[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Notices]
[Pages 13553-13574]
[FR Doc No: 2018-06339]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82945; File No. SR-NYSE-2017-36]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Adopt New Equity Trading Rules To Trade Securities Pursuant to Unlisted
Trading Privileges, Including Orders and Modifiers, Order Ranking and
Display, and Order Execution and Routing on Pillar, the Exchange's New
Trading Technology Platform

March 26, 2018.

I. Introduction

    On July 28, 2017, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt new equity trading rules to allow the
Exchange to trade securities pursuant to unlisted trading privileges
(``UTP Securities'') \3\ on Pillar, the Exchange's new trading
technology platform. The proposed rule change was published for comment
in the Federal Register on August 9, 2017.\4\ On September 18, 2017,
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether the proposed rule change should be
disapproved.\5\ On November 7, 2017, the Commission instituted
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine
whether to approve or disapprove the proposed rule change.\7\ On
February 1, 2018, the Commission designated a longer period for
Commission action on the proceedings to determine whether to approve or
disapprove the proposed rule change.\8\ The Commission received one
comment letter on the proposal.\9\ On February 23, 2018, the Exchange
filed Amendment No. 1 to the proposed rule change, which replaces and
supersedes the proposed rule change in its entirety.\10\ The Commission
is publishing notice of the filing of Amendment No. 1 to interested
persons, and is approving the proposed rule change, as modified by
Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ NYSE Rules define ``UTP Security'' as 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 NYSE Rule 1.1(ii).
    \4\ See Securities Exchange Act Release No. 81310 (Aug. 3,
2017), 82 FR 37257 (Aug. 9, 2017).
    \5\ See Securities Exchange Act Release No. 81641 (Sept. 18,
2017), 82 FR 44483 (Sept. 22, 2017).
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 82028 (Nov. 7,
2017), 82 FR 52757 (Nov. 14, 2017) (``Order Instituting
Proceedings'').
    \8\ See Securities Exchange Act Release No. 82613 (Feb. 1,
2018), 83 FR 5499 (Feb. 7, 2018).
    \9\ See Letter from Joanne Moffic-Silver, Executive Vice
President, General Counsel, and Corporate Secretary, Cboe Global
Markets, Inc., to Brent J. Fields, Secretary, Commission (Feb. 1,
2018) (``Cboe Letter'').
    \10\ In Amendment No. 1, among other changes, the Exchange
proposes to: (i) Respond to the Commission's concerns in the Order
Instituting Proceedings relating to offering a separate parity
allocation for floor brokers by (a) setting forth additional
requirements for floor broker orders to be eligible for a separate
parity allocation, (b) proposing to permit floor brokers to engage
in floor-based point-of-sale trading and crossing transactions in
UTP Securities, and (c) providing additional justification for
providing floor brokers with parity; (ii) amend the definition of
Aggressing Order to include that a resting order may become an
Aggressing Order if its working price change, the best protected bid
or offer (``PBBO'') or the national best bid or offer (``NBBO'') is
updated, there are changes to other orders on the Exchange Book, or
when processing inbound messages; (iii) amend the rules relating to
the Mid-Point Liquidity (``MPL'') Order and the Minimum Trade Size
(``MTS'') Modifier to reflect those of NYSE Arca and NYSE American
and proposes additional rules setting forth how orders with an MTS
Modifier would trade in a parity allocation model; (iv) change the
list of rules that are not applicable to Pillar; (v) amend proposed
NYSE Rules 7.37 and 7.46 to refer to an order with an MTS as an
order with an ``MTS Modifier;'' (vi) change cross-references to NYSE
Arca's rules to reflect the merger of NYSE Arca and NYSE Arca
Equities, and (vii) reflect the renaming of NYSE MKT to NYSE
American. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nyse-2017-36/nyse201736-3137940-161948.pdf).
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II. Exchange's Description of the Proposed Rule Change, as Modified by
Amendment No. 1

