[Federal Register: September 26, 2007 (Volume 72, Number 186)]
[Notices]
[Page 54696-54697]
[DOCID:fr26se07-117]

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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.

Extension:
    Rule 7d-1; SEC File No. 270-176; OMB Control No. 3235-0311.

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit these
existing collections of information to the Office of Management and
Budget (``OMB'') for extension and approval.
    Section 7(d) of the Investment Company Act of 1940 (15 U.S.C. 80a-
7(d)) (the ``Act'' or ``Investment Company Act'') requires an
investment company (``fund'') organized outside the United States
(``foreign fund'') to obtain an order from the Commission allowing the
fund to register under the Act before making a public offering of its
securities through the United States mail or any means of interstate
commerce. The Commission may issue an order only if it finds that it is
both legally and practically feasible effectively to enforce the
provisions of the Act against the foreign fund, and that the
registration of the fund is consistent with the public interest and
protection of investors.
    Rule 7d-1 (17 CFR 270.7d-1) under the Act, which was adopted in
1954, specifies the conditions under which a Canadian management
investment company (``Canadian fund'') may request an order from the
Commission permitting it to register under the Act. Although rule 7d-1
by its terms applies only to Canadian funds, other foreign funds
generally have agreed to comply with the requirements of rule 7d-1 as a
prerequisite to receiving an order permitting those foreign funds'
registration under the Act.
    The rule requires a Canadian fund that wishes to register to file
an application with the Commission that contains various undertakings
and agreements by the fund. Certain of these undertakings and
agreements, in turn, impose the following additional information
collection requirements:

    (1) The fund must file agreements between the fund and its
directors, officers, and service providers requiring them to comply
with the fund's charter and bylaws, the Act, and certain other
obligations relating to the undertakings and agreements in the
application;
    (2) the fund and each of its directors, officers, and investment
advisers that is not a U.S. resident, must file an irrevocable
designation of the fund's custodian in the United States as agent
for service of process;
    (3) the fund's charter and bylaws must provide that (a) the fund
will comply with certain provisions of the Act applicable to all
funds, (b) the fund will maintain originals or copies of its books
and records in the United States, and (c) the fund's contracts with
its custodian, investment adviser, and principal underwriter, will
contain certain terms, including a requirement that the adviser
maintain originals or copies of pertinent records in the United
States;
    (4) the fund's contracts with service providers will require
that the provider perform the contract in accordance with the Act,
the Securities Act of 1933 (15 U.S.C. 77a-77z-3), and the Securities
Exchange Act of 1934 (15 U.S.C. 78a-78mm), as applicable; and
    (5) the fund must file, and periodically revise, a list of
persons affiliated with the fund or its adviser or underwriter.

    Under section 7(d) of the Act the Commission may issue an order
permitting a foreign fund's registration

only if the Commission finds that ``by reason of special circumstances
or arrangements, it is both legally and practically feasible
effectively to enforce the provisions of the (Act).'' The information
collection requirements are necessary to assure that the substantive
provisions of the Act may be enforced as a matter of contract right in
the United States or Canada by the fund's shareholders or by the
Commission.
    Certain information collection requirements in rule 7d-1 are
associated with complying with the Act's provisions. These requirements
are reflected in the information collection requirements applicable to
those provisions for all registered funds.
    The Commission believes that one fund is registered under rule 7d-1
and currently active. Apart from requirements under the Act applicable
to all registered funds, rule 7d-1 imposes ongoing burdens to maintain
records in the United States, and to update, as necessary, the foreign
fund's list of affiliated persons. The Commission staff estimates that
the active registrant makes one response each year under the rule
update its list of affiliated persons.\1\ Commission staff estimates
that the response to update the list of affiliated persons requires 2
hours of compliance clerk time at a cost of $56 per hour, for a total
annual burden of 2 hours at a cost of $112.\2\ The estimated number of
2 burden hours is a reduction of 23.25 hours from the current
allocation. The reduction is a result of the registrant's elimination
of duplicative records in the United States. All of the registrant's
records are only maintained in the United States.
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    \1\ The rule requires an applicant to maintain records in the
United States (which, without the requirement, could be available
only in Canada or another foreign jurisdiction), which facilitates
routine inspections and any special investigations of the fund by
Commission staff. The registrant, however, only maintains its
records in the United States and in no other jurisdiction.
Therefore, the registrant's maintenance of records in the United
States does not impose an additional burden beyond the fund's
compliance with the Act's requirements. This recordkeeping
requirement is reflected in the information collection burdens
applicable to those requirements for all registered funds.
    \2\ The $56/hour figure for a Compliance Clerk is from the SIA
Report on Office Salaries in the Securities Industry 2006, modified
to account for an 1800-hour work-year and multiplied by 2.93 to
account for bonuses, firm size, employee benefits and overhead.
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    If a fund were to file an application under the rule, the
Commission estimates that the rule would impose initial information
collection burdens (for filing an application, preparing the specified
charter, bylaw, and contract provisions, designations of agents for
service of process, and an initial list of affiliated persons, and
establishing a means of keeping records in the United States) of
approximately 90 hours for the fund and its associated persons. The
Commission is not including these hours in its calculation of the
annual burden because no foreign fund has applied under rule 7d-1 to
register under the Act in the last three years.
    After registration, a foreign fund may file a supplemental
application seeking special relief designed for the fund's particular
circumstances. Because rule 7d-1 does not mandate these applications
and the fund determines whether to submit an application, the
Commission has not allocated any burden hours for the applications.
    The estimates of burden hours are made solely for the purposes of
the Paperwork Reduction Act. The estimates are not derived from a
comprehensive or even a representative survey or study of Commission
rules and forms.
    If a Canadian or other foreign fund in the future applied to
register under the Act under rule 7d-1, the fund initially might have
capital and start-up costs (not including hourly burdens) of an
estimated $17,280 to comply with the rule's initial information
collection requirements. These costs include legal and processing-
related fees for preparing the required documentation (such as the
application, charter, bylaw, and contract provisions), designations for
service of process, and the list of affiliated persons. Other related
costs would include fees for establishing arrangements with a custodian
or other agent for maintaining records in the United States, copying
and transportation costs for records, and the costs of purchasing or
leasing computer equipment, software, or other record storage equipment
for records maintained in electronic or photographic form.
    The Commission expects that a fund and its sponsors would incur
these costs immediately, and that the annualized cost of the
expenditures would be $17,280 in the first year. Some expenditures
might involve capital improvements, such as computer equipment, having
expected useful lives for which annualized figures beyond the first
year would be meaningful. These annualized figures are not provided,
however, because, in most cases, the expenses would be incurred
immediately rather than on an annual basis. The Commission is not
including these costs in its calculation of the annualized capital/
start-up costs because no foreign fund has applied under rule 7d-1 to
register under the Act pursuant to rule 7d-1 in the last three years.
    We request written comment on: (a) Whether the collections of
information are necessary for the proper performance of the functions
of the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burdens
of the collection of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology. Consideration will be given to
comments and suggestions submitted in writing within 60 days of this
publication.
    Please direct your written comments to R. Corey Booth, Director/
Chief Information Officer, Securities and Exchange Commission, C/O
Shirley Martinson, 6432 General Green Way, Alexandria, VA, 22312; or
send an e-mail to<EMAIL_ADDRESS>
    Dated: September 18, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18920 Filed 9-25-07; 8:45 am]

BILLING CODE 8010-01-P


9012B 1 Revision 2 August 2002 METHOD 9012B TOTAL AND AMENABLE CYANIDE ( AUTOMATED COLORIMETRIC, WITH OFF LINE DISTILLATION)

1.0 SCOPE AND APPLICATION 1.1 Method 9012 is used to determine the concentration of inorganic cyanide ( CAS Registry Number 57 12 5) in wastes or leachate. The method detects inorganic cyanides that are present as either soluble salts or complexes. It is used to determine values for both total cyanide and cyanide amenable to chlorination. The " reactive" cyanide content of a waste is not determined by this method. Refer to 40 CFR 261.23 for information on the characteristic of reactivity.

2.0 SUMMARY OF METHOD 2.1 The cyanide, as hydrocyanic acid ( HCN), is released from samples containing cyanide by means of a reflux distillation operation under acidic conditions and absorbed in a scrubber containing sodium hydroxide solution. The cyanide ion in the absorbing solution is then determined by automated UV colorimetry.

2.2 In the automated colorimetric measurement, the cyanide is converted to cyanogen chloride ( CNCl) by reaction with Chloramine T at a pH less than 8 without hydrolyzing to the cyanate. After the reaction is complete, color is formed on the addition of pyridine barbituric acid reagent. The concentration of NaOH must be the same in the standards, the scrubber solutions, and any dilution of the original scrubber solution to obtain colors of comparable intensity.

3.0 INTERFERENCES 3.1 Interferences are eliminated or reduced by using the distillation procedure. Chlorine and sulfide are interferences in Method 9012.

3.2 Oxidizing agents such as chlorine decompose most cyanides. Chlorine interferences can be removed by adding an excess of sodium arsenite to the waste prior to preservation and storage of the sample to reduce the chlorine to chloride which does not interfere.

3.3 Sulfide interference can be removed by adding an excess of bismuth nitrate to the waste ( to precipitate the sulfide) before distillation. Samples that contain hydrogen sulfide, metal sulfides, or other compounds that may produce hydrogen sulfide during the distillation should be treated by the addition of bismuth nitrate.

