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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES2

preamble is designed to promote clarity and transparency in Exchange rules that Rule 6.62O would not be applicable to trading on Pillar.
Proposed Rule 6.37APO: Market Maker Quotations Current Rule 6.37AO describes Market Maker quoting obligations, including defining quotations and describing the treatment to such quotations. Proposed Rule 6.37APO
would set forth Market Maker quoting obligations under Pillar.
First, Rule 6.37APOa would be based on the current rule and would provide that a Market Maker may enter quotations only in the issues included in its appointment. Proposed Rule 6.37APOa1 would provide that the term quote or quotation means a bid or offer sent by a Market Maker that is not sent as an order and that once received by the Exchange, a subsequent quotation sent by a Market Maker replaces that Market Makers previously displayed same-side quotation. This proposed text adds clarity to the existing definition that a Market Maker quote is distinct from a Market Maker order and that a subsequent quote will cancel an existing quote.
Proposed Rule 6.37APOa2
would provide that a Market Maker may designate a quote it sends as either a Non-Routable Limit Order or an ALO
Order and such quotes would be processed in the same way as those orders are processed under proposed Rule 6.62PO. The Exchange notes that these two quote types replace the existing quote types i.e., MMLO, MMALO and MMRP, which will no longer be offered under Pillar. Because proposed Rule 6.62POe1 and 2
would describe the treatment of a quote designated as Non-Routable Limit Order or an ALO Order, the Exchange will not include a section in proposed Rule 6.37APO regarding the treatment of such quotes.
Proposed Rule 6.37APObe would be substantively identical to current Rule 6.37AObe with nonsubstantive differences to change the term shall to will. Proposed Commentary .01 to Rule 6.37APO
would be substantively identical to Commentary .01 to Rule 6.37AO, with non-substantive differences to streamline the rule text.
The Exchange also proposes a nonsubstantive change to paragraph b of Rule 6.65AO Limit-Up and LimitDown During Extraordinary Market Volatility to correct a cross reference to Market Maker quoting obligations as set forth in Rule 6.37APOb and c.
Current Rule 6.65Ab erroneously
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cross-references Rule 6.37BOb and c.
In connection with proposed Rule 6.37APO, the Exchange proposes to add the following preamble to Rule 6.37AO: This Rule will not be applicable to trading on Pillar. This proposed preamble is designed to promote clarity and transparency in Exchange rules that Rule 6.37AO
would not be applicable to trading on Pillar.
Proposed Rule 6.40PO: Pre-Trade and Activity-Based Risk Controls For the OX system, current Rule 6.40
O sets forth the activity-based Risk Limitation Mechanisms for orders and quotes, which are designed to help OTP
Holders and OTP Firms effectively manage risk during periods of increased and significant trading activity. With the transition to Pillar, the Exchange proposes to incorporate new risk control functionality that is based on both existing activity-based risk controls for options and pre-trade risk controls that are available on the Exchanges cash equity platform. Proposed Rule 6.40PO
would describe the activity-based controls with updated functionality under Pillar and would also describe new optional pre-trade risk controls that are based on pre-trade risk controls available on the Exchanges cash equity platform, as described in Rule 7.19E, with proposed differences to reference quotes and proposed new Pillar functionality.
Proposed Rule 6.40POa would set forth the following definitions that would be used for purposes of the Rule:
The term Entering Firm would mean an OTP Holder or OTP Firm including those acting as Market Makers proposed Rule 6.40POa1.
This proposed definition is based in part on the definition of Entering Firm in Rule 7.19Ea1 and the Exchange believes that the addition of this term would add clarity to the proposed rule.
The term Pre-Trade Risk Controls would refer to two optional limits that an Entering Firm may utilize with respect to its trading activity on the Exchange proposed Rule 6.40P
Oa2. These controls would be the Single Order Maximum Notional Value Risk Limit and the Single Order Maximum Quantity Risk Limit. The proposed Pre-Trade Controls are based on the substantially identical risk controls available on the Exchanges cash equity market, as described in Rules 7.19Ea3 and 4, respectively, but differ in that the proposed rule would also apply to quotes and specifies the treatment of orders designated GTC.

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The term Single Order Maximum Notional Value Risk Limit would refer to a pre-established maximum dollar amount for a single order or quote to be applied one time proposed Rule 6.40P
Oa2A. This definition would also provide that orders designated GTC
would be subject to this pre-trade risk control only once.
The term Single Order Maximum Quantity Risk Limit would refer to a pre-established maximum number of contracts that may be included in a single order or quote before it can be traded proposed Rule 6.40P
Oa2B. This definition would also provide that orders designated GTC
would be subject to this pre-trade risk control only once.
The term Activity-Based Risk Controls would refer to three activitybased risk limits that an Entering Firm may apply to its orders and quotes in an options class based on specified thresholds measured over the course of an Interval to be defined below proposed Rule 6.40POa3. The proposed Activity-Based Risk Controls are based on the substantially identical risk controls set forth in current Rule 6.40Obd, except that on Pillar, a Market Makers orders and quotes would be aggregated and applied towards each risk limit as opposed to current functionality, where a Market Makers orders and quotes are counted separately.
The term Transaction-Based Risk Limit would refer to a pre-established limit on the number of an Entering Firms orders and quotes executed in a specified class of options per Interval proposed Rule 6.40POa3A. This risk control is based on the substantially identical risk control set forth in current Rule 6.40Ob, except as noted above.
The term Volume-Based Risk Limit would refer to a pre-established limit on the number of contracts of an Entering Firms orders and quotes that could be executed in a specified class of options per Interval proposed Rule 6.40POa3B. This risk control is based on the substantially identical risk control set forth in current Rule 6.40
Oc, except as noted above.
The term Percentage-Based Risk Limit would refer to a pre-established limit on the percentage of contracts executed in a specified class of options as measured against the full size of such Entering Firms orders and quotes executed per Interval proposed Rule 6.40POa3C. The proposed definition would also provide that to determine whether an Entering Firm has breached the specified percentage limit, the Exchange would calculate the percent of each order or quote in a
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