Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt New Rules Governing the Trading of Complex Orders on the Exchange

I. Introduction

On June 30, 2017, Bats EDGX Exchange, Inc. (“EDGX” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, a proposed rule change to adopt rules to govern the trading of complex orders on EDGX. The proposed rule change was published for comment in the Federal Register on July 19, 2017. The Commission received no comments regarding the proposal. On August 23, 2017, pursuant to Section 19(b)(2) of the Act, the Commission extended the time for Commission action on the proposal until October 17, 2017. EDGX filed Amendment No. 1 to the proposal on October 16, 2017. The Commission is publishing this notice to solicit comment on Amendment No. 1 to the proposed rule change from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis.

II. Description of the Proposed Rule Change, as Modified by Amendment No. 1

A. Definitions

New EDGX Rule 21.20 establishes the following defined terms that will apply to the trading of complex orders: ABBO, BBO, Complex Order Auction (“COA”), COA-Eligible Order, Complex Order, Complex Order Book (“COB”), Complex Strategy, NBBO, Regular Trading, Simple Book, Synthetic Best Bid or Offer (“SBBO”), and Synthetic National Best Bid or Offer (“SNBBO”).

B. Order Types and Times in Force

EDGX proposes to amend EDGX Rule 21.1 to add two new Times in Force that are not currently available on EDGX, Good Til Cancelled (“GTC”) and At the Open (“OPG”) orders. Both GTC and OPG ultimately will be available on both the Simple Book and on the COB. EDGX notes that other exchanges offer GTC orders and orders that, like OPG orders, participate only in the exchange's opening process. Complex orders also may be submitted with a Time in Force of GTD, IOC, or DAY.

EDGX proposes to allow Members to submit limit and market complex orders, COA-eligible and Do Not COA Orders, and Complex Orders with Match Trade Prevention Modifiers. EDGX Market Makers also will be able to submit Complex Only orders. EDGX notes that limiting Complex Only orders to EDGX Market Makers is equivalent to approved functionality on MIAX and will encourage use by participants that are most likely to provide liquidity to EDGX on the COB.

EDGX will communicate to Members via specifications and/or Regulatory Circular when the complex order types, among those listed in EDGX Rule 21.20(b), are available for use on EDGX. EDGX expects to launch the COB with all of the proposed order types, except for orders with a Time in Force of GTC.

C. Trading of Complex Orders

EDGX will determine and communicate to Members via specifications and/or Regulatory Circular which complex order origin codes (i.e., non-broker-dealer customers, broker-dealers that are not Market Makers on an options exchange, and/or Market Makers on an options exchange) are eligible for entry onto the COB. Complex orders will be subject to all other EDGX rules that pertain to orders submitted to EDGX generally, unless otherwise provided in Rule 21.20.

1. Minimum Increments and Trade Prices

Under the proposed rules, bids and offers on complex orders may be expressed in $0.01 increments, and the component(s) of a complex order may be executed in $0.01 increments, regardless of the minimum increments otherwise applicable to individual components of the complex order. If any component of a complex strategy would be executed at a price that is equal to a Priority Customer bid or offer on the Simple Book, at least one other component of the complex strategy must trade at a price that is better than the corresponding BBO. A complex order will not be executed at a net price that would cause any component of the complex strategy to be executed: (i) At a price of zero; or (ii) ahead of a Priority Customer Order on the Simple Book without improving the BBO of at least one component of the complex strategy.

2. Execution of Complex Orders

a. Opening and Reopening

The Opening Process for the COB (“Opening Process”) will operate at the beginning of each trading session and upon re-opening after a halt. Members may submit complex orders to EDGX as set forth in EDGX Rule 21.6(c). Any complex orders designated for the Opening Process for the COB will be queued until 9:30 a.m., at which time they will be eligible to be executed in the Opening Process for the COB. Any complex orders designated for a re-opening following a halt will be queued until the halt has ended, at which time they will be eligible to be executed in the Opening Process for the COB. Beginning at 7:30 a.m. and updated every five seconds thereafter, EDGX will disseminate through the data feeds described in EDGX Rule 21.15 indicative prices and order imbalance information associated with the Opening Process for the COB while complex orders are queued prior to 9:30 a.m. or, in the case of a halt, prior to re-opening.

Complex orders do not participate in the Opening Process for the individual option series conducted pursuant to EDGX Rule 21.7. The Opening Process will commence when all legs of the complex strategy are open on the Simple Book. If there are complex orders in a strategy that have been queued but none that can match, the System will open that strategy without a trade and transition such orders to the COB, subject to Legging into the Simple Book, as described in EDGX Rule 21.20(c)(2)(F).