3.4 High results may be obtained for samples that contain nitrate and/ or nitrite. During the distillation, nitrate and nitrite will form nitrous acid, which will react with some organic compounds to form oximes. These compounds once formed will decompose under test conditions to generate HCN. The possibility of interference of nitrate and nitrite is eliminated by pretreatment with sulfamic acid just before distillation. Nitrate and nitrite are interferences when present at levels higher than 10 mg/ L and in conjunction with certain organic compounds.

3.5 Thiocyanate is reported to be an interference when present at very high levels. Levels of 10 mg/ L were not found to interfere in Method 9010. 9012B 2 Revision 2 August 2002 3.6 Fatty acids, detergents, surfactants, and other compounds may cause foaming during the distillation when they are present in large concentrations and will make the endpoint of the titration difficult to detect. They may be extracted at pH 6 7.

4.0 APPARATUS AND MATERIALS 4.1 Reflux distillation apparatus such as shown in Figure 1 or Figure 2. The boiling flask should be of one liter size with inlet tube and provision for condenser. The gas scrubber may be a 270 mL Fisher Milligan scrubber ( Fisher, Part No. 07 513 or equivalent). The reflux apparatus may be a Wheaton 377160 distillation unit or equivalent.

4.2 Automated continuous flow analytical instrument with:

4.2.1 Sampler.

4.2.2 Manifold.

4.2.3 Proportioning pump.

4.2.4 Heating bath with distillation coil.

4.2.5 Distillation head.

4.2.6 Colorimeter equipped with a 15 mm flowcell and 570 nm filter.

4.2.7 Recorder.

4.3 Hot plate stirrer/ heating mantle.

4.4 pH meter.

4.5 Amber light.

4.6 Vacuum source.

4.7 Refrigerator.

4.8 5 mL microburette.

4.9 7 Class A volumetric flasks  100 and 250 mL.

4.10 Erlenmeyer flask  500 mL.

5.0 REAGENTS 5.1 Reagent grade chemicals shall be used in all tests. Unless otherwise indicated, it is intended that all reagents shall conform to the specifications of the Committee on Analytical Reagents of the American Chemical Society, where such specifications are available. Other grades may be used, provided it is first ascertained that the reagent is of sufficiently high purity to permit its use without lessening the accuracy of the determination. 9012B 3 Revision 2 August 2002 5.2 Reagent water. All references to water in this method refer to reagent water, as defined in Chapter One.

5.3 Reagents for sample collection, preservation, and handling 5.3.1 Sodium arsenite ( 0.1N), NaAsO 2. Dissolve 3.2 g NaAsO 2 in 250 mL water.

5.3.2 Ascorbic acid, C 6 H 8 O 6.

5.3.3 Sodium hydroxide solution ( 50%), NaOH. Commercially available.

5.3.4 Acetic acid ( 1.6M) CH 3 COOH. Dilute one part of concentrated acetic acid with 9 parts of water.

5.3.5 2,2,4 Trimethylpentane, C 8 H 18.

5.3.6 Hexane, C 6 H 14.

5.3.7 Chloroform, CHCl 3.

5.4 Reagents for cyanides amenable to chlorination 5.4.1 Calcium hypochlorite solution ( 0.35M), Ca( OCl) 2. Combine 5 g of calcium hypochlorite and 100 mL of water. Shake before using.

5.4.2 Sodium hydroxide solution ( 1.25N), NaOH. Dissolve 50 g of NaOH in 1 liter of water.

5.4.3 Sodium arsenite ( O. 1N). See Sec. 5.3.1.

5.4.4 Potassium iodide starch paper.

5.5 Reagents for distillation 5.5.1 Sodium hydroxide ( 1.25N). See Sec. 5.4.2.

5.5.2 Bismuth nitrate ( 0.062M), Bi( NO) 3 C 5H 2 O. Dissolve 30 g Bi( NO) 3 C 5H 2 O in 100 mL of water. While stirring, add 250 mL of glacial acetic acid, CH 3 COOH. Stir until dissolved and dilute to 1 liter with water.

5.5.3 Sulfamic acid ( 0.4N), H 2 NSO 3 H. Dissolve 40 g H 2 NSO 3 H in 1 liter of water.

5.5.4 Sulfuric acid ( 18N), H 2 SO 4. Slowly and carefully add 500 mL of concentrated H 2 SO 4 to 500 mL of water.

5.5.5 Magnesium chloride solution ( 2.5M), MgCl 2 C 6H 2 O. Dissolve 510 g of MgCl 2 C 6H 2 O in 1 liter of water.

5.5.6 Lead acetate paper.

5.6 Reagents for automated colorimetric determination 9012B 4 Revision 2 August 2002 5.6.1 Pyridine barbituric acid reagent: Place 15 g of barbituric acid in a 250 mL volumetric flask, add just enough reagent water to wash the sides of the flask, and wet the barbituric acid. Add 75 mL of pyridine and mix. Add 15 mL of concentrated HCl, mix, and cool to room temperature. Dilute to 250 mL with reagent water and mix. This reagent is stable for approximately six months if stored in a cool, dark place.

5.6.2 Chloramine T solution: Dissolve 2.0 g of white, water soluble chloramine T in 500 mL of reagent water and refrigerate until ready to use.

5.6.3 Sodium hydroxide, 1 N: Dissolve 40 g of NaOH in reagent water, and dilute to 1 liter.

5.6.4 All working standards should contain 2 mL of 1 N NaOH ( Sec. 5.6.3) per 100 mL.

5.6.5 Dilution water and receptacle wash water ( NaOH, 0.25 N): Dissolve 10.0 g NaOH in 500 mL of reagent water. Dilute to 1 liter.

6.0 SAMPLE COLLECTION, PRESERVATION, AND HANDLING 6.1 Samples should be collected in plastic or glass containers. All containers must be thoroughly cleaned and rinsed.

6.2 Oxidizing agents such as chlorine decompose most cyanides. To determine whether oxidizing agents are present, test a drop of the sample with potassium iodide starch test paper. A blue color indicates the need for treatment. Add 0.1N sodium arsenite solution a few mL at a time until a drop of sample produces no color on the indicator paper. Add an additional 5 mL of sodium arsenite solution for each liter of sample. Ascorbic acid can be used as an alternative although it is not as effective as arsenite. Add a few crystals of ascorbic acid at a time until a drop of sample produces no color on the indicator paper. Then add an additional 0.6 g of ascorbic acid for each liter of sample volume.

6.3 Aqueous samples must be preserved by adding 50% sodium hydroxide until the pH is greater than or equal to 12 at the time of collection.

6.4 Samples should be chilled to 4 E C.

6.5 When properly preserved, cyanide samples can be stored for up to 14 days prior to sample preparation steps.

6.6 Solid and oily wastes may be extracted prior to analysis by Method 9013 ( Cyanide Extraction Procedure for Solids and Oils). It uses a dilute NaOH solution ( pH = 12) as the extractant. This yields extractable cyanide.

6.7 If fatty acids, detergents, and surfactants are a problem, they may be extracted using the following procedure. Acidify the sample with acetic acid ( 1.6M) to pH 6.0 to 7.0.

CAUTION: This procedure can produce lethal HCN gas.

Extract with isooctane, hexane, or chloroform ( preference in order named) with solvent volume equal to 20% of the sample volume. One extraction is usually adequate to reduce the compounds below the interference level. Avoid multiple extractions or a long contact time at low pH in order to 9012B 5 Revision 2 August 2002 keep the loss of HCN at a minimum. When the extraction is completed, immediately raise the pH of the sample to above 12 with 50% NaOH solution.

7.0 PROCEDURE 7.1 Pretreatment for cyanides amenable to chlorination 7.1.1 This test must be performed under amber light. K 3[ Fe( CN) 6] may decompose under UV light and hence will test positive for cyanide amenable to chlorination if exposed to fluorescent lighting or sunlight. Two identical sample aliquots are required to determine cyanides amenable to chlorination.

7.1.2 To one 500 mL sample or to a sample diluted to 500 mL, add calcium hypochlorite solution dropwise while agitating and maintaining the pH between 11 and 12 with 1.25N sodium hydroxide until an excess of chlorine is present as indicated by KI starch paper turning blue. The sample will be subjected to alkaline chlorination by this step.

CAUTION: The initial reaction product of alkaline chlorination is the very toxic gas cyanogen chloride; therefore, it is necessary that this reaction be performed in a hood.

7.1.3 Test for excess chlorine with KI starch paper and maintain this excess for one hour with continuous agitation. A distinct blue color on the test paper indicates a sufficient chlorine level. If necessary, add additional calcium hypochlorite solution.

7.1.4 After one hour, add 1 mL portions of 0.1N sodium arsenite until KI starch paper shows no residual chlorine. Add 5 mL of excess sodium arsenite to ensure the presence of excess reducing agent.

7.1.5 Test for total cyanide as described below in both the chlorinated and the unchlorinated samples. The difference of total cyanide in the chlorinated and unchlorinated samples is the cyanide amenable to chlorination.

7.1.6 If samples are known or suspected to contain sulfide, add 50 mL of 0.062M bismuth nitrate solution through the air inlet tube. Mix for three minutes. Use lead acetate paper to check the sample for the presence of sulfide. A positive test is indicated by a black color on the paper.

7.2 Distillation procedure 7.2.1 Place 500 mL of sample, or sample diluted to 500 mL in the one liter boiling flask. Pipet 50 mL of 1.25N sodium hydroxide into the gas scrubber. If the apparatus in Figure 1 is used, add water until the spiral is covered. Connect the boiling flask, condenser, gas scrubber and vacuum trap.

