Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Various BX Rules in Connection With a Technology Migration, 48274-48295 [2020-17355]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 154 (Monday, August 10, 2020)]
[Notices]
[Pages 48274-48295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17355]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89476; File No. SR-BX-2020-017]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Various BX 
Rules in Connection With a Technology Migration

August 4, 2020.
    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 July 23, 2020, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change 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 Options 1, Section 1 (Definitions); 
Options 2, Section 4 (Obligations of Market Makers and Lead Market 
Makers); Options 2, Section 5 (Market Maker Quotations); Options 3, 
Section 5 (Entry and Display of Orders); Options 3, Section 7 (Types of 
Orders and Quote Protocols); Options 3, Section 10 (Order Book 
Allocation); Options 3, Section 13 (Price Improvement Auction 
(``PRISM'')); Options 3, Section 22 (Limitations on Order Entry); and 
Options 3, Section 23 (Data Feeds and Trade Information). The Exchange 
also proposes to adopt a new Options 3, Section 12 titled ``Crossing 
Orders.''
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange 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 Exchange 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 Options 1, Section 1 (Definitions); 
Options 2, Section 4 (Obligations of Market Makers and Lead Market 
Makers); Options 2, Section 5 (Market Maker Quotations); Options 3, 
Section 5 (Entry and Display of Orders); Options 3, Section 7 (Types of 
Orders and Quote Protocols); Options 3, Section 10 (Order Book 
Allocation); Options 3, Section 13 (Price Improvement Auction 
(``PRISM'')); Options 3, Section 22 (Limitations on Order Entry); and 
Options 3, Section 23 (Data Feeds and Trade Information) and adopt a 
new Options 3, Section 12 titled ``Crossing Orders'' in connection with 
a technology migration to an enhanced Nasdaq, Inc. (``Nasdaq'') 
functionality which results in higher performance, scalability, and 
more robust architecture. With this system migration, the Exchange 
intends to adopt certain trading functionality currently utilized at 
Nasdaq Exchanges.
    The Exchange intends to begin implementation of the proposed rule 
change prior to October 30, 2020. The Exchange will issue an Options 
Trader Alert to Participants to provide notification of the symbols 
that will migrate, the relevant dates and operative dates for specific 
functionalities.
Options 1, Section 1
    The Exchange proposes to amend the definition of ``Public 
Customer'' to conform to Nasdaq PHLX LLC's (``Phlx'') definition at 
Options 1, Section 1(b)(46). The Exchange believes that making clear 
that a Public Customer could be a person or entity and stating that a 
Public Customer is not a Professional, as defined within Options 1, 
Section 1(a)(48),\3\ will make clear what it meant by that term. Today, 
a Public Customer is not a Professional. The term ``Professional'' is 
separately defined, within BX Options 1, Section 1(a)(48). In order to 
properly represent orders entered on the Exchange, Participants are 
required to indicate whether orders are ``Professional Orders.'' To 
comply with this requirement, Participants are required to review their 
Public Customers' activity on at least a quarterly basis to determine 
whether orders, that are not for the account of a broker-dealer, should 
be represented as Public Customer Orders or Professional Orders.\4\ A 
Public

[[Page 48275]]

Customer may be a Professional, provided they meet the requirements 
specified within BX Options 1, Section 1(a)(48). If the Professional 
definition is not met, the order is treated as a Public Customer order.
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    \3\ BX Options 1, Section 1(a)(48) provides that, ``The term 
``Professional'' means any 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). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
    \4\ Participants conduct a quarterly review and make any 
appropriate changes to the way in which they are representing orders 
within five days after the end of each calendar quarter. While 
Participants only will be required to review their accounts on a 
quarterly basis, if during a quarter the Exchange identifies a 
customer for which orders are being represented as Public Customer 
Orders but that has averaged more than 390 orders per day during a 
month, the Exchange will notify the Participant and the Participant 
will be required to change the manner in which it is representing 
the customer's orders within five days.
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    The Exchange also proposes to remove a sentence within Options 1, 
Section 1(a)(48) which provides, ``A Participant or a Public Customers 
may, without limitation, be a Professional.'' This sentence is 
confusing, unnecessary, and adds no information to this defined term. 
Phlx Options 1, Section 1(b)(46) does not contain a similar sentence. 
BX proposes removing this sentence.
    The Exchange also proposes to remove sentences, within Options 3, 
Sections 10(a)(1)(C)(1)(a) and 10(a)(2)(i), Options 3, Section 13, in 
the introductory paragraph, and Options 3, Sections 13(ii)(E)(1) and 
(F)(1), which allocation and PRISM rules, respectively, provide that a 
Public Customer does not include a Professional. Today, the definition 
of a Public Customer does not explicitly exclude a Professional. The 
language that the Exchange proposes to delete currently indicates that 
Professionals would not be treated the same as a Public Customer in 
terms of priority and, therefore, would not receive the same allocation 
that is reserved for Public Customer orders. Since BX is amending the 
definition of a Public Customer to explicitly exclude Professionals, 
the language in the PRISM and allocation rules are no longer necessary 
to distinguish these two types of market participants.
Bid/Ask Differentials
    Currently, BX Market Maker intra-day quoting requirements, within 
Options 2, Section 5(d)(2), provide,

    Bid/ask Differentials (Quote Spread Parameters). Options on 
equities (including Exchange-Traded Fund Shares), and on index 
options must be quoted with a difference not to exceed $5 between 
the bid and offer regardless of the price of the bid, including 
before and during the opening. However, respecting in-the-money 
series where the market for the underlying security is wider than 
$5, the bid/ask differential may be as wide as the spread between 
the national best bid and offer in the underlying security. The 
Exchange may establish differences other than the above for one or 
more series or classes of options.

The Exchange proposes to amend BX Options 2, Section 5(d)(2) to add the 
words ``Intra-Day'' before the title ``Bid/ask Differentials (Quote 
Spread Parameters)'' to make clear that these requirements are intra-
day. Additionally the Exchange is deleting the words ``including before 
and during the opening.'' The bid/ask differentials, within BX Options 
2, Section 5(d)(2), will apply intra-day only. The bid/ask 
differentials applicable to the opening are noted within current 
Options 3, Section 8(a)(6).\5\ It is not necessary to discuss the 
opening bid/ask differentials within Options 2, Section 5, as those 
differentials are set forth within current Options 3, Section 
8(a)(6).\6\ The bid/ask differentials, within BX Options 2, Section 
5(d)(2), will apply intra-day only.
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    \5\ Current BX Options 3, Section 8(a)(6) provides, ``Valid 
Width National Best Bid or Offer'' or ``Valid Width NBBO'' shall 
mean the combination of all away market quotes and any combination 
of BX Options-registered Market Maker orders and quotes received 
over the SQF Protocols within a specified bid/ask differential as 
established and published by the Exchange. The Valid Width NBBO will 
be configurable by underlying, and tables with valid width 
differentials will be posted by BX on its website. Away markets that 
are crossed will void all Valid Width NBBO calculations. If any 
Market Maker orders or quotes on BX Options are crossed internally, 
then all such orders and quotes will be excluded from the Valid 
Width NBBO calculation.''
    \6\ Id.
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    The Exchange also proposes to amend BX Rules at Options 2, Section 
4(f)(4)-(6) (Obligations of Market Makers and Lead Market Makers), 
which specify quoting requirements for Lead Market Makers. Today, BX's 
Rules at Options 2, Section 4(f)(4)-(6) provides,

    (4) Options traded on the Trading System may be quoted with a 
difference not to exceed $5 between the bid and offer regardless of 
the price of the bid.
    (5) BX Regulation may establish quote width differences other 
than as provided in subparagraph (iv) for one or more options 
series.
    (6) In the event the bid/ask differential in the underlying 
security is greater than the bid/ask differential set forth in 
subsections (f)(4) and (5), the permissible price differential for 
any in-the-money option series may be identical to those in the 
underlying security market. In the case of the at-the-money and out-
of-the-money series, BX Regulation may waive the requirements of 
subsections (f)(4) and (5) on a case-by-case basis when the bid/ask 
differential for the underlying security is greater than .50. In 
such instances, the bid/ask differentials for the at-the-money 
series and the out-of-the-money series may be half as wide as the 
bid/ask differential in the underlying security in the primary 
market. Exemptions from subsections (f)(4) and (5) are subject to 
Exchange review. BX Regulation must file a report with BX operations 
setting forth the time and duration of such exemptive relief and the 
reasons therefore.

Today, Options 2, Section 4(f)(5) indicates that Exchange may establish 
other quote differences. Options 2, Section 4(f)(6) explains the manner 
in which such quote differences may be established by the Exchange. BX 
proposes to amend BX's Lead Market Maker quoting requirements by 
conforming the rule to proposed BX Options 2, Section 5(d)(2), which 
applies to BX Market Makers. Specifically, the Exchange proposes to 
replace Options 2, Section 4(f)(4)-(6) with the same rule text 
proposed, within BX Options 2, Section 5(d)(2), in order that BX Market 
Makers and Lead Market Makers have the same standards apply to their 
intra-day quotes.
    With this change, BX would continue to require Lead Market Makers 
to quote with a difference not to exceed $5 between the bid and offer 
regardless of the price of the bid. However, instead of requiring Lead 
Market Makers to quote a price differential for any in-the-money option 
series identical to those in the underlying security market, in the 
event the bid/ask differential in the underlying security is greater 
than the bid/ask differential set forth in subsections (f)(4) and (5), 
the Exchange would now permit the bid/ask differential to be as wide as 
the spread between the national best bid and offer in the underlying 
security when the market for the underlying security is wider than $5, 
as is the case today for BX Market Makers. This amendment would permit 
Lead Market Makers to quote as wide as Market Makers on BX quote 
today.\7\ Further, the Exchange would have discretion, as on other 
options markets, to widen the bid/ask differential.\8\
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    \7\ Phlx Options 2, Section 4(c)(1) describes bid/ask 
differential requirements for Market Makers and Lead Market Makers 
on Phlx. Phlx's standards are similar to the standards proposed for 
BX Lead Market Makers. Phlx Options 2, Section 4(c)(1) provides, 
``Options on equities (including Exchange-Traded Fund Shares), index 
options and options on U.S. dollar-settled FCOs may be quoted 
electronically with a difference not to exceed $5 between the bid 
and offer regardless of the price of the bid, provided that the 
foregoing bid/ask differentials shall not apply to in-the-money 
series where the market for the underlying security is wider than 
the differentials set forth above. For such series, the bid/ask 
differentials may be as wide as the spread between the national best 
bid and offer in the underlying security, or its decimal equivalent 
rounded down to the nearest minimum increment. The Exchange may 
establish differences other than the above for one or more series or 
classes of options.''
    \8\ Today, all options exchanges grant relief to market making 
participants, based on current market conditions, to enable those 
participants to provide liquidity in the marketplace without the 
need to constantly refresh their quotes to balance their risk in 
markets where stock prices are unstable. See https://www.miaxoptions.com/alerts; https://markets.cboe.com/us/options/notices/system/; https://boxoptions.com/system-alerts/ and https://www.nyse.com/market-status/history.

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[[Page 48276]]

    As proposed, the Exchange would remove the rule text which 
describes the additional allowance for at-the-money and out-of-the-
money series, where BX Regulation may waive the requirements of 
subsections (f)(4) and (5) on a case-by-case basis when the bid/ask 
differential for the underlying security is greater than .50. In these 
cases, pursuant to paragraph (f)(6), the bid/ask differentials for the 
at-the-money series and the out-of-the-money series may be half as wide 
as the bid/ask differential in the underlying security in the primary 
market. Today, exemptions from subsections (f)(4) and (5) are subject 
to Exchange review.\9\ The additional allowance and exemptions are no 
longer necessary because the Exchange proposes to add rule text, 
similar to BX Options 2, Section 4(f)(5) and BX Options 5, Section 
5(d)(2), which permits BX to establish differences other than the 
stated bid/ask differentials, for one or more series or classes of 
options. The ability to establish differences, other than the stated 
bid/ask differentials, for one or more series or classes of options 
already exists today for BX Lead Market Maker quoting requirements, 
however this discretion is limited by BX Options 2, Section 
4(f)(6).\10\ The Exchange's proposal would align the procedure BX would 
follow with procedures of other Nasdaq options exchanges, which notify 
members in writing, via an Options Regulatory Alert, of any discretion 
that is being granted by the Exchange. BX would no longer file a report 
with BX operations. Today, no other Nasdaq exchange files a report when 
it grants exemptions, including exemptions for BX Market Makers. 
Decisions to grant exemptions are made based on current market 
conditions. BX is required to react swiftly when market conditions 
change dramatically and, thereby, may require BX to grant quoting 
relief. The additional steps that are currently required on BX are not 
conducive to granting relief in fast changing markets. In addition, the 
proposed quoting requirements for BX Lead Market Makers and Market 
Makers is consistent with requirements on other Nasdaq Affiliated 
Markets that have both Lead Market Makers and Market Makers.\11\ Other 
options markets do not limit the quote relief they would grant their 
lead market makers in the same manner as BX limits quote relief for its 
Lead Market Makers. Today, BX limits its Lead Market Makers to quote 
relief which may not be greater than half as wide as the bid/ask 
differential.\12\
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    \9\ BX Regulation must file a report with BX operations setting 
forth the time and duration of such exemptive relief and the reasons 
therefore.
    \10\ See BX Options 2, Section 4(f)(5).
    \11\ See Phlx at Options 2, Section 4(c) and ISE, GEMX and MRX 
Rules at Options 2, Section 4(b)(4). ISE, GEMX and MRX utilize the 
term Primary Market Maker instead of Lead Market Maker.
    \12\ See ISE and GEMX at Options 2, Section 5, Miami 
International Securities Exchange LLC Rule 503(e)(2), BOX Exchange 
LLC Rule 8040 and NYSE American LLC Rule 925NY(b)(5) and (c).
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Options 3, Section 5

    The Exchange proposes to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c). BX's 
current Options 3, Section 5(c) states, ``The System automatically 
executes eligible orders using the Exchange's displayed best bid an 
offer (``BBO'').'' The Exchange proposes to state, ``The System 
automatically executes eligible orders using the Exchange's displayed 
best bid and offer (``BBO'') or the Exchange's non-displayed order book 
(``internal BBO'') if the best bid and/or offer on the Exchange has 
been repriced pursuant to subsection (d) below.'' Today, BX re-prices 
certain orders to avoid locking and crossing away markets, consistent 
with its Trade-Through Compliance and Locked or Crossed Markets 
obligations.\13\ Orders which lock or cross an away market will 
automatically re-price one minimum price improvement inferior to the 
original away best bid/offer price to one minimum trading increment 
away from the new away best bid/offer price or its original limit 
price.\14\ The re-priced order is displayed on OPRA. The order remains 
on BX's Order Book and is accessible at the non-displayed price. For 
example, a limit order may be accessed on BX by a Participant if the 
limit order is priced better than the NBBO. The Exchange believes that 
the addition of this rule text will allow BX to define an ``internal 
BBO'' within its rules when describing re-priced orders that remain on 
the Order Book and are available at non-displayed prices, which are 
resting on the Order Book.
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    \13\ BX Options 3, Section 5(d) provides, ``An order will not be 
executed at a price that trades through another market or displayed 
at a price that would lock or cross another market. An order that is 
designated by the member as routable will be routed in compliance 
with applicable Trade-Through and Locked and Crossed Markets 
restrictions. An order that is designated by a member as non-
routable will be re-priced in order to comply with applicable Trade-
Through and Locked and Crossed Markets restrictions. If, at the time 
of entry, an order that the entering party has elected not to make 
eligible for routing would cause a locked or crossed market 
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current 
national best bid (for offers) and displayed at one minimum price 
variance above (for offers) or below (for bids) the national best 
price.''
    \14\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
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Options 3, Section 7
    The Exchange proposes to amend the Cancel-Replacement Order, within 
Options 3, Section 7(a)(1). By way of background with respect to 
cancelling and replacing an order, a Participant has the option of 
either submitting a cancel order and then separately submitting a new 
order, which serves as a replacement of the original order, in two 
separate messages, or submitting a single cancel and replace order in 
one message (``Cancel-Replacement Order''). Submitting a cancel order 
and then separately submitting a new order will not retain the priority 
of the original order.
    Currently, the rule text for Cancel-Replacement Order provides, 
``Cancel-Replacement Order shall mean a single message for the 
immediate cancellation of a previously received order and the 
replacement of that order with a new order with new terms and 
conditions. If the previously placed order is already filled partially 
or in its entirety, the replacement order is automatically canceled or 
reduced by the number of contracts that were executed. The replacement 
order will not retain the priority of the cancelled order except when 
the replacement order reduces the size of the order and all other terms 
and conditions are retained.'' The Exchange proposes to replace the 
words ``shall mean'' with ``is'' and remove the final sentence of the 
rule text.\15\ The Exchange proposes to add a new sentence to the end 
of the rule which provides, ``The replacement order will retain the 
priority of the cancelled order, if the order posts to the Order Book, 
provided the price is not amended, and the size is not increased.'' 
Unlike the sentence proposed for deletion, the proposed sentence states 
in the affirmative the conditions under which the Cancel-Replacement 
Order will retain priority. Price and size are the terms that will 
determine if the Cancel-Replacement Order retains its priority, as is 
the case today, other terms and conditions do not amend the priority of 
the Cancel-Replacement Order.
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    \15\ The final sentence of current BX Options 3, Section 7(a)(1) 
provides, ``The replacement order will not retain the priority of 
the cancelled order except when the replacement order reduces the 
size of the order and all other terms and conditions are retained.''
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    The Exchange is not amending the current System functionality of a

[[Page 48277]]