If there are complex orders that can match, the System will determine the equilibrium price where the most complex orders can trade. When an equilibrium price is established at or within the SNBBO, EDGX will execute matching complex orders in price/time priority at the equilibrium price (i.e., orders better than the equilibrium price are executed first in price/time priority and thereafter orders at the equilibrium price are executed in time priority). Any remaining complex order or the remaining portion thereof will be entered into the COB, subject to the Member's instructions. If, after a configurable time period established by EDGX that may not exceed thirty seconds, the System cannot match orders because it cannot determine an equilibrium price (i.e., all queued orders are Market Orders) or a permissible equilibrium price (i.e., within the SNBBO that also satisfies proposed EDGX Rule 21.20(c)(1)(C)), the System will open the strategy without a trade and transition such orders to the COB. All complex orders received by EDGX prior to EDGX opening the strategy, including complex orders received during any delay that EDGX applies pursuant to EDGX Rule 21.20(c)(2)(D), will be eligible to be matched in the Opening Process.

b. Pricing

Incoming complex orders will not be executed at prices inferior to the SBBO or at a price that is equal to the SBBO when there is a Priority Customer Order at the best SBBO price. Complex orders will never be executed at a price that is outside of the individual component prices on the Simple Book, and the net price of a complex order executed against another complex order on the COB will never be inferior to the price that would be available if the complex order legged into the Simple Book.

Incoming complex orders that cannot be executed because the executions would be priced (i) outside of the SBBO, or (ii) equal to the SBBO due to a Priority Customer Order at the best SBBO price, will be cancelled if such complex orders are not eligible to be placed on the COB. Complex orders will be executed without consideration of any prices for the complex strategy that might be available on other exchanges trading the same complex strategy provided, however, that such complex order price may be subject to the Drill-Through Price Protection set forth in Interpretation and Policy .04(f) of EDGX Rule 21.20.

3. Priority

A complex order may be executed at a net credit or debit price against another complex order without giving priority to bids or offers established in the marketplace that are no better than the bids or offers comprising such net credit or debit; provided, however, that if any of the bids or offers established in the marketplace consist of a Priority Customer Order, at least one component of the complex strategy must trade at a price that is better than the corresponding BBO by at least a $0.01 increment.

Complex orders will be automatically executed against bids and offers on the COB in price priority, and bids and offers at the same price on the COB will be executed in time priority. Complex orders that leg into the Simple Book will be executed in accordance with EDGX Rule 21.8. EDGX notes that a complex order on EDGX would execute first against orders on the Simple Book (except in the limited circumstances described in EDGX Rule 21.20(c)(2)(F)) if any of the bids or offers established in the simple marketplace consist of a Priority Customer Order.

4. Managed Interest Process

EDGX Rule 21.20(c)(4) sets forth the managed interest process that describes how the System handles a complex order that is not immediately executed upon receipt, including how such an order is priced and re-priced on the COB. The managed interest process, which is initiated when a complex order that is eligible to be placed on the COB cannot be executed against either the COB or the Simple Book at the complex order's net price, is intended to ensure that a complex order to be managed does not result in a locked or crossed market on the Exchange. Once initiated, the managed interest process for complex orders will be based upon the SBBO.

Under the managed interest process, a complex order that is resting on the COB and is either a complex market order, as described in EDGX Rule 21.20(c)(6), or a complex order with a limit price that locks or crosses the current opposite side SBBO when the SBBO is the best price, may be subject to the managed interest process for complex orders. If the order is not a COA-eligible order, as defined in EDGX Rule 21.20(a)(4), the System will first determine if the inbound complex order can be matched against other complex orders resting on the COB at a price that is at or inside the SBBO (provided there are no Priority Customer Orders on the Simple Book at that price). Second, the System will determine if the inbound complex order can be executed by Legging against individual orders resting on the Simple Book at the SBBO. A complex order subject to the managed interest process will never be executed at a price that is through the individual component prices on the Simple Book. The net price of a complex order subject to the managed interest process that is executed against another complex order on the COB will never be inferior to the price that would be available if the complex order legged into the Simple Book. When the opposite side SBBO includes a Priority Customer Order, the System will book and display the booked complex order on the COB at a price (the “book and display price”) that is $0.01 away from the current opposite side SBBO.