7.2.2 Start a slow stream of air entering the boiling flask by adjusting the vacuum source. Adjust the vacuum so that approximately two bubbles of air per second enter the boiling flask through the air inlet tube.

7.2.3 If samples are known or suspected to contain nitrate or nitrite, or if bismuth nitrate was added to the sample, add 50 mL of 0.4N sulfamic acid solution through the air inlet tube. Mix for three minutes. 9012B 6 Revision 2 August 2002 NOTE: Excessive use of sulfamic acid could create method bias.

7.2.4 Slowly add 50 mL of 18N sulfuric acid through the air inlet tube. Rinse the tube with water and allow the airflow to mix the flask contents for three minutes. Add 20 mL of 2.5M magnesium chloride through the air inlet and wash the inlet tube with a stream of water.

7.2.5 Heat the solution to boiling. Reflux for one hour. Turn off heat and continue the airflow for at least 15 minutes. After cooling the boiling flask, and closing the vacuum source, disconnect the gas scrubber.

7.2.6 Transfer the solution from the scrubber into a 250 mL volumetric flask. Rinse the scrubber into the volumetric flask. Dilute to volume with water.

7.3 Automated colorimetric determination 7.3.1 Set up the manifold in a hood or a well ventilated area as shown in Figure 3.

7.3.2 Allow colorimeter and recorder to warm up for 30 min. Run a baseline with all reagents, feeding reagent water through the sample line.

7.3.3 Place appropriate standards in the sampler in order of increasing concentration. Complete loading of the sampler tray with unknown samples.

7.3.4 When the baseline becomes steady, begin the analysis.

7.4 Standard curve for samples without sulfide 7.4.1 Prepare a series of standards by pipetting suitable volumes of working standard potassium cyanide solution into 250 mL volumetric flasks. To each flask, add 50 mL of 1.25N sodium hydroxide and dilute to 250 mL with water. Prepare using the following table. The sodium hydroxide concentration will be 0.25N.

mL of Working Standard Solution ( 1 mL = 10 µ g CN) Concentration ( µ g CN/ L)

0.0 1.0 2.0 5.0 10.0 15.0 20.0 Blank 40 80 200 400 600 800 7.4.2 After the standard solutions have been prepared according to the table above, pipet 50 mL of each standard solution into a 100 mL volumetric flask and proceed to Secs 7.3.2 and 7.3.3 to obtain absorbance values for the standard curve. The final concentrations for the standard curve will be one half of the amounts in the above table ( final concentrations ranging from 20 to 400 µ g/ L). 9012B 7 Revision 2 August 2002 7.4.3 It is recommended that at least two standards ( a high and a low) be distilled and compared to similar values on the curve to ensure that the distillation technique is reliable. If distilled standards do not agree within + 10% of the undistilled standards, the analyst should find the cause of the apparent error before proceeding.

7.4.4 Prepare a standard curve ranging from 20 to 400 µ g/ L by plotting absorbance of standard versus the cyanide concentration 7.5 Standard curve for samples with sulfide 7.5.1 It is imperative that all standards be distilled in the same manner as the samples using the method of standard additions ( for example, bismuth nitrate must also be added to the standards). Standards distilled by this method will give a linear curve, at low concentrations, but as the concentration increases, the recovery decreases. It is recommended that at least five standards be distilled.

7.5.2 Prepare a series of standards similar in concentration to those mentioned in Sec. 7.4.1 and analyze as in Sec. 7.3. Prepare a standard curve by plotting absorbance of standard versus the cyanide concentration.

7.6 Calculation: Prepare a standard curve by plotting peak heights of standards against their concentration values. Compute concentrations of samples by comparing sample peak heights with the standard curve.

8.0 QUALITY CONTROL 8.1 Refer to Chapter One for specific quality control procedures.

8.2 Verify the calibration curve with an independent calibration check standard. If the standards are not within 15% of the expected value, a new recalibration curve is required. Verify the calibration curve with every sample batch by analyzing a mid range standard.

8.3 Run one matrix spike sample for every 10 samples to check the efficiency of sample distillation. A matrix spike should be prepared by adding cyanide from the working standard or intermediate standard to 500 mL of sample to ensure a concentration of approximately 40 µ g/ L. Both the matrix duplicate and matrix spike duplicate are brought through the entire sample preparation and analytical process.

8.4 The method of standard additions shall be used for the analysis of all samples that suffer from matrix interferences such as samples which contain sulfides.

9.0 METHOD PERFORMANCE 9.1 Precision and accuracy data are not available at this time.

10.0 REFERENCES 1. Annual Book of ASTM Standards, Part 31, " Water," Standard D2036 75, Method B, p. 505 ( 1976). 9012B 8 Revision 2 August 2002 2. Goulden, P. D., B. K. Afghan, and P. Brooksbank, Determination of Nanogram Quantities of Simple and Complex Cyanides in Water, Anal. Chem., 44( 11), pp. 1845 49 ( 1972).

3. Standard Methods for the Examination of Water and Wastewater, 14th ed., pp. 376 and 370, Method 413F and D ( 1975).

4. Technicon AutoAnalyzer II Methodology, Industrial Method No. 315 74 WCUV Digestion and Distillation, Technicon Industrial Systems, Tarrytown, New York, 10591 ( 1974). 9012B 9 Revision 2 August 2002 Figure 1. Apparatus for Cyanide Distillation 9012B 10 Revision 2 August 2002 Figure 2. Cyanide Distillation Apparatus 9012B 11 Revision 2 August 2002 Figure 3. Cyanide Manifold AA11 9012B 12 Revision 2 August 2002 METHOD 9012B TOTAL AND AMENABLE CYANIDE ( AUTOMATED COLORIMETRIC WITH OFF LINE DISTILLATION ) 9012B 13 Revision 2 August 2002 METHOD 9012B ( continued)


[Federal Register: October 23, 2006 (Volume 71, Number 204)]
[CORRECTIONS]
[Page 62153]
[DOCID:fr23oc06-109]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54138; File No. SR-Phix-2006-35]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to a System Change to the Options Floor Broker Management
System

Correction

    In notice document E6-11390 beginning on page 41064 in the issue of
Wednesday, July 19, 2006, make the following correction:
    On page 41066 insert footnote 16 at the bottom of the page to read
as follows:
    ``\16\ 17 CFR 200.30-3(a)(12)''

[FR Doc. Z6-11390 Filed 10-20-06; 8:45 am]

BILLING CODE 1505-01-D


[Federal Register Volume 82, Number 89 (Wednesday, May 10, 2017)]
[Notices]
[Pages 21843-21850]
[FR Doc No: 2017-09419]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80590; File No. SR-NYSEMKT-2017-01]

Self-Regulatory Organizations; NYSE MKT LLC; Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
No. 1, To Adopt New Equity Trading Rules To Transition Trading on the
Exchange From a Floor-Based Market With a Parity Allocation Model to a
Fully Automated Market With a Price-Time Priority Model on the
Exchange's New Trading Technology Platform, Pillar

May 4, 2017.

I. Introduction

    On January 25, 2017, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
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 transition trading on the Exchange
from a floor-based market with a parity-allocation model to a fully
automated market with price-time-priority allocation model on the
Exchange's new trading technology platform, Pillar. The proposed rule
change was published for comment in the Federal Register on February
15, 2017.\3\ On March 29, 2017, the Commission designated a longer
period for action on the proposed rule change.\4\ On April 24, 2017,
the Exchange filed Amendment No. 1 to the proposed rule change.\5\ The
Commission received no comments on the proposal. The Commission is
approving the proposed rule change, as modified by Amendment No. 1, on
an accelerated basis and soliciting comments on Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 79993 (Feb. 9,
2017), 82 FR 10814 (Feb. 15, 2017) (``Notice'').
    \4\ See Securities Exchange Act Release No. 80337 (Mar. 29,
2017), 82 FR 16459 (Apr. 4, 2017).
    \5\ In Amendment No. 1, the Exchange proposes to: (1) Amend
proposed Exchange Rule 7.35E(a)(10)(A) to specify the ``Auction
Collar'' as the greater of $0.50 or 10% away from the Auction
Reference Price and delete the specified percentages to conform to
rule filing SR-NYSEArca-2016-130; (2) amend proposed Exchange Rule
7.35E(d)(2) to note that the Closing Auction Imbalance Freeze will
begin ten minutes (rather than one minute) before the schedule time
for the Closing Auction; (3) amend proposed Exchange Rule
7.35E(f)(2) to reject certain orders until after the Auction
Processing Period for the IPO Auction has concluded; (4) amend
proposed Exchange Rule 7.35E(h)(3)(A) and (B) to define
``previously-live orders'' for Core Open Auction, Trading Halt
Auction, Closing Auction, and IPO Auction, and how unexecuted orders
would be processed, when the Exchange transitions from continuous
trading from a prior trading session; (5) amend proposed Exchange
rule 7.31E(h)(3)(A) to specify that Discretionary Pegged Orders do
not participate in any auctions; (6) amend proposed Exchange Rule
7.34E(c)(1)(A) to add that Discretionary Pegged Orders may not be
entered before or during the Early Trading Session; (7) amend
proposed Exchange Rule 7.46E to reflect recent changes to
publication dates with respect to the Tick Size Pilot Plan; and (8)
state that the Pillar transition is anticipated to occur in the
third quarter of 2017. The Exchange represents that most of the
amendments relate to a recent proposed rule change (SR-NYSEArca-
2017-47) by NYSE Arca, Inc. (``NYSE Arca'').
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1

