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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Notices
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that unexecuted Market Orders would be ranked Priority 1Market Orders.
This proposed rule text uses Pillar terminology similar to Rule 7.31Ea1, but with differences to reflect options trading.
Proposed Rule 6.62POa1 would further provide that for purposes of processing Market Orders, the Exchange would not use an adjusted NBBO.20 On the Exchanges cash equity market, the Exchange does not use an adjusted NBBO when processing Market Orders.
The Exchange proposes to similarly not use an adjusted NBBO when processing Market Orders on its options market.
Proposed Rule 6.62POa1A
would provide that a Market Order that arrives during continuous trading would be rejected, or that was routed, returns unexecuted, and has no resting quantity to join would be cancelled if it fails the validations specified in proposed Rule 6.62POa1Aiiv. This proposed rule is based in part on Rule 6.62Oa, which specifies circumstances when a Market Order will be rejected during Core Trading Hours, with differences to use Pillar terminology and to modify the circumstances when a Market Order would be rejected. As proposed, a Market Order would be rejected or cancelled if routed first if:21
There is no NBO proposed Rule 6.62POa1Ai.
There is no NBB and the NBO is higher than $0.50 for sell Market Orders only. The Exchange further proposes that if there is no NBB and the NBO is $0.50 or below, a Market Order to sell would not be rejected and would have a working price and display price one MPV above zero and would not be subject to a Trading Collar proposed Rule 6.62POa1Aii. 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 20 See discussion supra, regarding the proposed Rule 1.1 definition of NBBO.
21 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 6.65AOa1.
The Exchange proposes a non-substantive amendment to Rule 6.65AOa1 to add a cross reference to proposed Rule 6.62POa1. The Exchange also proposes to amend the second sentence of Rule 6.65AOa1 to remove references to trading collars, and instead specify that the Exchange would cancel any resting Market Orders if the underlying NMS stock enters a Limit State or a Straddle State and would notify OTP
Holders of the reason for such cancellation. This proposed change would describe both how Market Orders function today on the OX system and how they would be processed on Pillar.

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were no NBB and an NBO that is $0.50
or below, the returned, unexecuted Market Order would be cancelled rather than displayed at one MPV above zero.
There are no contra-side Market Maker quotes on the Exchange or contra-side Away Market NBBO, provided that a Market Order to sell would be accepted as provided for in proposed Rule 6.62POa1Aii proposed Rule 6.62POa1Aiii.
The NBBO is not locked or crossed and the spread is equal to or greater than a minimum amount based on the midpoint of the NBBO proposed Rule 6.62POa1Aiv. The proposed wide-spread parameter is based in part on Rule 6.87Ob3 with two differences. First, the first bucket would include $2.00, instead of capping at $1.99, and second, the wide-spread calculation would be based off of the midpoint of the NBBO, rather than off of the bid price, as follows:
The midpoint of the NBBO
$0.00 to $2.00
Above $2.00 to and including $5.00
Above $5.00 to and including $10.00
Above $10.00 to and including $20.00
Above $20.00 to and including $50.00
Above $50.00 to and including $100.00
Above $100.00

Spread parameter $0.75
1.25
1.50
2.50
3.00
4.50
6.00

Proposed Rule 6.62POa1B
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 Markets at each price.
Proposed Rule 6.62POa1B would further provide that after trading or routing, or both, a Market Order would be displayed at the Trading Collar, subject to proposed Rule 6.62P
Oa1C, which is consistent with current functionality that Market Orders would be displayed at a trading collar, per Rule 6.60Oa5.
Proposed Rule 6.62POa1C
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 Away Market NBBO. Proposed Rule 6.62POa1D
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 based on a subset of the scenarios of when a
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Market Order would have been rejected on arrival, and the Exchange believes it is appropriate to cancel a Market Order either before it is displayed, or after it is displayed, in these circumstances in order to prevent the potential for such order to be displayed when there is no real market in a series.
Finally, proposed Rule 6.62P
Oa1E 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 obtain the best price obtainable, the Exchange proposes to route displayed Market Orders if they are locked or crossed by an Away Market.22
Limit Orders. Proposed Rule 6.62P
Oa2 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 Priority 2Display Orders. This proposed rule text uses Pillar terminology that is based in part on Rule 7.31Ea2. The ability for a Limit Order to be designated Day, IOC, or GTC is based on current Rules 6.62
Om and 6.62On. In addition, marketable limit orders are currently subject to trading collars.
Proposed Rule 6.62POa2A
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 an Away Market NBO NBB 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 7.31Ea2A, with non-substantive differences to use terminology specific to options trading.
Limit Order Price Protection. The Exchange proposes to describe its 22 As described above for proposed Rule 6.76P
Ob3, 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 6.62POi1 and the proposed Proactive if Locked/Crossed Modifier.

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