    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 V 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 American LLC (``NYSE American'').\11\ NYSE
Arca's cash equities market was the first trading system to migrate to
Pillar.\12\ NYSE American's cash equities

market transitioned to Pillar on July 24, 2017.\13\
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    \11\ See Trader Update dated January 29, 2015, available here:
www.nyse.com/pillar.
    \12\ 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). NYSE Arca
Equities, Inc., which was a wholly-owned corporation of NYSE Arca,
has been merged with and into NYSE Arca and as a result, certain
former NYSE Arca Equities rules are now the rules of NYSE Arca using
the same rule number but with an additional suffix of ``-E'' added
to each rule. See Securities Exchange Act Release No. 81419 (August
17, 2017), 82 FR 40044 (August 23, 2017) (SR-NYSEArca-2017-40)
(Approval Order).
    \13\ In connection with the NYSE American implementation of
Pillar, NYSE American 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). NYSE American was previously known as
NYSE MKT LLC. See Securities Exchange Act Release No. 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).
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Overview
    The NYSE serves a unique role in the U.S. market as the only cash
equities exchange that still has an active Trading Floor.\14\ Member
organizations that operate a Floor broker business play a vital role in
that model, through participation in auctions and point-of-sale trading
with other members on the Floor. Under Exchange rules, member
organizations that operate a Floor broker business are eligible for
parity allocations for liquidity-providing orders that are entered on
the Floor.\15\ Because Floor brokers operate an agency-only business,
such parity allocations always accrue to their customers. All other
national securities exchanges use a price-time allocation methodology.
On an exchange with price-time allocation, the order resting on the
book that arrived first will be executed in full before other orders at
that same price are executed. In this way, a price-time allocation
creates incentives for market participants to invest in technology and
use the fastest telecommunication lines. While the Exchange does not
contend there is anything wrong with price-time allocation, it believes
that a parity allocation model serves as a choice to investors that are
not driven by speed and that value the service an agency Floor broker
can provide in managing order flow. The Exchange currently offers this
choice for trading in its listed securities and is proposing to offer
investors that same choice in other NMS securities.
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    \14\ 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 American-listed options
are traded, which, for the purposes of the Exchange's Rules, shall
be referred to as the ``NYSE American 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.
    \15\ See NYSE Rules 70 and 72.
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    Currently, the Exchange only trades securities listed on the
Exchange. With Pillar, the Exchange proposes to expand its offering and
introduce trading of UTP Securities.\16\ Because trading in UTP
Securities on the Exchange is designed to complement and be an
extension of the current trading services it offers, customer orders in
both Exchange-listed securities and UTP Securities entered by Floor
brokers while on the Floor would have consistent allocation behavior.
Accordingly, the Exchange proposes that trading in UTP Securities would
be subject to a parity allocation model that is similar to the existing
allocation model for Exchange-listed securities, with modifications
described below.
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    \16\ 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).
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    Unlike the trading of listed securities on the Exchange, the
Exchange would not conduct any auctions in UTP Securities.\17\ Even
though DMMs would not be assigned to UTP Securities, the Exchange
proposes to offer point-of-sale trading of UTP Securities for Floor
brokers on the Trading Floor for crossing transactions. Accordingly,
member organizations that operate Floor broker operations would be able
to represent their customers' orders in UTP Securities under both
current rules relating to manual transactions on the Trading Floor and
proposed rules relating to trading on the Pillar trading platform. As
with listed securities, member organizations approved as Supplemental
Liquidity Providers would be eligible to be assigned UTP
Securities.\18\
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    \17\ 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.
    \18\ See Rule 107B, which the Exchange is proposing to amend,
see infra.