    The Exchange proposes to adopt new equities trading rules to
facilitate the transition to Pillar, a new trading-technology platform,
in order to operate as a fully-automated cash equities market. As part
of this transition, the Exchange would move from the current floor-
based market with a parity-allocation model to a fully automated market
with a price-time-priority allocation model. Consequently,

Exchange floor-based designated market makers (``DMMs'') would be
replaced by Electronic DMMs, and the Exchange would no longer support
Supplemental Liquidity Providers or floor brokers as a separate class
of participant on the Exchange.\6\
---------------------------------------------------------------------------

    \6\ The Exchange would also expand unlisted trading privileges
to all NMS Securities, including securities listed on the New York
Stock Exchange LLC, NYSE Arca, the Nasdaq Stock Market LLC
(``Nasdaq''), and Bats BZX Exchange, Inc. See Securities Exchange
Act Release Nos. 79400 (Nov. 25, 2016), 81 FR 86750 (Dec. 1, 2016);
79738 (Jan. 4, 2017), 82 FR 3068 (Jan. 10, 2017); and 80097 (Feb.
24, 2017), 82 FR 12251 (Mar. 1, 2017).
---------------------------------------------------------------------------

    The Exchange represents that the proposal is based on the trading
rules of the NYSE Arca Equities exchange (``NYSE Arca Equities'') and
current Exchange equities rules. NYSE Arca Equities already uses
Pillar, the same trading technology platform that the Exchange proposes
to adopt.\7\ The Exchange proposes to adopt Exchange Rules 1E, 2E, 3E,
6E, 7E, 12E, and 13E to cover cash equities trading on the Pillar
platform.\8\ Exchange Rule 1E would cover definitions. Exchange Rule 2E
would cover equity trading permits. Exchange Rule 3E would cover
organization and administration of the Exchange. Exchange Rule 6E would
cover business conduct. Exchange Rule 7E would cover equities trading.
Exchange Rule 12E would cover arbitration. Exchange Rule 13E would
cover liability of directors and the Exchange.
---------------------------------------------------------------------------

    \7\ NYSE Arca filed four proposals to implement Pillar in
stages: (1) Adopting rules for trading sessions, order ranking and
display, and order execution; (2) adopting rules for orders and
modifiers and the retail liquidity program; (3) adopting rules for
trading halts, short sales, limit up-limit down, and odd lots and
mixed lots; and (4) adopting rules for auctions. See Securities
Exchange Act Release Nos. 74951 (May 13, 2015), 80 FR 28721 (May 19,
2015) and 75494 (July 20, 2015), 80 FR 44170 (July 24, 2015) (SR-
NYSEArca-2015-38) (first Pillar filing and approval); 75497 (July
21, 2015), 80 FR 45022 (July 28, 2015) and 76267 (Oct. 26, 2015), 80
FR 66951 (Oct. 30, 2015) (SR-NYSEArca-2015-56) (second Pillar filing
and approval); 75467 (July 16, 2015), 80 FR 43515 (July 22, 2015)
and 76198 (Oct. 20, 2015), 80 FR 65274 (Oct. 26, 2015) (third Pillar
filing and approval); and 76085 (Oct. 6, 2015), 80 FR 61513 (Oct.
13, 2015) and 76869 (Jan. 11, 2016), 81 FR 2276 (Jan. 15, 2016)
(fourth Pillar filing and approval).
    \8\ The Exchange previously adopted these rules, generally with
rule text reserved for future use, in anticipation of the current
proposal. See Securities Exchange Act Release No. 79242 (Nov. 4,
2016), 81 FR 79081 (Nov. 10, 2016) (SR-NYSEMKT-2016-97). The rule
numbers for the rules being adopted by NYSE MKT correspond with the
rule numbers of NYSE Arca Equities rules.
---------------------------------------------------------------------------

    The Exchange would announce the transition of its cash equities
trading to Pillar, if approved by the Commission, by a Trader Update.
The Exchange anticipates that the transition would occur in the third
quarter of 2017. If the Exchange transitions to Pillar trading
platform, the Exchange would no longer trade on its current floor-based
platform, and current Exchange equities rules governing the floor-based
platform would no longer be applicable. The Exchange proposes to mark
the affected Exchange rules with a preamble to state that these rules
would no longer be in effect and represents that it will subsequently
file a separate proposed rule change to delete rules no longer
applicable.
    A detailed description of the proposal appears in the Notice. The
proposal is summarized and discussed below.

A. Exchange Rule 1E--Definitions

    The Exchange proposes 12 new definitions to be used with the Pillar
trading platform. The Exchange represents that most of the proposed
definitions are based on the rules of NYSE Arca Equities. First, the
Exchange proposes to define the term ``Exchange Book'' as the
Exchange's electronic file of orders.\9\ Second, the Exchange proposes
to define ``Authorized Trader'' as a person who may submit orders to
the Exchange's cash equity Trading Facilities on behalf of his or her
ETP Holder.\10\ Third, the Exchange proposes to define ``Core Trading
Hours'' as the hours of 9:30 a.m. Eastern Time through 4:00 p.m.
Eastern Time, or such other hours as may be determined by the Exchange
from time to time.\11\ Fourth, the Exchange proposes to define the term
``Exchange'' as NYSE MKT LLC.\12\ Fifth, the Exchange proposes to
define the term ``ETP'' as an Equity Trading Permit issued by the
Exchange to a registered broker or dealer approved by the Exchange as a
member organization.\13\
---------------------------------------------------------------------------

    \9\ See Proposed Exchange Rule 1.1E (a) and NYSE Arca Equities
Rule 1.1(a). The proposed rule does not contain the phrase ``which
contains all orders entered on the NYSE Arca Marketplace'' from the
NYSE Arca rule.
    \10\ See Proposed Exchange Rule 1.1E (g).
    \11\ See Proposed Exchange Rule 1.1E (j).
    \12\ See Proposed Exchange Rule 1.1E (k).
    \13\ See Proposed Exchange Rule 1.1E (m).
---------------------------------------------------------------------------

    The Exchange proposes to define the term ``ETP Holder'' as a member
organization that has been issued an ETP.\14\ The Exchange proposes to
define the term ``General Authorized Trader'' as an Authorized Trader
who performs only non-market making activities on behalf an ETP
Holder.\15\ The Exchange proposes to define the term ``Marketable'' to
mean, for a limit order, that the order that can be immediately
executed or routed.\16\
---------------------------------------------------------------------------

    \14\ See Proposed Exchange Rule 1.1E (n).
    \15\ See Proposed Exchange Rule 1.1E (p).
    \16\ See Proposed Exchange Rule 1.1E (u). The Exchange proposes
that it will always consider a market order as Marketable.
---------------------------------------------------------------------------

    The Exchange proposes to define the term ``Official Closing Price''
as the reference price to determine the closing price in a
security.\17\ The Exchange proposes to define the term ``Security'' to
mean any security defined in Rule 3(a)(10) under the Act and, for
purposes of proposed Rule 7E, to mean any NMS stock.\18\ The Exchange
proposes to define the term ``Self-Regulatory Organization (`SRO')'' as
defined in the provisions of the Act relating to national securities
exchanges.\19\ Finally, the Exchange proposes to define the term
``Trading Facilities'' as any and all electronic or automatic trading
systems provided by the Exchange to ETP Holders.\20\
---------------------------------------------------------------------------

    \17\ See Proposed Exchange Rule 1.1E (gg). The proposed rule
provides detailed procedures for the determination of the official
closing price. According to the Exchange, proposed Rule 1.1E (gg),
together with proposed Exchange Rule 7.35E, would obviate the need
for current Exchange Rule 123C--Equities (The Closing Procedures),
which is how the Exchange currently determines the Official Closing
Price for an Exchange listed security.
    \18\ See Proposed Exchange Rule 1.1E (rr).
    \19\ See Proposed Exchange Rule 1.1E (ss).
    \20\ See Proposed Exchange Rule 1.1E (xx). The Exchange also
proposes to amend a cross reference in Exchange Rule 1.1 (hhh).
---------------------------------------------------------------------------

B. Exchange Rule 2E--Equity Trading Permits

    The Exchange proposes to adopt rules related to equity trading
permits on the Exchange, including procedures, qualifications, fees,
and employees of ETP Holders. Exchange member organizations who want to
trade on Pillar would need to obtain an ETP.\21\
---------------------------------------------------------------------------

    \21\ See Proposed Exchange Rule 2.2E. The Exchange is not
adopting the rule text in NYSE Arca Equities Rule 2.2 relating to
registered broker dealers, because the Exchange believes it is not
necessary.
---------------------------------------------------------------------------

    The Exchange proposes that it may, under certain conditions, deny
an ETP or condition trading privileges under an ETP.\22\ The Exchange
represents that these conditions are identical to NYSE Arca Equities
Rule 2.4(a) and (b). Additionally, the Exchange proposes that traders
of ETP Holders for which the Exchange is the Designated Examining
Authority must successfully complete the Series 7 examination.\23\ The
Exchange represents that these requirements are identical to those in
the NYSE Arca Equities rules.
---------------------------------------------------------------------------

    \22\ See Proposed Exchange Rule 2.4E.
    \23\ See Proposed Exchange Rule 2.4E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 2.6E would specify that the issuance of an
ETP constitutes a revocable privilege and confers on its holder no
right or interest of any nature to continue as an ETP Holder.\24\ The
Exchange represents that this rule is identical to NYSE Arca

