[Federal Register Volume 84, Number 108 (Wednesday, June 5, 2019)]
[Notices]
[Pages 26188-26231]
[FR Doc No: 2019-11566]

Vol. 84

Wednesday,

No. 108

June 5, 2019

Part II

Securities and Exchange Commission

-----------------------------------------------------------------------

Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of
Filing of Amendment No. 3 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 3, To Amend NYSE
Rules 7.31, 7.36, 7.37; Make Conforming Amendments to NYSE Rules 1.1,
7.11, 7.12, 7.16, 7.18, 7.32, 7.34, and 7.36; and Amend the Preambles
on Current Exchange Rules Relating to Their Applicability to the Pillar
Trading Platform; Notice

Federal Register / Vol. 84, No. 108 / Wednesday, June 5, 2019 /
Notices

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85962; File No. SR-NYSE-2019-05]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 3 and Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Amendment No. 3, To
Amend NYSE Rules 7.31, 7.36, 7.37; Make Conforming Amendments to NYSE
Rules 1.1, 7.11, 7.12, 7.16, 7.18, 7.32, 7.34, and 7.36; and Amend the
Preambles on Current Exchange Rules Relating to Their Applicability to
the Pillar Trading Platform

May 29, 2019.

I. Introduction

    On February 8, 2019, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to: (1) Amend NYSE Rules 7.36 and 7.37 to add the
designated market maker (``DMM'') as a Participant for trading of
Exchange-listed securities on the Exchange's Pillar technology
platform; (2) amend NYSE Rule 7.31 to add Auction-Only Orders and make
related changes; (3) add new trading rules relating to auctions for
Pillar; (4) make conforming amendments to NYSE Rules 1.1, 7.11, 7.12,
7.16, 7.18, 7.32, 7.34, and 7.36; and (5) amend the preambles on
current Exchange rules relating to their applicability to the Pillar
trading platform. The proposed rule change was published for comment in
the Federal Register on February 28, 2019.\3\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 85176 (Feb. 22,
2019), 84 FR 6868 (Feb. 28, 2019).
---------------------------------------------------------------------------

    On March 8, 2019, the Exchange filed Amendment No. 1 to the
proposed rule change, which superseded the original filing in its
entirety. On April 8, 2019, the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\4\ On April 18, 2019,
the Exchange filed Amendment No. 2 to the proposed rule change, which
superseded the original filing, as amended by Amendment No. 1, in its
entirety. On May 17, 2019, the Exchange filed Amendment No. 3 to the
proposed rule change, which superseded the original filing, as amended
by Amendments No. 1 and 2, in its entirety.\5\ The Commission has
received no comments on the proposed rule change.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 85552, 84 FR 15015
(April 12, 2019).
    \5\ In Amendment No. 3, compared to the original proposal, see
Notice, supra note 3, the Exchange, among other things: (i) Further
amends proposed NYSE 7.16 (Short Sales) to provide that, if an order
is not executed in an Auction and is eligible to trade, it will be
priced consistent with paragraph (f)(5) of NYSE Rule 7.16, and makes
certain clarifying changes; (ii) Further amends proposed NYSE Rule
7.18 (Halts) with respect to the processing of Last Sale Peg Orders
during a trading halt or pause; (iii) further amends NYSE Rule 7.31
(Orders and Modifiers) to provide: That MOO, MOC, LOC, and Closing
IO Orders would not be available to DMMs; that a Closing D Order in
an Auction-Eligible Security may include a Yielding Modifier; that
until the Closing Auction, a Closing D Order with the proposed
Yielding Modifier would be processed as a Yielding Order; that a
Closing D Order with a Yielding Modifier would be ranked Priority
4--Yielding Orders; and that a Last Sale Peg Order would not be
eligible to participate in any Auctions; (iv) further amends
proposed NYSE Rule 7.34 (Trading Sessions) to specify that Last Sale
Peg Orders will be rejected if entered before the Core Trading
Session begins; (v) provides additional justification for processing
DMM After-Auction Orders before other orders; (vi) provides
additional explanation for allocating LOC Orders based on time
priority; (vii) removes proposed NYSE Rules 7.35C(b)(2)(D) and (E)
because the Exchange cannot facilitate an auction if there is no
paired volume, and therefore, the Exchange's proposed rules do not
need to describe how an Indicative Match Price is determined if
there is no paired volume; (viii) removes provisions regarding the
use of extension logic from proposed NYSE Rule 7.35C; (ix) provides
additional justification for proposed Rule 7.35(e), which would
provide that DMM Auction Liquidity, certain DMM Orders, and Floor
Broker Interest entered during the Pre-Auction Freeze would be
eligible to participate in the applicable Auction; (x) provides
additional justification for ranking undisplayed DMM Auction
Liquidity as Priority 2--Display Orders; (xi) provides additional
justification for proposed NYSE Rules 7.35A(h)(3) and 7.35B(h)(3)
regarding DMM Participant Allocation of at-priced DMM Interest;
(xii) provides additional justification for canceling orders not
eligible to participate in a reopening following a halt or pause in
Exchange-listed securities; (xiii) removes proposed Rule
7.35A(d)(2)(v), which would have been new rule text relating to how
the Indication Reference Price could be determined for securities
that do not fall under proposed Rule 7.35A(d)(2)(A)(i)-(iv) and for
which there is limited publicly available pricing information; and
(xiv) amends Rule 7.37(b)(2) to specify that the Exchange would
create a separate allocation wheel for each Auction.
---------------------------------------------------------------------------

    The Commission is publishing this notice to solicit comments on
Amendment No. 3 from interested persons, and is approving the proposed
rule change, as modified by Amendment No. 3, on an accelerated basis.

II. Self-Regulatory Organization's Description of the Proposal, as
Modified by Amendment No. 3

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to (1) amend Rules 7.36 and 7.37 to add the
DMM as a Participant for trading of Exchange-listed securities on
Pillar; \6\ (2) amend Rule 7.31 to add Auction-Only Orders and make
related changes; (3) add new trading rules relating to auctions for
Pillar; (4) make conforming amendments to Rules 1.1, 7.11, 7.12, 7.16,
7.18, 7.31, 7.34, 7.36, and 7.37; and (5) amend the preambles on
current Exchange rules relating to their applicability to the Pillar
trading platform. This Amendment No. 3 supersedes Amendment Nos. 1 and
2 and the original filing in its entirety.\7\
---------------------------------------------------------------------------

    \6\ ``Participant'' is defined in Rule 7.36(a)(5) to mean, for
purposes of parity allocation, a Floor broker trading license (each,
a ``Floor Broker Participant'') or orders collectively represented
in the Exchange Book that have not been entered by a Floor broker
(``Book Participant'').
    \7\ This Amendment includes the substantive differences between
Amendment No. 2 and Amendment No. 1 regarding proposed Rule 7.35C
relating to how the Exchange would facilitate an auction if the DMM
is not available for one or more securities. As amended, the
Exchange proposes that Rule 7.35C would operate consistent with how
the Exchange would currently facilitate auctions, including that a
re-opening auction following a trading pause would not include
extension logic. In addition, Amendment No. 3 removes proposed Rule
7.35A(d)(2)(v), which would have been new rule text relating to how
the Indication Reference Price could be determined for securities
that do not fall under proposed Rule 7.35A(d)(2)(A)(i)-(iv) and for
which there is limited publicly-available pricing information
available. Finally, Amendment No. 3 amends Rule 7.37(b)(2) to
specify that the Exchange would create a separate allocation wheel
for each Auction.
---------------------------------------------------------------------------

    Currently, the Exchange trades UTP Securities on its Pillar trading
platform, subject to Pillar Platform Rules 1P-13P.\8\ In the next phase
of Pillar, the Exchange proposes to transition trading of Exchange-
listed securities to the Pillar trading platform.\9\ Once transitioned
to

Pillar, such securities will also be subject to the Pillar Platform
Rules 1P-13P.
---------------------------------------------------------------------------

    \8\ ``UTP Security'' is defined as a security that is listed on
a national securities exchange other than the Exchange and that
trades on the Exchange pursuant to unlisted trading privileges. See
Rule 1.1.
    \9\ The Exchange has announced that, subject to rule approvals,
the Exchange will begin transitioning Exchange-listed securities to
Pillar on August 5, 2019, available here: https://www.nyse.com/publicdocs/nyse/markets/nyse/Revised_Pillar_Migration_Timeline.pdf.
The Exchange will publish by separate Trader Update a complete
symbol migration schedule.
---------------------------------------------------------------------------

    As provided for under current Rule 103B, all Exchange-listed
securities are assigned a DMM, and when such securities transition to
trading on Pillar, the assigned DMM will continue to be responsible for
such securities. Accordingly, the Exchange proposes to amend the Pillar
rules to add the DMM as a Participant under the Pillar Platform Rules.
In addition, because the Exchange conducts auctions for Exchange-listed
securities, with this proposed rule change, the Exchange proposes
Pillar rules relating to auctions.
Overview
    DMM as Parity Participant. Under current Exchange rules, executions
in Exchange-listed securities are allocated based on parity by
individual participants. Pursuant to Rule 72(c)(ii), the individual
participants for purposes of share allocation in such executions are
each single Floor broker, the DMM, and orders collectively represented
in Exchange systems (referred to in Rule 72(c) as the ``Book
Participant''). In Pillar, executions in UTP Securities are similarly
allocated based on parity by individual participant, which are
currently individual Floor brokers (each, a ``Floor Broker
Participant'') and the Book Participant.\10\ The Exchange proposes that
when Exchange-listed securities transition to Pillar, executions of
Exchange-listed securities will continue to be allocated based on
parity by individual participants, which will include the DMM assigned
to a security as a Participant.
---------------------------------------------------------------------------

    \10\ See Rules 7.36 and 7.37.
---------------------------------------------------------------------------

    Auctions. Currently, auctions in Exchange-listed securities are
governed by a myriad of rules: Rule 15 (Pre-Opening Indications and
Opening Order Imbalance Information); Rule 115A (Orders at Opening);
Rule 116.40 (``Stopping'' stock on market-on-close orders); Rule 123C
(The Closing Procedures); and Rule 123D (Openings and Halts in Trading)
(collectively, the ``Current Auction Rules'').
    With the transition of Exchange-listed securities to Pillar, the
technology underpinning auctions on the Exchange would change, but
auctions for Exchange-listed securities would function largely the same
as under the Current Auction Rules, subject to specified differences,
described below. Specifically, DMMs would continue to be responsible
for facilitating openings, reopenings,\11\ and the close of trading, as
required by Rules 104(a)(2) and (3), and both Limit Orders priced
better than the auction price and Market Orders would continue to be
guaranteed to participate in such auctions.\12\ The Exchange also
proposes to continue disseminating the same order imbalance information
content in advance of auctions on the Exchange.
---------------------------------------------------------------------------

    \11\ The Exchange proposes that its Pillar rules would use the
term ``reopening'' rather than the hyphenated term ``re-opening.''
Accordingly, new proposed rules would use the term ``reopening,''
and in this filing, the Exchange proposes to replace the term ``re-
opening'' with the term ``reopening'' in Rules 7.11 and 7.31(c).
    \12\ See Rules 115A(a) and 123C(7).
---------------------------------------------------------------------------

    With the move to Pillar, the Exchange proposes to use standardized
Pillar terminology to describe auctions on the Exchange. Accordingly,
for Pillar auctions, the Exchange proposes the Rule 7.35 Series
(Auctions), which would be set forth under Rule 7P as proposed Rule
7.35 (General), proposed Rule 7.35A (DMM-Facilitated Core Open and
Trading Halt Auctions), proposed Rule 7.35B (DMM-Facilitated Closing
Auctions), and proposed Rule 7.35C (Exchange-Facilitated Auctions)
(collectively, the ``Pillar Auction Rules''), which would replace the
Current Auction Rules. The proposed rules would include new terminology
specific to the Exchange as well as text that is based on Pillar
terminology used by its affiliated exchanges that also operate
auctions, NYSE Arca, Inc. (``NYSE Arca'') and NYSE American LLC (``NYSE
American'').
    Except for specified differences described below, the Pillar
Auction Rules are substantively based on the Current Auction Rules.
However, the text for the Pillar Auction Rules would in many cases be
new to the Exchange as compared to the Current Auction Rules.
    The Exchange proposes to include a preamble to each of the Current
Auction Rules that would provide that each such rule would not be
applicable to trading on the Pillar trading platform. The Exchange
believes that this preamble will promote transparency in Exchange rules
that the Current Auction Rules would not be applicable to auctions on
Pillar, and is consistent with preambles on other Exchange rules that
specify that such rules are not applicable to trading on the Pillar
trading platform.
    Orders and Modifiers. Rule 13(c) specifies the Auction-Only Orders
currently available for auctions in Exchange-listed securities. Rule
7.31(c) defines Auction-Only Orders that the Exchange accepts in UTP
Securities, which are routed to the primary listing market. The
Exchange proposes to amend Rule 7.31(c) to specify in Pillar rules the
Auction-Only Orders that would be available for Exchange-listed
securities to participate in auctions on the Exchange. The Exchange
does not propose any differences to the order types that would be
available, but proposes to use Pillar terminology to describe these
order types.
    The Exchange further proposes to amend Rule 7.31 to specify which
order types would not be eligible to participate in an auction.
    Related Rule Changes. To address how auctions would impact other
Pillar rules and to support the transition of Exchange-listed
securities to Pillar, the Exchange proposes related rule changes to the
following Pillar Platform Rules 1.1 (Definitions), 7.11 (Limit Up--
Limit Down Plan and Trading Pauses in Individual Securities Due to
Extraordinary Market Volatility), 7.12 (Trading Halts Due to
Extraordinary Market Volatility), 7.16 (Short Sales), 7.18 (Halts),
7.32 (Order Entry), 7.34 (Trading Sessions), and 7.36 (Order Ranking
and Display).
    Updates to Rule Preambles. To support the transition of Exchange-
listed securities to trading on Pillar, the Exchange further proposes
to amend the preambles to certain current rules to remove references to
UTP Securities so that those preambles would provide that ``This Rule
is not applicable to trading on the Pillar trading platform.'' \13\
There are certain non-Pillar rules that would continue to be applicable
to trading of Exchange-listed securities on the Pillar trading
platform. For those rules, the Exchange does not propose to amend the
existing preamble.
---------------------------------------------------------------------------

