[Federal Register Volume 79, Number 127 (Wednesday, July 2, 2014)]
[Notices]
[Pages 37798-37820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15472]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72477; File No. SR-BOX-2014-16]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing of Proposed Rule Change To Adopt New Trade Allocation
Algorithms for Matching Trades at the Conclusion of the PIP and COPIP
June 26, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 16, 2014, BOX Options Exchange LLC (``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rules 7150 (Price Improvement
Period (``PIP'')) and 7245 (Complex Order Price Improvement Period
(``COPIP'')) to adopt new trade allocation algorithms for matching
trades at the conclusion of the PIP and COPIP. The text of the proposed
rule change is available from the principal office of the Exchange, at
the Commission's Public Reference Room and also on the Exchange's
Internet Web site at http://boxexchange.com.
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 and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BOX Rules 7150 (Price Improvement
Period (``PIP'')) and 7245 (Complex Order Price Improvement Period
(``COPIP'')) to adopt new trade allocation algorithms for matching
trades at the conclusion of the PIP and COPIP. This is a competitive
filing based on the rules of NASDAQ OMX PHLX LLC (``Phlx'').\3\
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\3\ See Phlx Rule 1080(n).
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PIP
The Exchange currently offers Participants the possibility of price
improvement via its innovative electronic auction process known as the
PIP. The PIP has saved investors more than $467 million versus the
prevailing NBBO since 2004, a monthly average of more than $3.8
million. BOX believes that the proposed rule change will result in
additional PIP transactions, and give customers a greater opportunity
to benefit from price improvement.
Options Participants executing agency orders for single options
series instruments may designate Customer Orders for price improvement
and submission to the PIP. Customer Orders designated for the PIP
(``PIP Orders'') may be submitted to BOX with a matching contra order
(``Primary Improvement Order'') equal to the full size of the PIP
Order. The Primary Improvement Order is on the opposite side of the
market from the PIP Order and at a price equal to or better than that
of the National Best Bid Offer (``NBBO'') at the time of the
commencement of the PIP (the ``PIP Start Price''). BOX begins a PIP by
broadcasting a message to market participants via the Exchange's High
Speed Vendor Feed (``HSVF''). During the PIP, order flow providers
(``OFPs'') and Market Makers (other than the Initiating Participant)
may submit competing orders (``Improvement Orders'') for their own
account and OFPs may also provide access to the PIP for the account of
a Public Customer \4\ or for any account except Market Maker. Options
Participants may continually
[[Page 37799]]
submit competing Improvement Orders during the PIP and Improvement
Orders are disseminated to market participants.
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\4\ The term ``Public Customer'' means a person that is not a
broker or dealer in securities. See BOX Rule 100(a)(51).
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Unrelated Orders \5\ and Legging Orders \6\ on the same side as the
PIP Order received during the PIP may cause the PIP to terminate early
under certain circumstances.\7\ During a PIP, when an Unrelated Order
is submitted to BOX or a Legging Order is generated on the same side as
the PIP Order that would cause an execution to occur prior to the end
of the PIP, the PIP ends early and the PIP Order is matched as if the
PIP terminated on its regular schedule. Following the execution of the
PIP Order, any remaining Improvement Orders are cancelled and the
Unrelated Order or Legging Order is filtered normally.\8\
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\5\ As defined in Rule 7150(a), the term ``Unrelated Order''
with respect to a PIP means a non-Improvement Order entered into the
BOX market during a PIP.
\6\ As defined in Rule 7240(c)(1), the term ``Legging Order''
means a Limit Order on the BOX Book that represents one side of a
Complex Order that is to buy or sell an equal quantity of two
options series resting on the Complex Order Book.
\7\ See Rule 7150(i).
\8\ See Rule 7130(b).
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Unrelated Orders and Legging Orders on the opposite side of the PIP
Order received during the PIP may be immediately executed under certain
circumstances.\9\ During a PIP, when such an Unrelated Order is
submitted to BOX or a Legging Order is generated on the opposite side
of the PIP Order such that it would cause an execution to occur prior
to the end of the PIP, the Unrelated Order or Legging Order is
immediately executed against the PIP Order. Any remaining portion of
the Unrelated Order or Legging Order is filtered normally.\10\ Any
remaining portion of the PIP Order is executed at the conclusion of the
PIP normally.\11\ Following the execution of the PIP Order, any
remaining Improvement Orders are cancelled.
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\9\ See Rule 7150(j).
\10\ See Rule 7130(b).
\11\ See Rule 7150(f)(3).
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Current PIP Allocation
At the conclusion of a PIP, the PIP Order is currently matched
against the best prevailing quote(s) or order(s) on BOX (except any
pre-PIP Broadcast proprietary quote or order from the Initiating
Participant), in accordance with price/time priority as set forth in
Rule 7130, whether Improvement Order(s) or Unrelated Order(s) received
by BOX, or Legging Orders generated, during the PIP (excluding
Unrelated Orders that were immediately executed during the interval of
the PIP). Such orders may include agency orders on behalf of Public
Customers, Market Makers at away exchanges and non-BOX Options
Participant broker-dealers, as well as non-PIP proprietary orders
submitted by Options Participants.
The Exchange's Rules currently provide certain exceptions to the
price/time priority set forth in Rule 7130. Specifically, Rule
7150(f)(4)(i) provides that no order for a non-market maker broker-
dealer account of an Options Participant may be executed before all
Public Customer orders, whether an Improvement Order, including a CPO,
or an Unrelated Order, and all non- BOX Options Participant broker-
dealer orders at the same price have been filled.
Rules 7150(g)(1) and (2) provide the Initiating Participant with
certain priority and trade allocation privileges upon conclusion of the
PIP, subject to certain exceptions.\12\ In instances in which a Single-
Priced Primary Improvement Order, as modified (if at all), is matched
by or matches any competing Improvement Orders and/or non-Public
Customers' Unrelated Orders at any price level, the Initiating
Participant retains priority for only forty percent (40%) of the
original size of the PIP Order. However, if only one competing order
matches the Initiating Participant's Single-Priced Primary Improvement
Order then the Initiating Participant may retain priority for up to
fifty percent (50%) of the original size of the PIP Order.
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\12\ Rule 7150(g)(4) provides that the Primary Improvement
Orders shall yield priority to certain competing orders in the
following circumstances: (i) When a Single-Priced or Max Improvement
Primary Improvement Order for the proprietary account of an OFP is
matched by or matches any competing Public Customer order(s),
whether an Improvement Order, including a CPO, or Unrelated Order,
or any non-BOX Options Participant broker-dealer order(s) at any
price level, it shall yield priority to them, including any priority
provided pursuant to 7150(g)(1) or (2), (ii) when the unmodified
Single-Priced Primary Improvement Order for the account of a Market
Maker is matched by any competing Public Customer order(s), whether
an Improvement Order, including a CPO, or Unrelated Order, or any
non-BOX Options Participant broker-dealer order(s) at the initial
PIP price level, it shall yield priority to all competing Public
Customer order(s) or non-BOX Options Participant broker-dealer
order(s), including any priority provided pursuant to 7150(g)(1) or
(2), or (iii) when the Max Improvement or the modified Single-Priced
Primary Improvement Order for the account of a Market Maker matches
any competing Public Customer order(s), whether an Improvement
Order, including a CPO, or Unrelated Order, or any non-BOX Options
Participant broker-dealer order(s) at subsequent price levels, it
shall yield priority to all competing Public Customer order(s) or
non-BOX Options Participant broker-dealer order(s), including any
priority provided pursuant to 7150(g)(1) or (2).
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In instances in which a Max Improvement Primary Improvement Order
is submitted by the Initiating Participant, the Initiating Participant
shall be allocated its full size at each price level, except where
restricted by the designated limit price and subject to the limitations
in 7150(g)(3), until a price level is reached where the balance of the
PIP Order can be fully executed. Only at such a price level will the
Initiating Participant retain priority for only forty percent (40%) of
the remaining size of the PIP Order. However, if only one competing
order matches the Initiating Participant at the final price level, then
the Initiating Participant may retain priority for up to fifty percent
(50%) of the remaining size of the PIP Order.
At its option, the Initiating Participant may designate a lower
amount for which it retains certain priority and trade allocation
privileges upon the conclusion of the PIP auction than it is entitled
to pursuant to the provisions of 7150(h)(1) [sic] or 7150(h)(2) [sic],
mentioned above.\13\ When starting a PIP, the Initiating Participant
may submit to the Exchange the Primary Improvement Order with a
designation of the total amount of the PIP Order it is willing to
``surrender'' to the other PIP Participants (``PIP Surrender
Quantity''). Under no circumstances will the Initiating Participant
receive an allocation percentage of more than 50% with one competing
order or 40% with multiple competing orders. Upon the conclusion of the
PIP auction, when the Trading Host determines the priority and trade
allocation amounts for the Initiating Participant pursuant to
7150(h)(1) [sic] or 7150(h)(2) [sic], the Trading Host will
automatically adjust the trade allocations to the other PIP
Participants, according to the priority set forth in 7150(g) [sic], up
to the PIP Surrender Quantity. The Primary Improvement Order is
allocated the remaining size of the PIP Order above the PIP Surrender
Quantity, if any, pursuant to 7150(g). If the aggregate size of other
PIP Participants' contra orders is not equal to or greater than the PIP
Surrender Quantity, then the remaining PIP Surrender Quantity shall be
left unfilled and the Primary Improvement Order shall be allocated the
remaining size of the PIP Order pursuant to 7150(h)(1) [sic] or
7150(h)(2) [sic].
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\13\ See Rule 7150(g)(6)(i).
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Proposed PIP Allocation
The Exchange is now proposing to amend the trade allocation
algorithm for matching orders at the conclusion of the PIP. The PIP
Order will continue to be matched with opposite side competing orders
and quotes in price priority. While quotes and orders on the BOX Book
will continue to execute in price/
[[Page 37800]]
time priority, in the event an execution opportunity occurs for a quote
or order on the BOX Book against a PIP Order at the end of a PIP, the
PIP execution will occur according to the priority algorithm described
below. Specifically, if the total quantity of orders, quotes,
Improvement Orders, Legging Orders and the Primary Improvement Order is
equal to or less than the quantity of the PIP Order at a given price
level, all orders at the price will be filled and the balance of the
PIP Order will be executed at the next best price. If the total
quantity of orders, quotes, Improvement Orders, Legging Orders and the
Primary Improvement Order is greater than the quantity of the PIP Order
at a given price level, the allocation will be as follows:
Public Customer Allocation
Whereas, currently, Public Customers do not have absolute execution
priority when certain orders have time priority at the same price, the
Exchange now proposes that all orders, other than Legging Orders and
the Primary Improvement Order, for the account of Public Customers,\14\
whether Improvement Orders or Unrelated Orders, including quotes and
orders on the BOX Book prior to the PIP Broadcast, will be allocated
for execution against the PIP Order first.\15\ Where there are multiple
such orders for the account of Public Customers at the same price, the
trade allocation will be by time priority. The Exchange notes that this
is the same as Phlx.\16\
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\14\ As discussed below under the heading ``Professional
Customers,'' upon approval of the proposed Rule change,
Professionals would be treated in the same manner as broker-dealers
for purposes of the PIP and COPIP, and not in the same manner as
non-Professional Public Customers. See proposed Rules 100(a)(50),
7150(a)(2) and 7245(a)(4).
\15\ See proposed Rule 7150(g)(1).
\16\ See Phlx Rule 1080(n)(ii)(E).
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If, at the end of the Public Customer allocation, there remains any
unallocated quantity of the PIP Order, the balance will be allocated as
described below.
Example 1: Primary Improvement Order for the Account of a Public
Customer
Suppose at the end of a PIP to sell 100 contracts, where the
Primary Improvement Order is for the account of a Public Customer that
has elected a PIP Surrender Quantity of 80, the BOX Book is as follows
in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.08
------------------------------------------------------------------------
Public Customer 1 order to buy PIP Order to sell 100.
20 at 2.04.
Public Customer 2 Primary
Improvement Order to buy 100 at
2.04
Market Maker Improvement Order
to buy 30 at 2.04
Public Customer 3 Improvement
Order to buy 30 at 2.04
Trade allocation is as follows:
Public Customer 1: 20 at 2.04
Public Customer 3: 30 at 2.04
Public Customer 2 Primary
Improvement Order: 20 at 2.04
(the PIP Surrender Quantity of
80 contracts results in Public
Customer 2 receiving an
allocation of 20 contracts,
which is less than 50% of the
remaining 50 contracts
(50%*50=25) to which the
Primary Improvement Order would
otherwise be entitled since
there is only one responder)
Market Maker: 30 at 2.04
------------------------------------------------------------------------
Allocation among all Public Customers, other than the Initiating
Participant, at the same price is by time priority.
Example 2: PIP Trade Allocation When Primary Improvement Order is for
the Account of a Public Customer
Suppose the Primary Improvement Order, in a PIP to sell 100
contracts of options instrument A, is for the account of a Public
Customer. At the end of the PIP, the BOX Book for instrument A is as
follows in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.08
------------------------------------------------------------------------
Public Customer 1 order to buy PIP Order to sell 100.
10 at 2.03.
Public Customer 2 Primary
Improvement order to buy 100 at
2.03
Market Maker order to buy 100 at
2.03
At the end of the PIP, the trade
allocation is as follows:
Public Customer 1: 10 at
2.03
Public Customer 2 Primary
Improvement Order: 45 at
2.03 (50% of the remaining
90 contracts since there is
only one responder)
Market Maker: 45 at 2.03
------------------------------------------------------------------------
Primary Improvement Order Allocation
After the Public Customer allocation, the applicable trade
allocation described below will be allocated to the Primary Improvement
Order.\17\ If the Primary Improvement Order has designated a PIP
Surrender Quantity, the Primary Improvement Order allocation will be
reduced, if necessary, in accordance with the PIP Surrender Quantity.
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\17\ See proposed Rule 7150(g)(2).
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When a Single-Priced Primary Improvement Order is matched by or
matches any competing Improvement Orders and/or non-Public Customers'
Unrelated Orders at the final price level, the Initiating Participant
retains priority for up to forty percent (40%) of the remaining size of
the PIP Order after Public Customer orders are satisfied. However, if
only one competing order matches the Initiating Participant's Single-
Priced Primary Improvement Order at the final price level, then the
Initiating Participant may retain priority for up to fifty percent
(50%) of the remaining size of the PIP Order after Public Customer
orders are satisfied.\18\ When a Max Improvement Primary Improvement
Order is submitted by the Initiating Participant, the Initiating
Participant shall be allocated its full size at each price level,
except where restricted by the designated limit price, until a price
level is reached where the balance of the PIP Order can be fully
executed. At such price level, the
[[Page 37801]]
Initiating Participant will be entitled to receive up to forty percent
(40%) of the remaining size of the PIP Order after Public Customer
orders are satisfied. However, if only one competing order matches the
Initiating Participant's Max Improvement Primary Improvement Order at
the final price level, then the Initiating Participant may retain
priority for up to fifty percent (50%) of the remaining size of the PIP
Order after Public Customer orders are satisfied.\19\ Neither Public
Customer orders nor Legging Orders will be considered when determining
whether the Initiating Participant retains 40% or 50% in proposed Rule
7150(h) because neither Public Customer order allocation (which are
executed in priority over the Initiating Participant) nor Legging Order
allocation (which receive allocations at the final price level only
when the Initiating Participant declines its full allocation by
electing a PIP Surrender Quantity) will be affected by the Initiating
Participant retaining the difference between 40% and 50%. The Exchange
notes that this is similar to Phlx in treatment of Public Customer
orders.\20\
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\18\ See proposed Rule 7150(h)(1).
