (as described 
herein) will not be offered on Pillar. The Exchange believes this 
difference is immaterial because the omitted text refers to order 
types/modifiers that the Exchange does not propose to offer on Pillar 
and therefore has no bearing on the proposed functionality. This 
proposed repricing of certain resting orders would be new functionality 
for options trading on the Exchange; currently, during a halt, resting 
orders do not reprice to their limit price. The proposed repricing of a 
Non-Routable Limit Order to its limit price during a trading halt would 
not be counted toward the (limited) number of times such order may be 
repriced, and any subsequent repricing of such order during the 
transition to continuous trading would be permitted as the additional 
(uncounted) repricing event as provided for in proposed Rule 
900.3NYP(e)(1)(B). As described above, and also identical to handling 
of resting orders on Arca Options, once resting, a Non-Routable Limit 
Order that was repriced on arrival is eligible to be repriced only one 
additional time. This proposed rule, which mirrors Arca Options, 
provides transparency that the repricing of such orders to their limit 
price during a trading halt would not count towards that ``one'' 
additional repricing, but that any subsequent repricing after the 
Auction concludes would count.
     Accept and process all cancellations (proposed Rule 
952NYP(g)(3), which is identical to Arca Options Rule 6.64P-O(g)(3)). 
This proposed rule is consistent with current functionality.
     Reject incoming Limit Orders designated IOC or FOK 
(proposed Rule 952NYP(g)(4), which is identical to Arca Options Rule 
6.64P-O(g)(4)). This proposed rule is consistent with current 
functionality.
     Accept all other incoming order and quote messages and 
instructions until the Auction Processing Period for the Trading Halt 
Auction ends, at which point, paragraph (e) of proposed Rule 952NYP 
would govern the entry of incoming orders, quotes, and order 
instructions (proposed Rule 952NYP(g)(5), which is identical to Arca 
Options Rule 6.64P-O(g)(5)).
     Disseminate a zero bid and zero offer quote to OPRA and 
proprietary data feeds (proposed Rule 952NYP(g)(6), which is identical 
to Arca Options Rule 6.64P-O(g)(6)) and is designed to promote clarity 
and transparency in Exchange rules that when a trading halt begins, the 
Exchange will ``zero'' out the Exchange's BBO.
    Finally, proposed Rule 952NYP(h) is identical to Arca Options Rule 
6.64P-O(h) and would provide that whenever, in the judgment of the 
Exchange, the interests of a fair and orderly market so require, the 
Exchange may adjust the timing of or suspend the Auctions set forth in 
this Rule with prior notice to ATP Holders.
    In connection with proposed Rule 952NYP, the Exchange proposes to 
add the following preamble to Rule 952NY: ``This Rule is not applicable 
to trading on Pillar.'' This proposed preamble is designed to promote 
clarity and transparency in Exchange rules that Rule 952NY would not be 
applicable to trading on Pillar.
* * * * *
    As discussed above, because of the technology changes associated 
with the migration to the Pillar trading platform, notwithstanding the 
timing of the effectiveness of this proposed rule change, the Exchange 
will announce by Trader Update when rules with a ``P'' modifier will 
become operative and for which symbols. The Exchange believes that 
keeping existing rules on the rulebook pending the full migration of 
Pillar will reduce confusion because it will ensure that the rules 
governing trading on the Exchange System will continue to be available 
pending the full migration to Pillar.
Implementation
    As noted immediately above, the Exchange will not implement the 
``P'' rules proposed herein until all other Pillar-related rule filings 
(i.e., proposed rules with a ``P'' modifier) are approved or operative, 
as applicable, and the Exchange announces the migration of underlying 
symbols to Pillar by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\146\ in general, and 
furthers the objectives of Section 6(b)(5),\147\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest. The Exchange 
believes that the proposed rules to support Pillar would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed rules would promote 
transparency in Exchange rules by using consistent terminology 
governing trading on both the Exchange's cash equity and options 
trading platforms, thereby ensuring that members, regulators, and the 
public can more easily navigate the Exchange's rulebook and better 
understand how options trading is conducted on the Exchange.
---------------------------------------------------------------------------

    \146\ 15 U.S.C. 78f(b).
    \147\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Generally, the Exchange believes that adding new rules with the 
modifier ``P'' to denote those rules that would be operative for the 
Pillar trading platform would remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
providing transparency of which rules would govern trading once a 
symbol has been migrated to the Pillar platform. The Exchange similarly 
believes that adding a preamble to those current rules that would not 
be applicable to trading on Pillar would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it would promote transparency regarding which rules 
would govern trading on the Exchange during and after the transition to 
Pillar.
    In addition, the Exchange believes that incorporating Pillar 
functionality currently available on Arca Options would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the Exchange would be able to offer 
consistent functionality with its affiliated options market. 
Accordingly, with the transition to Pillar, the Exchange will be able 
to offer additional features to its ATP Holders that are currently 
available on Arca Options. For similar reasons, the Exchange believes 
that using the same Pillar terminology for the proposed new rules as 
used on Arca Options would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because it would promote consistency in trading rules across the 
affiliated options exchanges. The Exchange believes this proposed 
harmonization of functionality and rules across the affiliated options 
exchanges would foster greater

