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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Notices Auction Collars. This proposed definition is based on Rule 7.35Ea8
with non-substantive differences to reflect options trading terminology i.e., contracts instead of shares. Proposed Rule 6.64POa7 would further provide that if there is no Legal Width Quote, the Indicative Match Price included in the Auction Imbalance Information would be calculated without Auction Collars. This would be a new feature applicable only to options trading and an Indicative Match Price without Auction Collars would be accompanied with an Auction Indicator that the Auction cannot be conducted because there is no Legal Width Quote.
Proposed Rule 6.64POa7A
would provide that if there is more than one price level at which the maximum number of contracts can be traded within the Auction Collars, the Indicative Match Price would be the price closest to the midpoint of the Legal Width Quote, rounded to the nearest MPV for the series, provided that the Indicative Match Price will not be lower higher than the highest lowest price of a Limit Order to buy sell ranked Priority 2Display Orders that is eligible to participate in the Auction. This proposed rule text is based on Rule 7.31Ea8A with a substantive difference only to reflect that in such circumstances, the Indicative Match Price would be the price closest to the midpoint of the Legal Width Quote rather than the price closest to an auction reference price.
Proposed Rule 6.64POa7B
would provide that an Indicative Match Price that is higher lower than the upper lower Auction Collar would be adjusted to the upper lower Auction Collar and orders eligible to participate in the Auction would trade at the collared Indicative Match Price.
Proposed Rule 6.64POa7Bi would provide that Limit Orders to buy sell with a limit price above below the upper lower Auction Collar would be included in the Auction Imbalance Information at the collared Indicative Match Price and would be eligible to trade at the Indicative Match Price.
Proposed Rule 6.64POa7Bii would provide that Limit Orders and quotes to buy sell with a limit price below above the lower upper Auction Collar would not be included in the Auction Imbalance Information and would not participate in an Auction.
The Exchange proposes that the manner that orders and quotes priced outside of the Auction Collar would be included in the Indicative Match Price would be the same as how it is determined for cash equity trading. Accordingly, this proposed rule text is based on Rules
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7.31Ea10A, B, and C with a difference only to reflect when the proposed rule would be applicable to quotes.
Proposed Rule 6.64POa7C
would provide that if the Matched Volume defined below for an Auction consists of only buy and sell Market Orders, the Indicative Match Price would be the midpoint of the Legal Width Quote, rounded to the MPV for the series, or, if the Legal Width Quote is locked, the locked price. This proposed rule text is based in part on Rule 7.31Ea8C, with differences to reflect that options trading is based on a Legal Width Quote.
Proposed Rule 6.64POa7D
would provide that if there is no Matched Volume, including if there are Market Orders on only one side of the Market, the Indicative Match Price and Total Imbalance for the Auction Imbalance Information would be zero.
This proposed rule text is based on Rule 7.31Ea8D and E with differences to reflect that on options, the Indicative Match Price would be zero in both circumstances.
Proposed Rule 6.64POa8 would define the term Legal Width Quote to mean the highest bid and lowest offer among all Market Maker quotes and the Away Market NBBO together, Calculated NBBO during the Auction Process. The proposed rule would further provide that the Calculated NBBO can be a Legal Width Quote if it:
A It is locked, but not crossed; B does not contain a zero offer; and C has a spread between the Calculated NBBO
for each option contract that does not exceed the following differentials, which can be widened as provided for in Rule 6.37Oc: i No more than .25
where the bid not does exceed $2; ii no more than .40 where the bid is more than $2 but does not exceed $5; iii no more than .50 where the bid is more than $5 but does not exceed $10; iv no more than .80 where the bid is more than $10 but does not exceed $20; and v no more than $1 where the bid is more than $20, provided that a Trading Official may establish differences other than the above for one or more series or classes of options.
Requiring that a bid-ask spread meet specified differentials before an Auction can proceed is based on the current OX
Opening Process, which requires the bid-ask differential for a series to be in an acceptable range. The proposed differential spread for the Pillar Auction Process is based on the bid-ask differentials currently set forth in Rule 6.37Ob4 with a difference that for Auctions on Pillar, for option contracts with a bid of $2, the differential will be
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.25 instead of .40. The Exchange believes that including the proposed bid-ask differential in the rule governing the Auction Process would promote clarity and transparency in Exchange rules regarding which quotesboth Market Maker quotes on the Exchange and the Away Market NBBOthat the Exchange would use to determine if there is a Legal Width Quote. The Exchange also proposes to make a conforming change to Rule 6.37Oc to add a cross-reference to proposed Rule 6.64POa8. This proposed amendment would ensure that the existing procedures for auctions specified in Rule 6.37Oc would continue to be available for option symbols that have transitioned to Pillar.
Proposed Rule 6.64POa9 would define the term Matched Volume to mean the number of buy and sell contracts that can be matched at the Indicative Match Price, excluding IO
Orders. This proposed rule text is based on the definition of Matched Volume set forth in Rule 7.31Ea9 with a non-substantive difference to reference contracts instead of shares and to be clear that the Matched Volume would not include IO Orders.
Proposed Rule 6.64POa10
would define the term pre-open state to mean the period before a series is opened or reopened and that during the pre-open state, the Exchange would accept Auction-Only Orders, quotes, and orders designated Day or GTC, including orders ranked Priority 3
Non-Display Orders that are not eligible to participate in an Auction. The proposed rule would further provide that the pre-open state for the Core Open Auction would begin at 6:00 a.m.
Eastern Time and would end when the Auction Processing Period begins and that during the pre-open state before the Core Open Auction, the Exchange would re-enter orders designated GTC.
The proposed rule would also provide that pre-open state for a Trading Halt Auction would begin at the beginning of the trading halt and would end when the Auction Processing Period begins.
This proposed definition would be new for Pillar and is designed to distinguish from both the Auction Processing Period and the period when a series is opened for trading. As noted above, this proposed definition would also be used in proposed Rules 6.40PO, 6.41PO, and 6.62PO.
Proposed Rule 6.64POa11
would define the term Rotational Quote to mean the highest Market Maker bid and lowest Market Maker offer on the Exchange when the Auction Process begins and that during the Auction Process, the Exchange would
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