\19\ See proposed Rule 7150(h)(2).
\20\ See Phlx Rule 1080(n)(ii)(E). Note that, in its Rule
1080(n)(ii)(E)(2)(b), the Phlx auto-match feature limits the
Initiating Participant to 40% allocation and that Phlx does not
address Legging Orders.
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The balance will be allocated as described below.
Example 3: PIP with Auto-Matching
Suppose a PIP Order to sell 150 contracts of options instrument A.
Suppose, further, at the end of the PIP auction, the BOX Book is as
follows in order of price/time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.09
------------------------------------------------------------------------
Broker-dealer 1 order to buy 10 at PIP Order to sell 150.
2.06.
Market Maker 1 Improvement Order Order to sell 10 at 2.09.
to buy 8 at 2.05.
Market Maker 2 Improvement Order
to buy 2 at 2.05
Broker-dealer 2 Improvement Order
to buy 5 at 2.05
Primary Improvement Order to buy
150 at 2.04
Broker-dealer 3 Improvement Order
to buy 8 at 2.04
Market Maker 3 Improvement Order
to buy 25 at 2.04
Public Customer order to buy 10 at
2.04
Suppose the Primary Improvement
Order specified an auto-match
limit price of 2.05. The trade
allocation at the best available
price (at 2.06) is as follows:
Broker-dealer 1 order: 10 140 remaining to allocate.
contracts at 2.06.
The Primary Improvement Order is
not willing to auto-match the
2.06 price level, so it goes to
the next price available. The
trade allocation at the 2.05
price level is as follows:
Market Maker 1 Improvement Order:
8 contracts at 2.05
Market Maker 2 Improvement Order:
2 contracts at 2.05
Broker-dealer 2 Improvement Order:
5 contracts at 2.05
Primary Improvement Order: auto- 110 remaining to allocate
match 15 contracts at 2.05.
As there is a remaining PIP Order
quantity to be filled, it goes to
the next price available. The
trade allocation at the 2.04
price level is as follows (this
is the price level where the PIP
Order will be completely filled):
Public Customer Order: 10
contracts at 2.04
Primary Improvement Order: 40
contracts at 2.04 (40% of 100
= 40, use 40% because there
are 2 responders at this
price level)
Market Maker 3 Improvement
Order: 25 contracts at 2.04
Broker-dealer 3 Improvement
Order: 8 contracts at 2.04
Primary Improvement Order will
take the remaining 27
contracts at 2.04 (for a
total of 67 contracts at
2.04)
------------------------------------------------------------------------
Example 4: Allocating 50%, Rather than 40%, to Primary Improvement
Order
Suppose a PIP Order to sell 100 contracts of options instrument A.
Suppose, further, at the end of the PIP auction, the BOX Book is as
follows in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.07
------------------------------------------------------------------------
Public Customer 1 order to buy 10 PIP Order to sell 100.
at 2.02.
Public Customer 2 order to buy 15
at 2.02
Primary Improvement Order to buy
100 at 2.02
Market Maker order to buy 100 at
2.02
At the end of the PIP, the trade
allocation is as follows:
10 contracts at 2.02 to Public
Customer 1
15 contracts at 2.02 to Public
Customer 2
37 contracts at 2.02 to Primary
Improvement Order (50%
allocation)
38 contracts at 2.02 to Market
Maker
------------------------------------------------------------------------
Note that the Primary Improvement Order received an allocation
priority of 50% of the remaining PIP Order size (50%*(100-25) = 37,
rounded down) \21\ in this case because Public Customer orders are not
included in the determination of the 50%/40% allocation rule.
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\21\ Contracts are allocated in whole numbers and, to ensure the
allocation priority to Primary Improvement Orders does not exceed
the applicable 40% or 50% specified in proposed Rule 7150(h),
allocations of fractional contracts to the Primary Improvement Order
in the Primary Improvement Order allocation step are rounded down.
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Market Maker Allocation
After the Primary Improvement Order allocation, any remaining
unallocated quantity of the PIP Order will be allocated to orders and
quotes, including Improvement Orders and quotes and orders on the BOX
Book prior to the PIP Broadcast for the account of Market Makers.\22\
Where
[[Page 37802]]
there are orders/quotes for the accounts of more than one Market Maker
at the same price, the trade allocation formula for Market Makers will
provide for the allocation of contracts among Market Makers based on
size pro rata for the remaining contracts. The proposed Market Maker
allocation would follow the formula: B * C where component B is derived
by dividing the quantity of contracts for the Market Maker at the price
level by the total quantity of contracts of all Market Makers at the
price level, and component C is the remaining quantity of the PIP Order
to be allocated after the Primary Improvement Order allocation. If the
quantity of contracts for the Market Maker order in B is greater than
the original quantity of the PIP Order, the Market Maker's quantity
will be capped at the size of the original PIP Order for purposes of
calculating B. If the trade allocation for a Market Maker would be
greater than the quantity of the Market Maker order/quote at the price
level, the Market Maker's trade allocation will not exceed the size of
the Market Maker order/quote at the price level. If the trade
allocation for a Market Maker would result in a fraction of a contract,
it will be rounded down.
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\22\ See proposed Rule 7150(g)(3).
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Example 5: Market Maker Allocation Formula
In certain circumstances, due to rounding down, it is possible that
some Market Maker orders will not be filled even though there is
sufficient quantity of the PIP Order to be allocated. Suppose at the
end of a PIP Order to sell 200 contracts of options instrument A, the
BOX Book is as follows in order of time priority:
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\23\ The Market Maker allocation formula is: 2 contracts for
Market Maker 1 divided by 222 contracts for all Market Makers,
multiplied by 120 remaining contracts to be allocated from the PIP
Order and rounded down = 1.
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Primary Improvement Order to buy PIP Order to sell 200.
200 at 2.02.
Market Maker 1 order to buy 2 at
2.02
Market Maker 2 order to buy 20 at
2.02
Market Maker 3 order to buy 80 at
2.02
Market Maker 4 order to buy 120 at
2.02
Professional Customer to buy 20 at
2.02
At the end of the PIP, the trade
allocation will be as follows:
First, to the Primary Improvement
Order for 80 contracts and then
to the Market Makers, pursuant to
the formula provided in Rule
7150(g)(3), as follows:
Market Maker 1-1 contract \23\
Market Maker 2-10 contracts
Market Maker 3-43 contracts
Market Maker 4-64 contracts
------------------------------------------------------------------------
As a result, a total of 118 contracts are allocated to all Market
Makers even though there were, in total, 120 contracts available to be
allocated to Market Makers from the remaining PIP Order. The remaining
PIP Order quantity of 2 contracts will be allocated to the Professional
Customer order.
Remaining Orders Allocation
After the Market Maker allocation, any remaining unallocated
quantity of the PIP Order will be allocated to any remaining orders,
other than Legging Orders and Market Maker orders, including orders for
the account of Professionals and orders on the BOX Book prior to the
PIP Broadcast, not receiving allocation in the above rounds.\24\
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\24\ See proposed Rule 7150(g)(4). Currently, Professionals are
treated like Public Customers in circumstances where the Exchange
yields priority to Public Customers under SEC Rule 11a1-1(T). Under
the proposed rule change, pursuant to which Improvement Orders will
not be broadcast, transactions executed on the Exchange will qualify
under SEC Rule 11a2-2(T) as described below. As a result,
Professionals will no longer be treated like Public Customers for
purposes of priority.
Example 6: Comparison of Professional Customer PIP Trade Allocation
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(Before and After Proposed Rule Change)
Suppose at the end of a PIP to sell 100 contracts of Instrument A,
where the Primary Improvement Order is for the account of a Market
Maker, the BOX Book for Instrument A is as follows in order of time
priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.07
------------------------------------------------------------------------
Public Customer 1 order to buy PIP Order to sell 100.
10 at 2.04.
Professional Customer 1 order to
buy 10 at 2.04
Primary Improvement Order to buy
100 at 2.04
Market Maker 1 Improvement Order
to buy 30 at 2.04
Broker-dealer 1 Improvement
Order to buy 20 at 2.04
Market Maker 2 Improvement Order
to buy 30 at 2.04
Trade allocation at the end of
the PIP under current BOX rules
is as follows:
Current Rules
Public Customer 1: 10 contracts
at 2.04
Professional Customer 1: 10
contracts at 2.04
Primary Improvement Order: 40
contracts at 2.04
Market Maker 1 Improvement
Order: 30 contracts at 2.04
Broker-dealer 1 Improvement
Order: 10 contracts at 2.04
Trade allocation at the end of
the PIP under the proposed
rules is as follows:
Proposed Rules
Public Customer 1: 10 contracts
at 2.04
Primary Improvement Order: 36
contracts at 2.04
[[Page 37803]]
Market Maker 1 Improvement
Order: 27 contracts at 2.04
\25\
Market Maker 2 Improvement
Order: 27 contracts at 2.04
------------------------------------------------------------------------
Where there are more than one remaining unallocated orders,
including Improvement Orders, at the same price, the trade allocation
to each such order will follow the formula: B * C where component B is
derived by dividing the quantity of contracts for the order at the
price level by the total quantity of contracts for all remaining orders
at the price level, and component C is the remaining quantity of the
PIP Order to be allocated after the Market Maker allocation. If the
quantity of contracts for the order in B is greater than the original
quantity of the PIP Order, the quantity of contracts for the order will
be capped at the size of the original PIP Order for purposes of
calculating B. If the trade allocation for an order/quote would be
greater than the quantity of the order/quote at the price level, the
trade allocation will not exceed the size of the order/quote at the
price level. If the trade allocation would result in a fraction of a
contract, it will be rounded down.
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\25\ The Market Maker allocation formula is: 30 contracts for
Market Maker 1 divided by 60 contracts for all Market Makers,
multiplied by 54 remaining contracts to be allocated from the PIP
Order = 27.
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If, at the end of the remaining orders allocation, there remains
any unallocated quantity of the PIP Order, the balance will be
allocated as described below.
Additional Allocation
The balance of the PIP Order will be allocated to all remaining
quotes and orders, if any, other than Legging Orders and the Primary
Improvement Order. The allocation method will be to allocate one
contract of the PIP Order per quote/order in sequence until each
remaining quote/order has received one contract or until the PIP Order
is fully allocated. Allocation sequence among quotes/orders in this
step will be in order of size with the largest remaining quote/order
allocated first. Where two or more such quotes/orders are the same
size, trade allocation sequence will be by time priority. If, at the
end of the additional allocation, there remains any unallocated
quantity of the PIP Order, the balance will be allocated as described
in the Legging Order allocation below.\26\
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\26\ See proposed Rule 7150(g)(5).
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Example 7: Additional Allocation When Limited by PIP Surrender Quantity
With Multiple Market Maker Orders
Suppose at the end of a PIP to sell 177 contracts, where the PIP
Surrender Quantity for the Primary Improvement Order is 177, the BOX
Book is as follows in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Public Customer 1 order to buy PIP Order to sell 177.
10 at 2.04.
Primary Improvement Order to buy Order to sell 10 at 2.06.
177 at 2.04.
Market Maker 1 Improvement Order
to buy 114 at 2.04
Market Maker 2 Improvement Order
to buy 115 at 2.04
Market Maker 3 Improvement Order
to buy 117 at 2.04
At the end of the PIP, the trade
allocation is as follows:
Public Customer 1: 10 167 remaining to allocate.
contracts at 2.04.
Primary Improvement Order: 0
contracts (all are
surrendered)
Market Maker 1 Improvement
Order: 55 contracts at 2.04
Market Maker 2 Improvement
Order: 55 contracts at 2.04
Market Maker 3 Improvement
Order: 56 contracts at 2.04
The PIP Order has 1
remaining contract to
allocate at 2.04.
The Market Maker orders have
the following contracts
remaining to be filled at
2.04:
Market Maker 1 Improvement
Order: 59 contracts
remaining at 2.04
Market Maker 2 Improvement
Order: 60 contracts
remaining at 2.04
Market Maker 3 Improvement
Order: 61 contracts
remaining at 2.04
The Market Maker orders are
ranked in order of size, with
Market Maker 3 being the
largest, and allocated on a
rotating basis one by one until
either the Market Maker order
or the PIP Order is exhausted.
In this case, the remaining 1
contract is allocated as
follows:
Market Maker 3 Improvement
Order: 1 contract at 2.04
------------------------------------------------------------------------
Legging Order Allocation
If, after the allocation of all orders, quotes and Improvement
Orders in proposed Rules 7150(g)(1) through (5), there remains any
unallocated quantity of the PIP Order, to the extent of any Surrender
Quantity, allocation will be made to any Legging Orders at the same
price in time priority.\27\
---------------------------------------------------------------------------
\27\ See proposed Rule 7150(g)(6). Legging Orders may receive
allocations of a PIP Order when the Legging Order is at a price
better than the final price level or at the final price level in the
event the Initiating Participant has specified a surrender quantity.
Example 8: Primary Improvement Order's PIP Surrender Quantity Is
---------------------------------------------------------------------------
Greater Than the Sum of Legging Orders at the Price Level
Suppose at the end of a PIP to sell 100 contracts, where the PIP
Surrender Quantity for the Primary Improvement Order is 70 contracts,
the BOX Book is as follows in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Public Customer order to buy 10 PIP Order to sell 100.
at 2.04.
Legging Order to buy 50 at 2.04. Order to sell 10 at 2.06.
Primary Improvement Order to buy
100 at 2.04
[[Page 37804]]
At the end of the PIP, the trade
allocation is as follows:
Public Customer: 10 90 remaining to allocate
contracts at 2.04
Primary Improvement Order: 60 remaining to allocate.
30 contracts at 2.04
Legging Order: 50 contracts 10 remaining to allocate.
at 2.04
The remaining 10 contracts are
allocated to the Primary
Improvement Order at 2.04 (40
contracts total) because all
other orders have been filled.
------------------------------------------------------------------------
Example 9: Primary Improvement Order's PIP Surrender Quantity is Less
Than the Sum of Legging Orders at the Price Level
Suppose at the end of a PIP to sell 100 contracts, where the PIP
Surrender Quantity for the Primary Improvement Order is 70 contracts,
the BOX Book is as follows in order of time priority:
------------------------------------------------------------------------
NBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Public Customer order to buy 10 PIP Order to sell 100.
at 2.04.
