82 FR 37257 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change for Trading UTP Securities on Pillar, the Exchange's New Trading Technology Platform, Including Orders and Modifiers, Order Ranking and Display, and Order Execution and Routing
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 152 (August 9, 2017)
Federal Register Volume 82, Issue 152 (August 9, 2017)
| Page Range | 37257-37271 | |
| FR Document | 2017-16742 |
[Federal Register Volume 82, Number 152 (Wednesday, August 9, 2017)] [Notices] [Pages 37257-37271] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-16742] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81310; File No. SR-NYSE-2017-36] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change for Trading UTP Securities on Pillar, the Exchange's New Trading Technology Platform, Including Orders and Modifiers, Order Ranking and Display, and Order Execution and Routing August 3, 2017 Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on July 28, 2017, New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self- regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C.78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes rules for trading UTP Securities on Pillar, the Exchange's new trading technology platform, including rules governing orders and modifiers, order ranking and display, and order execution and routing. The proposed rule change is available on the Exchange's Web site at www.nyse.com, 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 self-regulatory organization 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 those 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 parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose On January 29, 2015, the Exchange announced the implementation of Pillar, which is an integrated trading technology platform designed to use a single specification for connecting to the equities and options markets operated by the Exchange and its affiliates, NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT LLC (``NYSE MKT'').\4\ NYSE Arca Equities, Inc. (``NYSE Arca Equities [sic]),\5\ which operates the cash equities trading platform for NYSE Arca, was the first trading system to migrate to Pillar.\6\ [[Page 37258]] NYSE MKT's equities market will transition to Pillar in the third quarter of 2017 and as part of this transition, will be renamed NYSE American LLC (``NYSE American'').\7\ --------------------------------------------------------------------------- \4\ See Trader Update dated January 29, 2015, available here: www.nyse.com/pillar. \5\ NYSE Arca Equities is a wholly-owned corporation of NYSE Arca and operates as a facility of NYSE Arca. NYSE Arca has filed a proposed rule change to merge NYSE Arca Equities with and into NYSE Arca. See Securities Exchange Act Release No. 80929 (June 14, 2017), 82 FR 28157 (June 20, 2017) (Notice) (``NYSE Arca Merger Filing''). As part of the NYSE Arca Merger Filing, NYSE Arca has proposed that the NYSE Arca Equities rules will be integrated in the NYSE Arca rule book using the same rule number, but with an additional suffix of ``-E'' added to a rule. For example, ``NYSE Arca Equities Rule 7 (Equities Trading)'' will become ``NYSE Arca Rule 7-E (Equities Trading),'' and ``NYSE Arca Equities Rule 7.31'' will become ``NYSE Arca Rule 7.31-E.'' Accordingly, if the NYSE Arca Merger Filing is approved, all references in this proposed rule change to an NYSE Arca Equities rule should be deemed to be a reference to an NYSE Arca rule with the same number and added ``-E'' suffix. \6\ In connection with the NYSE Arca implementation of Pillar, NYSE Arca filed four rule proposals relating to Pillar. See Securities Exchange Act Release Nos. 74951 (May 13, 2015), 80 FR 28721 (May 19, 2015) (Notice) and 75494 (July 20, 2015), 80 FR 44170 (July 24, 2015) (SR-NYSEArca-2015-38) (Approval Order of NYSE Arca Pillar I Filing, adopting rules for Trading Sessions, Order Ranking and Display, and Order Execution); Securities Exchange Act Release Nos. 75497 (July 21, 2015), 80 FR 45022 (July 28, 2015) (Notice) and 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (SR- NYSEArca-2015-56) (Approval Order of NYSE Arca Pillar II Filing, adopting rules for Orders and Modifiers and the Retail Liquidity Program); Securities Exchange Act Release Nos. 75467 (July 16, 2015), 80 FR 43515 (July 22, 2015) (Notice) and 76198 (October 20, 2015), 80 FR 65274 (October 26, 2015) (SR-NYSEArca-2015-58) (Approval Order of NYSE Arca Pillar III Filing, adopting rules for Trading Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and Mixed Lots); and Securities Exchange Act Release Nos. 76085 (October 6, 2015), 80 FR 61513 (October 13, 2015) (Notice) and 76869 (January 11, 2016), 81 FR 2276 (January 15, 2016) (Approval Order of NYSE Arca Pillar IV Filing, adopting rules for Auctions). \7\ See Securities Exchange Act Release Nos. 80283 (March 21, 2017), 82 FR 15244 (March 27, 2017) (SR-NYSEMKT-201714 [sic]) (Notice of filing and immediate effectiveness of proposed rule change to change the name of NYSE MKT to NYSE American) and 80748 (May 23, 2017), 82 FR 24764, 24765 (SR-NYSEMKT-2017-20) (Notice of filing and immediate effectiveness of proposed rule change to change the name of NYSE MKT to NYSE American) (``NYSE American Filings''). In connection with the NYSE American implementation of Pillar, NYSE MKT filed several rule changes. See Securities Exchange Act Release Nos. 79242 (November 4, 2016), 81 FR 79081 (November 10, 2016) (SR- NYSEMKT-2016-97) (Notice and Filing of Immediate Effectiveness of Proposed Rule Change of framework rules); 81038 (June 28, 2017), 82 FR 31118 (July 5, 2017) (SR-NYSEMKT-2016-103) (Approval Order) (the ``ETP Listing Rules Filing''); 80590 (May 4, 2017), 82 FR 21843 (May 10, 2017) (Approval Order) (NYSE MKT rules governing automated trading); 80577 (May 2, 2017), 82 FR 21446 (May 8, 2017) (SR- NYSEMKT-2017-04) (Approval Order) (NYSE MKT rules governing market makers); 80700 (May 16, 2017), 82 FR 23381 (May 22, 2017) (SR- NYSEMKT-2017-05) (Approval Order) (NYSE MKT rules governing delay mechanism). --------------------------------------------------------------------------- Overview Currently, the Exchange only trades securities listed on the Exchange. With Pillar, the Exchange proposes to introduce trading of UTP Securities.\8\ Consistent with the Exchange's current allocation model for its listed securities, trading in UTP Securities would be subject to a parity allocation model. Unlike the trading of listed securities on the Exchange, when trading UTP Securities on Pillar, the Exchange would not offer Floor-based point-of-sale trading, Designated Market Makers (``DMMs'') would not be assigned to UTP Securities, and the Exchange would not conduct any auctions in UTP Securities.\9\ As with listed securities, member organizations approved as Supplemental Liquidity Providers would be eligible to be assigned UTP Securities.\10\ In addition, member organizations that operate Floor broker operations that are physically located on the Floor \11\ would be eligible to trade UTP Securities.\12\ --------------------------------------------------------------------------- \8\ The term ``UTP Security'' means a security that is listed on a national securities exchange other than the Exchange and that trades on the Exchange pursuant to unlisted trading privileges. See Rule 1.1(ii). The Exchange has authority to extend unlisted trading privileges to any security that is an NMS Stock that is listed on another national securities exchange or with respect to which unlisted trading privileges may otherwise be extended in accordance with Section 12(f) of the Act. See Rule 5.1(a)(1). \9\ The Exchange will continue to trade NYSE-listed securities on its current trading platform without any changes. The Exchange will transition trading in NYSE-listed securities to Pillar at a separate date, which will be the subject of separate proposed rule changes. \10\ See Rule 107B, which the Exchange is proposing to amend, see infra. \11\ The term ``Floor'' means the trading Floor of the Exchange and the premises immediately adjacent thereto, such as the various entrances and lobbies of the 11 Wall Street, 18 New Street, 8 Broad Street, 12 Broad Street and 18 Broad Street Buildings, and also means the telephone facilities available in these locations. See Rule 6. The term ``Trading Floor'' means the restricted-access physical areas designated by the Exchange for the trading of securities, commonly known as the ``Main Room'' and the ``Buttonwood Room,'' but does not include (i) the areas in the ``Buttonwood Room'' designated by the Exchange where NYSE Amex-listed options are traded, which, for the purposes of the Exchange's Rules, shall be referred to as the ``NYSE Amex Options Trading Floor'' or (ii) the physical area within fully enclosed telephone booths located in 18 Broad Street at the Southeast wall of the Trading Floor. See Rule 6A. \12\ Member organizations trading UTP Securities would continue to be required to comply with Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1), and any applicable exceptions thereto as are currently applicable to trading on the Exchange. --------------------------------------------------------------------------- Trading in UTP Securities would be subject to the Pillar Platform Rules, as set forth in Rules 1P-13P.\13\ With this proposed rule change, the Exchange proposes changes to Rule 7P Equities Trading that would govern trading in UTP Securities. The proposed rules are based in part on the rules of NYSE Arca Equities and NYSE American,\14\ with the following substantive differences: --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release Nos. 76803 (December 30, 2015), 81 FR 536 (January 6, 2016) (SR-NYSE-2015-67) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change) (``Framework Filing''); and 80214 (March 10, 2017), 82 FR 14050 (March 16, 2017) (SR-NYSE-2016-44) (Approval Order) (``ETP Listing Rules Filing''). See also SR-NYSE-2017-35. \14\ In the NYSE American Filings, supra note 7, NYSE MKT represented that the name change to NYSE American would become operative upon the effectiveness of an amendment to NYSE MKT's Certificate of Formation, which is expected to be no later than July 31, 2017. Because the NYSE American name would be operative before this proposed rule change would be approved, the Exchange believes it would promote transparency and reduce confusion to refer to NYSE MKT rules as ``NYSE American'' rules. ---------------------------------------------------------------------------Consistent with the Exchange's current allocation model, trading in UTP Securities on the Exchange would be a parity allocation model with a setter priority allocation for the participant that sets the BBO.\15\ --------------------------------------------------------------------------- \15\ The term ``BBO'' means the best bid or offer on the Exchange. See Rule 1.1(h). --------------------------------------------------------------------------- The Exchange would not offer a Retail Liquidity Program and related order types (Retail Orders and Retail Price Improvement Orders) for UTP Securities. The Exchange would not conduct auctions in UTP Securities. The Exchange would offer two trading sessions, with the Early Trading Session beginning at 7:00 a.m. Eastern Time. The Exchange is not proposing to offer the full suite of order instructions and modifiers that are available on NYSE Arca Equities and NYSE American. Subject to rule approvals, the Exchange will announce the implementation of trading UTP Securities on the Pillar trading system by Trader Update, which the Exchange anticipates will be in the fourth quarter of 2017. Once trading in UTP Securities on the Pillar trading platform begins, specified current Exchange trading rules would not be applicable for trading UTP Securities. As described in more detail below, for each current rule that would not be applicable for trading on the Pillar trading platform, the Exchange proposes to state in a preamble to such rule that ``this rule is not applicable to trading UTP Securities on the Pillar trading platform.'' Current Exchange rules governing equities trading that do not have this preamble will govern Exchange operations on Pillar. Proposed Rule Changes As noted above, the Exchange proposes rules that would be applicable to trading UTP Securities on Pillar that are based on the rules of NYSE Arca Equities and NYSE American. As a global matter, the Exchange proposes non-substantive differences as compared to the NYSE Arca Equities rules to use the terms ``Exchange'' instead of the terms ``NYSE Arca Marketplace,'' ``NYSE Arca,'' or ``Corporation,'' and to use the terms ``mean'' or ``have meaning'' instead of the terms ``shall mean'' or ``shall have the meaning.'' In addition, the Exchange will use the term ``member organization,'' which is defined in Rule 2, instead of the terms ``ETP Holder'' or ``User.'' \16\ --------------------------------------------------------------------------- \16\ Because these non-substantive differences would be applied throughout the proposed rules, the Exchange will not note these differences separately for each proposed rule. --------------------------------------------------------------------------- As previously established in the Framework Filing, Section 1 of Rule 7P sets forth the General Provisions relating to trading on the Pillar trading platform and Section 3 of Rule 7P sets forth Exchange Trading on the Pillar trading platform. In this filing, the Exchange proposes new Rules 7.10, 7.11, and 7.16 [[Page 37259]] and to amend Rule 7.18 for Section 1 of Rule 7P and new Rules 7.31, 7.34, 7.36, 7.37, and 7.38 for Section 3 of Rule 7P. In addition, the Exchange proposes new Section 5 of Rule 7P to establish rules for the Plan to Implement a Tick Size Pilot Program, and proposes new Rule 7.46 in that section. Below, the Exchange first describes proposed Rules 7.36 and 7.37, as these rules would establish the Exchange's Pillar rules governing order ranking and display and order execution and routing. Next, the Exchange describes proposed Rule 7.31, which would establish the orders and modifiers available for trading UTP Securities on Pillar. Finally, the Exchange describes proposed Rules 7.10, 7.11, 7.16, 7.34, 7.38, and 7.46 and amendments to Rule 7.18. Proposed Rule 7.36 Proposed Rule 7.36 (Order Ranking and Display) would establish how orders in UTP Securities would be ranked and displayed on the Pillar trading platform. As described above, the Exchange proposes to retain its current allocation model for trading UTP Securities on Pillar, including the concept of ``setter interest,'' which the Exchange would define in proposed Rule 7.36 as ``Setter Priority.'' Except for the addition of Setter Priority, the Exchange proposes to use Pillar functionality for determining how orders would be ranked and displayed. Accordingly, proposed Rule 7.36 is based in part on NYSE Arca Equities Rule 7.36 and NYSE American Rule 7.36E, with substantive differences as described below. Proposed Rule 7.36(a)-(g) Proposed Rules 7.36(a)-(g) would establish rules defining terms that would be used in Rule 7P--Equities Trading and describing display and ranking of orders on the Exchange, including ranking based on price, priority category, and time. The proposed rule text is based on NYSE Arca Equities Rule 7.36(a)-(g) and NYSE American Rule 7.36E(a)-(g) with the following substantive differences: Proposed Rule 7.36(a)(5) would add a definition of the term ``Participant,'' which is based on how the term ``individual participant'' is defined in current Rule 72(c)(ii), with non- substantive differences. The Exchange proposes that the term ``Participant'' would mean for purposes of parity allocation, a Floor broker trading license (each, a ``Floor Broker Participant'') or orders collectively represented in the Exchange Book that have not been entered by a Floor Broker (``Book Participant''). The Exchange proposes to use the term ``Floor broker trading license'' rather than ``each single Floor broker'' because pursuant to Rule 300 a trading license is required to effect transactions on the Floor of the Exchange or any facility thereof and a member organization designates natural persons to effect transactions on the Floor on its behalf. Accordingly, reference to a ``Floor broker trading license'' makes clear that the Floor broker participant is at the trading license level, rather than at the member organization level. The Exchange also proposes to use the term ``Exchange Book,'' which is a defined term, rather than referring more generally to ``Exchange systems.'' Proposed Rule 7.36(a)(6) would add the definition of ``Aggressing Order'' to mean a buy (sell) order that is or becomes marketable against sell (buy) interest on the Exchange Book. This proposed term would be used in proposed Rule 7.37, described below. Because all displayed Limit Orders would be displayed on an anonymous basis, the Exchange does not propose to include text based on the first clause of NYSE Arca Equities Rule 7.36(b)(2) in proposed Rule 7.36(b)(2). Proposed Rule 7.36(c) regarding ranking would not include reference to price-time priority, as the Exchange's allocation model would not always be a price-time priority allocation, as described below. As further described below, the Exchange would rank orders consistent with proposed Rule 7.36(c). Proposed Rule 7.36(e) would establish three priority categories: Priority 1--Market Orders, Priority 2--Display Orders, and Priority 3--Non-Display Orders. The Exchange would not offer any additional priority categories for trading of UTP Securities. In addition to these substantive differences, the Exchange proposes a non-substantive clarifying difference for proposed Rule 7.36(f)(1)(B) to add ``[o]ther than as provided for in Rule 7.38(b)(2),'' to make clear that the way in which a working time is assigned to an order that is partially routed to an Away Market and returns to the Exchange is addressed in both proposed Rule 7.36(f)(1)(B) and proposed Rule 7.38(b)(2). The Exchange also proposes non-substantive differences to proposed Rule 7.36(f)(2) and (3) to streamline the rule text. Proposed Rule 7.36(h)--Setter Priority Proposed Rule 7.36(h) would establish how Setter Priority would be assigned to an order and is based in part on current Rules 72(a) and (b). Rule 72(a)(ii) provides that when a bid or offer, including pegging interest is established as the only displayable bid or offer made at a particular price and such bid or offer is the only displayable interest when such price is or becomes the Exchange BBO (the ``setting interest''), such setting interest is entitled to priority for allocation of executions at that price as described in Rule 72. The rule further provides that: Odd-lot orders, including aggregated odd-lot orders that are displayable, are not eligible to be setting interest. (Rule 72(a)(ii)(A)) If, at the time displayable interest of a round lot or greater becomes the Exchange BBO, there is other displayable interest of a round lot or greater, including aggregated odd-lot orders that are equal to or greater than a round lot, at the price that becomes the Exchange BBO, no interest is considered to be a setting interest, and, therefore, there is no priority established. (Rule 72(a)(ii)(B)) If, at the time displayable interest of a round lot or greater becomes the Exchange BBO, there is other displayable interest the sum of which is less than a round lot, at the price that becomes the Exchange BBO, the displayable interest of a round lot or greater will be considered the only displayable bid or offer at that price point and is therefore established as the setting interest entitled to priority for allocation of executions at that price as described in this rule. (Rule 72(a)(ii)(C)) If executions decrement the setting interest to an odd-lot size, a round lot or partial round lot order that joins such remaining odd-lot size order is not eligible to be the setting interest. (Rule 72(a)(ii)(D)) If, as a result of cancellation, interest is or becomes the single displayable interest of a round lot or greater at the Exchange BBO, it becomes the setting interest. (Rule 72(a)(ii)(E)) Only the portion of setting interest that is or has been published in the Exchange BBO is entitled to priority allocation of an execution. That portion of setting interest that is designated as reserve interest and therefore not displayed at the Exchange BBO (or not displayable if it becomes the Exchange BBO) is not eligible for priority allocation of an execution irrespective of the price of such reserve interest or the time it is accepted into Exchange systems. However, if, following an execution of part or all of setting interest, such setting interest is replenished from any reserve interest, the replenished volume of such setting interest shall be entitled to priority if the setting interest is still the only [[Page 37260]] interest at the Exchange BBO. (Rule 72(a)(ii)(F)) If interest becomes the Exchange BBO, it will be considered the setting interest even if pegging interest, Limit Orders designated ALO, or sell short orders during a Short Sale Period under Rule 440B(e) are re-priced and displayed at the same price as such interest, and it will retain its priority even if subsequently joined at that price by re-priced interest. (Rule 72(a)(ii)(G)) Rule 72(b)(i) provides that once priority is established by setting interest, such setting interest retains that priority for any execution at that price when that price is at the Exchange BBO and if executions decrement the setting interest to an odd-lot size, such remaining portion of the setting interest retains its priority for any execution at that price when that price is the Exchange BBO. Rule 72(b)(ii) further provides that for any execution of setting interest that occurs when the price of the setting interest is not the Exchange BBO, the setting interest does not have priority and is executed on parity. Finally, Rule 73(b)(ii) provides that priority of setting interest will not be retained after the close of trading on the Exchange or following the resumption of trading in a security after a trading halt in such security has been invoked pursuant to Rule 123D or following the resumption of trading after a trading halt invoked pursuant to the provisions of Rule 80B. In addition, priority of the setting interest is not retained on any portion of the priority interest that is routed to an away market and is returned unexecuted unless such priority interest is greater than a round lot and the only other interest at the price point is odd-lot orders, the sum of which is less than a round lot. Proposed Rule 7.36(h) would use Pillar terminology to establish ``Setter Priority,'' which would function similarly to setting interest under Rule 72. The Exchange proposes the following substantive differences to how Setter Priority would be assigned and retained on Pillar: To be eligible for Setter Priority, an order would have to establish not only the BBO, but also either join an Away Market NBBO or establish the NBBO. The Exchange believes that requiring an order to either join or establish an NBBO before it is eligible for Setter Priority would encourage the display of aggressive liquidity on the Exchange. A resting order would not be eligible to be assigned Setter Priority simply because it is the only interest at that price when it becomes the BBO (either because of a cancellation of other interest at that price or because a resting order that is priced worse than the BBO becomes the BBO). The Exchange believes that the benefit of Setter Priority should be for orders that are aggressively seeking to improve the BBO, rather than for passive orders that become the BBO. The replenished portion of a Reserve Order would not be eligible for Setter Priority. The Exchange believes that Setter Priority should be assigned to interest willing to be displayed, and because the reserve interest would not be displayed on arrival, it would not be eligible for Setter Priority. Orders that are routed and returned unexecuted would be eligible for Setter Priority consistent with the proposed rules regarding the working time assigned to the returned quantity of an order. As described in greater detail below, if such orders meet the requirements to be eligible for Setter Priority, e.g., establish the BBO and either join or establish the NBBO, they would be evaluated for Setter Priority. Proposed Rule 7.36(h) would provide that Setter Priority would be assigned to an order ranked Priority 2--Display Orders with a display quantity of at least a round lot if such order (i) establishes a new BBO and (ii) either establishes a new NBBO or joins an Away Market NBBO. The rule would further provide that only one order is eligible for Setter Priority at each price. This proposed rule text is based in part on Rule 72(a)(ii), 72(a)(ii)(A), 72(a)(ii)(B), 72(a)(ii)(C), subject to the substantive differences described above.