Equities Rule 2.6. Proposed Exchange Rule 2.17E would set forth
``Activity Assessment Fees'' for securities transactions effected on
the Exchange, as required by Section 31 of the Act, and would specify
that the Exchange may retain payment to help fund its regulatory
expenses.\25\ The Exchange represents that proposed Exchange Rule 2.17E
is based on current Exchange Rule 440H--Equities.
---------------------------------------------------------------------------

    \24\ See Proposed Exchange Rule 2.6E.
    \25\ See Proposed Exchange Rule 2.17E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 2.21E would specify registration
requirements for employees of ETP Holders, including examination
requirements, continuing education requirements, and procedures for
registering employees. The proposed rule would prohibit an ETP Holder
from employing an Exchange employee during regular Exchange business
hours.\26\ The Exchange represents that the proposed rule is based on
NYSE Arca Equities Rule 2.21.\27\
---------------------------------------------------------------------------

    \26\ See Proposed Exchange Rule 2.21E.
    \27\ The Exchange represents that proposed Exchange Rule 2.21E,
together with proposed Exchange Rule 2.4E, would render the
following current Exchange rules obsolete: Rule 345--Equities
(Employees--Registration, Approval, Records); Rule 345A--Equities
(Continuing Education for Registered Persons); and Rule 342--
Equities (Compliance Supervisors) related to DMM Series 14A
requirement. However, an Exchange member organization engaged in a
public business in addition to a DMM business must have a qualified
compliance supervisor that has passed the Series 14A examination,
but would no longer need the Series 14A examination.
---------------------------------------------------------------------------

    Proposed Exchange Rule 2.22E would set forth the Exchange back-up
systems and mandatory testing requirements of the Exchange. The
Exchange represents that the proposed rule is based on current Exchange
Rule 49(b)--Equities.\28\ Proposed Exchange Rule 2.24E would set forth
the retention requirements for ETP books and records.\29\ The Exchange
represents that the proposed rule is based on NYSE Arca Equities Rule
2.24.\30\
---------------------------------------------------------------------------

    \28\ See Proposed Exchange Rule 2.22E. The Exchange would
designate current Exchange Rule 49--Equities (Exchange Business
Continuity and Disaster Recovery Plans and Mandatory Testing) as not
applicable to Pillar trading.
    \29\ See Proposed Exchange Rule 2.24E.
    \30\ The Exchange represents that proposed Exchange Rule 2.24E
would set forth the same requirements as current Exchange Rule 440--
Equities (Books and Records), therefore current Exchange Rule 440--
Equities would not be applicable on Pillar.
---------------------------------------------------------------------------

C. Exchange Rule 3E--Organization and Administration of the Exchange

    The next section of proposed Exchange rules would govern the
internal administration of the Exchange. Proposed Exchange Rule 3.6E
would allow the Exchange to enter into agreements with domestic and
foreign self-regulatory organizations to provide for the exchange of
information and other forms of mutual assistance for market
surveillance, investigative, enforcement, and other regulatory
purposes.\31\ The Exchange represents that the proposed rule is based
on NYSE Arca Equities Rule 3.6.\32\ Proposed Exchange Rule 3.11E would
set forth fingerprint-based background checks of Exchange employees and
other personnel related to the Exchange.\33\ The Exchange represents
that the proposed rule is based on NYSE Arca Equities Rule 3.11 and
current Exchange Rule 28--Equities.
---------------------------------------------------------------------------

    \31\ See Proposed Exchange Rule 3.6E.
    \32\ The Exchange proposes that current Rule 27--Equities would
not be applicable on Pillar because proposed Exchange Rule 3.6E
would cover the same matter. See id.
    \33\ See Proposed Exchange Rule 3.11E.
---------------------------------------------------------------------------

D. Exchange Rule 6E--Business Conduct

    The next section of proposed Exchange rules would govern the
business conduct of ETP Holders and their associated persons. Proposed
Exchange Rule 6.3E would establish the Exchange's requirement that
every ETP Holder establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the misuse of material, non-
public information by the ETP Holder or persons associated with the ETP
Holder.\34\ The Exchange represents that the proposed rule is based on
NYSE Arca Equities Rule 6.3.
---------------------------------------------------------------------------

    \34\ See Proposed Exchange Rule 6.3E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 6.10E would specify an ETP Holder's
obligations with respect to trading on the Exchange when holding any
options that are not issued by the Options Clearing Corporation.\35\
The Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 6.10.
---------------------------------------------------------------------------

    \35\ See Proposed Exchange Rule 6.10E. The Exchange proposes
that current Exchange Rule 96--Equities would not be applicable for
trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 6.12E would govern requirements for joint
accounts between an ETP Holder and another person, including reporting
obligations to the Exchange.\36\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 6.12.
---------------------------------------------------------------------------

    \36\ See Proposed Exchange Rule 6.12E. The Exchange proposes
that current Exchange Rule 93--Equities (Trading for Joint Account)
and Rule 94--Equities (Designated Market Maker's or Odd-Lot Dealers
Interest in Joint Accounts) would not be applicable for trading on
Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 6.15E would prohibit ETP Holders from
participating in a prearranged trade.\37\ The Exchange represents that
the proposed rule is based on NYSE Arca Equities Rule 6.15(b).
---------------------------------------------------------------------------

    \37\ See Proposed Exchange Rule 6.15E. The Exchange proposes
that current Exchange Rule 78--Equities would not be applicable on
Pillar. See Notice, 82 FR at 10819.
---------------------------------------------------------------------------

E. Exchange Rule 7E--Equities Trading

    The proposed rules under Exchange Rule 7E would set forth how
trading would be conducted on the Exchange. Section 1 of proposed
Exchange Rule 7E would set forth general provisions relating to cash
equities trading on the Pillar trading platform, such as hours of
business, clearly erroneous executions, limit up-limit down plan, and
clearance and settlement. Section 3 of proposed Exchange Rule 7E would
set forth the trading rules for Pillar. Other proposed Exchange rules
would provide that the Exchange would not offer a retail liquidity
program, set forth rules related to the Exchange routing broker, and
adopt rules to comply with the Tick Size Pilot Plan. The Exchange
represents that the trading system and rules are based on the rules of
NYSE Arca Equities.
1. General Provisions
    The general provisions of the proposed trading rules would set out
the necessary rules for trading on the Exchange, including rules
governing when the Exchange would be open for business, how clearly
erroneous executions would be handled by the Exchange, how the Exchange
would clear and settle securities transactions conducted on the
Exchange, requirements for short sales, and the limit up-limit down
plan.
    Proposed Exchange Rule 7.1E would set forth the hours of operation
for the Exchange.\38\ The proposed rule also sets forth when the
Exchange Chief Executive Officer may take specified actions, such as
halting or suspending trading in some or all securities on the
Exchange. The Exchange represents that the proposed rule is based on
NYSE Arca Equities Rule 7.1 and current Exchange Rule 51--Equities.\39\
---------------------------------------------------------------------------

    \38\ See Proposed Exchange Rule 7.1E.
    \39\ The Exchange proposes that current Exchange Rule 12--
Equities and Rule 51--Equities would not be applicable for trading
on Pillar. See id.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.2E would set forth the holiday schedules
for the Exchange.\40\ The Exchange represents that the proposed rule is
based on NYSE Arca Equities Rule 7.2 and current Exchange Rule 51.10--
Equities.
---------------------------------------------------------------------------

    \40\ See Proposed Exchange Rule 7.2E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.3E would specify that ETP Holders may not
charge fixed commissions and that they must indicate whether they are
acting as a broker or as a principal.\41\ The Exchange

represents that the proposed rule is based on NYSE Arca Equities Rule
7.3.\42\
---------------------------------------------------------------------------

    \41\ See Proposed Exchange Rule 7.3E.
    \42\ The Exchange proposes that current Exchange Rule 388--
Equities (Prohibition Against Fixed Rates of Commission) would not
be applicable for trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.4E would set the ex-dividend or ex-right
dates for stocks traded ``regular'' way.\43\ The Exchange represents
that the proposed rule is based on NYSE Arca Equities Rule 7.4.\44\
---------------------------------------------------------------------------

    \43\ See Proposed Exchange Rule 7.4E.
    \44\ The Exchange proposes that current Exchange Rule 235--
Equities would not be applicable for trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.7E would establish that all bids and
offers on the Exchange would be anonymous unless otherwise specified by
the ETP Holder.\45\ The Exchange represents that the proposed rule is
based on NYSE Arca Equities Rule 7.7.
---------------------------------------------------------------------------

    \45\ See Proposed Exchange Rule 7.7E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.8E would specify that all bids and offers
will be considered ``regular way,'' and the Exchange would not accept
orders that are not entered for regular way settlement.\46\ The
Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 7.8E.\47\
---------------------------------------------------------------------------

    \46\ See Proposed Exchange Rule 7.8E.
    \47\ The Exchange proposes that current Exchange Rules 12--
Equities, 14--Equities, and 73--Equities would not be applicable for
trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.9E would state that the execution price of
an order is binding, notwithstanding the Exchange's clearly erroneous
executions and limit up-limit down rules.\48\ The Exchange represents
that the proposed rule is based on NYSE Arca Equities Rule 7.9.\49\
---------------------------------------------------------------------------

    \48\ See Proposed Exchange Rule 7.9E.
    \49\ The Exchange proposes that current Exchange Rules 71--
Equities (Precedence of Highest Bid and Lowest Offer) and 411--
Equities (Erroneous Reports) would not be applicable for trading on
Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.10E would set forth the Exchange's rules
governing clearly erroneous executions.\50\ The Exchange represents
that the proposed rule is based on NYSE Arca Equities 7.10.\51\
---------------------------------------------------------------------------