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    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. As described below, trading by
Floor brokers on the Trading Floor at the point of sale for UTP
Securities, also referred to as ``manual trading'' or ``manual
transactions,'' would continue to be subject to current rules relating
to such trading. In addition, all trading by Floor brokers in UTP
Securities (whether manual or electronic transactions) on the Exchange
would continue to be subject to rules that are unique to Floor brokers,
including Rules 95 (Discretionary Transactions), 122 (Orders with More
than One Broker), 123 (Record of Orders), and paragraphs (d)-(j) of
Rule 134 and related Supplementary Material (requirement for Floor
brokers to maintain an error account).
    With the exception of specified point-of-sale trading for Floor
brokers, trading in UTP Securities would be subject to the Pillar
Platform Rules, as set forth in Rules 1P-13P.\19\ With this proposed
rule change, the Exchange proposes changes to Rule 7P Equities Trading
that would govern such trading in UTP Securities. The proposed rules
are based in part on the rules of NYSE Arca and NYSE American, with the
following substantive differences:
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    \19\ 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.
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     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.\20\
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    \20\ The term ``BBO'' means the best bid or offer on the
Exchange. See Rule 1.1(h).
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     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 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 second
quarter of 2018.
Applicability of Current Rules on Trading UTP Securities on Pillar
    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.\21\
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    \21\ See Securities Exchange Act Release No. 81225 (July 27,
2017), 82 FR 36033 (August 2, 2017) (SR-NYSE-2017-35) (Notice of
filing to amend certain Exchange rules to add a preamble that such
rules would not be applicable to trading UTP Securities on the
Pillar trading platform).
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    The Exchange proposes that current rules governing Floor-based
crossing transactions would be applicable to trading in UTP Securities.
As with crossing transactions for Exchange-listed securities, any such
cross transactions must meet the requirements of current Rule 76.
However, unlike trading in Exchange-listed securities, because UTP
Securities would not be assigned to a trading post with a DMM, the
trading crowd for such trading, i.e., the point of sale, would be a
physical location on the Trading Floor designated by the Exchange and
staffed by an Exchange employee.
    Because the Exchange proposes to provide for Floor crossing
transactions in UTP Securities, Rules 74, 75, and 76, which relate to
crossing transactions on the Floor and ancillary Floor-based
requirements, would be applicable to trading UTP Securities. At this
time, the Exchange would not make available for UTP Securities the
cross function described in Supplementary Material .10 to Rule 76.
Accordingly, the Exchange proposes to add a preamble to Rule 76 that
would provide that Supplementary Material .10 to that Rule would not be
applicable to trading UTP Securities on the Pillar trading platform.
    The Exchange also proposes to amend the existing preambles to Rules
128A, 128B, 130, 131, 132, and 135 \22\ to reflect that crossing
transactions pursuant to Rule 76 would be subject to existing Exchange
rules relating to publication of Floor-based transactions, corrections
to the Tape, and clearing. The amended preambles to these rules would
provide that ``except for manual transactions pursuant to Rule 76,''
such rules would not be applicable to trading UTP Securities on the
Pillar trading platform.
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    \22\ See id.
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    Finally, the Exchange proposes to amend the preamble to Rule 134,
which currently provides that such rule is not applicable to trading
UTP Securities on the Pillar trading platform. Rule 134(a)-(c) relates
to clearing of Floor-based transactions, and would be applicable to any
manual transactions pursuant to Rule 76 in UTP Securities. Rule 134(d)-
(j) separately requires a Floor broker to maintain an error account.
Because Floor brokers would continue to be subject to Section 11(a)(1)
of the Act for all trading in UTP Securities, the Exchange proposes
that current Rules 134(d)-(j) would be applicable to all Floor broker
trading of UTP Securities on the Exchange. To effect these two changes,
the Exchange proposes that the preamble to Rule 134 would be amended to
provide that: ``Except for manual transactions pursuant to Rule 76,