Legging Order to buy 100 at 2.04 Order to sell 10 at 2.06.
Primary Improvement Order to buy
100 at 2.04
At the end of the PIP, the trade
allocation is as follows:
Public Customer: 10 90 remaining to allocate.
contracts at 2.04
Primary Improvement Order: 60 remaining to allocate.
30 contracts at 2.04
Legging Order: 60 contracts
at 2.04
------------------------------------------------------------------------
If, at the end of the Legging Order allocation, there remains any
unallocated quantity of the PIP Order, the balance will be allocated to
the Initiating Participant regardless of any applicable PIP Surrender
Quantity.
Example 10: Orders on the BOX Book Prior to the PIP Broadcast, Which
are Eligible for Execution at the Conclusion of the PIP
Suppose the following orders (listed in time priority) are on the
BOX Book prior to the broadcast of a PIP Order to sell 100 contracts of
options instrument A.
------------------------------------------------------------------------
NBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Broker-dealer order to buy 100 Market Maker quote to sell 10 at 2.09.
at 2.02.
Public Customer order to buy 5
at 2.02
Market Maker quote to buy 15 at
2.02
Public Customer order to buy 12
at 2.02
Market Maker quote to buy 30 at
2.02
Primary Improvement Order to buy
100 at 2.02
------------------------------------------------------------------------
Suppose at the end of the PIP, only one Improvement Order has been
received from a Market Maker to buy 10 at 2.03 and one Unrelated Order
from a Professional Customer to buy 15 at 2.03. The BOX Book, including
the PIP Order, is as follows at the end of the PIP:
------------------------------------------------------------------------
NBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Market Maker Improvement Order PIP Order to sell 100.
to buy 10 at 2.03.
Professional order to buy 15 at Market Maker quote to sell 10 at 2.09.
2.03.
Broker-dealer order to buy 100
at 2.02
Public Customer order to buy 5
at 2.02
Market Maker quote to buy 15 at
2.02
Public Customer order to buy 12
at 2.02
Market Maker quote to buy 30 at
2.02
Primary Improvement Order to buy
100 at 2.02
The trade allocation will be as
follows:
First, because the orders at the
first/best price level are, in
total, less than the size of
the PIP Order, such orders are
filled for their entire 25
contracts at 2.03.
Second, at the next best price
level (2.02), the remaining 75
contracts of the PIP Order will
be allocated as follows:
Public Customer Order to buy
5 at 2.02
Public Customer Order to buy
12 at 2.02
As the total of the orders for
the account of Public Customers
(17) is less than the remaining
PIP Order quantity (75), the
two Public Customer orders are
filled, leaving 58 contracts
remaining.
Third, the remaining 58
contracts of the PIP Order are
allocated as follows:
Primary Improvement Order to
buy 23 at 2.02.
23 contracts (40% of the
remaining quantity of 58)
are allocated to the
Primary Improvement Order
at 2.02, leaving 35
contracts remaining.
[[Page 37805]]
Fourth, the remaining 35
contracts of the PIP Order are
allocated as follows:
Market Maker quote to buy 15
at 2.02
Market Maker quote to buy 30
at 2.02
As there are remaining
unallocated quotes and orders
for the accounts of more than
one Market Maker at the same
price, the trade allocation to
each Market Maker will follow
the formula provided in
proposed Rule 7150(g)(3). The
first Market Maker quote will
be allocated 33.3% (15/45) of
the 35 contracts, which is 11
contracts (allocation of
partial quantities are rounded
down in this step). The second
Market Maker quote will be
allocated 66.67% (30/45) of the
35 contracts or 23.
Fifth, the one remaining
contract will be allocated to
the broker-dealer Order to buy
100 at 2.02.
------------------------------------------------------------------------
Note: if the PIP Order had instead been a simple limit order to
sell 100 contracts of A at 2.02, the broker-dealer order would have
been filled first on the BOX Book due to its time priority.
Example 11: Valid Starting Prices for PIP Auctions
A Participant wishes to enter a PIP Order to sell 50 contracts of
options instrument A:
(a) Suppose the NBBO and the BOX Book for instrument A are as
follows:
------------------------------------------------------------------------
NBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Quote to buy 10 at 2.02................... Order to sell 5 at 2.09.
------------------------------------------------------------------------
The PIP auction start price can be any price between 2.02 and 2.08
inclusive.\28\
---------------------------------------------------------------------------
\28\ The PIP Start Price shall, on the opposite side of the PIP
Order, be equal to or better than the NBBO and, on the same side of
the PIP Order, be equal to or better than NBBO, provided that, if
BBO is equal to NBBO, then the PIP Start Price must also be better
than BBO on the same side at the time of commencement of the PIP
(Proposed Rule 7150(f)).
---------------------------------------------------------------------------
(b) Suppose, instead, the NBBO and the BOX Book for instrument A
are as follows:
------------------------------------------------------------------------
NBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Quote to buy 10 at 2.02................... Order to sell 5 at 2.10.
------------------------------------------------------------------------
The PIP auction start price can be any price between 2.02 and 2.09
inclusive.\29\
---------------------------------------------------------------------------
\29\ Id.
---------------------------------------------------------------------------
Quotes and Orders on the BOX Book
Currently, all quotes and orders on the BOX Book prior to the PIP
Broadcast, excluding any proprietary quotes or orders from the
Initiating Participant, are filled at the end of the PIP in time
priority before any other order at the same price.\30\ Further, Rule
7150(g)(3) states that the Primary Improvement Order follows in time
priority all quotes and orders on the BOX Book prior to the PIP
Broadcast that are equal to the (A) Single-Priced Primary Improvement
Order price; or (B) execution price of a Max Improvement Primary
Improvement Order that results in the balance of the PIP Order being
fully executed, except any proprietary quote or order from the
Initiating Participant.
---------------------------------------------------------------------------
\30\ See Rule 7150(f)(4)(i).
---------------------------------------------------------------------------
The Exchange is now proposing that quotes and orders on the BOX
Book prior to the PIP Broadcast will no longer be allocated against the
PIP Order at the end of the PIP in time priority before any other order
at the same price. Specifically, quotes and orders on the BOX Book
prior to the PIP Broadcast will now be considered alongside all other
quotes and orders, whether Improvement Order(s), Legging Order(s), or
Unrelated Order(s) received by BOX during the PIP (excluding all
Legging Orders and Unrelated Orders that were immediately executed
during the interval of the PIP), for matching at the conclusion of the
PIP. Therefore, the Exchange is proposing to remove the exceptions for
quotes and orders on the BOX Book prior to the PIP Broadcast in Rules
7150(f)(4)(i) and (g)(3). The Exchange notes that this is consistent
with Phlx.\31\ Proprietary quotes or orders from the Initiating
Participant at the Primary Improvement Order price shall not be
executed against the PIP Order during or at the conclusion of the PIP.
---------------------------------------------------------------------------
\31\ See Phlx Rule 1080(n)(ii)(E)(2).
---------------------------------------------------------------------------
Market Maker Prime
Current Rule 7160 provides that at the commencement of each PIP, a
single Market Maker Prime may be designated for that PIP only. The
Market Maker Prime is a Market Maker participating in the PIP who has
partial time priority over all other Market Maker Improvement Orders,
CPOs, PPOs and Unrelated Orders at the same limit price in a single
PIP. The Market Maker Prime must satisfy the following criteria: (i)
The Market Maker must have a quote that is equal to or better than the
NBBO on the same side of the market as the Primary Improvement Order at
the instant the PIP is initiated, (ii) the Market Maker's quote must
represent an order in the BOX Book with the best price/time priority,
and (iii) the Market Maker Prime must not have submitted the Primary
Improvement Order to commence the relevant PIP. If more than one Market
Maker meets the criteria, the Market Maker whose quote has time
priority would be the Market Maker Prime for that PIP.
When the PIP was first adopted the Exchange introduced the Market
Maker Prime designation to encourage Market Makers to quote
aggressively on the BOX Book and not wait for a PIP to begin.\32\ The
Exchange is now proposing to remove the Market Maker Prime designation
from the Exchange's Rulebook as this designation is obsolete. Market
Makers rarely use the Market Maker Prime functionality and the Exchange
believes the continued presence of the designation will only complicate
the Exchange's Rules, and provides little or no benefit.
---------------------------------------------------------------------------
\32\ See Securities Exchange Act Release No. 47186 (January 14,
2003), 78 FR 3062 (January 22, 2003) (Notice of Filing SR-BSE-2002-
15).
---------------------------------------------------------------------------
Customer PIP Order
Current Rule 7150(h) provides for a Customer PIP Order (``CPO''). A
CPO allows a Public Customer to submit an order on a single options
series, through an OFP, specifying one price for entry on the BOX Book
(in the applicable minimum increment for that series) and a different
price for interaction with a PIP (in one cent increments).
The CPO was intended to provide access to the PIP on behalf of a
Public Customer, however, CPOs are rarely submitted to the Exchange.
The Exchange has determined that CPOs have not provided the desired
benefit that they were intended to, therefore the Exchange is proposing
to remove CPOs from its Rules. Public Customers may continue to submit
orders to the Exchange and Improvement Orders to interact with a PIP.
Additional PIP Changes
The Exchange is proposing to remove various provisions of Rule 7150
to accommodate the proposed change in the PIP allocation. Currently,
Rule 7150(f)(4) provides certain exceptions to the price/time priority
currently applicable to the PIP allocation. Since
[[Page 37806]]
the Exchange is now proposing to change the allocation at the end of
the PIP so it is no longer based on price/time priority, these
exceptions are no longer applicable because transactions on the
Exchange will comply with Rule 11a2-2(T) as described below; therefore
the Exchange is proposing to remove these sections of Rule 7150.
As part of the proposed changes to the PIP allocation, the Exchange
is also making various non-substantive changes to its rules to
accommodate these proposed changes. Most of these are the renumbering
of sections to account for a new subsection (g) being proposed to Rule
7150 and the removal of certain sections. The Exchange proposes to
include language to provide clarity regarding the execution price in
Rule 7130(b)(5) and the PIP Start Price in Rule 7150(f) to ensure that
the PIP does not trade ahead of resting same-side orders. Additionally,
the Exchange also proposes to amend various cross-references in Rules
7000, 7130 and 7150 to take into account the renumbering.
The Exchange must also correct references in two additional rules
that reference provisions in the current Rule 7150 that are being
renumbered. Specifically, Rule 7000(c)(6) references Rule 7150(g),
which is being corrected to reference IM-7150-2, and Rule 7130(b)(5)
references Rule 7150(i) which is being renumbered to Rule 7150(j).
Additional detail is also being added to Rule 7130(b)(5) to provide
clarity.
COPIP
The Exchange recently amended its Rules to permit Complex Orders to
be submitted to a price improvement period auction mechanism similar to
the existing PIP mechanism for single options series on BOX.\33\
---------------------------------------------------------------------------
\33\ See Securities Exchange Act Release No. 71148 (December 19,
2013), 78 FR 78437 (December 26, 2013) (Order Approving SR-BOX-2013-
43).
---------------------------------------------------------------------------
Exchange Rule 7245 allows the submission of Complex Orders to a
COPIP mechanism that is substantially similar to the PIP except as
necessary to account for distinctions between regular orders on the BOX
Book and Complex Orders or as otherwise noted below. References to
Legging Orders do not appear in the COPIP rules because Legging Orders
interact only with the PIP. However, the COPIP rules do include other
provisions for interacting with interest on the BOX Book.
Current COPIP Allocation
At the conclusion of a COPIP, just as with a PIP,\34\ the COPIP
Order is executed against the best prevailing order(s) on BOX (except
any pre-COPIP Broadcast proprietary order from the Initiating
Participant), in accordance with price/time priority, whether
Improvement Order(s) or Unrelated Order(s) received by BOX during the
COPIP (excluding all Unrelated Orders that were immediately executed
during the interval of the COPIP).\35\ Such Unrelated Orders may
include agency orders on behalf of Public Customers, Market Makers at
away exchanges and non-BOX Options Participant broker-dealers, as well
as non-COPIP proprietary orders submitted by Options Participants. Any
portion of an Improvement Order left unfilled will be cancelled.
---------------------------------------------------------------------------
\34\ See Rule 7150(f)(3).
\35\ See Rule 7245(f)(3).
---------------------------------------------------------------------------
Notwithstanding the foregoing execution rules for a COPIP, BOX Book
Interest is executed in priority over Complex Orders at the same price
so as to preserve the already established execution priority of
interest on the BOX Book over Complex Orders.\36\
---------------------------------------------------------------------------
\36\ See Rule 7245(f)(3)(i).
---------------------------------------------------------------------------
Further, no Complex Order for a non-market maker broker-dealer
account of an Options Participant is executed before any Public
Customer Complex Order(s), whether Improvement Order(s) or non-
Improvement Order(s), and all non-BOX Options Participant broker-dealer
Complex Order(s) at the same price have been filled; provided however,
that all Complex Orders on the Complex Order Book prior to the COPIP
Broadcast, excluding any proprietary order(s) from the Initiating
Participant, are filled in time priority before any other Complex Order
at the same price.\37\
---------------------------------------------------------------------------
\37\ See Rule 7245(f)(3)(ii).
---------------------------------------------------------------------------
Subject to the execution priority of BOX Book Interest described
above, the Initiating Participant retains certain priority and trade
allocation privileges upon conclusion of a COPIP.\38\
---------------------------------------------------------------------------
\38\ See Rule 7245(g).
---------------------------------------------------------------------------
In instances in which a Single-Priced Primary Improvement Order, as
modified (if at all), is matched by or matches any Complex Order(s) or
BOX Book Interest at any price level, the Initiating Participant would
retain priority for up to forty percent (40%) of the original size of
the COPIP Order, notwithstanding the time priority of the Primary
Improvement Order or Complex Order(s). However, if only one Complex
Order or BOX Book Interest matches or is better than the Initiating
Participant's Single-Priced Primary Improvement Order, then the
Initiating Participant may retain priority for up to fifty percent
(50%) of the original size of the COPIP Order. The Initiating
Participant will receive additional allocation only after all other
Complex Orders have been filled at that price level. For purposes of
calculating the Initiating Participant's priority allocation, BOX Book
Interest is included as competing orders in a COPIP.
In instances in which a Max Improvement Primary Improvement Order
is submitted by the Initiating Participant, the Initiating Participant
is allocated its full size at each price level, except where restricted
by the designated limit price and subject to the limitations discussed
in the following paragraph, until a price level is reached where the
balance of the COPIP Order can be fully executed. Only at such price
level will the Initiating Participant retain priority for up to forty
percent (40%) of the remaining size of the COPIP Order. However, if
only one competing Complex Order or BOX Book Interest matches the
Initiating Participant at the final price level, then the Initiating
Participant may retain priority for up to fifty percent (50%) of the
remaining size of the COPIP Order. As with Single-Priced Primary
Improvement Orders discussed above, for purposes of calculating the
Initiating Participant's priority allocation, BOX Book Interest is
included as competing orders in a COPIP.
