Document ID: SEC-2020-1156-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq BX, Inc.
Posted Date: 2020-07-22T04:00Z

[Federal Register Volume 85, Number 141 (Wednesday, July 22, 2020)]
[Notices]
[Pages 44338-44347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15845]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89330; File No. SR-BX-2020-014]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BX's 
Routing Functionality

July 16, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), and Rule 19b-4 thereunder, notice is hereby given that on 
July 2, 2020, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III, below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Options 5, Section 4, Order Routing.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Options 5, Section 4, Order Routing, 
in connection with a technology migration to an enhanced Nasdaq, Inc. 
(``Nasdaq'') functionality which results in higher performance, 
scalability, and more robust architecture. With this system migration, 
the Exchange intends to adopt certain trading functionality currently 
utilized at Nasdaq Exchanges. Specifically, the Exchange proposes to 
conform BX Routing to Nasdaq Phlx LLC's (``Phlx'') routing rule at 
Options 5, Section 4, Order Routing.
    Today, BX offers the following order types for routing: DNR Order, 
SEEK Order and SRCH Order. A DNR Order will never be routed outside of 
the Exchange regardless of the prices displayed by away markets. A SEEK 
Order may route during and after an Opening Process. Once the SEEK 
Order rests on the Order Book, it will not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process. A SRCH Order may route during and after an Opening Process. A 
SRCH Order on the Order Book may be routed to an away market if it is 
locked or crossed by an away market.
    This proposal would amend BX Rules to remove the SEEK routing 
option and, instead, adopt the FIND Order routing option, which is 
currently available on Phlx. A FIND Order, similar to a SEEK Order, 
will only attempt to route once and then post to the Order Book. FIND 
Orders that are not marketable with the ABBO upon receipt, similar to 
SEEK Orders, will be treated as DNR for the remainder of the trading 
day and post to the Order Book, and will not be subject to routing even 
in the event that there is a new Opening Process after a trading halt. 
If a FIND Order was marketable

[[Page 44339]]

with the ABBO upon receipt, it would be eligible for routing the next 
time the option series is subject to a new Opening Process, which may 
include a re-opening after a trading halt. FIND Orders may route during 
and after an Opening Process, similar to SEEK Orders. The Exchange is 
replacing the ``SEEK'' option with a ``FIND'' option within Options 5, 
Section 4(a) to account for the change in routing options, which will 
be described below in greater detail below. Of note, unlike FIND and 
SEEK Orders, SRCH Orders will continue to route throughout the trading 
day, provided the SRCH Order is marketable with the ABBO.
    Further, this proposal would conform rule text describing DNR 
Orders and SRCH Orders with Phlx rule text. Proposed amendments to the 
DNR and SRCH Order rule text are not substantive and do not result in 
System changes.
DNR Orders
    The Exchange proposes to amend Options 5, Section 4(a)(iii)(A), 
related to DNR Orders, to conform the BX rule text to Phlx rule text. 
These amendments are intended bring clarity to the rule text. 
Currently, Options 5, Section 4(a)(iii)(A), relating to DNR Orders, 
states,
    A DNR Order will never be routed outside of BX regardless of the 
prices displayed by away markets. A DNR Order may execute on the 
Exchange at a price equal to or better than, but not inferior to, the 
best away market price but, if that best away market remains, the DNR 
Order will remain in the BX Order Book and be displayed at a price one 
minimum price variation (``MPV'') inferior to that away best bid/offer. 
If the DNR Order is locking or crossing the ABBO, the DNR Order shall 
be entered into the Order Book at the ABBO price and displayed one MPV 
away from the ABBO. The Exchange shall immediately expose the order at 
the ABBO to participants, provided the option series has opened for 
trading. Any incoming order interacting with such a resting DNR Order 
will execute at the ABBO price, unless the ABBO is improved to a price 
which crosses the DNR's displayed price, in which case the incoming 
order will execute at the previous ABBO price. Should the best away 
market change its price to an inferior price level, the DNR Order will 
automatically re-price from its one MPV inferior to the original away 
best bid/offer price to one minimum trading increment away from the new 
away best bid/offer price or its original limit price, and expose such 
orders at the ABBO to participants only if the repriced order locks or 
crosses the ABBO. Once priced at its original limit price, it will 
remain at that price until executed or cancelled. Should the best away 
market improve its price such that it locks or crosses the DNR Order 
limit price, the Exchange will execute the resulting incoming order 
that is routed from the away market that locked or crossed the DNR 
Order limit price.
    The Exchange proposes non-substantive amendments to Options 5, 
Section 4(a)(iii)(A), relating to DNR Orders, to align the rule text 
with Phlx's Rule at Options 5, Section 4(a)(iii)(A). The Exchange 
proposes to: (1) Add the word ``Order'' after DNR in the fifth sentence 
of the paragraph; (2) add the word ``already'' before ``displayed'' in 
the fifth sentence of the paragraph; (3) replace the word ``change'' 
with ``move'' in the sixth sentence of the paragraph; (4) delete the 
words ``its price'' in the sixth sentence of the paragraph; (5) use the 
defined term ``MPV'' instead of ``minimum trading increment'' in the 
sixth sentence of the paragraph; (6) replace ``away best bid/offer'' 
with ``ABBO'' in the sixth sentence of the paragraph; and (7) replace 
``priced'' with ``booked'' in the seventh sentence of the paragraph. 
These proposed amendments are non-substantive and intended solely to 
conform BX's DNR rule text to Phlx's DNR rule text as the functionality 
is the same on both markets.
    The Exchange also proposes to amend the fifth sentence of the 
paragraph within Options 5, Section 4(a)(iii)(A), which currently 
states, ``Any incoming order interacting with such a resting DNR Order 
will execute at the ABBO price, unless the ABBO is improved to a price 
which crosses the DNR's displayed price, in which case the incoming 
order will execute at the previous ABBO price'' to add more explanation 
and another scenario. The Exchange proposes to instead provide, ``Any 
incoming order interacting with such a resting DNR Order will execute 
at the ABBO price, unless (1) the ABBO is improved to a price which 
crosses the DNR Order's already displayed price, in which case the 
incoming order will execute at the previous ABBO price as the away 
market crossed a displayed price; or (2) the ABBO is improved to a 
price which locks the DNR Order's displayed price, in which case the 
incoming order will execute at the DNR Order's displayed price.'' This 
proposed new text intends to make clear that if the Exchange's System 
is executing an incoming order against a resting DNR Order, which is 
displayed, it would not consider an updated ABBO which crossed the 
already displayed DNR Order. The System would not take into account the 
away market order or quote that crossed the DNR Order's already 
displayed price. The Exchange is not trading-through an away market in 
this scenario, rather an away market is crossing BX's already displayed 
market and therefore the away market has the obligation not to trade-
through BX's displayed price. By way of example, consider the following 
sequence of events in the System:

9:45:00:00:00--MIAX Quote 0.95 x 1.20
9:45:00:00:10--OPRA updates MIAX BBO 0.95 x 1.20
9:45:00:00:20--BX Local BBO Quote 1.00 x 1.15
9:45:00:00:30--OPRA disseminates BX BBO updates: 1.00 x 1.15
9:45:00:00:35: CBOE Quote 1.00 x 1.12
9:45:00:00:45--OPRA disseminates CBOE BBO 1.00 x 1.12
9:45:00:00:50--DNR Order: Buy 5 @ 1.15 (exposes @ ABBO of 1.12, 
displays 1 MPV from ABBO @ 1.11)
9:45:00:00:51--OPRA disseminates BX BBO updates: 1.11 x 1.15 (1.11 
being the DNR Order displaying 1 MPV from ABBO)
9:45:00:00:60--MIAX Quote updates to 1.00 x 1.10 (1.10 crosses the 
displayed DNR Order price, violating locked/crossed market rules; 
henceforth, we need not protect this price)
9:45:00:00:65--OPRA disseminates MIAX BBO 1.00 x 1.10
9:45:00:00:75--BX Market Maker Order to Sell 5 @ 1.09
9:45:00:00:76--Market Maker Order immediately executes against DNR 
Order 5 contracts @ 1.12 (1.12 being the `previous' ABBO price 
disseminated by CBOE before the receipt of the DNR Order that was 
subsequently and illegally crossed by MIAX's 2nd quote)
9:45:00:00:77--OPRA disseminates BX BBO updates: 1.00 x 1.15 (reverts 
back to BBO set by BX Local Quote since the DNR Order has executed)

    The Exchange proposes to amend the next sentence of that same 
paragraph, which currently states, ``Should the best away market change 
its price to an inferior price level, the DNR Order will automatically 
re-price from its one MPV inferior to the original away best bid/offer 
price to one minimum trading increment away from the new away best bid/
offer price or its original limit price, and expose such orders at the 
ABBO to participants only if the repriced order locks or crosses the 
ABBO.'' In addition to the non-substantive changes noted above, the 
Exchange proposes to remove the phrase ``to participants only if the 
repriced order locks or crosses the ABBO.'' The proposed sentence would

[[Page 44340]]

provide, ``Should the best away market move to an inferior price level, 
the DNR Order will automatically re-price from its one MPV inferior to 
the original ABBO and display one MPV away from the new ABBO or its 
original limit price, and expose such orders at the new ABBO.'' The 
Exchange's proposal is intended to make clear the current System 
operation. The rewording of this sentence does not result in a System 
change, rather the new sentence is intended to bring greater clarity to 
the current System operation.
FIND Order
    The Exchange proposes to adopt a new routing options at Options 5, 
Section 4(a)(iii)(B), FIND Orders. As noted above, a FIND Order is an 
order that is: (i) Routable at the conclusion of an Opening Process; 
and (ii) routable upon receipt during regular trading, after an option 
series is open. FIND Orders that are not marketable with the ABBO upon 
receipt will be treated as DNR for the remainder of the trading day, 
and will not be subject to routing even in the event that there is a 
new Opening Process after a trading halt. This text is similar to Phlx 
Options 5, Section 4(a)(iii)(B). BX would treat FIND Orders upon 
receipt in the same manner as Phlx. BX proposes to add rule text to the 
end of Options 5, Section 4(a)(iii)(B) which states, ``and post to the 
Order book, even in the event that there is a new Opening Process after 
a trading halt'' to make clear that the FIND Order would post to the 
Order Book and not route again, even if there were a new Opening 
Process. This happens today on Phlx as well.
    The Exchange proposes to provide at BX proposed Options 5, Section 
4(a)(iii)(B)(1), ``At the end of an Opening Process, any FIND Order 
that is priced through the Opening Price, pursuant to Options 3, 
Section 8(a)(iii), will be cancelled, and any FIND Order that is at or 
inferior to the Opening Price will execute or book pursuant to Options 
3, Section 8(k).'' BX will permit all market participants to route. The 
Exchange proposes not to adopt the Phlx rule text at Options 5, section 
4(a)(iii)(B)(1) which provides, ``Such FIND Order will not be eligible 
for routing until the next time the option series is subject to a new 
Opening Process.'' The Opening Process describes the manner in which 
orders route at the end of that process and the sentence is not 
necessary within this rule. FIND Orders that are not marketable with 
the ABBO upon receipt will be treated as DNR for the remainder of the 
trading day, and will not be subject to routing even in the event that 
there is a new Opening Process after a trading halt.
    In order to more efficiently display the various potential 
scenarios, without repeating certain rule text several times throughout 
the rule, the Exchange proposes to adopt proposed Options 5, Section 
4(a)(iii)(B)(2). The proposed paragraph provides,
    Generally, a FIND Order will be included in the displayed BBO at 
its limit price, unless the FIND Order locks or crosses the ABBO, in 
which case it will be entered into the Order Book at the ABBO price and 
displayed one MPV inferior to the ABBO. If there exists a locked ABBO 
when the FIND Order is entered onto the Order Book, the FIND Order will 
be entered into the Order Book at the ABBO price and displayed one MPV 
inferior to the ABBO. If during a Route Timer, ABBO markets move such 
that the FIND Order is no longer marketable against the ABBO nor 
marketable against the BBO, the FIND Order will post at its limit 
price. If the FIND Order is locked or crossed by away quotes, it will 
route at the completion of the Route Timer. If the ABBO worsens but 
remains better than the BBO, the FIND Order will reprice and be re-
exposed at the new price(s) without interrupting the Route Timer. If, 
during the Route Timer, any new interest arrives opposite the FIND 
Order that is equal to or better than the ABBO price, the FIND Order 
will trade against such new interest at the ABBO price, unless the ABBO 
is improved to a price which crosses the FIND Order's already displayed 
price, in which case the incoming order will execute at the previous 
ABBO price as the away market crossed a displayed price.
    This paragraph utilizes the term ``generally'' because it always 
applies to FIND Orders. The Exchange proposes to state that a FIND 
Order will be included in the displayed BBO at its limit price, unless 
the FIND Order locks or crosses the ABBO, in which case it will be 
entered into the Order Book at the ABBO price and displayed one MPV 
inferior to the ABBO. This statement will provide context to the FIND 
Order and would apply consistently to FIND Orders. The Exchange further 
proposes to provide that if there exists a locked ABBO when the FIND 
Order is entered onto the Order Book, the FIND Order will be entered 
into the Order Book at the ABBO price and displayed one MPV inferior to 
the ABBO. The Exchange further proposes to describe the possible 
scenarios that may occurring during a Route Timer, when ABBO markets 
move such that the FIND Order is no longer marketable against the ABBO 
nor marketable against the BBO, the FIND Order will always post at its 
limit price. If the FIND Order is locked or crossed by away quotes, it 
will route each time at the completion of the Route Timer. In the 
situation where an ABBO worsens, but remains better than the BBO, the 
FIND Order will reprice and be re-exposed at the new price(s) without 
interrupting the Route Timer, each time. If, during the Route Timer, 
any new interest arrives opposite the FIND Order that is equal to or 
better than the ABBO price, the FIND Order will trade always against 
such new interest at the ABBO price, unless the ABBO is improved to a 
price which crosses the FIND Order's already displayed price, in which 
case the incoming order will execute at the previous ABBO price as the 
away market crossed a displayed price. The Exchange believes that 
describing these scenarios in this introductory paragraph will provide 
a basis to understand certain FIND Order behaviors in certain 
circumstances and eliminate the need to have these circumstances 
repeated throughout the rule. The sentences in this paragraph are 
currently located within the Phlx FIND Rule at Options 5, Section 
4(a)(iii)(B). The Exchange notes below where the sentences within 
proposed BX Options 5, Section 4(a)(iii)(B)(2) are located within the 
current Phlx rule.