    \13\ The Exchange proposes to make this change to Rules 4, 7,
12, 13, 14, 15, 15A, 19, 51, 52, 55, 56, 60, 61, 62, 67, 70, 71,
79A, 80C, 115A, 116, 123B, 123C, 123D, 128, 130, 131, 132, 133, 134,
135, 136, 137, 137A, 138, 139, 140, 141, 142, and 175-227. The
Exchange proposes that paragraph (d) of Rule 123D, which provides
for an Initial Listing Regulatory Halt, would continue to be
applicable. Accordingly, the preamble for that rule would provide
``[e]xcept for paragraph (d), this Rule is not applicable to trading
on the Pillar trading platform.''
---------------------------------------------------------------------------

Summary of Substantive Differences
    As noted above, when transitioning its trading platform for
Exchange-listed securities to Pillar, auctions on the Exchange will
continue to function largely the same as under the Current Auction
Rules. However, in moving to a new trading platform, the Exchange has
identified specified enhancements to how auctions would function.
Certain of these enhancements are available because the Exchange
proposes to avail

itself of existing Pillar functionality available on its affiliated
exchanges. Other enhancements are specific to how Exchange auctions
would function. These changes are described in greater detail below.
    The following provides a high-level summary of certain of the
substantive differences that the Exchange proposes to how its auctions
would function on Pillar as compared to how auctions function under the
Current Auction Rules:
     The Exchange proposes to determine the Official Closing
Price for Exchange-listed securities in the same manner as such price
is determined on NYSE Arca and NYSE American. Namely, if there is no
auction of a round-lot or more, the Official Closing Price would be
based on the most recent consolidated last-sale eligible trade, rather
than on the most recent last-sale eligible trade on the Exchange.
     The reference price for openings and reopenings would be
the most recent consolidated last-sale eligible trade after 9:30 a.m.
on a trading day, and if none, the Official Closing Price for the
security, rather than the last sale price on the Exchange.\14\
---------------------------------------------------------------------------

    \14\ All times in the Pillar Auction Rules are Eastern Times.
The Exchange proposes to amend Rule 1.1(d), the definition of Core
Trading Hours, to add that ``[a]ll times in the Pillar Platform
Rules are Eastern Time.'' With this proposed amendment, the Exchange
proposes that the remaining Pillar rules would not repeat the term
``Eastern Time'' next to time references and proposes to delete
references to that term in Rule 7.34.
---------------------------------------------------------------------------

     Auction Imbalance Information made available over the
Exchange's proprietary data feeds, which is referred to as Order
Imbalance Information under the Current Auction Rules, would be updated
every second (rather than in five-minute, one-minute, or five-second
intervals as under the Current Auction Rules), would begin for the open
at 8:00 a.m. rather than 8:30 a.m., and would continue to be published
until the applicable Auction begins. This would be new for the close as
currently, the Exchange stops publishing Order Imbalance Information at
4:00 p.m.
     Orders with immediate-or-cancel time-in-force instructions
would no longer be eligible to participate in opening or reopening
transactions and Primary Pegged Orders would no longer be eligible to
participate in the close.
     Any Floor broker interest represented orally at the close
must include a limit price, and would no longer be permitted to be
entered ``at the market,'' and Floor brokers, rather than the DMM,
would be responsible for electronically entering the details of such
orders for participation in the closing auction, subject to DMM
validation. Because, as noted above, the Exchange would continue
publishing Auction Imbalance Information until the security closes, any
such Floor broker oral interest would be included in the Auction
Imbalance Information once it has been electronically entered.
     The Exchange would publish its Regulatory Closing
Imbalance, referred to as the Mandatory MOC/LOC Imbalance Publication
under the Current Auction Rules, at the specified time, regardless of
whether a security is halted at that time.
     During a halt or pause in Exchange-listed securities,
orders not eligible to participate in the reopening would be cancelled
rather than kept on the Exchange Book.
     If the Exchange facilitates an Auction, such auction would
continue to be subject to price limitations and not all orders would be
guaranteed to participate, as provided for under the Current Auction
Rules, but the Exchange would determine how to price such auction based
on functionality available for electronic auctions on NYSE Arca and
NYSE American.
Proposed Amendments to Rule 1.1 (Definitions)
    To support DMMs and auctions on Pillar, the Exchange proposes to
amend Rule 1.1 of the Pillar Platform Rules to include additional
definitions.
    First, the Exchange proposes to define the terms ``Designated
Market Maker,'' ``DMM,'' and ``DMM unit'' in proposed Rule 1.1.
Specifically, the term ``DMM'' would mean an individual member,
officer, partner, employee or associated person of a DMM unit who is
approved by the Exchange to act in the capacity of a DMM. This proposed
rule text is based on current Rule 2(i) without any differences. The
term ``DMM unit'' would mean a member organization or unit within a
member organization that has met the requirements of Rules 98 and 104.
This proposed rule text is based on the first sentence of Rule 2(j)
without any differences. The Exchange does not propose text based on
the second sentence of Rule 2(j) because the Pillar Platform Rules do
not use the term ``DMM organization'' or ``DMM member organization.''
    Second, the Exchange proposes to define the term ``Direct Listing''
to mean a security that is listed under Footnote (E) to Section 102.01B
of the Listed Company Manual. This type of listing is currently
referenced in Rule 15(c)(1)(D) and Rule 104(a)(2) in connection with
obligations relating to the opening transaction for such listings. As
discussed below, the Exchange proposes to move text relating to that
type of listing from those rules to the Pillar Auction Rules and
believes that it would promote clarity and transparency in Exchange
rules to use a single defined term to reference this type of listing.
The Exchange proposes to use the term ``Direct Listing'' as this is how
this type of listing has been described publicly, and therefore is a
familiar term to member organizations and the public.
    Third, the Exchange proposes to define the term ``Initial Public
Offering'' or ``IPO'' as having the same meaning as that term is used
in Section 12(f)(1)(G) of the Act. The term ``initial public offering''
is currently referenced in Rule 15(c)(1)(B) and the Exchange proposes
to use this term in more than one place in the Pillar Auction Rules.
The Exchange believes it would promote clarity and transparency to
include this definition in Exchange rules. The Exchange further
believes that the cross reference to Section 12(f)(1)(G) of the Act
provides clarity of the scope of the term IPO as used in Exchange
Pillar rules.
    Finally, the Exchange proposes to add the term ``Official Closing
Price'' to Rule 1.1. Rule 123C(1)(e) currently defines the term
``Official Closing Price.'' For Pillar, similar to NYSE Arca and NYSE
American, the Exchange proposes to include that definition in Rule 1.1
rather than the Pillar Auction Rules. The Exchange further proposes
that the Exchange's proposed definition of Official Closing Price would
be based on the NYSE Arca Rule 1.1 and NYSE American Rule 1.1E
definitions of Official Closing Price rather than the Rule 123C(1)(e)
definition of that term.
    The NYSE Arca definition has four substantive differences from the
current NYSE Rule 123C(1)(e) definition (the NYSE American definition
has three substantive differences from the current NYSE definition).
     First, the NYSE Arca definition provides for how the
Official Closing Price is determined for a security listed on NYSE Arca
that is a Derivative Securities Product, which is a defined term on
NYSE Arca that has the same meaning as the term ``Exchange Traded
Product'' under Exchange Rules, and that has not had a closing auction
of one round lot or more on a trading day.\15\ Because the Exchange now
has rules permitting listing of Exchange Traded Products,\16\ the
Exchange proposes to include text based on NYSE Arca Rule

1.1(ll)(1)(B) in proposed Rule 1.1(s)(1)(B). With this proposed
difference, for Exchange Traded Products that list on the Exchange, the
Exchange would determine an Official Closing Price for such securities
in the same manner as determined by NYSE Arca for such securities.
---------------------------------------------------------------------------

    \15\ See Rule 1.1(i) (defining the term ``Exchange Traded
Product'' to mean a security that meets the definition of
``derivative securities product'' in Rule 19b-4(e) under the Act).
    \16\ See Rules 5P and 8P.
---------------------------------------------------------------------------

     Second, under NYSE Arca Rule 1.1(ll)(1)(C) and NYSE
American Rule 1.1E(gg)(2)(C), if NYSE Arca or NYSE American cannot
determine the Official Closing Price under subparagraphs (A) or (B) of
those Exchange's respective rules, the Official Closing Price will be
the most recent consolidated last-sale eligible trade during Core
Trading Hours on that trading day. By contrast, under NYSE Rule
123C(1)(e)(i), if the Exchange does not have a closing transaction of a
round lot or more, the Official Closing Price will be the most recent
last-sale eligible trade in such security on the Exchange on that
trading day. The Exchange proposes that on Pillar, the Exchange will
follow the NYSE Arca and NYSE American manner of determining the
Official Closing Price if there is no closing transaction of a round
lot or more. As proposed, if there is not a closing auction of a round
lot or more, the Official Closing Price would be the most recent
consolidated last-sale eligible trade during Core Trading Hours on that
trading day. The Exchange believes that this proposed substantive
difference to Exchange rules will promote consistency in how an
Official Closing Price is determined across affiliated exchanges, and
is more likely to represent a recent valuation in a security if an
exchange other than NYSE reports a last-sale eligible trade at a later
time than the Exchange.
     Third, current Rule 7.31(a)(1)(B)(i) provides that the
Exchange would use the Official Closing Price for purposes of
determining Trading Collars for Market Orders. For UTP Securities, the
official closing price as determined by the primary listing market is
used as the Official Closing Price for this purpose. Proposed Rule
1.1(s)(5) is based on NYSE Arca Rule 1.1(s)(5) and NYSE American Rule
1.1(gg)(5) and would specify that for purposes of Trading Collars for
Market Orders under Rule 7.31(a)(1)(B)(i) for UTP Securities only, the
Official Closing Price would be the official closing price disseminated
by the primary listing market for that security via a public data feed
on a trading day and that if the primary listing market does not
disseminate an official closing price on a trading day, the Official
Closing Price would be the most recent consolidated last sale eligible
trade during Core Trading Hours on that trading day. If there were no
consolidated last sale eligible trades during Core Trading Hours on
that trading day, the Official Closing Price would be the prior trading
day's Official Closing Price.
     Finally, NYSE Arca Rule 1.1(ll) and NYSE American Rule
1.1(gg) provide that an Official Closing Price may be adjusted to
reflect a corporate action or a correction to a closing price, as
disseminated by the primary listing market for the security. Proposed
Rule 1.1(s)(6) is based on these NYSE Arca and NYSE American rules and
would specify that the Exchange would similarly adjust an Official
Closing Price to reflect a corporate action in a security or a
correction to a closing price.
    The Exchange also proposes non-substantive differences to Rule 1.1
to re-number the existing definitions so that the above-described new
definitions can be included in alphabetical order in Rule 1.1. The
Exchange also proposes a non-substantive amendment to Rule 1.1(q)
(proposed to be Rule 1.1(t)) to fix a typographical error to add a
quotation mark after the term ``Best Offer'' in the last sentence of
that definition.
Proposal To Add the DMM as a Participant Under Pillar Platform Rules
    As noted above, once Exchange-listed securities transition to
Pillar, such securities will be subject to the Pillar Platform Rules,
including Rules 7.36 (Order Ranking and Display) and 7.37 (Order
Execution and Routing). Accordingly, orders in Exchange-listed
securities will be eligible for Setter Priority, as described in Rule
7.36(h) and will be allocated on parity, as provided for in Rule
7.37(b).
    Because DMMs are not assigned to UTP Securities, Rules 7.36 and
7.37 do not currently address the DMM participation in allocation. To
support the transition of Exchange-listed securities to Pillar, the
Exchange proposes to amend these rules to reflect that the DMM would be
included in the allocation process for securities assigned to that DMM.
    First, the Exchange proposes to amend Rule 7.36(a)(5), which
defines the term ``Participant,'' to add the DMM to this definition.
The proposed new rule would provide that (new text underlined):

    ``Participant'' means for purposes of parity allocation, a Floor
broker trading license (each, a ``Floor Broker Participant''), the
DMM assigned to the security (``DMM Participant''), or orders
collectively represented in the Exchange Book that have not been
entered by a Floor broker or DMM (``Book Participant'').