    \50\ See Proposed Exchange Rule 7.10E.
    \51\ The Exchange proposes that current Exchange Rule 128--
Equities (Clearly Erroneous Executions) would not be applicable for
trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.11E would specify how the Exchange would
comply with the Regulation NMS Plan to Address Extraordinary Market
Volatility (``LULD Plan'') \52\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 7.11(a), (b)(2), and
(b)(5).\53\
---------------------------------------------------------------------------

    \52\ See Proposed Exchange Rule 7.11E.
    \53\ The Exchange proposes that current Exchange Rule 80C--
Equities would not be applicable for trading on Pillar.
---------------------------------------------------------------------------

    The Exchange proposes to amend paragraph (c)(i) of Exchange Rule
7.12E to change the rule cross reference from Rule 123D--Equities to
Rule 7.35(e).\54\
---------------------------------------------------------------------------

    \54\ See Proposed Exchange Rule 7.12E. The Exchange proposes
Rule 7.35E to govern auctions. Accordingly, the Exchange proposes
that the procedures set out in current Exchange Rule 123D--Equities
would not be applicable on the Pillar trading platform.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.13E would govern trading suspensions.\55\
The Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 7.13.
---------------------------------------------------------------------------

    \55\ See Proposed Exchange Rule 7.13E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.14E would govern clearance and settlement
procedures.\56\ The Exchange represents that the proposed rule is based
on NYSE Arca Equities Rule 7.14.\57\
---------------------------------------------------------------------------

    \56\ See Proposed Exchange Rule 7.14E.
    \57\ The Exchange proposes that current Exchange Rules 130--
Equities and 132--Equities would not be applicable for trading on
Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.15E would state that Market Makers may not
have an interest in an option that is not issued by the Options
Clearing Corporation and prohibit pool dealing in registered
securities.\58\ The Exchange represents that the proposed rule is based
on NYSE Arca Equities Rule 7.15.\59\
---------------------------------------------------------------------------

    \58\ See Proposed Exchange Rule 7.15E.
    \59\ The Exchange proposes that current Exchange Rule 105--
Equities would not be applicable for trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.16E would set forth the short sales
rule.\60\ The Exchange represents that the proposed rule is based on
NYSE Arca Equities Rule 7.16.\61\
---------------------------------------------------------------------------

    \60\ See Proposed Exchange Rule 7.16E.
    \61\ The Exchange proposes that current Exchange Rule 440B--
Equities (Short Sales) would not be applicable for trading on
Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.17E would establish requirements that all
orders and quotes comply with Rule 602 of Regulation NMS (firm quote
rule).\62\ The Exchange represents that the proposed rule is based on
NYSE Arca Equities Rule 7.17.\63\
---------------------------------------------------------------------------

    \62\ See Proposed Exchange Rule 7.17E.
    \63\ The Exchange proposes that current Exchange Rule 60--
Equities (Dissemination of Quotations) would not be applicable for
trading on Pillar.
---------------------------------------------------------------------------

2. Trading Rules for Pillar
    The trading rules for Pillar would set forth definition of orders,
how auctions would operate, how orders are displayed and ranked, and
how orders are executed. The Exchange represents that the proposed
trading rules are based on NYSE Arca Equities rules, with the exception
of rules governing orders and modifiers and rules governing trading
sessions.
    Proposed Exchange Rule 7.29E would specify that, to obtain
authorized access to the Exchange, each ETP Holder would be required to
enter into a User Agreement.\64\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 7.29(a).
---------------------------------------------------------------------------

    \64\ See Proposed Exchange Rule 7.29E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.30E would establish requirements for ETP
Holders relating to authorized traders who can obtain access to the
Exchange on behalf of an ETP Holder.\65\ The Exchange represents that
the proposed rule is based on NYSE Arca Equities Rule 7.30.
---------------------------------------------------------------------------

    \65\ See Proposed Exchange Rule 7.30E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.31E would set forth the primary order
types, time in force modifiers for the order types, orders with
conditional or undisplayed price and/or size, non-routable and routable
order instructions, operations of pegged orders, and other order types
that would be available on the Pillar trading platform.\66\ The
Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 7.31 with the following differences: (1) The self-trade
prevention (``STP'') modifiers would not include references relating to
ETPIDs; \67\ (2) Arca Only Orders would be renamed ``MKT Only Orders''
on the Exchange; \68\ (3) ETP Holders would be permitted to specify
that Primary Only Day/IOC Orders in NYSE Arca-listed securities may
include an instruction to be routed to NYSE Arca as a routable order,
as set forth in proposed Rule 7.31E(f)(1)(B); \69\ and (4) NYSE Arca
Equities Rule 7.31.02 would not be adopted.\70\
---------------------------------------------------------------------------

    \66\ See Proposed Exchange Rule 7.31E.
    \67\ See Proposed Exchange Rule 7.31E(i)(2). Because the
Exchange would be operating on Pillar phase II protocols only, STPs
would be based on the MPID of an ETP Holder and not on an ETP ID.
Consequently, proposed Exchange Rule 7.32E(i)(2) would not include
references from NYSE Arca Equities Rule 7.31(i)(2) relating to
ETPIDs (ETP identifications).
    \68\ See Proposed Exchange Rule 7.31E(e)(1).
    \69\ See Proposed Exchange Rule 7.31E(f)(1)(B).
    \70\ The Exchange proposes that current Exchange Rules 13--
Equities (Orders and Modifiers) and 1000(c)--Equities would not be
applicable to trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange rule 7.32E would set forth the maximum order
entry size at 5 million shares.\71\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 7.32.\72\
---------------------------------------------------------------------------

    \71\ See Proposed Exchange Rule 7.32E.
    \72\ The Exchange proposes that the current maximum order size
references before subparagraph (a) in Exchange Rule 1000--Equities
would not be applicable to trading on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.33E would require ETP Holders to include,
with each order entered into the Exchange, their capacity code
information, whether as principal, agent, or riskless principal.\73\
The Exchange represents

that the proposed rule is based on NYSE Arca Equities Rule 7.33.
---------------------------------------------------------------------------

    \73\ See Proposed Exchange Rule 7.33E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.34E would specify that the Exchange would
operate three trading sessions each day: Early, Core, and Late.\74\ The
Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 7.34, except that the early trading session would start
at 7:00 a.m. Eastern Time rather than 4:00 a.m. Eastern Time for NYSE
Arca Equities.\75\
---------------------------------------------------------------------------

    \74\ See Proposed Exchange Rule 7.34E. The Exchange proposes
that NYSE Arca Equities Rule 7.34(b)(2) and (b)(3) would not be
adopted.
    \75\ See, e.g., Proposed Exchange Rule 7.34E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.35E would set forth the auction rules.\76\
The Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 7.35, with some substantive differences.\77\ First, the
Exchange states that, because it lists the securities of operating
companies, instead of the exchange traded products listed on NYSE Arca,
the auction-collar thresholds should be wider than those on NYSE Arca,
and the Exchange proposes auction collars based on the collars for the
Nasdaq opening and closing crosses. Second, the Exchange, based on the
rules of Nasdaq, proposes to provide that the Closing Auction Imbalance
Freeze would begin ten minutes (instead of one minute) before the
scheduled time for the closing auction.
---------------------------------------------------------------------------

    \76\ See Proposed Exchange Rule 7.35E.
    \77\ The Exchange proposes that current Exchange Rules 15--
Equities, 115A--Equities, 116.40--Equities, 123C--Equities, and
123D--Equities would not be applicable on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.36E would set forth how orders are ranked
and displayed, and the priority of orders.\78\ The Exchange represents
that the proposed rule is based on NYSE Arca Equities Rule 7.36.
---------------------------------------------------------------------------

    \78\ See Proposed Exchange Rule 7.36E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.37E would set forth how orders would
execute and route, the data feeds the Exchange would use, the
prohibition on quotations that lock or cross the best protected bid or
offer, and exceptions to the Commission's Order Protection Rule.\79\
The Exchange represents that the proposed rule is based on NYSE Arca
Equities 7.37, except that the Exchange would not be using data feeds
from broker-dealers or routing to away markets that do not display
protected quotations.\80\
---------------------------------------------------------------------------

    \79\ See Proposed Exchange Rule 7.37E.
    \80\ The Exchange proposes that the following rules would not be
applicable to trading on the Pillar trading platform: Exchange Rules
15A--Equities (Order Protection Rule), 19--Equities (Locking or
Crossing Protected Quotations in NMS Stocks), 60--Equities
(Dissemination of Quotations), 61--Equities (Recognized Quotations),
72--Equities (Priority of Bids and Offers and Allocation of
Executions), 79A.15--Equities, 100(a) and (b)--Equities (Automatic
Executions), 1001--Equities (Execution of Automatically Executing
Orders), 1002--Equities (Availability of Automatic Execution
Feature), and 1004--Equities (Election of Buy Minus and Sell Plus).
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.38E sets forth how odd-lot and mixed-lot
orders are treated on the Exchange.\81\ The Exchange represents that
the proposed rule is based on NYSE Arca Equities Rule 7.38.
---------------------------------------------------------------------------