Cancel-Replacement Order with respect to the terms that will cause the 
order to lose priority. Both today, and with the proposed change, if a 
Participant did not change the size of the order, it would not trigger 
a loss in priority. Today the Exchange's rule describes changes to 
priority with respect to reducing size. The proposed rule describes 
changes to priority with respect to increasing size. If the Participant 
does not change the size of the order, a consideration of loss in 
priority is not relevant. The rule is intended to provide transparency 
regarding changes to an a Cancel-Replacement Order which would trigger 
a loss in priority. Today, and with the proposal, the price of the 
order may not be changed when submitting a Cancel-Replacement Order; 
that would be a new order.
    The Exchange further proposes to provide, ``If the replacement 
portion of a Cancel-Replacement Order does not satisfy the System's 
price or other reasonability checks (e.g. Limit Order Price Protection 
and Market Order Spread Protection, within Options 3, Section 15(a)(1) 
and (a)(2), respectively); the existing order shall be cancelled and 
not replaced.'' The Limit Order Price Protection and Market Order 
Spread Protection are the only risk protections within Options 3, 
Section 15 (Risk Protections) that are applicable. Price or other 
reasonability checks consider the current market at the time the 
Cancel-Replacement Order is entered. The Exchange proposes to begin 
applying price or other reasonability checks to all Cancel-Replacement 
Orders, similar to Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC 
(``GEMX'') and Nasdaq MRX, LLC (``MRX'') to provide market participants 
with additional risk protection checks with the re-entry of the Cancel-
Replacement Order. This proposed rule is similar to ISE, GEMX and MRX 
Rules at Options 3, Section 7 at Supplementary Material .02, except 
that ISE, GEMX and MRX discuss Reserve Orders, which are not available 
on BX.\16\ All risk protections are noted within Options 3, Section 15. 
Those risk protections apply throughout the Rulebook, except where 
otherwise noted.
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    \16\ ISE, GEMX and MRX Options 3, Section 7 at Supplementary 
Material .02, provides, ``Cancel and Replace Orders shall mean a 
single message for the immediate cancellation of a previously 
received order and the replacement of that order with a new order. 
If the previously placed order is already filled partially or in its 
entirety, the replacement order is automatically canceled or reduced 
by the number of contracts that were executed. The replacement order 
will retain the priority of the cancelled order, if the order posts 
to the Order Book, provided the price is not amended, size is not 
increased, or in the case of Reserve Orders, size is not changed. If 
the replacement portion of a Cancel and Replace Order does not 
satisfy the System's price or other reasonability checks (e.g. 
Options 3, Section 15(b)(1)(A) and (b)(1)(B); and Supplementary 
Material .07 (a)(1)(A), (b) and (c)(1) to Options 8, Section 14) the 
existing order shall be cancelled and not replaced.''
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    The Exchange proposes to amend ``Directed Order,'' within Options 
3, Section 7(a)(2). The Exchange proposes to remove the text, 
``Directed Order, The term'' and replace ``means'' with ``is.'' These 
amendments are technical and non-substantive. The Exchange is otherwise 
not amending the Directed Order rule text.
    The Exchange proposes to amend ``Limit Order,'' within Options 3, 
Section 7(a)(3). The Exchange proposes to style ``Limit Orders'' in the 
singular and change ``are'' to ``is an'' and ``orders'' to ``order.'' A 
Limit Order on BX operates in the same manner as a Limit Order on ISE, 
GEMX and MRX. The Exchange proposes to conform the rule text of BX's 
Limit Order to ISE, GEMX and MRX Options 3, Section 7(b) and add the 
sentence describing marketable limit orders. The Exchange proposes to 
state, ``A marketable limit order is a limit order to buy (sell) at or 
above (below) the best offer (bid) on the Exchange.'' The Exchange 
believes that the rule amendment more aptly describes a marketable 
limit order as compared to the current rule text, which is confusing, 
but was intended to convey the substance of the proposed text. The new 
sentence does not substantively amend the current rule text.
The Exchange proposes to amend ``Minimum Quantity Orders,'' within 
Options 3, Section 7(a)(4). The Exchange proposes to style ``Minimum 
Quantity Orders'' in the singular and change ``are'' to ``is an'' and 
``orders'' to ``order.'' These amendments are technical and non-
substantive. The Exchange is otherwise not amending the Minimum 
Quantity Order rule text.
    The Exchange proposes to amend ``Market Orders,'' within Options 3, 
Section 7(a)(5). The Exchange proposes to style ``Market Orders'' in 
the singular and change ``are'' to ``is an'' and ``orders'' to 
``order.'' These amendments are technical and non-substantive. The 
Exchange also proposes to add a notation at the end of the rule to make 
clear that ``Participants can designate that their Market Orders not 
executed after a pre-established period of time, as established by the 
Exchange, will be cancelled back to the Participant, once an option 
series has opened for trading.'' Market Orders submitted during the 
opening may be executed, routed (depending on instructions from the 
market participant) or cancelled if the Market Order is priced through 
the opening price. The Exchange would only cancel those Market Orders 
that remained on the Order Book once an option series opened. The pre-
established period of time would commence once the intra-day trading 
session begins for that options series and the order would be cancelled 
back to the Participant, provided the Participant elected to cancel 
back its Market Orders. The Exchange proposes to make clear that while 
the opening is on-going, and the intra-day trading session has not 
commenced, the pre-established period of time would not commence. 
Further, the Exchange proposes to note that ``Market Orders on the 
Order Book would be immediately cancelled if an options series halted, 
provided the Participant designated the cancellation of Market 
Orders.'' Once an options series halts for trading, the Exchange 
conducts another Opening Process. In the case where a Market Order was 
resting on the Order Book, and the Participant had designated the 
cancellation of Market Orders, in the event of a halt, the Market 
Orders resting on the Order Book would immediately cancel. The Exchange 
believes that this additional rule text brings greater clarity to the 
Market Order type.\17\
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    \17\ See The Nasdaq Options Market (``NOM'') Rules at Options 3, 
Section 7(a)(4), which provides, ``Market Orders'' are orders to buy 
or sell at the best price available at the time of execution. 
Participants can designate that their Market Orders not executed 
after a pre-established period of time, as established by the 
Exchange, will be cancelled back to the Participant.''
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    The Exchange proposes to amend ``Intermarket Sweep Order'' or 
``ISO,'' within Options 3, Section 7(a)(6). Today, the rule text 
provides,

    (6) ``Intermarket Sweep Order'' or ``ISO'' are limit orders that 
are designated as ISOs in the manner prescribed by BX and are 
executed within the System by Participants at multiple price levels 
without respect to Protected Quotations of other Eligible Exchanges 
as defined in Options 5, Section 1. ISOs may have any time-in-force 
designation except WAIT, are handled within the System pursuant to 
Options 3, Section 10 and shall not be eligible for routing as set 
out in Options 3, Section 19. ISOs with a time-in-force designation 
of GTC are treated as having a time-in-force designation of Day.
    (1) Simultaneously with the routing of an ISO to the System, one 
or more additional limit orders, as necessary, are routed by the 
entering party to execute against the full displayed size of any 
protected bid or offer (as defined in Options 5, Section 1) in the 
case of a limit order to sell or buy with a price that is superior 
to the limit price of the limit order identified as an intermarket

[[Page 48278]]

sweep order (as defined in Options 5, Section 1). These additional 
routed orders must be identified as ISOs.

The Exchange proposes to replace the current rule, within Options 3, 
Section 7(a)(6), with the following text to describe an ISO Order, ``is 
a Limit Order that meets the requirements of Options 5, Section 1(8). 
Orders submitted to the Exchange as ISO are not routable and will 
ignore the ABBO and trade at allowable prices on the Exchange. ISOs may 
be entered on the Order Book or into the PRISM Mechanism pursuant to 
Options 3, Section 13(ii)(K). ISOs must have a time-in-force 
designation of Immediate-or-Cancel. ISO Orders may not be submitted 
during the opening.'' This rule text is identical to Phlx Options 3, 
Section 7(b)(3), except that BX Rules provide that an ISO must have a 
time-in-force designation of Immediate-or-Cancel, as proposed.
    The Phlx rules do not have this restriction on ISO Orders.\18\ An 
ISO Order is a Limit Order, as noted in the current text and Options 5, 
Section 1 continues to be referenced in the proposed text. The Exchange 
continues to note that the orders are not routable. The additional 
text, ``. . . will ignore the ABBO and trade at allowable prices on the 
Exchange'' is more precise than the current rule text and describes 
current functionality. The Exchange further proposes to state, ``ISOs 
maybe entered on the Order Book or into the PRISM Mechanism pursuant to 
Options 3, Section 13(ii)(K).'' That is also the case today. The 
remainder of the current rule text is not necessary as Options 5, 
Section 1 is cited. Removing the current rule text and replacing it 
with rule text similar to Phlx, is not proposed to change the 
functionality of an ISO Order. The proposed text merely describes the 
ISO Order similar to Phlx. The Exchange believes the proposed 
description provides a more succinct description.
---------------------------------------------------------------------------

    \18\ Phlx Options 3, Section 7(b)(3) provides, ``Intermarket 
Sweep Order. An Intermarket Sweep Order (ISO) is a Limit Order that 
meets the requirements of Options 5, Section 1. Orders submitted to 
the Exchange as ISO are not routable and will ignore the ABBO and 
trade at allowable prices on the Exchange. ISOs may be entered on 
the regular order book or into PIXL pursuant to Options 3, Section 
13 (b)(11). ISO Orders may not be submitted during the Opening 
Process pursuant to Options 3, Section 8.''
---------------------------------------------------------------------------

    The Exchange does propose to amend the current functionality of an 
ISO Order to require that ISOs have a time-in-force designation of 
Immediate-or-Cancel (``IOC'') within Options 3, Section 7(b)(2). Today, 
the rule provides that ISOs may have any time-in-force designation, 
except WAIT, and further requires that ISOs with a time-in-force 
designation of GTC are treated as having a time-in-force designation of 
Day.\19\ With this proposal, the Exchange would only continue to allow 
a time-in-force of IOC. The Exchange proposes to remove the WAIT time-
in-force within this proposed rule change and, therefore, WAIT no 
longer needs to be cited. The Exchange is proposing a TIF designation 
of IOC for an ISO Order, which would cause an ISO Order to cancel in 
whole or in part upon receipt, in the event that the ISO Order does not 
execute or does not entirely execute, because an ISO is generally used 
when trying to sweep a price level across multiple exchanges in an 
effort to post the balance of an order without locking an away market. 
ISO Orders have a limited purpose and should be cancelled if they do 
not execute or do not entirely execute.
---------------------------------------------------------------------------

    \19\ Today, BX's System does not treat an ISO with a time-in-
force designation of GTC as having a time-in-force designation of 
Day, as provided for within BX's current rule at Options 3, Section 
7(a)(6). The Exchange's proposed amendment would prevent ISOs from 
having any designation, other than IOC.
---------------------------------------------------------------------------

    The Exchange proposes to no longer offer the ``One-Cancels-the-
Other Order.'' The Exchange will no longer permit this order type with 
the technology migration. This order type is not in demand on BX. The 
Exchange would file a rule change with the Commission if it decides to 
offer this order type in the future.
    The Exchange proposes to amend the ``All-or-None Order,'' within 
Options 3, Section 7(a)(8). The Exchange proposes to renumber this rule 
text as Options 3, Section 7(a)(7) The Exchange proposes to replace 
``shall mean'' with ``is'' and change ``opening cross'' to simply 
``opening.'' These proposed amendments are technical and non-
substantive.
    The Exchange proposes to add a ``PRISM Order'' to the list of order 
types at proposed Options 3, Section 7(a)(10). The Exchange proposes to 
define this existing order type by cross-referencing Options 3, Section 
13, which explains the order type.
    The Exchange proposes to add a ``Customer Cross Order'' to the list 
of order types at proposed Options 3, Section 7(a)(11). The Exchange 
proposes to define this existing order type by cross-referencing 
Options 3, Section 12(a), which explains the order type.
    The Exchange proposes to amend Options 3, Section 7(b) to define 
``Time in Force'' as ``TIF''.
    The Exchange proposes to amend an ``Immediate-Or-Cancel'' Order or 
``IOC,'' within Options 3, Section 7(b)(2) to add hyphens and make 
``Or'' lowercase. The Exchange proposes to remove the current 
description which provides that an IOC Order, ``shall mean for orders 
so designated, that if after entry into the System a marketable order 
(or unexecuted portion thereof) becomes non-marketable, the order (or 
unexecuted portion thereof) shall be canceled and returned to the 
entering participant. IOC Orders shall be available for entry from the 
time prior to market open specified by the Exchange on its website 
until market close and for potential execution from 9:30 a.m. until 
market close. IOC Orders entered between the time specified by the 
Exchange on its website and 9:30 a.m. Eastern Time will be held within 
the System until 9:30 a.m. at which time the System shall determine 
whether such orders are marketable.'' The Exchange proposes to replace 
this description with rule text similar to Phlx Options 3, Section 
7(c)(2) as these order types are identical. The Exchange proposes to 
state that an Immediate-or-Cancel Order or ``IOC'' Order is a Market 
Order or Limit Order to be executed in whole or in part upon receipt. 
Any portion not so executed is cancelled. Further, with respect to IOC 
Orders,

    (A) Orders entered with a TIF of IOC are not eligible for 
routing.
    (B) IOC orders may be entered through FIX or SQF, provided that 
an IOC Order entered by a Market Maker through SQF is not subject to 
the Limit Order Price Protection or the Market Order Spread 
Protection in Options 3, Section 15(a)(1) and (a)(2), respectively;
    (C) Orders entered into the Price Improvement Auction 
(``PRISM'') Mechanism are considered to have a TIF of IOC. By their 
terms, these orders will be: (1) Executed after an exposure period, 
or (2) cancelled.

    Options 5, Section 4(a) provides, that IOC Orders will be cancelled 
immediately if not executed, and will not be routed. The Exchange is 
proposing to memorialize this information within the description of an 
IOC Order. The Exchange also proposes to note that IOC Orders may be 
entered through FIX or SQF.\20\ The Exchange

[[Page 48279]]

also proposes to note that an IOC Order entered by a Market Maker 
through SQF is not subject to the Limit Order Price Protection or the 
Market Order Spread Protection in Options 3, Section 15(a)(1) and 
(a)(2), respectively. The Order Price Protection and Market Order 
Spread Protection, while available for orders, are not available on 
SQF. These exceptions are provided for within this proposed rule to 
ensure that this information is available to market participants within 
the description of IOC.
---------------------------------------------------------------------------

    \20\ BX Options 3, Section 7(d)(1)(A) notes that orders may be 
entered through FIX and Options 3, Section 7(d)(1)(B) specifies that 
``Immediate-or-Cancel Orders may be entered through SQF.
    ``Financial Information eXchange'' or ``FIX'' is described in 
Options 3, Section 7(d)(1)(A) as an interface that allows 
Participants and their Sponsored Customers to connect, send, and 
receive messages related to orders and auction orders and responses 
to and from the Exchange. Features include the following: (1) 
Execution messages; (2) order messages; and (3) risk protection 
triggers and cancel notifications.
     ``Specialized Quote Feed'' or ``SQF'' is described in Options 
3, Section 7(d)(1)(B) as an interface that allows Market Makers to 
connect, send, and receive messages related to quotes, Immediate-or-
Cancel Orders, and auction responses into and from the Exchange. 
Features include the following: (1) Options symbol directory 
messages (e.g underlying instruments); (2) system event messages 
(e.g., start of trading hours messages and start of opening); (3) 
trading action messages (e.g., halts and resumes); (4) execution 
messages; (5) quote messages; (6) Immediate-or-Cancel Order 
messages; (7) risk protection triggers and purge notifications; (8) 
opening imbalance messages; (9) auction notifications; and (10) 
auction responses. The SQF Purge Interface only receives and 
notifies of purge request from the Market Maker. Market Makers may 
only enter interest into SQF in their assigned options series.
---------------------------------------------------------------------------

    The Exchange proposes to add rule text to the SQF protocol, within 
proposed Options 3, Section 7(e)(1)(B), which provides, ``Immediate-or-
Cancel Orders entered into SQF are not subject to the Limit Order Price 
Protection or the Market Order Spread Protection in Options 3, Section 
15(a)(1) and (a)(2), respectively.'' Adding this exception to the SQF 
protocol as well as the TIF of ``IOC'' will make clear that these order 
protections shall not apply to IOC Orders entered through SQF.
    Also, the proposed rule would also specify that orders entered into 
the PRISM Mechanism are considered to have a TIF of IOC. By their 
terms, these orders will be: (1) Executed after an exposure period, or 
(2) cancelled.\21\ The Exchange believes that adding these new details 
to the manner in which IOC Orders are handled within the System will 
bring greater transparency to these order types.
---------------------------------------------------------------------------

    \21\ The TIF of IOC is applied to all PRISM Orders today.
---------------------------------------------------------------------------

    The Exchange proposes to amend the TIF of ``DAY'' at Options 5, 
Section 7(b)(3) to remove the words ``shall mean for orders'' and add 
``is an order'' to conform the rule text to other text in this rule. 
The Exchange also proposes to conform the description of a TIF of 
``DAY'' similar to Phlx Options 3, Section 7(c)(1).\22\ The Exchange 
believes that the remainder of the description for a Day Order, ``if 
after entry into the System, the order is not fully executed, the order 
(or unexecuted portion thereof) shall remain available for potential 
display and/or execution until market close, unless canceled by the 
entering party, after which it shall be returned to the entering party. 
Day Orders shall be available for entry from the time prior to market 
open specified by the Exchange on its website until market close and 
for potential execution from 9:30 a.m. until market close,'' is 
unnecessarily verbose and proposes to remove this rule text. The 
Exchange proposes to state, ``Day'' is an order entered with a TIF of 
``Day'' that expires at the end of the day on which it was entered, if 
not executed. All orders by their terms are Day Orders unless otherwise 
specified. Day Orders may be entered through FIX. A Day Order on Phlx 
functions in the same way as a Day Order on BX. The Phlx rule text is 
more succinct in describing this order type.
---------------------------------------------------------------------------

    \22\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not 
executed, an order entered with a TIF of ``Day'' expires at the end 
of the day on which it was entered. All orders by their terms are 
Day Orders unless otherwise specified. Day orders may be entered 
through FIX.''
---------------------------------------------------------------------------