When the opposite side SBBO does not include a Priority Customer Order and is not available for execution in the ratio of the complex order, or cannot be executed through Legging with the Simple Book, as described in EDGX Rule 21.20(c)(2)(F), the System will place the complex order on the COB and display the booked complex order at a book and display price that will lock the current opposite side SBBO (i.e., because it is a price at which another complex order can trade).

If the SBBO changes, the complex order's book and display price will continuously re-price to the new SBBO until: (i) The complex order has been executed in its entirety; (ii) if not executed, the complex order's book and display price has reached its limit price or, in the case of a complex market order, the new SBBO, subject to any applicable price protections; (iii) the complex order has been partially executed and the remainder of the order's book and display price has reached its limit price or, in the case of a complex market order, the new SBBO, subject to any applicable price protections; or (iv) the complex order or any remaining portion of the complex order is cancelled. If EDGX receives a new complex order for the complex strategy on the opposite side of the market from the managed complex order that can be executed, the System will immediately execute the remaining contracts from the managed complex order to the extent possible at the complex order's current book and display price. If unexecuted contracts remain from the complex order on the COB, the complex order's size will be revised and disseminated to reflect the complex order's remaining contracts at its current managed book and display price.

5. Evaluation Process

EDGX Rule 21.20(c)(5) describes how and when the System determines to execute or otherwise handle complex orders in the System. EDGX notes that the System will evaluate complex orders initially once all components of the complex strategy are open, upon receipt as set forth in EDGX Rule 21.20(c)(5)(A), and continually, as set forth in EDGX Rule 21.20(c)(5)(B). EDGX Rule 21.20(c)(5)(C) states that if the System determines that a complex order is COA-eligible, the order will be submitted into the COA process described in EDGX Rule 21.20(d). EDGX states that the purpose of the evaluation process for complex orders is to determine (i) their eligibility to initiate, or to participate in, a COA; (ii) their eligibility to participate in the managed interest process; (iii) their eligibility for full or partial execution against a complex order resting on the COB or through the Legging into the Simple Book; (iv) whether the complex order should be cancelled; and (v) whether the complex order or any remaining portion thereof should be placed or remain on the COB. EDGX states that the continual and event-triggered evaluation process ensures that the System is monitoring and assessing the COB for incoming complex orders, and changes in market conditions or events that cause complex orders to re-price and/or execute, and conditions or events that result in the cancellation of complex orders on the COB.

6. Complex Market Orders

EDGX Rule 21.20(c)6) describes the handling of complex market orders. Complex orders may be submitted as market orders and may be designated as COA-eligible. Complex market orders designated as COA-eligible may initiate a COA upon arrival. Complex market orders not designated as COA-eligible will trade with any contra-side complex orders, or against the individual legs, up to and including the SBBO, and if not fully executed due to applicable price protection may be posted to the COB, subject to the managed interest process and the evaluation process.

D. Legging

EDGX Rule 21.20(c)(2)(F) describes the Legging process through which complex orders, under certain circumstances, are executed against the individual components of a complex strategy on the Simple Book. EDGX Rule 21.20(c)(2)(F) provides that complex orders up to a maximum number of legs (determined by the Exchange on a class-by-class basis as either two, three, or four legs and communicated to Members via specifications and/or Regulatory Circular) may be automatically executed against bids and offers on the Simple Book for the individual legs of the complex order (“Legging”), provided the complex order can be executed in full or in a permissible ratio by such bids and offers. Complex orders with two option legs where both legs are buying or both legs are selling and both legs are calls or both legs are puts may only trade against other complex orders on the COB and will not be permitted to leg into the Simple Book. Notwithstanding the foregoing, all two leg COA-eligible Customer complex orders will be allowed to leg into the Simple Book without restriction. Complex orders with three or four option legs where all legs are buying or all legs are selling may only trade against other complex orders on the COB and will not leg into the Simple Book, regardless of whether the option leg is a call or a put.

E. COA Process

EDGX Rule 21.20(d) describes the COA process. All option classes will be eligible to participate in a COA. Upon evaluation, as set forth in EDGX Rule 21.20(c)(5), EDGX may determine to automatically submit a COA-eligible order into a COA.

1. Eligibility and Initiation

A “COA-eligible order” is a complex order that, as determined by the Exchange, is eligible to initiate a COA based upon the Member's instructions, the order's marketability (i.e., if the price of such order is equal to or better than the current SBBO, subject to applicable restrictions when a Priority Customer Order comprises a portion of the SBBO) as determined by the Exchange, number of components, and complex order origin codes (i.e., non-broker-dealer customers, broker-dealers that are not market makers on an options exchange, and/or market makers on an options exchange as determined by the Exchange). Determinations by the EDGX with respect to COA eligibility will be communicated to Members via specifications and/or Regulatory Circular.

