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Federal Register / Vol. 86, No. 17 / Thursday, January 28, 2021 / Notices the Queuing Period 8 for the series continues including the dissemination of opening auction updates until the Maximum Composite Width Check is satisfied or the Exchange determines to open the series pursuant to Rule 6.11h.
The proposed rule change adds that such a series may open pursuant to a forced opening as set forth in proposed Rule 6.11f.9 Specifically, as proposed, if a series in an equity or exchangetraded product ETP option class 10 is unable to open because it does not satisfy the Maximum Composite Width Check described above within a time period which the Exchange determines for all equity and ETP option classes 11
after the occurrence of the opening rotation trigger for the class pursuant to Rule 6.11d, and the Composite Market is not crossed, the System forces the series to open after that time period upon the Systems observation of an away best bid and offer ABBO with a non-zero offer 12 for the series.13 For a series subject to a forced opening, the opening trade price determination and series open set forth in Rule 6.11e2
and 3 i.e., the opening auction do not occur; instead, the System opens the series without a trade. This will permit a series to open for trading on the Exchange if the series is open for trading on at least one other options exchange, even though the market for the series on the Exchange may be wide.
The proposed change to Rule 6.11f provides that in the event of a forced opening of a series pursuant to proposed Rule 6.11e4 or a compelled opening of a series pursuant to paragraph h, the conditions in subparagraph A or B could be satisfied, and the series would be ineligible to open. Additionally, if there were no Composite Market or if it were crossed, the System would be unable to perform the Maximum Composite Width Check, thus meaning the series could not satisfy that check and thus would not be eligible to open.
This proposed change merely adds detail to the Rules for additional transparency.
8 The term Queuing Period means the time period prior to the initiation of an opening rotation during which the System accepts orders and quotes in the Queuing Book the book into which Users may submit orders for participation in the opening rotation for participation in the opening rotation for the applicable trading session. See Rule 6.11a.
9 The proposed forced opening process has no impact on the modified opening auction process set forth in Rule 6.11j.
10 The proposed rule change is limited to series in equity and ETP option classes because these classes are eligible for listing on all U.S. options exchanges.
11 See Rule 1.2 which permits the Exchange to announce determinations by, among other things, notice, regulatory circular, and specification.
12 Such an ABBO would indicate that an away exchange is open, as it would have disseminated an opening quote.
13 The Exchange currently has a similar forced opening after a specified amount of time for complex order strategies. See Rule 6.13c2C.

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System enters all of a Users orders in that series in the Queuing Book into the Book in the manner set forth in current Rule 6.11f, unless a User instructs the System to cancel its market orders or all of its orders, in which case the System enters only the non-cancelled orders into the Book in this manner.
Specifically, they will be processed in accordance with Rule 6.12 as unexecuted orders and quotes are handled following the conclusion of the opening rotation, which describes how the System processes, handles, and executes orders. If any order or quote in the Queuing Book is marketable upon the forced opening and the User does not instruct the System to cancel it as proposed, the System would execute marketable orders subject to the priority rules set forth in Rule 6.12. If an order is marketable against away interest and is eligible for routing, the System may route the order for execution to an away exchange. Any non-marketable order would enter the Book or cancel, subject to the User instructions. This proposed change provides Users with flexibility for automated handling of their orders in the event a series opens with a wide market or is otherwise manually opened when the opening conditions may not otherwise be standard.
If a series satisfies the Maximum Composite Width Check prior to the Systems observation of an ABBO for the series, the series opens pursuant to Rule 6.11d2 and 3 i.e., the standard opening auction process occurs for the series. For example, suppose the Exchange determined the forced opening timer to be three minutes. If the opening trigger for a series occurs at 9:30:05 Eastern time but the series does not satisfy the Maximum Composite Width Check after the trigger, the System will force the series open after 9:33:05 Eastern time if it has received an ABBO by that time. However, if the series satisfies the Maximum Composite Width Check at 9:32:30, the series will open in accordance with the normal opening auction process.
2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6b of the Act.14 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6b5 15 requirements that the rules of an exchange be designed to prevent 14 15
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fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and 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.
Additionally, the Exchange believes the proposed rule change is consistent with the Section 6b5 16 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
In particular, the Exchange believes the proposed forced opening process for simple orders will remove impediments to and perfect the mechanism of a free and open market and a national market system and protect investors. The proposed rule change will provide for series to open for trading on the Exchange sooner than they may open currently, as long as they are open for trading on other options exchanges. The Exchange believes the proposed rule change will benefit investors, because it may permit these options to open sooner and increase the times during which investors may conduct trading in these options. Additionally, this may increase liquidity in the market for a series that is otherwise open on another options exchange. While the market on the Exchange for a series may be wider than the Maximum Composite Width,17
the Exchange believes it is reasonable to open the series if it opened for trading on another options exchange pursuant to that exchanges Commissionapproved rules. Options exchanges have varying opening processes and have made separate determinations on what constitutes separate, reasonable opening market widths. The Exchange believes if other options exchanges opened a series with a market width, it is reasonable to open the series for trading on the Exchange as well as orders submitted to other exchanges may be trading at those widths. Since orders may not trade outside of the disseminated NBBO
which defines the then-current market for the series, any orders resting in the Queuing Book that may execute following the forced opening will receive protection against executions at potentially erroneous prices.
Additionally, the proposed ability of 16 Id.
17 The Exchange notes pursuant to Rule 6.11e1B, there are currently instances in which the Exchange will open for trading despite the Composite Market Width being larger than the Maximum Composite Width.

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