[[Page 45766]]

uniformity and less burdensome and more efficient regulatory 
compliance.
    Given that the proposed rules for trading options on Pillar are 
identical to the Pillar trading rules on Arca Options, unless otherwise 
specified herein, the Exchange believes that the proposed rules changes 
are not novel and do not raise issues not previously considered by the 
Commission.
Orders and Modifiers
    The Exchange believes that proposed new Rule 900.3NYP, which is 
identical to Arca Options Rule 6.62P-O unless otherwise specified 
herein, would remove impediments to and perfect the mechanism of a free 
and open market and a national market system because it would use 
existing Pillar terminology based on Arca Options rules to describe the 
order types and modifiers that would be available on the Exchange's 
options Pillar trading system. As noted above, the Exchange proposes to 
offer order types and modifiers that are either based on existing order 
types available on the Exchange System as described in Rule 900.3NY, or 
orders and modifiers currently available for options trading on Pillar 
on Arca Options. The Exchange believes that structuring proposed Rule 
900.3NYP to mirror the structure of Arca Options Rule 6.62P-O would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would promote 
transparency and consistency between the Exchange's rulebook and the 
rules of its affiliated options exchange.
    In addition to the terminology changes to describe the order types 
and modifiers that are currently available on the Exchange, the 
Exchange further believes that the order types and modifiers proposed 
for options trading on Pillar that either differ from order types and 
modifiers available on the Exchange System or that would be new would 
remove impediments to and perfect the mechanism of a free and open 
market and national market system because:
     Market Orders on Pillar would function similarly to how 
Market Orders function under current rules, including being subject to 
Trading Collars. However, the proposed functionality is identical to 
Pillar functionality on Arca Options and would expand the circumstances 
under which Market Orders may be rejected (or cancelled), which 
expansion is designed to ensure that Market Orders do not execute 
either when there is no prevailing market in a series, which can occur 
if there is no NBO, no NBB and an NBO is higher than $0.50, or an 
absence of contra-side Market Maker quotations or the contra-side ABBO. 
In addition, the proposed functionality would provide that if the 
displayed prices are too wide to assure a fair and orderly execution of 
a Market Order, such Market Order would be rejected. The proposed 
``wide-spread'' check for Market Orders is identical to the check 
offered per Arca Options Rule 6.62P-O, is similar to price protections 
offered on other options exchanges, and is designed to prevent Market 
Orders from trading at a price that could be considered a Catastrophic 
Error.\148\ The Exchange believes that the proposed rule describing 
Market Orders would promote transparency by providing notice of when a 
Market Order would be subject to such validations.
---------------------------------------------------------------------------

    \148\ See supra note 21 (citing Cboe's Market Order NBBO Width 
Protection, which similarly looks to the midpoint of the NBBO in 
applying this protection).
---------------------------------------------------------------------------

     The Exchange is not proposing any new or different 
behavior for Limit Orders than is currently available on the Exchange, 
other than the application of Limit Order Price Protection and Trading 
Collars, which features would differ on Pillar but would be identical 
to Pillar functionality on Arca Options. The Exchange believes using 
Pillar terminology to describe Limit Orders would promote consistency 
and clarity in Exchange rules and align them with the rules of its 
affiliated options exchange.
     The proposed Limit Order Price Protection functionality, 
which is identical to functionality on Arca Options Rule 6.62P-O, is 
based in part on the existing ``Limit Order Filter'' for orders and 
price protection filters for quotes because an order or quote would be 
rejected if it is priced a specified percentage away from the contra-
side NBB or NBO. The Exchange believes that using the same mechanism 
for both orders and quotes would simplify the operation of the Exchange 
and achieve similar results as the current rules, which is to reject an 
order or quote that is priced too far away from the prevailing market. 
The Exchange believes that re-applying Limit Order Price Protection 
after an Auction concludes would ensure that Limit Orders and quotes 
continue to be priced consistent with the prevailing market, and that 
using an Auction Price (if available, and if not available, Auction 
Collars, and if not available, the NBBO) to assess Limit Orders and 
quotes after an Auction concludes would ensure that the Exchange would 
be applying the most recent price in a series in assessing whether such 
orders or quotes should be cancelled. The Exchange further believes 
that the proposed Specified Thresholds for determining whether to 
reject a Limit Order or quote would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because they are designed to be tailored to the applicable Reference 
Price, and thus more granular than the current thresholds.
    The proposed Trading Collar functionality, which is identical to 
Arca Options Rule 6.62P-O, is based in part on how trading collars 
currently function on the Exchange because the proposed functionality 
would create a ceiling or floor price at which an order could be traded 
or routed. The Exchange believes that the proposed differences for 
Trading Collars on Pillar (which are based on Trading Collar 
functionality on Arca Options), including applying the same Trading 
Collar logic to both Limit Orders and Market Orders, applying them once 
per trading day (unless there is a trading halt), tailoring the 
specified thresholds to be within the current parameters for 
determining whether a trade would be an Obvious Error or Catastrophic 
Error, and canceling orders that have been displayed at their Trading 
Collar for 500 milliseconds, would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because they are designed to provide a deterministic price protection 
mechanism for orders. In addition, the proposed Pillar Trading Collar 
functionality is designed to simplify the process by applying a static 
ceiling price (for buy orders) or floor price (for sell orders) at 
which such order could be traded or routed that would be applicable to 
the order until it is traded or cancelled. The Exchange believes that 
the proposal to explicitly add reference to Cross Orders being excluded 
from Trading Collars would add granularity to the proposed rule 
functionality. The Exchange believes that the proposed functionality 
would provide greater determinism to an ATP Holder of the Trading 
Collar that would be applicable to its orders and when such orders may 
be cancelled if it reaches its Trading Collar.
     The Exchange is not proposing any new or different Time-
in-Force modifiers than are currently available for options trading on 
the Exchange. The Exchange believes using Pillar terminology identical 
to terms used on Arca Options Rule 6.62P-O(b) to describe the time-in-
force modifiers would promote consistency and clarity in Exchange 
rules.
     Auction-Only Orders, and specifically, the proposed MOO 
and