    The Exchange proposes to amend the TIF of ``Good Til Cancelled'' or 
``GTC'' at Options 5, Section 7(b)(4). The Exchange proposes to remove 
the words ``shall mean for orders'' and add ``is an order.'' The 
Exchange also proposes to conform the rule text similar to Phlx Options 
3, Section 7(c)(4),\23\ and provide that a ``Good Til Cancelled'' or 
``GTC'' is ``an order entered with a TIF of ``GTC'' that, if not fully 
executed, will remain available for potential display and/or execution 
unless cancelled by the entering party, or until the option expires, 
whichever comes first. GTC Orders shall be available for entry from the 
time prior to market open specified by the Exchange until market 
close.'' The Exchange would remove the rule text which provides, ``that 
if after entry into System, the order is not fully executed, the order 
(or unexecuted portion thereof) shall remain available for potential 
display and/or execution unless cancelled by the entering party, or 
until the option expires, whichever comes first. GTC Orders shall be 
available for entry from the time prior to market open specified by the 
Exchange on its website until market close and for potential execution 
from 9:30 a.m. until market close.'' A GTC Order on Phlx functions in 
the same way as a GTC Order on BX. The Exchange is not proposing to 
amend the functionality of a GTC Order, rather the Exchange believes 
the proposed description is more succinct.
---------------------------------------------------------------------------

    \23\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til 
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully 
executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the 
option expires, whichever comes first. GTC Orders shall be available 
for entry from the time prior to market open specified by the 
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange proposes to no longer offer a TIF of ``WAIT.'' The 
Exchange would remove the rule text at BX Options 3, Section 7(b)(5). 
If the Exchange desires to offer this TIF in the future, it would file 
a proposed rule change with the Commission pursuant to Section 19(b)(1) 
of the Act.\24\
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange proposes to note, within BX Options 3, Section 7(c), 
the various routing options which are available. The Exchange proposes 
to add rule text which provides, ``Routing Strategies. Orders may be 
entered on the Exchange with a routing strategy of FIND, SRCH or Do-
Not-Route (``DNR'') as provided in Options 5, Section 4 through FIX 
only.'' These routing strategies are consistent with a recent rule 
change filed to amend routing strategies.\25\
---------------------------------------------------------------------------

    \25\ The Exchange separately filing to amend the routing 
strategies and adopt ``FIND''. See SR-BX-2020-7P.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to re-letter current Options 3, 
Section 7(c) and (d).
Options 3, Section 10
    The Exchange proposes to amend its Order Book allocation rule, 
within Options 3, Section 10, to amend the manner in which rounding 
occurs.
    Today, BX rounds up or down to the nearest integer when it 
allocates and any residual contract after rounding, if rounding would 
result in an allocation of less than one contract, would be allocated 
to the Lead Market Maker. The Exchange is amending the rounding 
methodology to round up to the nearest integer. Options 3, Section 10 
is being amended to reflect the new methodology. Each exchange has a 
different rounding methodology.\26\ The Exchange is opting to round up 
and not down, uniformly for all Participants, and disclose that 
rounding methodology directly within Options 3, Section 10, so that all 
Participants are aware of the rounding methodology that would be 
utilized by the System. Today, rounding is down, as specified in the 
Exchange's Rules. In addition, if the result of an allocation is not a 
whole number, it will now be rounded up to the nearest whole number 
instead of down. Finally, with respect to rounding, because it is 
rounding up, the provisions which describe allocations for remainders 
of

[[Page 48280]]

less than one contract cannot occur and therefore this rule text is 
being removed, as such remainders would not be mathematically possible. 
The Exchange believes that rounding up uniformly is consistent with the 
Act because it provides for the equitable allocation of contracts among 
the Exchange's market participants. The Exchange proposes to provide 
market participants with transparency as to the number of contracts 
that they are entitled to receive as the result of rounding. Further, 
the Exchange believes that this methodology produces an equitable 
outcome during allocation that is consistent with the protection of 
investors and the public interest because all market participants are 
aware of the methodology that will be utilized to calculate outcomes 
for allocation purposes.
---------------------------------------------------------------------------

    \26\ Phlx rounds down. See Options 3, Section 10. See also 
Securities Exchange Act Release No. 85876 (May 16, 2019), 84 FR 
23595 (May 22, 2019) (SR-Phlx-2019-20) (Notice of Filing of Proposed 
Rule Change Relating to the Allocation and Prioritization of 
Automatically Executed Trades.
---------------------------------------------------------------------------

Options 3, Sections 12 and 22
    Today, the Exchange permits an Initiating Participant to enter a 
PRISM Order for the account of a Public Customer paired with an order 
for the account of a Public Customer and such paired orders will be 
automatically executed without a PRISM Auction.\27\ The execution price 
for such a PRISM Order must be expressed in the quoting increment 
applicable to the affected series. Such an execution may not trade 
through the NBBO or trade at the same price as any resting Public 
Customer order.\28\ The Exchange proposes to remove the ability to 
enter Public Customer-to-Public Customer paired orders directly into 
PRISM for automatic execution and instead require them to be entered 
through FIX, directly as Customer Cross Orders. Today, a Public 
Customer-to-Public Customer paired order could only be entered into 
PRISM to receive the treatment described within proposed Options 3, 
Section 13(vi). With this proposal, the manner in which Public 
Customer-to-Public Customer paired orders are being processed by the 
System is changing. With this proposal, Participants may enter Public 
Customer-to-Public Customer paired orders directly into FIX and receive 
the same treatment that these orders receive today when entered into 
PRISM. The only difference to a Participant is the manner in which the 
order must now be submitted, via FIX, to post a Public Customer-to-
Public Customer Cross.
---------------------------------------------------------------------------

    \27\ See Options 3, Section 13(vi).
    \28\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to adopt the term ``Crossing Orders'' within 
Options 3, Section 12, which is currently reserved, to describe this 
process. Today, ISE, GEMX and MRX permit Customer Cross Orders as 
proposed herein.\29\ The Exchange proposes to adopt Customer Cross 
Orders, within Options 3, Section 12(a), similar to ISE, GEMX and MRX 
Options 3, Section 12(a) as follows:
---------------------------------------------------------------------------

    \29\ See ISE, GEMX and MRX Options 3, Section 12(a).

    Public Customer-to-Public Customer Cross Orders are 
automatically executed upon entry provided that the execution is at 
or between the best bid and offer on the Exchange and (i) is not at 
the same price as a Public Customer Order on the Exchange's limit 
order book and (ii) will not trade through the NBBO. Public 
Customer-to-Public Customer Cross Orders must be entered through 
FIX.
    (1) Public Customer-to-Public Customer Cross Orders will be 
rejected if they cannot be executed.
    (2) Public Customer-to-Public Customer Cross Orders may only be 
entered in the regular trading increments applicable to the options 
class under Options 3, Section 3.
    (3) Options 3, Section 22(b)(1) applies to the entry and 
execution of Customer Cross Orders.

    In particular, the Exchange proposes to add a definition of a 
Customer Cross Order specifying that a Customer Cross Order is 
comprised of a Public Customer Order to buy and a Public Customer Order 
to sell at the same price and for the same quantity. The Exchange 
proposes to adopt Options 3, Section 12(a) specifying that Public 
Customer-to-Public Customer Cross Orders are automatically executed 
upon entry provided that the execution is at or between the best bid 
and offer on the Exchange. Further, the execution would not be at the 
same price as a Public Customer Order on the Exchange's limit order 
book, nor trade through the NBBO. Public Customer-to-Public Customer 
Cross Orders must be entered through FIX for execution pursuant to 
proposed Options 3, Section 12(a). As noted below in the PRISM 
discussion, a Public Customer-to-Public Customer order submitted into 
PRISM directly would be subject to execution pursuant to Options 3, 
Section 13(i) and (ii). The Exchange is removing the current provisions 
within Options 3, Section 13(vi) with this proposed rule change. The 
proposed rule also specifies that Public Customer-to-Public Customer 
Cross Orders will be rejected if they cannot be executed and Public 
Customer-to-Public Customer Cross Orders may only be entered in the 
regular trading increments applicable to the options class under 
Options 3, Section 3.
    Current BX Options 3, Section 13(vi) provides,

    In lieu of the procedures in paragraphs (i)-(ii) above, an 
Initiating Participant may enter a PRISM Order for the account of a 
Public Customer paired with an order for the account of a Public 
Customer and such paired orders will be automatically executed 
without a PRISM Auction, provided there is not currently another 
auction in progress in the same series, in which case the orders 
will be cancelled. The execution price for such a PRISM Order must 
be expressed in the quoting increment applicable to the affected 
series. Such an execution may not trade through the NBBO or trade at 
the same price as any resting Public Customer order.

The Exchange is eliminating BX Options 3, Section 13(vi) because Public 
Customer-to-Public Customer Cross Orders would no longer be entered as 
PRISM Orders. With this proposal Public Customer-to-Public Customer 
Cross Orders would be entered through FIX as a Customer Cross Order. 
The prohibition expressed within current BX Options 3, Section 13(vi) 
provided for only one PRISM Auction to be conducted at a time in any 
given series. Today, to initiate the Auction, the Initiating 
Participant must mark the PRISM Order for Auction processing. With this 
proposal, Public Customer-to-Public Customer Cross Orders would not be 
tagged as a PRISM Auction. The Public Customer-to-Public Customer Cross 
Orders would be entered as a separate cross and therefore would not 
potentially cause more than one PRISM Auction to occur in the same 
series.
    BX also proposes to add that Options 3, Section 22(a)(1),\30\ which 
is similar to ISE Supplementary Material .01 to Options 3, Section 22, 
applies to the execution of Customer Cross Orders. In conjunction with 
this change, BX proposes to add Customer Cross Order to Options 3, 
Section 22(a) and (c) as an exception to the rules for limitations on 
principal transactions and solicitation orders, which require 
Participants to expose trading interest to the market before executing 
agency orders as principal or before executing agency

[[Page 48281]]

orders against orders that were solicited from other broker-dealers.
---------------------------------------------------------------------------

    \30\ BX Options 3, Section 22(a)(1) provides, ``This Rule 
prevents Options Participants from executing agency orders to 
increase its economic gain from trading against the order without 
first giving other trading interest on BX Options an opportunity to 
either trade with the agency order or to trade at the execution 
price when the Options Participant was already bidding or offering 
on the book. However, the Exchange recognizes that it may be 
possible for an Options Participant to establish a relationship with 
a customer or other person to deny agency orders the opportunity to 
interact on BX Options and to realize similar economic benefits as 
it would achieve by executing agency orders as principal. It will be 
a violation of this Rule for an Options Participant to be a party to 
any arrangement designed to circumvent this Rule by providing an 
opportunity for a customer to regularly execute against agency 
orders handled by the Options Participant immediately upon their 
entry into BX Options.''
---------------------------------------------------------------------------

    Options 3, Section 22(a)(1) contains language similar to current BX 
Options 3, Section 13(vi)(A) and, therefore, would continue to prevent 
a Participant from executing agency orders to increase its economic 
gain from trading against the order without first giving other trading 
interests on the Exchange an opportunity to either trade with the 
agency order or to trade at the execution price when the Participant 
was already bidding or offering on the book. The Exchange proposes to 
add a sentence to the end of current BX Options 3, Section 22(a)(1), 
which currently exists within BX Options 3, Section 13(vi)(A).\31\ 
Specifically, the Exchange proposes to add ``Further, it would be a 
violation of this Rule for an Options Participant to circumvent this 
Rule by providing an opportunity for (A) a Public Customer affiliated 
with the Participant, or (B) a Public Customer with whom the 
Participant has an arrangement that allows the Participant to realize 
similar economic benefits from the transaction as the Participant would 
achieve by executing agency orders as principal, to regularly execute 
against agency orders handled by the firm immediately upon their entry 
as Public Customer-to-Public Customer immediate crosses.'' The addition 
of this sentence to BX Options 3, Section 22(a)(1) will continue to 
make clear the type of behavior that is prohibited when executing 
Public Customer-to-Public Customer Cross Orders. Specifically, the 
Exchange notes that Options 3, Section 22 may not be circumvented by 
providing an opportunity for (A) a Public Customer affiliated with the 
Participant, or (B) a Public Customer with whom the Participant has an 
arrangement that allows the Participant to realize similar economic 
benefits from the transaction as the Participant would achieve by 
executing agency orders as principal. The Exchange would surveil Public 
Customer-to-Public Customer Cross Orders in the same fashion that it 
already surveils for these orders on ISE, GEMX and MRX. ISE 
Supplementary Material .01 to Options 3, Section 22 on ISE, GEMX and 
MRX and proposed BX Options 3, Section 22(a)(1) both prevent a 
executions of agency orders to increase its economic gain from trading 
against the order without first giving other trading interests on the 
exchange an opportunity to either trade with the agency order or to 
trade at the execution price when a market participant was already 
bidding or offering on the book.
---------------------------------------------------------------------------

    \31\ Current Options 3, Section 13(vi)(A) provides, ``Options 3, 
Section 22 prevents a Participant from executing agency orders to 
increase its economic gain from trading against the order without 
first giving other trading interests on the Exchange an opportunity 
to either trade with the agency order or to trade at the execution 
price when the Participant was already bidding or offering on the 
book. However, the Exchange recognizes that it may be possible for a 
Participant to establish a relationship with a Public Customer or 
other person to deny agency orders the opportunity to interact on 
the Exchange and to realize similar economic benefits as it would 
achieve by executing agency orders as principal. It would be a 
violation of Options 3, Section 22 for a Participant to circumvent 
Options 3, Section 22 by providing an opportunity for (i) a Public 
Customer affiliated with the Participant, or (ii) a Public Customer 
with whom the Participant has an arrangement that allows the 
Participant to realize similar economic benefits from the 
transaction as the Participant would achieve by executing agency 
orders as principal, to regularly execute against agency orders 
handled by the firm immediately upon their entry as PRISM Public 
Customer-to-Public Customer immediate crosses.''
---------------------------------------------------------------------------

Options 3, Section 13
    The Exchange proposes to amend Options 3, Section 13, which 
describes the Price Improvement Auction or ``PRISM.''
    Similar to ISE, GEMX and MRX Options 3, Section 13, the Exchange 
proposes to amend its System functionality to better any limit order or 
quote on the limit order book on the same side of the market as the 
PRISM Order, within Options 3, Section 13(i)(A) and (B). Today, Options 
3, Section 13 only considers orders. With the technology migration, the 
Exchange proposes, similar to ISE, GEMX and MRX's rules at Options 3, 
Section 13, to consider quotes as well. The Exchange is proposing to 
add ``or quote,'' within Options 3, Sections 13(i) and (A) and (B) and 
(ii)(A)(1). The addition of ``quotes,'' similar to ISE, GEMX and MRX at 
Options 3, Section 13, will enable the Exchange to consider additional 
interest on the Order Book at time a PRISM Auction is initiated. The 
Exchange believes expanding its consideration to both quotes and orders 
will consider a greater amount of interest present on BX's Order Book 
when initiating a PRISM.
    In various places, within Options 3, Section 13, where the Exchange 
cites to the minimum increment rule at Options 3, Section 3, the 
Exchange proposes to instead simply state the minimum increment 
allowable directly within the rule. For example, BX proposes to amend 
Options 3, Section 13(i)(A) and (B) to remove the rule text which 
states, ``at one minimum price improvement increment,'' and ``at least 
one minimum trading increment specified in Options 3, Section 3 
(``Minimum Increment'')'' and ``the Minimum Increment,'' respectively, 
and instead simply state ``$0.01'' within the rule text. This amendment 
does not amend the current System operation, rather it more simply 
states what that minimum increment is today. The Exchange proposes a 
similar change at Options 3, Section 13(ii)(A)(1) by proposing to 
remove ``one Minimum Increment'' and replace that text with ``$0.01.'' 
Finally, the Exchange proposes to amend Options 3, Section 13(ii)(A)(6) 
to replace a reference to ``the minimum price improvement increment 
established pursuant to subparagraph (i)(A) above'' with ``$0.01.''
    The Exchange also proposes technical amendments to capitalized the 
``if'' within Options 3, Section 13(i)(A) and add an ``If'' before 
Options 3, Section 13(i)(B) to conform the rule text.
    The final amendment proposed to Options 3, Section 13(ii)(A)(1) is 
to amend the System functionality with respect to Surrender. Today, a 
Surrender feature is available on BX, which permits the Initiating 
Participant to forfeit completely its priority and trade allocation 
privileges. The text related to Surrender, within Options 3, Section 
13(ii)(A)(1), currently provides,

    When starting an Auction, the Initiating Participant may submit 
the Initiating Order with a designation of ``surrender'' to the 
other PRISM Participants (``Surrender''), which will result in the 
Initiating Participant forfeiting the priority and trade allocation 
privileges which he is otherwise entitled to as per Section 
9(ii)(E)(2)(a) and Section 9(ii)(F)(2)(a). If Surrender is specified 
the Initiating Order will only trade if there is not enough interest 
available to fully execute the PRISM Order at prices which are equal 
to or improve upon the stop price. The Surrender function will never 
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 this Rule. Surrender will not be 
applied if both the Initiating Order and PRISM Order are Public 
Customer orders. Surrender information will not be available to 
other market participants and may not be modified.