\17\ --------------------------------------------------------------------------- \17\ Because of the proposed substantive differences, the Exchange is not proposing rules based on current Rules 72(a)(ii)(D) and (E). In addition, when an order is considered displayed on Pillar would be addressed in proposed Rule 7.36(b)(1). Accordingly, the Exchange is not proposing rule text based on Rule 72(a)(i). --------------------------------------------------------------------------- Proposed Rule 7.36(h)(1) would set forth when an order would be evaluated for Setter Priority. As noted above, the Exchange proposes a substantive difference from current Rule 72(a)(ii) in that a resting order would not be eligible to be assigned Setter Priority simply because it is the only interest at that price when it becomes the BBO. Proposed Rule 7.36(h)(1)(A) would provide that an order would be evaluated for Setter Priority on arrival, which would include when any portion of an order that has routed returns unexecuted and is added to the Exchange Book. Pursuant to proposed Rule 7.37(a)(1), described below, an order that is routed on arrival to an Away Market would not be assigned a working time. Proposed Rule 7.36(f) provides that an order would not be assigned a working time until it is placed on the Exchange Book. As such, an order that has returned after routing would be processed similarly to a newly arriving order. Therefore, the Exchange believes that an order should be evaluated for Setter Priority when it returns from an Away Market unexecuted in the same way as evaluating an order for Setter Priority on arrival. When evaluating Setter Priority for an order that has returned from an Away Market unexecuted, the Exchange would assess whether such order meets the requirements of proposed Rule 7.36(h), which is based in part on the second sentence of Rule 72(b)(iii). The Exchange proposes that for Pillar, an order that was routed to an Away Market and returned unexecuted would be evaluated for Setter Priority based on how a working time would be assigned to the returned quantity of the routed order, as described in proposed Rules 7.16(f)(5)(H), 7.36(f)(1)(A) and (B), and 7.38(b)(2). [cir] Proposed Rule 7.16(f)(5)(H) provides that if a Short Sale Price Test, as defined in that rule, is triggered after an order has routed, any returned quantity of the order and the order it joins on the Exchange Book would be adjusted to a Permitted Price.\18\ In such case, the returned quantity and the resting quantity that would be re- priced to a Permitted Price would be a single order and the Exchange would evaluate such order for Setter Priority. If such order would set a new BO and either join or establish a new NBO, it would be assigned Setter Priority. For example, if the Exchange receives a sell short order of 200 shares ranked Priority 2--Display Orders, routes 100 shares (``A'') of such order and adds 100 shares (``B'') of such order to the Exchange Book, ``B'' would be displayed at the price of the sell short order. If an Away Market NBB locks the price of ``B'' and then a Short Sale Price Test is triggered, ``B'' would remain displayed at the price of the NBB.\19\ If subsequently, ``A'' returns unexecuted, pursuant to proposed Rule 7.16(f)(5)(H), ``A'' and ``B'' would be considered a single order and would be re-priced to a Permitted Price, at which point the order would be evaluated for Setter Priority. --------------------------------------------------------------------------- \18\ Pursuant to proposed Rule 7.16(f)(5)(A), described below, during a Short Sale Period, as defined in that rule, short sale orders with a working price and/or a display price equal to or lower than the NBB will have the working price and/or display price adjusted one minimum price increment above the current NBB, which is the ``Permitted Price.'' \19\ See proposed Rule 7.16(f)(6). --------------------------------------------------------------------------- [[Page 37261]] [cir] Proposed Rule 7.36(f)(1)(A) provides that an order that is fully routed to an Away Market would not be assigned a working time unless and until any unexecuted portion of the order returns to the Exchange Book. As proposed, if the Exchange routes an entire order and a portion returns unexecuted, the Exchange would evaluate the returned quantity for Setter Priority as if it were a newly arriving order. For example, if less than a round lot returns unexecuted, the returned quantity would not be eligible for Setter Priority. If at least a round lot returns unexecuted, establishes a new BBO, and either joins or establishes the NBBO, it would be eligible for Setter Priority. [cir] Proposed Rule 7.36(f)(1)(B) provides that (except as provided for in proposed Rule 7.38(b)(2)), if an order is partially routed to an Away Market on arrival, the portion that is not routed would be assigned a working time and any portion of the order returning unexecuted would be assigned the same working time as any remaining portion of the original order resting on the Exchange Book and would be considered the same order as the resting order. In such case, if the resting portion of the order has Setter Priority, the returned portion would also have Setter Priority. For example, if the Exchange receives a 200 share order ranked Priority 2--Display Orders, routes 100 shares (``C'') of such order and adds 100 shares (``D'') of such order to the Exchange Book, which establishes the BBO and joined the NBBO, ``D'' would be assigned Setter Priority. If ``D'' is partially executed and decremented to 50 shares and another order ``E'' for 100 shares joins ``D'' at its price, pursuant to proposed Rules 7.36(h)(2)(A) and (B), described below, ``D'' would retain Setter Priority. If ``C'' returns unexecuted, it would join the working time of ``D'' pursuant to proposed Rule 7.36(f)(1)(B), ``C'' and ``D'' would be considered a single order, and ``C'' would therefore also receive Setter Priority. [cir] Proposed Rule 7.38(b)(2) provides that for an order that is partially routed to an Away Market on arrival, if any returned quantity of such order joins resting odd-lot quantity of the original order and the returned and resting quantity, either alone or together with other odd-lot orders, would be displayed as a new BBO, both the returned and resting quantity would be assigned a new working time. In such case, the returned quantity and the resting odd-lot quantity together would be a single order and would be evaluated for Setter Priority. For example, if the Exchange receives an order for 100 shares, routes 50 shares (``E'') of such order and the remaining 50 shares (``F'') of such order are added to the Exchange Book, pursuant to proposed Rule 7.36(f)(1)(B), ``F'' would be assigned a working time when it is added to the Exchange Book. If ``E'' returns unexecuted, and ``E'' and ``F'' together would establish a new BBO at that price, pursuant to proposed Rule 7.38(b)(2), ``F'' would be assigned a new working time to join the working time of ``E,'' and ``E'' and ``F'' would be considered a single order. If the returned quantity together with the resting quantity establishes the BBO pursuant to proposed Rule 7.38(b)(2), the order would be eligible to be evaluated for Setter Priority. Proposed Rule 7.36(h)(1)(B) would provide that an order would be evaluated for Setter Priority when it becomes eligible to trade for the first time upon transitioning to a new trading session. When an order becomes eligible to trade upon a trading session transition, it is treated as if it were a newly arriving order. Accordingly, the Exchange believes it would be consistent with its proposal to evaluate arriving orders for Setter Priority to also evaluate orders that become eligible to trade upon a trading session transition for Setter Priority. For example, pursuant to proposed Rule 7.34(c)(1), described below, the Exchange would accept Primary Pegged Orders during the Early Trading Session, however, such orders would not be eligible to trade until the Core Trading Session begins. In such case, a Primary Pegged Order would be evaluated for Setter Priority when it becomes eligible to trade in the Core Trading Session. Proposed Rule 7.36(h)(2) would establish when an order retains its Setter Priority, as follows: If it is decremented to any size because it has either traded or been partially cancelled (proposed Rule 7.36(h)(2)(A)). This proposed rule is based on Rule 72(b)(i), with non-substantive differences to use Pillar terminology. if it is joined at that price by a resting order that is re-priced and assigned a display price equal to the display price of the order with Setter Priority (proposed Rule 7.36(h)(2)(B)). This proposed rule is based on Rule 72(a)(ii)(G), with non-substantive differences to use Pillar terminology. if the BBO or NBBO changes (proposed Rule 7.36(h)(2)(C)). This proposed rule, together with proposed Rule 7.37(b)(1)(B), described below, is based on Rule 72(b)(ii), with non-substantive differences to use Pillar terminology. Specifically, once an order has been assigned Setter Priority, it has that status so long as it is on the Exchange Book, subject to proposed Rule 7.36(h)(3), described below, regardless of the BBO or NBBO. However, as described in proposed Rule 7.37(b)(1)(B), it would only be eligible for a Setter Priority allocation if it is executed when it is the BBO. if the order marking changes from (A) sell to sell short, (B) sell to sell short exempt, (C) sell short to sell, (D) sell short to sell short exempt, (E) sell short exempt to sell, and (F) sell short exempt to sell short (proposed Rule 7.36(h)(2)(D)). This proposed rule text is consistent with proposed Rule 7.36(f)(4) because if an order retains its working time, the Exchange believes it should also retain its Setter Priority status. when transitioning from one trading session to another (proposed Rule 7.36(h)(2)(E)). This text would be new because, with Pillar, the Exchange would be introducing an Early Trading Session. The Exchange believes that if an order entered during the Early Trading Session is assigned Setter Priority, it should retain that status in the Core Trading Session. Proposed Rule 7.36(h)(3) would establish when an order would lose Setter Priority, as follows: If trading in the security is halted, suspended, or paused (proposed Rule 7.36(h)(3)(A)). This proposed rule is based on the first sentence of current Rule 72(b)(iii), with non-substantive differences to use Pillar terminology. In addition, because all orders expire at the end of the trading day, the Exchange believes that the current rule text providing that setting interest would not be retained after the close of trading on the Exchange would not be necessary for Pillar. if such order is assigned a new display price (proposed Rule 7.36(h)(3)(B)). The Exchange believes that if an order has Setter Priority at a price, and then is assigned a new display price, it should not retain the Setter Priority status that was associated with its original display price. if such order is less than a round lot and is assigned a new working time pursuant to proposed Rule 7.38(b)(2). As discussed above, pursuant to proposed Rule 7.38(b)(2) the resting odd-lot portion of an order would be assigned a new working time if the returned quantity of that order, together with the resting portion, would establish a new BBO. In such case, if the resting quantity had Setter Priority status, it would lose that status, and would be re-evaluated for Setter Priority at its new working time. [[Page 37262]] For example, if the Exchange receives an order for 200 shares ranked Priority 2--Display Orders, routes 100 shares (``G'') of such order, and the remaining 100 shares (``H'') of such order are added to the Exchange Book and assigned Setter Priority, ``H'' would retain Setter Priority even if it is partially executed and the remaining portion of ``H'' is less than a round lot. If ``G'' returns unexecuted and ``G'' and ``H'' together would establish a new BBO at that price, pursuant to proposed Rule 7.38(b)(2), ``H'' would be assigned a new working time to join the working time of ``G,'' and ``G'' and ``H'' would be considered a single order. When ``H'' is assigned a new working time, it would lose its Setter Priority status. Even though ``G'' and ``H'' would establish the BBO, if that order does not also join or establish an NBBO, it would not be assigned Setter Priority. In this scenario, ``H'' would have lost its Setter Priority. The Exchange believes it is appropriate to re-evaluate such order for Setter Priority because it is being assigned a new working time together with the returned quantity of the order. Proposed Rule 7.36(h)(4) would establish when Setter Priority is not available, as follows: For any portion of an order that is ranked Priority 3-- Non-Display Orders (proposed Rule 7.36(h)(4)(A)). This proposed rule text is based on the second sentence of Rule 72(a)(ii)(F), with non- substantive differences to use Pillar terminology. when the reserve quantity replenishes the display quantity of a Reserve Order (proposed Rule 7.36(h)(4)(B)). This proposed rule text would be new and would be a substantive difference, described above, as compared to the third sentence of Rule 72(a)(ii)(F). Because proposed Rule 7.36 would address the display and working time of orders and Setter Priority, the Exchange proposes that Rules 72(a), (b), and (c)(xii) would not be applicable to trading UTP Securities on the Pillar trading platform. Proposed Rule 7.37 Proposed Rule 7.37 (Order Execution and Routing) would establish rules governing order execution and routing on the Pillar trading platform. As described above, the Exchange proposes to retain its parity allocation model, which the Exchange would set forth in proposed Rule 7.37(b). Except for the addition of parity allocation, the Exchange proposes to use Pillar functionality for determining how orders would be executed and routed. Accordingly, the proposed rule is based in part on NYSE Arca Equities Rule 7.37 and NYSE American Rule 7.37E, with substantive differences as described below. Proposed Rules 7.37(a), (c)-(g) Proposed Rules 7.37(a) and paragraphs (c)-(d) would establish rules regarding order execution, routing, use of data feeds, locking or crossing quotations in NMS Stocks, and exceptions to the Order Protection Rule. The proposed rule text is based on NYSE Arca Equities Rule 7.37(a)-(f) and NYSE American Rule 7.37E(a)-(f) with the following substantive differences: \20\ --------------------------------------------------------------------------- \20\ Because proposed Rule 7.37(b) would establish parity allocation, proposed Rule 7.37(c)-(g) would be based on NYSE Arca Rules 7.37(b)-(f) and NYSE American Rules 7.37E(b)-(f). --------------------------------------------------------------------------- Proposed Rule 7.37(a) would use the proposed new term ``Aggressing Order'' rather than the term ``incoming marketable order'' to refer to orders that would be matched for execution. In addition, because the Exchange would not use a price-time priority allocation for all orders, the Exchange proposes to specify that orders would be matched for execution as provided for in proposed Rule 7.37(b). As discussed below, the Exchange would not offer all order types that are available on NYSE Arca Equities and NYSE American. Accordingly, proposed Rule 7.37(a)(4) would not include a reference to Inside Limit Orders. Similar to NYSE American, because the Exchange would not be taking in data feeds from broker-dealers or routing to Away Markets that are not displaying protected quotations, the Exchange proposes that proposed Rule 7.37 would not include rule text from paragraph (b)(3) of NYSE Arca Equities Rule 7.37, which specifies that an ETP Holder can opt out of routing to Away Markets that are not displaying a protected quotation, i.e., broker dealers, or paragraph (d)(1) of NYSE Arca Equities Rule 7.37, which specifies that NYSE Arca Equities receives data feeds directly from broker dealers. As discussed in greater detail below, because the Exchange would not offer all orders available on NYSE Arca Equities and NYSE American, including orders based on NYSE Arca Equities Rule 7.31(f) that are orders with specific routing instructions, the Exchange proposes that proposed Rules 7.37(c)(5) and (c)(7)(B) would not include reference to orders that are designated to route to the primary listing market. Similarly, the Exchange would not include rule text based on NYSE Arca Equities Rule 7.37(b)(7)(C) and NYSE American Rule 7.37E(b)(7)(C). Proposed Rule 7.37(b)--Allocation Proposed Rule 7.37(b) would set forth how an Aggressing Order would be allocated against contra-side orders and is based in part on current Rule 72(c). The Exchange proposes to use Pillar terminology to describe allocations and proposes the following substantive differences to how allocations are processed under Rule 72(c): Mid-point Liquidity Orders (``MPL'') with a Minimum Trade Size (``MTS''), which are not currently available on the Exchange, would be allocated based on MTS size (smallest to largest) and time. The Exchange would maintain separate allocation wheels on each side of the market for displayed and non-displayed orders at each price. Currently, the Exchange maintains a single allocation wheel for each security.