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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Notices the Exchange per current Rule 6.40Oe and Commentaries .01 and .02 thereto, except that under the current rules, this is default not optional functionality.
Additionally, this proposed rule is substantially identical to the Cancel and Block option set forth in Rule 7.19
Ec3Aiii for breach of the Gross Credit Risk Limit on the Exchanges cash equity platform. The Exchange believes this proposed option would provide Entering Firms more control over how Activity-Based Risk Controls are implemented and would add consistency to the risk controls already offered under Pillar on the Exchanges cash equity platform.
Finally, proposed Rule 6.40P
Oc2D would provide that if an Entering Firm breaches an ActivityBased 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 6.40Oe 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 6.40POc2E
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 6.40POc2Ei.
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 6.40POc2Eii.
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 6.40POc2Eiii.
These proposed settings are identical to the Exchange-determined settings provided under current Rule 6.40O, Commentary .03.
Proposed Rule 6.40POc2F
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 6.40POc2Fi.
For transactions occurring in the Core Open Auction, per Rule 6.64PO, the applicable time period would be the
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lesser of i the time between the Core Open Auction of a series and the initial transaction or ii the Interval proposed Rule 6.40POc2Fii.
These proposed settings are identical to the Exchange-specified time periods provided under current Rule 6.40O, Commentary .03, except that the Exchange has included a maximum allowable time period for the Interval, which adds clarity to the rule.
Proposed Rule 6.40POc3 would set forth the automated breach actions for the Global Risk Controls set by an Entering Firm.
Proposed Rule 6.40POc3A
would provide that if the Global Risk Control limit is breached, the Exchange would Cancel and Block, per proposed Rule 6.40Pc2Ciii.
Proposed Rule 6.40POc3B
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 classes of options caused the underlying breach of Activity-Based Risk Controls. This proposed functionality is consistent with the automated breach action taken in the event of a breach of current Rule 6.40Of, per current Rule 6.40O, Commentaries .01 and .02.
Proposed Rule 6.40POc3C
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 6.40O, Commentary .03, except that the current rule allows for a minimum setting of one 1 whereas the proposed rule is increasing that minimum to twenty-five 25, which the Exchange believes is a more appropriate minimum.
Proposed Rule 6.40POc3D
would provide that the Exchange would specify by Trader Update the Interval for the Global 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, per proposed Rule 6.40POc3Di.
For transactions occurring in the Core Open Auction, per Rule 6.64PO, the applicable time period is the lesser of i the time between the Core Open Auction of a series and the initial
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transaction or ii the Interval, per proposed Rule 6.40POc3Dii.
Proposed Rule 6.40POd describes how an Entering Firms 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 6.40POd provides that the Exchange would not reinstate the Entering Firms ability to enter orders and quotes and related instructions on the Exchange other than instructions to cancel one or more orders or quotes including Auction-Only Orders and orders designated GTC in full 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 6.40O, 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 6.40POd is also consistent with the more granular level of risk control under Pillar functionality available for cash equity trading per Rule 7.19Ed.
Proposed Rule 6.40POe would set forth new kill switch 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.
Proposed Rule 6.40POe 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 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 AuctionOnly 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 posttrade Kill Switch Actions are not
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