    This proposed rule text is based in part on Rule 72(c)(ii), which
provides that the DMM constitutes an individual participant for
purposes of share allocation in a security that is assigned to such
DMM.
    Next, the Exchange proposes to amend Rule 7.37(b)(7), which is
currently designated as ``Reserved,'' to delete that term and add:
``DMM Participant Allocation. An Allocation to the DMM Participant will
be allocated to orders that comprise the DMM Participant by working
time.'' With this proposed rule change, if a DMM Participant has more
than one order at a price and receives an allocation, that parity
allocation would be allocated among the DMM orders by working time
associated with such orders. This proposed rule text is new for Pillar
and uses Pillar terminology to provide transparency regarding how
multiple orders from the DMM Participant would be allocated among those
orders.
    At this time, the Exchange is not proposing to move other rules
governing DMMs to the Pillar Platform Rules, such as Rules 98
(Operation of a DMM Unit), 103 (Registration and Capital Requirements
of DMMs and DMM Units), 103B (Security Allocation and Reallocation),
and 104 (Dealings and Responsibilities of DMMs). Accordingly, these
current rules, and any other current rule that does not include a
preamble that such rule is not applicable to trading on the Pillar
trading platform, will continue to be applicable to DMMs once Exchange-
listed securities transition to the Pillar trading platform.
Proposed Amendments to Rule 7.31 (Orders and Modifiers)
    Rule 7.31 sets forth the orders and modifiers that are available
for trading on Pillar on the Exchange. Because the Exchange currently
trades only UTP Securities, this rule does not address order types that
would participate in an auction on the Exchange. For example, Rule
7.31(c) defines Auction-Only Orders, but that rule currently provides
that these orders are only to be routed. The Exchange proposes to amend
Rule 7.31 to: (1) Provide that Auction-Only Orders would be available
for auctions on the Exchange for Exchange-listed securities; (2) add
additional Auction-Only Orders that are based on functionality
currently available under Rules 13 and 70.25; and (3) specify which
existing orders and modifiers would not be eligible to participate in
an auction.

    Auction-Only Orders for Auction-Eligible Securities.\17\ Under
current Rule 7.31(c), which defines Auction-Only Orders, if the
Exchange receives an Auction-Only Order in a UTP Security, the Exchange
routes such order directly to the primary listing market for that
security. Therefore, Rule 7.31(c) currently describes an Auction-Only
Order as a Limit Order or Market Order that is only to be routed
pursuant to Rule 7.34.
---------------------------------------------------------------------------

    \17\ See discussion infra regarding proposed Rule 7.35(a) and
definitions for purposes of Auctions, including the terms ``Core
Open Auction,'' ``Trading Halt Auction,'' ``Closing Auction,'' and
``Auction-Eligible Securities.''
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 7.31(c) to reflect the
difference between Auction-Only Orders for Exchange-listed securities,
which will be auction eligible when they transition to Pillar, and
Auction-Only Orders for UTP Securities, which are routed to the primary
listing market. As proposed, Rule 7.31(c) would provide that an
Auction-Only Order is a Limit Order or Market Order that is to be
traded only in an auction pursuant to the Rule 7.35 Series (for
Auction-Eligible Securities) \18\ or routed pursuant to Rule 7.34 (for
UTP Securities). This proposed rule text is based on NYSE Arca Rule
7.31-E(c) and NYSE American Rule 7.31E(c) with a non-substantive,
clarifying difference to specify that such orders in Auction-Eligible
Securities would be traded in an auction pursuant to the Rule 7.35
Series and that such orders in UTP Securities would be routed pursuant
to Rule 7.34. Rule 7.31(c) would further provide that MOO, MOC, LOC,
and Closing IO Orders (described below) would not be available to DMMs.
This proposed rule change is based on Rule 104(b)(vi) without any
substantive differences.
---------------------------------------------------------------------------

    \18\ See discussion infra regarding the proposed Rule 7.35
Series.
---------------------------------------------------------------------------

    This proposed amendment would also add to the definition of
Auction-Only Orders additional order types that are designated for an
auction and that are currently available for Exchange-listed
securities. First, because d-Quotes currently can be designated to
exercise discretion only in auctions, the Exchange proposes to include
in the definition of Auction-Only Orders how discretionary instructions
would function on Pillar auctions.\19\ Second, the Exchange proposes to
add the Closing Imbalance Offset Order to the Pillar rules. The
Exchange also proposes non-substantive differences to distinguish
Auction-Only Orders that would participate in the Core Open and Trading
Halt Auctions from Auction-Only Orders that would participate in the
Closing Auction.\20\
---------------------------------------------------------------------------

    \19\ See Rule 70.25(a)(ii).
    \20\ As described below, the Exchange proposes to define the
terms Core Open Auction, Trading Halt Auction, and Closing Auction
in proposed Rule 7.35(a).
---------------------------------------------------------------------------

    Core Open and Trading Halt Auctions. Proposed Rule 7.31(c)(1) would
describe the Auction-Only Orders designated for an opening or reopening
auction that the Exchange would accept before the Core Trading Session
begins (for the Core Open Auction) or during a halt or pause (for a
Trading Halt Auction). As proposed, any quantity of such orders that
are not traded in the designated auction would be cancelled. This
proposed text does not introduce new functionality, but uses Pillar
terminology relating to auctions. The Exchange proposes to move the
definitions for a Limit-on-Open Order (``LOO Order'') and a Market-on-
Open Order (``MOO Order'') as subparagraphs under Rule 7.31(c)(1)
without any changes.\21\
---------------------------------------------------------------------------

    \21\ Current Rule 7.31(c)(1) relating to LOO Orders would be
renumbered as Rule 7.31(c)(1)(A) and current Rule 7.31(c)(2)
relating to MOO Orders would be renumbered as Rule 7.31(c)(1)(B).
---------------------------------------------------------------------------

    Currently, under Rule 70.25(a)(ii), a d-Quote can include an
instruction to participate in the opening transaction only, meaning
that the discretionary instructions for an e-Quote would be live for
the opening transaction only.\22\ The Exchange proposes to replicate
this d-Quote behavior on Pillar without any substantive differences and
proposes to describe it as an Auction-Only Order that would be called
the ``Opening D Order.''
---------------------------------------------------------------------------

    \22\ The Exchange recently amended its rules to establish D
Orders on the Pillar trading platform, which are based on d-Quotes
under Rule 70.25, as well as to establish a Last Sale Peg Modifier
and Yielding Modifier. See Securities Exchange Act Release Nos.
84806 (December 12, 2018), 83 FR 64913 (December 18, 2018) (Notice
of filing) and 85158 (February 15, 2019), 84 FR 5794 (February 22,
2019) (Approval Order) (SR-NYSE-2018-52). The Exchange will be
announcing by Trader Update the implementation date for D Orders,
the Last Sale Peg Modifier (and related Last Sale Peg Order), and
the Yielding Modifier. Because these order types and modifiers will
be available when the Exchange transitions Exchange-listed
securities to Pillar, this proposed rule change includes how those
orders would function in auctions.
---------------------------------------------------------------------------

    Proposed Rule 7.31(c)(1)(C) would provide that an Opening D Order
is a Limit Order to buy (sell) with an instruction to exercise
discretion in the Core Open Auction or Trading Halt Auction up (down)
to a designated undisplayed price. Just as d-Quotes are available only
to Floor brokers, proposed Rule 7.31(c)(1)(C)(i) would provide that an
Opening D Order may be entered by a Floor broker only. Because an
Opening D Order would cancel if it does not trade in the designated
auction, this order type would not be eligible to trade in continuous
trading. This proposed rule text is based on current functionality
without any substantive differences, but uses Pillar terminology.
    Because an Opening D Order could be entered for a UTP Security,
proposed Rule 7.31(c)(1)(C)(ii) would provide that based on the
instruction of the Floor broker, an Opening D Order in a UTP Security
would be routed to the primary listing market as either a MOO or a LOO
Order. This is consistent with the treatment of Auction-Only Orders
today in UTP securities, which are routed to the primary listing market
for that security.
    Closing Auctions. Proposed Rule 7.31(c)(2) would describe the
Auction-Only Orders designated for a closing auction and proposes that
the Exchange would begin accepting such Auction-Only Orders when it
begins accepting orders for a trading day as provided for in Rule
7.34(a)(1).\23\ The Exchange proposes to move the definitions for a
Limit-on-Close Order (``LOC Order'') and a Market-on-Close Order (``MOC
Order'') as subparagraphs under Rule 7.31(c)(2) without any
changes.\24\
---------------------------------------------------------------------------

    \23\ Rule 7.34(a)(1) provides that the Exchange will begin
accepting orders 30 minutes before the Early Trading Sessions begins
at 7:00 a.m.
    \24\ Current Rule 7.31(c)(3) relating to LOC Orders would be
renumbered as Rule 7.31(c)(2)(A) and current Rule 7.31(c)(4)
relating to MOO Orders would be renumbered as Rule 7.31(c)(2)(B).
---------------------------------------------------------------------------

    Similar to d-Quotes for opening transactions, Rule 70.25(a)(ii)
provides that a d-Quote can include an instruction to participate in
the closing transaction only, meaning that the discretionary
instructions for an e-Quote would be live only for an auction. Because
the discretionary instructions are live only for an auction, the
Exchange proposes to describe this functionality for Pillar as part of
Auction-Only Orders. As proposed, a Closing D Order would be defined in
Rule 7.31(c)(2)(C) as a Limit Order to buy (sell) with an instruction
to exercise discretion in the Closing Auction up (down) to a designated
undisplayed price. As with d-Quotes, proposed Rule 7.31(c)(2)(C)(i)
would provide that a Closing D Order may be entered by a Floor broker
only.
    Proposed Rule 7.31(c)(2)(C)(ii) would provide that, on arrival, a
Closing D Order would be processed as a Limit Order and may trade or
route prior to the Closing Auction. This proposed rule text is based on
how a d-Quote with instructions to participate in the closing
transaction only currently operate, as such d-Quotes are eligible to
trade during continuous trading prior to the

closing transaction as a straight e-Quote and the discretionary
instructions of such a d-Quote are active only for an auction.
    Proposed Rule 7.31(c)(2)(C)(iii) would provide that a Closing D
Order in an Auction-Eligible Security may include a Yielding Modifier.
This would be new functionality on Pillar, as currently, a d-Quote
cannot be combined with a g-Quote. As proposed, until the Closing
Auction, a Closing D Order with the proposed Yielding Modifier would be
processed as a Yielding Order. The Exchange further proposes that a
Closing D Order with a Yielding Modifier would be ranked Priority 4--
Yielding Orders.\25\ When executing in the Closing Auction, a Closing D
Order with a Yielding Modifier would trade at its undisplayed
discretionary price, but would yield to other non-Yielding orders if
such discretionary price is the same as the Auction Price.\26\
---------------------------------------------------------------------------

    \25\ See Rule 7.36(e)(4) (Orders ranked Priority 4--Yielding
Orders have fourth priority).
    \26\ As described below, the Exchange proposes to define the
term ``Auction Price'' in proposed Rule 7.35(a).
---------------------------------------------------------------------------

    Proposed Rule 7.31(c)(2)(C)(iv) would provide that based on the
instruction of the Floor broker, a Closing D Order in a UTP Security
would be routed to the primary listing market as either a MOC or LOC
Order. This is consistent with the treatment of Auction-Only Orders
today in UTP securities, which are routed to the primary listing market
for that security.
    To complete the list of Auction-Only Orders that would be available
on the Exchange when it introduces auctions on Pillar for Exchange-
listed securities, the Exchange proposes to amend Rule 7.31(c) to
include the proposed Closing Imbalance Offset Order (``Closing IO
Order''), which is based on the Closing Offset Order (``CO Order'')
currently available for Exchange-listed securities.\27\ Proposed Rule
7.31(c)(2)(D) would provide that a Closing IO Order is a Limit Order to
buy (sell) in an Auction-Eligible Security that is to be traded only in
a Closing Auction.
---------------------------------------------------------------------------

    \27\ See Rule 13(c)(1).
---------------------------------------------------------------------------

    Proposed Rule 7.31(c)(2)(D)(i) would further provide that a Closing
IO Order would participate in a Closing Auction only if: (i) There is
an Unpaired Quantity (a term that will be defined in proposed Rule
7.35(a), described below) in the security on the opposite side of the
market from the Closing IO Order after taking into account all other
orders eligible to trade at the auction price; and (ii) the limit price
of the Closing IO Order to buy (sell) is at or above (below) the price
of the Closing Auction. This text is based on Rule 13(c)(1)(i) and
(ii), which describe when a CO Order may participate in the Closing
Auction, with changes to reflect Pillar terminology.
    Proposed Rule 7.31(c)(2)(D)(ii) would provide that the working
price of a Closing IO Order to buy (sell) would be adjusted to be equal
to the price of the Closing Auction, provided that the working price of
the Closing IO Order would not be higher (lower) than its limit price.
This proposed text would add further specificity to the operation of
Closing IO Order and is based on Rule 13(c)(1)(iii) which provides that
a CO Order will participate in the Closing Auction if its limit price
is at or within the price of the Closing Auction. The Exchange proposes
to specify the ranking and allocation of the proposed Closing IO Orders
in proposed Rule 7.35B, described below.
    Orders Not Eligible to Participate in an Auction. The Exchange
proposes that unless otherwise specified, orders and modifiers
described in Rule 7.31 would be eligible to participate in an Auction.
The Exchange proposes that the following order types would not be
eligible to participate in an Auction:
     Rule 7.31(b)(2) would be amended to provide that a Limit
Order designated IOC would not be eligible to participate in any
Auctions. This proposed rule is based on NYSE Arca Rule 7.31-E(b)(2)
and NYSE American Rule 7.31E(b)(2) with a non-substantive difference to
capitalize the term ``Auctions,'' which is a defined term described
below in proposed Rule 7.35(a)(1). This proposed rule change would be a
substantive difference on the Exchange, as currently, specified orders
designated IOC are eligible to participate in an opening or reopening
auction.\28\ The Exchange believes that the proposed Pillar rule would
standardize the treatment of Limit IOC Orders across affiliated
exchanges. In addition, the Exchange believes that cancelling such
orders on arrival rather than holding them for an auction is consistent
with the instruction of such orders to cancel if not immediately
executable.
---------------------------------------------------------------------------