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

    With respect to an Opening Process, if during a route timer at the 
conclusion of an Opening Process pursuant to Options 3, Section 8(k) 
markets move such that the FIND Order is executable against Exchange 
interest, the FIND Order will immediately execute. If during a route 
timer, ABBO markets move such that the FIND Order is no longer 
marketable against the ABBO nor marketable against the PBBO, the FIND 
Order will post at its limit price. If the FIND Order is locked or 
crossed by away quotes, it will route at the completion of the route 
timer. If the ABBO worsens but remains better than the PBBO, the FIND 
Order will reprice and be reexposed at the new price(s) without 
interrupting the route timer.
    The first sentence of Phlx Options 5, Section 4(a)(iii)(B)(2) is 
not being adopted because it is covered within Options 3, Section 8(k), 
which describes the Opening Process. The remainder of the Phlx rule 
text is the same as that within BX proposed Options 5, Section 
4(a)(iii)(B)(2), however it is arranged in a different order. Similar 
to SRCH Orders, the Exchange proposes various scenarios if markets 
move.
    Proposed BX Options 5, Section 4(a)(iii)(B)(3) provides, ``A FIND 
Order

[[Page 44341]]

received after an Opening Process that is not marketable against the 
BBO or the ABBO will be entered into the Order Book at its limit price. 
The FIND Order will be treated as DNR for the remainder of the trading 
day, even in the event that there is a new Opening Process after a 
trading halt.'' This text is similar to Phlx Options 5, Section 
4(a)(iii)(B)(3). BX would treat FIND Orders received after an Opening 
Process that are not marketable against the BBO or the ABBO in the same 
manner as Phlx. BX is adding rule text to make clear that the FIND 
Order will not route, even if there is a new Opening Process. The 
Exchange will not allow a non-marketable order to route.

Proposed BX Options 5, Section 4(a)(iii)(B)(4) provides,

    A FIND Order received after an Opening Process that is marketable 
against the BBO when the ABBO is inferior to the BBO will be traded on 
the Exchange at or better than the BBO price. If the FIND Order has 
size remaining after exhausting the BBO, it may: (1) Trade at the next 
BBO price (or prices) if the order price is locking or crossing that 
price (or prices) up to and including the ABBO price, (2) be entered 
into the Order Book at its limit price, or (3) if locking or crossing 
the ABBO, be entered into the Order Book at the ABBO price and 
displayed one MPV away from the ABBO. The FIND Order will be treated as 
DNR for the remainder of the trading day, even in the event that there 
is a new Opening Process after a trading halt.
    This rule text is similar to Phlx Options 5, Section 
4(a)(iii)(B)(4), except that Phlx has references to an ``internal 
PBBO'' because it has All-or-None Orders which are non-displayed 
orders, and BX is adding rule text to make clear that the FIND Order 
will not route, even if there is a new Opening Process. As explained 
above, BX's All-or-None Orders execute immediately or cancel and do not 
rest on the Order Book. This paragraph describes scenarios where the 
FIND Order is marketable against the BBO, when the ABBO is inferior to 
the BBO. In this case, the FIND Order will be traded at the Exchange at 
or better than the BBO price. If the FIND Order has size remaining 
after exhausting the BBO, there are various possible scenarios: the 
FIND Order may (1) trade at the next BBO price (or prices) if the order 
price is locking or crossing that price (or prices) up to and including 
the ABBO price, (2) be entered into the Order Book at its limit price, 
or (3) if locking or crossing the ABBO, be entered into the Order Book 
at the ABBO price and displayed one MPV away from the ABBO. BX handles 
FIND Orders similar to Phlx with respect to not routing for the 
remainder of the trading day, even if there is a new Opening Process.

Proposed BX Options 5, Section 4(a)(iii)(B)(5) provides,

    A FIND Order received after an Opening Process that is marketable 
against the BBO when the ABBO is equal to the BBO will be traded on the 
Exchange at the BBO. If the FIND Order has size remaining after 
exhausting the BBO, it will initiate a Route Timer, and expose the FIND 
Order at the ABBO to allow market participants an opportunity to 
interact with the remainder of the FIND Order. During the Route Timer, 
the FIND Order will be included in the BBO at a price one MPV away from 
the ABBO. If during the Route Timer, the ABBO markets move such that 
the FIND Order is no longer marketable against the ABBO, it may: (i) 
Trade at the next BBO price (or prices) if the FIND Order price is 
locking or crossing that price (or prices), and/or (ii) be entered into 
the Order Book at its limit price if not locking or crossing the BBO.
    This rule text is identical to Phlx Options 5, Section 
4(a)(iii)(B)(5), except that Phlx has references to an ``internal 
PBBO'' because it has All-or-None Orders as described above. Also, a 
sentence that is within this paragraph in the Phlx Rule is now captured 
within proposed BX Options 5, Section 4(a)(iii)(B)(2) and does not need 
to be repeated in this paragraph.
    Proposed BX Options 5, Section 4(a)(iii)(B)(5) explains that if a 
FIND Order is received after an Opening Process that is marketable 
against the BBO, when the ABBO is equal to the BBO, the FIND Order will 
be traded at the Exchange at the BBO. Further, if the FIND Order has 
size remaining after exhausting the BBO, it will initiate a Route 
Timer, and expose the FIND Order at the ABBO to allow market 
participants an opportunity to interact with the remainder of the FIND 
Order. During a Route Timer, the FIND Order will be included in the BBO 
at a price one MPV away from the ABBO. The Exchange also accounts for 
scenarios during a Route Timer. The first scenario describes a 
situation during the Route Timer, if ABBO markets move such that the 
FIND Order is no longer marketable against the ABBO. In this scenario, 
various events could occur, the FIND Order may: (i) Trade at the next 
BBO price (or prices) if the FIND Order price is locking or crossing 
that price (or prices), and/or (ii) be entered into the Order Book at 
its limit price if not locking or crossing the BBO. The remainder of 
the text in Phlx Options 5, Section 4(a)(iii)(B)(5) is not included as 
it is repetitive of text within proposed BX Options 5, Section 
4(a)(iii)(B)(2).

