[Federal Register Volume 83, Number 206 (Wednesday, October 24, 2018)]
[Notices]
[Pages 53692-53699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23174]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84451; File No. SR-NYSEArca-2018-74]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Amend Rules 6.62-O and 6.37A-O To Add New 
Order Types and Quotation Designations

October 18, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on October 5, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rules 6.62-O (Certain Types of 
Orders Defined) and 6.37A-O (Market Maker Quotations) to add new order 
types and quotation designations. The proposed change is available on 
the Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change

[[Page 53693]]

and discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify Rules 6.62-O and 6.37A-O to 
add new order types and quotation designations as described herein. The 
Exchange also proposes to make conforming changes to these rules to 
reflect the proposed order types and quotations designations.
Existing Order Types
    Current Rule 6.62-O sets forth the order types available on the 
Exchange, including Liquidity Adding Orders (each an ``ALO'') and PNP 
(Post No Preference) Orders, both of which provide market participants 
control over how their orders interact with contra-side liquidity. 
Specifically, an ALO is a Limit Order that is rejected if it is 
marketable against the NBBO on arrival.\4\ A PNP Order is eligible to 
interact solely with interest on the Exchange, will not route, and will 
cancel if it locks or crosses the NBBO.\5\ The Exchange proposes to add 
order types that build on the existing ALO and PNP Order functionality 
to allow for repricing (rather than cancellation or rejection of 
orders) under certain circumstances.
---------------------------------------------------------------------------

    \4\ See Rule 6.62-O(t) (providing that ``a Liquidity Adding 
Order is a Limit Order which is to be accepted only if it is not 
executable at the time of receipt. Orders with the liquidity adding 
instruction will not be routed if marketable against the NBBO, but 
will be rejected. Liquidity adding orders may only be entered as a 
Day Order''). The Exchange proposes to modify paragraph (t) of this 
Rule to define Liquidity Adding Orders as ALOs and make conforming 
changes to the Rule. See proposed Rule 6.62-O(t). The Exchange also 
proposes to modify the rule to reflect that ``[a]n ALO or RALO, as 
defined in paragraph (t)(1) of this Rule, will be rejected if 
entered outside of Core Trading Hours or during a trading halt or, 
if resting, will be cancelled in the event of a trading halt,'' 
which is a functionality update that ensures these rule types 
operate as intended. See id.
    \5\ See Rule 6.62-O(p) (providing that a PNP Order ``is a Limit 
Order to buy or sell that is to be executed in whole or in part on 
the Exchange, and the portion not so executed is to be ranked in the 
Consolidated Book, without routing any portion of the order to 
another market center; provided, however, the Exchange shall cancel 
a PNP Order that would lock or cross the NBBO''). The Exchange 
proposes to capitalize the ``Market Center'' as used in paragraph 
(p) of the Rule, which is a defined term in Rule 6.1A-O(6). See 
proposed Rule 6.62-O(p).
---------------------------------------------------------------------------

Repricing ALO (``RALO'')
    The Exchange proposes to allow market participants the option to 
send in ALOs designated as RALO.\6\ As proposed, a RALO would be 
repriced (rather than be rejected) if it would either trade as the 
liquidity taker or display at a price that locks or crosses any 
interest on the Exchange or the NBBO. Specifically, an incoming RALO to 
buy (sell) that would trade with any displayed or undisplayed sell 
(buy) interest on the Consolidated Book would be displayed at a price 
one minimum price variation (``MPV'') below (above) such sell (buy) 
interest. An incoming RALO to buy (sell) that is not marketable against 
interest in the Consolidated Book but that would lock or cross the NBO 
(NBB) would be displayed at a price that is one MPV below (above) the 
NBO (NBB). If the sell (buy) interest in the Consolidated Book or NBO 
(NBB) moves up (down), the display price of the RALO to buy (sell) and 
the undisplayed price at which it is eligible to trade would be 
continuously adjusted, up (down) to the RALO's limit price. In other 
words, to avoid trading as the liquidity taker, the RALO would be 
displayed at a price one MPV away from the best-priced contra-side 
interest, whether on the Exchange or an away market, and its display 
price would continue to be adjusted up to its limit price.
---------------------------------------------------------------------------

    \6\ See proposed Rule 6.62-O(t)(1). The Exchange proposes that a 
RALO that is designated as a Reserve Order (i.e., with a portion of 
the order not displayed) would be rejected because of the complexity 
(and potential priority conflict) that could be introduced if the 
Exchange allowed a combination of these two order types. See id.
---------------------------------------------------------------------------

    As proposed, a resting RALO to buy (sell) that is displayed one MPV 
below (above) interest on the Consolidated Book would be eligible to 
trade at its display price. As further proposed, a resting RALO to buy 
(sell) that is displayed at a price one MPV below (above) the NBO (NBB) 
would be eligible to trade at the NBO (NBB); provided, however, that if 
the NBO (NBB) updates to lock or cross the RALO's display price, such 
RALO would trade at its display price in time priority behind other 
eligible interest already displayed at that price.\7\ Because in such 
circumstances the RALO would be trading at its display price, which 
would be different than the (less aggressive) price it was previously 
eligible to trade, the Exchange believes that principles of price-time 
priority dictate that the repriced RALO should be ranked behind other 
interest already displayed at the RALO's updated display price.\8\ 
Similarly, the Exchange proposes that each time there is an update to 
the RALO's price, the RALO would be ranked by time priority behind 
other eligible interest already at that price. And, if multiple RALOs 
simultaneously reprice to the same price at which they are eligible to 
trade, the RALOs would be prioritized based on the time of original 
order entry. The Exchange believes that this proposed handling of RALOs 
likewise would respect and preserve the Exchange price-time priority 
model.
---------------------------------------------------------------------------

    \7\ The proposed RALO operates in substantially the same manner 
as the ALO Order, available on the Exchange's equity market, which, 
like the RALO, would not remove liquidity and reprices if it would 
lock or cross interest on the Consolidated Book or the NBBO. See 
Rule 7.31-E(e)(2).
    \8\ The proposal to re-rank an order when the price at which an 
order is eligible to trade changes is consistent with how the 
Exchange's equity order types function. See Rule 7.36-E(f)(3) 
(providing that an order is assigned a new working time (i.e., 
effective time sequence assigned to an order for purposes of 
determining its priority ranking) any time the working price (i.e., 
the price at which an order is eligible to trade) changes).
---------------------------------------------------------------------------

