Software Certification

Boston Options Exchange Group, LLC (BOX) maximizes performance, reliability and scalability using SOLA®, a leading edge proprietary trading technology developed by the Montréal Exchange (MX). BOX completed the technological overhaul of its trading platform with the implementation of the SOLA® Trading Engine in September 2006 and the SOLA® Routing Engine in June 2007.

To accommodate Independent Software Vendors (ISVs) and MX Approved Participants who want to connect their own front-end trading applications to our facilities, BOX offers an open platform. For order management applications, the following options are available:

• SAIL - SOLA® Access Information Language is the native protocol for SOLA®, offering functionalities required by both order flow providers and market makers.

• FIX - Industry Standard Protocol is available for connection for order flow providers.

Participants who will connect by means of CMS protocol are not covered in this section. To determine which of the BOX functionalities are required for certification of a given type of application, the user's business/trading profile must be considered. This evaluation is described in the following table.

Type of Application	Criteria
Agency	Application supports agency trading (i.e. execution of orders for customer accounts, including those accounts of other broker-dealers as clients of a BOX Participant)
Proprietary	Application supports proprietary trading (i.e. execution of orders for proprietary accounts of the BOX Participant)
Market Making	Application supports market making (i.e. has been allocated one or more market making appointments by BOX)

ISVs or Participants with a proprietary system planning to access BOX must successfully complete all "mandatory" test cases associated with their business/trading profile for each of the three "categories" above and may elect to complete those marked "optional".

Level	Description
N	The feature is optional
H/R	Although optional, provides a functional advantage to the user
N/A	The feature is prohibited (non-certifiable) if the application to be certified is limited to the associated trading activity
Y	The feature is mandatory

To determine the certification requirement of each feature, look up the requirement in the table below under each of the columns (MM, Prop and Agency) for which a "yes" answer is given and note the most stringent requirement; this will be the certification requirement.

For example, an application qualified as "agency, proprietary and market making", will be required to certify simple order functionality (in spite of it being "not available" for strictly market making applications).

The table below provides an inventory of the BOX functionalities with an indication of which are compulsory to certify the trading software. Click on the title of each functionality for a more detailed description of the functionality and its interest to the various user profiles.

Simple Orders	MM	Prop	Agency
Create, modify and cancel	N/A	N	Y
Directed Orders	MM	Prop	Agency
Send directed order	N/A	N	H/R
Receive and process directed order	H/R	N	N
Bulk Orders	MM	Prop	Agency
Create, modify and cancel with "bulk quote"	Y	N/A	N/A
Cancel with "panic quote"	N	N	N/A
Price Improvement Process	MM	Prop	Agency
Send PIP Initial Order	H/R	H/R	Y
"Read" PIP Initial Order	Y	N	N
Send PIP Improvement Order	Y	N	N
"Build" PIP orders market sheet	Y	N	N
Intermarket Linkage	MM	Prop	Agency
Send "P Orders" to "away" market	Y	N	N
"View" and react to IML exposure orders	Y	N	N
Send "S Orders" to BOX	N	N	Y
Read "S Execution" advisory from BOX	Y	Y	Y
Read "P/A Execution" advisory from BOX	Y	N	N
Receive OPRA NBBO broadcast	Y	N	N
Connection	MM	Prop	Agency
Establish, terminate and restart	Y	Y	Y
Trader connection message	N	N	N
	MM	Prop	Agency
Unsolicited status messages	Y	Y	Y
Trade management	Y	Y	Y
Additional HSVF messages	N	N	N

Simple Orders are basic order messages used to submit Public Customer orders to BOX. Certification for this function also requires the management (modification, cancellation) of these orders once accepted by the BOX trading engine and the ability to process the messages (acknowledgment, full or partial executions) sent by the BOX trading engine to the Participant. Generally, this message is not used for proprietary trading except where the BOX Participant is submitting the order as Agent for a client who is in turn a broker-dealer trading his proprietary account. This message is forbidden from BOX Market Makers except where they may be acting as Agent for an Order Flow Provider (OFP) in certain particular cases relating to the PIP.

Directed Orders are simple orders the originating BOX Participant wishes to direct by means of the BOX network to another BOX Participant in the hopes that the latter will provide price improvement. This is particularly useful where a BOX Participant is unable himself to provide price improvement and establishes a relationship with one or more BOX Participants (often, though not exclusively, BOX Market Makers) to provide this service to his clients.

The receiving BOX Participant must immediately do one of the following:

• Convert the Simple Order into an initial PIP Order with the client from the Directed Order being the "must be filled side" of the PIP initial order
• Decline to price improve. In this case, the receiving Participant refuses the Directed Order back to the BOX trading engine which will book the order as a normal order

Bulk Quote messages may only be used by BOX Market Makers and then only on the classes for which they hold a market maker appointment. Such messages are used to meet the market maker's obligations for continuous quoting; one Bulk Quote may contain up to 150 separate orders. However all the instruments included in a Bulk Quote must belong to the same option class (i.e. same underlying equity).

The Price Improvement Period (PIP) auction process is an integral part of the BOX market model. It allows the broker of a BOX Participant to improve the National Best Bid and Offer (NBBO) for his client in a short auction where he will compete with BOX Market Makers. Participants who act as Agent must be able to initiate a PIP while BOX Market Makers must show their ability to compete during a PIP. It is strongly suggested that the Proprietary desk of a Participant also be able to initiate a PIP.

Intermarket Linkage ("IML", also referred to as "OLA" for Options Linkage Authority) is an agreement among the U.S. equity options exchanges, including BOX, to ensure that Public Customer orders receive the best execution possible. There are various special functions and messages provided to operate IML. Most of them concern Market Makers only while others use existing BOX trading engine functionalities to minimize the development work required of each Participant to benefit from IML.

Managing connectivity to the BOX trading engine is obligatory for all BOX Participants' trading and order routing software.

These are messages sent by the BOX trading engine to BOX Participants without the Participant having initiated an action which required a response. Examples would include messages advising trading users whenever the market changes phases (e.g., opening match, closing).

BOX Market Operations Center (MOC) may occasionally create or cancel orders or trades of a Participant without the Participant having requested this electronically. In this case, BOX will nonetheless confirm such actions via the usual electronic routing.

Examples would include cancellation messages for orders the Participant has on the BOX Book and for which the Participant requested the MOC to do a global cancellation or the cancellation by MOC of a trade due to the "obvious error rule".

BOX Participants have the option of receiving other market data such as summaries and bulletins via the HSVF gateway. None of this is obligatory for certification but is in many cases very useful since this is often the means for BOX MOC to communicate with Participants when there are exceptions to the usual market procedures (e.g., information on the opening of a delayed class).