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Federal Register / Vol. 86, No. 158 / Thursday, August 19, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

with an option to instruct the Exchange to cancel their Marketable orders if an option series has not been opened within a specified time period. As proposed, new subparagraph d to Rule 952NY 5 would provide that an ATP
Holder may instruct the Exchange to cancel all Marketable orders in a series, including GTC Orders, if that series has not opened within a designated time period after the Exchange receives notification that the primary market for the underlying security has disseminated a quote and a trade that is at or within the quote. This proposed change is designed to provide ATP
Holders that electronically enter orders before Core Trading Hours 6 begin in a multitude of option series with an optional risk protection mechanism for the Exchange to automatically cancel Marketable orders on their behalf. ATP
Holders could submit requests to cancel such orders themselves, but would have to monitor which series have been opened on the Exchange. The proposed optional functionality would reduce operational risk for ATP Holders that sent orders in multiple series by providing them with a bulk cancel feature that would instruct the Exchange to cancel orders on their behalf if a series has not been opened by a specified time. Specifically, rather than have Marketable orders remain unexecuted on the Consolidated Book if the option series has not opened on the Exchange within a specified time period, ATP Holders would have the option to instruct the Exchange to cancel such orders back to the ATP
Holder. Once cancelled back, the ATP
Holder could choose to re-enter such orders on an exchange that has opened that series for trading.
The Exchange further proposes to provide that the Exchange would not cancel any Marketable orders received after the designated time period ends, even if the series has not yet opened.
The Exchange believes that if an ATP
Holder sends an order in an option series to the Exchange after Core Trading Hours begin, and more than the designated time period after the primary market for the underlying security has opened i.e., the series open trigger, such ATP Holder should be aware that the Exchange has not opened that series for trading when it sends the order to the Exchange, and therefore intends for 5 The Exchange proposes a non-substantive amendment to Rule 952NY to renumber current subparagraph d to that Rule as subparagraph e.
6 The term Core Trading Hours is defined in Rule 900.2NY15 to mean the regular trading hours for business set forth in the rules of the primary markets underlying those option classes listed on the Exchange.

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such order to be sent to the Exchange even though it has not yet opened that series for trading.
Proposed Rule 952NYd would also provide that the designated time period would be two minutes, unless determined otherwise by the Exchange and announced to ATP Holders via Trader Update, in which case the designated time period would not be greater than five minutes. The Exchange believes that a two-minute period would provide time for Market Makers to update their quotes after the Exchange receives the series open trigger so that the bid-ask differential in an option series can be within an acceptable range and therefore the series can open for trading on the Exchange. Specifically, the Exchange has observed that on a typical trading day, nearly 98% of all series are opened by 9:32 a.m. Eastern Time, and nearly 99% of all series are opened by 9:35 a.m. Eastern Time. By waiting two minutes before cancelling orders, the Exchange believes that the majority of series would be opened, thereby minimizing the number of series where there would be a bulk cancel of Marketable orders. In addition, ATP
Holders that want to cancel orders less than two minutes after the series open trigger would still be able to submit requests to cancel individual orders.
The Exchange further believes that it is appropriate to provide the Exchange with the ability to adjust the designated time period via Trader Update to no more than five minutes because it would provide additional flexibility for the Exchange to respond to the needs of ATP Holders to implement the instruction to cancel Marketable orders on a different time basis. The Exchange believes that a cap of five minutes would be reasonable because very few series remain unopened five minutes after the series open trigger. The Exchange notes that this is an optional instruction, and therefore no ATP
Holder is required to use this proposed new risk feature. The Exchange further notes that Exchange flexibility in connection with designating time periods for risk limitation measures is consistent with current Exchange rules.7
7 See, e.g., Commentary .03 to Rule 928NY Risk Limitation Mechanism providing that the Exchange will specify via Trader Update any applicable time periods for the Risk Limitation Mechanisms; provided, however, that the Exchange will not specify a time period of less than 100
milliseconds, inclusive of the duration of any trading halt occurring within that time. The Exchange also provides for flexibility in its rules for other risk mechanism parameters. See, e.g., Rule 967NYb Unless determined otherwise by the Exchange and announced to ATP Holders via Trader Update, the specified percentage shall be as follows: 100% for the contra-side NBB or NBO

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Finally, proposed Rule 952NYd would provide that this instruction would not be available for orders entered by Floor Brokers via the Electronic Order Capture System.8 The current EOC provider could not systemically apply the proposed optional instruction on a firm-by firm basis and therefore it would not be available to individual Floor Brokers.
The Exchange believes that because of the unique role of Floor Brokers on the Exchange to provide manual, high-touch services on behalf of customers, Floor Brokers should not need this optional feature. Specifically, unlike an off-Floor ATP Holder that may be relying on an algorithm to send orders in a multitude of series, a Floor Broker that provides high-touch services would be present on the Trading floor and in a position to monitor whether the Exchange has opened a series, and if not, whether to cancel an order that becomes Marketable.
The Exchange will announce via Trader Update when this proposed optional feature will be available, which, subject to effectiveness of this proposed rule change, the Exchange anticipates will be in early August 2021.
2. Statutory Basis For the reasons set forth above, the Exchange believes the proposed rule change is consistent with Section 6b of the Act 9 in general, and furthers the objectives of Sections 6b4 and 5 of the Act,10 in that it is designed to promote just and equitable principles of trade, 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.
The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it is designed to provide ATP Holders with an optional risk protection mechanism to instruct the Exchange to cancel Marketable orders in an option series on their behalf if that series has not opened on the Exchange within a priced at or below $1.00; and 50% for the contraside NBB or NBO priced above $1.00.
8 As defined in Rule 900.2NY20, the term Electronic Order Capture System or EOC
means the Exchanges electronic audit trail and order tracking system that provides an accurate time-sequenced record of all orders and transactions on the Exchange. As further defined, the EOC includes the electronic communications interface between EOC booth terminals and the Floor Broker Hand Held applications and also contains an electronic order entry screen.
9 15 U.S.C. 78fb.
10 15 U.S.C. 78fb4 and 5.

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