To initiate a COA, a COA-eligible order must be designated as such (either affirmatively or by default) and must meet the criteria described in proposed EDGX Rule 21.20, Interpretation and Policy .02. Dissemination of information related to COA-eligible orders by the submitting Member to third parties will be deemed conduct inconsistent with just and equitable principles of trade, as described in EDGX Rule 3.1.

2. Commencement of a COA

Upon receipt of a COA-eligible order, EDGX will send a COA auction message to all subscribers to EDGX's data feeds that deliver COA Auction messages. The COA auction message will identify the COA auction ID, instrument ID (i.e., the complex strategy), origin code, quantity, and side of the market of the COA-eligible order. EDGX may also determine to include the price in COA auction messages, and if it does so it will announce that determination in published specifications and/or Regulatory Circular to Members.

3. COA Responses

A Member with any origin code, including a Priority Customer, may submit a response to the COA auction message (a “COA Response”) during the Response Time Interval. COA Responses may be submitted in $0.01 increments and must specify the price, size, side of the market (i.e., a response to a buy COA as a sell or a response to a sell COA as a buy) and COA auction ID for the COA to which the response is targeted. Multiple COA Responses from the same Member may be submitted during the Response Time Interval. COA Responses represent non-firm interest that can be modified or withdrawn at any time prior to the end of the Response Time Interval, though any modification to a COA Response other than a decrease of size will result in a new timestamp and a loss of priority. COA Responses will not be displayed by the Exchange. At the end of the Response Time Interval, COA Responses are firm (i.e., guaranteed at their price and size). Any COA Responses not executed in full will expire at the end of the COA. Any COA Responses not executable based on the price of the COA will be cancelled immediately.

4. Processing of COA-Eligible Orders

At the end of the Response Time Interval, COA-eligible orders may be executed in whole or in part against the best priced contra side interest. Any unexecuted portion of a COA-eligible order remaining at the end of the Response Time Interval will be placed on the COB and ranked pursuant to EDGX Rule 21.20(c)(3) or cancelled, if IOC.

The COA will terminate: (i) Upon receipt of a new non-COA-eligible order on the same side as the COA but with a better price, in which case the COA will be processed and the new order will be posted to the COB; (ii) if an order is received that would improve the SBBO on the same side as the COA in progress to a price better than the auction price, in which case the COA will be processed, the new order will be posted to the Simple Book and the SBBO will be updated; or (iii) if a Priority Customer Order is received that would join or improve the SBBO on the same side as the COA in progress to a price equal to or better than the auction price, in which case the COA will be processed, the new order will be posted to the Simple Book and the SBBO will be updated. In addition, a COA will terminate immediately without trading if any individual component or underlying security of a complex strategy in the COA process is subject to a halt as described in EDGX Rule 21.20, Interpretation and Policy .05.

5. COA Pricing and Allocations at the Conclusion of a COA

A complex strategy will not be executed at a net price that would cause any component of the complex strategy to be executed: (A) At a price of zero; or (B) ahead of a Priority Customer Order on the Simple Book without improving the BBO on at least one component of the complex strategy by at least $.01. Orders executed in a COA will be allocated first in price priority based on their original limit price as follows: (A) Priority Customer Orders resting on the Simple Book; (B) COA Responses and unrelated orders on the COB in time priority; and (C) remaining individual orders in the Simple Book (i.e., non-Priority Customer), which will be allocated pursuant to EDGX Rule 21.8. EDGX believes the priority model to provide highest priority to Priority Customer Orders resting on the Simple Book is consistent with the long-standing policies of customer protection found throughout the Act and the rules of options exchanges, and maintains the Exchange's current practice by affording such priority. EDGX notes that the current priority model for the Exchange provides first priority to Priority Customers prior to execution of any orders of other participants (“non-Customers”) pursuant to the Customer Overlay set forth in EDGX Rule 21.8(d)(1). Thus, orders of non-Customers on the Simple Book are already afforded last priority as compared to Priority Customers. EDGX states that because all listed options are traded on options exchanges, there is significant retail customer participation directly on exchanges. In turn, because of such direct retail customer participation, EDGX states that the exchanges have taken steps to afford those retail customers—generally Priority Customers—more favorable treatment in some circumstances. EDGX believes this treatment is appropriate to encourage retail participation in the market generally, and in light of the fact that Priority Customers are not necessarily immersed in the day-to-day trading of the markets and may have less understanding of how complex order books operate and interact with leg markets.