[[Page 45767]]

LOO Orders, would operate no differently than how ``Opening-Only 
Orders'' currently function on the Exchange System. However, rather 
than refer to Opening-Only Orders, the Exchange proposes to use Pillar 
terminology that mirrors terms used on Arca Options Rule 6.62P-O(c) 
terminology. The Exchange further believes that offering its IO Order 
type for Auctions on the options trading platform--both for Core Open 
Auctions and Trading Halt Auctions--would provide ATP Holders with new, 
optional functionality to offset an Imbalance in an Auction. The 
proposed availability of the IO Order would be consistent with the IO 
Order as offered on Arca Options for Pillar options trading. The 
Exchange believes this proposed functionality would afford ATP Holders 
with greater flexibility for all Auctions on Pillar.
     The Exchange would continue to offer AON Orders, Stop 
Orders, and Stop Limit Orders, which are currently available on the 
Exchange System. In addition, on Pillar, the Exchange would offer 
Reserve Orders that would function identical to how this order type 
functions on Arca Options. The proposal that the reserve interest of a 
Reserve Order could never have a working price that is more aggressive 
than the working price of the display quantity of the Reserve Order 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because it is designed to 
ensure that the reserve interest of a Reserve Order to buy (sell) would 
never trade at a price higher (lower) than the working price of the 
display quantity of the Reserve Order. The proposed changes to AON 
Orders would provide greater execution opportunities for such orders by 
allowing them to be integrated in the Consolidated Book and once 
resting, trade with incoming orders and quotes. The changes are also 
based on how orders with an MTS Modifier, which are also conditional 
orders, function on Arca Options. The Exchange believes it is 
appropriate to opt not to support Market Orders designated as AON on 
Pillar because such functionality was not used often on the Exchange 
System, indicating a lack of market participant interest in this 
functionality. The proposed differences for Stop Orders and Stop Limit 
Orders are designed to promote transparency by providing clarity of 
circumstances when either order may be rejected on arrival (in the case 
of Stop Limit Orders) or elected and make clear that, once elected, 
such orders are subject to the price protection and risk checks 
applicable to Market Orders and Limit Orders, respectively.
     The Exchange believes that the proposed orders (and 
quotes) with instructions not to route (i.e., Non-Routable Limit Orders 
and ISOs) would streamline the offerings available for options trading 
on the Exchange by making the functionality the same for both orders 
and quotes and consolidating the description of non-routable orders and 
quotes in proposed Rule 900.3NYP(e), thereby adding clarity and 
transparency. The Exchange believes that using Pillar terminology, 
including order type names (for orders and quotes), and identical 
functionality as is used on Arca Options would promote clarity and 
consistency across the Exchange's options trading platform and its 
affiliated options trading platform.
    The Exchange believes that the proposed Non-Routable Limit Order is 
not novel because, in addition to being identical to Non-Routable Limit 
Orders currently available on Arca Options, the order type is based on 
how the PNP, RPNP, and MMRP orders and quotes currently function on the 
Exchange System, including the continued availability of the option to 
designate a non-routable order either to cancel or reprice if it is 
marketable against an ABBO.\149\ As such, the Exchange believes that 
the proposed non-routable order/quote types would continue to provide 
ATP Holders with the core functionality associated with existing non-
routable order/quote types, including that the proposed rules would 
provide for the ability to either reprice or cancel such orders/quotes. 
The Exchange believes that providing additional options to cancel a 
resting Non-Routable Limit Order rather than reprice an additional time 
would provide an additional choice to market participants. The Exchange 
also believes that not offering this second cancellation designation to 
Market Makers would assist Market Makers in maintaining quotes in their 
assigned series by reducing the potential to interfere with a Market 
Maker's ability to maintain their continuous quoting obligations. 
Finally, the proposed IOC ISO Order is not novel for options trading on 
the Exchange because both the proposed Pillar terminology and 
functionality would be identical to terms and IOC ISO functionality 
currently available on Arca Options rules, which would promote 
transparency. The proposed Day ISO functionality would be identical to 
how such order type functions on Arca Options. In addition, the 
proposed Day ISO functionality is consistent with existing Rule 
992NY(b)(3), which currently provides an exception to locking or 
crossing an Away Market Protected Quotation if the ATP Holder 
simultaneously routed an ISO to execute against the full displayed size 
of any locked or crossed Protected Bid or Protected Offer. The Exchange 
notes that this exception is not necessary for IOC ISOs because such 
orders would never be displayed at a price that would lock or cross a 
Protected Quotation; they cancel if they cannot trade. Accordingly, 
this existing exception in the Exchange's rules contemplates an ISO 
that would be displayed, which would mean it would need a time-in-force 
modifier of ``Day.'' In addition, Day ISOs are available for options 
trading on other options exchanges, and therefore are not novel.\150\
---------------------------------------------------------------------------