    \28\ See Rule 13(b)(2)(D) and (E) (specifying which IOC orders
entered before the Exchange opening or during a trading halt will be
held for the opening or reopening, respectively).
---------------------------------------------------------------------------

     Rule 7.31(d)(2) would be amended to provide that Non-
Displayed Limit Orders would not participate in any Auctions. This
proposed rule is based on NYSE Arca Rule 7.31-E(d)(2) and NYSE American
Rule 7.31E(d)(2) with a non-substantive difference to capitalize the
term Auctions. This proposed rule is also consistent with Rule
13(d)(2)(D), which provides that Non-Displayed Reserve Orders shall not
participate in manual executions, which means that they are not
eligible to participate in any auctions under current rules.
     Rule 7.31(d)(3) would be amended to provide that Mid-Point
Liquidity Orders (``MPL Order'') would not participate in any Auctions.
This proposed rule is based on NYSE Arca Rule 7.31-E(d)(3) and NYSE
American Rule 7.31E(d)(3) with a non-substantive difference to
capitalize the term Auctions. This proposed rule text is also based in
part on Rule 13(d)(1)(A), which provides that MPL Orders are not
eligible for openings, reopenings, or closing transactions.
     Rule 7.31(e)(2)(A) would be amended to provide that ALO
Orders may participate in Auctions, but the ALO designation would be
ignored and that an ALO Order that has not traded in an Auction would
be assigned a working price and display price pursuant to Rule
7.31(e)(2)(B). This proposed rule is based on NYSE Arca Rule 7.31-
E(e)(2)(A) with a non-substantive difference to capitalize the term
Auction. This proposed rule text is also based in part on Rule
13(e)(1)(A), which provides that an order designated ALO may
participate in openings, reopenings, or closings, but the ALO
designation shall be ignored.
     Rule 7.31(h)(4) would be amended to provide that Non-
Displayed Primary Pegged Orders would not participate in any Auctions.
This proposed rule is based on NYSE American Rule 7.31E(h) with a non-
substantive difference that on the Exchange, this text would be
specific to Non-Displayed Primary Pegged Orders, which is the only type
of non-displayed Pegged Order available on the Exchange. This proposed
rule is also based in part on how pegging interest currently functions
on the Exchange. Currently, because pegging interest is an e-Quote, it
may be designated as a Non-Display Reserve e-Quote pursuant to Rule
70(b)(ii) and (f)(ii). In such case, this non-displayed pegging
interest would not participate in openings, re-openings, or closings.
Accordingly, this proposed rule text is based on current functionality.
     Rule 7.31(i)(2) would be amended to provide that orders
marked with a Self-Trade Prevention (``STP'') modifier would not be
prevented from interacting during any Auction. This proposed rule is
based on the last sentence of NYSE Arca Rule 7.31-E(i)(2) and the last
sentence of NYSE American Rule 7.31E(i)(2) with a non-substantive
difference to capitalize the term Auction. This proposed rule text is
also based on the fourth paragraph of Rule 13(f)(3)(B), which provides
that STP modifiers will not be active and will be

ignored for opening, re-opening, and closing transactions.
     Rule 7.31(i)(4) would be amended to provide that a Last
Sale Peg Order would not be eligible to participate in any Auctions.
This functionality would be new on Pillar. The Exchange believes that
because orders would be included in an Auction at the limit price of
the order (as discussed below in connection with proposed Rule
7.35(b)), processing a Last Sale Peg Order in an Auction at its limit
price would defeat the purpose of such order, which is to assist member
organizations in their compliance with the ``safe harbor'' provisions
of Rule 10b-18 under the Act (``Rule 10b-18'') for issuer
repurchases.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 240.10b-18.
---------------------------------------------------------------------------

    The Exchange proposes two additional changes to Rule 7.31. First,
the Exchange proposes to amend Rule 7.31(a)(2)(B), relating to Limit
Order Price Protection.\30\ Currently, the rule provides that a Limit
Order entered before the Core Trading Session that becomes eligible to
trade in the Core Trading Session will become subject to Limit Order
Price Protection when the Core Trading Session begins. With this
functionality, orders not yet eligible to trade are not rejected on
arrival, but rather are evaluated for Limit Order Price Protection when
they become eligible to trade. The Exchange proposes to amend this
existing rule text to specify that it would be applicable to UTP
Securities only.
---------------------------------------------------------------------------

    \30\ NYSE Arca and NYSE American have each filed an immediately-
effective proposed rule change to make similar changes to how Limit
Order Price Protection operates on those exchanges. See Securities
Exchange Act Release Nos. 85265 (March 7, 2019), 84 FR 9175 (March
13, 2019) (SR-NYSEArca-2019-08) (Notice of filing and immediate
effectiveness of proposed rule change) and 85272 (March 8, 2019), 84
FR 9403 (March 14, 2019) (SR-NYSEAmer-2019-04) (Notice of filing and
immediate effectiveness of proposed rule change) (``NYSE Arca and
NYSE American Filings'').
---------------------------------------------------------------------------

    Because an order in an Auction-Eligible Security would be subject
to an auction process when it becomes eligible to trade, the Exchange
proposes different treatment for such securities. In that auction
process, a Limit Order priced better than the Auction Price would be
guaranteed to participate in the applicable Auction.\31\ If a security
opens or reopens on a quote, it is because the Exchange has not
received orders that can trade. Accordingly, the Exchange does not
believe that orders in Auction-Eligible Securities would need to be
subject to Limit Order Price Protection when they become eligible to
trade. Accordingly, the Exchange proposes to amend Rule 7.31(a)(2)(B)
to add that a Limit Order in an Auction-Eligible Security entered
before the Core Trading Session or during a trading halt or pause
(i.e., periods when the Exchange is not open for trading in such
securities), would not be subject to Limit Order Price Protection.
---------------------------------------------------------------------------

    \31\ See discussion infra regarding proposed Rule 7.35A(h)
regarding allocation of orders in an Auction.
---------------------------------------------------------------------------

    Second, the Exchange proposes to amend Rule 7.31(h)(2) to provide
that a Primary Pegged Order would not be eligible to participate in the
Closing Auction.\32\ The Exchange believes that excluding Primary
Pegged Orders from participating in the Closing Auction would
streamline order processing in the Closing Auction. As described below,
orders would participate in the Closing Auction at their limit price,
which would likely be a different price from where a Primary Pegged
Order is displayed immediately prior to the Closing Auction. Because a
Primary Pegged Order, which intraday is pegged to display to the same-
side PBBO, would likely need to be repriced to its limit price in order
to participate in the Closing Auction, the Exchange believes that
making such orders ineligible to participate in the Closing Auction
would streamline order processing when transitioning to the Closing
Auction.
---------------------------------------------------------------------------

    \32\ This proposed rule change is based on a recent amendment to
NYSE Arca Rule 7.31-E(h)(2), which similarly provides that Primary
Pegged Orders on that exchange will not participate in a closing
auction. See Securities Exchange Act Release No. 85265 (March 7,
2019), 84 FR 9175 (March 13, 2019) (SR-NYSEArca-2019-08) (Notice of
filing and immediate effectiveness of proposed rule change).
---------------------------------------------------------------------------

Proposed Rule 7.35 (General)
    Because there would be multiple rules governing auctions that each
reference Rule ``7.35,'' the Exchange proposes to add a sub-heading
above current Rule 7.35 that states ``Rule 7.35 Series. Auctions.'' The
Exchange then proposes to amend the heading for Rule 7.35 to delete the
term ``Reserved'' and rename it ``General.''
    Proposed Rule 7.35 would set forth the general rules for auctions
on the Exchange. As proposed, Rule 7.35 would be applicable to all
auctions on the Exchange.
    Definitions. Proposed Rule 7.35(a) would set forth definitions that
would be used for purposes of Rule 7P. The Exchange proposes to set
forth the definitions in alphabetical order in the rule text, but will
describe them out of alphabetical order in this filing to provide
context for definitions that reference other definitions.
    Proposed Rule 7.35(a)(1) would provide that the term ``Auction''
would refer to the process for opening, re-opening, or closing of
trading of Auction-Eligible Securities on the Exchange, which could
result in either a trade or a quote. The Current Auction Rules use
varying terms, including referencing an opening, re-opening, or closing
``transaction.'' For Pillar, the Exchange proposes that the term
``Auction'' would mean any action that results in the opening,
reopening, or closing of trading, which could result in a trade or a
quote, or in the case of the close of trading, no action.\33\ For
specific Auctions, the Exchange proposes to use terms based on NYSE
Arca Rule 7.35-E and NYSE American 7.35E:
---------------------------------------------------------------------------

    \33\ Currently, if there is no interest for a closing
transaction, the DMM is not required to take any action on such
security. Because the Exchange does not have any trading after 4:00
p.m., the Exchange does not publish a quote for such security if
there is no closing transaction. The Exchange will disseminate an
Official Closing Price for such security that is determined based on
Rule 123C(1)(e)(i)--(iii), or on Pillar, under proposed Rule 1.1(s).
---------------------------------------------------------------------------

     Proposed Rule 7.35(a)(1)(A) would provide that ``Core Open
Auction'' means the Auction that opens trading at the beginning of the
Core Trading Session.\34\ This proposed term would replace use of the
terms ``opening'' and ``opening transaction'' as used in the Current
Auction Rules.
---------------------------------------------------------------------------

    \34\ As described below, the Exchange proposes to amend Rule
7.34(a)(2) relating to the Core Trading Session. The term ``Core
Trading Hours'' means ``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.'' See Rule 1.1.
---------------------------------------------------------------------------

     Proposed Rule 7.35(a)(1)(B) would provide that ``Trading
Halt Auction'' means the Auction that reopens trading following a
trading halt or pause. This proposed term would replace use of the
terms ``reopening'' or ``reopening transaction'' as used in the Current
Auction Rules.
     Proposed Rule 7.35(a)(1)(C) would provide that ``Closing
Auction'' means the Auction that closes trading at the end of the Core
Trading Session. This proposed term would replace use of the terms
``close,'' ``closing,'' and ``closing transaction'' as used in the
Current Auction Rules.
     Proposed Rule 7.35(a)(1)(D) would provide that ``IPO
Auction'' means the Core Open Auction for the first day of trading on
the Exchange of a security that is an IPO. This definition would be new
for Pillar and is based on references to IPOs in the Current Auction
Rules.
     Proposed Rule 7.35(a)(1)(E) would provide that ``Direct
Listing Auction'' means the Core Open Auction for the first day of
trading on the Exchange of a security that is a Direct Listing. This
definition would be new for Pillar and

is based on the Exchange's listing rules that provide for a Direct
Listing, as described above.
    Proposed Rule 7.35(a)(2) would provide that the term ``Auction-
Eligible Security'' would mean all securities for which the Exchange is
the primary listing market. This proposed definition is based on NYSE
American Rule 7.35E(a)(1), which also defines the term ``Auction-
Eligible Security.'' Because the Exchange does not conduct Auctions in
UTP Securities, the Exchange proposes that this definition would be
applicable to Exchange-listed securities only.
    Proposed Rule 7.35(a)(3) would provide that the term ``Auction
Imbalance Freeze'' means the period that begins before the scheduled
time for an Auction. This proposed definition is based in part on NYSE
Arca Rule 7.35-E(a)(3) and NYSE American Rule 7.35E(a)(3). Because, as
described below, there will be an Auction Imbalance Freeze for the
Closing Auction only, the Exchange will set forth the details regarding
such freeze in proposed Rule 7.35B.
    Proposed Rule 7.35(a)(4) would provide that the term ``Auction
Imbalance Information'' means the information that is disseminated by
the Exchange for an Auction. This proposed definition is based in part
on NYSE Arca Rule 7.35-E(a)(4) and NYSE American Rule 7.35E(a)(4),
which also use this term. While the Exchange proposes to use the same
term as NYSE Arca and NYSE American, the content of the Auction
Imbalance Information that would be disseminated by the Exchange would
not be based on NYSE Arca or NYSE American Pillar rules. Instead, the
Exchange proposes to continue disseminating the same content for its
Auction Imbalance Information as under the Current Auction Rules, which
is described in Rule 15(g) as ``Opening Order Imbalance Information,''
in Rule 123C(5) as ``Publication of Mandatory MOC/LOC and Information
Imbalances,'' and in Rule 123C(6) as ``Order Imbalance Information Data
Feed.'' In the Pillar Auction Rules, the Exchange proposes to use
standardized Pillar terminology, as defined below, to describe such
information.
    The following are proposed defined terms that are used for Auction
Imbalance Information under the Pillar Auction Rules:
     Proposed Rule 7.35(a)(5) would define the term ``Auction
Price'' as the price at which an Auction is conducted. This would be a
new term in the Pillar Auction Rules and is based in part on the use of
the term ``opening or reopening price'' in Rule 115A(a)(1) and use of
the term ``closing price'' in Rule 123C(7).
    [cir] Proposed Rule 7.35(a)(5)(A) would provide that a buy (sell)
order is ``better-priced'' if it is priced higher (lower) than the
Imbalance Reference Price or the Auction Price. This proposed
definition is based in part on the term ``Better Priced'' as defined in
Rule 123C(1)(a) relating to the close.\35\ In the Pillar Auction Rules,
the Exchange proposes to use the term ``better-priced'' for all
Auctions.\36\ The rule would further provide that Market, MOO, and MOC
Orders would be better-priced orders unless such orders have been
ranked as a Priority 2--Display Order during a Short Sale Period as
provided for in Rule 7.16(f). This proposed rule text is based in part
on Rule 115A(a)(1)(A), which provides that Market Orders and MOO Orders
are guaranteed to participate in an opening or reopening transaction,
and Rule 123C(7)(a), which provides that MOC Orders are guaranteed to
participate in the closing transaction. Finally, this definition would
provide that DMM Interest (defined below) to buy (sell) would never be
a better-priced order, even if priced higher (lower) than the Imbalance
Reference Price or Auction Price. This proposal is consistent with the
Exchange's proposal, described in greater detail below, that DMM
Interest is not guaranteed to participate in an Auction.\37\
---------------------------------------------------------------------------