Proposed BX Options 5, Section 4(a)(iii)(B)(6) provides,

    If, at the end of the Route Timer pursuant to subparagraph (5) 
above, the FIND Order is still marketable with the ABBO, the FIND Order 
will route to an away market up to a size equal to the lesser of 
either: (1) An away market's size or (2) the remaining size of the FIND 
Order. If the FIND Order still has remaining size after routing, it 
will (i) trade at the next BBO price or better, subject to the order's 
limit price, and, if contracts still remain unexecuted, the remaining 
size will be routed to away markets disseminating the same price as the 
BBO, or (ii) be entered into the Order Book and posted either at its 
limit price or re-priced one MPV away if the order would otherwise lock 
or cross the ABBO. If size still remains, the FIND Order will not be 
eligible for routing until the next time the option series is subject 
to a new Opening Process.
    The Exchange's proposed rule text is the same as Phlx Options 5, 
Section 4(a)(iii)(B)(6). At the end of a Route Timer, if a FIND Order 
is still marketable with the ABBO, the FIND Order will route to an away 
market up to a size equal to the lesser of either (1) an away market's 
size or (2) the remaining size of the FIND Order. If the FIND Order 
still has remaining size after routing, it will (i) trade at the next 
BBO price or better, subject to the order's limit price, and, if 
contracts still remain unexecuted, the remaining size will be routed to 
away markets disseminating the same price as the BBO, or (ii) be 
entered into the Order Book and posted either at its limit price or re-
priced one MPV away if the order would otherwise lock or cross the 
ABBO. A FIND Order will only route once. BX Options 5, Section 
4(a)(iii)(B)(6)(i) describes a scenario where interest has routed and 
size remains, which size would be routed again without posting to the 
Order Book. Once the FIND Order posts to the Order Book, it will not 
route again until the options series is subject to a new Opening 
Process. If size still remains, the FIND Order will not be eligible for 
routing until the next time the option series is subject to a new 
Opening Process. An Opening Process would occur intra-day if there was 
a trading halt. After a trading halt, BX would reopen with an Opening 
Process.

Proposed BX Options 5, Section 4(a)(iii)(B)(7) provides,

[[Page 44342]]

    A FIND Order received after an Opening Process that is marketable 
against the ABBO when the ABBO is better than the BBO will initiate a 
Route Timer, and expose the FIND Order at the ABBO to allow 
participants and other market participants an opportunity to interact 
with the FIND Order.
    The Exchange's proposed rule text is similar to Phlx Options 5, 
Section 4(a)(iii)(B)(6), however, part of the rule text within Phlx 
Options 5, Section 4(a)(iii)(B)(6) is contained with proposed BX 
Options 5, Section 4(a)(iii)(B)(2), which applies to FIND Orders 
generally.

Proposed BX Options 5, Section 4(a)(iii)(B)(8) provides,

    If, at the end of the Route Timer pursuant to subparagraph (7) 
above, the ABBO is still the best price and is marketable with the FIND 
Order, the order will route to the away market(s) whose disseminated 
price(s) is better than the BBO, up to a size equal to the lesser of 
either: (1) The away markets' size, or (2) the remaining size of the 
FIND Order. If the FIND Order still has remaining size after such 
routing, it will (i) trade at the BBO price or better, subject to the 
order's limit price, and, if contracts still remain unexecuted, the 
remaining size will be routed to away markets disseminating the same 
price as the BBO, or (ii) be entered into the Order Book and posted 
either at its limit price or re-priced one MPV away if the order would 
otherwise lock or cross the ABBO. If size remains, the FIND Order will 
not be eligible for routing until the next time the option series is 
subject to a new Opening Process.
    The Exchange's proposed rule text the same as Phlx Options 5, 
Section 4(a)(iii)(B)(6). As stated herein, BX will route all market 
participant orders. During the Route Timer, the FIND Order will be 
included in the BBO at a price that is the better of one MPV away from 
the ABBO or the BBO. In this scenario, if during that Route Timer new 
interest arrives opposite the FIND Order, and that interest is equal to 
or better than the ABBO price, the FIND Order will trade against such 
new interest at the ABBO price. If, at the end of that Route Timer the 
ABBO is still the best price, and is marketable with the FIND Order, 
the order will route to the away market(s) whose disseminated price(s) 
is better than the BBO, up to a size equal to the lesser of either: (1) 
The away markets' size, or (2) the remaining size of the FIND Order. If 
the FIND Order still has remaining size after such routing, it will (i) 
trade at the BBO price or better, subject to the order's limit price, 
and, if contracts still remain unexecuted, the remaining size will be 
routed to away markets disseminating the same price as the BBO, or (ii) 
be entered into the Order Book and posted either at its limit price or 
re-priced one MPV away if the order would otherwise lock or cross the 
ABBO. If size remains, the FIND Order will not be eligible for routing 
until the next time the option series is subject to a new Opening 
Process, which may be intra-day if a trading halt occurs.
    Finally, proposed BX Options 5, Section 4(a)(iii)(B)(9) is 
identical to Phlx Options 5, Section 4(a)(iii)(B)(9) and provides that 
a FIND Order that is routed to an away market(s) will be marked as an 
Intermarket Sweep Order ``ISO'' and designated as an IOC order.
    As mentioned above, All-or-None Orders are handled differently in 
the System by Phlx and BX. Phlx All-or-None Orders are permitted to 
rest on the Order Book. BX All-or-None Orders must be executed in its 
entirety or not at all and do not rest on the Order Book.
SEEK Orders
    The Exchange proposes to remove the rule text for SEEK Orders as 
the Exchange will no longer offer this routing option. The Exchange 
believes that adopting the FIND Order routing option, similar to Phlx, 
will provide its market participants with ample choice as to the method 
in which they may route. As is the case today, an order may also be 
marked as ``DNR'' and therefore would not be subject to routing. With 
this proposal, any market participant may choose to route, as is the 
case today. The Exchange proposes to replace references to ``SEEK'' 
within Options 5, Section 4(a) with ``FIND'' references.
SRCH Orders
    The Exchange proposes to retain the SRCH Order functionality. The 
Exchange's current SRCH Order functionality is identical to SRCH Order 
functionality on Phlx with the exception that BX's All-or-None Orders 
must be executed in its entirety or not at all and do not rest on the 
Order Book. Also, BX permits routing for all market participants. A 
SRCH Order is routable at any time.
    The Exchange proposes to remove the first sentence of BX Options 5, 
Section 4(a)(iii)(C). The Exchange notes that the information in that 
first sentence of Options 5, Section 4(a)(iii)(C) is available within 
BX Options 5, Section 4(a) and applies to SRCH Orders. Current BX 
Options 5, Section 4(a)(iii)(C)(1) provides that if a SRCH Order is 
received during an Opening Process it may route as part of the Opening 
Cross pursuant to Options 3, Section 8(b)(7). The Exchange proposes to 
replace this rule text with the following proposed rule text within new 
Options 5, Section 4(a)(iii)(C), ``A SRCH Order on the Order Book 
during an Opening Process (including a re-opening following a trading 
halt), whether it is received prior to an Opening Process or it is a 
GTC SRCH Order from a prior day, may be routed as part of an Opening 
Process.'' The second sentence ``Orders initiate their own Route Timers 
and are routed in the order in which their Route Timers end'' is being 
retained. This proposed rule text for SRCH Orders is identical to 
Phlx's rule text within Options 5, Section 4(a)(iii)(C), except for the 
limitation on Phlx that only Public Customers and Professionals may 
route SRCH Orders. BX will permit any market participant to route SRCH 
Orders.
    Next, the Exchange proposes to insert a new Options 5, Section 
4(a)(iii)(C)(1) which states, ``At the end of an Opening Process, any 
SRCH Order that is priced through the Opening Price pursuant to Options 
3, Section 8(a)(iii), will be cancelled, and any SRCH Order that is at 
or inferior to the Opening Price will execute or book pursuant to 
Options 3, Section 8(k).'' The information concerning the Opening 
Process is specified within Options 3, Section 8 and is being 
reiterated within this rule to describe routing during the Opening 
Process. The Exchange notes that Options 3, Section 8 provides a 
process whereby BX arrives at an Opening Price. The System cancels any 
order or quote priced through the Opening Price which was not able to 
be satisfied either by routing to an away destination or trading in 
full as part of the opening trade. Specifically, the Exchange notes 
that ``priced through the Opening Price'' means buying interest with a 
price higher than the Opening Price and selling interest with a price 
lower than the Opening Price. This rule text is similar to Phlx's rule 
text within Options 5, Section 4(a)(iii)(C)(1), except that the BX rule 
adds a citation to the Opening Process rule at Options 3, Section 
8(a)(iii). Further, BX is establishing a sentence within Options 5, 
Section 4(a)(iii)(C)(2), similar to FIND Orders, to include rule text 
concerning SRCH Orders which applies generally. Phlx's rule text at 
Options 5, Section 4(a)(iii)(C)(1) is not being included within BX 
Options 5, Section 4(a)(iii)(C)(1), rather that rule text will be 
included within proposed BX Options 5, Section 4(a)(iii)(C)(2). The 
Exchange notes that the first sentence of