paragraphs (a)-(c) of this Rule are not applicable to trading UTP
Securities on the Pillar trading platform.''
Proposed Rule Changes
    As noted above, with the exception of crossing transactions
pursuant to Rule 76 and related rules, the Exchange proposes rules that
would be applicable to trading UTP Securities on Pillar that are based
on the rules of NYSE Arca and NYSE American. As a global matter, the
Exchange proposes non-substantive differences as compared to the NYSE
Arca rules to use the terms ``Exchange'' instead of the terms ``NYSE
Arca Marketplace'' or ``NYSE Arca'' 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.'' \23\
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    \23\ Because these non-substantive differences would be applied
throughout the proposed rules, the Exchange will not note these
differences separately for each proposed rule.
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    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 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 extend
its current allocation model to 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 Rule
7.36-E 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 that describe the
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 Rule 7.36-E(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 Participant (``Book Participant'').\24\ 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.''
    As described in greater detail below, the Exchange proposes that
its existing parity allocation model would be available for all
securities that trade on the Exchange. Because there would not be a DMM
assigned to any UTP Securities, orders represented by individual Floor
Brokers and the Book Participant would be eligible for a parity
allocation for UTP Securities.
    Because trading in UTP Securities is intended to be an extension of
the Exchange's current Floor-based trading model, the Exchange proposes
that Floor Broker Participant allocations for UTP Securities would be
available only to Floor brokers that also engage in a Floor broker
business in Exchange-listed securities. As further proposed, an order
entered by a Floor broker would be eligible to be included in the Floor
Broker Participant only if: (A) Such order is entered by a Floor broker
while on the Trading Floor, which is an existing requirement; \25\ and
(B) such order is not entered for the account of the member
organization, the account of an associated person, or an account with
respect to which the member, member organization, or an associated
person exercises investment discretion, unless such order is entered
pursuant to Rule 134(d)-(j), i.e., the order is entered via the Floor
broker's error account.
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    \24\ As defined in Rule 1.1(a), the term ``Exchange Book''
refers to the Exchange's electronic file of orders, which contains
all orders entered on the Exchange. Accordingly, all orders entered
by Floor brokers in UTP Securities are included in the Exchange
Book. The Exchange proposes to use the term ``Book Participant'' as
continuity from its current rules, which refer to the Book
Participant. See Rule 72(c)(ii).
    \25\ Rule 70(a)(i) requires a Floor broker to be in the
``Crowd'' in order to enter e-Quotes, which are eligible for a
parity allocation. Rule 70.30 defines the term ``Crowd'' as the
rooms on the Exchange Floor that contain active posts/panels where
Floor brokers are able to conduct business and a Floor broker is
considered to be in the Crowd if he or she is physically present in
one of these room. Rule 6A defines the term ``Trading Floor'' to
mean the restricted-access physical areas designated by the Exchange
for the trading of securities, commonly known as the ``Main Room''
and the ``Buttonwood Room.'' The terms ``Crowd'' and ``Trading
Floor'' therefore refer to the same physical location.
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     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 and that a
resting order may become an Aggressing Order if its working price
changes, if the PBBO or NBBO is updated, because of changes to other
orders on the Exchange Book, or when processing inbound messages.\26\
This proposed term would be used in proposed Rule 7.37, described
below.
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    \26\ NYSE Arca and NYSE American have recently amended their
rules to add this definition of ``Aggressing Order.'' See Securities
Exchange Act Release Nos. 82447 (January 5, 2018), 83 FR 1442
(January 11, 2018) (SR-NYSEAmer-2017-40) and 82504 (January 16,
2018), 83 FR 3038 (January 22, 2018) (SR-NYSEArca-2018-02) [sic].
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     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 Rule 7.36-E(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 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.\27\
---------------------------------------------------------------------------