    To avoid accepting RALOs priced too far through the NBBO, the 
Exchange proposes to limit the extent to which it would reprice such 
interest. Specifically, the Exchange would cancel an incoming RALO that 
has a limit price to buy (sell) that is more than a configurable number 
of MPVs above (below) the initial display price (on arrival) of the 
RALO.\9\ The Exchange would determine the configurable number of MPVs, 
which will be announced by Trader Update.\10\
---------------------------------------------------------------------------

    \9\ See proposed Rule 6.62[sic](t)(1)(B).
    \10\ For example, in a Penny Pilot issue, if the local best 
offer is 0.99 and the away best offer is 1.00 with a configuration 
set to 3 MPV, a RALO to buy of 1.02 or greater will cancel on 
arrival because the initial display price would be 0.98 which is 4 
MPVs away from its limit price.
---------------------------------------------------------------------------

    The following examples illustrate the proposed RALO order type.
RALO Example 1
Exchange BBO: (100) 1.98 x 2.22 (100)
Away BBO: (50) 1.97 x 2.23 (50)
    Order 1: RALO Buy 50 @ 2.25

     The incoming RALO (Order 1) will reprice to display and be 
eligible to trade @ 2.21 (i.e., one MPV below the NBO, which is also 
the Exchange BO).

    Order 2: Sell 50 @ 2.18

     Order 2 will trade on arrival with the RALO (Order 1) @ 
2.21.
RALO Example 2
Exchange BBO: (100) 2.15 x 2.22 (100)
Away BBO: (50) 2.20 x 2.23 (50)
    Order 1: PNPB \11\ Sell 50 @ 2.19

    \11\ A PNP-Blind Order (or PNPB) order ``is a Limit Order to buy 
or sell that is to be executed in whole or in part on the Exchange, 
and the portion not so executed is to be ranked in the Consolidated 
Book, without routing any portion of the order to another market 
center; however, if the [PNPB] order would lock or cross the NBBO, 
the price and size of the order will not be disseminated. Once the 
[PNPB] order no longer locks or crosses the NBBO, the price and size 
will be disseminated.'' See Rule 6.62-O(u).

---------------------------------------------------------------------------

[[Page 53694]]

     The PNPB (Order 1) will be eligible to trade @ 2.20 (but 
---------------------------------------------------------------------------
will not be displayed at this price because it crosses the NBB).

Order 2: RALO Buy 50 @ 2.25

    a. The RALO (Order 2) will reprice to display and be eligible to 
trade @ 2.19 (i.e., one MPV below the PNPB (Order 1) @ 2.20, which is 
the best priced (undisplayed) contra-side interest in the Consolidated 
Book).
Order 3: Sell 100 @ 2.18

    b. Order 3 will route 50 to the Away BB @ 2.20, and trade the 
remaining 50 with the RALO (Order 2) @ 2.19.
    c. The PNPB (Order 1) will then display (because it is no longer 
crossing the NBB) and be eligible to trade @ 2.19.
RALO Example 3
Exchange BBO: (100) 1.98 x 2.22 (10)
Away BBO: (50) 1.97 x 2.25 (50)
    Order 1: Sell Limit 10 @ 2.23
    Order 2: Sell Limit 10 @ 2.24
    Order 3: RALO Buy 50 @ 2.25

     The RALO (Order 3) will reprice to display and be eligible 
to trade @ 2.21 (i.e., one MPV below the NBO, which is also the 
Exchange BO).

    Order 4: Buy Limit [email protected] 2.25

     Order 4 will trade with the Exchange BO @ 2.22.

    Update to Exchange BBO: (50) 2.21 x 2.23 (10)

     Order 3 (RALO) will be repriced to display and be eligible 
to trade @ 2.22.
Order 5: Sell 50 @ 2.20
     Order 5 will trade with Order 3 (RALO) @ 2.22.
RALO Example 4
Exchange BBO: (100) 1.98 x 2.22 (10)
Away BBO: (50) 1.97 x 2.25 (50)
    Order 1: RALO Buy 50 @ 2.23

     The RALO (Order 1) will reprice to display and be eligible 
to trade @ 2.21 (i.e., one MPV below the NBO, which is also the 
Exchange BO).

    Order 2: Buy Limit 50 @ 2.23

     Order 2 will trade 10 contracts with the Exchange BO @ 
2.22 and the remaining 40 contracts of Order 2 will be added the 
Consolidated Book at 2.23. The RALO (Order 1) will reprice to display 
and be eligible to trade @ 2.23, at which time the RALO will get a new 
priority timestamp making it eligible to trade behind Order 2 (already 
displayed at this price) in time priority.

    Order 3: Sell Limit 10 @ 2.23

     Order 3 will trade with Order 2, as Order 2 has time 
priority over the RALO (Order 1).

    Order 4: Sell 10 @ 2.50
New Exchange BBO: (80) 2.23 x 2.50 (10)
* * * * *
    The Exchange believes the proposed RALO would give market 
participants more flexibility and control over the circumstances under 
which their orders trade with contra side-interest (i.e., by ensuring 
that a RALO would always add liquidity as maker, rather than remove 
liquidity as taker), while ensuring that RALOs priced too far through 
the contra-side NBBO would be rejected. The Exchange believes the 
proposed RALO would assist market participants in maximizing 
opportunities for execution (as such orders would reprice rather than 
reject) while encouraging the provision of greater displayed liquidity 
to the market, which would contribute to public price discovery.
Repricing PNP Order (``RPNP'')
    The Exchange proposes to allow market participants the option to 
send in PNP Orders as RPNP.\12\ As proposed, an RPNP is a PNP Order 
that would be repriced (rather than be cancelled after trading with 
interest in the Consolidated Book) if it would lock or cross the NBBO. 
Specifically, an RPNP to buy (sell) that would lock or cross the NBO 
(NBB) would be displayed at a price one MPV below (above) the NBO 
(NBB). If the NBO (NBB) moves up (down), the display price of the RPNP 
to buy (sell) and the undisplayed price at which it is eligible to 
trade would be continuously adjusted, up (down) to the limit price of 
the RPNP.
---------------------------------------------------------------------------