[[Page 44343]]

current BX Options 5, Section 4(a)(iii)(C)(1) is reworded within 
proposed BX Options 5, Section 4(a)(iii)(C)(1).
    Similar to the FIND Order proposal, the Exchange proposes to add a 
paragraph at proposed BX Options 5, Section 4(a)(iii)(C)(2) which 
provides general guidelines for the behavior of SRCH Orders which apply 
consistently. This proposed paragraph will allow the Exchange to more 
efficiently display the various potential scenarios without repeating 
certain rule text several times. The Exchange believes that describing 
these scenarios in this introductory paragraph will provide a basis to 
understand certain SRCH Order behaviors in certain circumstances and 
eliminate the need to have these circumstances repeated throughout the 
rule. Proposed BX Options 5, Section 4(a)(iii)(C)(2) provides,
    Generally, a SRCH Order will be included in the displayed BBO at 
its limit price, unless the SRCH Order locks or crosses the ABBO, in 
which case it will be entered into the Order Book at the ABBO price and 
displayed one MPV inferior to the ABBO. If there exists a locked ABBO 
when the SRCH Order is entered onto the Order Book, the SRCH Order will 
be entered into the Order Book at the ABBO price and displayed one MPV 
inferior to the ABBO. Once on the Order Book, the SRCH Order is 
eligible for routing if it is locked or crossed by an away market. If 
during a Route Timer, ABBO markets move such that the SRCH Order is no 
longer marketable against the ABBO nor marketable against the BBO, the 
SRCH Order will book at its limit price. If, during the Route Timer, 
any new interest arrives opposite the SRCH Order that is equal to or 
better than the ABBO price, the SRCH Order will trade against such new 
interest at the ABBO price, unless the ABBO is improved to a price 
which crosses the SRCH Order's already displayed price, in which case 
the incoming order will execute at the previous ABBO price as the away 
market crossed a displayed price. If the ABBO worsens but remains 
better than the BBO, the SRCH Order will reprice and be re-exposed at 
the new price(s) without interrupting the Route Timer. If an ABBO locks 
or crosses the SRCH Order during a new Route Timer, which would 
subsequently initiate at the conclusion of any Route Timer if interest 
remains, the SRCH Order may route to the away market at the ABBO at the 
conclusion of such Route Timer. If the SRCH Order is locked or crossed 
by away quotes, it will route at the completion of the Route Timer. The 
System will route and execute contracts contemporaneously at the end of 
the Route Timer.
    Generally a SRCH Order will be included in the displayed BBO at its 
limit price, unless the SRCH Order locks or crosses the ABBO, in which 
case it will be entered into the Order Book at the ABBO price and 
displayed one MPV inferior to the ABBO, similar to other routing order 
types. Also, if there is a locked ABBO when the SRCH Order is entered 
onto the Order Book, the SRCH Order will be entered into the Order Book 
at the ABBO price and displayed one MPV inferior to the ABBO to avoid 
locking the away market. The Exchange proposes to generally state, 
``Once on the Order Book, the SRCH Order is eligible for routing if it 
is locked or crossed by an away market.'' This provision is always true 
of SRCH Orders.
    Next, the Exchange provides scenarios that generally may occur 
during a Route Timer. The first scenario is if during a Route Timer, 
ABBO markets move such that the SRCH Order is no longer marketable 
against the ABBO nor marketable against the BBO. In this case, the SRCH 
Order will book at its limit price. The next scenario is whether during 
the Route Timer, any new interest arrives opposite the SRCH Order that 
is equal to or better than the ABBO price, the SRCH Order will trade 
against such new interest at the ABBO price, unless the ABBO is 
improved to a price which crosses the SRCH Order's already displayed 
price, in which case the incoming order will execute at the previous 
ABBO price as the away market crossed a displayed price. If new 
interest arrives that is that is equal to or better than the ABBO 
price, the SRCH Order will trade at the ABBO price. If new interest 
arrives that is marketable against the SRCH Order it will trade at the 
ABBO price unless the ABBO is improved to a price which crosses the 
SRCH Order's already displayed price, in which case the incoming order 
will execute at the previous ABBO price as the away market crossed a 
displayed price. This last sentence within proposed BX Options 5, 
Section 4(a)(iii)(C)(4) makes clear that the SRCH Order would execute 
at the previous ABBO price as the away market crossed a displayed 
price. Better priced incoming interest will execute against the SRCH 
Order, unless the ABBO crosses the SRCH Order, in which case any new 
interest will execute at the SRCH Order price. In this scenario, BX's 
price was already displayed when an away market subsequently crossed 
BX's displayed price. If the ABBO worsens but remains better than the 
BBO, the SRCH Order will reprice and be re-exposed at the new price(s) 
without interrupting the Route Timer. Also, if an ABBO locks or crosses 
the SRCH Order during a new Route Timer, which would subsequently 
initiate at the conclusion of any Route Timer if interest remains, the 
SRCH Order may route to the away market at the ABBO at the conclusion 
of such Route Timer, each time. Finally, if the SRCH Order is locked or 
crossed by away quotes, it will route at the completion of the Route 
Timer. The Exchange notes that the System will route and execute 
contracts contemporaneously at the end of the Route Timer. The last two 
sentences of this proposed rule are similar to the current last 
sentence of BX Options 5, Section 4(a)(iii)(C)(4). The sentences in 
this paragraph are currently within the Phlx SRCH Rule at Options 5, 
Section 4(a)(iii)(C). The Exchange notes below where the sentences 
within proposed BX Options 5, Section 4(a)(iii)(C)(2) are located 
within the current Phlx rule.
    The Exchange proposes to provide rule text at proposed BX Options 
5, Section 4(a)(iii)(C)(3) which is similar to Phlx Options 5, Section 
4(a)(iii)(C)(2). This paragraph explains what happens to a SRCH Order 
that is not marketable against the BBO or the ABBO. The SRCH Order 
would be entered into the Order Book. BX proposes to state that the 
SRCH Order is entered at its limit price to provide greater detail. 
This detail is not currently within the Phlx rule text, but applies to 
Phlx as well. Once on the Order Book, the SRCH Order may route if it is 
locked or crossed by an away market.