    \35\ Rule 123C(1)(a) provides that ``[b]etter priced than the
closing price means an order that is lower than the closing price in
the case of an order to sell or higher than the closing price in the
case of an order to buy.'' In addition, for opening and reopening
transactions, Rule 115A(a)(1)(A) describes interest to buy (sell)
priced higher (lower) than the opening or reopening price, which is
the same definition as the proposed ``better-priced'' orders in the
Pillar Auction Rules.
    \36\ As described in greater detail below, better-priced orders
are guaranteed to participate in an Auction. See discussion infra
regarding proposed Rules 7.35A(h)(1) and 7.35B(h)(1).
    \37\ See discussion infra regarding proposed Rules 7.35A(h)(2)
and (3) and 7.35B(h)(2) and (3).
---------------------------------------------------------------------------

    [cir] Proposed Rule 7.35(a)(5)(B) would provide that a buy (sell)
order is ``at-priced'' if it is priced equal to the Imbalance Reference
Price or Auction Price. This would be a new term for the Pillar Auction
Rules and is based in part on use of the phrase orders ``with a price
equal to the closing price,'' as used in Rule 123C(7)(b), or orders
``priced equal to the opening or reopening price of a security,'' as
used in Rule 115A(a)(1)(B).
     In proposed Rule 7.35(a)(8), the Exchange proposes to
define ``DMM Interest'' as all buy and sell interest entered by a DMM
unit in its assigned securities. As noted above, pursuant to Rule
104(a)(2) and (3), the DMM has an obligation to facilitate Auctions in
assigned securities and to supply liquidity as needed. In addition,
pursuant to Rule 104(f)(ii), the DMM has the obligation to maintain a
fair and orderly market in the stocks assigned to the DMM, which
implies the maintenance of price continuity with reasonable depth, and
to minimize the effects of temporary disparity between supply and
demand.
    The Exchange currently makes functionality available to DMMs to
facilitate these obligations when they conduct Auctions. For example,
when facilitating an auction, a DMM can either manually enter buy or
sell interest into the graphical user interface that is used by the DMM
on the Trading Floor \38\ to manage the auction process or
algorithmically enter buy or sell interest in response to the
Exchange's electronic request to the DMM unit to conduct an
Auction.\39\ Currently, the DMM interest entered as part of this
functionality can be intended to participate in an Auction only or to
meet the obligation to maintain price continuity and depth in assigned
securities immediately following the auction. In the Pillar Auction
Rules, the Exchange believes it would promote transparency regarding
the auction process to separately define these types of DMM Interest
for Auctions. As described below, these terms would be used in the
Pillar Auction Rules relating to Auction Imbalance Information, entry
of orders during the Auction Processing Period, the opening and closing
process, and auction allocation.
    As proposed, the following types of DMM Interest would be available
to DMMs to facilitate their obligations under Rule 104 in their
assigned securities:
---------------------------------------------------------------------------

    \38\ The term ``Trading Floor'' is defined in Rule 6A to mean
the restricted-access physical areas designated by the Exchange for
the trading of securities, commonly known as the ``Main Room'' and
the ``Buttonwood Room.''
    \39\ Pursuant to Rule 104(b)(i), DMM units have the ability to
employ algorithms for quoting and trading consistent with NYSE and
SEC regulations, and as provided for in Rules 104(a)(2) and (3) and
104(b)(ii), such algorithms will have access to aggregate order
information in order to comply with the DMM requirement to
facilitate Auctions.
---------------------------------------------------------------------------

    [cir] Proposed Rule 7.35(a)(8)(A) would define ``DMM Auction
Liquidity'' as non-displayed buy and sell interest that is (i) entered
by a DMM either manually on the Trading Floor or as part of the DMM
unit's electronic message to conduct an Auction; (ii) designated for an
Auction only; and (iii) not entered as an order or modifier as defined
in Rule 7.31. This would be a new term for Pillar Auction Rules that
would

describe current DMM functionality to enter buy and sell interest
intended for an auction only. Currently, such DMM interest is not
displayed, is generally entered by the DMM unit contemporaneously with
conducting an Auction, and cancels if it does not participate in an
Auction. In addition, this buy and sell interest is unique to the DMM's
role in facilitating Auctions and differs from the type of orders
defined in Rule 7.31. The term ``DMM Auction Liquidity'' would
therefore not represent new functionality, but would define this
functionality for the Pillar Auction Rules. Although it is not
displayed, the Exchange proposes that for the purpose of ranking and
allocation in an Auction, DMM Auction Liquidity would be ranked
Priority 2--Display Orders. As described in greater detail below in
connection with proposed Rule 7.35A(h)(3) and 7.35B(h)(3), this ranking
would be applicable only for parity allocations among at-priced orders
at the Auction Price and if the only DMM Interest is DMM Auction
Liquidity, such DMM Interest would not have time priority on the
allocation wheel.
    Proposed Rule 7.35(a)(4), which defines the term ``Auction
Imbalance Information,'' would further provide that DMM Auction
Liquidity would never be included in Auction Imbalance Information.
Because DMM Auction Liquidity generally is not entered until just
before an Auction is to be conducted, is intended to be offsetting
interest, is not displayed, and cancels if not executed in an Auction,
the Exchange does not believe that this information should be included
in Auction Imbalance Information.
    [cir] Proposed Rule 7.35(a)(8)(B) would define ``DMM Orders'' to be
orders, as defined under Rule 7.31, entered by a DMM unit. Such orders
would be ranked as provided for in Rule 7.31. Unlike DMM Auction
Liquidity, DMM Orders would function no differently than the orders
available to all other member organizations as described in Rule 7.31.
For example, for the Closing Auction, this definition would include
those orders entered by the DMM during continuous trading and that are
not executed before the Closing Auction. As currently available, in
Pillar, the DMM would also be able to enter DMM Orders when it uses its
electronic functionality to facilitate an Auction.
    [cir] Proposed Rule 7.35(a)(8)(C) would define ``DMM After-Auction
Orders'' to be orders, as defined under Rule 7.31, entered by a DMM
unit before either the Core Open or Trading Halt Auction that would not
participate in an Auction and would instead be intended to maintain
price continuity with reasonable depth immediately following an
Auction, as required by Rule 104(f)(ii). This proposed definition would
be new for the Pillar Auction Rules and would describe the existing
functionality, described above, that the DMM can enter buy and sell
orders that are intended to be included in the Exchange Book
immediately after the opening or reopening transaction to meet the
obligation to maintain price continuity with reasonable depth following
such transactions. The Exchange believes that this unique DMM
obligation, and related functionality to meet this obligation, protects
investors and the public interest by ensuring a smooth transition from
an Auction to continuous trading. As further proposed, once entered on
the Exchange Book, DMM After-Auction Orders would be ranked as provided
for in Rule 7.31.
     Proposed Rule 7.35(a)(10) would define the term
``Imbalance Reference Price'' as the reference price that is used for
the applicable Auction to determine the Auction Imbalance Information.
This would be a new term in the Pillar Auction Rules and is based on
the use of the term ``reference price'' in Rules 123C(6)(a)(iii) and
15(g)(2)(A).
    Proposed Rule 7.35(a)(4)(A) would define the term ``Imbalance'' to
mean the volume of better-priced buy (sell) shares that cannot be
paired with both at-priced and better-priced sell (buy) shares at the
Imbalance Reference Price. Use of the term ``Imbalance'' in the Pillar
Auction Rules refers to the manner by which an imbalance is calculated,
and not the actual information that is disseminated. Under the Current
Auction Rules, the Exchange calculates imbalance information in this
manner.\40\ For example, Rule 123C(4)(a)(iii) and (iv) provide that
buy/sell closing volume does not include at-priced interest. The
Exchange proposes to standardize this method of calculation for all
Auctions with the proposed term ``Imbalance.'' As further proposed, the
side that cannot be paired would be referred to as the ``Side of the
Imbalance.''
---------------------------------------------------------------------------

    \40\ The Exchange currently calculates information relating to
imbalances for its auctions differently from NYSE Arca and NYSE
American. See, e.g., NYSE Arca Rule 7.35-E(a)(7) and NYSE American
Rule 7.35E(a)(7) (describing the imbalance as the ``number of buy
(sell) shares that cannot be matched with sell (buy) shares''). As
described below, better-priced interest is guaranteed to participate
in an Auction on the Exchange, therefore, the Exchange's manner of
calculating the Imbalance provides information about how many shares
would need to be satisfied in an Auction.
---------------------------------------------------------------------------

    The Exchange proposes that it would disseminate two types of
Imbalance publications: Total Imbalance and Closing Imbalance. Total
Imbalance information would be disseminated for all Auctions, and
Closing Imbalance information would be disseminated for the Closing
Auction only:
     Proposed Rule 7.35(a)(4)(A)(i) would provide that the term
``Total Imbalance'' means for the Core Open and Trading Halt Auctions,
the Imbalance of all orders eligible to participate in an Auction and
for the Closing Auction, the Imbalance of MOC, LOC, and Closing IO
Orders, and beginning five minutes before the scheduled end of Core
Trading Hours, Closing D Orders.
    This would be a new term for the Pillar Auction Rules and is based
in part on the term ``Total Imbalance,'' as used in NYSE Arca Rule
7.35-E(a)(7)(A) and NYSE American Rule 7.35E(a)(7)(A), but with the
substantive difference compared to those exchanges in how such
Imbalance information would be calculated on the Exchange, as described
above.
    For the Core Open and Trading Halt Auctions, this proposed rule
text is based in part on Rule 15(g)(1), which provides that Order
Imbalance Information includes real-time order imbalances that
accumulate prior to the opening transaction on the Exchange and that
such Order Imbalance Information includes all interest eligible for
execution in the opening transaction of the security in Exchange
systems. For the Closing Auction, this proposed rule text is based in
part on Rules 123C(4) and (6)(a)(ii), with non-substantive differences
to use Pillar terminology. Accordingly, the content included in Auction
Imbalance Information under the Pillar Auction Rules would be the same
as the content included in Order Imbalance Information under the
Current Auction Rules, including that Total Imbalance information would
differ for the Closing Auction as compared to the Total Imbalance
information included for the Core Open or Trading Halt Auction.
     Proposed Rule 7.35(a)(4)(A)(ii) would provide that the
term ``Closing Imbalance'' means the Imbalance of MOC and LOC Orders to
buy and MOC and LOC Orders to sell. The rule would further provide that
a ``Manual Closing Imbalance'' would mean a Closing Imbalance
disseminated by the DMM before the Closing Auction Imbalance Freeze
Time and a ``Regulatory Closing Imbalance'' would mean a Closing
Imbalance disseminated at or after the Closing Auction Imbalance Freeze
Time.
    These would be new terms for the Pillar Auction Rules to define the
content currently described in Rule

123C as the ``Information Imbalance Publication'' and ``Mandatory MOC/
LOC Imbalance Publication.'' As described in Rules 123C(1)(b) (defining
the term ``Informational Imbalance Publication'') and 123C(1)(d)
(defining the term ``Mandatory MOC/LOC Imbalance Publication''), under
the Current Auction Rules, this is the information that indicates a
disparity between MOC and marketable LOC interest to buy and MOC and
marketable LOC interest to sell.\41\ As described in Rule 123C(4), the
manner by which the Informational Imbalance Publication and the
Mandatory MOC/LOC Imbalance Publication is determined is the same; the
difference between the two is when they are published and the impact
they have on order entry. As discussed in greater detail below in
connection with proposed Rule 7.35B(d), the Exchange proposes the same
timing distinction between a Manual Closing Imbalance and a Regulatory
Closing Imbalance.
---------------------------------------------------------------------------

    \41\ The Rule 123C(1)(d) definition provides further details of
what constitutes a Mandatory MOC/LOC Imbalance Publication and the
Exchange proposes to move that text in the Pillar Auction Rules to
proposed Rule 7.35B(d)(1).
---------------------------------------------------------------------------

    Proposed Rule 7.35(a)(4)(B) would provide that the term ``Paired
Quantity'' means the volume of better-priced and at-priced buy shares
that can be paired with better-priced and at-priced sell shares at the
Imbalance Reference Price and ``Unpaired Quantity'' means the volume of
better-priced and at-priced buy shares that cannot be paired with both
at-priced and better-priced sell shares at the Imbalance Reference
Price. The proposed rule would further provide that the term ``Side of
the Unpaired Quantity'' would mean the side of the Unpaired Quantity
with the greater quantity of shares that are eligible to trade at the
Imbalance Reference Price.
    The proposed Unpaired Quantity and Side of the Unpaired Quantity
would be new information on Pillar, and would be available for Closing
Auctions only. As noted above, Imbalance information on the Exchange
means better-priced orders on one side of the market compared to both
better-priced and at-price orders on the other side of the market. The
Exchange believes that the Unpaired Quantity data would provide market
participants with information regarding how many shares would be
unpaired at the Imbalance Reference Price, which would be different
from how the Imbalance would be calculated.\42\
---------------------------------------------------------------------------

