Price Improvement Period
Starting a Price Improvement Period (“PIP”)
Customer orders designated for the Price Improvement (“PIP Orders”) are submitted to the BOX market with a “Contra” order, the Primary Improvement Order. The Primary Improvement Order is on the opposite side of the market from the PIP Order and must provide a bid higher or equal to (offer lower or equal to) than that posted on the current BOX market for the instrument and greater than or equal to the bid (less than or equal to the offer) of the National Best Bid and Offer (“NBBO”).
The Primary Improvement Order cannot be cancelled by the initiating BOX Participant once accepted for processing by the BOX trading engine.
Competition During the PIP
A Price Improvement Order is broadcast to BOX Participants as a special order type which sets off a PIP. BOX Participants may introduce Improvement Orders to compete with the Primary Improvement Order. An Improvement Order is not obliged to be for the entire quantity of the PIP Order.
During the PIP, Improvement Orders may be incremented at price intervals of one cent ($0.01).
BOX Participants competing using the PIP Improvement Order may increase their quantity or improve their price at any point during the PIP; they may reduce their quantity only when they improve the price and may cancel their Improvement Order once they join the PIP auction. Under no circumstances may they disimprove the price on the PIP Order. Unrelated Orders (e.g., orders booked during the PIP at standard minimum price variation increment) are not restricted as to modification or cancellation during the PIP auction.
Duration of the PIP
The time at which a PIP will end and the orders are matched is provided to BOX Participants as part of the information broadcast that announces the initiation of a PIP.
In certain cases, a PIP may be terminated prior to the completion of the normal duration period. In general, a PIP is terminated prematurely in the case where it is in the customer orders interest to do so to maintain priority or due to new orders in the BOX Book which are unrelated to the PIP, but can provide the PIP Order with a better execution price than that available from the Improvement Orders.
Conclusion of the PIP
At the conclusion of the PIP, the PIP Order will be matched with opposite side competing orders and quotes in price priority, where the first price level processed is the one that is the best for the PIP Order.
At each price level where the remaining PIP Order quantity is not completely filled, including quantity auto-matched by the PIP contra order, all interest on the PIP contra order side of the market will be completely filled.
If the total quantity of orders, quotes, Improvement Orders, Legging Orders, and the Primary Improvement Order is greater than the quantity of the PIP Order at a given price level, the allocation will be in the following order:
- Public Customers
- The Primary Improvement Order allocation privilege of 40% (or 50% depending on the number of responders present at the price level) for the remaining PIP Order quantity
- Market Makers via pro-rata size algorithm
- Any remaining orders, other than Legging Orders and Market Maker orders, including orders for the account of Order Flow Providers (“Professionals”) and orders on the BOX Book prior to the PIP Broadcast via pro-rata size algorithm
- All remaining quotes and orders, if any, other than Legging Orders and the Primary Improvement Order
- If there remains an unallocated quantity of the PIP Order to the extent of any Surrender Quantity, allocation will be made to any Legging Orders
Other Comments Regarding the PIP
While the descriptive text above speaks in general terms typically of an Order Flow Provider initiating a PIP on which one side is a Public Customer order and the other side is the Professional’s proprietary account, the process is actually more flexible. For example, both sides of the PIP could be for Public Customers or both sides could be Professional orders. Similarly, a PIP may be initiated by a Market Maker (rather than an Order Flow Provider as in the previous discussion above).