    \27\ 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.\28\ 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.\29\ 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.
---------------------------------------------------------------------------

    \28\ 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.''
    \29\ See proposed Rule 7.16(f)(6).
---------------------------------------------------------------------------

    [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.
    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 Rule 7.37-E 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 Rule
7.37-E(a)-(f) and NYSE American Rule 7.37E(a)-(f) with the following
substantive differences: \30\
---------------------------------------------------------------------------

    \30\ 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-E(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 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 Rule 7.37-E, 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 Rule
7.37-E, which specifies that NYSE Arca 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 and NYSE American,
including orders based on NYSE Arca Rule 7.31-E(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 Rule 7.37-
E(b)(7)(C) and NYSE American Rule 7.37E(b)(7)(C).
     The Exchange proposes a non-substantive difference to
update the chart in proposed Rule 7.37(e) to reflect the amended names
of market centers.
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 that its existing parity allocation
model, modified as described below, would be applicable to UTP
Securities. Like the Exchange's existing parity allocation model for
NYSE-listed securities, the proposed parity allocation model for UTP
Securities would provide customers with choices. The Exchange's parity
allocation model provides customers that do not have latency sensitive
strategies or who value intermediation by a trusted agent with an
alternative to the price-time priority model offered by other
exchanges: Such customers can use a Floor broker and be allocated
trades based on parity, as described below. Those customers with
latency sensitive strategies or who prefer un-intermediated access can
choose to send orders electronically and would be allocated trades as
part of the Book Participant. Irrespective of whether the customer
chooses to use a Floor broker or enter their interest electronically
via the Book Participant, a customer assigned Setter Priority by
setting the BBO would receive the first 15% of an allocation.
    While there would be no DMMs assigned to UTP Securities, as noted
above, the Exchange would require that for an order to be eligible to
be included in the Floor Broker Participant, such order must be entered
by a Floor broker while on the Trading Floor and only if such Floor
broker also engages in a Floor broker business in Exchange-listed
securities. In addition, to be eligible to be included in the Floor
Broker Participant, orders must be entered on an agency basis (unless
trading out of the Floor broker's error account pursuant to Rule 134).
As a result, in contrast to off-Floor agency broker-dealers, Floor
brokers would not be permitted to trade for their own accounts while on
the Trading Floor, including principal trading on behalf of customers.
The result of any allocation to an individual Floor broker would
therefore always accrue to the customer. In addition, when trading UTP

Securities, Floor brokers would continue to be subject to current rules
that are applicable only to Floor brokers, including Rules 95, 122,
123, and paragraphs (d)-(j) of Rule 134.
    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.\31\
---------------------------------------------------------------------------

    \31\ 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 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 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. In other words, any allocation to
an individual Floor Broker Participant at a price would be further
allocated among multiple orders that may be represented by that Floor
broker. 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.\32\ This proposed
functionality would be new for Pillar.
---------------------------------------------------------------------------

    \32\ The Exchange proposes to designated [sic] 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.\33\
---------------------------------------------------------------------------

    \33\ 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 Securities on the Pillar trading platform. The Exchange
proposes to offer a subset of the orders and modifiers that are
available on NYSE Arca 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 Rule 7.31-E(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
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 Rule 7.31-E(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 Rule 7.31-E(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 Rule 7.31-E(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 a ``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 Rule 7.31-
E(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 Rule 7.31-E(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 Rule 7.31-E(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 Rule 7.31-E(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 Rule
7.31-E(d)(3)(G). Proposed Rule 7.31(e) would establish orders with
instructions not to route and is based on NYSE Arca Rule 7.31-E(e) and
NYSE American Rule 7.31E(e) without any differences.\34\
---------------------------------------------------------------------------

    \34\ Proposed Rule 7.31 includes behavior relating to MPL Orders
that were recently adopted on NYSE Arca and NYSE American. See supra
note 19.
---------------------------------------------------------------------------

     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
Rule 7.31-E(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 Rule 7.31-E(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 Rule
7.31-E(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
Rule 7.31-E(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 Rule 7.31-E(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)
of Regulation NMS and could be designated IOC or Day. The proposed rule
is based on NYSE Arca Rule 7.31-E(e)(3) and its sub-paragraphs (A)-(D)
and its sub-paragraphs (A)-(D) 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.\35\ 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 Rule 7.31-
E(e)(3)(D)(iii)(b).
---------------------------------------------------------------------------

    \35\ 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 Rule 7.31-E(h) with one substantive difference. Consistent
with the Exchange's current rules, Pegged Orders would be available
only to Floor brokers.\36\
    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 Rule 7.31-
E(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.''
---------------------------------------------------------------------------

    \36\ 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 Rule 7.31-
E(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 Rule 7.31-
E(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.\37\ 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.
---------------------------------------------------------------------------

    \37\ 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 Rule 7.31-E(i)(2)(B) and NYSE American Rule
7.31E(i)(2)(B), 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)(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 Rule 7.31(i)(3) would describe the Minimum Trade
Size (``MTS'') Modifier, which is based in part on NYSE Arca Rule 7.31-
E(i)(3).\38\ The Exchange proposes a substantive difference in that the
MTS Modifier would be available only for Limit IOC and MPL Orders.
Subject to this difference, proposed Rule 7.31(i)(3)(A)-(E) and (G) is
based on NYSE Arca Rule 7.31-E(i)(3)(A)-(F).
---------------------------------------------------------------------------