The Exchange proposes to amend the first sentence of the above-
referenced paragraph to describe ``Surrender.'' The Exchange proposes 
to state, ``For purposes of this Rule, Surrender shall mean the target 
allocation percentage the contra-side requests to be allocated from 0% 
to 39%. If the Participant requests 40%, then the Participant would 
receive its full priority and trade allocation provisions that it would 
be entitled to pursuant to Section 13(ii)(E)(2)(a) and Section 
13(ii)(F)(2)(a).'' The Exchange believes that this will make clear the 
manner in which the System will handle the percentage designation. The 
Exchange then proposes to amend the next sentence to provide, ``When 
starting an

[[Page 48282]]

Auction, the Initiating Participant may submit the Initiating Order 
with a percentage designation (a percentage from 0% up to 40% as noted 
above) of ``Surrender'', which will result in the Initiating 
Participant being allocated its designated percentage pursuant to 
Section 13(ii)(E)(2)(a) and Section 13(ii)(F)(2)(a).'' This proposed 
text would permit an Initiating Participant to submit an Initiating 
Order with a percentage for ``Surrender'' up to 40%, although the 
percentage may be lower. Today, the System permits a Participant to 
have either a Surrender of 0% or 40%. Today, ISE, GEMX and MRX Options 
3, Section 13(e)(5)(iii), related to PIM Complex Orders, has a 
configurable Surrender provision.\32\ The proposed text indicates that 
the percentage could be 40% or a lower percentage for priority and 
allocation by stating, ``. . .which will result in the Initiating 
Participant being allocated its designated percentage pursuant to 
Section 13(ii)(E)(2)(a) and Section 13(ii)(F)(2)(a).'' This text 
similarly proposes to amend Section 13(ii)(E)(2)(a) and Section 
13(ii)(F)(2)(a) which describe Surrender percentages.
---------------------------------------------------------------------------

    \32\ See ISE, GEMX and MRX Options 3, Section 13(e)(5)(iii) 
which provides, ``In the case where the Counter-Side Complex Order 
is at the same net price as Professional interest on the Complex 
Order Book in (ii) above, the Counter-Side Complex Order will be 
allocated the greater of one (1) contract or forty percent (40%) (or 
such lower percentage requested by the Member) of the initial size 
of the Agency Complex Order before other Professional interest on 
the Complex Order Book are executed. Upon entry of Counter-Side 
Complex Orders, Members can elect to automatically match the price 
and size of Complex Orders, Improvement Complex Orders received on 
the Complex Order Book during the exposure period up to a specified 
limit net price or without specifying a limit net price. This 
election will also automatically match the net price available from 
the ISE best bids and offers on the individual legs for the full 
size of the order; provided that with notice to Members the Exchange 
may determine whether to offer this option only for Complex Options 
Orders, Stock-Option Orders, and/or Stock Complex Orders. If a 
Member elects to auto-match, the Counter-Side Complex Order will be 
allocated its full size at each price point, or at each price point 
within its limit net price if a limit is specified, until a price 
point is reached where the balance of the order can be fully 
executed. At such price point, the Counter-Side Complex Order shall 
be allocated the greater of one contract or forty percent (40%) (or 
such lower percentage requested by the Member) of the original size 
of the Agency Complex Order, but only after Priority Customer 
Complex Orders and Improvement Complex Orders at such price point 
are executed in full. Thereafter, all Professional Complex Orders 
and Improvement Complex Orders at the price point will participate 
in the execution of the Agency Complex Order based upon the 
percentage of the total number of contracts available at the price 
that is represented by the size of the Professional Complex Order or 
Improvement Complex Order on the Complex Order Book.''
---------------------------------------------------------------------------

    By way of example, an Initiating Participant may submit an 
Initiating Order with a ``Surrender'' percentage designation of up to 
forty percent (40%). If a surrender percentage designation of 40% is 
submitted, this would indicate no surrender.\33\ If a surrender 
percentage designation between 0-39% is elected, this would indicate 
the Initiating Participant has surrendered their full 40% allocation 
entitlement and would retain only a lesser percentage designation that 
the Participant elected (between 0% and 39%). In this instance, the 
Initiating Participant will not be eligible to receive the highest 
possible allocation of fifty percent (50%). The 50% allocation is 
possible if only one other quote, or PAN response matches the stop 
price and the Initiating Participant has not chosen to designate any 
percentage designation of ``Surrender.'' A designation of Surrender 
will result in the Initiating Participant forfeiting all or a portion 
of their 40% enhanced allocation carve out to the other PRISM 
Participants. The percentage that is being submitted represents the 
percentage of allocation being requested by the contra-side party.
---------------------------------------------------------------------------

    \33\ Initiating Participants may submit a percentage for 
Surrender into the System, prior to submitting paired orders into 
PRISM. If the Initiating Participant submitted a percentage of 40% 
into the System, the Participant would receive its full priority and 
trade allocation provisions that it would be entitled to pursuant to 
Section 13(ii)(E)(2)(a) and Section 13(ii)(F)(2)(a). Of note, if the 
Initiating Participant does not select a percentage, the System will 
populate the field with 40%, the default Surrender percentage.
---------------------------------------------------------------------------

    The Exchange proposes to amend the current rule text, within 
Options 3, Section 13(ii)(A)(1), which provides, ``. . .forfeiting the 
priority and trade allocation privileges which he is otherwise entitled 
to as per. . .''. This rule text is being removed in favor of simply 
citing directly to the allocation provisions (Section 13(ii)(E)(2)(a) 
and Section 13(ii)(F)(2)(a)). Also, the current rule text, ``with a 
designation of ``surrender'' to the other PRISM Participants 
(``Surrender'')'' is being removed because the proposed rule text 
defines ``Surrender'' as the percentage designation, which the Exchange 
believes more accurately defines ``Surrender'' within the rule text.
    The Exchange is revising the second sentence of Options 3, Section 
13(ii)(A)(1), which currently provides, ``If Surrender is specified the 
Initiating Order will only trade if there is not enough interest 
available to fully execute the PRISM Order at prices which are equal to 
or improve upon the stop price.'' The Exchange proposes to instead 
provide, ``If zero (0%) is specified, the Initiating Order will only 
trade if there is not enough interest available to fully execute the 
PRISM Order at prices which are equal to or improve upon the stop 
price.'' The Exchange believes that explaining if no percentage were 
elected for Surrender (0%) more clearly describes the remainder of the 
sentence which provides the Initiating Order will only trade if there 
is not enough interest available to fully execute the PRISM Order at 
prices which are equal to or improve upon the stop price, in light of 
the ability to configure the Surrender percentage with this proposal.
    The Exchange proposes to amend Options 3, Section 13(ii)(A)(2) to 
add ``price'' as a detail which is specified today for a PRISM Auction 
Notification or ``PAN.'' Current Options 3, Section 13(ii)(A)(2) 
states, ``When the Exchange receives a PRISM Order for Auction 
processing, a PAN detailing the side, size, and options series of the 
PRISM Order will be sent over the BX Depth feed and the Exchange's 
Specialized Quote Feed.'' The Exchange is amending the current 
functionality of PRISM to disseminate ``price'' in addition to side, 
size, and options series similar to ISE, GEMX and MRX.\34\ Adding 
``price'' to the list of details will provide Participants with greater 
transparency and could encourage more competition in PRISM and greater 
opportunity for potential price improvement in PRISM.
---------------------------------------------------------------------------

    \34\ See ISE, GEMX and MRX Options 3, Section 13(c).
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 13(ii)(A)(7), 
which currently provides, ``A PAN response size at any given price 
point may not exceed the size of the PRISM Order. A PAN response with a 
size greater than the size of the PRISM Order will be immediately 
cancelled.'' The Exchange is amending this rule in conjunction with the 
technology migration to conform the behavior of PAN responses to ISE, 
GEMX and MRX System behavior.\35\ As noted above, the Exchange is 
amending the System to accept oversized responses. These responses will 
no longer cancel back, rather, PRISM will cap the response at the size 
of the PRISM Order for purposes of allocation. Any remaining interest 
from responses not filled during the PRISM Order allocation, including 
any response quantity in excess of the PRISM Order quantity, will be 
cancelled back to the Participant at the conclusion of the auction 
timer.
---------------------------------------------------------------------------

    \35\ See ISE, GEMX and MRX Options 3, Section 13(c)(2).
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 13(ii)(A)(8) and 
(9) to replace the words ``immediately cancelled'' with ``rejected.'' 
These technical amendments are intended to

[[Page 48283]]

conform the text of the rule where a response would be sent back as 
unacceptable by the System by uniformly noting the order would be 
``rejected.''
    The Exchange proposes to amend Options 3, Section 13(ii)(C) \36\ to 
replace ``the Minimum Increment,'' with ``$0.01'', which is the actual 
increment.
---------------------------------------------------------------------------

    \36\ BX Options 3, Section 13(ii)(C) provides, ``If the 
situations described in sub-paragraphs (B)(2) or (3) above occur, 
the entire PRISM Order will be executed at: (1) In the case of the 
BX BBO crossing the PRISM Order stop price, the best response 
price(s) or, if the stop price is the best price in the Auction, at 
the stop price, unless the best response price is equal to or better 
than the price of a limit order resting on the Order Book on the 
same side of the market as the PRISM Order, in which case the PRISM 
Order will be executed against that response, but at a price that is 
at least the Minimum Increment better than the price of such limit 
order at the time of the conclusion of the Auction; or (2) in the 
case of a trading halt on the Exchange in the affected series, the 
stop price, in which case the PRISM Order will be executed solely 
against the Initiating Order. Any unexecuted PAN responses will be 
cancelled.''
---------------------------------------------------------------------------

    The Exchange proposes to amend Options 3, Section 13(ii)(E)(2)(a) 
to amend the System allocation to the Initiating Participant after 
Public Customer orders have been allocated. Today, the Exchange rule 
provides,

    If the Initiating Participant selected the single stop price 
option of the PRISM Auction, PRISM executions will occur at prices 
that improve the stop price, and then at the stop price with up to 
40% of the remaining contracts after Public Customer interest is 
satisfied being allocated to the Initiating Participant at the stop 
price. However, if only one other quote, order or PAN response 
matches the stop price, then the Initiating Participant may be 
allocated up to 50% of the contracts executed at such price. 
Remaining contracts shall be allocated, pursuant to Options 3, 
Section 13(ii)(E)(3) through (5) below, among remaining quotes, 
orders and PAN responses at the stop price. Thereafter, remaining 
contracts, if any, shall be allocated to the Initiating Participant. 
The allocation will account for Surrender, if applicable.

The Exchange proposes, similar to ISE, GEMX and MRX Options 3, Section 
13(d)(3),\37\ to base the priority allocation of the Initiating 
Participant on the initial size of the Initiating Order after Public 
Customer interest is satisfied. The proposed rule text, within Options 
3, Section 13(ii)(E)(2)(a), would provide, ``If the Initiating 
Participant selected the single stop price option of the PRISM Auction, 
PRISM executions will occur at prices that improve the stop price, and 
then at the stop price with up to 40% (or such lower percentage 
requested by the Initiating Participant) of the initial size of the 
PRISM Order after Public Customer interest is satisfied being allocated 
to the Initiating Participant at the stop price.'' The Exchange states, 
``. . . or such lower percentage requested by the Initiating 
Participant'' because as stated previously, the Surrender percentage 
can be a percentage up to 40%. The caveat in the second sentence also 
accounts for Surrender. The proposed second sentence provides, 
``However, if only one other quote, order or PAN response matches the 
stop price, then the Initiating Participant may be allocated up to 50% 
of the contracts executed at such price, provided the Initiating 
Participant had not designated a percentage designation of 
``Surrender'' when initiating the Auction.'' The Exchange proposes 
similar changes to Options 3, Section 13(ii)(E)(2)(b), Section 
13(ii)(E)(2)(c)(ii), in two places, Section 13(ii)(F)(2)(a) and (b), 
and Section 13(ii)(F)(2)(c)(ii), in two places. The proposed changes do 
not impact the manner in which the Exchange allocates pursuant to 
price/time, size pro-rata and auto-match. In each of these places the 
Exchange is amending the rule text to remove the phrase ``contracts 
remaining'' and instead providing ``initial size of the PRISM Order.'' 
By way of example,
---------------------------------------------------------------------------

    \37\ ISE, GEMX and MRX Options 3, Section 13(d)(3), provides, 
``In the case where the Counter-Side Order is at the same price as 
Professional Interest in (d)(2), the Counter-Side order will be 
allocated the greater of one (1) contract or forty percent (40%) of 
the initial size of the Agency Order before Professional Interest is 
executed. Upon entry of Counter-Side orders, Members can elect to 
automatically match the price and size of orders, quotes and 
responses received during the exposure period up to a specified 
limit price or without specifying a limit price. In this case, the 
Counter-Side order will be allocated its full size at each price 
point, or at each price point within its limit price if a limit is 
specified, until a price point is reached where the balance of the 
order can be fully executed. At such price point, the Counter-Side 
order shall be allocated the greater of one contract or forty 
percent (40%) of the original size of the Agency Order, but only 
after Priority Customer Interest at such price point are executed in 
full. Thereafter, all Professional Interest at the price point will 
participate in the execution of the Agency Order based upon the 
percentage of the total number of contracts available at the price 
that is represented by the size of the Professional Interest. An 
election to automatically match better prices cannot be cancelled or 
altered during the exposure period.'' See also NYSE American Rule 
971 1NY(c)(5)(B)(i)(b) (order allocation for single stop price).

The NBBO and BX BBO are both 1 x 1.50
PRISM to buy 1000 is submitted with an Initiating Order to stop the 
PRISM Order at 1.20
    PRISM begins. During the PRISM Auction:
Public Customer PAN arrives to sell 600 @1.20
Firm 1 PAN to sell 1000 @1.20 arrives
Firm 2 PAN to sell 1000 @1.20 arrives
Current Rule: Public Customer allocated 600 @1.20, contra-side 
allocated 160 @1.20, Firm 1 and 2 each allocated 170 @1.20 (in this 
case contra-side allocated 40% of 400 contracts which remained after 
Public Customer allocation of 600 contracts, for a remainder of 160 
contracts)
Proposed Rule: Public Customer allocated 600 @1.20 and contra-side 
allocated 400 @1.20 (in this case contra-side allocated 40% of 1000 
contracts (initial size of the Initiating Order) which is 400 
contracts)

Additional example to illustrate ``initial size'' allocation with step 
up utilizing size pro-rata allocation pursuant to Options 3, Section 
13(ii)(E):

The NBBO and BX BBO are both 1 x 1.50
PRISM to buy 1000 is submitted with an Initiating Order to stop the 
PRISM Order at 1.20, and the Initiating Order step up price of 1.19
PRISM begins. During the PRISM Auction:
Public Customer PAN arrives to sell 200 @1.19 and 40% allocation 
elected
Firm 1 PAN to sell 1000 @1.20 arrives
Firm 2 PAN to sell 1000 @1.20 arrives
Current Rule: Public Customer allocated 200 @1.19, contra-side 
allocated 200 @1.19, contra-side allocated 240 @1.20 (40% of 
remaining 600), Firm 1 allocated 180 @1.20, Firm 2 allocated 180 
@1.20
Proposed Rule: Public Customer allocated 200 @1.19, contra-side 
allocated 200 @1.19, contra-side allocated 400 @1.20 (40% of initial 
1000), Firm 1 allocated 100 @1.20, Firm 2 allocated 100 @1.20.

    The Exchange proposes to amend rounding, within Options 3, Section 
13(ii)(G). Today, BX PRISM rounds up or down to the nearest integer 
when it allocates. The Exchange is amending the rounding methodology to 
round up to the nearest integer. Options 3, Section 13(ii)(G) is being 
amended to reflect the new methodology. As a result of changing the 
rounding methodology, residual odd lots will no longer exist. If the 
result of an allocation is not a whole number, it will now be rounded 
up to the nearest whole number instead of down. Finally, with respect 
to rounding, because it is rounding up, the provisions which describe 
allocations for remainders of less than one contract cannot occur and, 
therefore, this rule text is being removed because such remainders 
would not be possible.
    The Exchange proposes to amend Options 3, Section 13(ii)(H) to 
remove the phrase ``then-existing.'' Current Options 3, Section 
13(ii)(H) provides, ``If there are PAN responses that cross the then-
existing NBBO (provided such NBBO is not crossed), such PAN responses 
will be executed, if possible, at their limit price(s).'' The Exchange 
is not amending the current operation of the System, rather the 
Exchange is amending its rules to more accurately state, ``If there are 
PAN responses that cross the NBBO at the time of execution (provided 
such NBBO is not crossed), such PAN responses will be executed, if 
possible, at their limit price(s).'' The

[[Page 48284]]

current text appeared to state that the System was utilizing the NBBO 
upon entry to check if the PAN responses crossed the NBBO, however, the 
System utilizes the NBBO at the time of execution to check if the PAN 
responses cross the NBBO. The Exchange believes this revised text 
better expresses the manner in which the current System operates. This 
change does not amend the current System operation.
    The Exchange proposes to amend Options 3, Section 13(ii)(I), which 
currently provides:

    If the price of the PRISM Auction is the same as that of an 
order on the limit order book on the same side of the market as the 
PRISM Order, the PRISM Order may only be executed at a price that is 
at least one minimum trading increment better than the resting 
order's limit price or, if such resting order's limit price is equal 
to or crosses the stop price, then the entire PRISM Order will trade 
at the stop price with all better priced interest being considered 
for execution at the stop price.

The Exchange proposes to add some context to the rule to better reflect 
the current System operation. First, the Exchange purposes to add the 
word ``execution'' in the first sentence of Options 3, Section 
13(ii)(I). The execution price of the PRISM Auction is utilized to 
compare to the price of an order on the limit Order Book. The Exchange 
utilizes the execution price today on BX. Adding the word ``execution'' 
makes clear to Participants that the initial PRISM Order stop price is 
not utilized to compare the same side of the market transactions. If 
the potential execution price of the PRISM Order would be the same or 
better than the price of an order on the limit Order Book on the same 
side of the market as the PRISM Order then, today, would be executed at 
a price $0.01 better than such limit order, regardless of whether such 
limit was a Public or Non-Public Customer Order. While ``or better'' is 
not clearly specified, it is the case today and its inclusion is meant 
to capture cases where PAN responses provide price improvement for the 
PRISM Order at prices that are crossed with the same side interest 
mentioned above. The remainder of the changes are grammatical and 
technical in nature, to the extent the Exchange is creating two 
separate sentences.
    The Exchange proposes to amend Options 3, Section 13(ii)(K) to add 
the following introductory text which describes a PRISM ISO.

    A PRISM ISO Order is the transmission of two orders for crossing 
pursuant to this Rule without regard for better priced Protected 
Bids or Protected Offers (as defined in Options 5, Section 1) 
because the Participant transmitting the PRISM ISO to the Exchange 
has, simultaneously with the routing of the PRISM ISO, routed one or 
more ISOs, as necessary, to execute against the full displayed size 
of any Protected Bid or Protected Offer that is superior to the 
starting PRISM Auction price and has swept all interest in the 
Exchange's Order Book priced better than the proposed auction 
starting price. Any execution(s) resulting from such sweeps shall 
accrue to the PRISM Order.