6. Overlapping COAs

EDGX Rule 21.20, Interpretation and Policy .02 provides that a COA will be allowed to commence even when a COA for the same strategy is already underway. EDGX represents that it has systems capacity to process multiple overlapping COAs consistent with the proposal, including systems necessary to conduct surveillance of activity occurring in such auctions. EDGX states that if it does not permit overlapping COAs, a Member who wishes to submit a COA-eligible order but has its order rejected because another COA is already underway in the complex strategy must either wait for that COA to conclude and re-submit the order to the Exchange (possibly constantly resubmitting the complex order to ensure it is received by the Exchange before another COA commences) or must send the order to another options exchange that accepts complex orders.

F. Market-Maker Complex Quotes

EDGX has not proposed different standards for participation by Market Makers on the COB (i.e., no specific benefits or obligations). Market Makers are not required to quote on the COB. Complex strategies are not subject to any requirements that are applicable to Market Makers in the simple market for individual options series or classes. Volume executed in complex strategies is not taken into consideration when determining whether Market Makers are meeting quoting obligations applicable to Market Makers in the simple market for individual options.

G. Price and Other Protections

The proposal establishes several price and other protections for complex orders. Exchange believes that the complex order price protections will provide market participants with valuable price and order size protections to enable them to better manage their risk exposure when trading complex orders. In particular, EDGX believes the price protection mechanisms will mitigate potential risks associated with market participants entering orders at clearly unintended prices and orders trading at prices that are extreme and potentially erroneous, which may likely have resulted from human or operational error.

EDGX Rule 21.20, Interpretation and Policy .04 provides several price protection standards that are designed to ensure that certain types of complex strategies will not be executed outside of a preset standard minimum and/or maximum price limit.

Under the Credit-to-Debit parameter in EDGX Rule 21.20, Interpretation and Policy .04(b), market orders that would be executed at a net debit price after receiving a partial execution at a net credit price will be cancelled. The Debit/Credit Price Reasonability Check provisions in EDGX Rule 21.20, Interpretation and Policy .04(c) state that, to the extent a price check parameter is applicable, EDGX will not accept a complex order that is a limit order for a debit strategy with a net credit price that exceeds a pre-set buffer, a limit order for a credit strategy with a net debit price that exceeds a pre-set buffer, or a market order for a credit strategy that would be executed at a net debit price that exceeds a pre-set buffer. EDGX will determine these pre-set buffer amounts and communicate them to Members via specifications and/or Regulatory Circular. The System will reject or cancel back to the Member any limit order or any market order (or any remaining size after partial execution of the order) that does not satisfy the Debit/Credit Price Reasonability check. The Debit/Credit Price Reasonability Check applies to auction responses in the same manner as it does to orders.

The System defines a complex order as a debit or credit as follows: (A) A call butterfly spread for which the middle leg is to sell (buy) and twice the exercise price of that leg is greater than or equal to the sum of the exercise prices of the buy (sell) legs is a debit (credit); (B) a put butterfly spread for which the middle leg is to sell (buy) and twice the exercise price of that leg is less than or equal to the sum of the exercise prices of the buy (sell) legs is a debit (credit); and (C) an order for which all pairs and loners are debits (credits) is a debit (credit).

The Buy Strategy Parameters in EDGX Rule 21.20, Interpretation and Policy .04(d) provide that the System will reject a limit order where all the components of the strategy are to buy and the order is priced at zero, any net credit price that exceeds a pre-set buffer, or a net debit price that is less than the number of individual option series legs in the strategy (or applicable ratio) multiplied by the applicable minimum net price increment for the complex order.

The Maximum Value Acceptable Price Range parameter in EDGX Rule 21.20, Interpretation and Policy .04(e) provides that the System will reject an order if the order is a vertical, true butterfly or box spread, or a limit order or market order if it would execute at a price that is outside of an acceptable price range. The acceptable price range is set by the minimum and maximum possible value of the spread, subject to an additional buffer amount determined by EDGX and communicated to Members via specifications and/or a Regulatory Circular. The maximum possible value of a vertical, true butterfly and box spread is the difference between the exercise prices of (A) the two legs; (B) the middle leg and the legs on either side; and (C) each pair of legs, respectively. The minimum possible value of the spread is zero.