    \12\ See proposed Rule 6.62-O(p)(1). The Exchange proposes that 
an RPNP received during pre-open or during a trading halt will be 
treated as a PNP Order (i.e., as a Limit Order and will not reprice) 
for purposes of participating in opening auctions or re-opening 
auctions. See proposed Rule 6.62-O(p). An RPNP may only be entered 
as a Day Order (i.e., that expires at the end of the trading day). 
See proposed Rule 6.62-O(p)(1). The Exchange proposes that an RPNP 
that is designated as a Reserve Order (i.e., with a portion of the 
order not displayed) would be rejected because of the complexity 
(and potential priority conflict) that could be introduced if the 
Exchange allowed a combination of these two order types. See id.
---------------------------------------------------------------------------

    As proposed, a RPNP to buy (sell) that is displayed at a price one 
MPV below (above) the NBO (NBB) would be eligible to trade at the NBO 
(NBB), up (down) to the limit price of the RPNP; provided, however, 
that if the NBO (NBB) updates to lock or cross the RPNP's display 
price, such RPNP would trade at its display price in time priority 
behind other eligible interest already displayed at that price.\13\ 
And, if multiple RPNPs simultaneously reprice to the same price at 
which they are eligible to trade, the RPNPs would be prioritized based 
on the time of original order entry. For the same reason as described 
above for the proposed RALO, the Exchange believes that ranking the 
RPNP to buy (sell) behind other interest already displayed at the 
RPNP's updated display price, and ranking RPNPs that simultaneously 
reprice to the same price based on time of original order entry, would 
respect and preserve principles of priority. Also consistent with the 
Exchange's price-time priority model, the Exchange proposes that each 
time there is an update to the RPNP's price, the RPNP would be ranked 
by time priority behind other eligible interest already at that price.
---------------------------------------------------------------------------

    \13\ The proposed RPNP operates in substantially the same manner 
as the Non-Routable Limit Order available on the Exchange's equities 
market, which, like the RPNP, reprices if it would lock or cross a 
protected quotation of an Away Market or trade through a protected 
quotation. See Rule 7.31-E(e)(1).
---------------------------------------------------------------------------

    Similar to the proposed RALO, to avoid accepting RPNPs priced too 
far through the NBBO, the Exchange proposes to limit the extent to 
which it would reprice such interest.\14\ An incoming RPNP would be 
cancelled after trading with eligible interest (if any) if its limit 
price to buy (sell) is more than a configurable number of MPVs above 
(below) the initial display price (on arrival). The Exchange would 
determine the configurable number of MPVs, which would be announced by 
Trader Update.\15\
---------------------------------------------------------------------------

    \14\ See proposed Rule 6.62[sic](p)(1)(B).
    \15\ For example, in a Penny Pilot issue, if the local best 
offer is 0.99 and the away best offer is 1.00 with a configuration 
set to 3 MPV, a RPNP to buy at 1.03 or greater would trade with the 
local offer at 0.99 and any remaining interest will be cancelled 
(because the initial display price would be 0.99 which is 4 MPVs 
away from its limit price).
---------------------------------------------------------------------------

    The Exchange believes the proposed RPNP would give market 
participants more flexibility and control over the circumstances under 
which their orders trade with contra side-interest, while ensuring that 
RPNPs priced too far through the contra-side NBBO would be rejected. 
The Exchange believes the proposed RPNP would assist market 
participants in maximizing opportunities for execution (as such orders 
would reprice rather than reject) while encouraging the provision of 
greater liquidity to the market, which would contribute to public price 
discovery.
    The following examples illustrate the proposed RPNP order type.
RPNP Example 1
Exchange BBO: (100) 1.98 x 2.22 (100)

[[Page 53695]]

Away BBO: (50) 2.00 x 2.20 (50)
    Order 1: RPNP Buy 50 @ 2.25
     The RPNP (Order 1) will display @ 2.19 (i.e., one MPV 
below the NBO) and will be eligible to trade @ 2.20 (i.e., the NBO).
    Order 2: Sell 50 @ 2.18

     Order 2 will trade on arrival with the RPNP (Order 1) @ 
2.20.
RPNP Example 2
Exchange BBO: (100) 1.98 x 2.22 (100)
Away BBO: (50) 2.00 x 2.20 (50)
    Order 1: PNPB Buy 50 @ 2.22

     The PNPB (Order 1) will be eligible to trade @ 2.20 (but 
will not be displayed at this price because it crosses the NBO).

    Order 2: RPNP Buy 50 @ 2.21

     The RPNP (Order 2) will display @ 2.19 (i.e., one MPV 
below the NBO) and be eligible to trade @ 2.20 behind Order 1 in time 
priority.

    Order 3: Sell 10 @ 2.18

     Order 3 will trade on arrival with Order 1 @ 2.20.
RPNP Example 3
Exchange BBO: (100) 1.98 x 2.22 (100)
Away BBO: (50) 2.00 x 2.20 (50)
    Order 1: PNPB Buy 50 @ 2.21

     The PNPB (Order 1) will be eligible to trade at 2.20 (but 
will not be displayed at this price because it crosses the NBO).

    Order 2: RPNP Buy 50 @ 2.22

     The RPNP (Order 2) will display @ 2.19 and will be 
eligible to trade @2.20 behind Order 1 in time priority.

Away BBO updates to (50) 2.00 x 2.19 (50)

     The updated NBO locks the display price of the RPNP Buy 50 
(Order 2).
     The PNPB (Order 1) and the RPNP (Order 2) are both 
eligible to trade @ 2.19. The RPNP has priority to trade ahead of the 
PNPB because the RPNP was displayed @ 2.19 before the away market 
updated (and the PNPB is still undisplayed because its limit price is 
still crossing the NBO).