\21\ --------------------------------------------------------------------------- \21\ See Rule 72(c)(viii)(A). --------------------------------------------------------------------------- An allocation to a Floor Broker Participant would be allocated to orders represented by that Floor Broker on parity. If resting orders on one side of the Exchange Book are repriced such that they become marketable against orders on the other side of the Exchange Book, they would trade as Aggressing Orders based on their ranking pursuant to proposed Rule 7.36(c). If resting orders on both side of the Exchange Book are repriced such that they become marketable against each other, e.g., a crossed PBBO becomes uncrossed and orders priced based on the PBBO are repriced, the Exchange would determine which order is the Aggressing Order based on its ranking pursuant to Rule 7.36(c). Because there would not be any DMMs assigned to UTP Securities, the proposed rule would not reference DMM allocations. Proposed Rule 7.37(b)(1) would set forth that at each price, an Aggressing Order would be allocated against contra-side orders as follows: Proposed Rule 7.37(b)(1)(A) would provide that orders ranked Priority 1--Market Orders would trade first based on time. This proposed rule is based on the first sentence of Rule 72(c)(i) with non- substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(1)(B) would provide that next, an order with Setter Priority that has a display price and working price equal to the BBO would receive 15% of the remaining quantity of the Aggressing Order, rounded up to the next round lot size or the remaining displayed quantity of the order with [[Page 37263]] Setter Priority, whichever is lower. The rule would further provide that an order with Setter Priority is eligible for allocation under proposed Rule 7.37(b)(1)(B) if the BBO is no longer the same as the NBBO. This proposed rule text is based on Rules 72(b)(ii) and 72(c)(iii) with non-substantive differences to use Pillar terminology. Although the Exchange is using different rule text, the quantity of an Aggressing Order that would be allocated to an order with Setter Priority would be the same under both current rules and the proposed Pillar rule. Proposed Rule 7.37(b)(1)(C) would provide that next, orders ranked Priority 2--Displayed Orders would be allocated on parity by Participant and that any remaining quantity of an order with Setter Priority would be eligible to participate in this parity allocation, consistent with the allocation wheel position of the Participant that entered the order with Setter Priority. This proposed rule text is based on Rules 72(c)(i), (iv), (vi), and (ix) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(1)(D) would provide that next, orders ranked Priority 3--Non-Display Orders, other than MPL Orders with an MTS, would be allocated on parity by Participant. This proposed rule text is based on Rules 72(c)(i), (iv), (vi), and (ix) with non- substantive differences to use Pillar terminology and a substantive difference not to include MPL Orders with an MTS in the parity allocation of resting non-displayed orders. Proposed Rule 7.37(b)(1)(E) would provide that MPL Orders with an MTS would be allocated based on MTS size (smallest to largest) and time. Because MPL Orders with an MTS would be a new offering on the Exchange, this proposed rule text is new. With an MTS instruction, an [sic] member organization is instructing the Exchange that it does not want an execution of its order if the MTS cannot be met. Accordingly, an MPL Order with an MTS is willing to be skipped if such instruction cannot be met. The Exchange proposes to separate MPL Orders with an MTS from the parity allocation of Priority 3--Non-Display Orders because with a parity allocation, an MTS instruction would not be guaranteed. In order to honor the MTS instruction of the resting MPL Order, the Exchange proposes to allocate these orders after all other Priority 3-- Non-Display Orders have been allocated on parity. The Exchange believes that this proposed allocation priority would be consistent with the MTS instruction in that such orders are willing to be skipped in order to have the MTS met. Proposed Rule 7.37(b)(2) would establish the allocation wheel for parity allocations. The proposed rule would be new for Pillar and would establish that at each price on each side of the market, the Exchange would maintain an ``allocation wheel'' of Participants with orders ranked Priority 2--Display Orders and a separate allocation wheel of Participants with orders ranked Priority 3--Non-Display Orders. The rule further describes how the position of an order on an allocation wheel would be determined, as follows: Proposed Rule 7.37(b)(2)(A) would provide that the Participant that enters the first order in a priority category at a price would establish the first position on the applicable allocation wheel for that price. The rule would further provide that if an allocation wheel no longer has any orders at a price, the next Participant to enter an order at that price would establish a new allocation wheel. This proposed rule is based in part on the first sentence of Rule 72(c)(viii)(A), with both non-substantive differences to use Pillar terminology and substantive differences because the Exchange would maintain separate allocation wheels at each price point, rather than a single allocation wheel for a security. Accordingly, an allocation wheel at a price point could be re-established throughout the trading day. Proposed Rule 7.37(b)(2)(B) would provide that additional Participants would be added to an allocation wheel based on time of entry of the first order entered by a Participant. This proposed rule is based in part on the second sentence of Rule 72(c)(viii)(A) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(2)(C) would provide that once a Participant has established a position on an allocation wheel at a price, any additional orders from that Participant at the same price would join that position on an allocation wheel. This proposed rule uses Pillar terminology to describe current functionality. Proposed Rule 7.37(b)(2)(D) would provide that if an order receives a new working time or is cancelled and replaced at the same working price, a Participant that entered such order would be moved to the last position on an allocation wheel if that Participant has no other orders at that price. This proposed rule is based in part on the last sentence of Rule 72(c)(viii)(A) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(2)(E) would provide that a Participant would be removed from an allocation wheel if (i) all orders from that Participant at that price are executed or cancelled in full, (ii) the working price of an order changes and that Participant has no other orders at that price, or (iii) the priority category of the order changes and that Participant has no other orders at that price. This proposed rule would be new functionality associated with the substantive difference of having separate allocation wheels at each price point. Proposed Rule 7.37(b)(2)(F) would provide that if multiple orders are assigned new working prices at the same time, the Participants representing those orders would be added to an allocation wheel at the new working price in time sequence relative to one another. This proposed rule would be new functionality associated with the substantive difference of having separate allocation wheels at each price point. Proposed Rule 7.37(b)(3) would set forth the parity pointer associated with the allocation wheel. As proposed, if there is more than one Participant on an allocation wheel, the Exchange would maintain a ``pointer'' that would identify which Participant would be next to be evaluated for a parity allocation and that the Participant with the pointer would be considered the first position. This proposed rule is based in part on the Parity Example 1 described in Rule 72(c)(viii)(A) and Rule 72(c)(viii)(B), with non-substantive differences to use Pillar terminology. The rule would further provide that the Setter Priority allocation described in proposed Rule 7.37(b)(1)(B) would not move the pointer, which is based on the second sentence of Rule 72(c)(iv) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(4) would set forth how an Aggressing Order would be allocated on parity. As proposed, an Aggressing Order would be allocated by round lots. The Participant with the pointer would be allocated a round lot and then the pointer would advance to the next Participant. The pointer would continue to advance on an allocation wheel until the Aggressing Order is fully allocated or all Participants in that priority category are exhausted. This proposed rule is based on Rule 72(c)(viii), sub-paragraphs (A)-(C) of that Rule, and Parity Examples 1 through 4, with non-substantive differences to use Pillar terminology. Rather than include examples in the proposed rule, the Exchange believes that the Pillar terminology streamlines the description of parity allocations in [[Page 37264]] a manner that obviates the need for examples, as follows: Proposed Rule 7.37(b)(4)(A) would provide that not all Participants on an allocation wheel would be guaranteed to receive an allocation. The size of an allocation to a Participant would be based on which Participant had the pointer at the beginning of the allocation, the size of the Aggressing Order, the number of Participants in the allocation, and the size of the orders entered by Participants. The Exchange believes that this proposed rule makes clear that while the parity allocation seeks to evenly allocate an Aggressing Order, an even allocation may not be feasible and would be dependent on multiple variables. For example, if there are three Participants on an allocation wheel, ``A,'' ``B,'' and ``C,'' each representing 200 shares and ``A'' has the pointer, an Aggressing Order of 450 shares would be allocated as follows: ``A'' would be allocated 100 shares, ``B'' would be allocated 100 shares, ``C'' would be allocated 100 shares, ``A'' would be allocated 100 shares, and ``B'' would be allocated 50 shares. In this example, an uneven allocation would result because the Aggressing Order cannot be evenly divided by round lots among the Participants and the allocation sizes would be dependent on which Participant has the pointer at the beginning of the allocation. Accordingly, ``A'' would be allocated a total of 200 shares, ``B'' would be allocated a total of 150 shares, and ``C'' would be allocated a total of 100 shares. Proposed Rule 7.37(b)(4)(B) would provide that if the last Participant to receive an allocation is allocated an odd lot, the pointer would stay with that Participant. The Exchange proposes that the pointer would advance only after a round-lot allocation. If the last allocation is an odd-lot, the pointer would stay with that Participant. For example, continuing with the example above where ``B'' received an allocation of 150 shares because the last allocation was 50 shares, the pointer would remain with ``B'' for the next allocation at that price. By contrast, if the last Participant receives a round-lot allocation of an Aggressing Order, the pointer would advance to the next Participant for the next allocation at that price. Proposed Rule 7.37(b)(4)(C) would provide that if the Aggressing Order is an odd lot, the Participant with the pointer would be allocated the full quantity of the order, unless that Participant does not have an order that could satisfy the Aggressing Order in full, in which case, the pointer would move to the next Participant on an allocation wheel. This proposed rule uses Pillar terminology to describe how an odd-lot sized Aggressing Order would be allocated. Proposed Rule 7.37(b)(4)(D) would provide that a Participant that has an order or orders equaling less than a round lot would be eligible for a parity allocation up to the size of the order(s) represented by that Participant. This proposed rule is based in part on Rule 72(c)(viii)(B) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(5) would provide that an allocation to the Book Participant would be allocated to orders that comprise the Book Participant by working time. This proposed rule is based on the second sentence of Rule 72(c)(ii) with non-substantive differences to use Pillar terminology. Proposed Rule 7.37(b)(6) would provide that an allocation to a Floor Broker Participant, which would be defined as a ``Floor Broker Allocation,'' would be allocated to orders with unique working times that comprise the Floor Broker Participant, which would be defined as ``Floor Broker Orders,'' on parity. The proposed reference to ``unique working times'' would refer to orders that have multiple working times. For example, pursuant to proposed Rule 7.31(d)(1)(B), each time a Reserve Order is replenished from reserve interest, a new working time would be assigned to the replenished quantity of the Reserve Order, while the reserve interest would retain the working time of original order entry. As a result, the display quantity of a Reserve Order may be represented by multiple orders with unique working times representing each replenishment. For purposes of the Floor Broker Allocation, each quantity with a unique working time would be considered a separate order. As further proposed, the parity allocation within a Floor Broker Allocation would be processed as described in proposed Rule 7.37(b)(2)- (4) with the Floor Broker Allocation processed as the ``Aggressing Order'' and each Floor Broker Order processed as a ``Participant.'' Because a Floor Broker Participant may represent multiple orders, the Exchange believes that allocating the Floor Broker Allocation on parity would be consistent with the Exchange's allocation model, which provides for a parity allocation to Floor brokers. For example, if an Aggressing Order is allocated 200 shares to Floor Broker Participant ``X,'' which would be the Floor Broker Allocation, and ``X'' represents three Floor Broker Orders, ``A,'' ``B,'' and ``C'' for 100 shares each at a price and the parity pointer is on ``B,'' pursuant to proposed Rule 7.37(b)(6), the Floor Broker Allocation would be allocated 100 shares to ``B'' and 100 shares to ``C'' and ``A'' would not receive an allocation. Proposed Rule 7.37(b)(8) would provide that if resting orders on one side of the market are repriced and become marketable against contra-side orders on the Exchange Book, the Exchange would rank the re-priced orders as described in proposed Rule 7.36(c) and trade them as Aggressing Orders consistent with their ranking.\22\ This proposed functionality would be new for Pillar. --------------------------------------------------------------------------- \22\ The Exchange proposes to designated proposed Rule 7.37(b)(7) as ``Reserved.'' --------------------------------------------------------------------------- Proposed Rule 7.37(b)(9) would provide that if resting orders on both sides of the market are repriced and become marketable against one another, the Exchange would rank the orders on each side of the market as described in Rule 7.36(c) and trade them as follows: The best-ranked order would establish the price at which the marketable orders will trade, provided that if the marketable orders include MPL orders, orders would trade at the midpoint of the PBBO (proposed Rule 7.37(b)(9)(A)). The next best-ranked order would trade as the Aggressing Order with contra-side orders at that price pursuant to proposed Rule 7.37(b)(1) (proposed Rule 7.37(b)(9)(B)). When an Aggressing Order is fully executed, the next-best ranked order would trade as the Aggressing Order with contra-side orders at that price pursuant to proposed Rule 7.37(b)(1) (proposed Rule 7.37(b)(9)(C)). Orders on both sides of the market would continue to trade as the Aggressing Order until all marketable orders are executed (proposed Rule 7.37(b)(9)(D)). Because proposed Rule 7.37 would address order execution and routing, including parity allocations, locking and crossing, and the Order Protection Rule, the Exchange proposes that Rules 15A, 19, 72(c), 1000, 1001, 1002, and 1004 would not be applicable to trading UTP Securities on the Pillar trading platform.\23\ --------------------------------------------------------------------------- \23\ Rule 72(d) would also not be applicable to trading UTP Securities on the Pillar trading platform, accordingly the Exchange would designate the entirety of Rule 72 as not applicable to trading UTP Securities on the Pillar trading platform. --------------------------------------------------------------------------- Proposed Rule 7.31 Proposed Rule 7.31 (Orders and Modifiers) would establish the orders and modifiers that would be available on the Exchange for trading UTP [[Page 37265]] Securities on the Pillar trading platform. The Exchange proposes to offer a subset of the orders and modifiers that are available on NYSE Arca Equities and NYSE American, with specified substantive differences, as described below. Proposed Rule 7.31(a) would establish the Exchange's proposed Primary Order Types. The Exchange would offer Market Orders, which would be described in proposed Rule 7.31(a)(1), and Limit Orders, which would be described in proposed Rule 7.31(a)(2). These proposed rules are based on NYSE Arca Equities Rule 7.31(a)(1) and (2) with one substantive difference. Because the Exchange would not be conducting auctions for UTP Securities and because, as described below, with the exception of Primary Pegged Orders, Limit Orders entered before the Core Trading Session would be deemed designated for both the Early Trading Session and the Core Trading Session, the Exchange proposes not to include the following text in proposed Rule 7.31(a)(2)(B): ``A Limit Order entered before the Core Trading Session that is designated for the Core Trading Session only will become subject to Limit Order Price Protection after the Core Open Auction.'' Instead, the Exchange proposes to provide that a Limit Order entered before the Core Trading Session that becomes eligible to trade in the Core Trading Session would become subject to the Limit Order Price Protection when the Core Trading Session begins. Accordingly, Primary Pegged Orders entered before the Core Trading Session begins would not be subject to Limit Order Price Protection until the Core Trading Session begins. Proposed Rule 7.31(b) would establish the proposed time- in-force modifiers available for UTP Securities on the Pillar trading platform. The Exchange would offer both Day and Immediate-or-Cancel (``IOC'') time-in-force modifiers. The rule text is based on NYSE Arca Equities Rule 7.31(b) and NYSE American Rule 7.31E(b) without any substantive differences. Proposed Rule 7.31(c) would establish the Exchange's Auction-Only Orders. Because the Exchange would not be conducting auctions in UTP Securities, the Exchange would route all Auction-Only Orders in UTP Securities to the primary listing market, as described in greater detail below in proposed Rule 7.34. To reflect this functionality, proposed Rule 7.31(c) would provide that an Auction-Only Order is a Limit or Market Order that is only to be routed pursuant to Rule 7.34. Proposed Rules 7.31(c)(1)-(4) would define Limit-on-Open Orders (``LOO Order''), Market-on-Open Order (``MOO Order''), Limit-on- Close Order (``LOC Order''), and Market-on-Close (``MOC Order''). The proposed rule text is based on NYSE Arca Equities Rule 7.31(c)(1)-(4) and NYSE American Rule 7.31E(c)(1)-(4), with the substantive difference not to include rule text relating to how Auction-Only Orders would function during a Trading Halt Auction, as the Exchange would not be conducting any auctions in UTP Securities. Because the Exchange would not have defined terms for auctions in the Pillar rules, the Exchange proposes an additional non-substantive difference to use the term ``an opening or re-opening auction'' instead of ``the Core Open Auction or a Trading Halt Auction'' and the term ``a closing auction'' instead of ``the Closing Auction.'' Proposed Rule 7.31(d) would describe orders with a conditional or undisplayed price and/or size. Proposed Rule 7.31(d) is based on NYSE Arca Equities Rule 7.31(d) and NYSE American Rule 7.31E(d) without any differences. Proposed Rule 7.31(d)(1) would establish Reserve Orders, which would be a Limit Order with a quantity of the size displayed and with a reserve quantity (``reserve interest'') that is not displayed. Proposed Rule 7.31(d)(1) and subparagraphs (A)-(C) to that rule are based on NYSE Arca Equities Rule 7.31(d)(1) and its sub-paragraphs (A)- (C) without any substantive differences. As described below, the Exchange proposes to describe Limit Orders that do not route as ``Limit Non-Routable Order.'' Proposed Rule 7.31(d)(2) would establish Limit Non- Displayed Orders, which would be a Limit Order that is not displayed and does not route. This proposed rule is based on NYSE Arca Equities Rule 7.31(d)(2), with one substantive difference: the Exchange would not be offering the ability for a Limit Non-Displayed Order to be designated with a Non-Display Remove Modifier and therefore would not be proposing rule text based on NYSE Arca Equities Rule 7.31(d)(2)(B). Proposed Rule 7.31(d)(3) would establish MPL Orders, which would be a Limit Order that is not displayed and does not route, with a working price at the midpoint of the PBBO. Proposed Rule 7.31(d)(3) is based on NYSE Arca Equities Rule 7.31(d)(3) and NYSE American Rule 7.31E(d)(3) with one substantive difference: because the Exchange would not be conducting auctions in UTP Securities, the Exchange does not propose to include rule text that MPL Orders do not participate in any auctions. Proposed Rules 7.31(d)(3)(A)-(F), which further describe MPL Orders, are based on NYSE Arca Equities Rule 7.31(d)(3)(A)-(F) with two substantive differences. First, the Exchange would not offer the optional functionality for an incoming Limit Order to be designated with a ``No Midpoint Execution'' modifier. Second, the Exchange would not offer for MPL Orders to be designated with a Non-Display Remove Modifier. Because the Exchange would not offer the Non-Display Remove Modifier for MPL Orders, the Exchange is not proposing rule text based on NYSE Arca Equities Rule 7.31(d)(3)(G). Proposed Rule 7.31(e) would establish orders with instructions not to route and is based on NYSE Arca Equities Rule 7.31(e) and NYSE American Rule 7.31E(e) without any differences. Proposed Rule 7.31(e)(1) would establish the Limit Non- Routable Order, which is a Limit Order that does not route. Proposed Rule 7.31(e)(1) and its sub-paragraphs (A)-(B) is based on NYSE Arca Equities Rule 7.31(e)(1) and its sub-paragraphs (A)-(B) and NYSE American Rule 7.31E(1) and its sub-paragraphs (A)-(B) without any substantive differences. Because the Exchange would not offer Non- Display Remove Modifiers for Limit Non-Routable Orders, the Exchange is not proposing rule text based on NYSE Arca Equities Rule 7.31(e)(1)(C). Proposed Rule 7.31(e)(2) and sub-paragraphs (B)-(D) would establish the ALO Order, which is a Limit Non-Routable Order that, except as specified in the proposed rule, would not remove liquidity from the Exchange Book. The proposed rule is based on NYSE Arca Equities Rule 7.31(e)(2) and its sub-paragraphs (B)-(D) with two substantive differences. First, because the Exchange would not have auctions in UTP Securities, the Exchange does not propose rule text based on NYSE Arca Equities Rule 7.31(e)(2)(A), and would designate this sub-paragraph as ``Reserved.'' Second, because the Exchange would not offer the Non-Display Remove Modifier for Limit Non-Routable Orders or Limit Non-Display Orders, the Exchange does not propose rule text based on NYSE Arca Equities Rule 7.31(e)(2)(B)(iv)(b). Proposed Rule 7.31(e)(3) and sub-paragraphs (A)-(D) would establish Intermarket Sweep Orders (``ISO''), which would be a Limit Order that does not route and meets the requirements of Rule 600(b)(3) [sic] of Regulation NMS and could be designated IOC or Day. The proposed rule is based on NYSE Arca Equities rule 7.31(e)(3) and its sub- [[Page 37266]] paragraphs (A)-(D) and its sub-paragraphs (A)-(D) [sic] with two substantive differences. First, because Exchange Floor brokers do not have the ability to enter orders directly on Away Markets, the Exchange does not currently offer the ability for Floor brokers to enter ISOs.