Proposed BX Options 5, Section 4(a)(iii)(C)(4) provides,

    A SRCH Order received after an Opening Process that is marketable 
against the BBO when the ABBO is inferior to the BBO will be traded on 
the Exchange at or better than the BBO price. If the SRCH Order has 
size remaining after exhausting the BBO, it may: (1) Trade at the next 
BBO price (or prices) if the order price is locking or crossing that 
price (or prices) up to and including the ABBO price, and/or (2) be 
routed, subject to a Route Timer, to away markets if all BX interest at 
better or equal prices has been exhausted, and/or (3) be entered into 
the Order Book at its limit price if not locking or crossing the BBO or 
the ABBO.
    This proposed rule text represents a scenario where the SRCH Order 
is received after an Opening Process and is marketable against the BBO 
when the ABBO is inferior to the BBO. In this case the SRCH Order would 
be traded at or better than the BBO price. If size remains, the 
Exchange describes the

[[Page 44344]]

various potential scenarios, the SRCH Order may: (1) Trade at the next 
BBO price (or prices) if the order price is locking or crossing that 
price (or prices) up to and including the price equal to the ABBO 
price, and/or (2) be routed, subject to a Route Timer, to away markets 
if all BX interest at better or equal prices has been exhausted, and/or 
(3) be entered into the Order Book at its limit price if not locking or 
crossing the BBO or the ABBO. These scenarios are not currently 
contained in the BX rule text and will bring greater transparency to 
the rule. This rule text is similar to Phlx Options 5, Section 
4(a)(iii)(C)(3), except that Phlx has references to All-or-None Orders, 
which are non-displayed orders on Phlx and different than BX's All-or-
None Orders, which execute immediately or cancel. Also, the final 
sentence from Phlx Options 5, Section 4(a)(iii)(C)(3), ``Once on the 
Order Book, the SRCH Order is eligible for routing if it is locked or 
crossed by an away market,'' appears in proposed BX Options 5, Section 
4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(5) provides,

    A SRCH Order received after an Opening Process that is marketable 
against the BBO when the ABBO is equal to the BBO will be traded on the 
Exchange at the BBO. If the SRCH Order has size remaining after 
exhausting the BBO, it will initiate a Route Timer and expose the SRCH 
Order at the ABBO to allow participants and other market participants 
an opportunity to interact with the remainder of the SRCH Order. During 
the Route Timer, the SRCH Order will be included in the BBO at a price 
one MPV away from the ABBO.
    This proposed paragraph describes a scenario that is currently not 
provided for within BX's rule. This scenario explains when a SRCH 
Order, received after the Opening Process, is marketable against the 
BBO when the ABBO is equal to the BBO. In this case the SRCH Order will 
be traded at the BBO price. If size remains, it will start a Route 
Timer and expose the SRCH Order at the ABBO and display the SRCH Order 
one MPV away from the ABBO so as not to lock the away market. During 
the Route Timer the SRCH Order will be included in the BBO at a price 
one MPV away from the ABBO. The proposed paragraph is similar to Phlx 
Options 5, Section 4(a)(iii)(C)(4). The Exchange notes that the 
sentences which provided, ``If, during the Route Timer, any new 
interest arrives opposite the SRCH Order that is equal to or better 
than the ABBO price, the SRCH Order will trade against such new 
interest at the ABBO price'' is contained within proposed BX Options 5, 
Section 4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(6) provides,

    If, at the end of the Route Timer pursuant to subparagraph (5) 
above, the SRCH Order is still marketable with the ABBO, the SRCH Order 
will route to an away market up to a size equal to the lesser of 
either: (1) The away markets' size, or (2) the remaining size of the 
SRCH Order. If the SRCH Order still has remaining size after routing, 
it may: (i) Trade at the next BBO price (or prices) if the order price 
is locking or crossing that price (or prices) up to the ABBO price, 
and/or (ii) be entered into the Order Book at its limit price if not 
locking or crossing the BBO or the ABBO.
    The Exchange proposes to note what occurs at the end of the Route 
Timer in paragraph (5) within proposed BX Options 5, Section 
4(a)(iii)(C)(6). If the SRCH Order is still marketable with the ABBO, 
the SRCH Order will route up to a size equal to the lesser of either: 
(1) The away markets' size, or (2) the remaining size of the SRCH 
Order. If the SRCH Order still has remaining size after such routing, 
it may: (i) Trade at the next BBO price (or prices) if the order price 
is locking or crossing that price (or prices) up to the ABBO price, 
and/or (ii) be entered into the Order Book at its limit price if not 
locking or crossing the BBO or the ABBO. As mentioned also during the 
Opening Process, once on the Order Book, the SRCH Order is eligible for 
routing if it is locked or crossed by an away market. The Exchange 
believes that noting each potential scenario within the SRCH Order rule 
text will provide market participants with clarity as to the expected 
System handling. This rule text is similar to Phlx Options 5, Section 
4(a)(iii)(C)(4). Three sentences within the Phlx rule were copied to 
proposed BX Options 5, Section 4(a)(iii)(C)(2) and are therefore 
applicable to this paragraph. Also, BX and Phlx All-or None Order types 
differ.