    Order 3: Sell 10 @ 2.18

     Order 3 will trade on arrival with the RPNP (Order 2) @ 
2.19.
RPNP Example 4
Exchange BBO: (100) 1.98 x 2.22 (100)
Away BBO: (50) 2.00 x 2.20 (50)
    Order 1: Limit Buy 50 @ 2.19.
    Order 2: RPNP Buy 50 @ 2.22

     The RPNP will display @ 2.19 (because crosses the NBO) and 
will be eligible to trade @ 2.20.

Away BBO updates to (50) 2.00 x 2.19 (50)

     NBO now locks the display price of Order 2 (RPNP).
     The RPNP (Order 2) will reprice to display and (will 
continue to) be eligible to trade @ 2.19, but Order 1 will have 
priority over Order 2 as it was already being displayed at this price.

    Order 3: Sell 10 @ 2.18
     Order 3 will trade on arrival with Order 1 @ 2.19.
* * * * *
Existing Market Maker Quotations
    Current Rule 6.37A-O(a) defines Market Maker quotes, including 
quotations designated as Market Maker--Light Only (``MMLO''), and 
specifies how such quotes are processed when a series is open for 
trading. The Exchange proposes to modify Rule 6.37A-O(a) to add two new 
quote designations to provide market makers with the same functionality 
for their quotations as are proposed for orders entered on the 
Exchange. The proposed quotation designations are similar to how the 
proposed RALO and RPNP would function and would enable Market Makers to 
exert greater control over how their quotes would interact with contra-
side liquidity, while affording them more opportunities to provide 
liquidity.
Market Maker--Add Liquidity Only Quotation (``MMALO'')
    The Exchange proposes to allow Markets Makers the option to 
designate quotations as MMALO.\16\ Similar to how the proposed RALO 
would function, as proposed, an incoming or resting MMALO would never 
trade as the liquidity taker nor would it display at a price that would 
lock or cross any interest on the Exchange or the NBBO.\17\ Rather than 
trade, an MMALO would be repriced based on contra-side interest.\18\ 
Specifically, an incoming MMALO to buy (sell) that would trade with any 
sell (buy) interest on the Consolidated Book would be displayed at a 
price one minimum price variation (``MPV'') below (above) such sell 
(buy) interest. Similarly, an incoming MMALO to buy (sell) that is not 
marketable against interest in the Consolidated Book but that would 
lock or cross the NBO (NBB) would be displayed at a price that is one 
MPV below (above) the NBO (NBB). If the sell (buy) interest in the 
Consolidated Book or NBO (NBB) moves up (down), the display price of 
the MMALO to buy (sell) and the undisplayed price at which it is 
eligible to trade would be continuously adjusted, up (down) to the 
MMALO's limit price. In other words, to avoid trading as the liquidity 
taker, the MMALO would be displayed at a price one MPV away from the 
best-priced contra-side interest, whether on the Exchange or an away 
market. The above trading examples illustrating how a RALO is processed 
(RALO Examples 1-4) apply equally to an MMALO of the same size and 
price of the RALO in each example.
---------------------------------------------------------------------------

    \16\ See proposed Rule 6.37A-O(a)(3)(B) and (a)(4)(A)(i). The 
Exchange proposes to delete reference to MMLO in paragraph (a)(4), 
regarding the ``[t]reatment of Market Maker Quotations,'' as too 
restrictive in light of the proposed quote types; instead, the 
Exchange proposes to separately describe the treatment of the 
various quote types when a series is open for trading. See proposed 
Rule 6.37A-O(a)(4).
    \17\ Because incoming quotations, other than an MMALO, would 
immediately ``trade with contra-side interest in the Consolidated 
Book at prices that do not trade through interest on another Market 
Center,'' the Exchange proposes to modify the rule to carve out 
incoming MMALOs. See proposed Rule 6.37A-O(a)(4)(A). The Exchange 
also proposes to replace references to ``another Market Center'' 
with ``the NBBO'' to add clarity and consistency to the Rule. See 
id.; see also proposed Rule 6.37A-O(a)(4)(C)(i),(D)(i)-(ii).
    \18\ See proposed Rule 6.37A-O(a)(4)(A)(i).
---------------------------------------------------------------------------

    Similar to the proposed RALO, a resting MMALO to buy (sell) that is 
displayed one MPV below (above) interest on the Consolidated Book would 
be eligible to trade at its display price. Also similar to the proposed 
RALO, a resting MMALO to buy (sell) that is displayed at a price one 
MPV below (above) the NBO (NBB) would be eligible to trade at the NBO 
(NBB); provided, however, that if the NBO (NBB) updates to lock or 
cross the MMALO's display price, such MMALO would trade at its display 
price in time priority behind other eligible interest already displayed 
at that price.\19\ For the same reasons as described above for the 
proposed RALO and RPNP, the Exchange believes that ranking the MMALO to 
buy (sell) behind other interest already displayed at the MMALO's 
updated display price would respect and preserve principles of 
priority. Also consistent with the handling of RALOs, the Exchange 
proposes that each time there is an update to the MMALO's price, the 
MMALO would be ranked by time priority behind other eligible interest 
already at that price.\20\ And, if multiple MMALOs simultaneously 
reprice to the same price at which they are eligible to trade, the 
MMALOs would be prioritized based on the time of original order entry. 
The Exchange believes that this handling of MMALOs (which is consistent 
with proposed handling of RALOs) in the event of a reprice, including 
when multiple MMALOs simultaneously reprice, is consistent

[[Page 53696]]

with the Exchange's price-time priority model.
---------------------------------------------------------------------------

    \19\ See proposed Rule 6.37A-O(a)(4)(A)(i)(b).
    \20\ See proposed Rule 6.37A-O(a)(4)(A)(i)(c).
---------------------------------------------------------------------------

    To incorporate MMALO (and MMRP discussed below) into existing rule 
text, the Exchange proposes to streamline Rule 6.37A-O, by re-
organizing and re-numbering related text regarding the treatment of 
untraded incoming quotations. Specifically, the Exchange proposes to 
provide that ``[a]ny untraded quantity of an incoming quotation will be 
added to the Consolidated Book, except in the circumstances specified 
below, which result in the remaining balance being cancelled,'' \21\ 
including when the incoming quotation ``is not designated as MMALO or 
MMRP'' and locks or crosses the NBBO and when it is designated as MMLO 
and locks or crosses undisplayed interest.\22\ Similarly, the Exchange 
would modify the rule providing that an incoming quotation that locks 
or crosses the NBBO would be rejected, provided ``it is not designated 
as MMALO or MMRP'' and cannot trade with interest in the Consolidated 
Book at prices that do not trade through the NBBO.\23\
---------------------------------------------------------------------------