\24\ The Exchange similarly proposes that Floor brokers would not be able to enter ISOs for trading UTP Securities on the Pillar trading platform and therefore would specify that ISOs are not available to Floor brokers. Second, because Non-Display Remove Modifiers would not be available, the Exchange is not proposing rule text based on NYSE Arca Equities Rule 7.31(e)(3)(D)(iii)(b). --------------------------------------------------------------------------- \24\ See Rule 70(a)(i). --------------------------------------------------------------------------- Because the Exchange would not offer Primary Only Orders or Cross Orders, the Exchange proposes that Rules 7.31(f) and (g) would be designated as ``Reserved.'' Proposed Rule 7.31(h) would establish Pegged Orders, which would be a Limit Order that does not route with a working price that is pegged to a dynamic reference price. Proposed Rule 7.31(h) is based on NYSE Arca Equities Rule 7.31(h) with one substantive difference. Consistent with the Exchange's current rules, Pegged Orders would be available only to Floor brokers.\25\ Proposed Rule 7.31(h)(2) and sub-paragraphs (A) and (B) would establish Primary Pegged Orders, which would be a Pegged Order to buy (sell) with a working price that is pegged to the PBB (PBO), must include a minimum of one round lot of displayed, and with no offset allowed. This proposed rule text is based on NYSE Arca Equities Rule 7.31(h)(2) and sub-paragraphs (A) and (B) with one substantive difference. Because the Exchange would not conduct auctions in UTP Securities, the Exchange does not propose to include rule text that a Primary Pegged Order would be eligible to participate in auctions at the limit price of the order. Proposed Rule 7.31(h)(4) and sub-paragraphs (A) and (B) would establish a Non-Displayed Primary Pegged Order, which would be a Pegged Order to buy (sell) with a working price that is pegged to the PBB (PBO), with no offset allowed, that is not displayed. This rule text is based on NYSE American Rule 7.31E(h)(2), which describes a Primary Pegged Order that is not displayed. Similar to the rules of NYSE American, the proposed Non-Displayed Primary Pegged Order would be rejected on arrival, or cancelled when resting, if there is no PBBO against which to peg. In addition, Non-Displayed Primary Pegged Orders would be ranked Priority 3--Non-Display Orders and if the PBBO is locked or crossed, both an arriving and resting Non-Displayd [sic] Primary Pegged Order would wait for a PBBO that is not locked or crossed before the working price is adjusted and the order becomes eligible to trade. Because the Exchange would not offer Market Pegged Order or Discretionary Pegged Orders, the Exchange proposes that paragraphs (h)(1) and (h)(3) of proposed Rule 7.31 would be designated as ``Reserved.'' --------------------------------------------------------------------------- \25\ See Rule 13(f)(1)(A)(i), which describes Pegging Interest as being available for e-Quotes and d-Quotes, which is functionality available only to Floor brokers. --------------------------------------------------------------------------- Proposed Rule 7.31(i)(2) would establish Self Trade Prevention Modifiers (``STP'') on the Exchange. As proposed, any incoming order to buy (sell) designated with an STP modifier would be prevented from trading with a resting order to sell (buy) also designated with an STP modifier and from the same Client ID, as designated by the member organization, and the STP modifier on the incoming order would control the interaction between two orders marked with STP modifiers. Proposed Rule 7.31(i)(2)(A) would establish STP Cancel Newest (``STPN'') and proposed Rule 7.31(i)(2)(B) would establish STP Cancel Oldest (``STPO''). Proposed Rule 7.31(i)(2) and subparagraphs (A) and (B) are based in part on NYSE Arca Equities Rule 7.31(i)(2) and its sub-paragraphs (A) and (B) and NYSE American Rule 7.31E(i)(2) and its sub-paragraphs (A) and (B), with substantive differences to specify how STP modifiers would function consistent with the Exchange's proposed allocation model. Specifically, because, as described above, resting orders are allocated either on parity or time based on the priority category of an order, the Exchange proposes to specify in proposed Rule 7.31(i)(2) that the Exchange would evaluate the interaction between two orders marked with STP modifiers from the same Client ID consistent with the allocation logic applicable to the priority category of the resting order. The proposed rule would further provide that if resting orders in a priority category do not have an STP modifier from the same Client ID, the incoming order designated with an STP modifier would trade with resting orders in that priority category before being evaluated for STP with resting orders in the next priority category. For STPN, proposed Rule 7.31(i)(2)(A)(i) would provide that if a resting order with an STP modifier from the same Client ID is in a priority category that allocates orders on price-time priority, the incoming order marked with the STPN modifier would be cancelled back to the originating member organization and the resting order marked with one of the STP modifiers would remain on the Exchange Book. This proposed rule is based on NYSE Arca Equities Rule 7.31(i)(2)(A) and NYSE American Rule 7.31E(i)(2)(A), with non-substantive differences to specify that this order processing would be applicable for orders that are allocated in price-time priority. Proposed Rule 7.31(i)(2)(A)(ii) would be new and would address how STPN would function for resting orders in a priority category that allocates orders on parity. As proposed, if a resting order with an STP modifier from the same Client ID is in a priority category that allocates orders on parity and would have been considered for an allocation, none of the resting orders eligible for a parity allocation in that priority category would receive an allocation and the incoming order marked with the STPN modifier would be cancelled back.\26\ The Exchange believes that if a member organization designates an order with an STPN modifier, that member organization has instructed the Exchange to cancel the incoming order rather than trade with a resting order with an STP modifier from the same Client ID. Because in a parity allocation, resting orders are allocated based on their position on an allocation wheel, as described above, it would be consistent with the incoming order's instruction to cancel the incoming order if any of the resting orders eligible to participate in the parity allocation has an STP modifier from the same Client ID. --------------------------------------------------------------------------- \26\ As described above, if there were resting Market Orders against which the incoming order was marketable, because Market Orders are in a different priority category, the incoming order would trade with the resting Market Orders before being assessed for STP with resting orders in a parity priority category. --------------------------------------------------------------------------- For STPO, proposed Rule 7.31(i)(2)(B)(i) would provide that if a resting order with an STP modifier from the same Client ID is in a priority category that allocates orders on price-time priority, the resting order marked with the STP modifier would be cancelled back to the originating member organization and the incoming order marked with the STPO modifier would remain on the Exchange Book. This proposed rule is based on NYSE Arca Equities Rule 7.31(i)(2)(B) and NYSE American Rule 7.31E(i)(2)(B), with non-substantive differences to specify that this order processing would [[Page 37267]] be applicable for orders that are allocated in price-time priority. Proposed Rule 7.31(i)(2)(B)(ii) would be new and would address how STPO would function for resting orders in a priority category that allocates orders on parity. As proposed, if a resting order with an STP modifier from the same Client ID is in a priority category that allocates orders on parity, all resting orders with the STP modifier with the same Client ID in that priority category that would have been considered for an allocation would not be eligible for a parity allocation and would be cancelled. The rule would further provide that an incoming order marked with the STPO modifier would be eligible to trade on parity with orders in that priority category that do not have a matching STP modifier and that resting orders in that priority category with an STP modifier from the same Client ID that would not have been eligible for a parity allocation would remain on the Exchange Book. The Exchange believes that this proposed processing of STPO would allow for the incoming order to continue to trade with resting orders that do not have an STP modifier from the same client ID, while at the same time processing the instruction that resting orders with an STP from the same Client ID would be cancelled if there were a potential for an execution between the two orders. Proposed Commentary .01 and .02 to Rule 7.31is based on Commentary .01 and .02 to NYSE Arca Equities Rule 7.31 without any substantive differences. Because proposed Rule 7.31 would govern orders and modifiers, including orders entered by Floor brokers, the Exchange proposes that Rules 13 (Orders and Modifiers) and 70 (Execution of Floor broker interest) would not be applicable to trading UTP Securities on the Pillar trading platform. In addition, references to Trading Collars in Rule 1000(c) would not be applicable to trading UTP Securities on the Pillar Trading platform.\27\ --------------------------------------------------------------------------- \27\ As described in greater detail above in connection with proposed Rule 7.37, the Exchange proposes that the entirety of Rule 1000 would not be applicable to trading UTP Securities on the Pillar trading platform. --------------------------------------------------------------------------- Proposed Rule 7.10 Proposed Rule 7.10 (Clearly Erroneous Executions) would set forth the Exchange's rules governing clearly erroneous executions. The proposed rule is based on NYSE Arca Equities Rule 7.10 and NYSE American Rule 7.10E with substantive differences not to refer to a Late Trading Session or Cross Orders. The Exchange proposes rule text based on NYSE Arca Equities rather than current Rule 128 (Clearly Erroneous Executions) because the NYSE Arca Equities and NYSE American version of the rule uses the same terminology that the Exchange is proposing for the Pillar trading platform, e.g., references to Early and Core Trading Sessions. Accordingly, the Exchange proposes that Rule 128 (Clearly Erroneous Executions) would not be applicable to trading UTP Securities on the Pillar trading platform.\28\ Because the Exchange would not be conducting auctions in UTP Securities, proposed Rule 7.10(a) would not include the last sentence of NYSE Arca Equities Rule 7.10(a), which provides that ``[e]xecutions as a result of a Trading Halt Auction are not eligible for a request to review as clearly erroneous under paragraph (b) of this Rule.'' --------------------------------------------------------------------------- \28\ The Exchange proposes that because there is not a prior version of proposed Rule 7.10, if the Limit Up-Limit Down Plan is not approved, the prior version of sections (c), (e)(2), (f) and (g) of Rule 128 would be in effect. --------------------------------------------------------------------------- Proposed Rule 7.11 Proposed Rule 7.11 (Limit Up-Limit Down Plan and Trading Pauses in Individual Securities Due to Extraordinary Market Volatility) would establish how the Exchange would comply with the Regulation NMS Plan to Address Extraordinary Market Volatility (``LULD Plan'').\29\ The proposed rule is based on NYSE American Rule 7.11E with the following substantive differences. First, as proposed, the Exchange would not offer the optional functionality for a member organization to instruct the Exchange to cancel a Limit Order that cannot be traded or routed at prices at or within the Price bands, rather than the default processing of re-pricing a Limit Order to the Price Bands, as described in proposed Rule 7.11(a)(5)(B)(i). Accordingly, the Exchange would not include text relating to this instruction, as described in NYSE American Rules 7.11E(a)(5)(B)(i), 7.11E(a)(5)(C), or 7.11E(a)(5)(F). Second, because the Exchange would not be offering orders that include specific routing instructions, Q Orders, or Limit IOC Cross Orders, the Exchange would not include text that references these order types, as described in NYSE American Rule 7.11E(a)(5)(B)(iii), 7.11E(a)(5)(D), 7.11E(a)(5)(E), and 7.11E(a)(6). The Exchange proposes to designate proposed Rules 7.11(a)(5)(D) and 7.11(a)(5)(E) as ``Reserved.'' --------------------------------------------------------------------------- \29\ See Securities Exchange Act Release No. 80455 (April 13, 2017), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order approving 12th Amendment to the LULD Plan) [sic]. --------------------------------------------------------------------------- Finally, because proposed Rule 7.11 would govern trading in UTP Securities and the Exchange would not conduct auctions for such securities, the Exchange does not propose rule text from NYSE American Rule 7.11E(b) that describes how the Exchange would re-open trading in a security. The Exchange proposes that Rule 7.11(b)(1) would be based on rule text from NYSE American Rule 7.11E(b)(1). Because the proposed rule covers the same subject matter as Rule 80C, the Exchange proposes that Rule 80C would not be applicable to trading UTP Securities on the Pillar trading platform. Proposed Rule 7.16 Proposed Rule 7.16 (Short Sales) would establish requirements relating to short sales. The proposed rule is based on NYSE Arca Equities Rule 7.16 and NYSE American Rule 7.16E with two substantive differences. First, because the proposed rule would not be applicable to any securities that are listed on the Exchange, the Exchange would not be evaluating whether the short sale price test restrictions of Rule 201 of Regulation SHO have been triggered. Accordingly, the Exchange does not propose rule text based on NYSE Arca Equities Rule 7.16(f)(3) or NYSE American Rule 7.16E(f)(3) and would designate that sub-paragraph as ``Reserved.'' For similar reasons, the Exchange proposes not to include rule text based on NYSE Arca Equities Rules 7.16(f)(4)(A) and (B) or NYSE American Rule 7.16E(f)(4)(A) and (B). Second, because the Exchange would not be offering Tracking Orders, Cross Orders, or the Proactive if Locked/Crossed Modifier, the Exchange does not propose rule text based on NYSE Arca Equities Rule 7.16(f)(5)(D), (G), or (I) or NYSE American Rule 7.16E(f)(5)(D), (G), or (I). The Exchange proposes to designate proposed Rules 7.16(f)(5)(D) and (G) as ``Reserved.'' Because the proposed rule covers the same subject matter as Rule 440B (Short Sales), the Exchange proposes that Rule 440B would not be applicable to trading UTP Securities on the Pillar trading platform. Proposed Rule 7.18 The Exchange proposes to amend Rule 7.18 (Halts) to establish how the Exchange would process orders during a halt in a UTP Security and when it would halt trading in a UTP Exchange Traded Product.\30\ Proposed Rule [[Page 37268]] 7.18(b) would provide that the Exchange would not conduct a Trading Halt Auction in a UTP Security and would process new and existing orders in a UTP Security during a UTP Regulatory Halt \31\ as described in proposed Rule 7.18(b)(1)-(6). The proposed rule text is based on NYSE Arca Equities Rule 7.18(b) and its sub-paragraphs (1)-(6) and NYSE American Rule 7.18E(b) and its sub-paragraphs (1)-(6) with one substantive difference. Because the Exchange would not be offering ``Primary Only'' orders, proposed Rule 7.18(b)(5) would not reference such order types. --------------------------------------------------------------------------- \30\ The term ``UTP Exchange Traded Product'' is defined in Rule 1.1(bbb) to mean an Exchange Traded Product that trades on the Exchange pursuant to unlisted trading privileges. The terms ``Exchange Traded Product'' and ``UTP Exchange Traded Product'' on the Exchange have the same meaning as the NYSE Arca Equities terms ``Derivatives Securities Product'' and ``UTP Derivative Securities Product,'' which are defined in NYSE Arca Equities Rule 1.1(bbb). The Exchange proposes a non-substantive difference in proposed Rule 7.18 as compared to NYSE Arca Equities Rule 7.18 to use the Exchange-defined terms. \31\ The term ``UTP Regulatory Halt'' is defined in Rule 1.1(kk) to mean a trade suspension, halt, or pause called by the UTP Listing Market in a UTP Security that requires all market centers to halt trading in that security. --------------------------------------------------------------------------- The Exchange proposes to amend Rule 7.18(d)(1)(A) to specify that if a UTP Exchange Traded Product begins trading on the Exchange in the Early Trading Session and subsequently a temporary interruption occurs in the calculation or wide dissemination of the Intraday Indicative Value (``IIV'') or the value of the underlying index, as applicable, to such UTP Exchange Traded Product, by a major market data vendor, the Exchange may continue to trade the UTP Exchange Traded Product for the remainder of the Early Trading Session. This proposed rule text is based on NYSE Arca Equities Rule 7.18(d)(1)(A) and NYSE American Rule 7.18E(d)(1)(A) without any substantive differences. The Exchange also proposes to amend Rule 7.18(d)(1)(B) to change the reference from ``Exchange's Normal Trading Hours'' to the term ``Core Trading Session,'' which would be defined in proposed Rule 7.34, described below. The Exchange also proposes to amend Rule 7.18(a) to change the cross reference from Rule 80C to Rule 7.11 as proposed Rule 7.11 would govern how the Exchange would comply with the LULD Plan for trading UTP Securities. Proposed Rule 7.34 Proposed Rule 7.34 would establish trading sessions on the Exchange. The Exchange proposes that on the Pillar trading platform, it would have Early and Core Trading Sessions. Accordingly, proposed Rule 7.34 is based in part on NYSE Arca Equities Rule 7.34 and NYSE American Rule 7.34E, with the following substantive differences. First, similar to NYSE American, the Exchange proposes that the Early Trading Session would begin at 7:00 a.m. Eastern Time. Similar to NYSE Arca Equities and NYSE American, the Exchange would begin accepting orders 30 minutes before the Early Trading Session begins, which means order entry acceptance would begin at 6:30 a.m. Eastern Time. These differences would be reflected in proposed Rule 7.34(a)(1). Second, proposed Rule 7.34(b) would be new and is not based on NYSE Arca Equities Rule 7.34(b) or NYSE American Rule 7.34E(b). Rather than require member organizations to include a designation for which trading session the order would be in effect, the Exchange proposes to specify in Rule 7.34(b) and (c) which trading sessions an order would be deemed designated. Proposed Rule 7.34(b)(1) would provide that unless otherwise specified in Rule 7.34(c), an order entered before or during the Early or Core Trading Session would be deemed designated for the Early Trading Session and the Core Trading Session. Proposed Rule 7.34(b)(2) would provide that an order without a time-in-force designation would be deemed designated with a day time-in-force modifier. Proposed Rule 7.34(c) would specify which orders would be permitted in each session. Proposed Rule 7.34(c)(1) would provide that unless otherwise specified in paragraphs (c)(1)(A)-(C), orders and modifiers defined in Rule 7.31 would be eligible to participate in the Early Trading Session. This proposed rule text is based on NYSE Arca Equities Rule 7.34(c)(1) and NYSE American Rule 7.34E(c)(1) with a substantive difference not to refer to orders ``designated'' for the Early Trading Session. In addition, because the Exchange would not be offering a Retail Liquidity Program, the Exchange would not reference Rule 7.44. Proposed Rule 7.34(c)(1)(A) would provide that Pegged Orders would not be eligible to participate in the Early Trading Session. This rule text is based in part on NYSE Arca Equities Rule 7.34(c)(1)(A) and NYSE American Rule 7.34E(c)(1)(A) in the [sic] Pegged Orders would not be eligible to participate in the Early Trading Session. The Exchange proposes a substantive difference from the NYSE Arca Equities and NYSE American rules because proposed Rule 7.34(c)(1)(A) would not refer to Market Orders. Market Orders entered during the Early Trading Session would be addressed in proposed Rule 7.34(c)(1)(C), described below. The proposed rule would further provide that Non-Displayed Primary Pegged Orders entered before the Core Trading Session would be rejected and Primary Pegged Orders entered before the Core Trading Session would be accepted but would not be eligible to trade until the Core Trading Session begins. This rule text is based in part on both NYSE Arca Equities Rule 7.34(c)(1)(A) and NYSE American Rule 7.34E(c)(1)(A), but uses terminology consistent with the Exchange's proposed order types. Proposed Rule 7.34(c)(1)(B) would provide that Limit Orders designated IOC would be rejected if entered before the Early Trading Session begins. This proposed rule is based on NYSE Arca Equities Rule 7.34(c)(1)(B) and NYSE American Rule 7.34E(c)(1)(B) with two substantive differences. First, because the Exchange would not be conducting auctions, the Exchange proposes to specify that the rejection period would begin ``before the Early Trading Session begins'' rather than state ``before the Early Open Auction concludes.'' Second, the Exchange would not refer to Cross Orders, which would not be offered on the Exchange. Proposed Rule 7.34(c)(1)(C) would provide that Market Orders and Auction-Only Orders in UTP Securities