At its option, the Initiating Participant may designate a lower
amount for which it retains certain priority and trade allocation
privileges upon the conclusion of the COPIP auction than it is entitled
to pursuant to the provisions of Rule 7245(h)(1) or (2) [sic] mentioned
above. When starting a COPIP, the Initiating Participant may submit to
the Exchange the Primary Improvement Order with a designation of the
total amount of the COPIP Order it is willing to ``surrender'' to the
other COPIP Participants (``COPIP Surrender Quantity''). Under no
circumstances does the Initiating Participant receive an allocation
percentage preference of more than 50% with one competing order,
including counting BOX Book Interest as a competing order, or 40% with
multiple competing orders, including counting BOX Book Interest as a
competing order. The COPIP Surrender Quantity function will not result
in more than the maximum allowable allocation percentage to the
Initiating Participant than that which the Initiating Participant would
have otherwise received in accordance with the allocation procedures
set forth in Rule 7245.
Upon the conclusion of the COPIP auction, when the Trading Host
determines the priority and trade allocation amounts for the Initiating
[[Page 37807]]
Participant pursuant to Rule 7245(h)(1) or (2) [sic], the Trading Host
will automatically adjust the trade allocations to the other COPIP
Participants, according to the priority set forth in Rule 7245(g)
[sic], up to the COPIP Surrender Quantity. The Primary Improvement
Order shall be allocated the remaining size of the COPIP Order above
the COPIP Surrender Quantity, if any, pursuant to Rule 7245(g). If the
aggregate size of other COPIP Participants' contra Complex Orders is
not equal to or greater than the COPIP Surrender Quantity, then the
remaining COPIP Surrender Quantity shall be left unfilled and the
Primary Improvement Order shall be allocated the remaining size of the
COPIP Order pursuant to Rule 7245(h)(1) or (2) [sic].
As in a PIP, the Primary Improvement Order follows, in time
priority, all Complex Orders on the Complex Order Book prior to the
COPIP Broadcast that are equal to the Single Priced Primary Improvement
Order price; or the execution price of a Max Improvement Primary
Improvement Order that results in the balance of the COPIP Order being
fully executed, except any proprietary order(s) from the Initiating
Participant. Such proprietary order(s) do no execute against the COPIP
Order during or at the conclusion of the COPIP.
The Primary Improvement Order yields priority to certain competing
Complex Orders, including the priority of the Initiating Participant
described above, as follows.
When a Single-Priced or Max Improvement Primary Improvement Order
for the proprietary account of an OFP is matched by or matches any
competing Public Customer Complex Order(s), whether Improvement
Order(s), Unrelated Order(s) or any non-BOX Options Participant broker-
dealer Complex Order(s) at any price level, it yields priority to them.
When an unmodified Single-Priced Primary Improvement Order for the
account of a Market Maker is matched by any competing Public Customer
Complex Order(s), whether Improvement Order(s), Unrelated Order(s) or
any non-BOX Options Participant broker-dealer Complex Order(s) at the
initial COPIP price level, it will yield priority to them.
When a Max Improvement or a modified Single-Priced Primary
Improvement Order for the account of a Market Maker matches any
competing Public Customer Complex Order(s), whether Improvement
Order(s), Unrelated Order(s) or any non-BOX Options Participant broker-
dealer Complex Order(s) at subsequent price levels, it yields priority
to them.
Proposed COPIP Allocation
Similar to the changes being proposed to the PIP allocation above,
the Exchange is now proposing to amend the COPIP allocation. While
Complex Orders on the Complex Order Book will continue to execute in
price/time priority, in the event an execution opportunity occurs for a
Complex Order on the Complex Order Book against a COPIP Order at the
end of a COPIP, the COPIP execution will occur according to the
priority algorithm described below. Specifically, the Exchange is
proposing that, at the end of the COPIP, the COPIP Order will continue
to be matched with opposite side competing orders in price priority. If
the total quantity of orders, Improvement Orders, BOX Book Interest and
the Primary Improvement Order is equal to or less than the quantity of
the COPIP Order at a given price level, all orders at the price will be
filled and the balance of the COPIP Order will be executed at the next
best price. If the total quantity of orders, Improvement Orders, BOX
Book Interest and the Primary Improvement Order is greater than the
quantity of the COPIP Order at a given price level, the allocation will
be as follows:
BOX Book Interest Allocation
BOX Book Interest is executed in priority over Complex Orders.
Accordingly, BOX Book Interest \39\ will continue to be allocated for
execution against the COPIP Order in priority over Complex Orders and
in time priority.\40\ If, after the BOX Book Interest allocation, there
remains any unallocated quantity of the COPIP Order, the balance will
be allocated as described below.
---------------------------------------------------------------------------
\39\ ``BOX Book Interest'' is defined as bids and offers on the
BOX Book for the individual legs of a Strategy. See Rule 7245(a)(3).
\40\ See proposed Rule 7245(g)(1).
---------------------------------------------------------------------------
Example 12: BOX Book Interest at Multiple Price Levels is Eligible for
Execution at the End of a COPIP
Suppose at the end of a COPIP to sell 100 Strategies A+B, the
orders on BOX for Strategy A+B are as follows:
------------------------------------------------------------------------
cNNBO Buy at 2.00 Sell at 2.10
------------------------------------------------------------------------
BOX Book Interest to buy 10 at COPIP Order to sell 100.
2.03.
Public Customer 1 order to buy
20 at 2.03
Primary Improvement Order to buy
100 at 2.02
Market Maker 1 Improvement Order
to buy 30 at 2.02
At the end of the COPIP, both
the BOX Book Interest and the
Public Customer order (each at
2.03) are executed against the
COPIP Order, leaving 70
contracts to be executed at
2.02. Prior to the execution of
any order at 2.02, the BOX
trading engine determines that
BOX Book Interest exists to buy
10 contracts at 2.02. Only
after the execution of this BOX
Book Interest will any other
trades at the same price occur.
------------------------------------------------------------------------
Trade allocation is as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
BOX Book Interest: 10 Strategies 90 remaining to allocate.
at 2.03.
Public Customer 1: 20 Strategies 70 remaining to allocate.
at 2.03.
BOX Book Interest: 10 Strategies 60 remaining to allocate.
at 2.02.
Primary Improvement Order: 30 30 remaining to allocate.
Strategies (50%) at 2.02.
Market Maker 1: 30 Strategies at
2.02
------------------------------------------------------------------------
[[Page 37808]]
Public Customer Allocation
After the BOX Book Interest allocation, Complex Orders, other than
the Primary Improvement Order, for the account of Public Customers,
including Improvement Orders and orders on the Complex Order Book prior
to the COPIP Broadcast, will be allocated for execution against the
COPIP Order in priority over other Complex Orders.\41\ Where there are
multiple such Complex Orders for the account of Public Customers at the
same price, the trade allocation will be by time priority.
---------------------------------------------------------------------------
\41\ See proposed Rule 7245(g)(2).
---------------------------------------------------------------------------
If, at the end of the Public Customer allocation, there remains any
unallocated quantity of the COPIP Order, the balance will be allocated
as described below.
Example 13: Primary Improvement Order for the Account of a Public
Customer
Suppose at the end of a COPIP to sell 100 Strategies, where the
Primary Improvement Order is for the account of a Public Customer that
has elected a COPIP Surrender Quantity of 80, the Complex Order Book is
as follows in order of time priority:
------------------------------------------------------------------------
cNBBO Buy at 2.00 Sell at 2.08
------------------------------------------------------------------------
Public Customer 1 order to buy COPIP Order to sell 100.
20 at 2.04.
Public Customer 2 Primary
Improvement Order to buy 100 at
2.04
Market Maker Improvement Order
to buy 30 at 2.04
Public Customer 3 Improvement
Order to buy 30 at 2.04
Trade allocation is as follows:
Public Customer 1: 20 at 2.04
Public Customer 3: 30 at 2.04
Public Customer 2 Primary
Improvement Order: 20 at 2.04
(the COPIP Surrender Quantity
of 80 Strategies results in
Public Customer 2 receiving an
allocation of 20 Strategies,
which is less than 50% of the
remaining 50 Strategies (50%*50
= 25) to which the Primary
Improvement Order would
otherwise be entitled since
there is only one responder)
Market Maker: 30 at 2.04
Allocation among all Public
Customers, other than the
Initiating Participant, at the
same price is by time priority.
------------------------------------------------------------------------
Example 14: COPIP Trade Allocation When Primary Improvement Order is
for the Account of a Public Customer
Suppose the Primary Improvement Order, in a COPIP to sell 100 of
Strategy A+B, is for the account of a Public Customer. At the end of
the COPIP, the Complex Order Book for Strategy A+B is as follows in
order of time priority:
------------------------------------------------------------------------
cNNBO Buy at 2.00 Sell at 2.10
------------------------------------------------------------------------
Public Customer 1 order to buy COPIP Order to sell 100.
10 at 2.03.
Public Customer 2 Primary
Improvement Order to buy 100 at
2.03
Market Maker order to buy 100 at
2.03
At the end of the COPIP, the
trade allocation is as follows:
Public Customer 1: 10 at 2.03
Public Customer 2 Primary
Improvement Order: 45 at 2.03
(50% of the remaining 90
Strategies since there is only
one responder)
Market Maker: 45 at 2.03
------------------------------------------------------------------------
Primary Improvement Order Allocation
After the Public Customer allocation, the applicable trade
allocation described below will be allocated to the Primary Improvement
Order.\42\ If the Primary Improvement Order has designated a COPIP
Surrender Quantity, the Primary Improvement Order allocation will be
reduced, if necessary, in accordance with the COPIP Surrender Quantity.
---------------------------------------------------------------------------
\42\ See proposed Rule 7150(h).
---------------------------------------------------------------------------
When a Single-Priced Primary Improvement Order is matched by or
matches any Complex Order(s) at the final price level, the Initiating
Participant retains priority for up to forty percent (40%) of the
remaining size of the COPIP Order after BOX Book Interest and Public
Customer orders are satisfied. However, if only one Complex Order
matches the Initiating Participant's Single-Priced Primary Improvement
Order at the final price level, then the Initiating Participant may
retain priority for up to fifty percent (50%) of the remaining size of
the COPIP Order after BOX Book Interest and Public Customer orders are
satisfied.\43\ When a Max Improvement Primary Improvement Order is
submitted by the Initiating Participant, the Initiating Participant
shall be allocated its full size at each price level, except where
restricted by the designated limit price, until a price level is
reached where the balance of the COPIP Order can be fully executed. At
such price level, the Initiating Participant will be entitled to
receive up to forty percent (40%) of the remaining size of the COPIP
Order after BOX Book Interest and Public Customer orders are satisfied.
However, if only one competing Complex Order matches the Initiating
Participant's Max Improvement Primary Improvement Order at the final
price level, then the Initiating Participant may retain priority for up
to fifty percent (50%) of the remaining size of the COPIP Order after
BOX Book Interest and Public Customer orders are satisfied.\44\ Neither
Public Customer orders nor BOX Book Interest will be considered when
determining whether the Initiating Participant retains 40% or 50% in
proposed Rule 7245(h) because neither Public Customer order allocation
nor BOX Book Interest allocation (which are executed in priority over
the Initiating Participant) will be affected by the Initiating
Participant retaining the difference between 40% and 50%.\45\ The
Exchange notes that this is similar
[[Page 37809]]
to Phlx in treatment of Public Customer orders.\46\ The balance will be
allocated as described below.
---------------------------------------------------------------------------
\43\ See proposed Rule 7245(h)(1).
\44\ See proposed Rule 7245(h)(2).
\45\ The first sentence of proposed Rule 7245(h)(1) deletes from
the current rule the words ``or BOX Book Interest'' in order to be
consistent with the proposal not to consider BOX Book Interest for
purposes of determining the Primary Improvement Order's preference
percentage.
\46\ See Phlx Rule 1080(n)(ii)(E). Note that, in its Rule
1080(n)(ii)(E)(2)(b), the Phlx auto-match feature limits the
Initiating Participant to 40% allocation.
---------------------------------------------------------------------------
Example 15: COPIP with Auto-Matching
Suppose a COPIP Order to sell 150 Strategies on A+B. Suppose,
further, at the end of the COPIP auction, the Complex Order Book is as
follows in order of price/time priority:
------------------------------------------------------------------------
cNBBO Buy at 2.00 Sell at 2.09
------------------------------------------------------------------------
Broker-dealer 1 order to buy 10 COPIP Order to sell 150
at 2.06.
Market Maker 1 Improvement Order Order to sell 10 at 2.09.
to buy 8 at 2.05.
Market Maker 2 Improvement Order
to buy 2 at 2.05
Broker-dealer 2 Improvement
Order to buy 5 at 2.05
Primary Improvement Order to buy
150 at 2.04
Broker Dealer 3 Improvement
Order to buy 8 at 2.04
Market Maker 3 Improvement Order
to buy 25 at 2.04
Public Customer Order to buy 10
at 2.04
Suppose the Primary Improvement
Order specified an auto-match
limit price of 2.05. The trade
allocation at the best
available price (at 2.06) is as
follows:
Broker-dealer 1 order: 10 140 remaining to allocate.
Strategies at 2.06.
The Primary Improvement Order is
not willing to auto-match the
2.06 price level, so it goes to
the next price available. The
trade allocation at the 2.05
price level is as follows:
Market Maker 1 Improvement
Order: 8 Strategies at 2.05
Market Maker 2 Improvement
Order: 2 Strategies at 2.05
Broker-dealer 2 Improvement
Order: 5 Strategies at 2.05
Primary Improvement Order:
auto-match 15 Strategies at
2.05 110 remaining to
allocate
As there is remaining COPIP
Order quantity to be filled, it
goes to the next price
available. The trade allocation
at the 2.04 price level is as
follows (this is the price
level where the COPIP Order
will be completely filled):
Public Customer order: 10
Strategies at 2.04
Primary Improvement Order: 40
Strategies at 2.04 (40% of 100
= 40, use 40% because there are
2 responders at this price
level)
Market Maker 3 Improvement
Order: 25 Strategies at 2.04
Broker-dealer 3 Improvement
Order: 8 Strategies at 2.04
Primary Improvement Order will
take the remaining 27
Strategies at 2.04 (for a total
of 67 Strategies at 2.04)
------------------------------------------------------------------------
Example 16: Allocating 50%, Rather than 40%, to Primary Improvement
Order
Suppose a COPIP Order to sell 100 of Strategy A+B. Suppose,
further, at the end of the COPIP auction, the Complex Order Book is as
follows in order of time priority:
------------------------------------------------------------------------
cNNBO Buy at 2.00 Sell at 2.10
------------------------------------------------------------------------
Public Customer 1 order to buy COPIP Order to sell 100.
10 at 2.02.