    \21\ See proposed Rule 6.37A-O(a)(4)(C).
    \22\ See proposed Rule 6.37A-O(a)(4)(C)(i) and (ii).
    \23\ See proposed Rule 6.37A-O(a)(4)(D)(i).
---------------------------------------------------------------------------

    To avoid accepting MMALOs priced too far through the NBBO, the 
Exchange proposes to limit the extent to which it would reprice such 
interest. Specifically, the Exchange would reject an incoming quote 
that is designated as MMALO that has a limit price to buy (sell) that 
is more than a configurable number of MPVs above (below) the initial 
display price of the MMALO.\24\ The Exchange would determine the 
configurable number of MPVs, which will be announced by Trader 
Update.\25\
---------------------------------------------------------------------------

    \24\ See proposed Rule 6.37A-O(a)(4)(D)(iii). The Exchange notes 
that incoming MMALOs that fail the MPV check are rejected while 
similarly-priced RALOs would be accepted and then cancelled. The 
Exchange notes that this is a distinction without a difference and 
simply reflects an operational difference in how the Exchange 
evaluates these types of interest. The Exchange also proposes to re-
locate text that is currently at the end of this provision to the 
beginning, such that the Rules states that ``[a]n incoming quotation 
will be rejected, and the Exchange will cancel the Market Maker's 
current quotation on the same side of the market, if:'' as the 
Exchange believes this would streamline the Rule making it easier to 
navigate and understand. See proposed Rule 6.37A-O(a)(4)(D).
    \25\ For example, in a Penny Pilot issue, if the local best 
offer is 0.99 and the away best offer is 1.00 with a configuration 
set to 3 MPV, a MMALO to buy of 1.02 or greater would be rejected 
because the initial display price would be 0.98, which is 4 MPVs 
away from its limit price.
---------------------------------------------------------------------------

    The Exchange believes the proposed MMALO would give Market Makers 
more flexibility and control over the circumstances under which their 
quotes trade with contra side-interest (i.e., by ensuring that an MMALO 
would always add liquidity as maker, rather than remove liquidity as 
taker), while ensuring that MMALOs priced too far through the contra-
side NBBO would be rejected. The Exchange believes the proposed MMALO 
would assist Market Makers in maintaining a fair and orderly market, as 
it would encourage Market Makers to provide displayed liquidity to the 
market and thereby contribute to public price discovery.
Market Maker--Repricing Quotation (``MMRP'')
    The Exchange also proposes to allow Markets Makers the option to 
designate quotations as MMRP, which is similar to the proposed 
RPNP.\26\ As proposed, an incoming or resting quotation designated as 
MMRP would never display at a price that locks or crosses the NBBO. 
Instead, after trading with interest in the Consolidated Book, an 
incoming MMRP to buy (sell) that locks or crosses the NBO (NBB) would 
be displayed at a price that is one MPV below (above) the NBO (NBB). If 
the NBO (NBB) moves up (down), the display price of the MMRP to buy 
(sell) and the undisplayed price at which it is eligible to trade would 
be continuously adjusted, up (down) to the MMRP's limit price.
---------------------------------------------------------------------------

    \26\ See proposed Rule 6.37A-O(a)(3)(C) and (a)(4)(B).
---------------------------------------------------------------------------

    Similar to the proposed RPNP, an MMRP to buy (sell) that is 
displayed at a price one MPV below (above) the NBO (NBB) would trade at 
the NBO (NBB); provided, however, that if the NBO (NBB) updates to lock 
or cross the MMRP's display price, such MMRP would trade at its display 
price in time priority behind other eligible interest already displayed 
at that price. For the same reasons described above for the proposed 
RALO and RPNP, the Exchange believes that ranking the MMRP to buy 
(sell) behind other interest already displayed at the MMRP's updated 
display price would respect and preserve principles of priority.\27\ 
Also consistent with the handling of RALOs and RPNPs,, [sic] the 
Exchange proposes that each time there is an update to the MMRP's 
price, the MMRP would be ranked by time priority behind other eligible 
interest already at that price.\28\ And, if multiple MMRPs 
simultaneously reprice to the same price at which they are eligible to 
trade, the MMRPs would be prioritized based on the time of original 
order entry. The Exchange believes that this handling of MMRPs (which 
is consistent with the proposed handling of RALOs and RPNPs) in the 
event of a reprice, including when multiple MMRPs simultaneously 
reprice, is consistent with the Exchange's price-time priority model.
---------------------------------------------------------------------------

    \27\ See proposed Rule 6.37A-O(a)(4)(B)(i).
    \28\ See proposed Rule 6.37A-O(a)(4)(B)(ii).
---------------------------------------------------------------------------

    The Exchange notes that an MMRP may be submitted when a series is 
not open for trading (i.e., during pre-open or a trading halt) and such 
MMRP would be eligible to participate in the opening auction and re-
opening auction (as applicable) at the limit price of the MMRP.\29\ 
Such MMRPs would not be repriced as an option series may not open (or 
re-open) if a quote is locked or crossed.\30\
---------------------------------------------------------------------------

    \29\ See proposed Rule 6.37A-O(a)(5). The Exchange also proposes 
to make clear that ``[a]ll resting quotations will be cancelled in 
the event of a trading halt.'' See id.
    \30\ See Rule 6.64-O(b)(E)(providing in relevant part, that 
``[i]f the OX System does not open a series with an Auction Process, 
the OX System shall open the series for trading after receiving 
notification of an initial uncrossed NBBO disseminated by OPRA for 
the series'').
---------------------------------------------------------------------------