entered before the Core Trading Session begins would be routed to the primary listing market on arrival and any order routed directly to the primary listing market on arrival would be cancelled if that market is not accepting orders. This proposed rule is based on NYSE Arca Equities Rule 7.34(c)(1)(D) and NYSE American Rule 7.34E(c)(1)(D) with a non- substantive difference to specify that such orders would be routed until the Core Trading Session begins. Proposed Rule 7.34(c)(2) would provide that unless otherwise specified in Rule 7.34(c)(2)(A)-(B), all orders and modifiers defined in Rule 7.31 would be eligible to participate in the Core Trading Session. This proposed rule text is based on NYSE Arca Equities Rule 7.34(c)(2) and NYSE American Rule 7.34E(c)(2) with a substantive difference not to refer to orders ``designated'' for the Core Trading Session. In addition, because the Exchange would not be offering a Retail Liquidity Program, the Exchange would not reference Rule 7.44. Proposed Rule 7.34(c)(2)(A) would provide that Market Orders in UTP Securities would be routed to the primary listing market until the first opening print of any size on the primary listing market or 10:00 a.m. Eastern Time, whichever is earlier. This [[Page 37269]] proposed rule is based on NYSE Arca Equities Rule 7.34(c)(2)(A) and NYSE American Rule 7.34E(c)(2)(A) with a non-substantive difference to use the term ``UTP Securities'' instead of referencing orders that ``are not eligible for the Core Open Auction.'' Proposed Rule 7.34(c)(2)(B) would provide that Auction- Only Orders in UTP Securities would be accepted and routed directly to the primary listing market. This proposed rule is based on NYSE Arca Equities Rule 7.34(c)(2)(B) and NYSE American Rule 7.34E(c)(2)(B) with a non-substantive difference to use the term ``UTP Securities'' instead of referencing orders that ``are not eligible for an auction on the Exchange.'' Proposed Rule 7.34(d) would establish requirements for member organizations to provide customer disclosure when accepting orders for execution in the Early Trading Session. The proposed rule is based on NYSE Arca Equities Rule 7.34(d) and NYSE American Rule 7.34E(d) without any substantive differences. Proposed Rule 7.34(e) would provide that trades on the Exchange executed and reported outside of the Core Trading Session would be designated as .T trades. This proposed rule is based on NYSE Arca Equities Rule 7.34(e) and NYSE American Rule 7.34E(e) without any substantive differences. Proposed Rule 7.38 Proposed Rule 7.38 (Odd and Mixed Lot) would establish requirements relating to odd lot and mixed lot trading on the Exchange. The proposed rule is based on NYSE Arca Equities Rule 7.38 and NYSE American Rule 7.38E with one substantive difference. Because orders ranked Priority 2--Display Orders, including odd-lot sized orders, are on an allocation wheel at their display price, the Exchange proposes that if the display price of an odd-lot order to buy (sell) is above (below) its working price (i.e., the PBBO, which is the price at which the odd-lot order is eligible to trade, has crossed the display price of that odd-lot order), the odd-lot order would be ranked and allocated based on its display price. In such case, the order would execute at its working price, but if there is more than one odd-lot order at the different display price, they would be allocated on parity. For example, if at 10.02, the Exchange has an order ``A'' to buy 50 shares ranked Priority 2--Display Orders, and at 10.01, the Exchange has an order ``B'' to buy 10 shares ranked Priority 2--Display Orders, an order ``C'' to buy 10 shares ranked Priority 2--Display Orders, and an order ``D'' to buy 10 shares ranked Priority 2--Display Orders, and the parity pointer is on order ``C,'' if the Away Market PBO becomes 10.00, which crosses the display price of ``A,'' ``B,'' ``C,'' and ``D,'' those orders would trade at 10.00. If the Exchange were to receive a Market Order to sell 70 shares, it would trade at 10.00 and be allocated 50 shares to ``A,'' 10 shares to ``C,'' and 10 shares to ``D.'' ``B'' would not receive an allocation based on its position on the allocation wheel. The Exchange proposes that Rule 61 (Recognized Quotations) would not be applicable to trading UTP Securities on the Pillar trading platform. Proposed Rule 7.46 Section 5 of Rule 7P would establish requirements relating to the Plan to Implement a Tick Size Pilot Program. Proposed Rule 7.46 (Tick Size Pilot Plan) would specify such requirements. The proposed rule is based on NYSE American Rule 7.46E with the following substantive differences for proposed Rule 7.46(f). First, because the Exchange would not offer Market Pegged Orders, the Exchange proposes that paragraph (f)(3) of the Rule would be designated as ``Reserved.'' Second, the Exchange proposes to set forth the priority of resting orders both for ranking and for allocation. For Pilot Securities in Test Group Three, proposed Rule 7.46(f)(5)(A) would govern ranking instead of proposed Rule 7.36(e), described above, as follows: Priority 2--Display Orders. Non-marketable Limit Orders with a displayed working price would have first priority. Protected Quotations of Away Markets. Protected quotations of Away Markets would have second priority. Priority 1--Market Orders. Unexecuted Market Orders would have third priority. Priority 3--Non-Display Orders. Non-marketable Limit Orders for which the working price is not displayed, including reserve interest of Reserve Orders, would have fourth priority. For Pilot Securities in Test Group Three, proposed Rule 7.46(f)(5)(B) would set forth how an Aggressing Order would be allocated against contra-side orders, instead of proposed Rule 7.37(b)(1), described above, as follows: First, an order with Setter Priority that has a display price and working price equal to the BBO would receive 15% of the remaining quantity of the Aggressing Order, rounded up to the next round lot size or the remaining displayed quantity of the order with Setter Priority, whichever is lower. An order with Setter Priority would be eligible for Setter Priority allocation if the BBO is no longer the same as the NBBO. Next, orders ranked Priority 2--Displayed Orders would be allocated on parity by Participant. The remaining quantity of the order with Setting Priority would be eligible to participate in this parity allocation, consistent with the allocation wheel position of the Participant that entered the order with Setter Priority. Next, subject to proposed Rule 7.46(f)(5)(F) (describing orders with instructions not to route), the Exchange would route the Aggressing Order to protected quotations of Away Markets. Next, orders ranked Priority 1--Market Orders would trade based on time. Next, orders ranked Priority 3--Non-Display Orders, other than MPL Orders with an MTS, would be allocated on parity by Participant. Next, MPL Orders with an MTS would be allocated based on MTS size (smallest to largest) and time. Third, the Exchange would not include rule text based on NYSE American Rule 7.46E(f)(G), relating to Limit IOC Cross Orders, which would not be offered on the Exchange. Finally, proposed Rules 7.46(f)(5)(F)(i)(a) and (b) are based on NYSE Arca Equities Rules 7.46(f)(5)(F)(i)(a) and (b) and not the NYSE American version of the rule because NYSE American does not offer Day ISO orders. The Exchange proposes that Rule 67 (Tick Size Pilot Plan) would not be applicable to trading UTP Securities on the Pillar trading platform. Amendments to Rule 103B and 107B As described above, the Exchange would not assign UTP Securities to DMMs. Accordingly, the Exchange proposes to amend Rule 103B(I) (Security Allocation and Reallocation) to specify that UTP Securities would not be allocated to a DMM unit. In addition, because UTP Securities would be eligible to be assigned to Supplemental Liquidity Providers, the Exchange proposes to amend Rule 107B (Supplemental Liquidity Providers) to replace the term ``NYSE-listed securities'' with the term ``NYSE-traded securities,'' which would include UTP Securities. Current Rules That Would Not Be Applicable to Trading UTP Securities on Pillar As described in more detail above, in connection with the proposed rules to support trading of UTP Securities on the Pillar trading platform, the Exchange has identified current Exchange rules that would not be applicable because [[Page 37270]] they would be superseded by a proposed rule. The Exchange has identified additional current rules that would not be applicable to trading on Pillar. These rules do not have a counterpart in the proposed Pillar rules, described above, but would be obsolete when trading UTP Securities on Pillar. The main category of rules that would not be applicable to trading on the Pillar trading platform are those rules that are specific to auctions and Floor-based point-of-sale trading, including requirements relating to DMMs and Floor brokers. For this reason, the Exchange proposes that the following Floor-specific rules would not be applicable to trading on the Pillar trading platform: Rule 15 (Pre-Opening Indication and Opening Order Imbalance Information). Rule 74 (Publicity of Bids and Offers). Rule 75 (Disputes as to Bids and Offers). Rule 76 (`Crossing' Orders). Rule 77 (Prohibited Dealings and Activities). Rule 79A (Miscellaneous Requirements on Stock Market Procedures). Rule 108 (Limitation on Members' Bids and Offers). Rule 111 (Reports of Executions). Rule 115A (Orders at Opening). Rule 116 (`Stop' Constitutes Guarantee). Rule 123A (Miscellaneous Requirements). Rule 123B (Exchange Automated Order Routing System). Rule 123C (The Closing Procedures). Rule 123D (Openings and Halts in Trading). Rule 127 (Block Crosses Outside the Prevailing NYSE Quotation). In addition, as noted above, the Exchange would not offer a Retail Liquidity Program when it trades on the Pillar trading platform. Proposed rules that are based on NYSE Arca Equities rules that include a cross reference to NYSE Arca Equities Rule 7.44 would not include that rule reference. The Exchange also proposes that Rule 107C would not be applicable to trading UTP Securities on the Pillar trading platform. * * * * * As discussed above, because of the technology changes associated with the migration to the Pillar trading platform, the Exchange will announce by Trader Update when the Pillar rules for trading UTP Securities will become operative. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\32\ in general, and furthers the objectives of Section 6(b)(5),\33\ in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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. The Exchange believes that the proposed rules to support Pillar on the Exchange would remove impediments to and perfect the mechanism of a free and open market because they provide for rules to support the Exchange's introduction of trading UTP Securities on the Pillar trading platform. --------------------------------------------------------------------------- \32\ 15 U.S.C. 78f(b). \33\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Generally, the Exchange believes that the proposed rules would remove impediments to and perfect the mechanism of a free and open market and a national market system because they would support the Exchange's introduction of trading UTP Securities in a manner that would use Pillar terminology to describe how the Exchange's current Floor-based parity allocation model with Setter Priority would operate, with specified substantive differences from current rules, and introduce Pillar rules for the Exchange that are based on the rules of its affiliated markets, NYSE Arca Equities and NYSE American. With respect to how UTP Securities would be ranked, displayed, executed, and routed on Pillar, the Exchange believes that proposed Rules 7.36(a)-(g) and proposed Rules 7.37(a) and (c)-(g) would remove impediments to and perfect the mechanism of a free and open market and a national market system because these rules would use Pillar terminology that is based on the approved rules of NYSE Arca Equities and NYSE American. The Exchange believes that proposed Rule 7.36(h), which would establish Setter Priority, would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed rule is based on current Rule 72(a), with substantive differences designed to encourage the display of aggressively-priced orders by requiring that an order not only establish the BBO, but also establish or join the NBBO to be eligible for Setter Priority. The Exchange similarly believes that proposed Rule 7.37(b), which would use Pillar terminology to describe how an Aggressing Order would be allocated, would remove impediments to and perfect the mechanism of a free and open market and a national market system because it is based on current Rule 72(b) and (c). The Exchange believes that the proposed substantive difference to maintain separate allocation wheels for displayed and non-displayed orders at each price would promote just and equitable principles of trade because it would allow for Exchange member organizations to establish their position on an allocation wheel at each price point, rather than rely on their position on a single allocation wheel that would be applicable to trades at multiple price points. The Exchange believes that proposed Rules 7.10, 7.11, 7.16, 7.18, 7.31, 7.34, 7.38, and 7.46 would remove impediments to and perfect the mechanism of a free and open market and a national market system because they are based on the rules of NYSE Arca Equities and NYSE American. The proposed substantive differences to the Exchange's rules would be because the Exchange would not be offering the full suite of orders and modifiers available on NYSE Arca Equities and NYSE American. In addition, the Exchange proposes substantive differences to these rules consistent with the Exchange's proposed parity allocation model. The Exchange believes that the proposed substantive differences for these rules would remove impediments to and perfect the mechanism of a free and open market and a national market system because they would provide transparency of which orders, modifiers and instructions would be available on the Exchange when it begins trading UTP Securities on the Pillar trading platform, and how the Pillar rules would function with a parity allocation model. The Exchange believes that the proposed substantive differences to Rule 7.34 to offer Early and Core Trading Sessions, but not a Late Trading Session, would remove impediments to and perfect the mechanism of a free and open market and a national market system because it is consistent with the Exchange's current hours, described in Rule 51, that the Exchange is not open for business after 4:00 p.m. Eastern Time. The Exchange further believes that adding a trading session before 9:30 a.m. Eastern Time would provide additional time for Exchange member organizations to trade UTP Securities on the Exchange consistent with the trading hours of other exchanges, [[Page 37271]] including NYSE American, which also will begin trading at 7:00 a.m. Eastern Time. The Exchange believes that the proposed amendments to Rules 103B and 107B would remove impediments to and perfect the mechanism of a free and open market and a national market system because they would provide transparency that the Exchange would not be assigning UTP Securities to DMMs and that member organizations would be eligible to register as a Supplemental Liquidity Providers in UTP Securities. The Exchange further believes that not assigning DMMs to UTP Securities is consistent with just and equitable principles of trade because the Exchange would not be conducting auctions in UTP Securities and therefore the Exchange would not need DMMs assigned to such securities to facilitate auctions. Not having DMMs registered in UTP Securities is also consistent with how NYSE Arca Equities and NYSE American function on Pillar, in that neither lead market makers (on NYSE Arca Equities) nor electronic designated market makers (on NYSE American) are assigned securities not listed on those exchanges. The Exchange further believes that it would remove impediments to and perfect the mechanism of a free and open market and a national market system for member organizations to be eligible to register as Supplemental Liquidity Providers in UTP Securities as this would provide an incentive for displayed liquidity in UTP Securities. The Exchange further believes that it would remove impediments to and perfect the mechanism of a free and open market and a national market system to specify which current rules would not be applicable to trading UTP Securities on the Pillar trading platform. The Exchange believes that the following legend, which would be added to existing rules, ``This Rule is not applicable to trading UTP Securities on the Pillar trading platform,'' would promote transparency regarding which rules would govern trading UTP Securities on the Exchange on Pillar. The Exchange has proposed to add this legend to rules that would be superseded by proposed rules or rules that would not be applicable because they relate to auctions or Floor-based point-of-sale trading. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is designed to propose rules to support trading of UTP Securities on the Exchange's new Pillar trading platform. The Exchange operates in a highly competitive environment in which its unaffiliated exchange competitors operate multiple affiliated exchanges that operate under common rules. By adding the trading of UTP Securities on the Exchange, the Exchange believes that it will be able to compete on a more level playing field with its exchange competitors that similarly trade all NMS Stocks. In addition, by basing certain rules on those of NYSE Arca Equities and NYSE American, the Exchange will provide its members with consistency across affiliated exchanges, thereby enabling the Exchange to compete with unaffiliated exchange competitors that similarly operate multiple exchanges on the same trading platforms. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be 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 (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSE-2017-36 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-NYSE-2017-36. 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 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; 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-NYSE-2017-36 and should be submitted on or before August 30, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\34\ --------------------------------------------------------------------------- \34\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-16742 Filed 8-8-17; 8:45 am] BILLING CODE 8011-01-P
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change, the Commission summarily may All submissions should refer to File II. Self-Regulatory Organization’s
temporarily suspend such rule change if Number SR–NSCC–2017–014 and Statement of the Purpose of, and
it appears to the Commission that such should be submitted on or before Statutory Basis for, the Proposed Rule
action is necessary or appropriate in the August 30, 2017. Change
public interest, for the protection of In its filing with the Commission, the
investors, or otherwise in furtherance of self-regulatory organization included
For the Commission, by the Division of
the purposes of the Act. statements concerning the purpose of,
Trading and Markets, pursuant to delegated
IV. Solicitation of Comments authority.14 and basis for, the proposed rule change
Eduardo A. Aleman, and discussed any comments it received
Interested persons are invited to on the proposed rule change. The text
submit written data, views and Assistant Secretary.
of those statements may be examined at
arguments concerning the foregoing, [FR Doc. 2017–16740 Filed 8–8–17; 8:45 am]
the places specified in Item IV below.
including whether the proposed rule BILLING CODE 8011–01–P The Exchange has prepared summaries,
change is consistent with the Act. set forth in sections A, B, and C below,
Comments may be submitted by any of of the most significant parts of such
the following methods: SECURITIES AND EXCHANGE statements.
Electronic Comments COMMISSION
A. Self-Regulatory Organization’s
• Use the Commission’s Internet [Release No. 34–81310; File No. SR–NYSE–
Statement of the Purpose of, and the
comment form (http://www.sec.gov/ 2017–36] Statutory Basis for, the Proposed Rule
rules/sro.shtml); or Change
• Send an email to rule-comments@ Self-Regulatory Organizations; New 1. Purpose
sec.gov. Please include File Number SR– York Stock Exchange LLC; Notice of
NSCC–2017–014 on the subject line. On January 29, 2015, the Exchange
Filing of Proposed Rule Change for
announced the implementation of Pillar,
Paper Comments Trading UTP Securities on Pillar, the
which is an integrated trading
Exchange’s New Trading Technology
• Send paper comments in triplicate Platform, Including Orders and
technology platform designed to use a
to Secretary, Securities and Exchange single specification for connecting to the
Modifiers, Order Ranking and Display, equities and options markets operated
Commission, 100 F Street NE.,
and Order Execution and Routing by the Exchange and its affiliates, NYSE
Washington, DC 20549–1090.
August 3, 2017 Arca, Inc. (‘‘NYSE Arca’’) and NYSE
All submissions should refer to File
MKT LLC (‘‘NYSE MKT’’).4 NYSE Arca
Number SR–NSCC–2017–014. This file Pursuant to Section 19(b)(1) 1 of the Equities, Inc. (‘‘NYSE Arca Equities
number should be included on the Securities Exchange Act of 1934 (the [sic]),5 which operates the cash equities
subject line if email is used. To help the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 trading platform for NYSE Arca, was the
Commission process and review your notice is hereby given that, on July 28, first trading system to migrate to Pillar.6
comments more efficiently, please use
2017, New York Stock Exchange LLC
only one method. The Commission will
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with 4 See Trader Update dated January 29, 2015,
post all comments on the Commission’s available here: www.nyse.com/pillar.