EDGX Rule 21.20, Interpretation and Policy .04(f) establishes EDGX's Drill-Through Price Protection feature, a price protection mechanism applicable to all complex orders under which a buy (sell) order will not be executed at a price that is higher (lower) than the SNBBO or the SNBBO at the time of order entry plus (minus) a buffer amount (the “Drill-Through Price”). EDGX will adopt a default buffer amount for the Drill-Through Price Protection and will publish this amount in publicly available specifications and/or a Regulatory Circular. A Member may modify the buffer amount applicable to Drill-Through Price Protections to either a larger or smaller amount than the Exchange default. If a buy (sell) order would execute or post to the COB at a price higher (lower) than the Drill-Through Price, the System will instead post the order to the COB at the Drill-Through Price, unless the terms of the order instruct otherwise. Any order (or unexecuted portion thereof) will rest in the COB (based on the time at which it enters the book for priority purposes) for a time period in milliseconds that may not exceed three seconds (which the Exchange will determine and communicate to Members via specifications and/or Regulatory Circular) with a price equal to the Drill-Through Price. If the order (or unexecuted portion thereof) does not execute during that time period, the System will cancel it.

H. Risk Monitor Mechanism

EDGX proposes to add Interpretation and Policy .01 to EDGX Rule 21.16 to provide that complex orders will participate in EDGX's existing the Risk Monitor Mechanism. The Risk Monitor Mechanism functions by counting a member's executions, contract volume, and notional value both within a specified time period established by the member and on an absolute basis for the trading day. The Risk Monitor Mechanism rejects or cancels orders that exceed member-designated volume, notional, count, or percentage triggers. EDGX Rule 21.16, Interpretation and Policy .01 states that, for purposes of counting within a specified time period and for purposes of calculating absolute limits, EDGX will count individual trades executed as part of a complex order when determining whether a volume, notional, or count trigger has been reached. For purposes of counting within a specified time period and for purposes of calculating absolute limits, EDGX will count the percentage executed of a complex order when determining whether the percentage trigger has been reached.

I. Additional Risk Protection for Complex Orders

In addition to the protections described above, EDGX proposes to establish the Fat Finger Price Protection and a complex order size protection. These protections will be available for complex orders as determined by the Exchange and communicated to Members via specifications and/or Regulatory Circular.

Under the Fat Finger Price Protection, EDGX will define a price range outside of which the System will not accept a complex limit order. The price range will be a number defined by EDGX and communicated to Members via specifications and/or Regulatory Circular, and a Member may establish a more aggressive or restrictive value than the Exchange default. The default price range for Fat Finger Price Protection will be greater than or equal to a price through the SNBBO for the complex strategy to be determined by the Exchange and communicated to Members via specifications and/or Regulatory Circular. A complex limit order to sell will not be accepted at a price that is lower than the SNBBO bid, and a complex limit order to buy will not be accepted at a price that is higher than the SNBBO offer, by more than the Exchange defined or Member established price range. A complex limit order that is priced through this range will be rejected.

Under the complex order size protection, the System will prevent certain complex orders from executing or being placed on the COB if the size of the complex order exceeds the complex order size protection designated by the Member. If the maximum size of complex orders is not designated by the Member, the Exchange will set a maximum size of complex orders on behalf of the Member by default. Members may designate the complex order size protection on a firm wide basis. The default maximum size for complex orders will be determined by the Exchange and communicated to Members via specifications and/or Regulatory Circular.

J. Trading Halts

EDGX Rule 21.20, Interpretation and Policy .05, describes the Exchange's handling of complex orders in the context of a trading halt. Under EDGX Rule 21.20, Interpretation and Policy .05(a), if a trading halt exists for the underlying security or a component of a complex strategy, trading in the complex strategy will be suspended and a Member's complex orders will be cancelled unless the Member has instructed the Exchange not to cancel its orders. The COB will remain available for Members to enter and manage complex orders. Incoming complex orders that could otherwise execute or initiate a COA in the absence of a halt will be placed on the COB. Incoming complex orders with a time in force of IOC will be cancelled.

EDGX Rule 21.20, Interpretation and Policy .05(b) states that if, during a COA, any component(s) and/or the underlying security of a COA-eligible order is halted, the COA will end early without trading and all COA Responses will be cancelled. Remaining complex orders will be placed on the COB if eligible, or cancelled. When trading in the halted component(s) and/or underlying security of the complex order resumes, the System will evaluate and re-open the COB pursuant to EDGX Rule 21.20(c)(2)(B)-(D).