Public Customer 2 order to buy
15 at 2.02
Primary Improvement Order to buy
100 at 2.02
Market Maker order to buy 100 at
2.02
At the end of the COPIP, the
trade allocation is as follows:
10 Strategies at 2.02 to
Public Customer 1
15 Strategies at 2.02 to
Public Customer 2
37 Strategies at 2.02 to
Primary Improvement Order
(50% allocation)
38 Strategies at 2.02 to
Market Maker
------------------------------------------------------------------------
Note that the Primary Improvement Order received an allocation
priority of 50% of the remaining COPIP Order size (50%*(100 - 25) = 38,
rounded down) \47\ in this case because Public Customer orders are not
included in the determination of the 50%/40% allocation rule.
---------------------------------------------------------------------------
\47\ Strategies are allocated in whole numbers and, to ensure
the allocation priority to Primary Improvement Orders does not
exceed the applicable 40% or 50% specified in proposed Rule 7245(h),
allocations of fractional Strategies to the Primary Improvement
Order in the Primary Improvement Order allocation step are rounded
down.
---------------------------------------------------------------------------
Example 17: COPIP Allocation
Suppose a COPIP to sell 150 contracts of Strategy A+B. At the end
of the COPIP, the Complex Order Book for Strategy A+B is as follows in
order of time priority:
------------------------------------------------------------------------
cNBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Public Customer order to buy 10 COPIP Order to sell 150.
at 2.04.
Primary Improvement Order to buy Order to sell 10 at 2.06.
150 at 2.04.
Market Maker 1 Improvement Order
to buy 5 at 2.04
Market Maker 2 Improvement Order
to buy 25 at 2.04
Market Maker 3 Improvement Order
to buy 60 at 2.04
Market Maker 4 Improvement Order
to buy 5 at 2.04
Market Maker 5 Improvement Order
to buy 5 at 2.04
Broker-dealer 1 Improvement
Order to buy 8 at 2.04
Trade allocation (all at 2.04)
is as follows:
Public Customer order: 10 140 remaining to allocate.
Strategies.
[[Page 37810]]
Primary Improvement Order: 56 84 remaining to allocate.
Strategies.
Market Maker 1 Improvement
Order: 4 Strategies
Market Maker 2 Improvement
Order: 21 Strategies
Market Maker 3 Improvement
Order: 50 Strategies
Market Maker 4 Improvement
Order: 4 Strategies
Market Maker 4 Improvement 1 remaining to allocate
Order: 4 Strategies.
Broker-dealer 1 Improvement
Order: 1 Strategy
------------------------------------------------------------------------
Market Maker Allocation
After the Primary Improvement Order allocation, any remaining
unallocated quantity of the COPIP Order will be allocated to Complex
Orders, including Improvement Orders and orders on the Complex Order
Book prior to the COPIP Broadcast, for the account of Market
Makers.\48\ Where there are Complex Orders for the accounts of more
than one Market Maker at the same price, the trade allocation formula
for Market Makers will provide for the allocation of contracts among
Market Makers based on size pro rata for the remaining Strategies. The
proposed Market Maker allocation would follow the formula: B * C where
component B is derived by dividing the quantity of Strategies for the
Market Maker at the price level by the total quantity of Strategies for
all Market Makers at the price level, and component C is the remaining
quantity of the COPIP Order to be allocated after the Primary
Improvement Order allocation. If the quantity of Strategies for the
Market Maker order in B is greater than the original quantity of the
COPIP Order, the Market Maker's quantity will be capped at the size of
the original COPIP Order for purposes of calculating B. If the trade
allocation for a Market Maker would be greater than the quantity of the
Market Maker order at the price level, the Market Maker's trade
allocation will not exceed the size of the Market Maker order at the
price level. If the trade allocation for a Market Maker would result in
a fraction of a Strategy, it will be rounded down.
---------------------------------------------------------------------------
\48\ See proposed Rule 7245(g)(4).
---------------------------------------------------------------------------
Example 18: Market Maker Allocation Formula
In certain circumstances, due to rounding down, it is possible that
some Market Maker orders will not be filled even though there is
sufficient quantity of the COPIP Order to be allocated. Suppose at the
end of a COPIP Order to sell 200 Strategies of A+B, the Complex Order
Book is as follows in order of time priority:
------------------------------------------------------------------------
cNNBO Buy at 2.00 Sell at 2.10
------------------------------------------------------------------------
Primary Improvement Order to buy COPIP Order to sell 200.
200 at 2.02.
Market Maker 1 order to buy 2 at
2.02
Market Maker 2 order to buy 20
at 2.02
Market Maker 3 order to buy 80
at 2.02
Market Maker 4 order to buy 120
at 2.02
Professional Customer order to
buy 20 at 2.02
At the end of the COPIP, the
trade allocation will be as
follows:
First, to the Primary
Improvement Order for 80
Strategies and then to the
Market Makers, pursuant to the
formula provided in Rule
7245(g)(4), as follows:
Market Maker 1-1 Strategy
\49\
Market Maker 2-10 Strategies
Market Maker 3-43 Strategies
Market Maker 4-64 Strategies
As a result, a total of 118
Strategies are allocated to all
Market Makers even though there
were, in total, 120 Strategies
available to be allocated to
Market Makers from the
remaining COPIP Order. The
remaining COPIP Order quantity
of 2 Strategies will be
allocated to the Professional
Customer order.
------------------------------------------------------------------------
Remaining Complex Orders Allocation
After the Market Maker allocation, any remaining unallocated
quantity of the COPIP Order will be allocated to any remaining Complex
Orders, other than Market Maker orders, including orders for the
account of Professionals and orders on the Complex Order Book prior to
the COPIP Broadcast, not receiving allocation above.\50\
---------------------------------------------------------------------------
\49\ The Market Maker allocation formula is: 2 Strategies for
Market Maker 1 divided by 222 Strategies for all Market Makers,
multiplied by 120 remaining Strategies to be allocated from the
COPIP Order and rounded down = 1.
\50\ See Proposed Rule 7245(g)(5).
Example 19: Comparison of Professional Customer COPIP Trade Allocation
---------------------------------------------------------------------------
(Before and After Proposed Rule Change)
Suppose at the end of a COPIP to sell 100 Strategies on A+B, where
the Primary Improvement Order is for the account of a Market Maker, the
Complex Order Book for Strategy A+B is as follows in order of time
priority:
------------------------------------------------------------------------
cNBBO Buy at 2.00 Sell at 2.07
------------------------------------------------------------------------
Public Customer 1 order to buy COPIP Order to sell 100.
10 at 2.04.
Professional Customer 1 order to
buy 10 at 2.04
Primary Improvement Order to buy
100 at 2.04
Market Maker 1 Improvement Order
to buy 30 at 2.04
Broker-dealer 1 Improvement
Order to buy 20 at 2.04
Market Maker 2 Improvement Order
to buy 30 at 2.04
Trade allocation at the end of
the COPIP under current BOX
rules is as follows:
[[Page 37811]]
Current Rules
Public Customer 1: 10 Strategies
at 2.04
Professional Customer 1: 10
Strategies at 2.04
Primary Improvement Order: 40
Strategies at 2.04
Market Maker 1 Improvement
Order: 30 Strategies at 2.04
Broker-dealer 1 Improvement
Order: 10 Strategies at 2.04
Trade allocation at the end of
the COPIP under the proposed
rules is as follows:
Proposed Rules
Public Customer 1: 10 Strategies
at 2.04
Primary Improvement Order: 36
Strategies at 2.04
Market Maker 1 Improvement
Order: 27 Strategies at 2.04
\51\
Market Maker 2 Improvement
Order: 27 Strategies at 2.04
------------------------------------------------------------------------
Where there are more than one remaining unallocated Complex Orders,
including Improvement Orders, at the same price, the trade allocation
to each such Complex Order will follow the formula: B * C where
component B is derived by dividing the quantity of Strategies for the
Complex Order at the price level by the total quantity of Strategies
for all remaining Complex Orders at the price level, and component C is
the remaining quantity of the COPIP Order to be allocated after the
Market Maker allocation. If the quantity of Strategies for the Complex
Order in B is greater than the original quantity of the COPIP Order,
the quantity of Strategies for the Complex Order will be capped at the
size of the original COPIP Order for purposes of calculating B. If the
trade allocation for a Complex Order would be greater than the quantity
of Strategies for the Complex Order at the price level, the trade
allocation will not exceed the quantity of Strategies for the Complex
Order at the price level. If the trade allocation would result in a
fraction of a Strategy, it will be rounded down.
If, at the end of the remaining Complex Orders allocation, there
remains any unallocated quantity of the COPIP Order, the balance will
be allocated as described below.
Additional Allocation
The balance of the COPIP Order will be allocated to all remaining
orders, if any, other than the Primary Improvement Order. The
allocation method will be to allocate one Strategy of the COPIP Order
per order in sequence until each remaining order has received one
Strategy or until the COPIP Order is fully allocated. Allocation
sequence among orders in this step will be in order of size with the
largest remaining order allocated first. Where two or more such orders
are the same size, trade allocation sequence will be by time priority.
---------------------------------------------------------------------------
\51\ The Market Maker allocation formula is: 30 Strategies for
Market Maker 1 divided by 60 Strategies for all Market Makers,
multiplied by 54 remaining Strategies to be allocated from the PIP
Order = 27.
---------------------------------------------------------------------------
If, at the end of the additional allocation, there remains any
unallocated quantity of the COPIP Order, the balance will be allocated
to the Initiating Participant regardless of any applicable COPIP
Surrender Quantity.\52\
---------------------------------------------------------------------------
\52\ See proposed Rule 7245(g)(6).
Example 20: Additional Allocation When Limited by COPIP Surrender
---------------------------------------------------------------------------
Quantity with Multiple Market Maker Orders
Suppose at the end of a COPIP to sell 177 Strategies on A+B, where
the COPIP Surrender Quantity for the Primary Improvement Order is 177,
the Complex Order Book for Strategy A+B is as follows in order of time
priority:
------------------------------------------------------------------------
cNBBO Buy at 2.00 Sell at 2.06
------------------------------------------------------------------------
Public Customer 1 order to buy COPIP Order to sell 177.
10 at 2.04.
Primary Improvement Order to buy Order to sell 10 at 2.06.
177 at 2.04.
Market Maker 1 Improvement Order
to buy 114 at 2.04
Market Maker 2 Improvement Order
to buy 115 at 2.04
Market Maker 3 Improvement Order
to buy 117 at 2.04
At the end of the COPIP, the
trade allocation is as follows:
Public Customer 1: 10 167 remaining to allocate.
Strategies at 2.04.
Primary Improvement Order: 0
Strategies (all are
surrendered)
Market Maker 1 Improvement
Order: 55 Strategies at
2.04
Market Maker 2 Improvement
Order: 55 Strategies at
2.04
Market Maker 3 Improvement
Order: 56 Strategies at
2.04
The COPIP Order has 1
remaining Strategy to
allocate at 2.04.
The Market Maker orders have the
following Strategies remaining
to be filled at 2.04:
Market Maker 1 Improvement
Order: 59 Strategies
remaining at 2.04
Market Maker 2 Improvement
Order: 60 Strategies
remaining at 2.04
Market Maker 3 Improvement
Order: 61 Strategies
remaining at 2.04
The Market Maker orders are
ranked in order of size, with
Market Maker 3 being the
largest, and allocated on a
rotating basis one by one until
either the Market Maker order
or the COPIP Order is
exhausted. In this case, the
remaining 1 Strategy is
allocated as follows:
Market Maker 3 Improvement
Order: 1 Strategy at 2.04
------------------------------------------------------------------------
Example 21: Orders on the Complex Order Book Prior to the COPIP
Broadcast, Which are Eligible for Execution at the Conclusion of the
COPIP
[[Page 37812]]
Suppose the following Complex Orders (listed in order of time
priority) are on the Complex Order Book prior to the broadcast of a
COPIP Order to sell 100 Strategies of A+B.
------------------------------------------------------------------------
cNBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Broker-dealer order to buy 100 Market Maker order to sell 10 at 2.09.
at 2.02.
Public Customer order to buy 5
at 2.02
Market Maker order to buy 15 at
2.02
Public Customer order to buy 12
at 2.02
Market Maker order to buy 30 at
2.02
Primary Improvement Order to buy
100 at 2.02
------------------------------------------------------------------------
Suppose at the end of the COPIP, only one Improvement Order has
been received from a Market Maker to buy 10 at 2.03 and one Unrelated
Order from a Professional Customer to buy 15 at 2.03. The Complex Order
Book, including the COPIP Order, is as follows at the end of the COPIP:
------------------------------------------------------------------------
cNBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Market Maker Improvement Order COPIP Order to sell 100.
to buy 10 at 2.03.
Professional order to buy 15 at Market Maker order to sell 10 at 2.09.
2.03.
Broker-dealer order to buy 100
at 2.02
Public Customer order to buy 5
at 2.02
Market Maker order to buy 15 at
2.02
Public Customer order to buy 12
at 2.02
Market Maker order to buy 30 at
2.02
Primary Improvement Order to buy
100 at 2.02
The trade allocation will be as
follows:
First, because the orders at the
first/best price level are, in
total, less than the size of
the COPIP Order, such orders
are filled for their entire 25
Strategies at 2.03.
Second, at the next best price
level (2.02), the remaining 75
Strategies of the COPIP Order
will be allocated as follows:
Public Customer order to buy
5 at 2.02
Public Customer order to buy
12 at 2.02
As the total of the orders for
the account of Public Customers
(17) is less than the remaining
COPIP Order quantity (75), the
two Public Customer orders are
filled, leaving 58 Strategies
remaining.
Third, the remaining 58
Strategies of the COPIP Order
are allocated as follows:
Primary Improvement Order to buy
23 at 2.02.
23 Strategies (40% of the
remaining quantity of 58) are
allocated to the Primary
Improvement Order at 2.02,
leaving 35 Strategies
remaining.
Fourth, the remaining 35
Strategies of the COPIP Order
are allocated as follows:
Market Maker order to buy 15 at
2.02
Market Maker order to buy 30 at
2.02
------------------------------------------------------------------------
As there are remaining unallocated orders for the accounts of more
than one Market Maker at the same price, the trade allocation to each
Market Maker will follow the formula provided in proposed Rule
7245(g)(4). The first Market Maker order will be allocated 33.3% (15/
45) of the 35 Strategies, which is 11 Strategies (allocation of partial
quantities are rounded down in this step). The second Market Maker
order will be allocated 66.67% (30/45) of the 35 Strategies or 23.
Fifth, the one remaining contract will be allocated to the broker-
dealer Order to buy 100 at 2.02. Note: if the COPIP Order had instead
been a simple limit order to sell 100 Strategies of A+B at 2.02, the
broker-dealer Order would have been filled first on the Complex Order
Book due to its time priority.
Example 22: Valid Starting Prices for COPIP Auctions
A Participant wishes to enter a COPIP Order to sell 50 of Strategy
A+B.