Internet Web site (http://www.sec.gov/ the Securities and Exchange 5 NYSE Arca Equities is a wholly-owned
rules/sro.shtml). Copies of the Commission (the ‘‘Commission’’) the corporation of NYSE Arca and operates as a facility
submission, all subsequent proposed rule change as described in of NYSE Arca. NYSE Arca has filed a proposed rule
Items I, II, and III below, which Items change to merge NYSE Arca Equities with and into
amendments, all written statements NYSE Arca. See Securities Exchange Act Release
with respect to the proposed rule have been prepared by the self- No. 80929 (June 14, 2017), 82 FR 28157 (June 20,
change that are filed with the regulatory organization. The 2017) (Notice) (‘‘NYSE Arca Merger Filing’’). As
Commission, and all written Commission is publishing this notice to part of the NYSE Arca Merger Filing, NYSE Arca
solicit comments on the proposed rule has proposed that the NYSE Arca Equities rules will
communications relating to the be integrated in the NYSE Arca rule book using the
proposed rule change between the change from interested persons. same rule number, but with an additional suffix of
Commission and any person, other than ‘‘-E’’ added to a rule. For example, ‘‘NYSE Arca
I. Self-Regulatory Organization’s Equities Rule 7 (Equities Trading)’’ will become
those that may be withheld from the
Statement of the Terms of Substance of ‘‘NYSE Arca Rule 7–E (Equities Trading),’’ and
public in accordance with the ‘‘NYSE Arca Equities Rule 7.31’’ will become
the Proposed Rule Change
provisions of 5 U.S.C. 552, will be ‘‘NYSE Arca Rule 7.31–E.’’ Accordingly, if the
available for Web site viewing and The Exchange proposes rules for NYSE Arca Merger Filing is approved, all references
printing in the Commission’s Public in this proposed rule change to an NYSE Arca
trading UTP Securities on Pillar, the Equities rule should be deemed to be a reference to
Reference Room, 100 F Street NE., Exchange’s new trading technology an NYSE Arca rule with the same number and
Washington, DC 20549–1090 on official platform, including rules governing added ‘‘-E’’ suffix.
business days between the hours of orders and modifiers, order ranking and
6 In connection with the NYSE Arca
10:00 a.m. and 3:00 p.m. Copies of the implementation of Pillar, NYSE Arca filed four rule
display, and order execution and proposals relating to Pillar. See Securities Exchange
filing also will be available for
routing. The proposed rule change is Act Release Nos. 74951 (May 13, 2015), 80 FR
inspection and copying at the principal 28721 (May 19, 2015) (Notice) and 75494 (July 20,
available on the Exchange’s Web site at
office of NSCC and on DTCC’s Web site 2015), 80 FR 44170 (July 24, 2015) (SR–NYSEArca–
(http://dtcc.com/legal/sec-rule- www.nyse.com, at the principal office of 2015–38) (Approval Order of NYSE Arca Pillar I
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filings.aspx). All comments received the Exchange, and at the Commission’s Filing, adopting rules for Trading Sessions, Order
Public Reference Room. Ranking and Display, and Order Execution);
will be posted without change; the Securities Exchange Act Release Nos. 75497 (July
Commission does not edit personal 21, 2015), 80 FR 45022 (July 28, 2015) (Notice) and
identifying information from 14 17 CFR 200.30–3(a)(12). 76267 (October 26, 2015), 80 FR 66951 (October 30,
2015) (SR–NYSEArca–2015–56) (Approval Order of
submissions. You should submit only 1 15 U.S.C.78s(b)(1).
NYSE Arca Pillar II Filing, adopting rules for Orders
information that you wish to make 2 15 U.S.C. 78a.
and Modifiers and the Retail Liquidity Program);
available publicly. 3 17 CFR 240.19b–4. Continued
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![37258 Federal Register / Vol. 82, No. 152 / Wednesday, August 9, 2017 / Notices
NYSE MKT’s equities market will member organizations approved as Price Improvement Orders) for UTP
transition to Pillar in the third quarter Supplemental Liquidity Providers Securities.
of 2017 and as part of this transition, would be eligible to be assigned UTP • The Exchange would not conduct
will be renamed NYSE American LLC Securities.10 In addition, member auctions in UTP Securities.
(‘‘NYSE American’’).7 organizations that operate Floor broker • The Exchange would offer two
operations that are physically located on trading sessions, with the Early Trading
Overview
the Floor 11 would be eligible to trade Session beginning at 7:00 a.m. Eastern
Currently, the Exchange only trades UTP Securities.12 Time.
securities listed on the Exchange. With Trading in UTP Securities would be • The Exchange is not proposing to
Pillar, the Exchange proposes to subject to the Pillar Platform Rules, as offer the full suite of order instructions
introduce trading of UTP Securities.8 set forth in Rules 1P–13P.13 With this and modifiers that are available on
Consistent with the Exchange’s current proposed rule change, the Exchange NYSE Arca Equities and NYSE
allocation model for its listed securities, proposes changes to Rule 7P Equities American.
trading in UTP Securities would be Trading that would govern trading in Subject to rule approvals, the
subject to a parity allocation model. UTP Securities. The proposed rules are Exchange will announce the
Unlike the trading of listed securities on based in part on the rules of NYSE Arca implementation of trading UTP
the Exchange, when trading UTP Equities and NYSE American,14 with Securities on the Pillar trading system
Securities on Pillar, the Exchange would the following substantive differences: by Trader Update, which the Exchange
not offer Floor-based point-of-sale • Consistent with the Exchange’s anticipates will be in the fourth quarter
trading, Designated Market Makers current allocation model, trading in of 2017.
(‘‘DMMs’’) would not be assigned to UTP Securities on the Exchange would Once trading in UTP Securities on the
UTP Securities, and the Exchange be a parity allocation model with a Pillar trading platform begins, specified
would not conduct any auctions in UTP setter priority allocation for the current Exchange trading rules would
Securities.9 As with listed securities, participant that sets the BBO.15 not be applicable for trading UTP
• The Exchange would not offer a Securities. As described in more detail
Securities Exchange Act Release Nos. 75467 (July Retail Liquidity Program and related
16, 2015), 80 FR 43515 (July 22, 2015) (Notice) and below, for each current rule that would
order types (Retail Orders and Retail
76198 (October 20, 2015), 80 FR 65274 (October 26, not be applicable for trading on the
2015) (SR–NYSEArca–2015–58) (Approval Order of Pillar trading platform, the Exchange
NYSE Arca Pillar III Filing, adopting rules for trading in NYSE-listed securities to Pillar at a
separate date, which will be the subject of separate proposes to state in a preamble to such
Trading Halts, Short Sales, Limit Up-Limit Down,
and Odd Lots and Mixed Lots); and Securities proposed rule changes. rule that ‘‘this rule is not applicable to
Exchange Act Release Nos. 76085 (October 6, 2015), 10 See Rule 107B, which the Exchange is
trading UTP Securities on the Pillar
80 FR 61513 (October 13, 2015) (Notice) and 76869 proposing to amend, see infra. trading platform.’’ Current Exchange
11 The term ‘‘Floor’’ means the trading Floor of
(January 11, 2016), 81 FR 2276 (January 15, 2016) rules governing equities trading that do
(Approval Order of NYSE Arca Pillar IV Filing, the Exchange and the premises immediately
adopting rules for Auctions). adjacent thereto, such as the various entrances and not have this preamble will govern
7 See Securities Exchange Act Release Nos. 80283 lobbies of the 11 Wall Street, 18 New Street, 8 Exchange operations on Pillar.
(March 21, 2017), 82 FR 15244 (March 27, 2017) Broad Street, 12 Broad Street and 18 Broad Street
(SR–NYSEMKT–201714 [sic]) (Notice of filing and Buildings, and also means the telephone facilities Proposed Rule Changes
immediate effectiveness of proposed rule change to available in these locations. See Rule 6. The term
‘‘Trading Floor’’ means the restricted-access As noted above, the Exchange
change the name of NYSE MKT to NYSE American)
and 80748 (May 23, 2017), 82 FR 24764, 24765 (SR– physical areas designated by the Exchange for the proposes rules that would be applicable
NYSEMKT–2017–20) (Notice of filing and trading of securities, commonly known as the to trading UTP Securities on Pillar that
immediate effectiveness of proposed rule change to ‘‘Main Room’’ and the ‘‘Buttonwood Room,’’ but are based on the rules of NYSE Arca
change the name of NYSE MKT to NYSE American) does not include (i) the areas in the ‘‘Buttonwood
Room’’ designated by the Exchange where NYSE Equities and NYSE American. As a
(‘‘NYSE American Filings’’). In connection with the
NYSE American implementation of Pillar, NYSE Amex-listed options are traded, which, for the global matter, the Exchange proposes
MKT filed several rule changes. See Securities purposes of the Exchange’s Rules, shall be referred non-substantive differences as
Exchange Act Release Nos. 79242 (November 4, to as the ‘‘NYSE Amex Options Trading Floor’’ or compared to the NYSE Arca Equities
2016), 81 FR 79081 (November 10, 2016) (SR– (ii) the physical area within fully enclosed
telephone booths located in 18 Broad Street at the rules to use the terms ‘‘Exchange’’
NYSEMKT–2016–97) (Notice and Filing of
Immediate Effectiveness of Proposed Rule Change Southeast wall of the Trading Floor. See Rule 6A. instead of the terms ‘‘NYSE Arca
of framework rules); 81038 (June 28, 2017), 82 FR 12 Member organizations trading UTP Securities Marketplace,’’ ‘‘NYSE Arca,’’ or
31118 (July 5, 2017) (SR–NYSEMKT–2016–103) would continue to be required to comply with ‘‘Corporation,’’ and to use the terms
(Approval Order) (the ‘‘ETP Listing Rules Filing’’); Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1), and
any applicable exceptions thereto as are currently
‘‘mean’’ or ‘‘have meaning’’ instead of
80590 (May 4, 2017), 82 FR 21843 (May 10, 2017)
(Approval Order) (NYSE MKT rules governing applicable to trading on the Exchange. the terms ‘‘shall mean’’ or ‘‘shall have
automated trading); 80577 (May 2, 2017), 82 FR 13 See Securities Exchange Act Release Nos. the meaning.’’ In addition, the Exchange
21446 (May 8, 2017) (SR–NYSEMKT–2017–04) 76803 (December 30, 2015), 81 FR 536 (January 6, will use the term ‘‘member
(Approval Order) (NYSE MKT rules governing 2016) (SR–NYSE–2015–67) (Notice of Filing and organization,’’ which is defined in Rule
market makers); 80700 (May 16, 2017), 82 FR 23381 Immediate Effectiveness of Proposed Rule Change)
(May 22, 2017) (SR–NYSEMKT–2017–05) (‘‘Framework Filing’’); and 80214 (March 10, 2017), 2, instead of the terms ‘‘ETP Holder’’ or
(Approval Order) (NYSE MKT rules governing 82 FR 14050 (March 16, 2017) (SR–NYSE–2016–44) ‘‘User.’’ 16
delay mechanism). (Approval Order) (‘‘ETP Listing Rules Filing’’). See As previously established in the
8 The term ‘‘UTP Security’’ means a security that also SR–NYSE–2017–35. Framework Filing, Section 1 of Rule 7P
is listed on a national securities exchange other 14 In the NYSE American Filings, supra note 7,
than the Exchange and that trades on the Exchange NYSE MKT represented that the name change to
sets forth the General Provisions relating
pursuant to unlisted trading privileges. See Rule NYSE American would become operative upon the to trading on the Pillar trading platform
1.1(ii). The Exchange has authority to extend effectiveness of an amendment to NYSE MKT’s and Section 3 of Rule 7P sets forth
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unlisted trading privileges to any security that is an Certificate of Formation, which is expected to be no Exchange Trading on the Pillar trading
NMS Stock that is listed on another national later than July 31, 2017. Because the NYSE
securities exchange or with respect to which American name would be operative before this
platform. In this filing, the Exchange
unlisted trading privileges may otherwise be proposed rule change would be approved, the proposes new Rules 7.10, 7.11, and 7.16
extended in accordance with Section 12(f) of the Exchange believes it would promote transparency
Act. See Rule 5.1(a)(1). and reduce confusion to refer to NYSE MKT rules 16 Because these non-substantive differences
9 The Exchange will continue to trade NYSE- as ‘‘NYSE American’’ rules. would be applied throughout the proposed rules,
listed securities on its current trading platform 15 The term ‘‘BBO’’ means the best bid or offer on the Exchange will not note these differences
without any changes. The Exchange will transition the Exchange. See Rule 1.1(h). separately for each proposed rule.
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and to amend Rule 7.18 for Section 1 of Participant’’). The Exchange proposes to offer, including pegging interest is
Rule 7P and new Rules 7.31, 7.34, 7.36, use the term ‘‘Floor broker trading established as the only displayable bid
7.37, and 7.38 for Section 3 of Rule 7P. license’’ rather than ‘‘each single Floor or offer made at a particular price and
In addition, the Exchange proposes new broker’’ because pursuant to Rule 300 a such bid or offer is the only displayable
Section 5 of Rule 7P to establish rules trading license is required to effect interest when such price is or becomes
for the Plan to Implement a Tick Size transactions on the Floor of the the Exchange BBO (the ‘‘setting
Pilot Program, and proposes new Rule Exchange or any facility thereof and a interest’’), such setting interest is
7.46 in that section. member organization designates natural entitled to priority for allocation of
Below, the Exchange first describes persons to effect transactions on the executions at that price as described in
proposed Rules 7.36 and 7.37, as these Floor on its behalf. Accordingly, Rule 72. The rule further provides that:
rules would establish the Exchange’s reference to a ‘‘Floor broker trading • Odd-lot orders, including
Pillar rules governing order ranking and license’’ makes clear that the Floor aggregated odd-lot orders that are
display and order execution and broker participant is at the trading displayable, are not eligible to be setting
routing. Next, the Exchange describes license level, rather than at the member interest. (Rule 72(a)(ii)(A))
proposed Rule 7.31, which would organization level. The Exchange also • If, at the time displayable interest of
establish the orders and modifiers proposes to use the term ‘‘Exchange a round lot or greater becomes the
available for trading UTP Securities on Book,’’ which is a defined term, rather Exchange BBO, there is other
Pillar. Finally, the Exchange describes than referring more generally to displayable interest of a round lot or
proposed Rules 7.10, 7.11, 7.16, 7.34, ‘‘Exchange systems.’’ greater, including aggregated odd-lot
7.38, and 7.46 and amendments to Rule • Proposed Rule 7.36(a)(6) would add orders that are equal to or greater than
7.18. the definition of ‘‘Aggressing Order’’ to a round lot, at the price that becomes
mean a buy (sell) order that is or the Exchange BBO, no interest is
Proposed Rule 7.36
becomes marketable against sell (buy) considered to be a setting interest, and,
Proposed Rule 7.36 (Order Ranking interest on the Exchange Book. This therefore, there is no priority
and Display) would establish how proposed term would be used in
orders in UTP Securities would be established. (Rule 72(a)(ii)(B))
proposed Rule 7.37, described below. • If, at the time displayable interest of
ranked and displayed on the Pillar • Because all displayed Limit Orders
trading platform. As described above, a round lot or greater becomes the
would be displayed on an anonymous
the Exchange proposes to retain its Exchange BBO, there is other
basis, the Exchange does not propose to
current allocation model for trading displayable interest the sum of which is
include text based on the first clause of
UTP Securities on Pillar, including the less than a round lot, at the price that
NYSE Arca Equities Rule 7.36(b)(2) in
concept of ‘‘setter interest,’’ which the becomes the Exchange BBO, the
proposed Rule 7.36(b)(2).
displayable interest of a round lot or
Exchange would define in proposed • Proposed Rule 7.36(c) regarding
Rule 7.36 as ‘‘Setter Priority.’’ Except for greater will be considered the only
ranking would not include reference to
the addition of Setter Priority, the displayable bid or offer at that price
price-time priority, as the Exchange’s
Exchange proposes to use Pillar point and is therefore established as the
allocation model would not always be a
functionality for determining how setting interest entitled to priority for
price-time priority allocation, as
orders would be ranked and displayed. allocation of executions at that price as
described below. As further described
Accordingly, proposed Rule 7.36 is described in this rule. (Rule 72(a)(ii)(C))
below, the Exchange would rank orders
based in part on NYSE Arca Equities consistent with proposed Rule 7.36(c). • If executions decrement the setting
Rule 7.36 and NYSE American Rule • Proposed Rule 7.36(e) would interest to an odd-lot size, a round lot
7.36E, with substantive differences as establish three priority categories: or partial round lot order that joins such
described below. Priority 1—Market Orders, Priority 2— remaining odd-lot size order is not
Display Orders, and Priority 3—Non- eligible to be the setting interest. (Rule
Proposed Rule 7.36(a)–(g) 72(a)(ii)(D))
Display Orders. The Exchange would
Proposed Rules 7.36(a)–(g) would not offer any additional priority • If, as a result of cancellation,
establish rules defining terms that categories for trading of UTP Securities. interest is or becomes the single
would be used in Rule 7P—Equities In addition to these substantive displayable interest of a round lot or
Trading and describing display and differences, the Exchange proposes a greater at the Exchange BBO, it becomes
ranking of orders on the Exchange, non-substantive clarifying difference for the setting interest. (Rule 72(a)(ii)(E))
including ranking based on price, proposed Rule 7.36(f)(1)(B) to add • Only the portion of setting interest
priority category, and time. The ‘‘[o]ther than as provided for in Rule that is or has been published in the
proposed rule text is based on NYSE 7.38(b)(2),’’ to make clear that the way Exchange BBO is entitled to priority
Arca Equities Rule 7.36(a)–(g) and NYSE in which a working time is assigned to allocation of an execution. That portion
American Rule 7.36E(a)–(g) with the an order that is partially routed to an of setting interest that is designated as
following substantive differences: Away Market and returns to the reserve interest and therefore not
• Proposed Rule 7.36(a)(5) would add Exchange is addressed in both proposed displayed at the Exchange BBO (or not
a definition of the term ‘‘Participant,’’ Rule 7.36(f)(1)(B) and proposed Rule displayable if it becomes the Exchange
which is based on how the term 7.38(b)(2). The Exchange also proposes BBO) is not eligible for priority
‘‘individual participant’’ is defined in non-substantive differences to proposed allocation of an execution irrespective
current Rule 72(c)(ii), with non- Rule 7.36(f)(2) and (3) to streamline the of the price of such reserve interest or
substantive differences. The Exchange the time it is accepted into Exchange
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rule text.
proposes that the term ‘‘Participant’’ systems. However, if, following an
would mean for purposes of parity Proposed Rule 7.36(h)—Setter Priority execution of part or all of setting
allocation, a Floor broker trading license Proposed Rule 7.36(h) would interest, such setting interest is
(each, a ‘‘Floor Broker Participant’’) or establish how Setter Priority would be replenished from any reserve interest,
orders collectively represented in the assigned to an order and is based in part the replenished volume of such setting
Exchange Book that have not been on current Rules 72(a) and (b). Rule interest shall be entitled to priority if
entered by a Floor Broker (‘‘Book 72(a)(ii) provides that when a bid or the setting interest is still the only
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Setter Priority, whichever is lower. The that such orders are willing to be removed from an allocation wheel if (i)
rule would further provide that an order skipped in order to have the MTS met. all orders from that Participant at that
with Setter Priority is eligible for Proposed Rule 7.37(b)(2) would price are executed or cancelled in full,
allocation under proposed Rule establish the allocation wheel for parity (ii) the working price of an order
7.37(b)(1)(B) if the BBO is no longer the allocations. The proposed rule would be changes and that Participant has no
same as the NBBO. This proposed rule new for Pillar and would establish that other orders at that price, or (iii) the
text is based on Rules 72(b)(ii) and at each price on each side of the market, priority category of the order changes
72(c)(iii) with non-substantive the Exchange would maintain an and that Participant has no other orders
differences to use Pillar terminology. ‘‘allocation wheel’’ of Participants with at that price. This proposed rule would
Although the Exchange is using orders ranked Priority 2—Display be new functionality associated with the
different rule text, the quantity of an Orders and a separate allocation wheel substantive difference of having
Aggressing Order that would be of Participants with orders ranked separate allocation wheels at each price
allocated to an order with Setter Priority Priority 3—Non-Display Orders. The point.