K. Market Data

EDGX proposes to amend EDGX Rule 21.15(b) to specify the data feeds that EDGX proposes to adopt in connection with the proposal. EDGX currently offers a Multicast PITCH data feed and an Auction Feed. EDGX proposed to adopt a similar, but separate, Multicast PITCH data feed and Auction Feed for the COB. Second, EDGX proposes to adopt a new separate Multicast TOP data feed for its Simple Order Book and for the COB. Third, EDGX proposes to adopt a separate Auction Feed for the COB, in addition to its existing Auction Feed for the Simple Book. Fourth, EDGX the Exchange proposes to identify Priority Customer Orders and trades as such on messages disseminated by the Exchange through its Multicast TOP data feed, in addition to disseminating that information through it Multicast PITCH and Auction data feeds.

III. Discussion and Commission Findings

After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, for the reasons discussed below, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. This order approves the proposed rule change in its entirety, although only certain more significant aspects of the proposed rules are discussed below.

A. Definitions and Order Types

The proposal adopts several defined terms related to the trading of complex orders. The Commission notes that EDGX's definition of complex order is consistent with the definition of complex order adopted by other options exchanges. The Commission believes that adding EDGX Rule 21.20(b) to allow complex orders to be entered as limit orders, market orders, GTD orders, IOC orders, DAY orders, GTC orders, OPG orders, Complex Only orders, COA-eligible orders, do-not-COA orders, and complex orders with Match Trade Prevention modifiers could provide market participants with greater flexibility and control over the trading of complex orders. The Commission notes that EDGX currently permits each of these orders types (other than GTC, OPG, Complex Only orders, COA-eligible orders, and do-not-COA orders) for orders on single option series. The Commission further notes that Complex Only orders will be available only to EDGX Market Makers, which is consistent with similar functionality available on other options exchanges.

B. Trading of Complex Orders and Quotes

EDGX states that it has designed its execution and priority rules to allow complex orders to interact with interest in the Simple Book and vice versa in an efficient and orderly manner. The Commission notes that EDGX Rule 21.20(c)(3)(A) is designed to protect interest established in the leg market by providing that if any of the bids or offers established in the marketplace consist of a Priority Customer Order, at least one leg of the complex order must trade at a price that is better than the corresponding bid or offer in the marketplace by at least a $0.01 increment. The Commission further notes that other options exchanges have similar provisions requiring one leg to trade at a better price in such a circumstance.

EDGX proposes that complex orders will never be executed at a price that is outside of the individual component prices on the Simple Book. Furthermore, the net price of a complex order executed against another complex order on the COB will never be inferior to the price that would be available if the complex order legged into the Simple Book. According to EDGX, these provisions should help prevent a component of a complex order from being executed at a price that compromises the priority already established by a Priority Customer on the Simple Book. The Commission notes that another options exchange has comparable provisions.

C. Legging

As described more fully above, EDGX proposes to provide for Legging of complex orders into the Simple Book. The Commission believes that Legging could benefit investors by providing additional execution opportunities for both complex orders and interest on the Simple Book. In addition, the Commission believes that Legging could facilitate interaction between the COB and the Simple Book, potentially resulting in a more competitive and efficient market, and better executions for investors.

As discussed above, EDGX is proposing to prohibit Legging for: (i) Complex orders with two option legs where both legs are buying or both legs are selling and both legs are calls or both legs are puts, other than COA-eligible two-legged Customer complex orders; and (ii) complex orders with three option legs where all legs are buying or all legs are selling regardless of whether the option leg is a call or a put. The Commission notes that this prohibition is similar to the rules of other options markets, which the Commission has approved. The Commission notes that directional complex orders may continue to trade against other complex orders on the Exchange's COB, and that market participants may submit the individual legs of a directional complex order separately to the regular market for execution should they so choose.

D. Complex Order Auction Process

EDGX describes the Complex Order Auction Process in EDGX Rule 21.20(d). EDGX states that the auction process is designed to ensure that complex orders are given every opportunity to be executed at the best prices against an increased level of contra-side liquidity. In addition, EDGX states that the Complex Order Auction process is designed to work effectively with the COB with a simple priority of allocation that continues to respect the priority of allocations on the Simple Book (via the Exchange's pro rata allocation methodology). The Commission notes that the ability for unrelated marketable orders to join and be executed in a Complex Order Auction may enhance the liquidity in the Complex Order Auction and thus increase opportunities for execution of complex orders on both sides of the market.

As noted above, EDGX will permit a COA for a strategy to begin even if another COA for that strategy is already underway. The Commission notes that EDGX's rules regarding the processing of overlapping COAs for a strategy have been made transparent in the proposal and are reasonable, given that the electronic nature of EDGX makes the sequence of auction start times readily discernable. In particular, the Commission notes that a COA Response will only be considered for its specified COA. Each COA Response must specifically identify the COA for which it is targeted, and if not fully executed, the COA Response will be cancelled back at the conclusion of the COA.