Phlx similarly describes a Price Improvement XL Mechanism (``PIXL'') 
ISO in its rule text at Options 3, Section 13(b)(11).\38\ This text 
does not amend the current System functionality, rather it adds context 
to the current PRISM rule in describing a PRISM ISO. BX also proposes 
to amend the title of Options 3, Section 13(ii)(K) from ``ISO Orders'' 
to ``PRISM ISO Orders.'' The Exchange also proposes to utilize this 
proposed term within Options 3, Section 13(ii)(K).
---------------------------------------------------------------------------

    \38\ Phlx Options 3, Section 13(b)(11) states, ``PIXL ISO Order. 
A PIXL ISO order (PIXL ISO) is the transmission of two orders for 
crossing pursuant to this Rule without regard for better priced 
Protected Bids/Offers (as defined in Options 5, Section 1) because 
the member transmitting the PIXL ISO to the Exchange has, 
simultaneously with the routing of the PIXL ISO, routed one or more 
ISOs, as necessary, to execute against the full displayed size of 
any Protected Bid/Offer that is superior to the starting PIXL 
Auction price and has swept all interest in the Exchange's book 
priced better than the proposed Auction starting price. Any 
execution(s) resulting from such sweeps shall accrue to the PIXL 
Order.''
---------------------------------------------------------------------------

    The Exchange proposes to correct Options 3, Section 13(ii)(K) to 
clearly describe the current System operation. The Exchange proposes to 
amend the first sentence of current Options 3, Section 13(ii)(K) to 
provide:

    If a PRISM Auction is initiated for an order designated as a 
PRISM ISO Order, all executions which are at a price inferior to the 
Initial NBBO (on the contra-side of the PRISM Order) shall be 
allocated pursuant to the Size Pro-Rata execution algorithm, as 
described in Options 3, Section 10(a)(1)(C)(2), or Price/Time 
execution algorithm, as described in Options 3, Section 10 
(a)(1)(C)(1), and the aforementioned priority in Options 3, Section 
13(ii)(E) and (F) shall not apply, with the exception of allocating 
to the Initiating Participant which will be allocated in accordance 
with the priority as specified in Options 3, Section 13(ii)(E) and 
(F).

    The Exchange states ``on the contra-side of the PRISM Order'' to 
distinguish the contra-side from the same side of the PRISM Order, 
which receives different treatment in allocation. This proposed 
amendment is intended to clarify the current System operation, not 
amend the System.
    Finally, the Exchange proposes to renumber Options 3, Section 
13(vi) to ``(v).'' This reflects the deletion of section ``vi'' which 
was described above in this proposal with respect to Public Customer-
to-Public Customer orders. Public Customer-to-Public Customer orders 
submitted into PRISM would be subject to the procedures, within Options 
3, Section 12(a).
Options 3, Section 23
    The Exchange proposes to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its descriptions of the BX Depth of 
Market (BX Depth) and BX Top of Market (BX Top) data feeds. The 
Exchange proposes to amend the BX Depth data feed at Options 3, Section 
23(a)(1) to more closely align with current System operation. The 
Exchange proposes a technical amendment to the first sentence to 
replace a comma with the word ``and.'' The Exchange also proposes to 
relocate rule text concerning order imbalances to the end of the 
description. The Exchange proposes to amend the first sentence to state 
``BX Depth of Market (BX Depth) is a data feed that provides full order 
and quote depth information for individual orders and quotes on the BX 
Options book, and last sale information for trades executed on BX 
Options.'' The Exchange would amend and relocate the rule text that 
provides, ``and Order Imbalance Information as set forth in BX Options 
Rules Options 3, Section 8'' to the end of the first sentence. The 
Exchange proposes to add a sentence at the end of the description which 
states, ``The feed also provides order imbalances on opening/re-opening 
(size of matched contracts and size of the imbalance), auction and 
exposure notifications.'' This sentence makes clear that order 
imbalance information is provided for both an opening and re-opening 
process. Today, a re-opening process initiates after a trading halt has 
occurred intra-day. Also, the proposed rule provides the specific 
information that would be provided in the data feed, namely the size of 
matched contracts and size of the imbalance. Finally, auction \39\ and 
exposure notifications \40\ are also provided in the data feed. The 
Exchange believes that this additional context to imbalance messages as 
well as also noting that auction and exposure notifications are 
provided will provide market participants with more complete 
information about what is contained in the data feed. This information 
is available today and the rule text is being

[[Page 48285]]

amended to make clear what information is currently provided.\41\
---------------------------------------------------------------------------

    \39\ Auctions notifications refer to PANs within Options 3, 
Section 13.
    \40\ Exposure notifications refer to those messages that are 
disseminated as part of routing within Options 5, Section 4.
    \41\ Fees related to BX TOP are noted within BX Options 7, 
Section 3.
---------------------------------------------------------------------------

    The Exchange also proposes to amend the description of the BX Top 
data feed, within Options 3, Section 23(a)(2). The Exchange proposes to 
amend the first sentence to provide that the BX Top ``calculates and 
disseminates BX's best bid and offer and last sale information for 
trades executed on BX Options.'' The current sentence provides that the 
BX Top, ``is a data feed that provides the BX Options Best Bid and 
Offer and last sale information for trades executed on BX Options.'' 
The Exchange believes that the amended description more clearly 
describes the BX Top data feed. Further, the Exchange proposes to amend 
the second sentence to provide, ``The feed also provides last trade 
information and for each options series includes the symbols (series 
and underlying security), put or call indicator, expiration date, the 
strike price of the series, and whether the option series is available 
for trading on BX and identifies if the series is available for closing 
transactions only.'' The current second sentence provides, ``The data 
provided for each options series includes the symbols (series and 
underlying security), put or call indicator, expiration date, the 
strike price of the series, and whether the option series is available 
for trading on BX and identifies if the series is available for closing 
transactions only.'' The Exchange believes noting that the last trade 
information is provided will make clear to market participants the data 
that is currently available on BX Top. This information is available 
today and the rule text is being amended to make clear what information 
is currently provided.\42\
---------------------------------------------------------------------------

    \42\ Fees related to BX Depth are noted within BX Options 7, 
Section 3.
---------------------------------------------------------------------------

2. Statutory Basis

    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\43\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\44\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b)
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public 
Customer'' to conform to Phlx's definition is intended to provide 
greater specificity regarding what is meant by the term ``Public 
Customer.'' Specifically, the Exchange proposes to provide that a 
``Public Customer'' could be a person or entity and is not a 
Professional as defined within Options 1, Section 1(a)(48).\45\ Today, 
a Public Customer is not a Professional. The term `Professional'' is 
separately defined, within BX Options 1, Section 1(a)(48). In order to 
properly represent orders entered on the Exchange, Participants are 
required to indicate whether orders are ``Professional Orders.'' To 
comply with this requirement, Participants are required to review their 
Public Customers' activity on at least a quarterly basis to determine 
whether orders that are not for the account of a broker-dealer should 
be represented as Public Customer Orders or Professional Orders.\46\ A 
Public Customer may be a Professional if they meet the requirements 
specified within BX Options 1, Section 1(a)(48). If the Professional 
definition is not met, the order is treated as a Public Customer order. 
The Exchange believes that it is consistent with the Act to state 
within the definition of ``Public Customers'' that a Professional is 
not a Public Customer. As noted above, there is a process for 
determining if a market participant qualifies as a ``Professional.'' 
This specificity will serve to protect investors and the public 
interest in that the terms ``Public Customer'' and ``Professional'' are 
separate categories of market participants, as defined. Also, this 
definition conforms to Phlx's definition at Options 1, Section 
1(b)(46).
---------------------------------------------------------------------------

    \45\ BX Options 1, Section 1(a)(48) provides that, ``The term 
``Professional'' means any 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). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
    \46\ Participants conduct a quarterly review and make any 
appropriate changes to the way in which they are representing orders 
within five days after the end of each calendar quarter. While 
Participants only will be required to review their accounts on a 
quarterly basis, if during a quarter the Exchange identifies a 
customer for which orders are being represented as Public Customer 
Orders but that has averaged more than 390 orders per day during a 
month, the Exchange will notify the Participant and the Participant 
will be required to change the manner in which it is representing 
the customer's orders within five days.
---------------------------------------------------------------------------

    The Exchange's proposal to remove a sentence within Options 1, 
Section 1(a)(48) which provides, ``A Participant or a Public Customers 
may, without limitation, be a Professional,'' is consistent with the 
Act. This sentence is confusing and not necessary. Phlx Options 1, 
Section 1(b)(46) does not contain a similar sentence. BX proposes 
removing this sentence because it does not add useful information to 
understanding who may qualify as a Professional.
    The Exchange's proposal to remove sentences, within Options 3, 
Section 10(a)(1)(C)(1)(a), Options 3, Section 10(a)(2)(i), Options 3, 
Section 13, in the introductory paragraph, and Options 3, Section 
13(ii)(E)(1) and (F)(1), which allocation and PRISM rules, 
respectively, provide that a Public Customer does not include a 
Professional, are consistent with the Act. Today, the definition of a 
Public Customer does not explicitly exclude a Professional. The 
language that the Exchange proposes to delete, today, indicates that 
Professionals would not be treated the same as a Public Customer in 
terms of priority and, therefore, would not receive the same allocation 
that is reserved for Public Customer orders. Because BX is amending the 
definition of a Public Customer to explicitly exclude Professionals, 
the language in the PRISM and allocation rules are no longer necessary 
to distinguish these two types of market participants.
Bid/Ask Differentials
    The Exchange's proposal to amend BX Options 2, Section 5(d)(2) to 
add the words ``Intra-Day'' before the title ``Bid/ask Differentials 
(Quote Spread Parameters)'' and remove references to the opening, will 
make clear for Market Makers their intra-day requirements. The bid/ask 
differentials, within BX Options 2, Section 5(d)(2), will apply intra-
day only. The bid/ask differentials applicable to the opening are noted 
within current BX Options 3, Section 8(a)(6).\47\ It is not necessary 
to discuss the opening bid/ask differentials within Options 2, Section 
5. The bid/ask differentials, within BX Options 2, Section 5(d)(2), are 
not otherwise being amended. This clarification is consistent with the 
Act because it is designed to avoid any confusion for Market Makers as 
to their intra-day requirements versus their opening requirements.
---------------------------------------------------------------------------

    \47\ See note 5 above.
---------------------------------------------------------------------------

    The Exchange's proposal to amend BX Rules at Options 2, Section 
4(f)(4)-(6) (Obligations of Market Makers and Lead Market Makers), 
which specifies quoting requirements for Lead Market Makers, to conform 
the rule to proposed BX Options 2, Section 5(d)(2), which applies to BX 
Market Makers, is consistent with the Act. The Exchange believes it is 
consistent with the Act to permit Lead Market Makers to quote as wide 
as Market Makers on BX.

[[Page 48286]]

    Today, Lead Market Makers have higher quoting requirements and 
other obligations noted within Options 2, Section 3, than Market 
Makers, which accounts for their priority allocations, within Options 
3, Section 10.\48\ The Exchange is proposing to allow Lead Market 
Makers to obtain similar quoting relief as, today, may be provided to 
Market Makers. There is no limitation on the quoting relief that may be 
afforded to Market Makers today, the Exchange is proposing to conform 
the ability for the Exchange to grant quoting relief equally to Market 
Makers and Lead Market Makers in the same option series. Today, while a 
Lead Market Maker has higher quoting obligations they have less 
opportunity for quoting relief in a certain options series as compared 
to a Market Maker who is quoting in the same options series. In periods 
of market volatility, similar to those experienced in the first half of 
2020, BX's ability to grant quote relief was limited as compared to 
other options markets.
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    \48\ See BX Options 3, Section 10(a)(1)(C)(1)(b) and Section 
10(a)(2)(ii) which describe Lead Market Maker Priority.
---------------------------------------------------------------------------

    Replacing Options 2, Section 4(f)(4)--(6) with the rule text, 
within BX Options 2, Section 5(d)(2), would continue to require Lead 
Market Makers to quote with a difference not to exceed $5 between the 
bid and offer regardless of the price of the bid. However, instead of 
requiring Lead Market Makers to quote a price differential for any in-
the-money option series identical to those in the underlying security 
market, in the event the bid/ask differential in the underlying 
security is greater than the bid/ask differential set forth in 
subsections (f)(4) and (5), the Exchange would now permit the bid/ask 
differential to be as wide as the spread between the national best bid 
and offer in the underlying security when the market for the underlying 
security is wider than $5. Further, replacing the exemptions from 
subsections (f)(4) and (5) and permitting BX to establish quote width 
differentials similar to BX Market Makers with this provision is 
consistent with the Act, because it would align the bid/ask 
differentials for BX Market Makers and BX Lead Market Makers with 
quoting requirements of other Nasdaq Affiliated Markets that have both 
Market Makers and Lead Market Makers.\49\ Further, the additional 
allowance and exemptions are no longer necessary because the Exchange 
proposes to add rule text, similar to BX Options 2, Section 4(f)(5) and 
BX Options 5, Section 5(d)(2), which permits BX to establish 
differences other than the stated bid/ask differentials, for one or 
more series or classes of options. The ability to establish 
differences, other than the stated bid/ask differentials, for one or 
more series or classes of options already exists today for BX Lead 
Market Maker quoting requirements, however this discretion is limited 
by BX Options 2, Section 4(f)(6).\50\ The Exchange's proposal would 
align the procedural BX would follow with other options exchanges, 
which notify members in writing of any discretion that is being granted 
by the Exchange. BX would no longer file a report with BX operations. 
Today, no other Nasdaq exchange files a report when it grants 
exemptions, including exemptions for BX Market Makers. Decisions to 
grant exemptions are made based on current market conditions. Exchanges 
need to be able to react when market conditions change dramatically and 
require the Exchange to grant relief. The additional steps that are 
currently required on BX, are not conducive to granting relief in fast 
changing markets. In addition, the quoting requirements for BX Lead 
Market Makers and Makers is consistent with requirements on other 
Nasdaq Affiliated Markets that have both Market Makers and Lead Market 
Makers.\51\ Other options markets do not limit their lead market makers 
to quote relief as BX limits quote relief today for its Lead Market 
Makers. Today, BX limits its Lead Market Makers to quote relief which 
may not be greater than half as wide as the bid/ask differential.\52\
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    \49\ See Nasdaq Phlx LLC Rules at Options 2, Section 4(c) and 
ISE, GEMX and MRX Rules at Options 2, Section 4(b)(4). ISE, GEMX and 
MRX utilize the term Primary Market Maker instead of Lead Market 
Maker.
    \50\ See BX Options 2, Section 4(f)(5).
    \51\ See Phlx at Options 2, Section 4(c) and ISE, GEMX and MRX 
Rules at Options 2, Section 4(b)(4). ISE, GEMX and MRX utilize the 
term Primary Market Maker instead of Lead Market Maker.
    \52\ See ISE and GEMX at Options 2, Section 5, Miami 
International Securities Exchange LLC Rule 503(e)(2), BOX Exchange 
LLC Rule 8040 and NYSE American LLC Rule 925NY(b)(5) and (c).
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c) is 
consistent with the Act. Today, BX re-prices certain orders to avoid 
locking and crossing away markets, consistent with its Trade-Through 
Compliance and Locked or Crossed Markets obligations.\53\ Orders which 
lock or cross an away market will automatically re-price one minimum 
price improvement inferior to the original away best bid/offer price to 
one minimum trading increment away from the new away best bid/offer 
price or its original limit price.\54\ The re-priced order is displayed 
on OPRA. The order remains on BX's Order Book and is accessible at the 
non-displayed price. For example, a limit order may be accessed on BX 
by a Participant if the limit order is priced better than the NBBO. The 
Exchange believes that the addition of this rule text will allow BX to 
define an ``internal BBO'' within its rules when describing re-priced 
orders that remain on the Order Book and are available at non-displayed 
prices, which are resting on the Order Book.
---------------------------------------------------------------------------

    \53\ BX Options 3, Section 5(d) provides, ``An order will not be 
executed at a price that trades through another market or displayed 
at a price that would lock or cross another market. An order that is 
designated by the member as routable will be routed in compliance 
with applicable Trade-Through and Locked and Crossed Markets 
restrictions. An order that is designated by a member as non-
routable will be re-priced in order to comply with applicable Trade-
Through and Locked and Crossed Markets restrictions. If, at the time 
of entry, an order that the entering party has elected not to make 
eligible for routing would cause a locked or crossed market 
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current 
national best bid (for offers) and displayed at one minimum price 
variance above (for offers) or below (for bids) the national best 
price.''
    \54\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order, 
within Options 3, Section 7(a)(1), is consistent with the Act. The 
Exchange's proposal to amend its System functionality for Cancel-
Replacement Orders that do not meet price or other reasonability 
checks, which consider the current market at the time of the Cancel-
Replacement Order, is consistent with the Act, because, with this 
proposal, all Cancel-Replacement Orders would receive price or other 
reasonability checks as a result of being viewed as new orders. Price 
and size are the terms that will determine if the Cancel-Replacement 
Order retains its priority, as is the case today, other terms and 
conditions do not amend the priority of the Cancel-Replacement Order. 
The Exchange is not amending the current System functionality of a 
Cancel-Replacement Order with respect to the terms that will cause the 
order to lose priority. Today, the price of the order may not be 
changed when submitting a Cancel-Replacement Order, that would be a new 
order.
    If a Cancel-Replacement Order does not pass a price or other 
reasonability check, the order will cancel, but it will not be replaced 
with a new order. The Limit Order Price Protection and Market Order 
Spread Protection are the only