(a) Suppose the cNBBO and the Complex Order Book for Strategy A+B
are as follows:
------------------------------------------------------------------------
cNBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Quote to buy 10 at 2.02................... Order to sell 5 at 2.09
------------------------------------------------------------------------
The COPIP auction start price can be any price between 2.02 and
2.08 inclusive.\53\
---------------------------------------------------------------------------
\53\ The COPIP Start Price shall, on the opposite side of the
COPIP Order, be equal to or better than the best of the BBO on the
Complex Order Book for the Strategy, the cNBBO, and the cBBO and, on
the same side of the COPIP Order, be equal to or better than the
cNBBO. In addition to the foregoing requirements, if the better of
the BBO on the Complex Order Book for the Strategy and the cBBO is
equal to or better than cNBBO on the same side of the COPIP Order,
the COPIP Start Price must also be better than the better of the BBO
on the Complex Order Book for the Strategy and the cBBO on the same
side on the Complex Order Book for the Strategy at the time of
commencement of the COPIP (Proposed Rule 7245(f)).
---------------------------------------------------------------------------
(b) Suppose, instead, that the cNBBO, cBBO and the Complex Order
Book for Strategy A+B are as follows:
------------------------------------------------------------------------
cNBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
cBBO Buy at 2.02.......................... Sell at 2.09
Quote to buy 10 at 2.02................... Order to sell 5 at 2.07.
------------------------------------------------------------------------
The COPIP auction start price can be any price between 2.02 and
2.06 inclusive.\54\
---------------------------------------------------------------------------
\54\ Id.
---------------------------------------------------------------------------
(c) Suppose, instead, that there is no BOX Book Interest that could
generate a sell price of 2.09 and the cNBBO and the Complex Order Book
for Strategy A+B are as follows:
[[Page 37813]]
------------------------------------------------------------------------
cNBBO Buy at 2.02 Sell at 2.09
------------------------------------------------------------------------
Quote to buy 10 at 2.02................... Order to sell 5 at 2.10.
------------------------------------------------------------------------
The COPIP auction start price can be any price between 2.02 and
2.09 inclusive.\55\
---------------------------------------------------------------------------
\55\ Id.
---------------------------------------------------------------------------
Complex Orders on the Complex Order Book
Currently, all Complex Orders on the Complex Order Book prior to
the COPIP Broadcast, excluding any proprietary orders from the
Initiating Participant, are filled at the end of the COPIP in time
priority before any other Complex Orders at the same price.\56\
Further, Rule 7245(g)(3) states that the Primary Improvement Order
follows in time priority all Complex Orders on the Complex Order Book
prior to the COPIP Broadcast that are equal to the (A) Single Priced
Primary Improvement Order price; or (B) execution price of a Max
Improvement Primary Improvement Order that results in the balance of
the COPIP Order being fully executed, except any proprietary order(s)
from the Initiating Participant.
---------------------------------------------------------------------------
\56\ See Rule 7245(f)(3)(ii).
---------------------------------------------------------------------------
The Exchange is now proposing that quotes and orders on the Complex
Order Book prior to the COPIP Broadcast will no longer be allocated
against the COPIP Order at the end of the COPIP in time priority before
any other order at the same price. Specifically, quotes and orders on
the Complex Order Book prior to the COPIP Broadcast will now be
considered alongside all other orders, whether Improvement Order(s),
including Unrelated Order(s) received by BOX during the COPIP
(excluding all Unrelated Orders that were immediately executed during
the interval of the COPIP), for matching at the conclusion of the
COPIP. Therefore, the Exchange is proposing to remove the exceptions
for quotes and orders on the BOX Book prior to the COPIP Broadcast in
Rules 7245(f)(3)(ii) and (g)(3). The Exchange notes that this proposed
change is consistent with Phlx.\57\ Proprietary quotes or orders from
the Initiating Participant at the Primary Improvement Order price shall
not be executed against the COPIP Order during or at the conclusion of
the COPIP.
---------------------------------------------------------------------------
\57\ See Phlx Rule 1080(n)(ii)(E)(2)(d).
---------------------------------------------------------------------------
Additional COPIP Changes
The Exchange is proposing to amend various provisions of Rule 7245
to accommodate the proposed change in the COPIP allocation and amend
certain sections that are no longer relevant with the proposed changes.
The Exchange is also making various non-substantive changes to its
rules to accommodate the changes to the COPIP allocation. Most of these
changes deal with renumbering of sections to account for the new
subsection (g) being proposed to Rule 7245 and the removal of certain
sections. The Exchange proposes to include language to provide clarity
regarding the COPIP Start Price in Rule 7245(f) to ensure that the
COPIP does not trade ahead of resting same-side orders. Additionally,
the Exchange must amend various cross-references within Rule 7245 to
take into account the renumbering of sections.
Professional Customers
The Exchange proposes to amend Rule 100(a)(50) to distinguish
between Professionals and other Public Customers (``non-Professional,
Public Customers'') for proposes of the Exchange's priority rules in
the PIP and COPIP auctions. Pursuant to Rule 100(a)(50), a
``Professional'' is a person or entity that (i) is not a broker or
dealer in securities, and (ii) places more than 390 orders in listed
options per day on average during a calendar month for its own
beneficial account(s).
Under existing Exchange rules, Public Customers benefit from
certain order priority advantages in PIP and COPIP transactions on the
Exchange (``Order Priority''). Rule 7150(f)(4) currently provides that,
at the conclusion of a PIP, Public Customer orders have Order Priority.
Rule 7245(f)(3)(ii) currently provides that, at the conclusion of a
COPIP, Public Customer Complex Orders have Order Priority. Rules
7150(g)(4) and 7245(g)(4) currently provide that Public Customer orders
have priority over Primary Improvement Orders.
Order Priority is a marketplace advantage provided to Public
Customers on the Exchange. Order Priority means that Public Customer
orders are given execution priority over non-Public Customer orders as
provided in the Exchange rules. The purpose of providing Order Priority
to Public Customers is to attract retail order flow to the Exchange by
leveling the playing field for retail investors as compared with market
professionals.
Professionals in today's marketplace are more akin to broker-
dealers in some respects than to non-Professional, Public
Customers.\58\ As a result, the Exchange believes that providing Order
Priority simply based upon whether the order is for the account of a
Public Customer is no longer appropriate in today's marketplace.
Professionals now have access to information and technology that
enables them to trade listed options in the same manner as broker-
dealers. Moreover, because Professionals are included in the definition
of Public Customers under Exchange rules, Professionals currently have
the same priority in PIP and COPIP transactions as non-Professional,
Public Customers. Therefore, non-Professional, Public Customers are
prevented from benefitting fully from the intended Order Priority
advantage when Professionals are afforded the same Order Priority.
---------------------------------------------------------------------------
\58\ Professionals have access to sophisticated trading systems
that contain functionality not available to retail customers,
including things such as continuously updated pricing models based
upon real-time streaming data, access to multiple markets
simultaneously and order and risk management tools.
---------------------------------------------------------------------------
Accordingly, the Exchange proposes to amend Rule 100(a)(50), and
related cross references in Rules 7150(a)(2) and 7145(a)(4), to more
appropriately limit the availability of Order Priority advantages in
PIP and COPIP transactions to non-Professional, Public Customers on the
Exchange.\59\ Under the proposal, a Professional will now be treated
like non-Public Customers for Order Priority in PIP and COPIP
transactions. The effect of the enactment of this proposal will be that
Professionals will no longer receive the same Order Priority that is
afforded to non-Professional, Public Customers in PIP and COPIP
transactions and, instead, will be treated like broker-dealers in this
regard.
---------------------------------------------------------------------------
\59\ See proposed Rule 7150(g)(4). Currently, Professionals are
treated like Public Customers in circumstances where the Exchange
yields priority to Public Customers under SEC Rule 11a1-1(T). Under
the proposed rule change, pursuant to which Improvement Orders will
not be broadcast, transactions executed on the Exchange will qualify
under SEC Rule 11a2-2(T) as described below. As a result,
Professionals will no longer be treated like Public Customers for
purposes of priority.
---------------------------------------------------------------------------
The order-sending behavior and trading activity of Professionals
tend to be more similar to broker-dealers trading on a proprietary
basis. This is particularly true of orders placed in response to the
Exchange's PIP and COPIP mechanisms. Accordingly, the Exchange believes
it is not unfairly discriminatory to give Professional orders the same
priority as broker-dealers for allocation purposes. The Exchange notes
that it is not a novel proposal to treat Professional's as non-Public
Customers for Order Priority in auction transactions and that other
exchanges currently do this.\60\
---------------------------------------------------------------------------
\60\ See Phlx Rule 1000(b)(14).
---------------------------------------------------------------------------
[[Page 37814]]
Cancel Improvement Orders
The Exchange is proposing to allow Participants to cancel their
Improvement Orders at any time up to the end of the PIP or COPIP.
Currently, the Exchange does not allow Participants to cancel their
Improvement Orders and only allows them to decrease the size of their
Improvement Order by improving the price of that order.\61\
---------------------------------------------------------------------------
\61\ See Rules 7150(f)(2) and 7245(f)(2).
---------------------------------------------------------------------------
The Exchange believes that since the PIP Order is guaranteed to
execute at a price that is at least equal to, if not better than, the
NBBO, that allowing Participants to cancel their Improvement Orders
will not affect the ability of an order to receive an execution at the
NBBO. Additionally, the Exchange believes that not allowing
Participants to cancel their Improvement Order during a PIP or COPIP
exposes a Participant to the risk of the market moving against them
after they submit their Improvement Order. The Exchange believes that
by allowing a Participant to cancel their Improvement Order
Participants will be more willing to enter aggressively priced
responses. The Exchange notes that this proposed change is consistent
with Phlx's Rules.\62\
---------------------------------------------------------------------------
\62\ See Phlx Rule 1080(n)(ii)(6).
---------------------------------------------------------------------------
Additionally, the Exchange is proposing that Participants will no
longer be able to decrease the size of their Improvement Order by
improving the price of that order. The Exchange believes that this is
no longer needed now that Participants can cancel their Improvement
Orders because under the proposal a Participant will be able to cancel
their Improvement Order and submit a new Improvement Order with a
better price and a smaller size, therefore achieving the same result as
they can under the current rule.
Removal of Broadcast
Currently, during a PIP and COPIP, Improvement Orders are broadcast
via the HSVF but are not disseminated through OPRA.\63\ The Exchange is
proposing that it will no longer broadcast Improvement Orders received
during and PIP and COPIP via the HSVF.
---------------------------------------------------------------------------
\63\ See Rules 7150(f)(1) and 7245(f)(1).
---------------------------------------------------------------------------
The Exchange believes that this proposed change will encourage
greater participation in the PIP and COPIP which should lead to greater
price improvement. The Exchange believes that this should encourage
Participants to submit Improvement Orders at the best possible price at
which the Participant is willing to participate. This, in turn, should
result in better execution prices, which is the ``price improvement''
that the PIP and COPIP functionalities offer. The Exchange notes that
this is similar to the rules of other exchanges.\64\
---------------------------------------------------------------------------
\64\ See Phlx Rule 1080(n)(ii)(A)(6) and CBOE Rule
6.74A(b)(1)(F).
---------------------------------------------------------------------------
Section 11(a)
As discussed above, the rule changes proposed herein would change
the Exchange's PIP and COPIP auction processes to blind auctions by
eliminating the broadcast of Improvement Orders. As a result, responses
to the PIP and COPIP auctions would no longer be visible to
Participants. Upon implementing this change, the Exchange believes that
transactions executed through the PIP and COPIP processes will be
consistent with the requirements in Section 11(a) of the Act by
satisfying what is known as the ``effect versus execute'' exemption
provided by Rule 11a2-2(T) (``the Effect Versus Execute Rule'').
Section 11(a)(1) of the Act \65\ prohibits a member of a national
securities exchange from effecting transactions on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated person exercises discretion
(collectively, ``covered accounts''), unless an exception applies. The
purpose of Section 11(a) is to address trading advantages enjoyed by
the exchange members and conflicts of interest in money management.\66\
In particular, as the Commission has stated, Congress enacted Section
11(a) out of concern about members benefiting in their principal
transactions from special ``time and place'' advantages associated with
floor trading--such as the ability to ``execute decisions faster than
public investors.'' \67\
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\65\ 15 U.S.C. 78k(a)(1).
\66\ See Securities Reform Act of 1975, Report of the House
Comm. On Interstate and Foreign Commerce, H.R. Rep. No. 94-123, 94th
Cong., 1st Sess. (1975); Securities Acts Amendments of 1975, Report
of the Senate Comm. on Banking, Housing, and Urban Affairs, S. Rep.
No. 94-75, 94th Cong., 1st Sess. (1975).
\67\ See Securities Exchange Act Release Nos. 14563 (March 14,
1978), 43 FR 11542, 11543 (March 17, 1978); 14713 (April 27, 1978),
43 FR 18557 (``April 1978 Release''); 15533 (January 29, 1979), 44
FR 6084 (``1979 Release'').
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Section 11(a) includes several exceptions from the general
prohibition for principal transactions that contribute to the fairness
and orderliness of exchange transactions or do not reflect any time and
place advantages. For example, Section 11(a)(1) provides that the
prohibition on principal transactions does not apply to transactions by
a dealer acting in the capacity of a market maker,\68\ bona fide
arbitrage, risk arbitrage or hedge transactions,\69\ transactions by an
odd lot dealer,\70\ and transactions made to offset errors.\71\
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\68\ Section 11(a)(1)(A).
\69\ Section 11(a)(1)(D).
\70\ Section 11(a)(1)(B).
\71\ Section 11(a)(1)(F).
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The Commission has previously stated that it believes that
transactions effected through the BOX PIP and COPIP are consistent with
the requirements in Section 11(a) of the Act, relying in part upon Rule
11a1-1(T) and in part upon Rule 11a2-2(T) thereunder.\72\
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\72\ See Securities Exchange Act Release No. 68177 (November 7,
2012), 77 FR 67851, at 67851 (November 14, 2012) (the ``November
2012 Order''). See Securities Exchange Act Release No. 71148
(December 19, 2013), 78 FR 78437, at 78442 (December 26, 2013).
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For the reasons set forth below, under the proposed rule change,
the Exchange believes that BOX Options Participants effecting
transactions through the PIP and COPIP, including executions of PIP
Orders and COPIP Orders against orders on the BOX Book and the Complex
Order Book (whether prior to or after the respective PIP or COPIP
Broadcast), are consistent with the requirements of Section 11(a) of
the Act by satisfying the conditions of Rule 11a2-2(T) under the Act.