    \149\ As discussed supra, the proposed Non-Routable Limit Order 
functionality is also consistent with the treatment of Market Maker 
quotes not designated as MMRP (i.e., such quotes cancel if locking 
or crosses the NBBO). See supra note 51.
    \150\ See supra note 64 (citing to availability of Day ISO 
orders on Nasdaq and Cboe).
---------------------------------------------------------------------------

     The Exchange believes that the proposed additional detail 
defining Complex Orders to define the ``legs'' and ``components'' of 
such orders would promote transparency in Exchange rules and is also 
identical to how that order type is described on Arca Options.
     On Pillar, the only electronically-entered crossing orders 
would be QCC Orders, which is consistent with current functionality and 
identical to functionality on Arca Options. The Exchange believes that 
the proposed differences to how QCC Orders would function, including 
using Pillar terminology and consolidating rule text relating to QCC 
Orders in proposed Rule 900.3NYP, would promote transparency and 
clarity in Exchange rules. The proposed description of Complex QCC 
Orders is designed to distinguish such orders from single-leg QCC 
Orders and to promote clarity and transparency in Exchange rules 
regarding the price requirements for a Complex QCC Order. Further, 
Complex QCC Orders are available for trading on Arca Options, per Arca 
Options Rule 6.62P-O, and on other options exchanges, and therefore are 
not novel.\151\
---------------------------------------------------------------------------

    \151\ See supra note 67 (citing Complex QCC Order type, as 
offered on MIAX and Cboe).
---------------------------------------------------------------------------

     The Exchange believes that moving the descriptions of 
orders available only in open outcry from Rule 900.3NY to proposed Rule 
900.3NYP(h) (which mirrors the placement of analogous text on Arca 
Options) would ensure that

[[Page 45768]]

these order types remain in the rulebook after the transition to Pillar 
is complete. On Pillar, a CTB Order would trade at its limit price 
provided there is contra-side displayed Customer interest at that 
price. The CTB Order would also trade with displayed non-Customer 
interest that is priced better than the CTB Order's limit price. In 
addition to being similar to Arca Options Rule 6.62P-O(h)(1), the 
Exchange believes that codifying CTB Order functionality, and thus 
automating priority would make it easier for Floor Brokers to comply 
with their obligation to satisfy better-priced interest on the 
Consolidated Book. In addition, the Exchange believes that this 
proposed change would increase execution opportunities and achieve the 
goal of a CTB Order, which is to clear priority on the Consolidated 
Book at the time of the TO Approval. The Exchange also believes that 
codifying this order type and the associated regulatory obligations 
would add clarity and transparency in Exchange rules.
     The proposed Proactive if Locked/Crossed Modifier, STP 
Modifier, and MTS Modifier are not novel and are identical to modifiers 
of the same name available on Arca Options. The Exchange believes that 
offering these existing modifiers for options trading on Pillar would 
provide ATP Holders with additional, optional functionality that is not 
novel and is based on existing Arca Options rules. Further, such 
proposed optional functionality would afford ATP Holders with greater 
flexibility in specifying how their trading interest should be handled. 
For example, the proposed MTS Modifier works similarly to the existing 
(and proposed) AON functionality but provides the ATP Holder with the 
alternative to designate a portion smaller than the full quantity as 
the minimum trade size. The Exchange further believes that extending 
the availability of STP Modifiers to all orders and quotes, and not 
just those of Market Makers, would provide additional protections for 
ATP Holders and facilitate their compliance and risk management by 
assisting them in avoiding unintentional wash-sale trading.
Market Maker Quotations
    The Exchange believes that proposed Rule 925.1NYP, which is 
identical to Arca Options Rule 6.37AP-O unless otherwise specified 
herein, would remove impediments to and perfect the mechanism of a free 
and open market and a national market system because it is based on 
current Rule 925.1NY, with such changes as necessary to clarify 
functionality and to use Pillar terminology consistent with Arca 
Options. The Exchange believes that the proposed detail (consistent 
with current functionality) to make clear that same-side quotations 
sent by a Market Maker over the same order/quote entry port would be 
replaced would clarify the Exchange's handling of multiple Market Maker 
quotations should a Market Maker's quotations queue during a period of 
excessive message traffic, thereby adding clarity and transparency to 
Exchange rules.\152\ No system, including Pillar, has unlimited 
capacity. The Exchange therefore believes that displaying only the most 
recent Market Maker quote when it is in receipt of multiple same-side 
quotations in the same series from such Market Maker, would protect 
investors and the public interest by ensuring accurate representation 
of that Market Maker's quoting interest. The Exchange believes that 
consolidating into one rule functionality for orders and quotes, such 
that Non-Routable Limit Orders may be designated as quotes per proposed 
Rule 925.1NYP, would obviate the need to separately describe the same 
functionality in two rules and therefore streamline the Exchange's 
rules and promote transparency and consistency. As noted above, the 
Exchange believes that the quoting functionality available in the 
proposed Non-Routable Limit Order would continue to provide Market 
Makers with the core functionality associated with existing quote 
types, including that the proposed rules would provide for the ability 
to either reprice or cancel such quotes.
---------------------------------------------------------------------------

