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Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Notices
subparagraph C to Rule 5.32b1, which states if the bid offer of a Book Only buy sell non-AON order or bulk message 9 submitted through a bulk port at the time of entry would lock or cross 1 a protected offer bid of another options exchange 10 or a resting offer bid with a Capacity of M, the System ranks and displays the order at one minimum price variation below above the better of the current away best offer ABO away best bid ABB or resting M-Capacity offer bid; or 2 the offer bid of a sell buy AON order resting on the Book at or better than the Exchanges best offer bid, the System ranks the resting AON order one minimum price variation above below the bid offer of the non-AON order.11
This will permit appointed MarketMaker orders and quotes submitted through bulk ports the primary purpose of which is to provide liquidity to the Book that are subject to the Price Adjust process indicating the submitting Market-Makers prefer a price adjustment to rejection so their quotes may rest in the Book if they would otherwise lock interest against which they could not execute.
The proposed rule change makes nonsubstantive changes to current Rules 5.32b1A and B to set forth to which orders and bulk messages the functionality in each subparagraph will apply; the proposed rule change has no impact on how the Price Adjust process applies to orders and bulk messages other than Book Only orders and bulk messages submitted through a bulk port that would otherwise execute against resting M-Capacity interest. Similarly, the proposed rule change updates Rule 5.32c6 to indicate that provision will only apply to Cancel Back Book Only orders and bulk messages submitted through bulk ports. Book Only orders and bulk messages submitted through a bulk port may either be Price Adjust or Cancel Back. As Price Adjust Book Only orders and bulk messages submitted through a bulk port will be handled as described above if they would execute against resting M-Capacity interest, this provision will now only apply to Cancel Back Book Only bulk messages and orders submitted through bulk ports.12

The proposed rule change also clarifies in Rule 5.32b1 that the Price Adjust process applies to an order or remaining portion that does not execute upon entry. This is consistent with current functionality, as Price Adjust orders may execute upon entry against resting interestthe price adjustment applies only to permit any remaining interest from an incoming order to rest at a price that would not lock or cross opposite side interest in accordance with the linkage plan.
Additionally, Rule 5.32b2 provides that if the circumstances that caused the System to adjust the price of an order pursuant to subparagraph b1 change so that it would not lock or cross, as applicable, a Protection Quotation or an AON resting on the Book at a price at or better than the BBO,13 the System gives the Price Adjust order a new timestamp. Currently, the rule states the System ranks or displays the order at a price that locks or is one minimum price variation away from the new Protection Quotation or AON resting on the Book at or better than the BBO, as applicable. Pursuant to current subparagraph 3, the System adjusts the ranked and displayed price of an order subject to Price Adjust once or multiple times depending upon the Users instructions and changes to the prevailing NBBO. The proposed rule change deletes this subparagraph 3
and moves the concept of single or multiple price adjust to subparagraph 2.14 The proposed rule change clarifies how each of single price adjust and multiple price adjust currently function.
Specifically, if a User designated an order as eligible for single price adjust, the System ranks and displays the order at the price of the Protected Quotation that was present in the Book at the time of order entry. That is the price at which the Price Adjust order would have entered the Book but for the presence of that Protected Quotation.
Additionally, the proposed rule change clarifies that bulk message bids and offers are only subject to single price adjust. The Exchange understands that Market-Makers automated quote streaming systems review their resting interest when the markets change and
9 The Exchange notes that pursuant to Rule 5.5c, only appointed Market-Makers may submit such orders and bulk messages through a bulk port.
10 This is how these orders and messages are currently handled pursuant to Rule 5.32b1Ai.
11 This is how these orders and messages are currently handled pursuant to Rule 5.32b1Aii.
12 The proposed rule change also clarifies in Rule 5.32c6 that it applies if the incoming order or bulk message would execute against or lock resting M-Capacity interest. It is possible a Cancel Back Book Only order or bulk message may otherwise not execute against resting M-Capacity interest but
would instead lock that interest if it rested in the book, so the System would reject that order or bulk message to prevent the dissemination of a locked market.
13 The Exchange notes that a change in the BBO
would include a change in M-Capacity interest resting at the top of the Book that caused a Book Only bulk message or order to have its price adjusted.
14 The proposed rule change also moves the latter part of current subparagraph 2 regarding the priority of re-ranked and re-displayed Price Adjust orders to proposed subparagraph 3.

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update as appropriate in accordance with their business and risk models.
Therefore, the Exchange does not believe it is necessary for it also to review resting Market-Maker interest continuously and reprice as the market changes. The proposed rule change amends proposed subparagraph 2B to indicate it applies to orders designated as multiple price adjust, and specifies the repricing described in that paragraph may occur multiple times as the opposite side of the NBBO changes up to the orders limit price. The proposed rule change has no impact on how the System handles order and bulk messages subject to single or multiple price adjust; it rather more accurately describes this process. The proposed rule change also amends this provision to reflect that a Price Adjust bulk message may be re-priced upon entry due to the presence of opposite side M
Capacity interest rather than rejected in accordance with current functionality.
With respect to multiple price adjust functionality, the proposed rule change clarifies that the price at which the System reprices an order is the ranked and displayed price rather than or, which is consistent with the remainder of paragraph b. Price Adjust orders are always ranked and displayed at the same price. Additionally, the proposed rule change deletes the concept of the new price locking a new Protected Quotation, as the new price will always be one minimum price variation away to be consistent with linkage rules. Finally, the proposed rule change deletes the concept of repricing a Price Adjust order based on the presence of an AON order.
As set forth in Rule 5.32b1, if an incoming order would lock the price of an AON resting on the book, the System reprices the AON rather than the incoming order. Therefore, if the AON
is no longer in the book, there would be no reason to reprice the other order, making the reference to AON in subparagraph 2 regarding repricing is unnecessary.
Finally, the proposed rule change enhances the bulk message fat finger check set forth in Rule 5.34a5. In accordance with the fat finger check, the System cancels or rejects any bulk message bid offer above below the NOB sic NBB by more than a specified amount determined by the Exchange.15 The proposed rule change indicates that the Exchange may also determine a minimum and maximum dollar value for the bulk message fat 15 This check does not apply to bulk messages submitted prior to the conclusion of the opening process or when no NBBO is available.

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