    To avoid accepting MMRPs priced too far through the NBBO, the 
Exchange proposes to limit the extent to which it would reprice such 
interest. Specifically, an incoming MMRP that has a limit price more 
than a configurable number of MPVs above (below) the initial display 
price (on arrival) would first trade with marketable interest in the 
Consolidated Book up (down) to the NBO (NBB) and any remaining balance 
would be cancelled.\31\ Similarly, the Exchange would reject an 
incoming MMRP that does not trade (i.e., because there is no marketable 
interest in the Consolidated Book) and has a limit price to buy (sell) 
that is more than a configurable number of MPVs above (below) the 
initial display price (on arrival) of the MMRP.\32\ The Exchange would 
determine the applicable number of MPVs and announce the configurable 
by Trader Update.\33\ The above trading

[[Page 53697]]

examples illustrating how a RPNP is processed (RPNP Examples 1-4) apply 
equally to an MMRP of the same size and price of the RPNP in each 
example.
---------------------------------------------------------------------------

    \31\ See proposed Rule 6.37A-O(a)(4)(C)(iii).
    \32\ See proposed Rule 6.37A-O(a)(4)(D). The Exchange notes that 
incoming MMRPs that fail the MPV check are rejected while similarly-
priced RPNPs would be accepted and then cancelled. The Exchange 
notes that this is a distinction without a difference and simply 
reflects an operational difference in how the Exchange evaluates 
these types of interest.
    \33\ For example, in a Penny Pilot issue, if the local best 
offer is 0.99 and the away best offer is 1.00 with a configuration 
set to 3 MPV, a MMRP to buy at 1.03 or greater would trade with the 
local offer at 0.99 and any remaining interest will be cancelled 
(because the initial display price would be 0.99 which is 4 MPVs 
away from its limit price). Because the MMRP is cancelled, the 
Exchange would also cancel the opposite-side quote for that Market 
Maker. See Rule 6.37A-O(a)(4)(B)(or, as renumbered, proposed Rule 
6.37A-O(a)(4)(C) (providing, ``[w]hen such quantity of an incoming 
quotation is cancelled, the Exchange will also cancel the Market 
Maker's current quotation on the opposite side of the market).
---------------------------------------------------------------------------

    The Exchange notes that absent the proposed MMRP, incoming quotes 
(or portions thereof) would reject or cancel if such quotes locked or 
crossed away markets, which aligns with the NMS plan for Options Order 
Protection And Locked/Crossed Market Plan (``Plan''), to which the 
Exchange is a party.\34\ Thus, the Exchange believes that affording 
Market Makers the ability to designate quotes as MMRP affords Market 
Makers more certainty when providing liquidity, while ensuring that 
MMRPs priced too far through the contra-side NBBO would cancel or 
reject after trading with any eligible interest on the Exchange.
---------------------------------------------------------------------------

    \34\ See Plan, dated April 14, 2009, available here, http://www.optionsclearing.com/components/docs/clearing/services/options_order_protection_plan.pdf. See also Securities Exchange Act 
Release No. 60405 (July 30, 2009), 74 FR 39362 (August 6, 2009) 
(File No. 4-546) (order approving the Plan). The Plan obligates the 
participating exchanges to provide order protection, including 
addressing locked and crossed markets and the potential for trade-
throughs in certain options classes. See id. Consistent with the 
Plan, the rules of the Exchange include prohibitions against trade-
throughs and a pattern or practice of displaying certain quotations 
that lock or cross away markets. See, e.g., Rules 6.94-O, 6.95-O.
---------------------------------------------------------------------------

    To reflect the quote types proposed herein, the Exchange proposes 
to re-organize paragraph (a) of Rule 6.37A-O, by re-locating text that 
a quote will never route from existing paragraph (a)(4) to paragraph 
(a)(2); adding new paragraph (a)(3) to provide that ``[a] Market Maker 
may designate a quote as follows''; and re-numbering the balance of the 
paragraph to account for such changes.\35\ In addition, as proposed, 
the description of a Market Maker--Light Only Quotation (``MMLO'') 
would be re-numbered as paragraph (a)(3)(A), and the text would be 
streamlined to provide simply that ``[o]n arrival, a quotation 
designated MMLO will trade with displayed interest in the Consolidated 
Book only. Once resting, the MMLO designation no longer applies and 
such quotation is eligible to trade with displayed and undisplayed 
interest.'' \36\
---------------------------------------------------------------------------

    \35\ See proposed Rule 6.37A-O(a)(2)-(3).
    \36\ See proposed Rule 6.37A-O(a)(3)(A).
---------------------------------------------------------------------------

    The Exchange notes that this proposal does not relieve a Market 
Maker of its continuous quoting or firm quote obligations pursuant to 
Rules 6.37A-O and 6.86-O, respectively. Further, the Exchange notes 
that Market Makers would still be able to send orders in (and out of) 
classes to which they are appointed, as orders are not affected by this 
proposal.
Implementation
    The Exchange will announce by Trader Update the implementation date 
of the proposed rule change within 90 days of the effective date of 
this rule filing.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\37\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\38\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to 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.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78f(b).
    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

RALO and RPNP
    The proposed RALO and RPNP would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because the proposed order types would provide market participants with 
greater flexibility and control over how their orders interact with 
liquidity on the Exchange. The Exchange believes this proposal allows 
market participants to provide and access greater liquidity on the 
Exchange, thus benefiting Exchange members. Both proposed order types 
provide a means to display such orders at prices that are designed to 
maximize their opportunities for execution. Specifically, allowing any 
eligible RALO and RPNP to be repriced and potentially trade at multiple 
price points would improve the mechanism of price discovery. The 
Exchange believes that ranking a repriced RALO or repriced RPNP behind 
other interest already eligible to trade at a price, as well as ranking 
such orders that simultaneously reprice to the same price by time of 
original order entry, respects and preserves principles of priority and 
therefore would promote just and equitable principles of trade. The 
Exchange notes that similar order types are offered by other options 
exchanges.\39\ In addition, the Exchange has approved order types that 
function similar to the proposed RALO, and RPNP in its equities market 
rules.\40\
---------------------------------------------------------------------------