    \38\ See supra note 19.
---------------------------------------------------------------------------

    The Exchange proposes an additional substantive difference to
address how a resting order with an MTS that becomes an Aggressing
Order would trade under the parity allocation model. As described in
proposed Rule 7.31(i)(3)(B), on arrival, an order to buy (sell) with an
MTS Modifier would trade with sell (buy) orders in the Exchange Book
that in the aggregate meet such order's MTS. In other words, the MTS of
an Aggressing Order on arrival can be met by one or more resting
orders. Because more than one resting order can trade with an arriving
order with an MTS, such allocation can be made consistent with the
Exchange's parity allocation model without any changes.\39\
---------------------------------------------------------------------------

    \39\ For example, if the midpoint of the PBBO is 10.00 and at
10.00, the Exchange has a sell order ``A'' ranked Priority 3--Non-
Displayed for 100 shares from the Book Participant and a sell order
``B'' ranked Priority 3--Non-Displayed for 100 shares from the Floor
Broker Participant, if the Exchange receives a buy MPL Order with a
limit price of 10.00 and an MTS of 200 shares, the MTS could be met
by the resting orders in the aggregate, and the arriving buy order
would trade with both ``A'' and ``B.''
---------------------------------------------------------------------------

    By contrast, proposed Rule 7.31(i)(3)(E) would provide that a
resting order to buy (sell) with an MTS Modifier that becomes an
Aggressing Order would trade with individual sell (buy) orders that
each meet the MTS. Because a resting order that becomes an Aggressing
Order, which could only be an MPL Order, would need to be able to trade
with individual contra-side orders that each meet the MTS, the Exchange
proposes to address how such requirement would operate with the
Exchange's proposed allocation model. Specifically, proposed Rule
7.31(i)(3)(F)(i) would provide that when such Aggressing Order is
trading with sell (buy) orders in a priority category that allocates
orders on price-time priority, if a sell (buy) order does not meet the
MTS, the MPL Order with the MTS Modifier would not trade and would be
ranked on the Exchange Book.
    Accordingly, for orders that trade in a price-time priority
category, the MPL Order with an MTS Modifier would stop trading if a
contra-side order does not meet the MTS. This proposal is consistent
with how a resting order that becomes an Aggressing Order would trade
on NYSE Arca, which has a price-time priority allocation model.
    Proposed Rule 7.31(i)(3)(F)(ii) would set forth how a resting MPL
Order to buy (sell) with an MTS that becomes an Aggressing Order would
trade with sell (buy) orders in a priority category that allocates
orders on parity. Because in a parity allocation model, more than one
resting order may participate in an allocation, the Exchange proposes
that a resting order to buy (sell) with an MTS that becomes an
Aggressing Order would not trade with any contra-side orders if at
least one sell (buy) order that would have been considered for
allocation does not meet the MTS. As proposed, in such case, the
resting order with the MTS Modifier would be ranked on the Exchange
Book.\40\ The Exchange

believes that if a member organization designates an MPL Order with an
MTS Modifier, that member organization has instructed the Exchange not
to trade that order with contra-side orders that are smaller in size
than the MTS. 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 not
to trade at all rather than to trade with even one order in the parity
allocation that that does not meet the MTS.
---------------------------------------------------------------------------

    \40\ For example, the midpoint of the PBBO is 10.01 and at
10.00, the Exchange has a sell order ``A'' ranked Priority 3--Non-
Displayed for 100 shares from the Book Participant and a sell order
``B'' ranked Priority 3--Non-Displayed for 200 shares from the Floor
Broker Participant and a buy MPL Order with a limit price of 10.00
and an MTS of 200 shares. If the midpoint changes to 10.00, the
resting buy MPL Order would become an Aggressing Order. In this
scenario, both ``A'' and ``B'' would be eligible for an allocation,
but because ``A'' cannot individually meet the MTS of the buy MPL
Order, the MPL Order would not trade with either ``A'' or ``B'' and
the buy MPL Order would be ranked on the Exchange Book as provided
for in proposed Rule 7.31(i)(3)(F)(ii).
---------------------------------------------------------------------------

