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Federal Register / Vol. 86, No. 129 / Friday, July 9, 2021 / Notices
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Market Makers would streamline the Exchanges rules. The Exchange notes that the remaining differences in proposed Rule 6.76APO relating to the LMM Guarantee are designed to promote clarity and transparency in Exchange rules and would not introduce new functionality.
The Exchange believes that the structure and content of the rule text in proposed Rule 6.76APO promotes transparency by using consistent Pillar terminology. The Exchange also believes that adding more detail regarding current functionality in new Rule 6.76APO, as described above, would promote transparency by providing notice of when orders would be executed or routed by the Exchange.
Orders and Modifiers The Exchange believes that proposed new Rule 6.62PO would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would use existing Pillar terminology to describe the order types and modifiers that would be available on the Exchanges options Pillar trading system. As noted above, the Exchange proposes to offer order types and modifiers that are either based on existing order types available on the OX
system as described in Rule 6.62O, or orders and modifiers available on the Exchanges cash equity trading platform, as described in Rule 7.31E. The Exchange believes that structuring proposed Rule 6.62PO based on the structure of Rule 7.31E would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote transparency and consistency in the Exchanges rulebook.
In addition to the terminology changes to describe the order types and modifiers that are currently available on the Exchange, the Exchange further believes that the order types and modifiers proposed for options trading on Pillar that either differ from order types and modifiers available on the OX
system or that would be new would remove impediments to and perfect the mechanism of a free and open market and national market system because:
Market Orders on Pillar would function similarly to how Market Orders function under current options trading rules, including being subject to Trading Collars, with additional proposed functionality that is designed to ensure that Market Orders do not execute either when there is no prevailing market in a series, or if the displayed prices are too wide to assure a fair and orderly execution of a Market Order. The
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Exchange believes that the proposed rule describing Market Orders would promote transparency by providing notice of when a Market Order would be subject to such validations.
The Exchange is not proposing any new or different behavior for Limit Orders than is currently available for options trading on the Exchange, other than the application of Limit Order Price Protection and Trading Collars, which would differ on Pillar. The Exchange believes using Pillar terminology based on Rule 7.31Ea2
to describe Limit Orders would promote consistency and clarity in Exchange rules.
The proposed Limit Order Price Protection functionality is based in part on the existing Limit Order Filter for orders and price protection filters for quotes because an order or quote would be rejected if it is priced a specified percentage away from the contra-side NBB or NBO. The proposed Limit Order Price Protection functionality is also based in part on the functionality available on the Exchanges cash equity trading platform, and therefore is not novel. The Exchange believes that using the same mechanism for both orders and quotes would simplify the operation of the Exchange and achieve similar results as the current rules, which is to reject an order or quote that is priced too far away from the prevailing market.
The Exchange believes that re-applying Limit Order Price Protection after an Auction concludes would ensure that Limit Orders and quotes continue to be priced consistent with the prevailing market, and that using an Auction Price if available, and if not available, Auction Collars, and if not available, the NBBO to assess Limit Orders and quotes after an Auction concludes would ensure that the Exchange would be applying the most recent price in a series in assessing whether such orders or quotes should be cancelled.
The proposed Trading Collar functionality is based in part on how trading collars currently function on the Exchange because the proposed functionality would create a ceiling or floor price at which an order could be traded or routed. The proposed Pillar Trading Collar functionality is designed to simplify the process by applying a static ceiling price for buy orders or floor price for sell orders at which such order could be traded or routed that would be applicable to the order until it is traded or cancelled. The Exchange believes that the proposed functionality would provide greater determinism to an OTP Holder or OTP
Firm of the Trading Collar that would be applicable to its orders and when such
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orders may be cancelled if it reaches its Trading Collar.
The Exchange is not proposing any new or different Time-in-Force modifiers than are currently available for options trading on the Exchange.
The Exchange believes using Pillar terminology based on Rule 7.31Eb to describe the time-in-force modifiers would promote consistency and clarity in Exchange rules.
Auction-Only Orders, and specifically, the proposed MOO and LOO Orders, would operate no differently than how Opening-Only Orders currently function on the OX
system. The Exchange proposes nonsubstantive differences to use Pillar terminology that is based on Rule 7.31
Ec terminology. The Exchange further believes that offering its IO Order type, which is currently available for Trading Halt Auctions on the Exchanges cash equity platform, for Auctions on the options trading platform would provide OTP Holders and OTP Firms with new, optional functionality to offset an Imbalance in an Auction.
The Exchange would continue to offer Reserve Orders, AON Orders, Stop Orders, and Stop Limit Orders, which are currently available on the OX
system. The proposed differences to Reserve Orders for options trading would harmonize with how Reserve Orders function on the Exchanges cash equity market, with changes as applicable to address options trading e.g., no round lot/odd lot concept for options trading. The proposed changes to AON Orders would provide greater execution opportunities for such orders by allowing them to be integrated in the Consolidated Book and once resting, trade with incoming orders and quotes.
The changes are also based on how orders with an MTS Modifier, which are also conditional orders, function on the Exchanges cash equity market. The proposed differences for Stop Orders and Stop Limit Orders are designed to promote transparency by providing clarity of circumstances when either order may be elected. Finally, the Exchange believes that offering NonDisplayed Limit Orders for options trading on Pillar, which are available on the Exchanges cash equity platform, would provide additional, optional trading functionality for OTP Holders and OTP Firms. The Exchange notes that the proposed Non-Displayed Limit Order would function similarly to how a PNP Blind Order that locks or crosses the contra-side NBBO would be processed because in such circumstances, a PNP Blind Order is not displayed. A Non-Displayed Limit Order would differ from a PNP Blind
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