would be the same under both current rule further describes how the position • Proposed Rule 7.37(b)(2)(F) would
rules and the proposed Pillar rule. of an order on an allocation wheel provide that if multiple orders are
• Proposed Rule 7.37(b)(1)(C) would would be determined, as follows: assigned new working prices at the
provide that next, orders ranked Priority • Proposed Rule 7.37(b)(2)(A) would same time, the Participants representing
2—Displayed Orders would be allocated provide that the Participant that enters those orders would be added to an
on parity by Participant and that any the first order in a priority category at allocation wheel at the new working
remaining quantity of an order with a price would establish the first position price in time sequence relative to one
Setter Priority would be eligible to on the applicable allocation wheel for another. This proposed rule would be
participate in this parity allocation, that price. The rule would further new functionality associated with the
consistent with the allocation wheel provide that if an allocation wheel no substantive difference of having
position of the Participant that entered longer has any orders at a price, the next separate allocation wheels at each price
Participant to enter an order at that point.
the order with Setter Priority. This
price would establish a new allocation
proposed rule text is based on Rules Proposed Rule 7.37(b)(3) would set
wheel. This proposed rule is based in
72(c)(i), (iv), (vi), and (ix) with non- forth the parity pointer associated with
part on the first sentence of Rule
substantive differences to use Pillar the allocation wheel. As proposed, if
72(c)(viii)(A), with both non-substantive
terminology. there is more than one Participant on an
differences to use Pillar terminology and
• Proposed Rule 7.37(b)(1)(D) would substantive differences because the allocation wheel, the Exchange would
provide that next, orders ranked Priority Exchange would maintain separate maintain a ‘‘pointer’’ that would
3—Non-Display Orders, other than MPL allocation wheels at each price point, identify which Participant would be
Orders with an MTS, would be allocated rather than a single allocation wheel for next to be evaluated for a parity
on parity by Participant. This proposed a security. Accordingly, an allocation allocation and that the Participant with
rule text is based on Rules 72(c)(i), (iv), wheel at a price point could be re- the pointer would be considered the
(vi), and (ix) with non-substantive established throughout the trading day. first position. This proposed rule is
differences to use Pillar terminology and • Proposed Rule 7.37(b)(2)(B) would based in part on the Parity Example 1
a substantive difference not to include provide that additional Participants described in Rule 72(c)(viii)(A) and Rule
MPL Orders with an MTS in the parity would be added to an allocation wheel 72(c)(viii)(B), with non-substantive
allocation of resting non-displayed based on time of entry of the first order differences to use Pillar terminology.
orders. entered by a Participant. This proposed The rule would further provide that the
• Proposed Rule 7.37(b)(1)(E) would rule is based in part on the second Setter Priority allocation described in
provide that MPL Orders with an MTS sentence of Rule 72(c)(viii)(A) with non- proposed Rule 7.37(b)(1)(B) would not
would be allocated based on MTS size substantive differences to use Pillar move the pointer, which is based on the
(smallest to largest) and time. Because terminology. second sentence of Rule 72(c)(iv) with
MPL Orders with an MTS would be a • Proposed Rule 7.37(b)(2)(C) would non-substantive differences to use Pillar
new offering on the Exchange, this provide that once a Participant has terminology.
proposed rule text is new. With an MTS established a position on an allocation Proposed Rule 7.37(b)(4) would set
instruction, an [sic] member wheel at a price, any additional orders forth how an Aggressing Order would be
organization is instructing the Exchange from that Participant at the same price allocated on parity. As proposed, an
that it does not want an execution of its would join that position on an Aggressing Order would be allocated by
order if the MTS cannot be met. allocation wheel. This proposed rule round lots. The Participant with the
Accordingly, an MPL Order with an uses Pillar terminology to describe pointer would be allocated a round lot
MTS is willing to be skipped if such current functionality. and then the pointer would advance to
instruction cannot be met. The • Proposed Rule 7.37(b)(2)(D) would the next Participant. The pointer would
Exchange proposes to separate MPL provide that if an order receives a new continue to advance on an allocation
Orders with an MTS from the parity working time or is cancelled and wheel until the Aggressing Order is
allocation of Priority 3—Non-Display replaced at the same working price, a fully allocated or all Participants in that
Orders because with a parity allocation, Participant that entered such order priority category are exhausted. This
an MTS instruction would not be would be moved to the last position on proposed rule is based on Rule
guaranteed. In order to honor the MTS 72(c)(viii), sub-paragraphs (A)–(C) of
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an allocation wheel if that Participant
instruction of the resting MPL Order, has no other orders at that price. This that Rule, and Parity Examples 1
the Exchange proposes to allocate these proposed rule is based in part on the through 4, with non-substantive
orders after all other Priority 3—Non- last sentence of Rule 72(c)(viii)(A) with differences to use Pillar terminology.
Display Orders have been allocated on non-substantive differences to use Pillar Rather than include examples in the
parity. The Exchange believes that this terminology. proposed rule, the Exchange believes
proposed allocation priority would be • Proposed Rule 7.37(b)(2)(E) would that the Pillar terminology streamlines
consistent with the MTS instruction in provide that a Participant would be the description of parity allocations in
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Securities on the Pillar trading platform. Order’’), Market-on-Open Order (‘‘MOO participate in any auctions. Proposed
The Exchange proposes to offer a subset Order’’), Limit-on-Close Order (‘‘LOC Rules 7.31(d)(3)(A)–(F), which further
of the orders and modifiers that are Order’’), and Market-on-Close (‘‘MOC describe MPL Orders, are based on
available on NYSE Arca Equities and Order’’). The proposed rule text is based NYSE Arca Equities Rule 7.31(d)(3)(A)–
NYSE American, with specified on NYSE Arca Equities Rule 7.31(c)(1)– (F) with two substantive differences.
substantive differences, as described (4) and NYSE American Rule First, the Exchange would not offer the
below. 7.31E(c)(1)–(4), with the substantive optional functionality for an incoming
• Proposed Rule 7.31(a) would difference not to include rule text Limit Order to be designated with a ‘‘No
establish the Exchange’s proposed relating to how Auction-Only Orders Midpoint Execution’’ modifier. Second,
Primary Order Types. The Exchange would function during a Trading Halt the Exchange would not offer for MPL
would offer Market Orders, which Auction, as the Exchange would not be Orders to be designated with a Non-
would be described in proposed Rule conducting any auctions in UTP Display Remove Modifier. Because the
7.31(a)(1), and Limit Orders, which Securities. Because the Exchange would Exchange would not offer the Non-
would be described in proposed Rule not have defined terms for auctions in Display Remove Modifier for MPL
7.31(a)(2). These proposed rules are the Pillar rules, the Exchange proposes Orders, the Exchange is not proposing
based on NYSE Arca Equities Rule an additional non-substantive difference rule text based on NYSE Arca Equities
7.31(a)(1) and (2) with one substantive to use the term ‘‘an opening or re- Rule 7.31(d)(3)(G).
difference. Because the Exchange would opening auction’’ instead of ‘‘the Core • Proposed Rule 7.31(e) would
not be conducting auctions for UTP Open Auction or a Trading Halt establish orders with instructions not to
Securities and because, as described Auction’’ and the term ‘‘a closing route and is based on NYSE Arca
below, with the exception of Primary auction’’ instead of ‘‘the Closing Equities Rule 7.31(e) and NYSE
Pegged Orders, Limit Orders entered Auction.’’ American Rule 7.31E(e) without any
before the Core Trading Session would • Proposed Rule 7.31(d) would differences.
be deemed designated for both the Early describe orders with a conditional or • Proposed Rule 7.31(e)(1) would
Trading Session and the Core Trading undisplayed price and/or size. Proposed establish the Limit Non-Routable Order,
Session, the Exchange proposes not to Rule 7.31(d) is based on NYSE Arca which is a Limit Order that does not
include the following text in proposed Equities Rule 7.31(d) and NYSE route. Proposed Rule 7.31(e)(1) and its
Rule 7.31(a)(2)(B): ‘‘A Limit Order American Rule 7.31E(d) without any sub-paragraphs (A)–(B) is based on
entered before the Core Trading Session differences. NYSE Arca Equities Rule 7.31(e)(1) and
that is designated for the Core Trading • Proposed Rule 7.31(d)(1) would its sub-paragraphs (A)–(B) and NYSE
Session only will become subject to establish Reserve Orders, which would American Rule 7.31E(1) and its sub-
Limit Order Price Protection after the be a Limit Order with a quantity of the paragraphs (A)–(B) without any
Core Open Auction.’’ Instead, the size displayed and with a reserve substantive differences. Because the
Exchange proposes to provide that a quantity (‘‘reserve interest’’) that is not Exchange would not offer Non-Display
Limit Order entered before the Core displayed. Proposed Rule 7.31(d)(1) and Remove Modifiers for Limit Non-
Trading Session that becomes eligible to subparagraphs (A)–(C) to that rule are Routable Orders, the Exchange is not
trade in the Core Trading Session would based on NYSE Arca Equities Rule proposing rule text based on NYSE Arca
become subject to the Limit Order Price 7.31(d)(1) and its sub-paragraphs (A)– Equities Rule 7.31(e)(1)(C).
Protection when the Core Trading (C) without any substantive differences. • Proposed Rule 7.31(e)(2) and sub-
Session begins. Accordingly, Primary As described below, the Exchange paragraphs (B)–(D) would establish the
Pegged Orders entered before the Core proposes to describe Limit Orders that ALO Order, which is a Limit Non-
Trading Session begins would not be do not route as ‘‘Limit Non-Routable Routable Order that, except as specified
subject to Limit Order Price Protection Order.’’ in the proposed rule, would not remove
until the Core Trading Session begins. • Proposed Rule 7.31(d)(2) would liquidity from the Exchange Book. The
• Proposed Rule 7.31(b) would establish Limit Non-Displayed Orders, proposed rule is based on NYSE Arca
establish the proposed time-in-force which would be a Limit Order that is Equities Rule 7.31(e)(2) and its sub-
modifiers available for UTP Securities not displayed and does not route. This paragraphs (B)–(D) with two substantive
on the Pillar trading platform. The proposed rule is based on NYSE Arca differences. First, because the Exchange
Exchange would offer both Day and Equities Rule 7.31(d)(2), with one would not have auctions in UTP
Immediate-or-Cancel (‘‘IOC’’) time-in- substantive difference: the Exchange Securities, the Exchange does not
force modifiers. The rule text is based would not be offering the ability for a propose rule text based on NYSE Arca
on NYSE Arca Equities Rule 7.31(b) and Limit Non-Displayed Order to be Equities Rule 7.31(e)(2)(A), and would
NYSE American Rule 7.31E(b) without designated with a Non-Display Remove designate this sub-paragraph as
any substantive differences. Modifier and therefore would not be ‘‘Reserved.’’ Second, because the
• Proposed Rule 7.31(c) would proposing rule text based on NYSE Arca Exchange would not offer the Non-
establish the Exchange’s Auction-Only Equities Rule 7.31(d)(2)(B). Display Remove Modifier for Limit Non-
Orders. Because the Exchange would • Proposed Rule 7.31(d)(3) would Routable Orders or Limit Non-Display
not be conducting auctions in UTP establish MPL Orders, which would be Orders, the Exchange does not propose
Securities, the Exchange would route all a Limit Order that is not displayed and rule text based on NYSE Arca Equities
Auction-Only Orders in UTP Securities does not route, with a working price at Rule 7.31(e)(2)(B)(iv)(b).
to the primary listing market, as the midpoint of the PBBO. Proposed • Proposed Rule 7.31(e)(3) and sub-
described in greater detail below in Rule 7.31(d)(3) is based on NYSE Arca paragraphs (A)–(D) would establish
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proposed Rule 7.34. To reflect this Equities Rule 7.31(d)(3) and NYSE Intermarket Sweep Orders (‘‘ISO’’),
functionality, proposed Rule 7.31(c) American Rule 7.31E(d)(3) with one which would be a Limit Order that does
would provide that an Auction-Only substantive difference: because the not route and meets the requirements of
Order is a Limit or Market Order that is Exchange would not be conducting Rule 600(b)(3) [sic] of Regulation NMS
only to be routed pursuant to Rule 7.34. auctions in UTP Securities, the and could be designated IOC or Day.
Proposed Rules 7.31(c)(1)–(4) would Exchange does not propose to include The proposed rule is based on NYSE
define Limit-on-Open Orders (‘‘LOO rule text that MPL Orders do not Arca Equities rule 7.31(e)(3) and its sub-
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paragraphs (A)–(D) and its sub- Pegged Order would be rejected on category that allocates orders on price-
paragraphs (A)–(D) [sic] with two arrival, or cancelled when resting, if time priority, the incoming order
substantive differences. First, because there is no PBBO against which to peg. marked with the STPN modifier would
Exchange Floor brokers do not have the In addition, Non-Displayed Primary be cancelled back to the originating
ability to enter orders directly on Away Pegged Orders would be ranked Priority member organization and the resting
Markets, the Exchange does not 3—Non-Display Orders and if the PBBO order marked with one of the STP
currently offer the ability for Floor is locked or crossed, both an arriving modifiers would remain on the
brokers to enter ISOs.24 The Exchange and resting Non-Displayd [sic] Primary Exchange Book. This proposed rule is
similarly proposes that Floor brokers Pegged Order would wait for a PBBO based on NYSE Arca Equities Rule
would not be able to enter ISOs for that is not locked or crossed before the 7.31(i)(2)(A) and NYSE American Rule
trading UTP Securities on the Pillar working price is adjusted and the order 7.31E(i)(2)(A), with non-substantive
trading platform and therefore would becomes eligible to trade. differences to specify that this order
specify that ISOs are not available to Because the Exchange would not offer processing would be applicable for
Floor brokers. Second, because Non- Market Pegged Order or Discretionary orders that are allocated in price-time
Display Remove Modifiers would not be Pegged Orders, the Exchange proposes priority.
available, the Exchange is not proposing that paragraphs (h)(1) and (h)(3) of Proposed Rule 7.31(i)(2)(A)(ii) would
rule text based on NYSE Arca Equities proposed Rule 7.31 would be designated be new and would address how STPN
Rule 7.31(e)(3)(D)(iii)(b). as ‘‘Reserved.’’ would function for resting orders in a
• Because the Exchange would not • Proposed Rule 7.31(i)(2) would
priority category that allocates orders on
offer Primary Only Orders or Cross establish Self Trade Prevention
parity. As proposed, if a resting order
Orders, the Exchange proposes that Modifiers (‘‘STP’’) on the Exchange. As
with an STP modifier from the same
Rules 7.31(f) and (g) would be proposed, any incoming order to buy
Client ID is in a priority category that
designated as ‘‘Reserved.’’ (sell) designated with an STP modifier
allocates orders on parity and would
• Proposed Rule 7.31(h) would would be prevented from trading with a
have been considered for an allocation,
establish Pegged Orders, which would resting order to sell (buy) also
none of the resting orders eligible for a
be a Limit Order that does not route designated with an STP modifier and
parity allocation in that priority
with a working price that is pegged to from the same Client ID, as designated
by the member organization, and the category would receive an allocation
a dynamic reference price. Proposed and the incoming order marked with the
Rule 7.31(h) is based on NYSE Arca STP modifier on the incoming order
would control the interaction between STPN modifier would be cancelled
Equities Rule 7.31(h) with one back.26 The Exchange believes that if a
substantive difference. Consistent with two orders marked with STP modifiers.
Proposed Rule 7.31(i)(2)(A) would member organization designates an
the Exchange’s current rules, Pegged order with an STPN modifier, that
establish STP Cancel Newest (‘‘STPN’’)
Orders would be available only to Floor member organization has instructed the
and proposed Rule 7.31(i)(2)(B) would
brokers.25 Exchange to cancel the incoming order
establish STP Cancel Oldest (‘‘STPO’’).
Proposed Rule 7.31(h)(2) and sub- rather than trade with a resting order
Proposed Rule 7.31(i)(2) and
paragraphs (A) and (B) would establish with an STP modifier from the same
subparagraphs (A) and (B) are based in
Primary Pegged Orders, which would be Client ID. Because in a parity allocation,
part on NYSE Arca Equities Rule
a Pegged Order to buy (sell) with a resting orders are allocated based on
7.31(i)(2) and its sub-paragraphs (A) and
working price that is pegged to the PBB their position on an allocation wheel, as
(B) and NYSE American Rule 7.31E(i)(2)
(PBO), must include a minimum of one described above, it would be consistent
and its sub-paragraphs (A) and (B), with
round lot of displayed, and with no substantive differences to specify how with the incoming order’s instruction to
offset allowed. This proposed rule text STP modifiers would function cancel the incoming order if any of the
is based on NYSE Arca Equities Rule consistent with the Exchange’s resting orders eligible to participate in
7.31(h)(2) and sub-paragraphs (A) and proposed allocation model. the parity allocation has an STP
(B) with one substantive difference. Specifically, because, as described modifier from the same Client ID.
Because the Exchange would not above, resting orders are allocated either For STPO, proposed Rule
conduct auctions in UTP Securities, the on parity or time based on the priority 7.31(i)(2)(B)(i) would provide that if a
Exchange does not propose to include category of an order, the Exchange resting order with an STP modifier from
rule text that a Primary Pegged Order proposes to specify in proposed Rule the same Client ID is in a priority
would be eligible to participate in 7.31(i)(2) that the Exchange would category that allocates orders on price-
auctions at the limit price of the order. evaluate the interaction between two time priority, the resting order marked
Proposed Rule 7.31(h)(4) and sub- orders marked with STP modifiers from with the STP modifier would be
paragraphs (A) and (B) would establish the same Client ID consistent with the cancelled back to the originating
a Non-Displayed Primary Pegged Order, allocation logic applicable to the member organization and the incoming
which would be a Pegged Order to buy priority category of the resting order. order marked with the STPO modifier
(sell) with a working price that is The proposed rule would further would remain on the Exchange Book.
pegged to the PBB (PBO), with no offset provide that if resting orders in a This proposed rule is based on NYSE
allowed, that is not displayed. This rule priority category do not have an STP Arca Equities Rule 7.31(i)(2)(B) and
text is based on NYSE American Rule modifier from the same Client ID, the NYSE American Rule 7.31E(i)(2)(B),
7.31E(h)(2), which describes a Primary incoming order designated with an STP with non-substantive differences to
Pegged Order that is not displayed.
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modifier would trade with resting specify that this order processing would
Similar to the rules of NYSE American, orders in that priority category before
the proposed Non-Displayed Primary being evaluated for STP with resting 26 As described above, if there were resting
24 See
orders in the next priority category. Market Orders against which the incoming order
Rule 70(a)(i). For STPN, proposed Rule was marketable, because Market Orders are in a
25 See Rule 13(f)(1)(A)(i), which describes Pegging different priority category, the incoming order
Interest as being available for e-Quotes and d-
7.31(i)(2)(A)(i) would provide that if a would trade with the resting Market Orders before
Quotes, which is functionality available only to resting order with an STP modifier from being assessed for STP with resting orders in a
Floor brokers. the same Client ID is in a priority parity priority category.
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be applicable for orders that are rather than current Rule 128 (Clearly proposed Rules 7.11(a)(5)(D) and
allocated in price-time priority. Erroneous Executions) because the 7.11(a)(5)(E) as ‘‘Reserved.’’