[[Page 48287]]

risk protections within Options 3, Section 15 (Risk Protections) that 
are applicable. Price or other reasonability checks consider the 
current market at the time the Cancel-Replacement Order is entered. The 
Exchange proposes to begin applying price or other reasonability checks 
to all Cancel-Replacement Orders, similar to ISE, GEMX and MRX, to 
provide market participants with additional risk protection checks with 
the re-entry of the Cancel-Replacement Order. This proposed rule is 
similar to ISE, GEMX and MRX Rules at Options 3, Section 7 at 
Supplementary Material .02, except that ISE, GEMX and MRX discuss 
Reserve Orders, which are not available on BX.\55\ All risk protections 
are noted within Options 3, Section 15. Those risk protections apply 
throughout the Rulebook, except where otherwise noted. The Exchange 
believes that it is consistent with the Act to treat such orders as new 
orders which will be subject to price or other reasonability checks. 
The Exchange believes that conducting price or other reasonability 
checks for all Cancel and Replace Orders will protect investors and the 
public interest by validating the order against the current market 
conditions prior to proceeding with the request to modify the order.
---------------------------------------------------------------------------

    \55\ ISE, GEMX and MRX Options 3, Section 7 at Supplementary 
Material .02, provides, ``Cancel and Replace Orders shall mean a 
single message for the immediate cancellation of a previously 
received order and the replacement of that order with a new order. 
If the previously placed order is already filled partially or in its 
entirety, the replacement order is automatically canceled or reduced 
by the number of contracts that were executed. The replacement order 
will retain the priority of the cancelled order, if the order posts 
to the Order Book, provided the price is not amended, size is not 
increased, or in the case of Reserve Orders, size is not changed. If 
the replacement portion of a Cancel and Replace Order does not 
satisfy the System's price or other reasonability checks (e.g. 
Options 3, Section 15(b)(1)(A) and (b)(1)(B); and Supplementary 
Material .07 (a)(1)(A), (b) and (c)(1) to Options 8, Section 14) the 
existing order shall be cancelled and not replaced.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Directed Order,'' within Options 
3, Section 7(a)(2), is non-substantive and makes technical edits that 
do not change the meaning of the term.
    The Exchange's proposal to amend ``Limit Order,'' within Options 3, 
Section 7(a)(3), to add the sentence for marketable limit orders 
currently within ISE, GEMX and MRX Options 3, Section 7(b)(1) is 
consistent with the Act. The Exchange believes that this description 
more aptly informs participants about a marketable limit order as 
compared to the current rule text, which may be confusing. The new 
sentence does not substantively amend the manner in which a Limit Order 
operates.
    The Exchange's proposal to amend ``Minimum Quantity Orders,'' 
within Options 3, Section 7(a)(4), is non-substantive and makes 
technical edits that do not change the meaning of the term.
    The Exchange's proposal to amend ``Market Orders,'' within Options 
3, Section 7(a)(5), is consistent with the Act. The Exchange's proposes 
to style ``Market Orders'' in the singular and change ``are'' to ``is 
an'' and ``orders'' to ``order'' are technical and non-substantive 
amendments. The Exchange's proposal to add a notation at the end of the 
rule to provide that ``Participants can designate that their Market 
Orders not executed after a pre-established period of time, as 
established by the Exchange, will be cancelled back to the Participant, 
once an option series has opened for trading'' adds specificity 
regarding the opening. Market Orders submitted during the opening may 
be executed, routed (depending on instructions from the market 
participant) or cancelled if the Market Order is priced through the 
opening price. The Exchange would only cancel those Market Orders that 
remained on the Order Book once an option series opened. The pre-
established period of time would commence once the intra-day trading 
session begins for that options series and the order would be cancelled 
back to the Participant, provided the Participant elected to cancel 
back its Market Orders. The Exchange's proposal differentiates when the 
opening is on-going, and the intra-day trading session has not 
commenced, the manner in which the pre-established period of time would 
commence.
    The proposal to note that ``Market Orders on the Order Book would 
be immediately cancelled if an options series halted, provided the 
Participant designated the cancellation of Market Orders'' specifically 
addresses trading halts within the rule. Once an options series halts 
for trading, the Exchange conducts another Opening Process. In the case 
where a Market Order was resting on the Order Book, and the Participant 
had designated the cancellation of Market Orders, in the event of a 
halt, the Market Orders resting on the Order Book would immediately 
cancel. The Exchange believes that this text provides more detail for 
market participants to understand the manner in which the System 
handles Market Orders.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' or 
``ISO'' Orders, within Options 3, Section 7(a)(6), is consistent with 
the Act. The Exchange is amending the current functionality of an ISO 
Order to require that ISOs have a time-in-force designation of 
Immediate-or-Cancel. Today, ISOs may have any time-in-force designation 
except WAIT, except that ISOs with a time-in-force designation of GTC 
are treated as having a time-in-force designation of ``Day.'' With this 
proposal, the Exchange would only continue to allow a time-in-force of 
IOC. A TIF designation of IOC that would cause an ISO Order to cancel 
in whole or in part upon receipt, in the event that the ISO Order does 
not execute or does not entirely execute, is consistent with the Act 
because an ISO is generally used when trying to sweep a price level 
across multiple exchanges in an effort to post the balance of an order 
without locking an away market.
    The Exchange's proposal to remove the ``One-Cancels-the-Other 
Order'' is consistent with the Act because it will remove an order type 
that is not in demand on BX and simply the offerings provided by BX. 
The Exchange would file a proposed rule change with the Commission 
pursuant to Section 19b1 of the Act,\56\ if it decides to offer this 
order type in the future. It will provide notice to Participants that 
this order type will no longer be available.
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange's amendment to ``All-or-None Order,'' within Options 
3, Section 7(a)(7), is non-substantive and does not change the meaning 
of the term. The amendment makes technical changes and replaces the 
words ``opening cross'' with ``opening''.
    The Exchange's proposal to include a ``PRISM Order'' and ``Customer 
Cross Order'' in the list of order types is consistent with the Act 
because the addition of these terms within the list of order types 
simply cross-references the existing order types and does not change 
the functionality of the order types. The Exchange's proposal defines 
this existing order type by cross-referencing Options 3, Section 13 and 
Options 3, Section 12(a), respectively, which explains these existing 
order types. The Exchange believes that adding these order types, 
within Options 7, Section 3, will bring greater clarity to the list of 
order types available on BX for the protection of investors and the 
general public.
    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order 
or ``IOC,'' within Options 3, Section 7(b)(2), is consistent with the 
Act. The Exchange's proposal replaces the current description with 
Phlx's description at Options 3, Section 7(c)(2) as these order types 
are identical. The Exchange's proposal to state that an Immediate-or-

[[Page 48288]]

Cancel Order or ``IOC'' Order is a Market Order or Limit Order to be 
executed in whole or in part upon receipt will bring greater clarity to 
the rule. Further the Exchange's proposal to add that any portion not 
so executed is cancelled is consistent with the current description. 
The Exchange is adding additional context, similar to Phlx, with 
respect to routing, submission through FIX or SQF and the price 
protections that apply when utilizing SQF. The Exchange believes that 
this additional clarity will provide market participants with greater 
information for the protection of investors and the general public. SQF 
is not subject to the Limit Order Price Protection or the Market Order 
Spread Protection in Options 3, Section 15(a)(1) and (a)(2), 
respectively, because SQF is a quoting protocol. The Order Price 
Protection and Market Order Spread Protection, while available for 
orders, are not available on SQF. These exceptions within this rule to 
make clear that this information is available to market participants 
within the description of IOC. Market Makers utilize IOC Orders to 
trade out of accumulated positions and manage their risk when providing 
liquidity on the Exchange. Proper risk management, including using 
these IOC Orders to offload risk, is vital for Market Makers, and 
allows them to maintain tight markets and meet their quoting and other 
obligations to the market. The Exchange believes that allowing Market 
Makers to submit IOC Orders though their preferred protocol increases 
their efficiency in submitting such orders and thereby allow them to 
maintain quality markets to the benefit of all market participants that 
trade on the Exchange. Further, unlike other market participants, 
Market Makers provide liquidity to the market and have obligations.\57\ 
The Exchange believes not offering Order Price Protection and Market 
Order Spread Protection for IOC Orders entered through SQF is 
consistent with the Act, because Market Makers have more sophisticated 
infrastructures than other market participants and are able to manage 
their risk, particularly with respect to quoting, using tools that are 
not available to other market participants.\58\
---------------------------------------------------------------------------

    \57\ Market Makers have quoting obligations as specified in 
Options 2, Section 5(d).
    \58\ Market quotes are subject to various protections listed in 
Options 3, Section 15(c). These additional quoting protections 
permit Market Makers to manage their exposure at the Exchange. Other 
market participants would not be subject to these risk protections 
because they do not submit quotes or utilize SQF.
---------------------------------------------------------------------------

    Finally, orders entered into the PRISM Mechanism are considered to 
have a TIF of IOC; this is also true of the PIXL Mechanism on Phlx.\59\ 
The Exchange believes that adding these new details to the manner in 
which IOC Orders are handled within the System will bring greater 
transparency to these order types and provide Participants with greater 
detail as to the manner in which the System will handle a TIF of IOC.
---------------------------------------------------------------------------

    \59\ See Phlx Options 3, Section 7(c)(2).
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``DAY'' at Options 5, 
Section 7(b)(3) to conform the description of a TIF of ``DAY'' to Phlx 
Options 3, Section 7(c)(1) \60\ is consistent with the Act. The 
Exchange believes the current text describing BX's Day TIF is 
unnecessarily verbose and proposes to remove this language. A DAY Order 
on Phlx functions in the same way as a DAY Order on BX. The proposal is 
not amending the System functionality of a DAY Order.
---------------------------------------------------------------------------

    \60\ Phlx Options 3, Section 7(c)(1) provides, ``Day. If not 
executed, an order entered with a TIF of ``Day'' expires at the end 
of the day on which it was entered. All orders by their terms are 
Day Orders unless otherwise specified. Day orders may be entered 
through FIX.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend the TIF of ``Good Til Cancelled'' 
or ``GTC'' at Options 5, Section 7(b)(4) is consistent with the Act. 
The Exchange proposes to conform the rule text to Phlx Options 3, 
Section 7(c)(4).\61\ The Exchange is not amending the manner in which 
the System function with respect to GTC Orders. GTC Orders, if not 
fully executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the option 
expires, whichever comes first. GTC Orders shall be available for entry 
from the time prior to market open, as specified by the Exchange, until 
market close, as is the case today. Also, today, a GTC Order may only 
be entered through FIX. A GTC Order on Phlx functions in the same way 
as a GTC Order on BX. The Exchange believes that the amended rule text 
will bring greater transparency to its rules for the protection of 
investors and the general public.
---------------------------------------------------------------------------

    \61\ Phlx Options 3, Section 7(c)(4) provides, ``A Good Til 
Cancelled (``GTC'') Order entered with a TIF of GTC, if not fully 
executed, will remain available for potential display and/or 
execution unless cancelled by the entering party, or until the 
option expires, whichever comes first. GTC Orders shall be available 
for entry from the time prior to market open specified by the 
Exchange until market close.''
---------------------------------------------------------------------------

    The Exchange's proposal to no longer offer a TIF of ``WAIT'' is 
consistent with the Act because it will remove an order type that is 
not in demand on BX and simply the offerings provided by BX. The 
Exchange would file a proposed rule change with the Commission pursuant 
to Section 19b1 of the Act,\62\ if it decides to offer this order type 
in the future. It will provide notice to Participants that this order 
type will no longer be available.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange's proposal to note, within BX Options 3, Section 7(c), 
the various routing options which are available is consistent with the 
Act. These routing strategies are consistent with a recent rule change 
filed by BX to amend routing strategies.\63\
---------------------------------------------------------------------------

    \63\ See SR-BX-2020-7P.
---------------------------------------------------------------------------

Options 3, Section 10
    The Exchange's proposal to amend its Order Book allocation rule, 
within Options 3, Section 10, to amend the manner in which rounding 
occurs is consistent with the Act because the Exchange is proposing to 
make transparent the manner in which rounding will occur once the 
technology migration occurs. Today, BX rounds up or down to the nearest 
integer. With this proposal, the Exchange would round up to the nearest 
integer. Also, corresponding changes are being made, within Options 3, 
Section 10, to update the rounding methodology. Removing unnecessary 
language regarding remainders is also consistent with the Act because 
remainders of less than one contract cannot occur with the new rounding 
method.
    The Exchange believes that rounding up uniformly is consistent with 
the Act because it provides for the equitable allocation of contracts 
among the Exchange's market participants. The Exchange proposes to 
provide market participants with transparency as to the number of 
contracts that they are entitled to receive as the result of rounding. 
Further, the Exchange believes that this methodology produces an 
equitable outcome during allocation that is consistent with the 
protection of investors and the public interest because all market 
participants are aware of the methodology that will be utilized to 
calculate outcomes for allocation purposes.
Options 3, Section 12 and 22
    The adoption of Customer Cross Orders is consistent with the Act 
because this proposal would permit Participants to enter and execute 
paired Public Customer-to-Public Customer Orders automatically outside 
of a PRISM Auction, while also protecting Public Customer Orders on the 
book at the same price. Today, the Exchange permits an Initiating 
Participant to enter a PRISM Order for the account of a Public Customer 
paired with an order

[[Page 48289]]

for the account of a Public Customer and such paired orders will be 
automatically executed without a PRISM Auction.\64\ The Exchange's 
proposal would continue to permit the ability to enter Public Customer-
to-Public Customer paired orders to be automatically executed, however, 
not require these orders to be first entered into PRISM. A Public 
Customer-to-Public Customer order submitted into PRISM directly would 
be subject to execution pursuant to Options 3, Section 13(i) and (ii). 
The Exchange is removing the current provisions within Options 3, 
Section (iv) with this proposed rule change. Similar to ISE, GEMX and 
MRX rules,\65\ BX would require Customer Crossing Orders to be entered 
into the Order Book. The Exchange's proposal would require executions 
to be at or between the best bid and offer on the Exchange and not at 
the same price as a Public Customer Order on the Exchange's Order Book. 
Finally, the execution may not be through the NBBO.
---------------------------------------------------------------------------

    \64\ See Options 3, Section 13(vi). The execution price for such 
a PRISM Order must be expressed in the quoting increment applicable 
to the affected series. Such an execution may not trade through the 
NBBO or trade at the same price as any resting Public Customer 
order.
    \65\ See ISE, GEMX and MRX Options 3, Section 12(a).
---------------------------------------------------------------------------

    While the Exchange is limiting these orders to be entered through 
FIX, any market participant may utilize FIX. The Exchange believes that 
this proposal would allow all Participants the ability to continue 
automatically execute paired to enter Public Customer-to-Public 
Customer Orders as they do today, without the need to utilize PRISM. 
Public Customer-to-Public Customer Cross Orders will be rejected if 
they cannot be executed, as is the case today. Finally, Public 
Customer-to-Public Customer Cross Orders may only be entered in the 
regular trading increments applicable to the options class under 
Options 3, Section 3, as is the case today. Today, a Public Customer-
to-Public Customer paired order could only be entered into PRISM to 
receive the treatment described within proposed Options 3, Section 
13(vi). With this proposal, the manner in which Public Customer-to-
Public Customer paired orders are being processed by the System is 
changing. With this proposal, Participants may enter Public Customer-
to-Public Customer paired orders directly into FIX and receive the same 
treatment that these orders receive today when entered into PRISM. The 
only difference to a Participant is the manner in which the order must 
now be submitted directly into FIX to initiate a Customer Cross Order.
    Further, the elimination of BX Options 3, Section 13(vi) is 
consistent with the Act because Public Customer-to-Public Customer 
Cross Orders would no longer be entered as PRISM Orders. With this 
proposal Public Customer-to-Public Customer Cross Orders would be 
entered through FIX as Customer Cross Order. The prohibition expressed 
within current BX Options 3, Section 13(vi) provided for only one PRISM 
Auction to be conducted at a time in any given series. Today, to 
initiate the Auction, the Initiating Participant must mark the PRISM 
Order for Auction processing. With this proposal, Public Customer-to-
Public Customer Cross Orders would not be tagged as a PRISM Auction. 
The Public Customer-to-Public Customer Cross Orders would be entered as 
a separate order type and therefore would not potentially cause more 
than one PRISM Auction to occur in the same series.
    In conjunction with this change, BX proposes to add the Customer 
Cross Order to Options 3, Section 22(a) and (c) as an exception to the 
rules for limitations on principal transactions and solicitation 
orders, which require Participants to expose trading interest to the 
market before executing agency orders as principal or before executing 
agency orders against orders that were solicited from other broker-
dealers. Options 3, Section 22 contains language similar to current BX 
Options 3, Section 13(vi)(A). The Exchange believes that its proposal 
continue to protect customers and the general public by affirming that 
it is a violation of BX Options 3, Section 22(a)(1) for a Participant 
from executing agency orders to increase its economic gain from trading 
against the order without first giving other trading interests on the 
Exchange an opportunity to either trade with the agency order or to 
trade at the execution price when the Participant was already bidding 
or offering on the book.\66\ The Exchange would surveil Public 
Customer-to-Public Customer Cross Orders in the same fashion that it 
already surveils for these orders on ISE, GEMX and MRX.
---------------------------------------------------------------------------

    \66\ See Options 3, Section 22(a)(1).
---------------------------------------------------------------------------

Options 3, Section 13
    The Exchange's proposal to amend the System functionality, within 
Options 3, Section 13, similar to ISE, GEMX and MRX Options 3, Section 
13, to better any limit order or quote on the limit order book on the 
same side of the market as the PRISM Order, within Options 3, Section 
13(i)(A) and (B), is consistent with the Act because expanding its 
consideration to both quotes and orders will consider a greater amount 
of interest present on BX's Order Book when initiating a PRISM. The 
addition of ``quotes,'' similar to ISE, GEMX and MRX at Options 3, 
Section 13, will enable the Exchange to consider additional interest in 
determining eligibility for PRISM. Today, BX Options 3, Section 13 only 
considers orders. With this System change, quotes and orders would be 
considered in determining the execution price of the PRISM order. This 
change will not impact the handling of orders and quotes and their 
respective priority on the limit order book. The Exchange is proposing 
to add ``or quote,'' within proposed Options 3, Sections 13(i) and (A) 
and (B) and (ii)(A)(1).
    The Exchange's proposal to state the minimum increment allowable 
directly within the rule and not utilize references to Options 3, 
Section 3 is consistent with the Act because the Exchange will note the 
exact increment within the rule. This amendment does not amend the 
current System operation, rather it more simply states what that 
minimum increment is today. The Exchange proposes similar changes at 
Options 3, Section 13(ii)(A)(1), Options 3, Section 13(ii)(A)(6), 
Options 3, Section 13(ii)(C) and Options 3, Section 13(ii)(I).
    The Exchange's proposal to amend the System functionality, within 
Options 3, Section 13(ii)(A)(1), for Surrender language is consistent 
with the Act because an Initiating Participant will be able to submit 
an Initiating Order with a configurable percentage designation of 
``Surrender'' up to 40% or such lower percentage requested by the 
Participant. Today, the System permits an Initiating Participant to 
elect to receive either the full 40% allocation entitlement or no 
allocation at all. The Exchange believes that the proposed feature will 
provide an Initiating Participant with more flexibility to choose its 
priority allocation percentage, similar to functionality currently 
offered on ISE, GEMX and MRX at Options 3, Section 13(e)(5)(iii). Any 
Initiating Participant may elect to use the PRISM Surrender feature.
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(1) to 
remove the following rule text, ``. . . forfeiting the priority and 
trade allocation privileges which he is otherwise entitled to as per. . 
.'', is consistent with the Act, because the proposed text defines 
``Surrender'' as the percentage designation, which the Exchange 
believes more accurately defines ``Surrender.''