Effect Versus Execute--Rule 11a2-2(T)
The Commission previously has found that the priority and
allocation rules for electronic trading on the Exchange are consistent
with Section 11(a) of the Act because such rules satisfy the Effect
Versus Execute Rule.\73\ The Commission also found that executions of
PIP Orders and COPIP Orders against orders on the BOX Book and the
Complex Order Book, excluding certain executions of PIP Orders and
COPIP Orders permitted pursuant to Rule 11a1-1(T), satisfy the
conditions of the Effect Versus Execute Rule.\74\ Under the proposed
rule changes, as described above, the Exchange believes the procedures
for the execution of orders submitted through the PIP and COPIP,
including the execution of PIP Orders and COPIP Orders against orders
on the BOX Book or on the Complex Order Book (whether prior to or after
the respective PIP or COPIP Broadcast), would satisfy the conditions of
the
[[Page 37815]]
Effect Versus Execute Rule for the same reasons previously determined
by the Commission for other categories of electronic trading on the
Exchange.
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\73\ See Securities Exchange Act Release No. 66871 (April 27,
2012), 77 FR 26323, at 26336 (May 3, 2012), In the Matter of the
Application of BOX Options Exchange LLC for Registration as a
National Securities Exchange Findings, Opinion, and Order of the
Commission (the ``BOX Approval Order'').
\74\ See November 2012 Order.
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The Effect Versus Execute Rule provides exchange members with an
exemption from the Section 11(a)(1) prohibition on principal trading,
in addition to the exceptions delineated in the statute. The Effect
Versus Execute Rule permits an exchange member, subject to certain
conditions, to effect transactions for covered accounts by arranging
for an unaffiliated member to execute the transactions on the exchange.
To comply with the Effect Versus Execute Rule's conditions, a member:
(1) May not be affiliated with the executing member; (2) must transmit
the order from off the exchange floor; (3) may not participate in the
execution of the transaction once it has been transmitted to the member
performing the execution; \75\ and (4) with respect to an account over
which the member has investment discretion, neither the member nor its
associated person may retain any compensation in connection with
effecting the transaction except as provided in the rule.
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\75\ The member may, however, participate in clearing and
settling the transaction. See Securities Exchange Act Release No.
14563 (March 14, 1978), 43 FR 11542 (March 17, 1978) (regarding the
NYSE's Designated Order Turnaround System (``1978 Release'')).
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The Commission has stated that these four requirements of the
Effect Versus Execute Rule are ``designed to put members and non-
members on the same footing, to the extent practicable, in light of the
purposes of Section 11(a).'' \76\ If a transaction meets the four
conditions of the Effect Versus Execute Rule, it will be deemed to be
in compliance with Section 11(a)(1) consistent with the protection of
investors and the maintenance of fair and orderly markets.\77\ The
Exchange believes the proposed structural and operational
characteristics of the PIP and COPIP are consistent with the stated
objectives of Section 11(a) of the Act, and that all users would be
placed on the ``same footing,'' as intended by the Effect Versus
Execute Rule, for the execution of orders submitted through the PIP and
COPIP, including the execution of PIP Orders and COPIP Orders against
orders on the BOX Book or on the Complex Order Book (whether prior to
or after the respective PIP or COPIP Broadcast).
---------------------------------------------------------------------------
\76\ April 1978 Release at 18560.
\77\ 17 C.F.R. 240.11a2-2(T)(e).
---------------------------------------------------------------------------
The Commission has recognized and accommodated the functioning of
electronic exchange facilities under the Effect Versus Execute
Rule.\78\ In addition, the Commission and its staff have permitted
exchanges to sponsor innovative trading systems in reliance on the
Effect Versus Execute Rule, based on the exchanges' representations
that such facilities, by design, do not provide any special time and
place advantage to members.\79\ In particular, the Commission has
stated, in the context of certain automated execution systems, that
where the execution is performed on an automated basis by the facility
itself, ``the member would not retain any ability to control the timing
of the execution or otherwise enjoy the kind of special order-handling
advantages inherent in being on an exchange floor.\80\ The Commission
has applied the Effect Versus Execute Rule in a functional manner,
taking into account the structural characteristics that distinguish the
operation of an automated execution system from traditional exchange
floor activities. This approach represents the sensible conclusion by
the Commission and its Staff that implementation of Section 11(a)
should reflect the ``continuing rapid pace of economic, technological
and regulatory changes in the market.'' \81\
---------------------------------------------------------------------------
\78\ See Securities Exchange Act Release Nos. 61152 (December
10, 2009), 74 FR 66699 (December 16, 2009) (File No. 10-191)
(Findings, Opinion, and Order of the Commission In the Matter of the
Application of C2 Options Exchange, Incorporated for Registration as
a National Securities Exchange) (``C2 Approval Order'') at note 170;
57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (File No. SR-
NASDAQ-2007-004) (approval order concerning the establishment of the
NASDAQ Options Market LLC (``NOM'')) (``NOM Approval Order''); Order
approving the rules of the Boston Options Exchange, supra n.11;
54552 (September 29, 2006) (AMEX AEMI trading system), 71 FR 59546
(October 10, 2006); 54550 (September 29, 2006), 71 FR 59563 (October
10, 2006) (Chicago Stock Exchange trading system); 54528 (September
28, 2006), 71 FR 58650 (October 4, 2006) (International Securities
Exchange trading system); and 49747 (May 20, 2004), 69 FR 30344 (May
27, 2004) (AMEX electronic options trading system)
\79\ See e.g., Securities Exchange Act Release No. 44983
(October 25, 2001) (Archipelago Exchange), citing Letter from Paula
R. Jensen, Deputy Chief Counsel, Division of Market Regulation, SEC,
to Kathryn L. Beck, Senior Vice President, Special Counsel and
Antitrust Compliance Officer, Pacific Exchange, Inc. (October 25,
2001); Letter from Larry E. Bergmann, Senior Associate Director,
Division of Market Regulation, SEC, to Edith Hallahan, Associate
General Counsel, Philadelphia Stock Exchange, Inc. (March 24, 1999);
Letter from Catherine McGuire, Chief Counsel, Division of Market
Regulation, SEC, to David E. Rosedahl, PCX (November 30. 1998);
Letter from Brandon Becker, Director, Division of Market Regulation,
SEC, to George T. Simon, Partner, Foley & Lardner (November 30,
1994); Securities Exchange Act Release No. 29237 (May 24, 1991), 56
FR 24853 (May 31, 1991) (NYSE's Off-Hours Trading Facility (October
25, 2001).
\80\ See 1979 Release at 6087.
\81\ See 1979 Release at 6087.
---------------------------------------------------------------------------
The Effect Versus Execute Rule's first condition is that the order
be executed by an exchange member that is unaffiliated with the member
initiating the order.\82\ The Commission has stated that this
requirement is satisfied when automated exchange facilities, such as
BOX, are used, so long as the design of these systems ensures that
members do not possess any special or unique trading advantages in
handling their orders after transmitting them to the system.\83\ In
considering the operation of NOM and C2, the Commission noted, while
there is no independent executing exchange member, the execution of an
order is automatic once it has been transmitted to the system.\84\
Because the design of these systems ensures members do not possess any
special or unique trading advantages in handling their orders after
transmitting them to the exchange, the Commission has stated executions
obtained through these systems satisfy the independent execution
requirement of Rule 11a2-2(T).\85\
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\82\ 17 C.F.R. 240.11a2-2(T)(a)(2)(i).
\83\ See, e.g., C2 Approval Order, NOM Approval Order and
Securities Exchange Act Release No. 49068 (January 13, 2004), 69 FR
2775, at 2790 (January 20, 2004) (establishing, among other things,
the Boston Options Exchange, LLC options trading facility of BSE).
\84\ See NOM Approval Order and C2 Approval Order.
\85\ See NOM Approval Order and C2 Approval Order.
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This principle is directly applicable to BOX, including the
execution of PIP Orders and COPIP Orders under the proposed rule
change. The design of the PIP and COPIP, as proposed, ensures that
broker-dealers do not have any special or unique trading advantages in
handling their orders after transmission to BOX. Accordingly, the
Exchange believes that a broker-dealer effecting the execution of PIP
Orders and COPIP Orders under the proposed rule change, including
against orders on the BOX Book or the Complex Order Book, satisfies the
requirement for execution through an unaffiliated member.
The design of BOX ensures that no BOX Options Participant will
enjoy any special control over the timing of execution or special order
handling advantages after order transmission. All orders submitted to
BOX, including orders on the Complex Order Book and on the BOX Book,
are centrally processed and executed automatically by BOX. Orders sent
to BOX are transmitted from remote terminals directly to the system by
electronic means. Once an order is submitted to BOX, the order is
executed against one or more other orders based on the
[[Page 37816]]
established matching algorithms of the Exchange. Under the proposed
rules, orders on the BOX Book or on the Complex Order Book may also
trade with one or more other orders, including PIP Orders and COPIP
Orders, based on the established matching algorithms of the Exchange.
The execution in each combination does not depend on the Options
Participant but rather upon what other orders are entered into BOX at
or around the same time as the subject order, what orders are on the
BOX Book and on the Complex Order Book, whether a PIP or COPIP is
initiated and where the order is ranked based on the priority ranking
algorithm. At no time following its submission of an order to BOX will
an Options Participant be able to acquire control or influence over the
result or timing of order execution. Accordingly, Participants do not
control or influence the result or timing of execution of orders
submitted to BOX, including PIP Orders and COPIP Orders. Orders will be
ranked and maintained on the BOX Book, the Complex Order Book, the PIP
and the COPIP according to established automatic priority rules. A
Participant relinquishes any ability to influence or guide the
execution of its order at the time the order is transmitted into the
BOX system. Trades will execute when orders or quotations entered on
BOX match one another, and the priority of orders at the same price
will be determined, according to an established algorithm based on the
order's characteristics determined at time it is entered.\86\
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\86\ See November 2012 Order.
---------------------------------------------------------------------------
Upon adoption of the proposal, the execution of a PIP Order or a
COPIP Order against orders on the BOX Book or on the Complex Order Book
will be determined automatically, according to the proposed matching,
priority and allocation rules described in detail above. The Exchange
notes that existing BOX rules provide that a Participant initiating a
PIP or a COPIP is prohibited from subsequently entering an Order on the
BOX Book for the purpose of disrupting or manipulating the ongoing
COPIP.\87\
---------------------------------------------------------------------------
\87\ See IM-7150(b) and IM-7245-2(b).
---------------------------------------------------------------------------
Under the proposal, no Participant has any special or unique
trading advantage in the execution of PIP Orders and COPIP Orders,
including against orders on the BOX Book and the Complex Order Book. As
a result, the Exchange believes the proposal satisfies this
requirement.
Second, the Effect Versus Execute Rule requires that orders for a
covered account transaction be transmitted from off the exchange
floor.\88\ Again, the Commission has considered this requirement in the
context of various automated trading and electronic order-handling
facilities operated by national securities exchanges.\89\ In these
contexts, the Commission determined that a covered account order sent
through such an exchange facility would be deemed to be transmitted
from off the floor. Like these other automated systems, orders sent to
BOX, regardless of where it executes within the BOX system, including
the Complex Order Book, the BOX Book, a PIP or a COPIP, will be
transmitted from remote terminals directly to BOX by electronic means.
OFPs and BOX Market Makers will only submit orders and quotes to BOX
from electronic systems from remote locations, separate from BOX. There
are no other Options Participants that are able to submit orders to BOX
other than OFPs or Market Makers. Therefore, the Exchange believes that
Participants' orders electronically received by BOX satisfy the off-
floor transmission requirement for the purposes of the Effect Versus
Execute Rule.\90\
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\88\ 17 C.F.R. 240.11a2-2(T)(a)(2)(ii).
\89\ See e.g., Release Nos. 29237 (May 24, 1991), 56 FR 24853
(May 31, 1991) (File Nos. SR-NYSE-90-52 and SR-NYSE-90-53)
(regarding NYSE's Off-Hours Trading Facility); 61419 (January 26,
2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031) (approving
BATS options trading); 59154 (December 28, 2008), 73 FR 80468
(December 31, 2008) (SR-BSE-2008-48) (approving equity securities
listing and trading on BSE); NOM Approval Order; 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006) (File No. 10-131) (approving
The Nasdaq Stock Market LLC); 44983 (October 25, 2001), 66 FR 55225
(November 1, 2001) (SR-PCX-00-25) (approving Archipelago Exchange);
29237 (May 24, 1991), 56 FR 24853 (May 31, 1991) (SR-NYSE-90-52 and
SR-NYSE-90-53) (approving NYSE's Off-Hours Trading Facility); and
1979 Release.
\90\ The Commission has not considered the lack of a traditional
physical floor to be an impediment to the satisfaction of the off-
floor requirement. See, e.g., 1979 Release. Also see November 2012
Order.
---------------------------------------------------------------------------
Third, the Effect Versus Execute Rule provides that the exchange
member and his associated person not participate in the execution of
the order once it has been transmitted.\91\ This requirement originally
was intended to prevent members with their own floor brokers from using
those persons to influence or guide their orders' executions.\92\ A
member is not precluded from canceling or modifying orders, or from
modifying instructions for executing orders, after they have been
transmitted; provided, however, such cancellations or modifications are
transmitted from off the exchange floor.\93\
---------------------------------------------------------------------------
\91\ 17 C.F.R. 240.11a2-2(T)(a)(2)(iii).
\92\ See April 1978 Release.
\93\ See April 1978 Release.
---------------------------------------------------------------------------
In analyzing the application of the non-participation requirement
to automated execution facilities, the Commission has specifically
noted, in regard to BOX, that the execution does not depend on the
Participant but rather upon what other orders are entered into BOX at
or around the same time as the subject order, what orders are on the
BOX Book, and where the order is ranked based on the priority ranking
and execution algorithm.\94\ Orders submitted electronically to the BOX
Book will similarly meet the non-participation requirement. Upon
submission to BOX, an order is executed against one or more other
orders on the BOX Book or the Complex Order Book or with orders
submitted through the PIP or the COPIP based on an established matching
algorithm. The execution does not depend on the Participant but rather
upon what other orders are entered into BOX at or around the same time
as the subject order, what orders are on the Complex Order Book and on
the BOX Book, whether a PIP or COPIP is initiated and where the order
is ranked based on the priority ranking algorithm. At no time following
the submission of an order to BOX is an Options Participant able to
acquire control or influence over the result or timing of order
execution. Accordingly, Participants do not control or influence the
result or timing of the execution of orders submitted to BOX through
the PIP or the COPIP, including whether such Participant's order
executes against an order on the BOX Book or the Complex Order Book. As
such, the Exchange believes the non-participation requirement is met
with respect to all orders submitted to BOX, including orders on the
BOX Book, the Complex Order Book, a PIP or a COPIP.
---------------------------------------------------------------------------
\94\ See November 2012 Order.
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Fourth, in the case of a transaction effected for an account with
respect to which the initiating member or an associated person thereof
exercises investment discretion, neither the initiating member nor any
associated person thereof may retain any compensation in connection
with effecting the transaction, unless the person authorized to
transact business for the account has expressly provided otherwise by
written contract referring to Section 11(a) of the Act and Rule 11a2-
2(T).\95\ Participants trading for
[[Page 37817]]
covered accounts over which they exercise investment discretion must
comply with this condition in order to rely on the rule's exemption and
the Exchange will enforce this requirement pursuant to its obligation
under Section 6(b)(1) of the Act to enforce compliance with federal
securities laws.