E. Opening Process, Managed Interest Process, and Evaluation Process

As described above, EDGX Rule 21.20(c)(2)(A)-(D) sets forth EDGX's opening process for complex orders. The Commission believes that the opening process is designed to provide for the orderly opening of complex orders on EDGX. EDGX Rules 21.20(c)(4) and (5) describe, respectively, the managed interest process and the evaluation process for complex orders. The Commission believes that the managed interest process is designed to protect the priority of Priority Customer interest on the Simple Book and assure that complex orders do not trade through the prices of interest on the Simple Book for the component securities of the complex order. The Commission believes that the evaluation process is designed to facilitate the execution of complex orders and other interest on EDGX in accordance with EDGX's rules. The Commission notes that EDGX's managed interest and evaluation processes for complex orders are similar to processes adopted by another options exchange.

F. Market Maker Complex Quotes

As described above, EDGX has not proposed different standards for participation by Market Makers on the COB. Market Makers are not required to quote on the COB and there are no continuous quoting requirements respecting complex orders. In addition, complex strategies are not subject to any requirements that are applicable to Market Makers in the simple market for the individual options series or classes. Finally, volume executed in complex strategies is not taken into consideration when determining whether Market Makers are meeting quoting obligations applicable to Market Makers in the simple market for individual options. The Commission notes that other options exchanges have adopted similar rules.

G. Price Protection and Other Features

EDGX's proposed price and order protection features are intended to provide market participants with price and order size protection to allow them to better manage their risk exposure. The credit-to-debit parameters, Debit/Credit Price Reasonability Checks, Buy Strategy Parameters, Maximum Value Acceptable Price Range, Fat Finger Price Protection, and order size protection are similar to functionalities already available on other options exchanges. EDGX's provisions regarding trading halts could help to protect investors by pausing trading during potentially disruptive conditions. Finally, according to EDGX, adding complex orders to the Risk Protection Monitor should allow EDGX members to better manage their risk and encourage them to submit additional liquidity to the Exchange. The Commission believes the proposed new price protection features are designed to promote just and equitable principles of trade to the extent they are able to mitigate potential risks associated with market participants entering orders or executing trades at what EDGX believes are extreme and potentially erroneous prices.

H. Market Data

As described above, EDGX proposes to make available various data feeds that will provide information regarding complex orders on EDGX. EDGX states that each of the proposed data feeds is based on and similar to an existing data feed offered by EDGX Options and/or the EDGX equities trading platform. EDGX notes that the proposed data feeds, which will be free of charge, would be accessed and subscribed to on a voluntary basis by market participants interested in obtaining data regarding activity in the COB. If EDGX proposes to adopt fees in connection with any of its data feeds, it will file a separate proposal to include such fees in its Fee Schedule. The Commission believes that the proposed data feeds, which will be available free of charge to any subscriber that chooses to receive the data, will provide investors and other market participants with information concerning transactions on EDGX.

IV. Solicitation of Comments on Amendment No. 1

Interested persons are invited to submit written data, views, and arguments concerning whether Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's Internet comment form ( http://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include File Number SR-BatsEDGX-2017-29 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BatsEDGX-2017-29. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( http://www.sec.gov/rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BatsEDGX-2017-29, and should be submitted on or before November 13, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1

The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of the notice of Amendment No. 1 in the Federal Register. In Amendment No. 1, EDGX revises its original proposal to make the changes discussed in detail above. Notably, in Amendment No. 1, EDGX revises its proposal to make Complex Only orders available only to EDGX Market Makers, provide additional rationale for its methodology for allocating orders at the conclusion of a COA, and limit to 30 seconds the configurable time period for the System to match orders during the complex order opening process. EDGX also made changes to clarify and add detail to its proposal and the proposed rule text. The Commission believes that Amendment No. 1 does not raise any novel regulatory issues and instead better aligns EDGX's proposed rules governing the trading of complex orders with the rules of other options exchanges. Amendment No. 1 also provides additional clarity in the rule text and additional analysis of several aspects of the proposal, thus facilitating the Commission's ability to make the findings set forth above to approve the proposal. Accordingly, the Commission finds good cause for approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis.

VI. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-BatsEDGX-2017-29), as modified by Amendment No. 1, be, and hereby is, approved on an accelerated basis.