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LEAD℠ Marker Makers (LMMs) Performance Standards1

Assigned LEAD℠ Marker Makers must meet the following requirements when an LMM issue assignments are active in an assigned security:

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Continuous Two-Sided Market

At all times during the Regular Trading Session, an LMM is obligated to provide a Continuous Two-Sided Market meeting the standards stated in Article 16, Rule 4 (d) and Rule 4 (f) (2) (A).

Example:

  • Assume that CHX Participant WXYZ was assigned as an LMM in symbols AAAA, BBBB, and CCCC effective April 5, 2018.
  • Assume that WXYZ had established two LMM trading accounts (LMM1 and LMM2) with CHX and that WYXZ had given timely notice to CHX that LMM activity in these three symbols would be entered in trading account LMM1 for April 5-6, 2018 (Thursday and Friday) and would be entered in trading account LMM2 for April 9, 2018 (Monday).
  • CHX measured WXYZ’s performance in meeting the Continuous Two-Sided Market requirement as follows:

FIRM: WXYZ

 
 
SYMBOL

 
 
TRADE DATE

 
TRADING
ACCOUNT

CONTINUOUS QUOTING REQUIREMENT

AAAA

04/05/18

LMM1

Y

AAAA

04/06/18

LMM1

Y

AAAA

04/09/18

LMM2

Y

AAAA

Y

BBBB

04/05/18

LMM1

Y

BBBB

04/06/18

LMM1

Y

BBBB

04/09/18

LMM2

Y

BBBB

Y

CCCC

04/05/18

LMM1

Y

CCCC

04/06/18

LMM1

Y

CCCC

04/09/18

LMM2

N

CCCC

N

In this example, WXYZ had met the Continuous Two-Sided Market requirement in symbols AAAA and BBBB because, on each date, the requirement was met. However, WXYZ had failed to meet the Continuous Two-Sided Market requirement in CCCC on April 8, 2018 and, therefore, had failed to meet that requirement in symbol CCCC for the calendar month.

CHX will provide daily reports on LMM compliance with this requirement on a secure ftp site.

For more information on this requirement, contact:

Karen Calvin
Director — Market Surveillance
312.663.2695

For information on how to obtain daily LMM reports, contact:

CHX Help Desk
312.663.2111

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Requirement: Quoting at the NBBO

Each day for each security assigned to an LMM, CHX will measure the percentage of time during the Regular Trading Session that the LMM trading account to which the security is assigned: (1) is bidding for at least one round lot at the NBB price; as well as (2) is offering at least one round lot at the NBO price. CHX will compute the average of these two numbers as the percentage of time during the Regular Trading Session that the LMM is on the NBBO.

Requirement: For those days on which the Participant is assigned as an LMM to each security, the average — over the course of each calendar month — of the time on the NBBO must be at least 10%.

Example:

  • Assume that CHX Participant WXYZ was assigned as an LMM in symbols AAAA, BBBB, and CCCC effective April 5, 2018.
  • Assume that WXYZ had established two LMM trading accounts (LMM1 and LMM2) with CHX and that WYXZ had given timely notice to CHX that LMM activity in these three symbols would be entered in trading account LMM1 for April 5-6, 2018 and would be entered in trading account LMM2 for April 9, 2018.
  • CHX measured WXYZ’s performance in meeting the Quoting at the NBBO requirement as follows:

FIRM: WXYZ

% TIME QUOTING AT NBBO DURING TIME PERIOD

 
SYMBOL

TRADE DATE

TRADING ACCOUNT

%
at NBB

%
at NBO

%
at NBBO

AAAA

04/05/18

LMM1

10.00%

2.40%

6.20%

AAAA

04/06/18

LMM1

2.00%

13.60%

7.80%

AAAA

04/09/18

LMM2

18.00%

20.00%

19.00%

AAAA

AVERAGE

 

 

11.00%

BBBB

04/05/18

LMM1

12.00%

30.00%

21.00%

BBBB

04/06/18

LMM1

8.00%

0.00%

4.00%

BBBB

04/09/18

LMM2

9.80%

4.00%

6.90%

BBBB

AVERAGE

 

 

10.63%

CCCC

04/05/18

LMM1

14.00%

10.00%

12.00%

CCCC

04/06/18

LMM1

0.00%

8.00%

4.00%

CCCC

04/09/18

LMM2

6.00%

10.00%

8.00%

CCCC

AVERAGE

 

 

8.00%

In this example, WXYZ had met the Quoting at the NBBO requirement in symbols AAAA and BBBB for the calendar month because, on average over the course of the calendar month, WXYZ quoted on the NBBO 11.00% and 10.63% of the time, respectively. However, WXYZ had failed to meet the Quoting at the NBBO requirement in symbol CCCC for the calendar month because, on average over the course of the calendar month, WXYZ quoted on the NBBO 8.00% of the time.

CHX will provide daily reports on LMM compliance with this requirement on a secure ftp site.