    \81\ See Proposed Exchange Rule 7.38E.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.39E sets forth how trading would occur on
the Exchange through its off-hours trading facility.\82\ The Exchange
proposes to permit only aggregate-price coupled orders--an order to buy
or sell a group of securities (no fewer than 15) having a total market
value of $1 million or more--through the off-hours trading facility.
The Exchange represents that NYSE Arca Equities Rule 7.39 would not be
adopted, but rather, current Exchange Rule 900 series would form the
basis for the proposed rules.\83\
---------------------------------------------------------------------------

    \82\ See Proposed Exchange Rule 7.39E.
    \83\ NYSE Arca Equities Rule 7.39 addresses the adjustment of
open orders. Because the Exchange does not propose to have any open
orders when trading on the Pillar trading platform, the Exchange
would not adopt rule text based on NYSE Arca Equities Rule 7.39.
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    Proposed Exchange Rule 7.40E would set forth the Exchange's
obligation to report trades to an appropriate consolidated transaction
reporting system.\84\ The Exchange represents that the proposed rule is
based on NYSE Arca Equities Rule 7.40.\85\
---------------------------------------------------------------------------

    \84\ See Proposed Exchange rule 7.40E.
    \85\ The Exchange proposes that current Exchange Rule 128A--
Equities would not be applicable on Pillar.
---------------------------------------------------------------------------

    Proposed Exchange Rule 7.41E would specify that each executed
transaction on the Exchange will be automatically processed for
clearance and settlement on a locked-in and anonymous basis.\86\ With
the exception of proposed Exchange Rule 7.41E(c), the Exchange
represents that the proposed rule is based on NYSE Arca Equities 7.41.
The Exchange represents that proposed Exchange Rule 7.41E(c) is based
on NYSE Rule 130(b), which specifies the circumstances under which the
Exchange may reveal the contra-party identity.\87\
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    \86\ See Proposed Exchange rule 7.41E.
    \87\ The Exchange represents that proposed Exchange Rule
7.41E.10 is based on current Exchange Rule 132.10--Equities. The
Exchange proposes that current Exchange Rules 130--Equities
(Overnight Comparison of Exchange Transaction), 132--Equities
(Comparison and Settlement of Transactions Through a Fully-
Interfaced or Qualified Clearing Agency), 133--Equities
(Comparison--Non-cleared Transactions), 134--Equities (Differences
and Omissions--Non-cleared Transactions (``DKs'')), and 136--
Equities (Comparison--Transactions Excluded from a Clearance) would
not apply to trading on Pillar. See Notice, 82 FR at 10821.
---------------------------------------------------------------------------

3. Retail Liquidity Program Would Not Be Available
    The Exchange currently operates a retail liquidity program on a
pilot basis.\88\ The Exchange proposes that it would not establish a
retail liquidity program on Pillar.
---------------------------------------------------------------------------

    \88\ See Securities Exchange Act Release Nos. 67347 (Jul. 3,
2012), 77 FR 40673 (Jul. 10 2012) (approving the retail liquidity
program on a pilot basis); 79587 (Dec. 16, 2016), 81 FR 93975 (Dec.
22, 2016) (extending the pilot until June 30, 2017) (SR-NYSE-2011-
55; SR-NYSEAmex-2011-84).
---------------------------------------------------------------------------

4. Rules Related to Exchange Routing Broker
    Proposed Exchange Rule 7.45E would establish the rules for the
Exchange's routing broker.\89\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 7.45.\90\
---------------------------------------------------------------------------

    \89\ See Proposed Exchange Rule 7.45E.
    \90\ The Exchange proposes that current Exchange Rule 17--
Equities (Use of Exchange Facilities and Vendor Services) would not
be applicable on Pillar.
---------------------------------------------------------------------------

5. Rules Related to Tick Size Pilot Plan
    Proposed Exchange Rule 7.46E sets forth the rules for the Tick Size
Pilot Plan.\91\ The Exchange represents that the proposed rule is based
on NYSE Arca Equities Rule 7.46, with the exception of references to
the retail liquidity program.\92\
---------------------------------------------------------------------------

    \91\ See Proposed Exchange Rule 7.46E.
    \92\ The Exchange proposes that current Exchange Rule 67--
Equities (Tick Size Pilot Plan) would not be applicable on Pillar.
---------------------------------------------------------------------------

F. Exchange Rule 12E--Arbitration

    Proposed Exchange Rule 12E would provide that disputes between or
among ETP Holders and their associated persons would be resolved via
arbitration.\93\ The Exchange represents that the proposed rule is
based on current Exchange Rule 600--Equities.
---------------------------------------------------------------------------

    \93\ See Proposed Exchange Rule 12E.
---------------------------------------------------------------------------

G. Exchange Rule 13E--Liability of Directors and the Exchange

    Proposed Exchange Rule 13.2E would set forth requirements governing
liability of the Exchange, including the limits on liability under
specified circumstances.\94\ The Exchange represents that the proposed
rule is based on current Exchange Rule 905NY and NYSE Arca Equities
Rule 13.2. Proposed Exchange Rule 13.3E would set forth when ETP
Holders and their associated persons may sue Exchange

subsidiaries and personnel.\95\ The Exchange represents that the
proposed rule is based on NYSE Arca Equities Rule 13.3. Proposed
Exchange Rule 13.4E would determine the responsible party for legal
costs when the Exchange is defending a legal proceeding.\96\ The
Exchange represents that the proposed rule is based on NYSE Arca
Equities Rule 13.4.
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    \94\ See Proposed Exchange Rule 13.2E. The Exchange proposes
that current Exchange Rule 18--Equities would not be applicable on
Pillar. See Notice, 82 FR at 10822.
    \95\ See Proposed Exchange Rule 13.3E.
    \96\ See Proposed Exchange Rule 13.4E. The Exchange proposes
that current Exchange Rule 25--Equities (Exchange Liability for
Legal Costs) would not be applicable on Pillar. See Notice, 82 FR at
10822.
---------------------------------------------------------------------------

H. Current Exchange Rules Not Applicable on Pillar

    As noted earlier, the Exchange would no longer operate a trading
floor once the Exchange transitions to Pillar. As a result, the
Exchange proposes that certain current rules that relate to floor-based
trading would not be applicable on Pillar.\97\
---------------------------------------------------------------------------

    \97\ See Notice, 82 FR at 10823-10824, for a list of current
Exchange rules related to floor-based trading that would not be
applicable on Pillar.
---------------------------------------------------------------------------

III. Discussion and Findings

    After careful review of the proposal, the Commission finds, for the
reasons discussed below, that the proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the Exchange.\98\ In particular, the Commission finds
that the proposed rule change is consistent with Section 6(b)(5) of the
Act,\99\ which requires, among other things, that the rules of a
national securities exchange be 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 systems and, in general, to protect investors and the
public interest and that the rules are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \98\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
    \99\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

A. Pillar Trading System

    The proposal would replace the Exchange's current floor based
trading, which has a parity-allocation model, with a fully automated,
electronic trading system with a price-time-priority model. The
Commission notes that the proposed rules closely parallel, and are
substantially similar to, current NYSE Arca Equities rules and current
Exchange rules, which were filed and approved by the Commission (or
which became immediately effective) pursuant to Section 19(b) of the
Act. NYSE Arca Equities currently operates using the Pillar trading
platform, and most other national securities exchanges operate fully
electronic markets that use a price-time-priority model. Accordingly,
the Commission believes that the proposal raises no novel regulatory
issues, that it is reasonably designed to protect investors and the
public interest, and that it is consistent with the requirements of the
Act.

B. Section 11(a) of the Act

    Section 11(a)(1) of the Act \100\ prohibits a member of a national
securities exchange from effecting transactions on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated person exercises investment discretion
(collectively, ``covered accounts'') unless an exception applies. Rule
11a2-2(T) under the Act,\101\ known as the ``effect versus execute''
rule, provides exchange members with an exemption from the Section
11(a)(1) prohibition. Rule 11a2-2(T) permits an exchange member,
subject to certain conditions, to effect transactions for covered
accounts by arranging for an unaffiliated member to execute
transactions on the exchange. To comply with Rule 11a2-2(T)'s
conditions, a member: (i) Must transmit the order from off the exchange
floor; (ii) may not participate in the execution of the transaction
once the order has been transmitted to the member performing the
execution; \102\ (iii) may not be affiliated with the executing member;
and (iv) with respect to an account over which the member or an
associated person has investment discretion, neither the member nor an
associated person may retain any compensation in connection with
effecting the transaction except as provided in the Rule. For the
reasons set forth below, the Commission believes that ETP Holders
entering orders into the Exchange's Pillar trading system would satisfy
the requirements of Rule 11a2-2(T).\103\
---------------------------------------------------------------------------