    \152\ See supra note 83 (citing NYSE American Options Fee 
Schedule, Port Fees, and the ability for Market Makers to pay for 
upwards of forty order/quote entry ports per month).
---------------------------------------------------------------------------

Pre-Trade and Activity-Based Risk Controls
    The Exchange believes that the proposed Rule 928NYP, which is 
identical to Arca Options Rule 6.40P-O unless otherwise specified 
herein, setting forth pre-trade and activity-based risk controls, would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and promote just and equitable 
principles of trade because the proposed functionality would 
incorporate existing activity-based risk controls, without any 
substantive differences, and augment them with additional pre-trade 
risk controls and related functionality that are based on the pre-trade 
risk controls currently available on Arca Options. The Exchange 
believes that the proposed differences from current functionality are 
designed to provide greater flexibility to ATP Holders in how to set 
risk controls for both orders and quotes. The Exchange does not believe 
it is unfairly discriminatory to have all orders on the Exchange pass 
through the risk checks, even for ATP Holders that opt not to use the 
Exchange's pre-trade risk controls. As described above, the proposed 
pre-trade risk checks are a functional enhancement that the Exchange 
proposes to apply uniformly to all orders and quotes on the Exchange; 
by applying them uniformly, the Exchange would avoid producing 
incentives for all firms to opt not to use the risk controls for fear 
of suffering a competitive disadvantage. Additionally, any latency 
imposed by the proposed pre-trade risk controls is de minimis and would 
not have a material impact on the order flow of ATP Holders that choose 
to employ non-exchange providers to provide them with risk control 
solutions. The Exchange expects that the potential latency added by the 
proposed pre-trade risk controls would be significantly less than one 
microsecond.
    The Exchange believes that using Pillar terminology based on Arca 
Options rules, including using the term ``Entering Firm'' to mean ATP 
Holders, including Market Makers, would promote transparency in 
Exchange rules. In addition, the proposed Single-Order Risk Controls 
would provide Entering Firms with additional risk protection mechanisms 
on an individual order or quote basis. Moreover, the Exchange believes 
that aggregating a Market Maker's quotes and orders for purposes of 
calculating activity-based risk controls (which is identical to 
handling on Arca Options) would better reflect the aggregate risk that 
a Market Maker has with respect to its quotes and orders. The Exchange 
further believes that the proposed Automated Breach Actions would 
provide Entering Firms with additional flexibility in how they could 
set their risk mechanisms and the automated responses if a risk 
mechanism is breached. The proposed Kill Switch Action functionality 
would also provide ATP Holders with greater flexibility to provide bulk 
instructions to the Exchange with respect to cancelling existing orders 
and quotes and blocking new orders and quotes. Further, as noted 
herein, providing ``Kill Switch Action'' functionality in Exchange 
rules is consistent with the rules of other options exchanges.\153\
---------------------------------------------------------------------------

    \153\ See supra note 99 (citing optional ``Kill Switch'' 
functionality available on Cboe).

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[[Page 45769]]