    \42\ This proposed definition of ``Unpaired Quantity'' is
comparable to how NYSE Arca and NYSE American calculate imbalance
information under NYSE Arca Rule 7.35-E(a)(7) and NYSE American Rule
7.35E(a)(7) (i.e., the ``number of buy (sell) shares that cannot be
matched with sell (buy) shares''.)
---------------------------------------------------------------------------

     Proposed Rule 7.35(a)(4)(B)(i) would provide that for the
Core Open and Trading Halt Auctions, the Paired Quantity would include
all orders eligible to trade in an Auction. This proposed rule text is
based on Rule 15(g)(1), which provides that Order Imbalance Information
includes all interest eligible for execution in the opening transaction
of the security in Exchange systems.
     Proposed Rule 7.35(a)(4)(B)(ii) would provide that for the
Closing Auction, Paired and Unpaired Quantity would include MOC, LOC,
and Closing IO Orders, and beginning five minutes before the scheduled
end of Core Trading Hours, Closing D Orders. This proposed rule text is
based in part on Rule 123C(6)(a)(i) and (ii), which describes the
various data fields under the Current Auction Rules that include
Auction-Only Orders.
    Proposed Rule 7.35(a)(4)(C) would define the term ``Continuous Book
Clearing Price'' as the price at which all better-priced orders
eligible to trade in an Auction on the Side of the Imbalance of such
orders can be traded. As further proposed, if there is no Imbalance of
all orders eligible to trade in the Auction, the Continuous Book
Clearing Price would be the Imbalance Reference Price. This would be a
new term for the Pillar Auction Rules and is based in part on Rule
123C(6)(a)(i)(C), which refers to a data field indicating the price at
which interest in the Display Book as well as closing-only orders may
be executed in full,\43\ and Rule 15(g)(1), which refers to the ``price
at which interest eligible to participate in the opening transaction
may be executed in full.''
---------------------------------------------------------------------------

    \43\ As described above and consistent with Rule 123C(6), for
the Closing Auction, only the Continuous Book Clearing Price would
be based on all orders eligible to participate in the Closing
Auction.
---------------------------------------------------------------------------

    Proposed Rule 7.35(a)(4)(D) would define the term ``Closing Only
Interest Clearing Price'' as the price at which all better-priced MOC
and LOC Orders on the Side of the Total Imbalance can trade with both
better-priced and at-priced contra-side MOC, LOC, and Closing IO
Orders. As further proposed, if there is no Total Imbalance or there
are no MOC or LOC Orders, the Closing Interest Only Clearing Price
would be the Imbalance Reference Price. This would be a new term for
the Pillar Auction Rules and is based in part on Rule 123C(6)(a)(i)(B),
which refers to ``a data field indicating the price at which closing-
only interest . . . may be executed in full.''
    Proposed Rule 7.35(a)(6) would define the term ``Auction Processing
Period'' to mean the period during which the applicable Auction is
being processed. This proposed term is new for the Pillar Auction Rules
and is based in part on the same term as used in NYSE Arca Rule 7.35-
E(a)(2) and NYSE American Rule 7.35E(a)(2). Because Auctions can be
facilitated by a DMM on the Exchange, which differs from the electronic
auction process on NYSE Arca and NYSE American, the Exchange proposes
to further provide that for DMM-Facilitated Auctions, the Auction
Processing Period includes the time when the DMM begins the process for
conducting the Auction. As noted above, on the Trading Floor, the
Exchange provides the DMM with a graphical user interface to manage the
auction process, generally referred to as the ``opening'' or
``closing'' template. If a DMM-Facilitated Auction is being manually
conducted from the Trading Floor, as proposed, the Auction Processing
Period would begin when the DMM begins using such template to conduct
the Auction, which the Exchange proposes to refer to as the ``Pre-
Auction Freeze.'' Orders entered during such Auction Processing Period
would be processed as described in proposed Rule 7.35(e).
    Proposed Rule 7.35(a)(7) would define the term ``Closing Auction
Imbalance Freeze Time'' to mean 10 minutes before the scheduled close
of trading. This proposed term would be new for the Pillar Auction
Rules and is based on the numerous references to 3:50 p.m. in Rule 123C
and Supplementary Material .40 to Rule 123C.\44\ The Exchange believes
that the proposed definition would streamline the Pillar Auction Rules
as compared to Rule 123C by using a single term to reference the period
10 minutes before the scheduled close of trading and would obviate the
need for the text from Supplementary Material .40 to Rule 123C to
account for early scheduled closes. The Exchange further believes that
the proposed term is consistent with the use of the term

``Auction Imbalance Freeze'' in the NYSE Arca and NYSE American auction
rules.\45\
---------------------------------------------------------------------------

    \44\ The Exchange recently amended Rule 123C to change the time
from 3:45 p.m. to 3:50 p.m. and plans to implement this change on
April 1, 2019. See Securities Exchange Act Release No. 85021
(January 31, 2019), 84 FR 2292 (February 6, 2019) (SR-NYSE-2018-58)
(Approval Order) and Trader Update dated December 14, 2018,
available here: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_MOC_LOC_Cutoff_Time_Change.pdf. In the Pillar Auction Rules,
the Exchange similarly proposes to use 3:50 p.m., but instead of
referring to the clock time in the rule, would refer to a time
period before the scheduled close of trading that is defined as the
``Closing Auction Imbalance Freeze Time.''
    \45\ See, e.g., NYSE American Rule 7.35E(d)(2) (describing the
time for when the Closing Auction Imbalance Freeze would begin by
referring to ten minutes before the scheduled time for the Closing
Auction).
---------------------------------------------------------------------------

    Proposed Rule 7.35(a)(9) would define the term ``Floor Broker
Interest'' to mean orders represented orally by a Floor broker at the
point of sale. This would be a new term for the Pillar Auction Rules
and is based in part on the reference to ``Floor broker interest
entered manually by the DMM'' as described in Rule 123C(7)(a)(iii).
    Proposed Rule 7.35(a)(11) would define the term ``Last Sale Price''
to mean one of the following:
     Proposed Rule 7.35(a)(11)(A) would define the term
``Consolidated Last Sale Price'' to mean the most recent consolidated
last-sale eligible trade in a security on any market during Core
Trading Hours on that trading day, and if none, the Official Closing
Price from the prior trading day for that security. This proposed
definition would be new for Pillar on the Exchange. Under this proposed
definition, prior to 9:30 a.m., the Consolidated Last Sale Price would
be the prior day's Official Closing Price for a security. However,
after 9:30 a.m., if a security is trading on other exchanges, the
Consolidated Last Sale Price would be the most recent consolidated
last-sale eligible trade in such security on any exchange. The Exchange
further proposes to provide that for a transferred security, the
Consolidated Last Sale Price means the most recent consolidated last-
sale eligible trade in a security on any market during Core Trading
Hours on that trading day, and if none, the official closing price from
the prior trading day for that security from the exchange from which
the security was transferred. This proposed rule text is based in part
on Rule 15(g)(2)(B)(iv), which provides that for purposes of Order
Imbalance Information, if the security is a transferred security, the
reference price is the last reported sale price on the securities
market from which the security was transferred prior to its first day
of trading on the Exchange. The Exchange believes that the proposed
definition of ``Consolidated Last Sale Price'' would obviate the need
for this rule text. As described below, the Consolidated Last Sale
Price may be used for determining the Imbalance Reference Price for a
Core Open Auction or Trading Halt Auction.\46\
---------------------------------------------------------------------------

    \46\ Use of the Consolidated Last Sale Price for the Core Open
or Trading Halt Auction would be a substantive difference in the
Pillar Auction Rules from the Current Auction Rules. See discussion
infra regarding proposed Rule 7.35A(e)(3).
---------------------------------------------------------------------------

     Proposed Rule 7.35(a)(11)(B) would define the term
``Exchange Last Sale Price'' to mean the most recent trade on the
Exchange of a round lot or more in a security during Core Trading Hours
on that trading day, and if none, the Official Closing Price from the
prior trading day for that security. This proposed definition would be
new for the Pillar Auction Rules and is based in part on references to
the term ``last sale price'' in Rules 123C(4)(a)(i) and (ii) and
123C(6)(a)(iii)(A)-(C).
    Proposed Rule 7.35(a)(12) would define the term ``Legitimate
Error'' to mean an error in any term of an order, such as price, number
of shares, side of the transaction (buy or sell), or identification of
the security. This proposed definition would be new for the Pillar
Auction Rules and is based in part on Rule 123C(1)(c), which defines
the term ``Legitimate Error'' to mean ``an error in any term of a MOC
or LOC order, such as price, number of shares, side of the transaction
(buy or sell) or identification of the security.'' Unlike the Current
Auction Rules, use of this term in the Pillar Auction Rules would not
be limited to MOC and LOC Orders.\47\
---------------------------------------------------------------------------

    \47\ See discussion infra regarding proposed Rules
7.35B(a)(1)(C) and 7.35B(f)(2)(A) relating to the proposed use of
the term ``Legitimate Error.''
---------------------------------------------------------------------------

    Auction Ranking. Proposed Rule 7.35(b) would set forth the general
rules for how different types of orders would be ranked for purposes of
how they are included in Auction Imbalance Information or for an
Auction allocation.
    First, proposed Rule 7.35(b)(1) would provide that orders would be
ranked based on the price at which they would participate in an
Auction. The price at which an order would be ranked would be used to
determine whether it is a better-priced or an at-priced order. The
proposed rule would specify which price would be applicable to
different types of orders, as follows:
     Proposed Rule 7.35(b)(1)(A) would provide that for Limit
Orders, the ranked price would be the limit price of an order.\48\ The
Limit Orders that would be eligible to participate in Auctions include
varying order types that are subject to repricing, such as a Non-
Routable Limit Order, ALO, and Primary Pegged Order. Under the Pillar
Auction Rules, such orders would be ranked for purposes of both Auction
Imbalance Information and Auction allocation at their limit price,
which represents current functionality.\49\
---------------------------------------------------------------------------

    \48\ The term ``limit price'' is defined in Rule 7.36(a)(2) to
mean the highest (lowest) specified price at which a Limit Order to
buy (sell) is eligible to trade.
    \49\ For example, under Rule 13(e)(1)(A), an ALO Order may
participate in openings, reopenings, or closing, but the ALO
designation shall be ignored, which means that the order would
participate in such transactions at its limit price.
---------------------------------------------------------------------------

     Proposed Rule 7.35(b)(1)(B) would provide that for Opening
D Orders, described above, the ranked price would be the undisplayed
discretionary price. This would be new text for Pillar Auction Rules
and is based on how d-Quotes designated for the opening or reopening
transaction are ranked for purposes of Order Imbalance Information
under Rule 15(g) and allocation in an auction under Rule 115A.
     Proposed Rule 7.35(b)(1)(C) would provide that for Closing
D Orders, described above, the ranked price would be based on a
specified time. As proposed, up to five minutes before the end of Core
Trading Hours, the ranked price of a Closing D Order would be the
order's limit price.\50\ As further proposed, beginning five minutes
before the end of Core Trading Hours, the ranked price of a Closing D
Order would be the order's undisplayed discretionary price.\51\ This
proposed rule text is based on how currently, pursuant to Rule
123C(6)(a)(ii), at 3:55 p.m., Order Imbalance Information begins
including d-Quotes eligible to participate in the closing transaction
at their undisplayed discretionary price. As described below, on
Pillar, the Exchange proposes to retain this functionality for Closing
D Orders. To reflect this functionality, and to reflect that prior to
3:55 p.m., Closing D Orders would be eligible to trade at their limit
price,\52\ the Exchange proposes that the price at which such orders
would be ranked would change once they are included in Auction
Imbalance Information at their undisplayed discretionary price.
---------------------------------------------------------------------------

    \50\ See proposed Rule 7.35(b)(1)(C)(i).
    \51\ See proposed Rule 7.35(b)(1)(C)(ii).
    \52\ As described above, pursuant to proposed Rule
7.31(c)(2)(C)(ii), on arrival, Closing D Orders would be eligible to
trade based on their limit price.
---------------------------------------------------------------------------

     Proposed Rule 7.35(b)(1)(D) would provide that the ranked
price for DMM Interest would be the Imbalance Reference Price (for when
DMM Interest is included in the Auction Imbalance Information) or the
Auction Price (for how DMM Interest is ranked for an Auction
allocation). As described in more detail below, regardless of the limit
price of DMM Interest, it will never be considered ``better-priced''
interest or be guaranteed to participate in an Auction. Accordingly,
for purposes of Auctions, DMM Interest is always considered at-priced
interest.