    \39\ See, e.g., Nasdaq Options Market (``NOM''), Chapter VI 
Trading Systems, Sec. 1(e)(11) (providing for a non-routable Post-
Only Order that will reprice upon entry rather than remove liquidity 
or lock or cross the NBBO as described herein) and Nasdaq PHLX LLC 
(``PHLX'') Rule 1080(m)(iv)(A) (providing for a non-routable Do Not 
Route (``DNR'') Order that that will repeatedly reprice as described 
herein).
    \40\ See Rules 7.31-E(e)(1) (describing the ``Non-Routable Limit 
Order'', which reprices if it would lock or cross a protected 
quotation of an Away Market or trade through a protected quotation) 
and 7.31-E(e)(2) (describing the ``ALO Order,'' which is an non-
routable limit order that would also reprice if it would remove 
liquidity from the NYSE Arca Book).
---------------------------------------------------------------------------

    Specifically, the proposed RALO is substantially similar to the 
Post-Only Order available on NOM. A NOM Post-Only Order is a non-
routable order that will not remove liquidity from the NOM System and 
is ranked and executed on the exchange or cancelled (at the request of 
a market participant), as appropriate, without routing away to another 
market. A RALO, like a NOM Post-Only Order, is evaluated at the time of 
entry with respect to locking or crossing other orders and if such 
order would lock or cross an order on the Exchange, the order would be 
repriced to one MPV below the current best offer (for bids) or above 
the current best bid (for offers) and displayed at one MPV below the 
current best offer (for bids) or above the current best bid (for 
offers). Also, like NOM's Post-Only Order, if a proposed RALO would not 
lock or cross an order on the local book but would lock or cross the 
NBBO of another market center, in violation of the Plan, such order 
would be repriced to the current NBO (for bids) or the current NBB (for 
offers) and displayed at one MPV above (for offers) or below (for bids) 
the national best price. Given that an incoming RALO (like a NOM Post-
Only Order) would need to be evaluated for potential repricing, it may 
only be entered with a time-in-force of Day (i.e., like NOM's Post-Only 
Order, a RALO could not be submitted as an Immediate-or-Cancel (IOC) or 
Good-till-Cancel (GTC)).\41\ The RALO, however, will continuously 
reprice to avoid locking or crossing once resting, while the NOM Post-
Only Order appears to be evaluated and repriced only upon entry, which 
distinction does not change the underlying principle to both order 
types, which is to avoid locking and crossing the market.\42\
---------------------------------------------------------------------------

    \41\ See proposed Rule 6.62-O(t) (providing that an ALO may only 
be entered as a Day order) and (t)(1) (providing that a RALO in an 
ALO that may be repriced).
    \42\ The continuous repricing feature of the RALO is similar to 
the ``multiple display price sliding'' available on Cboe BZX 
Exchange, Inc. for its Post Only Order; however that order type has 
certain differences from the proposed RALO, including that the BZX 
Post Only Order allows such orders to remove liquidity when cost 
beneficial or cost neutral to market participants and does not 
appear to reprice the Post Only Order based on interest in the local 
book. See BZX Rule 11.9(c)(6) and (g).

---------------------------------------------------------------------------

[[Page 53698]]

    The Exchange's ALO and the RALO combine elements of the NOM Post-
Only Order in that NOM market participants can opt to have their Post-
Only Order cancelled back if such order locks or crosses another market 
(an ALO would simply be rejected) and/or if the Post-Only Order would 
be posted to the NOM System at a price other than its limit price 
(whereas the RALO is designed to provide additional flexibility for a 
potential executions until the order reaches its limit price). The NOM 
Post-Only Order does not specify how it interacts, if at all, with 
undisplayed interest. The Exchange notes that NOM does not appear to 
provide for the cancellation of Post-Only Orders that have a limit 
price that is more than a certain number of MPVs through the best-
priced contra-side interest. The Exchange notes that this feature does 
not alter the repricing feature of the proposed RALO, but rather 
operates as a check for market participants that may have priced their 
RALO erroneously. The Exchange therefore believes that any differences 
between the proposed RALO and the NOM Post-Only Order are minimal and 
do not change the underlying principle to both order types, which is to 
avoid locking and crossing the market (with the RALO offering 
additional protection against erroneous orders).
    The RPNP is substantially similar to PHLX's ``DNR Order,'' which is 
a non-routable order that, after trading with eligible interest on PHLX 
on arrival, is displayed one MPV ``inferior'' to the away best bid/
offer'' and is eligible to trade with the best-priced contra-side 
interest.\43\ The proposed RPNP, like the DNR Order, automatically 
reprices if the best away market changes, or moves to an inferior price 
level, and such orders are displayed at the NBBO only if the repriced 
order locks or crosses the best-priced local interest. A RPNP (like a 
DNR Order) may reprice until it reaches its limit price, at which time 
it will remain at that price until executed or cancelled. And, for both 
the RPNP and a DNR Order, if the best away market improves its price 
such that it locks or crosses its limit price, the exchange executes 
the incoming order that is routed from the away market that locked or 
crossed the order's limit price. Finally, similar to DNR Orders, any 
RPNPs that are submitted outside of trading hours will be executed to 
the extent possible, i.e., at their limit price.\44\ The Exchange notes 
that PHLX does not appear to provide for the cancellation of DNR Orders 
that have a limit price that is more than a certain number of MPVs 
through the best-priced contra-side interest. The Exchange notes that 
this feature does not alter the repricing feature of the proposed RPNP, 
but rather operates as a check for market participants that may have 
priced their RPNP erroneously. The Exchange believes that such 
difference between the proposed RPNP and PHLX's DNR Order is minimal 
and is designed to protect against erroneous orders.
---------------------------------------------------------------------------

    \43\ See PHLX Rule 1080(m)(iv)(A). See also proposed Rule 
6.62[sic](p)(1)(A). The Exchange notes, however, that immediately 
upon receipt, the DNR Order is exposed at the NBBO, which differs 
from the proposed RPNP. However, the Exchange believes this is not a 
material difference as a DNR Orders (like the proposed RPNP) may not 
trade at prices inferior to the NBBO.
    \44\ See PHLX Rule 1017(k)(C)(6)(providing that DNR Orders will 
be executed to ``to the extent possible'' if received pre-open). See 
also proposed Rule 6.62[sic](p) (providing that an RPNP received 
during pre-open or during a trading halt will be treated as a PNP 
Order (i.e., as a Limit Order and will not reprice) for purposes of 
participating in opening auctions or re-opening auctions'').
---------------------------------------------------------------------------