For more information on this requirement, contact:

Karen Calvin
Director — Market Surveillance

312.663.2695

For information on how to obtain daily LMM reports, contact:

CHX Help Desk
312.663.2111

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Requirement: Trading Activity

Each day for each security assigned to an LMM, CHX will compute number of shares traded by the LMM in its assigned LMM account which are Qualified Executions divided by the total number of all Qualified Executions. The result is the LMM’s participation in the trading of Qualified Shares.

Requirement: For those days on which the Participant is assigned as an LMM to each security, the average — over the course of each calendar month — of the LMM’s participation in shares traded which are Qualified Executions must be at least 2%.

Example:

  • Assume that CHX Participant WXYZ was assigned as an LMM in symbols AAAA, BBBB, and CCCC effective April 5, 2018.
  • Assume that WXYZ had established two LMM trading accounts (LMM1 and LMM2) with CHX and that WYXZ had given timely notice to CHX that LMM activity in these three symbols would be entered in trading account LMM1 for April 5-6, 2018 and would be entered in trading account LMM2 for April 9, 2018.
  • CHX measured WXYZ’s performance in meeting the Participation requirement as follows:

FIRM: WXYZ

 
 
SYMBOL

 
TRADE
DATE

 
TRADING
ACCOUNT

% LMM SHARES TRADED vs. CHX SHARES TRADED

AAAA

04/05/18

LMM1

2.00%

AAAA

04/06/18

LMM1

1.00%

AAAA

04/09/18

LMM2

0.00%

AAAA

AVERAGE

1.00%

BBBB

04/05/18

LMM1

1.00%

BBBB

04/06/18

LMM1

1.00%

BBBB

04/09/18

LMM2

4.00%

BBBB

AVERAGE

2.00%

CCCC

04/05/18

LMM1

4.00%

CCCC

04/06/18

LMM1

1.50%

CCCC

04/09/18

LMM2

2.00%

CCCC

AVERAGE

2.50%

In this example, WXYZ had met the Trading Activity requirement in symbols BBBB and CCCC for the calendar month because, on average over the course of the calendar month, WXYZ participated in 2.00% and 2.50% of Qualified Shares traded, respectively. However, WXYZ failed to meet the Trading Activity requirement in symbol AAAA for the calendar month because, on average over the course of the calendar month, WXYZ participated on in 1.00% of Qualified Shares traded.

CHX will provide daily reports on LMM compliance with this requirement on a secure ftp site.

For more information on this requirement, contact:

Karen Calvin
Director — Market Surveillance
312.663.2695

For information on how to obtain daily LMM reports, contact:

CHX Help Desk
312.663.2111

+-
Requirement: Provide Activity

Each day for each security assigned to an LMM, CHX will compute number shares traded by the LMM which are Qualified Executions in which the LMM provides liquidity divided by the total number of shares traded by the LMM which are Qualified Executions. The result is the LMM’s Provide Percentage for that security for that day.

Requirement: For those days on which the Participant is assigned as an LMM to each security, the average — over the course of each calendar month — of the LMM’s participation in the trading of Qualified Executions must be at least 80% as a liquidity provider.

Example:

  • Assume that CHX Participant WXYZ was assigned as an LMM in symbols AAAA, BBBB, and CCCC effective April 5, 2018.
  • Assume that WXYZ had established two LMM trading accounts (LMM1 and LMM2) with CHX and that WYXZ had given timely notice to CHX that LMM activity in these three symbols would be entered in trading account LMM1 for April 5-6, 2018 and would be entered in trading account LMM2 for April 9, 2018.
  • CHX measured WXYZ’s performance in meeting the Provide Activity requirement as follows:

FIRM: WXYZ

TOTAL # LMM SHARES TRADED

 
SYMBOL

TRADE
DATE

TRADING
ACCOUNT

 
PROVIDE

 
TAKE

PROVIDE
%

AAAA

04/05/18

LMM1

8,000

2,000

80.00%

AAAA

04/06/18

LMM1

16,000

0

100.00%

AAAA

04/09/18

LMM2

6,000

4,000

60.00%

AAAA

AVERAGE

80.00%

BBBB

04/05/18

LMM1

100,000

0

100.00%

BBBB

04/06/18

LMM1

50,000

0

100.00%

BBBB

04/09/18

LMM2

30,000

30,000

50.00%

BBBB

AVERAGE

83.33%

CCCC

04/05/18

LMM1

2,000

2,000

50.00%

CCCC

04/06/18

LMM1

16,000

0

100.00%

CCCC

04/09/18

LMM2

0

4,000

0.00%

CCCC

AVERAGE

50.00%

In this example, WXYZ had met the Provide Activity requirement in symbols AAAA and BBBB for the calendar month because, on average over the course of the calendar month, 80.00% and 83.33% of LMM shares traded by the LMM in its LMM trading account(s) provided liquidity, respectively. However, WXYZ failed to meet the Provide Activity requirement in symbol CCCC for the calendar month because, on average over the course of the calendar month, only 50.00% of LMM shares traded by the LMM in its LMM trading account(s) provided liquidity.

CHX will provide daily reports on LMM compliance with this requirement on a secure ftp site.

For more information on this requirement, contact:

Karen Calvin
Director — Market Surveillance
312.663.2695

For information on how to obtain daily LMM reports, contact:

CHX Help Desk
312.663.2111

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