[[Page 48290]]

    The Exchange's proposal to amend the second sentence of Options 3, 
Section 13(ii)(A)(1) to instead provide, ``If zero (0%) is specified, 
the Initiating Order will only trade if there is not enough interest 
available to fully execute the PRISM Order at prices which are equal to 
or improve upon the stop price,'' is consistent with the Act. The 
proposed text makes clear that if no percentage were elected for 
Surrender (0%) then the Initiating Order will only trade if there is 
not enough interest available to fully execute the PRISM Order at 
prices which are equal to or improve upon the stop price.
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(2) to 
add ``price'' to the PRISM Auction Notification or ``PAN,'' as part of 
the technology migration, is consistent with the Act because adding 
``price'' to the list of details will provide Participants with greater 
transparency with respect to the PRISM and could encourage more 
competition in PRISM and greater opportunity for potential price 
improvement in PRISM. This rule change is similar to the behavior of 
PAN responses on ISE, GEMX and MRX.\67\
---------------------------------------------------------------------------

    \67\ See ISE, GEMX and MRX Options 3, Section 13(c)(2).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(7) to 
conform the behavior of PAN responses to ISE, GEMX and MRX System 
behavior \68\ is consistent with the Act. As noted above, the Exchange 
is amending the System to accept oversized responses. These responses 
will no longer cancel back, rather, PRISM will cap the response at the 
size of the Initiating Order for purposes of allocation and then cancel 
any remaining quantity not allocated in the PRISM, including any 
quantity in excess of the original PRISM quantity, back to the 
originator of the PAN response at the end of the auction timer. 
Responses are a source of liquidity and potential price improvement, 
the Exchange believes it is appropriate to accept these responses and 
cap them at the size of the Initiating Order.
---------------------------------------------------------------------------

    \68\ See ISE, GEMX and MRX Options 3, Section 13(c)(2).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(8) 
and (9) to replace the words ``immediately cancelled'' with 
``rejected'' is a non-substantive technical amendment. Non-eligible and 
non-compliant orders that are submitted into PRISM are rejected as 
those orders are reviewed for compliance with Exchange Rules, these 
orders are not immediately cancelled, as technically there is time, 
however miniscule, between the submission of the order and the 
rejection of the order. The Exchange believes this non-substantive 
change adds more clarity to the rule text.
    The Exchange's proposal to amend Options 3, Section 13(ii)(E)(2)(a) 
to provide the Initiating Participant with a priority allocation based 
on the initial size of the Initiating Order after Public Customer 
interest has been satisfied is consistent with the Act. Allocating 
based on the ``initial size of the Initiating Order'' provides an 
expectation for Participants that respond to PRISM Orders, whether that 
allocation is price/time,\69\ size pro-rata \70\ or auto-match.\71\
---------------------------------------------------------------------------

    \69\ At the conclusion of the Auction, for option classes 
governed under BX's Price/Time execution algorithm, the PRISM Order 
will be allocated at the best price(s), pursuant to the priority set 
forth in proposed Options 3, Section 13(ii)(F)(1) through (4). 
First, Public Customer orders would have time priority at each price 
level. Next, the Initiating Participant would receive an allocation 
after Public Customer orders.
    \70\ At the conclusion of the Auction, for option classes 
governed under BX's Size Pro-Rata execution algorithm, the PRISM 
Order will be allocated at the best price(s), pursuant to the 
priority set forth in Options 3, Section 13(ii)(E)(1) through (5).
    \71\ If the Initiating Participant selected the auto-match 
option, the Initiating Participant would be allocated a number of 
contracts equal to the aggregate size of all other quotes, orders, 
and PAN responses at each price point until a price point is reached 
where the balance of the order can be fully executed, except that 
the Initiating Participant would be entitled to receive up to 40% 
(if there are multiple competing quotes, orders or PAN responses) or 
50% (if there is only one competing quote, order or PAN response) of 
the contracts remaining at the final price point (including 
situations where the stop price is the final price) after Public 
Customer interest has been satisfied but before remaining interest 
receives an allocation.
---------------------------------------------------------------------------

    With this proposed change, the Exchange believes that Participants 
are better able to determine their allocation when responding with a 
PAN if the Initiating Participant's allocation is based on the initial 
size of the Initiating Order after Public Customer interest is 
satisfied, rather than the remaining contracts after Public Customer 
interest is satisfied. The Exchange's proposal provides greater 
transparency to market participants in that when they respond to the 
PRISM, they are aware of the initiating size, as compared to an 
undetermined remaining size which is unknown as responses are not 
visible to all market participants. The Exchange's proposal is similar 
to ISE, GEMX and MRX Options 3, Section 13(d)(3).\72\
---------------------------------------------------------------------------

    \72\ ISE, GEMX and MRX Options 3, Section 13(d)(3), provides, 
``In the case where the Counter-Side Order is at the same price as 
Professional Interest in (d)(2), the Counter-Side order will be 
allocated the greater of one (1) contract or forty percent (40%) of 
the initial size of the Agency Order before Professional Interest is 
executed. Upon entry of Counter-Side orders, Members can elect to 
automatically match the price and size of orders, quotes and 
responses received during the exposure period up to a specified 
limit price or without specifying a limit price. In this case, the 
Counter-Side order will be allocated its full size at each price 
point, or at each price point within its limit price if a limit is 
specified, until a price point is reached where the balance of the 
order can be fully executed. At such price point, the Counter-Side 
order shall be allocated the greater of one contract or forty 
percent (40%) of the original size of the Agency Order, but only 
after Priority Customer Interest at such price point are executed in 
full. Thereafter, all Professional Interest at the price point will 
participate in the execution of the Agency Order based upon the 
percentage of the total number of contracts available at the price 
that is represented by the size of the Professional Interest. An 
election to automatically match better prices cannot be cancelled or 
altered during the exposure period.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend rounding, within Options 3, 
Section 13(ii)(G), is consistent with the Act. Today, BX PRISM rounds 
up or down to the nearest integer when it allocates. The Exchange is 
amending the rounding methodology to round up to the nearest integer. 
Options 3, Section 13(ii)(G) will reflect the new methodology and 
provide notice to Participants of this change to the methodology. The 
rounding methodology will be uniformly applied when allocating PRISM 
Orders.
    The Exchange's proposal to amend Options 3, Section 13(ii)(H) to 
remove the phrase ``then-existing'' and instead note ``at time of 
execution'' to describe the NBBO is consistent with the Act. The 
Exchange is not amending the current operation of the System, rather 
the Exchange is amending its rules to more accurately state, ``If there 
are PAN responses that cross the NBBO at the time of execution 
(provided such NBBO is not crossed), such PAN responses will be 
executed, if possible, at their limit price(s).'' The current text 
appeared to state that the System was utilizing the NBBO upon execution 
to check if the PAN responses crossed the NBBO, however, the System 
utilizes the NBBO at the time of arrival to check of the PAN responses 
cross the NBBO. This amendment promotes just and equitable principles 
of trade, because it will ensure the execution price does not cross the 
Initial NBBO in accordance with linkage rules. This proposed 
clarification is not changing current functionality, and this 
functionality applies in the same manner to the responses of all 
Participants.
    The Exchange's proposal to amend Options 3, Section 13(ii)(I) is 
consistent with the Act, because the Exchange seeks to make clear the 
current text contained in this section. The Exchange's proposal to add 
context to the rule to better reflect the current System operation is 
consistent with the Act because without the word

[[Page 48291]]

``execution'' in this sentence, a comparison of the ``price of the 
PRISM auction'' does not clearly differentiate the price in question as 
the execution price of the PRISM Auction or the original stop price of 
the PRISM Order. Without this clear differentiation, current Options 3, 
Section 13(ii)(I) can be interpreted to describe scenarios that cannot 
happen. The Exchange's proposed addition of the word ``execution'' in 
the first sentence of Options 3, Section 13(ii)(I) reflects current 
System handling. The execution price of the PRISM Auction is utilized 
to compare to the price of an order on the limit Order Book. Adding the 
word ``execution'' makes clear to Participants that the initial PRISM 
stop price is not utilized to compare the same side of the market 
transactions. Also, if the potential execution price of the PRISM Order 
would be the same or better than the price of an order on the limit 
Order Book on the same side of the market as the PRISM Order then, 
today, would be executed at a price $0.01 better than such limit order, 
regardless of whether such limit was a Public or Non-Public Customer 
Order. While ``or better'' is not clearly specified, it is the case 
today and its inclusion is meant to capture cases where PAN responses 
provide price improvement for the PRISM Order at prices that are 
crossed with the same side interest mentioned above. The proposed 
wording is intended to provide greater clarity to Participants for 
System handling with respect to same side of the market executions 
against the Order Book and is consistent with the Act and the 
protection of investors and the general public. The proposed amendments 
reflect current System handling are would not result in changes to the 
System. The remaining amendments are technical in that the change and 
non-substantive as the change merely structures the paragraph into two 
sentences.
    The Exchange's proposal to amend Options 3, Section 13(ii)(K) to 
add introductory text which defines a PRISM ISO is consistent with the 
Act. Phlx similarly describes a PIXL ISO in its rule text at Options 3, 
Section 13(b)(11).\73\ This text does not amend the current System 
functionality, rather it adds context to the current PRISM rule in 
describing a PRISM ISO.
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    \73\ Phlx Options 3, Section 13(b)(11) states, ``PIXL ISO Order. 
A PIXL ISO order (PIXL ISO) is the transmission of two orders for 
crossing pursuant to this Rule without regard for better priced 
Protected Bids/Offers (as defined in Options 5, Section 1) because 
the member transmitting the PIXL ISO to the Exchange has, 
simultaneously with the routing of the PIXL ISO, routed one or more 
ISOs, as necessary, to execute against the full displayed size of 
any Protected Bid/Offer that is superior to the starting PIXL 
Auction price and has swept all interest in the Exchange's book 
priced better than the proposed Auction starting price. Any 
execution(s) resulting from such sweeps shall accrue to the PIXL 
Order.''
---------------------------------------------------------------------------

    The Exchange's proposal to correct Options 3, Section 13(ii)(K) to 
add ``on the contra-side of the PRISM Order'' is consistent with the 
Act, because this rule text clearly describes the current System 
operation. The Exchange states ``on the contra-side of the PRISM 
Order'' to distinguish the contra-side from the same side of the order, 
which receives different treatment in allocation. This proposed 
amendment is intended to clarify the current System operation, not 
amend the System.
    Finally, the Exchange's proposal to renumber Options 3, Section 
13(vii) to ``(vi)'' is a technical non-substantive amendment.
Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its descriptions of the BX Depth of 
Market (BX Depth) and BX Top of Market (BX Top) data feeds is 
consistent with the Act, because the updated descriptions will bring 
greater transparency to the Exchange's rules.
    The Exchange's proposal will make clear that order imbalance 
information is provided for both an opening and re-opening process 
within BX Depth. Today, a re-opening process initiates after a trading 
halt has occurred intra-day. Also, the Exchange's proposal notes the 
specific information that would be provided in the data feed, namely 
the size of matched contracts and size of the imbalance. Finally the 
auction and exposure notifications are also provided in the data feed. 
The Exchange believes that this additional context to imbalance 
messages as well as also noting that auction and exposure notifications 
are provided will provide market participants with more complete 
information about what is contained in the data feed. This information 
is available today within the data feed. The proposed rule text is 
being amended to make clear what information is currently provided.
    With respect to the BX Top data feed, within Options 3, Section 
23(a)(2), the amended description more clearly describes the BX Top 
data feed. Further, the Exchange believes noting that the last trade 
information is provided will make clear to market participants the data 
that is currently available on BX Top. This information is available in 
the data feed today and the rule text is being amended to make clear 
what information is currently provided.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Options 1, Section 1
    The Exchange's proposal to amend the definition of ``Public 
Customer'' to conform to Phlx's definition does not impose an undue 
burden on competition because it will make clear that a Public Customer 
could be a person or entity and clarifying that a Public Customer is 
not a Professional, as defined within Options 1, Section 1(a)(48),\74\ 
will make clear what it meant by that term. Today, a Public Customer is 
not a Professional. The term `Professional'' is separately defined, 
within BX Options 1, Section 1(a)(48). In order to properly represent 
orders entered on the Exchange, Participants are required to indicate 
whether orders are ``Professional Orders.''
---------------------------------------------------------------------------

    \74\ BX Options 1, Section 1(a)(48) provides that, ``The term 
``Professional'' means any 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). A Participant or a Public Customer may, 
without limitation, be a Professional. All Professional orders shall 
be appropriately marked by Participants.''
---------------------------------------------------------------------------

    Further, the Exchange's proposal to remove a sentence within 
Options 1, Section 1(a)(48) which provides, ``A Participant or a Public 
Customers may, without limitation, be a Professional,'' does not impose 
an undue burden on competition. This sentence is confusing and not 
necessary. Phlx Options 1, Section 1(b)(46) does not contain a similar 
sentence. BX proposes removing this sentence because it does not add 
useful information to understanding who may qualify as a Professional.
Bid/Ask Differentials
    The Exchange's proposal to amend BX's Lead Market Maker quotation 
rules to conform to those of other BX Market Makers does not impose an 
undue burden on competition. This proposal conforms the requirements 
for all Market Makers. Today, Lead Market Makers have higher quoting 
requirements and other obligations noted within Options 2, Section 3, 
than Market Makers, which accounts for their priority allocations, 
within Options 3, Section 10.\75\ The Exchange is proposing

[[Page 48292]]

to allow Lead Market Makers to obtain similar quoting relief as, today, 
may be provided to Market Makers. There is no limitation on the quoting 
relief that may be afforded to Market Makers today, the Exchange is 
proposing to conform the ability for the Exchange to grant quoting 
relief equally to Market Makers and Lead Market Makers in the same 
option series. Today, while a Lead Market Maker has higher quoting 
obligations they have less opportunity for quoting relief in a certain 
options series as compared to a Market Maker who is quoting in the same 
options series.
---------------------------------------------------------------------------

    \75\ See BX Options 3, Section 10(a)(1)(C)(1)(b) and Section 
10(a)(2)(ii) which describe Lead Market Maker Priority.
---------------------------------------------------------------------------

    Replacing Options 2, Section 4(f)(4)-(6) with the rule text, within 
BX Options 2, Section 5(d)(2), would continue to require Lead Market 
Makers to quoted with a difference not to exceed $5 between the bid and 
offer regardless of the price of the bid. However, instead of requiring 
Lead Market Makers to quote a price differential for any in-the-money 
option series identical to those in the underlying security market, in 
the event the bid/ask differential in the underlying security is 
greater than the bid/ask differential set forth in subsections (f)(4) 
and (5), the Exchange would now permit the bid/ask differential to be 
as wide as the spread between the national best bid and offer in the 
underlying security when the market for the underlying security is 
wider than $5.
    Further, the additional allowance and exemptions are no longer 
necessary because the Exchange proposes to add rule text, similar to BX 
Options 2, Section 4(f)(5) and BX Options 5, Section 5(d)(2), which 
permits BX to establish differences other than the stated bid/ask 
differentials, for one or more series or classes of options. The 
ability to establish differences, other than the stated bid/ask 
differentials, for one or more series or classes of options already 
exists today for BX Lead Market Maker quoting requirements, however 
this discretion is limited by BX Options 2, Section 4(f)(6).\76\ The 
Exchange's proposal would align the procedural BX would follow with 
other options exchanges, which notify members in writing of any 
discretion that is being granted by the Exchange. BX would no longer 
file a report with BX operations. Today, no other Nasdaq exchange files 
a report when it grants exemptions, including exemptions for BX Market 
Makers. Decisions to grant exemptions are made based on current market 
conditions. Exchanges need to be able to react when market conditions 
change dramatically and require the Exchange to grant relief.
---------------------------------------------------------------------------

    \76\ See BX Options 2, Section 4(f)(5).
---------------------------------------------------------------------------

Options 3, Section 5
    The Exchange's proposal to amend Options 3, Section 5(c) to add 
additional rule text similar to Phlx Options 3, Section 5(c) does not 
impose an undue burden on competition. Today, BX re-prices certain 
orders to avoid locking and crossing away markets, consistent with its 
Trade-Through Compliance and Locked or Crossed Markets obligations.\77\ 
Orders which lock or cross an away market will automatically re-price 
one minimum price improvement inferior to the original away best bid/
offer price to one minimum trading increment away from the new away 
best bid/offer price or its original limit price.\78\ The re-priced 
order is displayed on OPRA. The order remains on BX's Order Book and is 
accessible at the non-displayed price.
---------------------------------------------------------------------------