The Exchange therefore believes that the ranked price of such interest
should be either the Imbalance Reference Price or the Auction Price so
that it is not included on the Side of the Imbalance for the Imbalance
calculation.
    Second, proposed Rule 7.35(b)(2) would provide that the working
time for an order participating in an Auction would be its entry time,
which would be used for determining the relative time priority of such
orders on the applicable allocation wheel under Rule 7.37(b). Use of
the entry time would be new for NYSE on Pillar. Currently, the last
time stamp associated with an order is used for opening, reopening, and
closing transactions. The Exchange proposes to change this
functionality on Pillar because an order would be participating at its
limit price in an auction, and not its last working price (if it is an
order that reprices), and therefore the entry time is reflective of the
relative time priority of multiple orders.
    The rule would further provide that the working time of a Closing D
Order would be the later of its entry time or five minutes before the
end of Core Trading Hours.\53\ The Exchange believes it would be
appropriate to assign a working time to such orders based on when they
would be included in the Auction Imbalance Information at their
undisplayed discretionary price. As noted above, the Exchange would
begin including the undisplayed discretionary price of Closing D Orders
in Auction Imbalance Information five minutes before the scheduled
close of trading.
---------------------------------------------------------------------------

    \53\ For example, a Closing D Order entered at 3:00 p.m. would
have a working time of 3:55 p.m. and a Closing D Order entered at
3:57 p.m. would have a working time of 3:57 p.m.
---------------------------------------------------------------------------

    The Exchange also proposes that if a short sale order is repriced
to a Permitted Price during a Short Sale Period pursuant to Rule
7.16(f), the time of such repricing would be considered the working
time for such an order participating in an Auction. The Exchange
believes that the time of such repricing should be used as the working
time rather than the time of entry because such order would participate
in an Auction at the Permitted Price, and not at the limit price of the
order.
    Auction Imbalance Information. Proposed Rule 7.35(c) would provide
that the Exchange disseminates Auction Imbalance Information via a
proprietary data feed during the times specified in the Rule 7.35
Series. This proposed rule text would be new for the Pillar Auction
Rules and is based in part on NYSE Arca Rule 7.35-E(a)(4)(C) and NYSE
American Rule 7.35E(a)(4)(C). This proposed rule text is also based on
Rule 15(g) and 123C(6), which provide that the Exchange may make
available Order Imbalance Information.
    Proposed Rule 7.35(c)(1) would provide that Auction Imbalance
Information would be updated at least every second, unless there is no
change to the information. This proposed rule is based on NYSE Arca
Rule 7.35-E(a)(4)(A) and NYSE American Rule 7.35E(a)(4)(A) and would be
a substantive difference from how the Exchange currently functions.\54\
The Exchange believes that disseminating Auction Imbalance Information
at least every second, rather than the five-second time intervals (or
longer) under the current rules, would provide member organizations
with more updated information leading into each respective Auction. The
Exchange further believes that this proposed substantive difference
from the Current Auction Rules would standardize the manner of
dissemination of Auction Imbalance Information across affiliated
exchanges.
---------------------------------------------------------------------------

    \54\ Pursuant to Rule 15(g)(3), Order Imbalance Information
before the opening is disseminated approximately every five minutes
between 8:30 a.m. and 9:00 a.m., approximately every minute between
9:00 a.m. and 9:20 a.m., and approximately every five seconds
between 9:20 a.m. and the opening of trading in that security.
Pursuant to Rule 123C(6)(a)(iv), Order Imbalance Information is
disseminated approximately every five seconds between 3:50 p.m. and
4:00 p.m.
---------------------------------------------------------------------------

    Proposed Rule 7.35(c)(2) would provide that Auction Imbalance
Information would continue to be disseminated until the Auction begins.
This proposed rule text is new for the Pillar Auction Rules. This rule
is based in part on Rule 15(g)(3)(C) (and Supplementary Material .10 to
Rule 15 relating to reopening transactions), which provides that Order
Imbalance Information continues to be disseminated until the opening or
reopening of trading in that security. Accordingly, for the Core Open
Auction and Trading Halt Auction, the functionality would not change on
Pillar.
    However, this proposed rule text would be a substantive difference
for Closing Auctions. Currently, Rule 123C(6)(a)(iv) provides that
Order Imbalance Information for the close is disseminated until 4:00
p.m. The Exchange therefore stops disseminating this information at
4:00 p.m., regardless of the timing of the closing transaction. In the
Pillar Auction Rules, the Exchange proposes that for the Closing
Auction, the Exchange would continue disseminating Auction Imbalance
Information until the Closing Auction begins, which is after 4:00
p.m.\55\ As discussed below, Floor Broker Interest that was represented
by the end of Core Trading Hours will be entered electronically into
Exchange systems after 4:00 p.m. and such interest may change the
Auction Imbalance Information.\56\ The Exchange believes that it would
promote transparency and provide market participants with greater
specificity regarding a potential Closing Auction Price for such Floor
Broker Interest to be included in the Auction Imbalance Information
after the scheduled end of Core Trading Hours.
---------------------------------------------------------------------------

    \55\ As discussed below, because of the manual nature of the
Closing Auction, the Auction Processing Period for such Auction
begins after 4:00 p.m.
    \56\ See discussion infra regarding proposed Rule 7.35B(a)(1).
---------------------------------------------------------------------------

    Proposed Rule 7.35(c)(3) would provide that the Exchange would not
disseminate Auction Imbalance Information if a security is an IPO or a
Direct Listing and has not had its IPO Auction or Direct Listing
Auction. This proposed rule text would be new for the Pillar Auctions
Rules and is based in part on how Rule 15(g) functions for IPOs.\57\
The Exchange proposes non-substantive differences to use Pillar
terminology to describe this functionality and to extend this
functionality to Direct Listings as well.
---------------------------------------------------------------------------

    \57\ See Securities Exchange Act Release No. 74837 (April 29,
2015), 80 FR 25741 (May 5, 2015) (SR-NYSE-2015-19) (Notice of filing
and immediate effectiveness of proposed rule change to reflect that
Exchange systems will not publish Order Imbalance Information for an
IPO.)
---------------------------------------------------------------------------

    Openings and Reopenings in the Last Ten Minutes of Trading.
Proposed Rule 7.35(d) would provide that the Exchange would not open or
reopen a security that has not yet opened or is halted or paused and
would not transition to continuous trading if such opening or reopening
would be in the last ten minutes of trading before the end of Core
Trading Hours. This proposed rule text would be new for the Pillar
Auction Rules and is based in part on the first sentence of NYSE Arca
Rule 7.35-E(e)(10) and NYSE American Rule 7.35E(e)(10), which both
provide that if the re-opening time for a Trading Halt Auction would be
in the last ten minutes of trading before the end of Core Trading
Hours, NYSE Arca and NYSE American will not conduct a Trading Halt
Auction in that security and will not transition to continuous trading.
This proposed rule text is also based on Rule 80C(b)(2), which provides
that if the reopening following a Trading Pause would be in the last
ten minutes of trading before the end of regular trading hours, the
Exchange will not

reopen trading in that security and will not transition to continuous
trading.
    The Exchange proposes a substantive difference for the first
sentence of Rule 7.35(d) as compared to the NYSE Arca and NYSE American
versions of the rule to reflect that on the Exchange, a security may
not be opened by 3:50 p.m.\58\ The Exchange proposes that if a security
has not opened or reopened before the last ten minutes of trading
before the end of Core Trading Hours, the Exchange will not open that
security during that period.
---------------------------------------------------------------------------

    \58\ Both NYSE Arca and NYSE American transition electronically
to the Core Trading Session at 9:30 a.m. By contrast, DMM-
Facilitated Core Open Auctions do not require the DMM to open a
security if there is no interest in such security. Alternately, a
security may be the subject of a regulatory halt at that time.
---------------------------------------------------------------------------

    Proposed Rule 7.35(d) would further provide how the Exchange would
process such security if it is eligible to trade in the last ten
minutes of trading before the end of Core Trading Hours, i.e., it is
not subject to a regulatory halt, as follows:
     Proposed Rule 7.35(d)(1) would provide that the Exchange
would remain unopened, halted, or paused and would disseminate an
auction indicator that the security is eligible to be closed as
provided for in the Rule 7.35 Series. This proposed rule text is based
on the second sentence of NYSE Arca Rule 7.35-E(e)(10) and NYSE
American Rule 7.35E(e)(10) and the definition of ``Auction Indicator''
in NYSE Arca Rule 7.35-E(a)(13) and NYSE American Rule 7.35E(a)(13)
with a proposed substantive difference that the Exchange would
disseminate an auction indicator only if such security would be
eligible to be closed. The Exchange believes that this proposed auction
indicator would provide transparency to member organizations whether a
Closing Auction would be conducted in a security that has not opened or
reopened for trading by the last ten minutes of trading before the end
of Core Trading Hours.
     Proposed Rule 7.35(d)(2) would provide that MOO Orders,
LOO Orders, Opening D Orders, and Primary Pegged Orders would be
cancelled. This proposed rule text is based in part on NYSE Arca Rule
7.35-E(e)(10)(A) and NYSE American Rule 7.35E(e)(10)(A) with a proposed
substantive difference to reference Opening D Orders and Primary Pegged
Orders, which, as discussed above, are not eligible to participate in
the Closing Auction.\59\
---------------------------------------------------------------------------

    \59\ See proposed Rules 7.31(c)(1) and 7.31(h)(2).
---------------------------------------------------------------------------

     Proposed Rule 7.35(d)(3) would provide that the Exchange
would begin disseminating Closing Auction Imbalance Information. This
proposed rule text would be new for Pillar Auction Rules and is
intended to provide transparency in Exchange rules regarding which
Auction Imbalance Information would be disseminated by the Exchange.
    Order Processing During an Auction Processing Period. The Exchange
proposes that the manner by which new orders and requests to cancel,
cancel and replace, or modify an order would be processed during an
Auction Processing Period would be the same as how such instructions
are processed on its affiliated exchanges, with specified differences
to reflect the Exchange's model to have DMM-facilitated auctions.
    Proposed Rules 7.35(e), 7.35(e)(1), and 7.35(e)(2) are based on
NYSE Arca Rules 7.35-E(g), 7.35-E(g)(1), and 7.35-E(g)(2) and NYSE
American Rules 7.35E(g), 7.35E(g)(1), and 7.35(g)(2) without any
differences. Specifically, as proposed, new orders received during the
Auction Processing Period would be accepted but would not be processed
until after the Auction Processing Period. In other words, such orders
would not be eligible to participate in an Auction, which is how order
processing functions currently on the Exchange.
    The Exchange proposes additional text for proposed Rule 7.35(e) as
compared to the rules of NYSE Arca and NYSE American to reflect
differences in how DMM-Facilitated Auctions would function, and
specifically, that the Auction Processing Period on the Exchange would
include the Pre-Auction Freeze. As proposed, DMM Auction Liquidity,
certain DMM Orders, and Floor Broker Interest entered during the Pre-
Auction Freeze would be eligible to participate in the applicable
Auction. Any other orders entered during the Pre-Auction Freeze would
be considered entered during the Auction Processing Period, and
therefore would be accepted but not eligible to participate in an
Auction.
    The Exchange proposes this difference because during a DMM-
Facilitated Auction, the DMM uses the respective opening or closing
template to enter DMM Auction Liquidity, DMM Orders, or Floor Broker
Interest (for the Closing Auction only). When facilitating an Auction
electronically, the DMM is similarly able to enter DMM Auction
Liquidity and certain DMM Orders that would be eligible to participate
in the applicable Auction.\60\ Accordingly, this proposed rule change
would reflect in Pillar Auction Rules how DMM-facilitated auctions
would function, which would differ from how the NYSE Arca and NYSE
American electronic auctions function.
---------------------------------------------------------------------------

    \60\ The reference to ``certain'' DMM Orders is to distinguish
DMM Orders that are entered via the algorithmic interface for the
DMM to facilitate the Auction pursuant to Rules 104(b) and (a)(2) or
(3), described above. DMM Orders entered via this functionality
would be accepted during the Pre-Auction Freeze and would be
eligible to participate in the Auction. DMM Orders not entered via
this functionality would be accepted during the Auction Processing
Period, but would not be eligible to participate in the applicable
Auction, as provided for in the first sentence of proposed Rule
7.35(e). In either case, DMM Orders would mean an order as defined
in Rule 7.31.
---------------------------------------------------------------------------

    The Exchange proposes an additional difference as compared to the
NYSE Arca and NYSE American rules to reflect that an order instruction
received during the Pre-Auction Freeze for the Closing Auction would be
processed on arrival if it relates to Floor Broker Interest entered
before the Pre-Auction Freeze. In proposed Rule 7.35(e), an ``order
instruction'' would be defined for purposes of proposed Rules 7.35(e)
and (f) to mean a request to cancel, cancel and replace, or modify an
order, which is based on the NYSE Arca and NYSE American use of such
term. As described in greater detail below, Floor Broker Interest for
the Closing Auction would be electronically entered after the end of
Core Trading Hours, and there would be specified circumstances when
such interest could be cancelled, which the DMM would have to
process.\61\ Because the DMM would be processing such cancellation
requests, the Exchange proposes that such requests would be accepted
during the Pre-Auction Freeze, which is controlled by the DMM.
---------------------------------------------------------------------------

    \61\ See discussion infra regarding proposed Rule 7.35B(a)(1).
---------------------------------------------------------------------------

    Transition to Continuous Trading. The Exchange also proposes that
the manner by which the Exchange would transition to continuous trading
following an Auction would be based on existing Pillar functionality.
Accordingly, proposed Rule 7.35(f) and subparagraphs (1)-(3) would be
based on NYSE Arca Rule 7.35-E(h) and subparagraphs (1)-(3) and NYSE
American Rule 7.35E(h) and subparagraphs (1)-(3) with the following
substantive differences.
     First, current NYSE Arca Rule 7.35-E(h)(2)(A) provides
that during the transition to continuous trading, an order instruction
(as defined in NYSE Arca Rule 7.35-E(g)) received during the Auction
Imbalance Freeze, the transition to continuous trading, or the Auction
Processing Period would be processed in time sequence with the
processing of orders as specified in NYSE Arca Rules 7.35-E(h)(3)(A) or
(B)

if it relates to an order that was received before the Auction
Processing Period. Proposed Rule 7.35(f)(2)(A) would not include text
that is not applicable to the NYSE (e.g., Auction Imbalance Freeze).
The Exchange proposes an additional difference because the rule would
provide that the processing of order instructions described in that
sentence would also apply to orders that have already transitioned to
continuous trading. This is intended to promote clarity and
transparency in Exchange rules of when an order instruction (as defined
in proposed Rule 7.35(e)) would be applied to an order.
    The Exchange proposes a corollary difference to proposed Rule
7.35(f)(2)(B) as compared to NYSE Arca Rule 7.35-E(h)(2)(B) to provide
that subparagraph of proposed Rule 7.35(f)(2)(B) would apply only to an
order instruction (as defined in Rule 7.35(e)) for an order that has
not yet transitioned to continuous trading.
     Second, NYSE Arca Rule 7.35-E(h)(3) sets forth how orders
are processed when transitioning to continuous trading from a prior
trading session or following an auction. Because the Exchange only has
one trading session for Exchange-listed securities, the Exchange does
not propose to include text in proposed Rule 7.35(f)(3) from the NYSE
Arca rule referencing transitioning to continuous trading from a prior
trading session. The Exchange further proposes that proposed Rule
7.35(f)(3)(A)(i) would provide that reserve interest that replenishes
the display quantity of a routable Reserve Order would route, if
marketable against protected quotations on Away Markets. This proposed
rule text differs from NYSE Arca Rule 7.35-E(h)(3)(A)(i) because the
Exchange would not include the modifier ``fully-executed'' before the
reference to ``display quantity.'' The Exchange has amended its Reserve
Order functionality and specifically the circumstances when a Reserve
Order would be replenished, and the reference to ``fully-executed'' is
now moot.\62\
---------------------------------------------------------------------------