Proposed Rule 7.31(i)(2)(B)(ii) would NYSE Arca Equities and NYSE Finally, because proposed Rule 7.11
be new and would address how STPO American version of the rule uses the would govern trading in UTP Securities
would function for resting orders in a same terminology that the Exchange is and the Exchange would not conduct
priority category that allocates orders on proposing for the Pillar trading auctions for such securities, the
parity. As proposed, if a resting order platform, e.g., references to Early and Exchange does not propose rule text
with an STP modifier from the same Core Trading Sessions. Accordingly, the from NYSE American Rule 7.11E(b) that
Client ID is in a priority category that Exchange proposes that Rule 128 describes how the Exchange would re-
allocates orders on parity, all resting (Clearly Erroneous Executions) would open trading in a security. The
orders with the STP modifier with the Exchange proposes that Rule 7.11(b)(1)
not be applicable to trading UTP
same Client ID in that priority category would be based on rule text from NYSE
Securities on the Pillar trading
that would have been considered for an American Rule 7.11E(b)(1).
allocation would not be eligible for a platform.28 Because the Exchange Because the proposed rule covers the
parity allocation and would be would not be conducting auctions in same subject matter as Rule 80C, the
cancelled. The rule would further UTP Securities, proposed Rule 7.10(a) Exchange proposes that Rule 80C would
provide that an incoming order marked would not include the last sentence of not be applicable to trading UTP
with the STPO modifier would be NYSE Arca Equities Rule 7.10(a), which Securities on the Pillar trading platform.
eligible to trade on parity with orders in provides that ‘‘[e]xecutions as a result of
a Trading Halt Auction are not eligible Proposed Rule 7.16
that priority category that do not have
a matching STP modifier and that for a request to review as clearly Proposed Rule 7.16 (Short Sales)
resting orders in that priority category erroneous under paragraph (b) of this would establish requirements relating to
with an STP modifier from the same Rule.’’ short sales. The proposed rule is based
Client ID that would not have been on NYSE Arca Equities Rule 7.16 and
Proposed Rule 7.11 NYSE American Rule 7.16E with two
eligible for a parity allocation would
remain on the Exchange Book. The substantive differences. First, because
Proposed Rule 7.11 (Limit Up-Limit
Exchange believes that this proposed the proposed rule would not be
Down Plan and Trading Pauses in
processing of STPO would allow for the applicable to any securities that are
Individual Securities Due to listed on the Exchange, the Exchange
incoming order to continue to trade Extraordinary Market Volatility) would
with resting orders that do not have an would not be evaluating whether the
establish how the Exchange would short sale price test restrictions of Rule
STP modifier from the same client ID, comply with the Regulation NMS Plan
while at the same time processing the 201 of Regulation SHO have been
to Address Extraordinary Market triggered. Accordingly, the Exchange
instruction that resting orders with an
Volatility (‘‘LULD Plan’’).29 The does not propose rule text based on
STP from the same Client ID would be
proposed rule is based on NYSE NYSE Arca Equities Rule 7.16(f)(3) or
cancelled if there were a potential for an
American Rule 7.11E with the following NYSE American Rule 7.16E(f)(3) and
execution between the two orders.
• Proposed Commentary .01 and .02 substantive differences. First, as would designate that sub-paragraph as
to Rule 7.31is based on Commentary .01 proposed, the Exchange would not offer ‘‘Reserved.’’ For similar reasons, the
and .02 to NYSE Arca Equities Rule 7.31 the optional functionality for a member Exchange proposes not to include rule
without any substantive differences. organization to instruct the Exchange to text based on NYSE Arca Equities Rules
Because proposed Rule 7.31 would cancel a Limit Order that cannot be 7.16(f)(4)(A) and (B) or NYSE American
govern orders and modifiers, including traded or routed at prices at or within Rule 7.16E(f)(4)(A) and (B).
orders entered by Floor brokers, the the Price bands, rather than the default Second, because the Exchange would
Exchange proposes that Rules 13 processing of re-pricing a Limit Order to not be offering Tracking Orders, Cross
(Orders and Modifiers) and 70 the Price Bands, as described in Orders, or the Proactive if Locked/
(Execution of Floor broker interest) proposed Rule 7.11(a)(5)(B)(i). Crossed Modifier, the Exchange does
would not be applicable to trading UTP Accordingly, the Exchange would not not propose rule text based on NYSE
Securities on the Pillar trading platform. include text relating to this instruction, Arca Equities Rule 7.16(f)(5)(D), (G), or
In addition, references to Trading as described in NYSE American Rules (I) or NYSE American Rule
Collars in Rule 1000(c) would not be 7.11E(a)(5)(B)(i), 7.11E(a)(5)(C), or 7.16E(f)(5)(D), (G), or (I). The Exchange
applicable to trading UTP Securities on 7.11E(a)(5)(F). Second, because the proposes to designate proposed Rules
the Pillar Trading platform.27 Exchange would not be offering orders 7.16(f)(5)(D) and (G) as ‘‘Reserved.’’
that include specific routing Because the proposed rule covers the
Proposed Rule 7.10 same subject matter as Rule 440B (Short
instructions, Q Orders, or Limit IOC
Proposed Rule 7.10 (Clearly Sales), the Exchange proposes that Rule
Cross Orders, the Exchange would not
Erroneous Executions) would set forth 440B would not be applicable to trading
include text that references these order
the Exchange’s rules governing clearly UTP Securities on the Pillar trading
types, as described in NYSE American platform.
erroneous executions. The proposed
Rule 7.11E(a)(5)(B)(iii), 7.11E(a)(5)(D),
rule is based on NYSE Arca Equities Proposed Rule 7.18
7.11E(a)(5)(E), and 7.11E(a)(6). The
Rule 7.10 and NYSE American Rule
Exchange proposes to designate The Exchange proposes to amend
7.10E with substantive differences not
to refer to a Late Trading Session or Rule 7.18 (Halts) to establish how the
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Cross Orders. The Exchange proposes
28 The Exchange proposes that because there is
Exchange would process orders during
not a prior version of proposed Rule 7.10, if the a halt in a UTP Security and when it
rule text based on NYSE Arca Equities Limit Up-Limit Down Plan is not approved, the
prior version of sections (c), (e)(2), (f) and (g) of
would halt trading in a UTP Exchange
27 As described in greater detail above in Rule 128 would be in effect. Traded Product.30 Proposed Rule
connection with proposed Rule 7.37, the Exchange 29 See Securities Exchange Act Release No. 80455
proposes that the entirety of Rule 1000 would not (April 13, 2017), 81 FR 24908 (April 27, 2016) (File 30 The term ‘‘UTP Exchange Traded Product’’ is
be applicable to trading UTP Securities on the Pillar No. 4–631) (Order approving 12th Amendment to defined in Rule 1.1(bbb) to mean an Exchange
trading platform. the LULD Plan) [sic]. Continued
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![37268 Federal Register / Vol. 82, No. 152 / Wednesday, August 9, 2017 / Notices
7.18(b) would provide that the Exchange based in part on NYSE Arca Equities proposed Rule 7.34(c)(1)(C), described
would not conduct a Trading Halt Rule 7.34 and NYSE American Rule below. The proposed rule would further
Auction in a UTP Security and would 7.34E, with the following substantive provide that Non-Displayed Primary
process new and existing orders in a differences. First, similar to NYSE Pegged Orders entered before the Core
UTP Security during a UTP Regulatory American, the Exchange proposes that Trading Session would be rejected and
Halt 31 as described in proposed Rule the Early Trading Session would begin Primary Pegged Orders entered before
7.18(b)(1)–(6). The proposed rule text is at 7:00 a.m. Eastern Time. Similar to the Core Trading Session would be
based on NYSE Arca Equities Rule NYSE Arca Equities and NYSE accepted but would not be eligible to
7.18(b) and its sub-paragraphs (1)–(6) American, the Exchange would begin trade until the Core Trading Session
and NYSE American Rule 7.18E(b) and accepting orders 30 minutes before the begins. This rule text is based in part on
its sub-paragraphs (1)–(6) with one Early Trading Session begins, which both NYSE Arca Equities Rule
substantive difference. Because the means order entry acceptance would 7.34(c)(1)(A) and NYSE American Rule
Exchange would not be offering begin at 6:30 a.m. Eastern Time. These 7.34E(c)(1)(A), but uses terminology
‘‘Primary Only’’ orders, proposed Rule differences would be reflected in consistent with the Exchange’s
7.18(b)(5) would not reference such proposed Rule 7.34(a)(1). proposed order types.
order types. Second, proposed Rule 7.34(b) would • Proposed Rule 7.34(c)(1)(B) would
The Exchange proposes to amend be new and is not based on NYSE Arca provide that Limit Orders designated
Rule 7.18(d)(1)(A) to specify that if a Equities Rule 7.34(b) or NYSE American IOC would be rejected if entered before
UTP Exchange Traded Product begins Rule 7.34E(b). Rather than require the Early Trading Session begins. This
trading on the Exchange in the Early member organizations to include a proposed rule is based on NYSE Arca
Trading Session and subsequently a designation for which trading session Equities Rule 7.34(c)(1)(B) and NYSE
temporary interruption occurs in the the order would be in effect, the American Rule 7.34E(c)(1)(B) with two
calculation or wide dissemination of the Exchange proposes to specify in Rule substantive differences. First, because
Intraday Indicative Value (‘‘IIV’’) or the 7.34(b) and (c) which trading sessions the Exchange would not be conducting
value of the underlying index, as an order would be deemed designated. auctions, the Exchange proposes to
applicable, to such UTP Exchange Proposed Rule 7.34(b)(1) would provide specify that the rejection period would
Traded Product, by a major market data that unless otherwise specified in Rule begin ‘‘before the Early Trading Session
vendor, the Exchange may continue to 7.34(c), an order entered before or begins’’ rather than state ‘‘before the
trade the UTP Exchange Traded Product during the Early or Core Trading Early Open Auction concludes.’’
for the remainder of the Early Trading Session would be deemed designated Second, the Exchange would not refer to
Session. This proposed rule text is for the Early Trading Session and the Cross Orders, which would not be
based on NYSE Arca Equities Rule Core Trading Session. Proposed Rule offered on the Exchange.
7.18(d)(1)(A) and NYSE American Rule 7.34(b)(2) would provide that an order • Proposed Rule 7.34(c)(1)(C) would
7.18E(d)(1)(A) without any substantive without a time-in-force designation provide that Market Orders and
differences. The Exchange also proposes would be deemed designated with a day Auction-Only Orders in UTP Securities
to amend Rule 7.18(d)(1)(B) to change time-in-force modifier. entered before the Core Trading Session
the reference from ‘‘Exchange’s Normal Proposed Rule 7.34(c) would specify begins would be routed to the primary
Trading Hours’’ to the term ‘‘Core which orders would be permitted in listing market on arrival and any order
Trading Session,’’ which would be each session. Proposed Rule 7.34(c)(1) routed directly to the primary listing
defined in proposed Rule 7.34, would provide that unless otherwise market on arrival would be cancelled if
described below. specified in paragraphs (c)(1)(A)–(C), that market is not accepting orders. This
The Exchange also proposes to amend orders and modifiers defined in Rule proposed rule is based on NYSE Arca
Rule 7.18(a) to change the cross 7.31 would be eligible to participate in Equities Rule 7.34(c)(1)(D) and NYSE
reference from Rule 80C to Rule 7.11 as the Early Trading Session. This American Rule 7.34E(c)(1)(D) with a
proposed Rule 7.11 would govern how proposed rule text is based on NYSE non-substantive difference to specify
the Exchange would comply with the Arca Equities Rule 7.34(c)(1) and NYSE that such orders would be routed until
LULD Plan for trading UTP Securities. American Rule 7.34E(c)(1) with a the Core Trading Session begins.
substantive difference not to refer to Proposed Rule 7.34(c)(2) would
Proposed Rule 7.34 provide that unless otherwise specified
orders ‘‘designated’’ for the Early
Proposed Rule 7.34 would establish Trading Session. In addition, because in Rule 7.34(c)(2)(A)–(B), all orders and
trading sessions on the Exchange. The the Exchange would not be offering a modifiers defined in Rule 7.31 would be
Exchange proposes that on the Pillar Retail Liquidity Program, the Exchange eligible to participate in the Core
trading platform, it would have Early would not reference Rule 7.44. Trading Session. This proposed rule text
and Core Trading Sessions. • Proposed Rule 7.34(c)(1)(A) would is based on NYSE Arca Equities Rule
Accordingly, proposed Rule 7.34 is provide that Pegged Orders would not 7.34(c)(2) and NYSE American Rule
be eligible to participate in the Early 7.34E(c)(2) with a substantive difference
Traded Product that trades on the Exchange Trading Session. This rule text is based not to refer to orders ‘‘designated’’ for
pursuant to unlisted trading privileges. The terms in part on NYSE Arca Equities Rule
‘‘Exchange Traded Product’’ and ‘‘UTP Exchange
the Core Trading Session. In addition,
Traded Product’’ on the Exchange have the same 7.34(c)(1)(A) and NYSE American Rule because the Exchange would not be
meaning as the NYSE Arca Equities terms 7.34E(c)(1)(A) in the [sic] Pegged Orders offering a Retail Liquidity Program, the
‘‘Derivatives Securities Product’’ and ‘‘UTP would not be eligible to participate in Exchange would not reference Rule
Derivative Securities Product,’’ which are defined the Early Trading Session. The
sradovich on DSK3GMQ082PROD with NOTICES
in NYSE Arca Equities Rule 1.1(bbb). The Exchange
7.44.
proposes a non-substantive difference in proposed Exchange proposes a substantive • Proposed Rule 7.34(c)(2)(A) would
Rule 7.18 as compared to NYSE Arca Equities Rule difference from the NYSE Arca Equities provide that Market Orders in UTP
7.18 to use the Exchange-defined terms. and NYSE American rules because Securities would be routed to the
31 The term ‘‘UTP Regulatory Halt’’ is defined in
proposed Rule 7.34(c)(1)(A) would not primary listing market until the first
Rule 1.1(kk) to mean a trade suspension, halt, or
pause called by the UTP Listing Market in a UTP
refer to Market Orders. Market Orders opening print of any size on the primary
Security that requires all market centers to halt entered during the Early Trading listing market or 10:00 a.m. Eastern
trading in that security. Session would be addressed in Time, whichever is earlier. This
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![Federal Register / Vol. 82, No. 152 / Wednesday, August 9, 2017 / Notices 37271
including NYSE American, which also proposed change is designed to propose Paper Comments
will begin trading at 7:00 a.m. Eastern rules to support trading of UTP
Time. Securities on the Exchange’s new Pillar • Send paper comments in triplicate
The Exchange believes that the trading platform. The Exchange operates to Secretary, Securities and Exchange
proposed amendments to Rules 103B in a highly competitive environment in Commission, 100 F Street NE.,
and 107B would remove impediments which its unaffiliated exchange Washington, DC 20549–1090.
to and perfect the mechanism of a free competitors operate multiple affiliated All submissions should refer to File
and open market and a national market exchanges that operate under common Number SR–NYSE–2017–36. This file
system because they would provide rules. By adding the trading of UTP
transparency that the Exchange would number should be included on the
Securities on the Exchange, the subject line if email is used. To help the
not be assigning UTP Securities to Exchange believes that it will be able to
DMMs and that member organizations Commission process and review your
compete on a more level playing field
would be eligible to register as a comments more efficiently, please use
with its exchange competitors that
Supplemental Liquidity Providers in similarly trade all NMS Stocks. In only one method. The Commission will
UTP Securities. The Exchange further addition, by basing certain rules on post all comments on the Commission’s
believes that not assigning DMMs to those of NYSE Arca Equities and NYSE Internet Web site (http://www.sec.gov/
UTP Securities is consistent with just American, the Exchange will provide its rules/sro.shtml). Copies of the
and equitable principles of trade members with consistency across submission, all subsequent
because the Exchange would not be affiliated exchanges, thereby enabling amendments, all written statements
conducting auctions in UTP Securities the Exchange to compete with with respect to the proposed rule
and therefore the Exchange would not unaffiliated exchange competitors that change that are filed with the
need DMMs assigned to such securities similarly operate multiple exchanges on Commission, and all written
to facilitate auctions. Not having DMMs the same trading platforms. communications relating to the
registered in UTP Securities is also proposed rule change between the
consistent with how NYSE Arca C. Self-Regulatory Organization’s Commission and any person, other than
Equities and NYSE American function Statement on Comments on the
those that may be withheld from the
on Pillar, in that neither lead market Proposed Rule Change Received From
public in accordance with the
makers (on NYSE Arca Equities) nor Members, Participants, or Others
provisions of 5 U.S.C. 552, will be
electronic designated market makers (on
NYSE American) are assigned securities No written comments were solicited available for Web site viewing and
not listed on those exchanges. The or received with respect to the proposed printing in the Commission’s Public
Exchange further believes that it would rule change. Reference Room, 100 F Street NE.,
remove impediments to and perfect the Washington, DC 20549 on official
III. Date of Effectiveness of the business days between the hours of
mechanism of a free and open market Proposed Rule Change and Timing for
and a national market system for 10:00 a.m. and 3:00 p.m. Copies of the
Commission Action
member organizations to be eligible to filing also will be available for
register as Supplemental Liquidity Within 45 days of the date of inspection and copying at the principal
Providers in UTP Securities as this publication of this notice in the Federal office of the Exchange. All comments
would provide an incentive for Register or up to 90 days (i) as the received will be posted without change;
displayed liquidity in UTP Securities. Commission may designate if it finds the Commission does not edit personal
The Exchange further believes that it such longer period to be appropriate identifying information from
would remove impediments to and and publishes its reasons for so finding submissions. You should submit only
perfect the mechanism of a free and or (ii) as to which the self-regulatory information that you wish to make
open market and a national market organization consents, the Commission available publicly. All submissions
system to specify which current rules will: should refer to File Number SR–NYSE–
would not be applicable to trading UTP 2017–36 and should be submitted on or
Securities on the Pillar trading platform. (A) By order approve or disapprove
the proposed rule change, or before August 30, 2017.
The Exchange believes that the
following legend, which would be (B) institute proceedings to determine For the Commission, by the Division of
added to existing rules, ‘‘This Rule is whether the proposed rule change Trading and Markets, pursuant to delegated
not applicable to trading UTP Securities should be disapproved. authority.34
on the Pillar trading platform,’’ would Eduardo A. Aleman,
IV. Solicitation of Comments
promote transparency regarding which Assistant Secretary.
rules would govern trading UTP Interested persons are invited to [FR Doc. 2017–16742 Filed 8–8–17; 8:45 am]
Securities on the Exchange on Pillar. submit written data, views, and BILLING CODE 8011–01–P
The Exchange has proposed to add this arguments concerning the foregoing,
legend to rules that would be including whether the proposed rule
superseded by proposed rules or rules change is consistent with the Act.
that would not be applicable because Comments may be submitted by any of
they relate to auctions or Floor-based the following methods:
point-of-sale trading.
Electronic Comments
sradovich on DSK3GMQ082PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition • Use the Commission’s Internet
The Exchange does not believe that comment form (http://www.sec.gov/
the proposed rule change will impose rules/sro.shtml); or
any burden on competition that is not • Send an email to rule-comments@
necessary or appropriate in furtherance sec.gov. Please include File Number SR–
of the purposes of the Act. The NYSE–2017–36 on the subject line. 34 17 CFR 200.30–3(a)(12).
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Document Created: 2017-08-09 02:18:27
Document Modified: 2017-08-09 02:18:27
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 37257 |
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