Price Reasonability Checks--Orders and Quotes
    The Exchange believes that the proposed Rule 928.1NYP, which is 
identical to Arca Options Rule 6.41P-O unless otherwise specified 
herein, setting forth Price Reasonability Checks would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because they are based on existing 
functionality, with differences designed to use Pillar terminology 
based on Arca Options rules and to promote consistency and transparency 
in Exchange rules. Specifically, on Pillar, the Exchange proposes to 
apply the same types of Price Reasonability Checks to both orders and 
quotes, and therefore proposes to describe those checks in a single 
rule--proposed Rule 928.1NYP. Like on Arca Options, the proposed rule 
would add an Intrinsic Value Check for quotes under Pillar (in addition 
to orders) and this check would enhance existing price protection 
features for quotes and provide Market Makers greater control and 
flexibility over setting risk tolerance and exposure for their quotes. 
The proposed rule would also provide specificity regarding when the 
Price Reasonability Checks would be applied to an order or quote, which 
would promote transparency and clarity in Exchange rules. The Exchange 
further believes that applying the Checks based on a broader range of 
underlying transactions--both round lots and odd lots--would enhance 
the efficacy of the Checks as this proposed functionality would provide 
a better representation of the trade prices in occurring in the 
underlying market.
Auction Process
    With the proposed Auction Process, the Exchange endeavors to 
attract the highest quality quote for each series at the open to 
attract order flow for the auction. While the Exchange does not require 
Market Makers assigned to a series to quote before a series can be 
opened (or reopened)--which is consistent with the current rule--the 
Exchange believes that providing time for such Market Makers to do so 
would promote a fair and orderly market by providing both better and 
more consistent prices on executions to ATP Holders in an Auction and 
facilitate a fair and orderly transition to continuous trading.
    The Exchange believes that proposed Rule 952NYP, which mirrors Arca 
Options Rule 6.64P-O unless otherwise specified herein, would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed rule maintains the 
fundamentals of an auction process that is tailored for options trading 
and enhances the process by incorporating Pillar auction functionality 
that is currently available on Arca Options. For example, the Exchange 
proposes to augment the imbalance information that would be 
disseminated in advance of an Auction to include the same fields 
available on Arca Options. The Exchange believes that the proposed 
additional Auction Imbalance Information would promote transparency to 
market participants in advance of an Auction. The Exchange also 
proposes to transition to continuous trading following an Auction in 
the same manner as Arca Options, including how the Exchange would 
process orders and quotes that are received during an Auction 
Processing Period and how unexecuted quotes and orders would be 
transitioned to continuous trading, which the Exchange believes would 
promote consistency across affiliated options trading platforms. The 
proposed rule describing how orders and quotes that are received during 
the Auction Processing Period would be handled would add granularity 
and transparency to Exchange rules.
    The Exchange further believes that the proposed Auction Process 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because it would maintain the 
core functionality of the Exchange's current auction process. With 
regard to Auction Ranking and Allocation, the Exchange proposes to 
treat Limit Orders, quotes, LOO Orders, MOO Orders, and IO Orders in 
the same manner as per Arca Options Rule 6.64P-O(b), which would 
promote consistency across the Exchange's options trading platforms. 
However, the proposed Rule would differ to address how eligible orders 
and quotes would trade per the Pillar priority and allocation model 
established in Rule 964NYP. As proposed, orders and quotes priced 
better than the Auction Price (i.e., the price at which an Auction will 
be conducted) would trade based on ranking and orders and quotes priced 
at (or equal to) the Auction Price would trade per Rule 964NYP(j), 
except that the Exchange would not apply any participation guarantee 
during the Auction Process. This proposed Rule would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system because it would align with the ranking and allocation 
set forth in Rule 964NYP, which would add clarity, transparency, and 
internal consistency to Exchange rules. As noted here, the proposed 
auction ranking and allocation is consistent with how the Exchange 
ranks and allocates interest in the opening auction for Complex Orders 
and is also consistent with the handling of opening interest on other 
exchanges.\154\
---------------------------------------------------------------------------

    \154\ See supra notes 128 (regarding Rule 980NYP) and 131 
(regarding Cboe's opening process).
---------------------------------------------------------------------------

    As relates to the exclusion of the participation entitlements (per 
Rule 964NYP(j)(4)) from the auction allocation, the Exchange believes 
this proposed change would promote equitable principles of trade and 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because this exclusion (which 
is consistent with current functionality) would add clarity and 
transparency to Exchange rules.
    The Exchange also proposes to maintain the core functionality of 
the Auction Process as relates to the requirement that the Exchange 
would not conduct an Auction if the bid-ask differential is not within 
an acceptable range. As proposed, the Auction Process on Pillar would 
begin with the proposed Rotational Quote, which would provide notice 
not only of when the process would begin, but also whether Market 
Makers on the Exchange have quoted in a series. Similar to the current 
rule, the Exchange would require a ``Calculated NBBO,'' which is 
calculated using information consistent with the information the 
Exchange receives from OPRA before the Exchange opens a series, to meet 
specified requirements, including that it not be crossed, not have a 
zero offer, and that it not exceed a maximum differential that is 
determined by the Exchange on a class by class basis and announced by 
Trader Update, i.e., be a ``Legal Width Quote'' before a series can be 
opened with a trade.\155\ Allowing the Exchange the flexibility to 
determine the maximum differential for the Calculated NBBO for a Legal 
Width Quote is consistent with functionality and accompanying 
discretion available on Arca Options and other options exchanges and 
allows the Exchange to consider the different market models and 
characteristics of different classes, as well as modify amounts in 
response to then-current

[[Page 45770]]

market conditions.\156\ In addition, the proposed discretion to modify 
acceptable bid-ask differential is also consistent with discretion 
Exchange has today on the Exchange System.\157\ In addition, the 
Exchange believes that the proposed Auction Trigger, which would begin 
the Auction Process, is consistent with the current trigger for 
starting an auction. The Exchange believes that the proposed difference 
to allow the trade on the Primary Market to be odd-lot sized (in 
addition to having a quote from the Primary Market, which means that 
the underlying security would be open on the Primary Market), would 
allow for options series overlying low-volume securities to open 
automatically and reduce the need to manually trigger an Auction in a 
series.
---------------------------------------------------------------------------

    \155\ As noted herein, the concept of a Calculated NBBO is also 
consistent with similar concepts utilized on other options 
exchanges. See, e.g., Cboe Rule 5.31(a) (regarding use of 
``Composite Market'' concept).
    \156\ See supra note 121 (regarding the concept of a ``Maximum 
Composite Width,'' per Cboe Rule 5.31(a)).
    \157\ See supra note 118 (regarding discretion afforded to the 
Exchange per Rule 925NY(c)).
---------------------------------------------------------------------------