---------------------------------------------------------------------------
\95\ 17 C.F.R. 240.11a2-2(T)(a)(2)(iv). In addition, Rule 11a2-
2(T)(d) requires a member or associated person authorized by written
contract to retain compensation, in connection with effecting
transactions for covered accounts over which such member or
associated person thereof exercises investment discretion, to
furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member in connection with effecting
transactions for the account during the period covered by the
statement. See 17 C.F.R. 240.11a2-2(T)(d). See also 1978 Release
(stating ``[t]he contractual and disclosure requirements are
designed to assure that accounts electing to permit transaction-
related compensation do so only after deciding that such
arrangements are suitable to their interests'').
---------------------------------------------------------------------------
In light of the automated execution of orders submitted to BOX, no
Options Participant will enjoy any special control over the timing and
execution or special order handling advantages in effecting
transactions in orders submitted to BOX. All orders are electronically
executed, rather than being handled manually by an Options Participant.
Because these processes prevent Options Participants from gaining any
time and place advantage once an order is submitted to BOX, the
Exchange believes that the execution of orders submitted through the
PIP and COPIP, including the execution of PIP Orders and COPIP Orders
against orders on the BOX Book or on the Complex Order Book, will
satisfy three of the four conditions of the Effect Versus Execute Rule.
The Exchange notes that BOX Options Participants also must comply with
the fourth condition of the Effect Versus Execute Rule with respect to
discretionary accounts and the Exchange will enforce this requirement
pursuant to its obligation under Section 6(b)(1) of the Act to enforce
compliance with federal securities laws.
The Exchange believes the proposal promotes just and equitable
principles of trade and is consistent with the general policy
objectives of Section 11(a) of the Act. The Exchange believes that the
execution of orders submitted through the PIP and COPIP, including the
execution of PIP Orders and COPIP Orders against orders on the BOX Book
or on the Complex Order Book (whether prior to or after the respective
PIP or COPIP Broadcast) satisfy the requirements of the Effect Versus
Execute Rule. Further, the Exchange believes the policy concerns
Congress sought to address in Section 11(a) of the Act, the time and
place advantage members on exchange floors have over non-members off
the floor and the general public, are not present for transactions
entered into BOX whether the transaction is executed on the BOX Book,
the Complex Order Book, through a PIP or through a COPIP.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\96\ in general, and Section 6(b)(5) of the Act,\97\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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.
---------------------------------------------------------------------------
\96\ 15 U.S.C. 78f(b).
\97\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes this proposed rule change is a
reasonable modification designed to provide additional opportunities
for Participants to obtain executions with price improvement for their
customers while continuing to provide meaningful competition within the
PIP and COPIP. The Exchange also believes that the proposed rule change
will increase the number of PIP and COPIP transactions on the Exchange
and participation in the PIP and COPIP, which will ultimately enhance
competition and provide customers with additional opportunities for
price improvement. The Exchange believes these changes are consistent
with the goals to remove impediments to and to perfect the mechanism
for a free and open market and a national market system.
Specifically, the Exchange believes that the proposal will result
in increased liquidity available at improved prices, with competitive
pricing outside the control of the Initiating Participant. The proposed
rule change should promote and foster competition and provide more
options contracts with the opportunity for price improvement. As a
result of the increased opportunities for price improvement, the
Exchange believes that Participants will increasingly use the PIP and
COPIP so that more customer orders are provided the opportunity to
receive price improvement.
PIP and COPIP Allocation
The Exchange believes the proposed changes to the PIP and COPIP
allocations is an improvement over the current allocations, and will
benefit all market participants submitting PIP and COPIP orders on the
Exchange. As a result of the proposed changes, the Exchange believes
that additional Participants will use the PIP and COPIP to increase the
number of orders that are provided with the opportunity to receive
price improvement. Additionally, the Exchange believes that the
proposed allocation algorithm will encourage greater participation in
the PIP and COPIP process by encouraging additional Participants to
respond to the PIP and COPIP. The Exchange believes that the proposed
pro rata allocation encourages additional Participants to respond at a
particular price in size, even if that Participant did not set the
price. These additional responses should encourage greater competition
in the PIP and COPIP, which should, in turn, benefit and protect
investors and the public interest through the potential for greater
price improvement.
The proposed rule changes preserve the priority of Public Customer
orders over non-Public Customer orders at the same price. The Exchange
believes this priority remains consistent with the purposes of the Act.
The Exchange believes that the new PIP and COPIP allocations are
designed to promote just and equitable principles of trade and to
protect investors and the public interest, because it continues to
recognizes the unique status of customers in the marketplace by
continuing to afford Public Customers certain priority advantages.
The Exchange believes that the proposed Primary Improvement Order
allocation is reasonable, equitable and not unfairly discriminatory to
customers and Participants. Giving Primary Improvement Orders
allocation priority for 40% or 50% of the remaining quantity of the PIP
or COPIP Order will continue to provide incentive for Participants to
initiate PIP and COPIP auctions on BOX, which provides greater
opportunity to receive price improvement by encouraging participation
in the PIP and COPIP process. The Exchange believes that disregarding
Public Customer orders and Legging Orders when determining whether the
Initiating Participant retains 40% or 50% under proposed Rule 7150(h)
is reasonable, equitable and not unfairly discriminatory to customers
and Participants because neither Public Customer order allocation nor
Legging Order allocation will be affected by the Initiating Participant
retaining the difference between 40% or 50% as discussed above.
The Exchange believes that the Market Maker Allocation is designed
to promote just and equitable principles of trade and to protect
investors and the
[[Page 37818]]
public interest, because it strikes a reasonable balance between
encouraging vigorous price competition and rewarding Market Makers for
their unique obligations. Overall, the proposed PIP and COPIP
allocations represent a careful balancing by the Exchange of the
rewards and obligations of various types of market participants.
The Exchange believes that the proposal to give Legging Orders last
priority is reasonable, equitable and not unfairly discriminatory to
customers and Participants. Giving Legging Orders last priority
preserves the established priority of Legging Orders since they
currently have last priority during the current PIP allocation.
The Exchange believes that providing priority to BOX Book Interest
in the proposed COPIP allocation is reasonable as it preserves the
established priority of BOX Book Interest when executing with Complex
Orders. Therefore the Exchange believes the proposal will reduce
investor confusion when executing orders on the Exchange.
Orders and Quotes on the BOX Book
The Exchange believes its proposal to no longer give quotes and
orders on the BOX Book prior to the PIP Broadcast priority for purposes
of the PIP allocation is reasonable, equitable and not unfairly
discriminatory. As stated above, with the current PIP allocation,
orders and quotes on the BOX Book prior to the PIP Broadcast have time
priority and therefore execute before PIP responses. Since, with this
proposal, the Exchange is changing the allocation at the end of the PIP
from a price/time allocation to a pro rata allocation, the Exchange
believes that continuing to give orders and quotes on the BOX Book
prior to the commencement of a PIP priority would contradict the new
PIP allocation. Therefore the Exchange believes it is reasonable to
remove the provisions of the rules that give interest on the BOX Book
prior to the commencement of a PIP priority in order to avoid investor
confusion.
Additionally, the Exchange believes its proposal to no longer give
Complex Orders on the Complex Order Book prior to the COPIP Broadcast
priority for purposes of the COPIP allocation is reasonable, equitable
and not unfairly discriminatory. As mentioned above, with the proposed
changes to the COPIP allocation from a price/time allocation to a pro
rata allocation, the Exchange believes that continuing to give Complex
Orders on the Complex Order Book prior to the COPIP Broadcast priority
would contradict the new COPIP allocations. Therefore the Exchange
believes it is reasonable to remove the provisions of the rules that
give Complex Orders on the Complex Order Book prior to the COPIP
Broadcast priority in order to avoid investor confusion.
Additionally, the Exchange believes these proposed changes will
encourage additional Participants to response to the PIP and COPIP. The
Exchange believes that under the current rules Participants are
discouraged from responding to the PIP and COPIP since certain orders
on the book were executed before a Participants response at the same
price level. By no longer giving interest on the book priority, the
Exchange believes that additional Participants will respond to the PIP
and COPIP. These additional responses should encourage greater
competition, which should, in turn, benefit and protect investors and
the public interest through greater price improvement.
Broadcast of Improvement Orders
The Exchange believes the proposal to remove the broadcast of
Improvement Orders via the HSVF is reasonable, equitable and not
unfairly discriminatory to customers and Participants because under the
proposal no market participants will be able to receive broadcast
notification of Improvement Orders. As a result, no Participants will
have an information advantage, therefore the proposal serves to promote
just and equitable principles of trade and to remove impediments to and
perfect the mechanism of a free and open market and a national market
system. Additionally, the Exchange believes that this proposed change
will encourage greater participation in the PIP and COPIP which should
lead to greater price improvement. The Exchange believes that this
should encourage Participants to submit Improvement Orders at the best
possible price that the Participant is willing to participate. This, in
turn, should result in better execution prices which should, in turn,
benefit and protect investors and the public interest through greater
price improvement. The Exchange notes that this is similar to the rules
of other exchanges.\98\
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\98\ See Phlx Rule 1080(n)(ii)(A)(6) and CBOE Rule
6.74A(b)(1)(F).
---------------------------------------------------------------------------
Cancel Improvement Orders
The Exchange believes that the proposal to allow Participants to
cancel Improvement Orders during the PIP and COPIP is reasonable,
equitable and not unfairly discriminatory. The Exchange believes that
since the PIP and COPIP Orders are guaranteed to execute at a price
that is at least equal to, if not better, than the NBBO, that allowing
Participants to cancel their Improvement Orders will not affect the
ability of an order to receive an execution at the NBBO. Additionally,
the Exchange believes that allowing Participants to cancel Improvement
Orders will protect Participants from the risk of the market moving
against them. The Exchange believes that this protection for
Participants should lead to more aggressive responses, which, should
lead to greater price improvement for investors. Therefore the Exchange
believes that the proposed change will not affect investor protection
and investors will continue to benefit from the potential for price
improvement. The Exchange notes that this is consistent with the rules
of Phlx.\99\
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\99\ See Phlx Rule 1080(n)(ii)(A)(9).
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Removal of Market Maker Prime
As stated above, the Exchange is removing the Market Maker Prime
designation because it has not achieved the intended results.
Specifically, the Market Maker Prime designation has not incentivized
Market Makers to quote aggressively on the BOX Book as it was intended.
The Exchange believes that the continued presence of the Market Maker
Prime designation will only serve to confuse and complicate the
Exchange's Rules, while providing little or no benefit. Therefore the
Exchange believes that removing the Market Maker Prime will promote
just and equitable principles of trade and protect investors and the
public interest.
Customer PIP Order
The Exchange is removing the CPO functionality because it has not
achieved the intended results. The Exchange believes that the continued
presence of the CPO will only serve to confuse and complicate the
Exchange's Rules, while providing little or no benefit. The Exchange
notes that Public Customers will continue to have opportunities to
participate in PIP auctions without limits imposed by CPOs. Therefore,
the Exchange believes that removing the CPO will avoid investor
confusion when executing orders on the Exchange.
Professional Priority
The Exchange believes the proposal to treat Professionals as
broker-dealers for the purposes of the PIP and COPIP will ensure that
non-Professional, Public Customers continue to receive the appropriate
order priority marketplace advantages on BOX, while furthering
[[Page 37819]]
fair competition among marketplace professionals.
The Exchange believes the proposed change to the priority rules for
Professionals in the PIP and COPIP is reasonable, equitable and not
unfairly discriminatory because it treats Professionals, whose activity
on BOX is akin to the order flow activity and system usage of broker-
dealers, the same priority for competing in the PIP and COPIP as the
priority given to broker-dealers. As noted above, the order sending
behavior, trading activity and available technology and information of
Professionals tend to be more similar to broker-dealers trading on a
proprietary basis than to non-Professional, Public Customers. This can
be particularly true of orders placed in response to the PIP and COPIP.
As such, the Exchange believes it is not unfairly discriminatory to
treat Professionals like broker-dealers for order priority purposes
when competing for customer order flow in auction transactions.
Further, the Exchange believes the proposed change to the priority
rules is equitable and not unfairly discriminatory because it will
assure that non-Professional, Public Customers continue to receive the
appropriate order priority marketplace advantages on BOX, while
furthering fair competition among marketplace professionals (both
Professionals and Broker-Dealers) by treating them equally in order
priority when they compete for these desirable customer orders. The
Exchange believes it is reasonable and equitable to treat Professionals
in the PIP and COPIP like broker-dealers because it applies an order
priority structure that groups these sophisticated market participants
together when they are competing in this manner.
The Exchange believes it is equitable and not unfairly
discriminatory for non-Professional, Public Customers to have priority
over Professionals and broker-dealers for the PIP and COPIP. The
securities markets generally, and the Exchange in particular, have
historically aimed to improve markets for retail investors and develop
various features within the market structure for the benefit of non-
Professional, Public Customers.
The Exchange proposes to make certain miscellaneous conforming and
clarifying changes to Rules 7000, 7130, 7150, and 7245 to make them
consistent with the adoption of the proposed PIP and COPIP allocations.
These conforming and clarifying changes are required to make the rules
consistent and are necessary to promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged
in facilitating transactions in securities, and to remove impediments
to and perfect the mechanism of a free and open market and a national
market system.
For the foregoing reasons, the Exchange believes this proposal is a
reasonable modification to its rules, designed to facilitate increased
interaction of PIP and COPIP on the Exchange, and to do so in a manner
that ensures a dynamic, real-time trading mechanism that maximizes
opportunities for trade executions for orders. The Exchange believes it
is appropriate and consistent with the Act to adopt the proposed rule
changes.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe the proposed rule change represents
any undue burden on competition or will impose any burden on
competition among exchanges in the listed options marketplace not
necessary or appropriate in furtherance of the purposes of the Act. To
the contrary, the proposal is pro-competitive because it will enable
the Exchange to better compete with another options exchange that
provides a similar allocation algorithm within its auctions.\100\
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\100\ See supra, note 3.
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With respect to intra-market competition, the PIP and COPIP will
still be available to all Participants. The Exchange believes that the
proposal should encourage Participants to compete amongst each other by
responding with the best price in each auction. Submitting an order to
the PIP or a Complex Order to the COPIP is entirely voluntary and
Participants will determine whether they wish to submit these orders to
the Exchange. The Exchange operates in a highly competitive marketplace
with other competing exchanges and market participants can readily
direct their order flow to other exchanges if they so choose.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on 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 (i) as the Commission may
designate up to 90 days of such date 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-BOX-2014-16 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-BOX-2014-16. 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 Web site (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 Web site 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make
[[Page 37820]]
available publicly. All submissions should refer to File Number SR-BOX-
2014-16 and should be submitted on or before July 23, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\101\
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\101\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15472 Filed 7-1-14; 8:45 am]
BILLING CODE 8011-01-P