    \77\ BX Options 3, Section 5(d) provides, ``An order will not be 
executed at a price that trades through another market or displayed 
at a price that would lock or cross another market. An order that is 
designated by the member as routable will be routed in compliance 
with applicable Trade-Through and Locked and Crossed Markets 
restrictions. An order that is designated by a member as non-
routable will be re-priced in order to comply with applicable Trade-
Through and Locked and Crossed Markets restrictions. If, at the time 
of entry, an order that the entering party has elected not to make 
eligible for routing would cause a locked or crossed market 
violation or would cause a trade-through violation, it will be re-
priced to the current national best offer (for bids) or the current 
national best bid (for offers) and displayed at one minimum price 
variance above (for offers) or below (for bids) the national best 
price.''
    \78\ See Options 5, Section 4 (Order Routing), which describes 
the repricing of orders for both routable and non-routable orders 
within Options 5, Section 4(a)(iii)(A), (B) and (C).
---------------------------------------------------------------------------

Options 3, Section 7
    The Exchange's proposal to amend the Cancel-Replacement Order, 
within Options 3, Section 7(a)(1), does not impose an undue burden on 
competition. Price and size are the terms that will determine if the 
Cancel-Replacement Order retains its priority, as is the case today, 
other terms and conditions do not amend the priority of the Cancel-
Replacement Order. The Exchange is not amending the current System 
functionality of a Cancel-Replacement Order with respect to the terms 
that will cause the order to lose priority. Today, the price of the 
order may not be changed when submitting a Cancel-Replacement Order, 
that would be a new order.
    With this proposal, all Cancel-Replacement Orders would receive 
price or other reasonability checks as a result of being viewed as new 
orders. If a Cancel-Replacement Order does not pass a price or other 
reasonability check, the order will cancel, but it will not be replaced 
with a new order. The Limit Order Price Protection and Market Order 
Spread Protection are the only risk protections within Options 3, 
Section 15 (Risk Protections) that are applicable. Price or other 
reasonability checks consider the current market at the time the 
Cancel-Replacement Order is entered. The Exchange proposes to begin 
applying price or other reasonability checks to all Cancel-Replacement 
Orders, similar to ISE, GEMX and MRX, to provide market participants 
with additional risk protection checks with the re-entry of the Cancel-
Replacement Order. This proposed rule is similar to ISE, GEMX and MRX 
Rules at Options 3, Section 7 at Supplementary Material .02, except 
that ISE, GEMX and MRX discuss Reserve Orders, which are not available 
on BX.\79\ All risk protections are noted within Options 3, Section 15. 
Those risk protections apply throughout the Rulebook, except where 
otherwise noted.
---------------------------------------------------------------------------

    \79\ ISE, GEMX and MRX Options 3, Section 7 at Supplementary 
Material .02, provides, ``Cancel and Replace Orders shall mean a 
single message for the immediate cancellation of a previously 
received order and the replacement of that order with a new order. 
If the previously placed order is already filled partially or in its 
entirety, the replacement order is automatically canceled or reduced 
by the number of contracts that were executed. The replacement order 
will retain the priority of the cancelled order, if the order posts 
to the Order Book, provided the price is not amended, size is not 
increased, or in the case of Reserve Orders, size is not changed. If 
the replacement portion of a Cancel and Replace Order does not 
satisfy the System's price or other reasonability checks (e.g. 
Options 3, Section 15(b)(1)(A) and (b)(1)(B); and Supplementary 
Material .07 (a)(1)(A), (b) and (c)(1) to Options 8, Section 14) the 
existing order shall be cancelled and not replaced.''
---------------------------------------------------------------------------

    The Exchange's proposal to amend ``Market Orders,'' within Options 
3, Section 7(a)(5) does not amend the manner in which a Market Order 
operates today on BX. The Exchange's proposal to add a notation at the 
end of the rule to provide that ``Participants can designate that their 
Market Orders not executed after a pre-established period of time, as 
established by the Exchange, will be cancelled back to the Participant, 
once an option series has opened for trading'' adds specificity 
regarding the opening. Market Orders submitted during the opening may 
be executed, routed (depending on instructions from the market 
participant) or cancelled if the Market Order is priced through the 
opening price. The Exchange would only cancel those Market Orders that 
remained on the Order Book once an option series opened. The pre-
established period of time would commence once the intra-

[[Page 48293]]

day trading session begins for that options series and the order would 
be cancelled back to the Participant, provided the Participant elected 
to cancel back its Market Orders. The Exchange's proposal 
differentiates when the opening is on-going, and the intra-day trading 
session has not commenced, the manner in which the pre-established 
period of time would commence.
    The proposal to note that ``Market Orders on the Order Book would 
be immediately cancelled if an options series halted, provided the 
Participant designated the cancellation of Market Orders'' specifically 
addresses trading halts within the rule. Once an options series halts 
for trading, the Exchange conducts another Opening Process. In the case 
where a Market Order was resting on the Order Book, and the Participant 
had designated the cancellation of Market Orders, in the event of a 
halt, the Market Orders resting on the Order Book would immediately 
cancel. Market Orders would apply uniformly to all market participants.
    The Exchange's proposal to amend ``Intermarket Sweep Order'' Order 
or ``ISO,'' within Options 3, Section 7(a)(6), does no impose an undue 
burden on competition. The Exchange is amending the current 
functionality of an ISO Order to require that ISOs have a time-in-force 
designation of Immediate-or-Cancel. Today, ISOs with a time-in-force 
designation of GTC are treated as having a time-in-force designation of 
Day. All ISO Orders would be treated in a uniform manner.
    The Exchange's proposal to remove the ``One-Cancels-the-Other 
Order'' and ``WAIT'' TIF do not impose an undue burden on competition. 
The Exchange will no longer permit this order type and TIF for any 
market participant with the technology migration. Further, it will 
remove an order type that is not in demand on BX and simply the 
offerings provided by BX.
    The Exchange's proposal to include a ``PRISM Order'' and ``Customer 
Cross Order'' in the list of order types does not impose an undue 
burden on competition because the addition of these terms within the 
list of order types simply cross-references the existing order types 
and does not change the functionality of the order types.
    The Exchange's proposal to amend an ``Immediate-Or-Cancel'' Order 
or ``IOC,'' within Options 3, Section 7(b)(2), does not impose an undue 
burden on competition. The Exchange is adding additional context, 
similar to Phlx, with respect to routing, submission through FIX or SQF 
and the price protections that apply when utilizing SQF, which will 
provide market participants with greater information for the protection 
of investors and the general public. Market Makers utilize IOC Orders 
to trade out of accumulated positions and manage their risk when 
providing liquidity on the Exchange. Proper risk management, including 
using these IOC Orders to offload risk, is vital for Market Makers, and 
allows them to maintain tight markets and meet their quoting and other 
obligations to the market. The Exchange believes that allowing Market 
Makers to submit IOC Orders though their preferred protocol increases 
their efficiency in submitting such orders and thereby allow them to 
maintain quality markets to the benefit of all market participants that 
trade on the Exchange. Further, unlike other market participants, 
Market Makers provide liquidity to the market place and have 
obligations.\80\ The Exchange believes not offering Order Price 
Protection and Market Order Spread Protection for IOC Orders entered 
through SQF does not create a burden on competition because Market 
Makers have more sophisticated infrastructures than other market 
participants and are able to manage their risk, particularly with 
respect to quoting, using tools that are not available to other market 
participants.\81\
---------------------------------------------------------------------------

    \80\ Market Makers have quoting obligations as specified in 
Options 2, Section 5(d).
    \81\ Market quotes are subject to various protections listed in 
Options 3, Section 15(c). These additional quoting protections 
permit Market Makers to manage their exposure at the Exchange. Other 
market participants would not be subject to these risk protections 
because they do not submit quotes or utilize SQF.
---------------------------------------------------------------------------

    The remainder of the amendments, within Options 3, Section 7, are 
technical in nature or non-substantive.
Options 3, Section 10
    The Exchange's proposal to amend its Order Book allocation rule, 
within Options 3, Section 10, to amend the manner in which rounding 
occurs does not create a burden on competition because the Exchange is 
proposing to make transparent the manner in which rounding will occur 
once the technology migration occurs. All Participants will be subject 
to the rounding methodology when PRISM Orders allocate.
Options 3, Section 12 and 22
    The adoption of Customer Cross Orders does not impose an undue 
burden on competition. This proposal would continue to permit any 
Participant to enter and execute paired Public Customer-to-Public 
Customer Orders automatically outside of a PRISM Auction, while also 
protecting Public Customer Orders on the book at the same price. Today, 
the Exchange permits an Initiating Participant to enter a PRISM Order 
for the account of a Public Customer paired with an order for the 
account of a Public Customer and such paired orders will be 
automatically executed without a PRISM Auction.\82\ While the Exchange 
is limiting these orders to be entered through FIX, any market 
participant may utilize FIX. The Exchange's proposal would continue to 
permit the ability to enter Public Customer-to-Public Customer paired 
orders to be automatically executed, however, not require these orders 
to be first entered into PRISM. A Public Customer-to-Public Customer 
order submitted into PRISM directly would be subject to execution 
pursuant to Options 3, Section 13(i) and (ii). With this proposal, all 
Participants may enter Public Customer-to-Public Customer paired orders 
into FIX and receive the same treatment that these orders receive today 
when entered into PRISM. The elimination of Options 3, Section 13(vi) 
does not impose an undue burden on competition because Public Customer-
to-Public Customer Cross Orders would be entered as a separate order 
type and therefore would not potentially cause more than one PRISM 
Auction to occur in the same series.
---------------------------------------------------------------------------

    \82\ See BX Options 3, Section 13(vi). The execution price for 
such a PRISM Order must be expressed in the quoting increment 
applicable to the affected series. Such an execution may not trade 
through the NBBO or trade at the same price as any resting Public 
Customer order.
---------------------------------------------------------------------------

Options 3, Section 13
    The Exchange's proposal to amend the System functionality, within 
Options 3, Section 13, similar to ISE, GEMX and MRX Options 3, Section 
13, to better any limit order or quote on the limit order book on the 
same side of the market as the PRISM Order, within Options 3, Section 
13(i)(A) and (B), does not impose an undue burden on competition. The 
addition of ``quotes,'' similar to ISE, GEMX and MRX at Options 3, 
Section 13, will enable the Exchange to consider additional interest in 
determining eligibility for PRISM.
    The Exchange's proposal to state the minimum increment allowable 
directly within the rule and not utilize references to Options 3, 
Section 3 does not impose an undue burden on competition as these 
amendments merely restate the current increment.
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(1), 
for Surrender language does not impose an undue burden on competition 
because, with this proposal, all Participants will be able to submit an 
Initiating Order

[[Page 48294]]

with a configurable percentage designation of ``Surrender'' up to 40% 
or such lower percentage requested by the Participant. Today, the 
System permits a Participant to have either a Surrender of 0% or 40%. 
The Exchange believes that the proposed feature will provide all 
Participants with more flexibility, similar to functionality currently 
offered on ISE, GEMX and MRX at Options 3, Section 13(e)(5)(iii).
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(1) to 
remove the following rule text, ``. . .forfeiting the priority and 
trade allocation privileges which he is otherwise entitled to as per. . 
.'', does not impose a burden on competition because the proposed text 
defines ``Surrender'' as the percentage designation, which the Exchange 
believes more accurately defines ``Surrender''.
    The Exchange's proposal to amend the second sentence of Options 3, 
Section 13(ii)(A)(1) to instead provide, ``If zero (0%) is specified, 
the Initiating Order will only trade if there is not enough interest 
available to fully execute the PRISM Order at prices which are equal to 
or improve upon the stop price,'' does not impose a burden on 
competition. The proposed text makes clear that if no percentage were 
elected for Surrender (0%) then the Initiating Order will only trade if 
there is not enough interest available to fully execute the PRISM Order 
at prices which are equal to or improve upon the stop price.
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(2) to 
add ``price'' as a detail, which is specified today for a PRISM Auction 
Notification or ``PAN,'' does not impose a burden on competition 
because adding ``price'' to a PAN will be greater transparency with 
respect to the PRISM and could encourage more competition in PRISM and 
greater opportunity for potential price improvement in PRISM.
    The Exchange's proposal to amend Options 3, Section 13(ii)(A)(7) to 
conform the behavior of PAN responses to ISE, GEMX and MRX System 
behavior \83\ does not impose a burden on competition. As noted above, 
the Exchange is amending the System to accept oversized responses. 
These responses will no longer cancel back, rather, PRISM will cap the 
response at the size of the Initiating Order for purposes of allocation 
for all Participants.
---------------------------------------------------------------------------

    \83\ See ISE, GEMX and MRX Options 3, Section 13(c)(2).
---------------------------------------------------------------------------

    The Exchange's proposal amend Options 3, Section 13(ii)(A)(8) and 
(9) to replace the words ``immediately cancelled'' with ``rejected'' is 
a non-substantive technical amendment.
    The Exchange's proposal to amend Options 3, Section 13(ii)(E)(2)(a) 
to provide the Initiating Participant with a priority allocation based 
on the initial size of the Initiating Order after Public Customer 
interest has been satisfied does not impose a burden on competition. 
With this proposed amendment, all Participants would be allocated based 
on the initial size of the Initiating Order after Public Customer 
interest has been satisfied. The Exchange's proposal is similar to ISE, 
GEMX and MRX Options 3, Section 13(d)(3).\84\
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    \84\ ISE, GEMX and MRX Options 3, Section 13(d)(3), provides, 
``In the case where the Counter-Side Order is at the same price as 
Professional Interest in (d)(2), the Counter-Side order will be 
allocated the greater of one (1) contract or forty percent (40%) of 
the initial size of the Agency Order before Professional Interest is 
executed. Upon entry of Counter-Side orders, Members can elect to 
automatically match the price and size of orders, quotes and 
responses received during the exposure period up to a specified 
limit price or without specifying a limit price. In this case, the 
Counter-Side order will be allocated its full size at each price 
point, or at each price point within its limit price if a limit is 
specified, until a price point is reached where the balance of the 
order can be fully executed. At such price point, the Counter-Side 
order shall be allocated the greater of one contract or forty 
percent (40%) of the original size of the Agency Order, but only 
after Priority Customer Interest at such price point are executed in 
full. Thereafter, all Professional Interest at the price point will 
participate in the execution of the Agency Order based upon the 
percentage of the total number of contracts available at the price 
that is represented by the size of the Professional Interest. An 
election to automatically match better prices cannot be cancelled or 
altered during the exposure period.''
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    The Exchange's proposal to amend rounding, within Options 3, 
Section 13(ii)(G), does not impose a burden on competition. The 
rounding methodology will be uniformly applied when allocating PRISM 
Orders.
    The Exchange's proposal to amend Options 3, Section 13(ii)(H) to 
remove the phrase ``then-existing'' and instead note ``at time of 
execution'' to describe the NBBO does not impose a burden on 
competition. The Exchange is not amending the current operation of the 
System. The Exchange will uniformly check if the PAN responses crossed 
the NBBO at the time of execution.
    The Exchange's proposal to amend Options 3, Section 13(ii)(I) does 
not impose an undue burden on competition. Without the word 
``execution'' in this sentence, a comparison of the ``price of the 
PRISM auction'' does not clearly differentiate the price in question as 
the execution price of the PRISM Auction or the original stop price of 
the PRISM Order. Without this clear differentiation, Options 3, Section 
13(ii)(I) can be interpreted to describe scenarios that cannot happen. 
The Exchange's proposed addition of the word ``execution'' in the first 
sentence of Options 3, Section 13(ii)(I) reflects current System 
handling. The execution price of the PRISM Auction is utilized to 
compare to the price of an order on the limit Order Book. Adding the 
word ``execution'' makes clear to Participants that the initial PRISM 
stop price is not utilized to compare the same side of the market 
transactions. While ``or better'' is not clearly specified, it is the 
case today and its inclusion is meant to capture cases where PAN 
responses provide price improvement for the PRISM Order at prices that 
are crossed with the same side interest mentioned above. The proposed 
wording is intended to provide greater clarity to Participants for 
System handling with respect to same side of the market executions 
against the Order Book. The proposed amendments reflect current System 
handling are would not result in changes to the System. The remaining 
amendments are technical and non-substantive.
    The Exchange's proposal to amend Options 3, Section 13(ii)(K) to 
add introductory text which defines a PRISM ISO does not impose a 
burden on competition. Phlx similarly describes a PIXL ISO in its rule 
text at Options 3, Section 13(b)(11).\85\ This text does not amend the 
current System functionality, rather it adds context to the current 
PRISM rule in describing a PRISM ISO.
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    \85\ Phlx Options 3, Section 13(b)(11) states, ``PIXL ISO Order. 
A PIXL ISO order (PIXL ISO) is the transmission of two orders for 
crossing pursuant to this Rule without regard for better priced 
Protected Bids/Offers (as defined in Options 5, Section 1) because 
the member transmitting the PIXL ISO to the Exchange has, 
simultaneously with the routing of the PIXL ISO, routed one or more 
ISOs, as necessary, to execute against the full displayed size of 
any Protected Bid/Offer that is superior to the starting PIXL 
Auction price and has swept all interest in the Exchange's book 
priced better than the proposed Auction starting price. Any 
execution(s) resulting from such sweeps shall accrue to the PIXL 
Order.''
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    The Exchange's proposal to correct Options 3, Section 13(ii)(K) to 
add ``on the contra-side of the PRISM Order'' does not impose a burden 
on competition because this rule text clearly describes the current 
System operation. The Exchange provides that ``on the contra-side of 
the PRISM Order'' to distinguish the contra-side from the same side of 
the order, which receives different treatment in allocation. This 
proposed amendment is intended to clarify the current System operation, 
not amend the System.

[[Page 48295]]

    Finally, the Exchange's proposal to renumber Options 3, Section 
13(vi) to ``(v)'' is technical and non-substantive.
Options 3, Section 23
    The Exchange's proposal to amend Options 3, Section 23, Data Feeds 
and Trade Information, to update its descriptions of the BX Depth of 
Market (BX Depth) and BX Top of Market (BX Top) data feeds does not 
impose an undue burden on competition because the updated descriptions 
will bring greater transparency to the Exchange's rules.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \86\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\87\
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    \86\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \87\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BX-2020-017 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-BX-2020-017. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BX-2020-017 and should be submitted on 
or before August 31, 2020.
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    \88\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\88\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17355 Filed 8-7-20; 8:45 am]
BILLING CODE 8011-01-P