MMALO and MMRP
    Similar to the proposed RALO and RPNP, the proposed MMALO and MMRP 
quote designations would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because they would provide Market Makers with increased control over 
interactions with contra-side liquidity and would increase 
opportunities for such interactions. The Exchange notes that, absent 
the proposed repricing functionality associated with the MMALO and 
MMRP, a Market Maker quote that locks or crosses interest on the 
Exchange or an away market would reject or cancel. In the case of 
MMALOs, the proposal would promote the display of liquidity because 
such quotations would be displayed at the next-best aggressive price 
instead of being cancelled. The proposal would also ensure that an 
MMALO would always add liquidity as maker, rather than remove liquidity 
as taker, while ensuring that MMALOs priced too far through the contra-
side interest on the Exchange or the NBBO would be rejected. As such, 
the proposed MMALO would assist Market Makers in maintaining a fair and 
orderly market, as it would encourage Market Makers to provide 
displayed liquidity to the market and thereby contribute to public 
price discovery. In the case of MMRPs, the proposal would afford Market 
Makers more certainty when providing liquidity, while ensuring that 
MMRPs priced too far through the contra-side NBBO would cancel or 
reject after trading with any eligible interest on the Exchange. The 
Exchange notes that the proposed MMALO and MMRP are optional and Market 
Makers have the option to utilize these quote types (or not). The 
Exchange believes that ranking the repriced MMALO or repriced MMRP by 
time priority behind other interest already available to trade at a 
price respects and preserves principles of priority and therefore would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
    Because the options market is quote driven and Market Makers are 
vital to the price discovery process, the Exchange believes that the 
proposed (optional) quote types would provide Market Makers with a 
greater level of determinism, in terms of managing their exposure, and 
thus may encourage more aggressive liquidity provision, resulting in 
more trading opportunities and tighter spreads. This too would help 
improve the mechanism of price discovery. Accordingly, the Exchange 
believes that the proposal would improve overall market quality and 
enhance competition on the Exchange to the benefit of all market 
participants. Moreover, the Exchange also notes that other options 
exchanges have recently adopted quote types designed to strengthen 
market making.\45\ Accordingly, the Exchange believes that the proposal 
would improve overall market quality and improve competition on the 
Exchange, to the benefit of all market participants.
---------------------------------------------------------------------------

    \45\ See, e.g., MIAX Options Exchange (``MIAX'') Rule 515(d) 
(providing that ``[i]f a Market Maker order or quote could not be 
executed or could not be executed in full upon receipt, the System 
will continue to execute the Market Maker's order or quote at 
multiple prices until (i) the Market Maker's quote has been 
exhausted or its order has been completely filled; (ii) the 
executions have reached the Market Maker's limit price; or (iii) 
further executions will trade at a price inferior to the ABBO [Away 
Best Bid or Offer], whichever occurs first''). The Exchange notes 
that MIAX does not appear to provide for the rejection of Market 
Maker quotes that have a limit price that is more than a certain 
number of MPVs through the best-priced contra-side interest. The 
Exchange notes that this feature does not alter the repricing 
feature of the proposed MMALO/MMRP, but rather operates as a check 
for market participants that may have priced their MMALO/MMRP 
erroneously. See also BOX Options Exchange LLC (``BOX'') IM-8050-3 
(providing that ``[i]f an incoming quote is marketable against the 
BOX Book and will execute against a resting order or quote, it will 
be rejected''). The Exchange notes that other options exchanges 
currently offer repricing functionality that are substantially 
similar to the proposed functionality for quotes. See supra n. 39.
---------------------------------------------------------------------------

Technical Changes
    The Exchange notes that the proposed organizational and non-
substantive

[[Page 53699]]

changes to the rule text would provide clarity and transparency to 
Exchange rules and would promote just and equitable principles of trade 
and remove impediments to, and perfect the mechanism of, a free and 
open market and a national market system.\46\ The proposed rule 
amendments would also provide internal consistency within Exchange 
rules and operate to protect investors and the investing public by 
making the Exchange rules easier to navigate and comprehend.
---------------------------------------------------------------------------

    \46\ See, e.g., supra nn. 4, 5, 16, 17, 24.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed quote designations would add value to market making on the 
Exchange and the proposed order types would provide market participants 
the option of exercising greater control over how orders interact with 
contra-side liquidity both on the Exchange and on away markets. The 
proposed quotations and order types would allow market participants to 
exert greater control over how their quotes and orders interact with 
liquidity on the Exchange, thereby attracting more investors to the 
Exchange, which, in turn, leads to greater price discovery and improves 
overall market quality.
    The Exchange does not believe the proposal would impose a burden on 
competition among the options exchanges but instead, because the 
Exchange would be offering the proposed optional quotes and order 
types, the proposal would add to the existing competitive landscape. In 
this highly competitive market, the Exchange would be at a competitive 
disadvantage absent this proposal, which adopts functionality available 
on other options exchanges. Permitting the Exchange to operate on an 
even playing field relative to other exchanges that have similar 
functionality removes impediments to and perfects the mechanism for a 
free and open market and a national market system. The proposal does 
not impose an undue burden on intramarket competition because the 
proposed quote designations would be available to all Market Makers on 
the Exchange and the proposed order types would be available to all 
market participants. The proposal is structured to offer the same 
enhancement to all Market Makers and/or market participants, regardless 
of size, and would not impose a competitive burden on any participant.
    The proposed quote designations, which provide Market Makers with 
enhanced determinism over their quotes, may contribute to more 
aggressive quoting by Market Makers, resulting in more trading 
opportunities and tighter spreads. To the extent this purpose is 
achieved, the proposed quote designations would enhance the market 
making function on the Exchange, which would improve overall market 
quality and improve competition on the Exchange to the benefit of all 
market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2018-74 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2018-74. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-74 and should be submitted 
on or before November 14, 2018.
---------------------------------------------------------------------------

    \47\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\47\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-23174 Filed 10-23-18; 8:45 am]
 BILLING CODE 8011-01-P