    \100\ 15 U.S.C. 78k(a)(1).
    \101\ 17 CFR 240.11a2-2(T).
    \102\ This prohibition also applies to associated persons of the
initiating member. The member may, however, participate in clearing
and settling the transaction.
    \103\ The Exchange has clarified that its analysis relating to
Section 11(a) of the Act in the Notice applies to the Exchange's
proposed Pillar trading platform and does not apply to trading in
the Exchange's off-hours trading facility, which is to be governed
by proposed Rule 7.39E (``Off-Hours Trading Facility''). See Email
from Clare Saperstein, Associate General Counsel, NYSE Group, Inc.
to Yue Ding, Jennifer Dodd, and Steve Kuan, Division of Trading and
Markets, Commission (May 2, 2017). The Exchange has also clarified
that its Off-Hours Trading Facility would continue to operate on its
existing technology and would not operate on the proposed Pillar
trading platform. See id. Additionally, the Exchange represents that
it is not proposing any new or different functionality for its Off-
Hours Trading Facility and that member organizations using the Off-
Hours Trading Facility pursuant to proposed Rule 7.39E would
continue to be required to comply with Section 11(a)(1) of the Act,
and any applicable exceptions thereto as are currently applicable to
the Exchange's off-hours trading facility under the Exchange's Rule
900 Series, which is based on the rules of the New York Stock
Exchange LLC (``NYSE''). See id.; see also Securities Exchange Act
Release Nos. 33992 (May 2, 1994), 59 FR 23907 (May 9, 1994) (SR-
NYSE-93-50) (approving the NYSE's off-hours trading facility on a
permanent basis); 29237 (May 24, 1991), 56 FR 24853 (May 31, 1991)
(SR-NYSE-90-52 and SR-NYSE-90-53) (approving the NYSE's off-hours
trading facility on a temporary basis); and 58705 (Oct. 1, 2008), 73
FR 58995 (Oct. 8, 2008) (SR-Amex-2008-63) (approving the adoption of
new equity trading rules by the Exchange that are substantially
identical to the equity trading rules of NYSE).
---------------------------------------------------------------------------

    Rule 11a2-2(T)'s first requirement is that orders for covered
accounts be transmitted from off the exchange floor. The Exchange
represents that it will not have a physical trading floor once it
transitions to the Pillar trading platform, and the Exchange's Pillar
trading system will receive orders from members electronically through
remote terminals or computer-to-computer interfaces.\104\ In the
context of other automated trading systems, the Commission has found
that the off-floor transmission requirement is met if a covered account
order is transmitted from a remote location directly to an exchange's
floor by electronic means.\105\ Because the Pillar trading system
receives orders electronically through remote terminals or computer-to-
computer interfaces, the Commission believes that the Pillar

trading system would satisfy this off-floor transmission requirement.
---------------------------------------------------------------------------

    \104\ See Notice, supra note 3, 82 FR at 10825.
    \105\ In the context of other all-electronic systems, the
Commission has similarly found that the off-floor transmission
requirement is met if the system receives orders electronically
through remote terminals or computer-to-computer interfaces. See,
e.g., Securities Exchange Act Release Nos. 61419 (Jan. 26, 2010), 75
FR 5157 (Feb. 1, 2010) (SR-BATS-2009-031) (approving BATS options
trading); 59154 (Dec. 23, 2008), 73 FR 80468 (Dec. 31, 2008) (SR-
BSE-2008-48) (approving equity securities listing and trading on
BSE); 57478 (Mar. 12, 2008), 73 FR 14521 (Mar. 18, 2008) (SR-NASDAQ-
2007-004 and SR-NASDAQ-2007-080) (approving NOM options trading);
53128 (Jan. 13, 2006), 71 FR 3550 (Jan. 23, 2006) (File No. 10-131)
(granting the application of The Nasdaq Stock Market LLC for
registration as a national securities exchange); and 44983 (Oct. 25,
2001), 66 FR 55225 (Nov. 1, 2001) (SR-PCX-00-25) (approving the
establishment of the Archipelago Exchange as the equities trading
facility of PCX Equities, Inc., a subsidiary of the Pacific
Exchange, Inc.).
---------------------------------------------------------------------------

    Second, Rule 11a2-2(T) requires that neither the initiating member
nor an associated person of the initiating member participate in the
execution of the transaction at any time after the order for the
transaction has been transmitted. The Exchange represents that the
Pillar trading system would at no time following the submission of an
order allow an ETP Holder or an associated person of the ETP Holder to
acquire control or influence over the result or timing of the order's
execution.\106\ According to the Exchange, the execution of an ETP
Holder's order would be determined solely by the quotes and orders that
are present in the system at the time the member submits the order and
by the order priority under the Exchange rules.\107\ Accordingly, the
Commission believes that an Exchange member and its associated persons
would not participate in the execution of an order submitted to the
Pillar trading system.
---------------------------------------------------------------------------

    \106\ See Notice, supra note 3, 82 FR at 10825.
    \107\ See id. The Exchange notes that Rule 11a2-2(T) does not
preclude a member from cancelling or modifying orders, or from
modifying the instructions for executing orders, after they have
been transmitted, provided that such cancellations or modifications
are transmitted from off an exchange floor. See id. The Commission
has stated that the non-participation requirement is satisfied under
such circumstances so long as the modifications or cancellations are
also transmitted from off the floor. See Securities Exchange Act
Release No. 14563 (Mar. 14, 1978), 43 FR 11542 (Mar. 17, 1978)
(``1978 Release'') (stating that the ``non-participation requirement
does not prevent initiating members from canceling or modifying
orders (or the instructions pursuant to which the initiating member
wishes orders to be executed) after the orders have been transmitted
to the executing member, provided that any such instructions are
also transmitted from off the floor'').
---------------------------------------------------------------------------

    Third, Rule 11a2-2(T) requires that the order be executed by an
exchange member that is not associated with the member initiating the
order. The Commission has stated that this requirement is satisfied
when automated exchange facilities are used, as long as the design of
these systems ensures that members do not possess any special or unique
trading advantages in handling their orders after transmitting them to
the exchange.\108\ The Exchange represents that the design of the
Pillar trading system ensures that no ETP Holder has any special or
unique trading advantage in the handling of its orders after
transmitting its orders to the Exchange.\109\ Based on the Exchange's
representation, the Commission believes that the Pillar trading system
would satisfy this requirement.
---------------------------------------------------------------------------

    \108\ In considering the operation of automated execution
systems operated by an exchange, the Commission noted that, while
there is not an independent executing exchange member, the execution
of an order is automatic once it has been transmitted into the
system. Because the design of these systems ensures that members do
not possess any special or unique trading advantages in handling
their orders after transmitting them to the exchange, the Commission
has stated that executions obtained through these systems satisfy
the independent execution requirement of Rule 11a2-2(T). See
Securities Exchange Act Release No. 15533 (Jan. 29, 1979), 44 FR
6084 (Jan. 31, 1979).
    \109\ See Notice, supra note 3, 82 FR at 10825.
---------------------------------------------------------------------------

    Fourth, in the case of a transaction effected for an account with
respect to which the initiating member or an associated person thereof
exercises investment discretion, neither the initiating member nor any
associated person may retain any compensation in connection with
effecting the transaction, unless the person authorized to transact
business for the account has expressly provided otherwise by written
contract referring to Section 11(a) of the Act and Rule 11a2-2(T)
thereunder.\110\ ETP Holders trading for covered accounts over which
they exercise investment discretion must comply with this condition in
order to rely on the rule's exemption.\111\
---------------------------------------------------------------------------

    \110\ In addition, Rule 11a2-2(T)(d) requires that, if a member
or associated person is authorized by written contract to retain
compensation in connection with effecting transactions for covered
accounts over which the member or associated person thereof
exercises investment discretion, the member or associated person
must furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member or any associated person
thereof in connection with effecting transactions for the account
during the period covered by the statement. See 17 CFR 240.11a2-
2(T)(d). See also 1978 Release, supra note 107 (``The contractual
and disclosure requirements are designed to assure that accounts
electing to permit transaction-related compensation do so only after
deciding that such arrangements are suitable to their interests'').
    \111\ The Exchange has represented that it will advise its
membership through the issuance of a Regulatory Bulletin that those
ETP Holders trading for covered accounts over which they exercise
investment discretion must comply with this condition in order to
rely on the exemption in Rule 11a2-2(T). See Notice, supra note 3,
82 FR at 10825.
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to the proposed rule change is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2017-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2017-01. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2017-01 and should
be submitted on or before May 31, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    As noted above, in Amendment No. 1, the Exchange proposes to: (1)
Amend proposed Exchange Rule 7.35E(a)(10)(A) to specify the ``Auction
Collar'' as the greater of $0.50 or 10% away from the Auction Reference
Price and delete the specified percentages to conform to SR-NYSEArca-
2016-130; (2) amend proposed Exchange Rule 7.35E(d)(2) to note that the
Closing Auction Imbalance Freeze will begin ten minutes (rather than
one minute) before the scheduled time for the Closing Auction; (3)
amend proposed Exchange Rule 7.35E(f)(2) to reject certain orders until
after the Auction Processing Period for the IPO Auction has concluded;
(4) amend

proposed Exchange Rule 7.35E(h)(3)(A) and (B) to define ``previously-
live orders'' for Core Open Auction, Trading Halt Auction, Closing
Auction, and IPO Auction and to define how unexecuted orders would be
processed when the Exchange transitions from continuous trading from a
prior trading session; (5) amend proposed Exchange rule 7.31E(h)(3)(A)
to specify that Discretionary Pegged Orders do not participate in any
auctions; (6) amend proposed Exchange Rule 7.34E(c)(1)(A) to add a
provision that Discretionary Pegged Orders may not be entered before or
during the Early Trading Session; (7) amend proposed Exchange Rule
7.46E to reflect recent changes to publication dates with respect to
the Tick Size Pilot Plan; and (8) state that the Pillar transition is
anticipated to occur in the third quarter of 2017.
    The Commission believes that Amendment No. 1 does not raise novel
regulatory issues and is based on, and substantively identical to, the
existing rules of other self-regulatory organizations. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\112\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \112\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, that pursuant to Section 19(b)(2) of the
Act, that the proposed rule change, as modified by Amendment No. 1,
(SR-NYSEMKT-2017-01), be, and it hereby is, approved on an accelerated
basis.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\113\
---------------------------------------------------------------------------

    \113\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09419 Filed 5-9-17; 8:45 am]
 BILLING CODE 8011-01-P