    As with the current rule, on Pillar, Market Makers are not 
obligated to quote in their assigned series for an Auction. However, 
the Exchange believes that providing Market Maker(s) assigned to a 
series the opportunity to quote within the bid-ask differential before 
opening a series for trading would promote fair and orderly Auctions 
and facilitate a fair and orderly transition to continuous trading. In 
particular, rather than layer additional quoting requirements on the 
Market Making community, the Exchange believes it would be more 
beneficial to all market participants to employ alternative methods to 
help ensure an orderly transition to continuous trading. As such, the 
Exchange believes that the proposed so-called ``waterfall'' approach to 
opening, which mirrors Arca Options Rule 6.64P-O, would offer a number 
of checks that are intended to provide adequate opportunity for a 
greater number of Market Makers to provide their liquidity interest and 
help ensure increased liquidity at a level commensurate with which the 
market is accustomed during continuous trading on the Exchange. In 
short, although the Exchange does not require a Market Maker assigned 
to a series to quote on the Exchange in order to open or reopen a 
series for trading, the Exchange believes that providing Market Makers 
assigned to a series the opportunity to do so would promote a fair and 
orderly Auction process and facilitate a fair and orderly transition to 
continuous trading.\158\
---------------------------------------------------------------------------

    \158\ As noted, infra, although the Exchange does not require 
that Market Makers assigned to a series quote at the open, once a 
series is opened for trading, Market Makers are nonetheless required 
to continuously fulfill their obligations to engage in a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market.
---------------------------------------------------------------------------

    Accordingly, the Exchange proposes a difference on Pillar, 
consistent with functionality on Arca Options, to provide time for 
Market Maker(s) assigned to a series to enter quotes within the 
specified bid-ask differentials before a series could be opened or 
reopened for trading. The proposed Opening MMQ Timer(s) would be 
announced by Trader Update. The proposed rule provides transparency of 
how many Market Makers assigned to a series would be required to quote 
in a series and when the Exchange would conduct an Auction in a series 
based on a Legal Width Quote. As noted above, the proposed Auction 
Process is designed to attract the highest quality quote for each 
series at the open to attract order flow to the Auction. As such, the 
Exchange believes it is reasonable to require more than one Opening MMQ 
Timer to run when there are at least two Market Makers because it 
allows the Exchange time to attract the best quote from these market 
participants, which in turn should attract order flow to the Exchange 
at the open (i.e., the Exchange can leverage the highest bid and lowest 
offer from the various Marker Makers that submit quotes). The Exchange 
believes that if a Legal Width Quote is not obtained in the first 
Opening MMQ Timer, it is to the benefit of all market participants to 
begin a second Opening MMQ Timer to allow the bid-ask differential to 
tighten before a series is opened. However, if there is a Legal Width 
Quote based on the ABBO and the required number of quotes with non-zero 
offers have been submitted by Market Makers, the Exchange would open or 
reopen that series for trading. The Exchange believes that the proposed 
waterfall approach (i.e., setting minimum time periods for a Market 
Maker assigned to a series to quote within the specified bid-ask 
differential before opening a series, unless there is a Legal Width 
Quote) would appropriately balance the benefits of increasing the 
opportunities for Market Makers assigned to a series to enter 
quotations within the specified bid-ask differential, with a timely 
series opening or reopening when there is a Legal Width Quote.
    The Exchange believes its proposed process for opening option 
series that have two or more assigned Market Makers would promote just 
and equitable principles of trade and remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
and protect investors because it would continue to provide Market 
Makers assigned to such series the opportunity to submit a quote while 
potentially promoting a more timely opening once at least two quotes 
(even if from a single Market Maker) have been submitted and would add 
clarity and transparency to Exchange rules. The Exchange believes the 
proposed rule would provide more flexibility in terms of how market 
depth in the affected series is achieved (i.e., based on quotes from a 
single Market Maker as opposed to two) and may result in a more timely 
and efficient opening process. Further, the proposed change may 
increase the availability of Legal Width Quotes in more series. 
Improving the validity of the opening price benefits all market 
participants and benefits the reputation of the Exchange as being a 
venue that provides accurate price discovery. To the extent that this 
proposed rule results in an option series opening sooner, which, in 
turn would increase the times during which investors may conduct 
trading in these options, this proposed rule would benefit investors 
and the investing public. In addition, the Exchange believes that 
expanding the opportunities for Market Makers to enter the market would 
result in deeper liquidity--which market participants have come to 
expect in options with multiple assigned Market Makers, and a more 
stable trading environment.
    The proposed rule would also provide transparency of when the 
Exchange would open or reopen a series for trading when the Calculated 
NBBO is wider than the Legal Width Quote for the series. The Exchange 
believes that the proposed process is designed to provide additional 
opportunities for a series to open or reopen not currently available on 
the Exchange System, while at the same time preserving the existing 
requirement that a series would not open on a trade if there is no 
Legal Width Quote. The proposed functionality to provide additional 
opportunities to open or reopen a series when the market is wider than 
the specified bid-ask differentials is consistent with functionality on 
Arca Options, and the Exchange believes that this proposed rule would 
allow for more automated Auctions on the Exchange for series that may 
already be opened on another exchange.\159\ The Exchange also believes 
that the proposed rule to permit the Exchange to conduct an Auction on 
a wide Calculated NBBO once it has cancelled certain trading interest 
would promote just and equitable principles of