The Exchange proposes to delete current Options 5, Section 
4(a)(iii)(C)(2) and (3) and replace that language with similar text 
within proposed BX Options 5, Section 4(a)(iii)(C)(7) which provides,

    A SRCH Order received after an Opening Process that is marketable 
against the ABBO when the ABBO is better than the BBO will initiate a 
Route Timer, and expose the SRCH Order at the ABBO to allow 
participants and other market participants an opportunity to interact 
with the SRCH Order. If during the Route Timer, the ABBO markets move 
such that the SRCH Order is no longer marketable against the ABBO, it 
may: (i) Trade at the next BBO price (or prices) if the SRCH Order 
price is locking or crossing that price (or prices), and/or (ii) be 
entered into the Order Book at its limit price if not locking or 
crossing the BBO.
    The first sentence of this proposed rule is the same as the last 
sentence of current BX Options 5, Section 4(a)(iii)(C)(1). In this 
scenario, the SRCH Order is received after the Opening Process and is 
marketable against the ABBO when the ABBO is better than the BBO. A 
Route Timer will initiate and expose the SRCH Order at the ABBO to 
provide an opportunity to trade with the SRCH Order. If during the 
Route Timer, the ABBO markets move such that the SRCH Order is no 
longer marketable against the ABBO a few scenarios are possible: The 
SRCH Order may: (i) Trade at the next BBO price (or prices) if the SRCH 
Order price is locking or crossing that price (or prices), and/or (ii) 
be entered into the Order Book at its limit price if not locking or 
crossing the BBO. This rule text is identical to Phlx Options 5, 
Section 4(a)(iii)(C)(6). The remainder of the rule text within Phlx 
Options 5, Section 4(a)(iii)(C)(6) appears in proposed BX Options 5, 
Section 4(a)(iii)(C)(2), which generally describes SRCH Orders.

Proposed BX Options 5, Section 4(a)(iii)(C)(8) provides,

    If, at the end of the Route Timer pursuant to subparagraph (7) 
above, the ABBO is still the best price and is marketable with the SRCH 
Order, the order will route to the away market(s) whose disseminated 
price(s) is better than the BBO, up to a size equal to the lesser of 
either: (1) The away markets' size, or (2) the remaining size of the 
SRCH Order. If the SRCH Order still has remaining size after such 
routing, it may: (i) Trade at the next BBO price (or prices) if the 
order price is locking or crossing that price (or prices) up to the 
ABBO price, and/or (ii) be entered into the Order Book at its limit 
price if not locking or crossing the BBO or the ABBO.
    This scenario considers what is possible at the end of the Route 
Timer within proposed BX Options 5, Section 4(a)(iii)(C)(7). If the 
ABBO is still at the best price and is marketable with the SRCH Order, 
the order will route to the away market with a price that is better 
than the BBO, up to a size equal to the lesser of either: (1) The away 
markets' size, or (2) the remaining size of the SRCH Order. If the SRCH 
Order still has

[[Page 44345]]

remaining size after such routing, there are various possibilities, the 
SRCH Order may: (i) Trade at the next BBO price (or prices) if the 
order price is locking or crossing that price (or prices) up to the 
ABBO price, and/or (ii) be entered into the Order Book at its limit 
price if not locking or crossing the BBO or the ABBO. As is the case 
with SRCH Orders, once on the Order Book, the SRCH Order is eligible 
for routing if it is locked or crossed by an away market. This rule 
text is the same as Phlx Options 5, Section 4(a)(iii)(C)(7), except for 
the final sentence which states, ``Once on the Order Book, the SRCH 
Order is eligible for routing if it is locked or crossed by an away 
market'' and the mention of All-or-None Orders.
    The Exchange does not propose to replicate Phlx Options 5, Section 
4(a)(iii)(C)(8) because the paragraph is repetitive of the first 
sentence of proposed BX Options 5, Section 4(a)(iii)(C)(8) and the last 
sentence of proposed BX Options 5, Section 4(a)(iii)(C)(4). 
Notwithstanding the foregoing, the Exchange does propose to relocate a 
sentence from Phlx Options 5, Section 4(a)(iii)(C)(8) into BX Options 
5, Section 4(a)(iii)(C)(2) which provides, ``If an ABBO locks or 
crosses the SRCH Order during a new Route Timer, which would 
subsequently initiate at the conclusion of any Route Timer if interest 
remains, the SRCH Order may route to the away market at the ABBO at the 
conclusion of such Route Timer.'' The Exchange does not propose to 
replicate Phlx Options 5, Section 4(a)(iii)(C)(9) because this 
paragraph replicates proposed BX Options 5, Section 4(a)(iii)(C)(7).
    Proposed BX Options 5, Section 4(a)(iii)(C)(9) provides, ``A SRCH 
Order that is routed to an away market(s) will be marked as an ISO and 
designated as an IOC Order.'' This sentence is identical to Phlx 
Options 5, Section 4(a)(iii)(C)(10). This paragraph, which is currently 
not contained in BX's rule, represents existing System functionality. 
Describing the manner in which an IOC Order will be marked will provide 
greater transparency to the Exchange's current rule.
Implementation
    The Exchange intends to begin implementation of the proposed rule 
change prior to October 30, 2020. The Exchange will issue an Options 
Trader Alert to Members to provide notification of the symbols that 
will migrate and the relevant dates.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act, in general, and furthers the objectives of Section 
6(b)(5) of the Act, in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest. The Exchange's proposal to adopt a routing strategy 
similar to Phlx with respect to FIND Orders and remove SEEK Orders will 
provide BX Participants the same flexibility for routing orders that is 
afforded to Phlx members today.
    With respect to the SRCH feature, the Exchange is adding more 
detail to its routing rule to provide market participants with greater 
transparency. The Exchange believes the added scenarios will provide 
more context to routing in general and for the specific routing 
strategies for the benefit of investors and the public interest. The 
Exchange continues to offer various choices to its market participants 
with respect to routing. A Participant may elect either (1) to not 
route their orders and mark those orders ``DNR''; or (2) to route their 
orders. If a Participant elects to route their orders, then a 
Participant may select to mark their orders as ``FIND'' or ``SRCH'' 
Orders, as proposed herein. A FIND Order, similar to a SEEK Order, is 
not eligible for routing until the next time the option series is 
subject to a new Opening Process. The FIND Order would route once and 
then post to the Order Book. A SRCH Order may route during and after an 
Opening Process. A SRCH Order on the Order Book may be routed to an 
away market if it is locked or crossed by an away market. With respect 
to the addition of FIND Orders, the Exchange proposes various scenarios 
related to FIND Orders to account for various routing scenarios, as is 
the case today with respect to SEEK Orders. Various scenarios are also 
proposed to explain System functionality in locked and crossed markets. 
The Exchange also accounts for scenarios both during and after the 
Opening Process. The Exchange notes that it is consistent with the Act 
to account for the behavior of FIND Orders with respect to locked and 
crossed markets. The Exchange will not trade-through an away market's 
price. This behavior is consistent with the protection of investors and 
the general public because it affords Participants the ability to 
obtain the best price offered among the various options markets.
    There are two distinctions in the Phlx rules which BX is not 
adopting. First, All-or-None Orders are handled differently in the 
System by Phlx and BX. Phlx All-or-None Orders are permitted to rest on 
the Order Book while BX All-or-None Orders must be executed in its 
entirety or not at all and do not rest on the Order Book. Because BX's 
All-or-None Orders do not rest on the Order Book, the treatment of such 
orders would be different on the two markets (Phlx and BX) and 
therefore it is consistent with the Act for BX to align its treatment 
of order types within the routing rule with its treatment of those 
orders pursuant to BX Options 3, Section 7. Second, the Exchange is not 
adopting the distinction on Phlx which permits routing for Public 
Customer and Professional SRCH Orders. The Exchange believes it is 
consistent with the Act to not limit routing for any market 
participant. BX's proposal would allow all market participants to 
route. Participants would have the ability to elect to route orders to 
away markets to obtain the best price, while also accessing Phlx's 
Order Book. The Exchange believes that offering Participants the 
ability to route enables a Participant to obtain an execution on any 
market, provided the order is marketable, without the need to cancel 
the order and submit it anew.
DNR Orders
    The Exchange's proposal to amend Options 5, Section 4(a)(iii)(A), 
related to DNR Orders, to conform the text within BX to that of Phlx is 
consistent with the Act and should bring greater clarity to the rule 
text. The Exchange's proposed amendments to Options 5, Section 
4(a)(iii)(A), relating to DNR Orders, align the rule text with Phlx's 
Rule. The proposed rule text does not result in a System change, rather 
the text is intended to bring greater clarity to the current System 
operation.
    The Exchange's proposal to amend the sentence within Options 5, 
Section 4(a)(iii)(A), related to DNR Orders which provides, ``Any 
incoming order interacting with such a resting DNR order will execute 
at the ABBO price, unless the ABBO is improved to a price which crosses 
the DNR's displayed price, in which case the incoming order will 
execute at the previous ABBO price,'' is consistent with the Act. The 
Exchange proposes to amend this rule text to clarify the current rule 
text and add another scenario that is not currently within the rule 
text. The Exchange proposes to state, ``Any incoming order interacting 
with such a resting DNR order will execute at the ABBO price, unless 
(1), the ABBO is improved to a price which crosses the DNR Order's 
already displayed price, in which case the incoming order will execute 
at the previous ABBO price as the away market crossed a displayed 
price; or (2) the ABBO is improved to a price which locks the DNR 
Order's