     Proposed Commentary .01 and .02 to Rule 7.31 is based on
Commentary .01 and .02 to NYSE Arca Rule 7.31-E 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.\41\
---------------------------------------------------------------------------

    \41\ 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 Rule 7.10-E 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 rather than current Rule 128 (Clearly Erroneous Executions)
because the NYSE Arca 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.\42\ 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 Rule 7.10-E(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.''
---------------------------------------------------------------------------

    \42\ 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'').\43\ 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).\44\ 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.''
---------------------------------------------------------------------------

    \43\ 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).
    \44\ The Exchange will offer this optional functionality when it
implements Pillar phase II communication protocols.
---------------------------------------------------------------------------

    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 Rule
7.16-E 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 Rule 7.16-E(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 Rules 7.16-E(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 Rule 7.16-E(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.\45\
Proposed Rule 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 \46\ as
described in proposed Rule

7.18(b)(1)-(6). The proposed rule text is based on NYSE Arca Rule 7.18-
E(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.
---------------------------------------------------------------------------

    \45\ 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 terms
``Derivatives Securities Product'' and ``UTP Derivative Securities
Product,'' which are defined in NYSE Arca Rule 1.1(k). The Exchange
proposes a non-substantive difference in proposed Rule 7.18 as
compared to NYSE Arca Rule 7.18-E to use the Exchange-defined terms.
    \46\ 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 Rule 7.18-E(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 Rule 7.34-E 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 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 Rule 7.34-E(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 Rule
7.34-E(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 Rule 7.34-
E(c)(1)(A) and NYSE American Rule 7.34E(c)(1)(A) in the Pegged Orders
would not be eligible to participate in the Early Trading Session. The
Exchange proposes a substantive difference from the NYSE Arca 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 Rule
7.34-E(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 Rule
7.34-E(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 Rule 7.34-E(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 Rule 7.34-
E(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 proposed rule is
based on NYSE Arca Rule 7.34-E(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
Rule 7.34-E(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 Rule 7.34-E(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 Rule
7.34-E(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 Rule 7.38-E 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 Rules 7.46-
E(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 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 other than crossing
transactions pursuant to Rule 76. 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 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 rules that include a cross
reference to NYSE Arca Rule 7.44-E 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''),\47\ in general, and
furthers the objectives of Section 6(b)(5),\48\ 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.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b).
    \48\ 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 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 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 extending its parity allocation model to
UTP Securities, including extending parity allocation for orders
entered by Floor brokers, is not designed to permit unfair
discrimination between customers, issuers, brokers or dealers. First,
although the Exchange would not have DMMs assigned to UTP Securities,
the Exchange proposes to maintain Floor trading for UTP Securities.
Similar to trading in Exchange-listed securities, Floor brokers, would
be able to effect crossing transactions in UTP Securities on the Floor,
but with Exchange employees rather than DMMs staffing where such
trading would occur.
    Second, to be eligible to be included in the Floor Broker
Participant, and thus be eligible for a parity allocation, the Floor
broker that entered the order must be engaged in a Floor broker
business in Exchange-listed securities. The Exchange believes that this
requirement provides a nexus between Exchange Floor trading in
Exchange-listed securities and the extension of that model to trading
in UTP Securities.
    Third, because member organizations operating as Floor brokers
would be trading on the floor of an exchange, they would be subject to
restrictions on trading for their own account set forth in Section
11(a)(1) of the Act and rules thereunder. Moreover, the Exchange
proposes to specify in proposed Rule 7.36 that for an order to be
eligible to be included in the Floor Broker Participant, it cannot be
for the account of the Floor broker or any associated persons (unless
entered via an error account pursuant to Rule 134).
    Because Floor brokers trading in UTP Securities would not be
permitted to trade for their own accounts, they would not be permitted
to engage in the type of customer-based principal trading activities of
a member organization that enters orders from off the Floor of the
Exchange. Therefore, an allocation to an individual Floor broker under
the Exchange's proposed allocation model would always accrue to the
customer of that Floor broker (or customers if multiple orders are
represented by a Floor broker). Conversely, because a member
organization operating a Floor broker may trade on behalf of customers