    \62\ See Securities Exchange Act Release No. 83768 (August 3,
2018), 83 FR 39488 (August 9, 2018) (SR-NYSE-2018-26) (Approval
Order).
---------------------------------------------------------------------------

     Third, NYSE Arca Rule 7.35-E(h)(3)(B) provides that
unexecuted orders that were not eligible to trade in the prior trading
session (or were received during a halt or pause) or that were received
during the Auction Processing Period, will be assigned a new working
time at the end of the Auction Processing Period in time sequence
relative to one another based on original entry time. The Exchange's
proposed Rule 7.35(f)(3)(B) would differ from NYSE Arca Rule 7.35-
E(h)(3)(B) because it would not include references to orders received
during a halt or pause or orders that were not eligible to trade in the
prior trading session (because the Exchange has only one trading
session for Exchange-listed securities). The Exchange proposes that the
working time for orders received during a halt or pause would be the
original entry time, as provided for in Rule 7.36(f)(1), and therefore
would not have to be discussed separately in proposed Rule
7.35(f)(3)(B). This proposed difference is based on proposed Rule
7.35(b)(2), discussed above, that the working time for an order
participating in an Auction would be its entry time.
    The Exchange also proposes a substantive difference to proposed
Rule 7.35(f)(3)(B) as compared to the NYSE Arca and NYSE American
versions of the rule to reflect that DMM After-Auction Orders would be
processed before other orders. As discussed above, DMM After-Auction
Orders are intended to help facilitate the DMM's compliance with the
Rule 104(f)(ii) obligation to maintain continuity with reasonable
depth, particularly in the period immediately following an Auction.
Accordingly, the Exchange proposes that when it begins processing
orders that were received during the Auction Processing Period, DMM
After-Auction Orders would be processed first.\63\ The Exchange
believes that because the DMM has an obligation not only to maintain a
fair and orderly market when arranging an Auction, but also to maintain
price continuity with reasonable depth immediately following an
Auction, the DMM After-Auction Orders would be more likely to be priced
to closely correlate to the Auction Price and therefore quoting this
interest before other orders that were received during the Auction
Processing Period would promote a fair and orderly transition from the
Auction to continuous trading.\64\
---------------------------------------------------------------------------

    \63\ As proposed in Rule 7.35(f)(3)(A), the first quote that
would be published after an Auction would be based on unexecuted
orders that were eligible to participate in the Auction but did not.
Proposed Rule 7.35(f)(3)(B) concerns orders that were not eligible
to participate in the Auction and how they would be released into
continuous trading.
    \64\ The Exchange notes that pursuant to proposed Rule
7.35(f)(3)(A), unexecuted orders that were eligible to trade in the
Auction would be quoted ahead of orders referenced in proposed Rule
7.35(f)(3)(B). Accordingly, DMM Auction-Only Orders would not be
quoted ahead of orders that arrived before the Auction Processing
Period.
---------------------------------------------------------------------------

     Fourth, the Exchange proposes a non-substantive change
that proposed Rule 7.35(f)(3)(D) would be based on the last stand-alone
paragraph NYSE Arca Rule 7.35-E(h)(3)(C), without any substantive
differences.
     Finally, the Exchange proposes additional differences
between proposed Rules 7.35(e) and (f) as compared to NYSE Arca Rules
7.35-E(g) and (h) and NYSE American Rules 7.35E(g) and (h) to reflect
the differences between the operation of the Exchange and those
markets. Specifically, because these proposed rules would be applicable
only to Exchange-listed securities and such securities would be
eligible to trade during the Core Trading Session only, there is no
Auction Imbalance Freeze before the Core Open Auction, and the Exchange
does not offer the Proactive if Locked/Crossed Modifier, the Exchange
proposes differences from the NYSE Arca and NYSE American rules to
remove references relating to transitions of trading sessions and the
Early Open Auction, Auction Imbalance Freezes, the Proactive if Locked/
Crossed Modifier, and also to use Pillar terminology applicable to the
Exchange.
    Short Sale Period. Proposed Rule 7.35(g) would provide that during
a Short Sale Period, as defined in Rule 7.16(f), Sell Short MOO and MOC
Orders in Auction-Eligible Securities would be ranked for purposes of
Auction Imbalance Information and allocated in an Auction as Priority
2- Display Orders at the Permitted Priced (as defined in Rule
7.16(f)).\65\ This proposed rule text is based in part on Commentary
.01 to NYSE Arca Rule 7.35-E with a substantive difference to reference
MOO and MOC Orders specifically, rather than referring to Market Orders
more generally, and not to reference Market Imbalance, which would not
be provided on the Exchange. The Exchange proposes non-substantive
differences to update the order of the rule text, as compared to the
NYSE Arca Rule, to use NYSE Pillar terminology.
---------------------------------------------------------------------------

    \65\ See Proposed Rule 7.35(g)(1).
---------------------------------------------------------------------------

    Proposed Rule 7.35(g)(2) would provide that sell short orders that
are included in the Auction Imbalance Information would be adjusted to
a Permitted Price as the NBB moves both up and down. This proposed rule
text is based on Commentary .01(b) to NYSE Arca Rule 7.35-E.
    Miscellaneous. Proposed Rule 7.35(h) would provide that whenever in
the judgment of the Exchange the interests of a fair and orderly market
so require, the Exchange may adjust the timing of or suspend the
auctions set forth in this Rule with prior notice to member
organizations. This proposed rule text would be new for Pillar Auction
Rules

and is based on NYSE Arca Rule 7.35-E(i) and NYSE American Rule
7.35E(i) with a non-substantive difference to reference member
organizations rather than ETP Holders.
    Proposed Rule 7.35(i) would provide that for purposes of Rule
611(b)(3) of Regulation NMS, an Auction is a single-priced opening,
reopening, or closing transactions and may trade through any Away
Market's Protected Quotations. This proposed rule text would be new for
Pillar Auction Rules and is based on both Rule 611(b)(3) of Regulation
NMS \66\ and NYSE Arca Rule 7.35-E(j) and NYSE American Rule 7.35E(j)
without any substantive differences.
---------------------------------------------------------------------------

    \66\ 17 CFR 242.611(b).
---------------------------------------------------------------------------

Proposed Rule 7.35A (DMM-Facilitated Core Open and Trading Halt
Auctions)
    Proposed Rule 7.35A would set forth the process for DMM-facilitated
Core Open and Trading Halt Auctions.
    DMM and Floor Broker Responsibilities. Proposed Rule 7.35A(a) would
set forth both the DMM and Floor broker responsibilities for the
opening and reopening of securities, and is based on Rule 123D(a)(1)
and 123D(b). Rule 123D(b) sets forth responsibilities for both DMMs and
Floor brokers relating to their unique roles on the Trading Floor with
respect to the opening and reopening of securities. On Pillar, the
Exchange will continue to operate a Trading Floor under substantively
the same rules as the Current Auction Rules, and therefore the Exchange
proposes to include the responsibilities described in Rule 123D(b) in
the Pillar Auction Rules, modified as described below.
    Proposed Rule 7.35A(a) would provide that it is the responsibility
of each DMM to ensure that registered securities open as close to the
beginning of Core Trading Hours as possible or reopen at the end of the
halt or pause, while at the same time not unduly hasty, particularly
when at a price disparity from the Consolidated Last Sale Price. This
proposed rule text is based on Rule 123D(a)(1) with a non-substantive
difference to use Pillar terminology.
    The Exchange proposes a substantive difference to proposed Rule
7.35A(a) as compared to Rule 123D(a)(1). Specifically, under the
current rule, for the opening, the DMM should look at the prior close's
price for determining whether the opening price would be at a price
disparity. For reopenings, the DMM should look at the last price on the
Exchange to determine whether the reopening price would be at a price
disparity. On Pillar, the Exchange proposes that for both the Core Open
and Trading Halt Auctions, the Consolidated Last Sale Price should be
used to determine whether there is a price disparity.
    For a Core Open Auction that takes place at 9:30 a.m. (e.g., if a
DMM facilitates the Core Open Auction electronically), this proposed
rule change would have minimal difference from the current rule because
at that time, the definition of Consolidated Last Sale Price means the
Official Closing Price of a security, which may be the prior close's
price on the Exchange.\67\ For a Core Open Auction that takes place
after 9:30 a.m. and for which there are consolidated last-sale eligible
trades on other exchanges, this proposed rule change would represent a
substantive difference because the DMM should look at any price
disparity between the proposed Core Open Auction Price and how the
security is already trading on other markets, rather than the prior
close price. The Exchange proposes a similar difference for Trading
Halt Auctions, as the DMM should look at the Consolidated Last Sale
Price, rather than the Exchange's last sale price, to determine whether
there is a price disparity. The Exchange believes these proposed
substantive differences would reflect that there may be more recent
trading activity on another exchange, and such price may reflect a more
recent valuation for a security with which to assess whether an Auction
Price would be at a price disparity.
---------------------------------------------------------------------------

    \67\ See proposed Rule 7.35(a)(11(a), discussed supra. As noted
above, if there is no Closing Auction of one round lot or more, the
Official Closing Price would be based on the last consolidated last-
sale eligible price rather than the last Exchange sale price, and in
such scenario, use of the Official Closing Price in proposed Rule
7.35A(a) would differ from the price that would be used under Rule
123D(a)(1).
---------------------------------------------------------------------------

    Proposed Rules 7.35A(a)(1)-(5) are based on 123D(b) as follows:
     Proposed Rule 7.35A(a)(1) would provide that openings and
reopenings should reflect the professional assessment of market
conditions at the time, and appropriate consideration of the balance of
supply and demand as reflected by orders in the Exchange Book. This
proposed rule text is based on the first sentence of the first
paragraph of Rule 123D(b), with non-substantive differences to use
Pillar terminology and streamline the rule text.
     Proposed Rule 7.35A(a)(2) would provide that to the best
of their ability, at the point of sale on the Trading Floor, DMMs
should provide timely and impartial information at all phases of the
opening or reopening process and that DMM units are responsible for
ensuring that adequate personnel are available to assist in the fair
and orderly opening or reopening of all securities registered with that
DMM unit. This proposed rule text is based on the second and third
sentences of the first paragraph of Rule 123D(b) with non-substantive
differences to use Pillar terminology and streamline the rule text.
     Proposed Rule 7.35A(a)(3) would relate to Floor broker
responsibilities and would provide that:
    Floor brokers should make every effort to ascertain their
customers' interest as early as possible and to inform the DMM so that
such interest can be factored into the opening or reopening process.
Floor brokers should communicate to their customers the problems caused
by delaying their interest until the last minute. Floor brokers should
not expect to be able to delay the opening or reopening to accommodate
customer reactions to changing prices. Once a relatively narrow range
of opening or reopening possibilities is available, brokers and their
customers should have sufficient information to electronically enter an
order with a firm limit price.
    This proposed rule text is based on the second, third, fifth, and
sixth sentences of the second paragraph of Rule 123D(b) with non-
substantive differences to use Pillar terminology and streamline the
rule text. The Exchange does not propose to include the balance of the
second paragraph of Rule 123D(b) in Rule 7.35A(a)(3) as such rule text
is either duplicative of the rule text proposed to be retained or
obsolete in today's trading environment (e.g., reference to orders or
cancellations ``merely dropped on the counter'').
     Proposed Rule 7.35A(a)(4) would provide that Floor
Officials participate in the opening and reopening process to provide
an impartial professional assessment of unusual situations, as well as
to provide guidance with respect to pricing when a significant
disparity in supply and demand exists. This proposed rule text is based
on the first sentence of the third paragraph of Rule 123D(b) with non-
substantive differences to use Pillar terminology and streamline the
rule text. The balance of proposed Rule 7.35A(a)(4) would provide that
DMMs should consult with a Floor Official under specified
circumstances, which is based on the last sentence of the first
paragraph and the fifth paragraph of Rule 123D(b).\68\

    The Exchange proposes to specify in proposed Rules 7.35A(a)(4)(A)-
(D) the specific circumstances when a DMM should consult with a Floor
Official:
---------------------------------------------------------------------------

    \68\ Rules 46, 46A, and 47 specify how Floor Officials, Senior
Floor Officials, Executive Floor Officials, Floor Governors, and
Executive Floor Governors are appointed and their general authority
under Exchange rules.
---------------------------------------------------------------------------

    [cir] If a security would be opened more than 30 minutes after the
scheduled beginning of Core Trading Hours, which the Exchange proposes