[[Page 45771]]

trade and remove impediments to and perfect the mechanism of a free and 
open market and a national market system and protect investors. In 
particular, the Exchange believes that the proposed change would 
improve the speed and efficiency of the Exchange's opening process 
without impairing price discovery, which should result in better and 
more consistent prices on Auction executions. The proposed cancellation 
of Market Orders, MOO Orders, and Limit Orders to buy (sell) priced 
equal to or higher (lower) than the Indicative Match Price, would allow 
the Exchange to proceed with a timely opening of each series while 
preventing extreme executions for series opened based on a wide 
Calculated NBBO. The proposal to cancel Limit Orders to buy (sell) 
priced equal to or higher (lower) than the Indicative Match Price when 
the Calculated NBBO is wider than the Legal Width Quote would similarly 
allow the Exchange to help ensure that potentially executable Limit 
Orders would be cancelled rather than execute at potentially extreme 
prices before the Exchange transitions to continuous trading (in a wide 
market). As such, the Exchange believes that providing for the 
cancellation of potentially executable interest (Market Orders, MOOs 
and Limit Orders alike) would protect investors as it would continue to 
limit the risk of execution of orders at extreme prices.
---------------------------------------------------------------------------

    \159\ See, e.g., Cboe Rule 5.31.
---------------------------------------------------------------------------

    Finally, the proposed rule describing how existing and new orders 
would be processed during a trading halt is designed to provide 
additional granularity in Exchange rules. Certain of the proposed 
functionality is based on current processes. The Exchange believes that 
the proposed differences in order/quote handling would remove 
impediments to and perfect the mechanism of a free and open market 
because they align with the proposed differences in behavior for 
specified orders and quotes on Pillar. For example, the Exchange 
believes that repricing resting non-routable orders and quotes during a 
trading halt to their limit price would be consistent with how such 
orders would be processed in an Auction if they arrived during a pre-
open state. In addition, the Exchange believes that canceling orders 
that are subject to the Trading Collar 500 millisecond timer would be 
consistent with the intent of such functionality, which is to cancel 
such collared orders after a specified time period.
Conforming Changes to Rules 925NY, 953.1NY, and 994NY
    The Exchange believes that the proposed conforming non-substantive 
changes to Rules 925NY (Obligations of Market Makers), 953.1NY (Limit-
Up and Limit-Down During Extraordinary Market Volatility), and 994NY 
(Broadcast Order Liquidity Delivery Mechanism) to add cross-references 
to certain of the new Pillar rules, including Rule 964NYP and those 
proposed in this filing would remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, protect investors and the public interest because the 
proposed conforming changes would add clarity, transparency and 
consistency to the Exchange's rules. The Exchange believes that market 
participants would benefit from the increased clarity, thereby reducing 
potential confusion.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange operates in a 
competitive market and regularly competes with other options exchanges 
for order flow. The Exchange believes that the transition to Pillar 
would promote competition among options exchanges by offering a low-
latency, deterministic trading platform. The proposed rule changes 
would support that inter-market competition by allowing the Exchange to 
offer additional functionality to its ATP Holders that is currently 
available on Arca Options, thereby potentially attracting additional 
order flow to the Exchange. Otherwise, the proposed changes are not 
designed to address any competitive issues, but rather to amend the 
Exchange's rules to support the transition to Pillar. As discussed in 
detail above, unless otherwise specified herein, the Exchange is not 
proposing to change its core functionality relating to order types and 
modifiers, risk controls, Market Maker quotations, or auctions. Rather, 
the Exchange believes that the proposed rule changes would promote 
consistent functionality, rules, and use of terminology for options 
trading on Pillar across the Exchange and its affiliated options 
trading platform, Arca Options. The Exchange believes this uniformity 
would make the Exchange's rules easier to navigate in connection with 
the transition to Pillar.
    The Exchange does not believe that the proposed rule changes would 
raise any intra-market competition as the proposed rule changes would 
be applicable to all ATP Holders. In particular, the proposed waterfall 
approach utilized during the Auction Process, which mirrors Arca 
Options, would not result in an undue burden on intra-market 
competition because it would apply equally to all similarly-situated 
Market Makers regarding their assigned series. Market Makers are 
encouraged but not required to quote in their assigned series at the 
open, thus they are not subject to additional obligations. The Exchange 
believes that encouraging, rather than requiring, participation of such 
Market Makers at the open, may increase the availability of Legal Width 
Quotes in more series, thereby allowing more series to open. Improving 
the validity of the opening price benefits all market participants and 
benefits the reputation of the Exchange as being a venue that provides 
accurate price discovery. With respect to inter-market competition, the 
Exchange notes that most options markets do not require Market Makers 
to quote during the opening.\160\
---------------------------------------------------------------------------

    \160\ See, e.g., Cboe and its affiliated exchanges.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \161\ and Rule 19b-4(f)(6) thereunder.\162\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \161\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \162\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the

[[Page 45772]]

Commission shall institute proceedings under Section 19(b)(2)(B) \163\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \163\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2023-34 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to file number SR-NYSEAMER-2023-34. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2023-34 and should 
be submitted on or before August 7, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\164\
---------------------------------------------------------------------------

    \164\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-14912 Filed 7-14-23; 8:45 am]
BILLING CODE 8011-01-P