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Federal Register / Vol. 86, No. 41 / Thursday, March 4, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

Identical language currently exists in the rules governing simple Facilitation on GEMX and MRX, which operate in the same way as ISEs simple Facilitation.21
In renumbered subsection b3, the Exchange proposes to replace the words must not exceed with will only be considered up to in order to align with identical language in the complex Facilitation rule.22 This change more accurately describes that the System will cap Responses to the size of the auction for purposes of allocation methodology.
In renumbered subsection b4A, the Exchange proposes to provide that the facilitation order will be cancelled at the end of the exposure period if an execution would take place at a price that is inferior to the best bid offer on the Exchange. This is a non-substantive change that makes clear that any executions in Facilitation will comply with the general prohibition on tradethroughs in Options 5, Section 2a.
Identical language is included in the rules governing simple Facilitation on GEMX and MRX.23
In renumbered subsections b4B
and b4C, the Exchange proposes to amend the rule to provide that the facilitating Member will be allocated up to forty percent 40% or such lower percentage requested by the Member of the original size of the facilitation order.
If the Member requests a lower allocation percentage, the contra-side order would receive an allocation consistent with the percentage requested by the Member. Regardless of the Members request, the contra-side order would still be responsible for executing up to the full size of the agency order if there is not enough interest to execute the agency order at a particular price. Similar language indicating that the Member may request a lower allocation percentage than 40%
is currently included in the complex Facilitation rule, which operate in the same way as the simple Facilitation in this manner.24 For greater consistency between its simple and complex Facilitation rules, the Exchange also proposes to make aligning, nonsubstantive changes in the complex 21 See GEMX and MRX Options 3, Section 11b1.
22 See Options 3, Section 11c6.
23 See GEMX and MRX Options 3, Section 11b3.
24 See Options 3, Section 11c7B and C.
Other options exchanges such as BX provide similar functionality that allows members using an auction mechanism to configure allocation priority. See, e.g., BX Options 3, Section 13, which provides a similar feature for the BX Options Price Improvement Auction PRISM called Surrender.

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Facilitation rule to provide that the Member will be allocated up to forty percent. The current complex Facilitation language provides that the Member will execute at least forty percent or that the Member will be allocated at least forty percent. 25 The non-substantive language proposed for complex Facilitation will therefore serve to harmonize the complex rule with the amended simple rule.
The Exchange also proposes to more accurately describe Facilitations automatch functionality, which provides an enhanced price improvement opportunity for the agency order by permitting the contra-side order to further participate in the cross by automatching the price and size of competing interest providing price improvement from other market participants.26 The rule currently provides that upon entry of an order into the Facilitation Mechanism, the facilitating Electronic Access Member can elect to automatically match the price and size of orders, quotes and responses received during the exposure period up to a specified limit price or without specifying a limit price. In this case, the facilitating Electronic Access Member will be allocated its full size at each price point, or at each price point within its limit price is a limit is specified, until a price point is reached where the balance of the order can be fully executed.27 The Exchange proposes to state that if a Member elects to auto-match, the facilitating Electronic Access Member will be allocated the aggregate size of all competing quotes, orders, and Responses instead of its full size at each price point, or at each price point up to the specified limit price instead of within its limit price if a limit is specified, until a price point is reached where the balance of the order can be fully executed. The Exchange believes that the modified language more accurately explains how the functionality works today, and better aligns with how this feature is described in the Auto-Match Filing.28
25 Id.
26 See
Securities Exchange Act Release No. 62644
August 4, 2010, 75 FR 48395 August 10, 2010
SRISE201061 Auto-Match Filing. As discussed later in this filing, the Auto-Match Filing also introduced the auto-match feature on PIM. As such, the Exchange is proposing to make similar changes in PIMs auto-match rule as proposed for Facilitations auto-match rule.
27 See Options 3, Section 11b3C renumbered to Section 11b4C under this proposal.
28 The Auto-Match Filing describes the automatch feature as allowing the initiating member to submit a contra-side order that will automatically match the price and size set forth by the competing interest from other market participants i.e., auction responses, quotes, and orders at any price level
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For greater consistency within its Rulebook, the Exchange will also make the same changes in the complex Facilitation auto-match rule in Options 3, Section 11c7C.
Lastly, the Exchange proposes to add at the end of Supplementary Material .01 to Options 3, Section 11 that any solicited contra orders entered by Members into the Facilitation Mechanism to trade against Agency Orders may not be for the account of a Nasdaq ISE Market Maker that is assigned to the options class.29 This language was included in the approval order to SRISE200678 to allow solicited transactions in ISEs Facilitation Mechanism, so the proposed change will import that prohibition into the rule text for greater transparency.
Solicited Order Mechanism The Exchange proposes a number of changes to its Solicitation rule, none of which will change the current operation of this technology offering.
In Options 3, Section 11d, the Exchange proposes to add new subsection d1,30 which will provide that orders must be must be entered into the Solicited Order Mechanism at a price that is equal to or better than the NBBO on both sides of the market;
provided that, if there is a Priority Customer order on the Exchange best bid or offer, the order must be entered at an improved price. Orders that do not meet these requirements are not eligible for the Solicited Order Mechanism and will be rejected. The Exchange is not proposing any other changes to the current entry requirements for Solicitation. The new subsection d1
would simply provide additional detail about simple Solicitations existing entry checks, and align to the level of detail currently within the complex Solicitation rule regarding entry checks.31
Example 3
Assume the following market:
ISE BBO: 1 2 also NBBO
during the auction or up to a specified limit price if a limit is specified.
29 See Securities Exchange Act Release No. 55557
March 29, 2007, 72 FR 16838 April 5, 2007 SR
ISE200678 Order Granting Approval of Proposed Rule Change Relating to Facilitation Mechanism.
30 As a result, current paragraphs d13 will be renumbered accordingly. The Exchange will also renumber current paragraph d2D as paragraph d4.
31 See Options 3, Section 11e1. Complex Solicitation refers to the Exchanges best bid or offer instead of the NBBO. As noted above, there is no NBBO for complex orders, and executions of legs of complex orders are exceptions to the prohibition of trade-throughs. See supra note 20.

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