[[Page 44346]]

displayed price, in which case the incoming order will execute at the 
DNR Order's displayed price.'' The System would not take into account 
the away market order or quote which crossed the DNR's displayed price. 
The Exchange is not trading-through an away market in this scenario, 
rather an away market is crossing BX's displayed market and therefore 
that market has the obligation not to trade-through BX's displayed 
price. The Exchange is also adding a scenario where the ABBO is 
improved to a price which locks the DNR's displayed price. In this 
added scenario, the incoming order will execute at the DNR's displayed 
price. The Exchange notes that this scenario is not contained in the 
current rule text. Adding this scenario is consistent with the Act 
because it will bring greater transparency to the routing rule and 
inform members about this potential outcome if a member elects to mark 
their order as DNR.
    Additionally, amending a sentence, within Options 5, Section 
4(a)(iii)(A), to provide, ``Should the best away market move to an 
inferior price level, the DNR Order will automatically re-price from 
its one MPV inferior to the original ABBO and display one MPV away from 
the new ABBO or its original limit price, and expose such orders at the 
new ABBO only if the repriced order locks or crosses the new ABBO'' is 
consistent with the Act because the additional language expands on the 
current re-pricing that exists today. The Exchange believes that this 
language provides more context to the manner in which a DNR Order will 
be handled by the Exchange's System. The Exchange believes that this 
additional rule text is consistent with the Act as the DNR Order would 
re-price again from its one MPV inferior to the original ABBO because 
the best away market moved to an inferior price level. The DNR Order 
would display one MPV away from the new ABBO price or its original 
limit price. Also, the DNR Order would expose such orders at the new 
ABBO. Once booked at its original limit price, it will remain on the 
Order Book at that price until executed or cancelled. Providing this 
additional transparency will assist members in determining if they want 
their orders routed.
    The remaining rule text amendments are non-substantive and makes 
technical changes.
SRCH Orders
    The Exchange's proposal to add more scenarios for SRCH Order 
functionality on BX is consistent with the Act. Today, BX's current 
SRCH Order functionality is identical to SRCH Order functionality on 
Phlx, with the exception that All-or-None Orders must be executed in 
its entirety or not at all and do not rest on the Order Book. BX 
permits routing for all market participants, unlike Phlx which limits 
routing to Public Customers and Professionals. The Exchange's proposal 
to include all potential scenarios will bring greater transparency to 
the Exchange's Rules. Within this rule, the Exchange accounts for 
various scenarios to explain System functionality in locked and crossed 
markets, particularly during a Route Timer. The Exchange also accounts 
for scenarios both during and after the Opening Process. The Exchange 
notes that it is consistent with the Act to account for the behavior of 
SRCH Orders with respect to locked and crossed markets. The Exchange 
will not trade-through an away market's price. This behavior is 
consistent with the protection of investors and the general public 
because it affords Participants the ability to obtain the best price 
offered among the various options markets.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange's proposal to adopt a routing strategy, similar to 
Phlx, with respect to FIND Orders and remove SEEK Orders does not 
impose an undue burden on intermarket competition. This proposal will 
provide BX Participants the same choices with respect to routing that 
is afforded to Phlx members today. Also, the proposed routing rules 
apply to all market participants including routing during an Opening 
Process.
    The Exchange believes that adding greater detail to its rules does 
not impose an undue burden on intramarket competition, rather it 
provides greater transparency as to the potential outcomes when 
utilizing different routing strategies with respect to SRCH Orders. The 
substitution of FIND Orders for SEEK Orders allows Participants to 
continue to have choices as to the manner in which they route orders, 
if they elect to route, as Phlx. Market participants may elect not to 
route their orders.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act and 
subparagraph (f)(6) of Rule 19b-4 thereunder.
    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2020-014 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-BX-2020-014. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the

[[Page 44347]]

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 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-BX-
2020-014 and should be submitted on or before August 12, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15845 Filed 7-21-20; 8:45 am]
BILLING CODE 8011-01-P