[Federal Register Volume 82, Number 30 (Wednesday, February 15, 2017)]
[Notices]
[Pages 10814-10827]
[FR Doc No: 2017-02990]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79993; File No. SR-NYSEMKT-2017-01]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change To Adopt New Equities Trading Rules To Transition
Trading on the Exchange From a Floor Based Market With a Parity
Allocation Model to Fully Automated Price-Time Priority Model on the
Exchange's New Trading Technology Platform, Pillar

February 9, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 25, 2017, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes new rules to transition trading on the
Exchange to Pillar, the Exchange's new trading technology platform, and
to operate as a fully-automated cash equities market. The proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

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

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

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

1. Purpose
    On January 29, 2015, the Exchange announced the implementation of
Pillar, which is an integrated trading technology platform designed to
use a single specification for connecting to the equities and options
markets operated by the Exchange and its affiliates, NYSE Arca, Inc.
(``NYSE Arca'') and New York Stock Exchange LLC (``NYSE'').\4\ NYSE
Arca Equities, Inc. (``NYSE Arca Equities),\5\ which operates the cash
equities trading platform for NYSE Arca, was the first trading system
to migrate to Pillar.\6\
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    \4\ See Trader Update dated January 29, 2015, available here:
www.nyse.com/pillar.
    \5\ NYSE Arca Equities is a wholly-owned corporation of NYSE
Arca and operates as a facility of NYSE Arca.
    \6\ In connection with the NYSE Arca implementation of Pillar,
NYSE Arca filed four rule proposals relating to Pillar. See
Securities Exchange Act Release Nos. 74951 (May 13, 2015), 80 FR
28721 (May 19, 2015) (Notice) and 75494 (July 20, 2015), 80 FR 44170
(July 24, 2015) (SR-NYSEArca-2015-38) (Approval Order of NYSE Arca
Pillar I Filing, adopting rules for Trading Sessions, Order Ranking
and Display, and Order Execution); Securities Exchange Act Release
Nos. 75497 (July 21, 2015), 80 FR 45022 (July 28, 2015) (Notice) and
76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (SR-
NYSEArca-2015-56) (Approval Order of NYSE Arca Pillar II Filing,
adopting rules for Orders and Modifiers and the Retail Liquidity
Program); Securities Exchange Act Release Nos. 75467 (July 16,
2015), 80 FR 43515 (July 22, 2015) (Notice) and 76198 (October 20,
2015), 80 FR 65274 (October 26, 2015) (SR-NYSEArca-2015-58)
(Approval Order of NYSE Arca Pillar III Filing, adopting rules for
Trading Halts, Short Sales, Limit Up-Limit Down, and Odd Lots and
Mixed Lots); and Securities Exchange Act Release Nos. 76085 (October
6, 2015), 80 FR 61513 (October 13, 2015) (Notice) and 76869 (January
11, 2016), 81 FR 2276 (January 15, 2016) (Approval Order of NYSE
Arca Pillar IV Filing, adopting rules for Auctions).
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Overview
    With Pillar, the Exchange proposes to transition its cash equities
trading platform from a Floor-based market with a parity allocation
model to a fully automated price-time priority allocation model. As
such, when the Exchange transitions to Pillar, the Exchange would no
longer have a Floor-based point-of-sale trading model. As a
consequence, the Exchange is proposing to replace its Floor-based
Designated Market Makers (``DMM'') with electronic DMMs, and would no
longer have Floor brokers or support Supplemental Liquidity Providers
as a separate class of participant on the Exchange.\7\
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    \7\ See, e.g., Rule 107B--Equities.
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    The Exchange also proposes to expand the securities it trades to
all NMS securities, including securities listed on NYSE, NYSE Arca, the
Nasdaq Stock Market LLC (``Nasdaq''), and the Bats BZX Exchange, Inc.
(``Bats''). Trading of securities on an unlisted trading privileges
basis would be subject to the same trading rules as trading of
securities listed on the Exchange, except for specified rules directed
to the Exchange's responsibility as a primary listing market, e.g.,
proposed Rules 7.11E and 7.16E, described in further detail below.
    The Exchange will be filing several proposed rule changes to
support the NYSE MKT cash equities implementation of Pillar. The
Exchange has already adopted the rule numbering framework of the NYSE
Arca Equities rules for Exchange cash equities trading on the Pillar
trading platform.\8\ As described in the Framework Filing, the Exchange
is denoting the rules applicable to cash equities trading on Pillar
with the letter ``E'' to distinguish such rules from current Exchange
rules with the same numbering.\9\ In addition, the Exchange has filed a
proposed rule change to support Exchange trading of securities listed
on NYSE, NYSE Arca, and other exchanges on an unlisted trading
privileges basis, including Exchange Traded Products (``ETP'') listed
on other exchanges.\10\
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    \8\ See Securities Exchange Act Release No. 79242 (November 4,
2016), 81 FR 79081 (November 10, 2016) (SR-NYSEMKT-2016-97) (Notice
and Filing of Immediate Effectiveness of Proposed Rule Change) (the
``Framework Filing'').
    \9\ To distinguish Rule 1E-13E from Exchange rules that govern
options trading, the Exchange proposes a non-substantive change to
amend the description of ``Pillar Platform Rules'' after Rule 0--
Equities to specify that these are ``cash equities'' rules.
    \10\ See Securities Exchange Act Release No. 79400 (November 25,
2016), 81 FR 86750 (December 1, 2016) (SR-NYSEMKT-2016-103) (Notice)
(the ``ETP Listing Rules Filing''). When trading on Pillar, the
Exchange would not be relying on Rule 500--Equities--Rule 525--
Equities for authority to trade securities on an unlisted trading
privileges basis. Accordingly, the Exchange proposes to amend Rule
500--Equities to provide that the Rules of that series (Rules 500--
Equities--Rule 525--Equities) would not be applicable to trading on
the Pillar trading platform. To use terms applicable to trading on
Pillar, the Exchange also proposes to amend Rule 2A(b)(2)--Equities
to replace the term ``Nasdaq Security'' with the term ``UTP
Security'' and replace the rule reference from Rule 501--Equities to
Rule 1.1E(ii).
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    In this filing, the Exchange proposes trading rules that would
govern Exchange cash equities trading on Pillar. All trading would be
automated, including opening, re-opening, and closing auctions. As
proposed, the Exchange's Pillar cash equities trading platform would be
based on the rules and trading model of NYSE Arca Equities, which is a
fully-automated price-time priority allocation model with registered
market makers.
    As discussed in the Framework Filing, Rules 1E-13E govern cash
equities trading on the Pillar platform.\11\ In particular, Rule 7E
Equities Trading would establish the trading rules. Rule 7E Equities
Trading would be based on NYSE Arca Equities Rule 7 Equities Trading.
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    \11\ Rules 1E-13E are including in the ``Equities Rules''
portion of the Exchange's rule book. Pursuant to Rule 0--Equities,
the Equities Rules govern all transactions conducted on the Equities
Trading Systems.
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    In addition, to support the proposed fully-automated market, the
Exchange is proposing rules based on NYSE Arca Equities Rules 1
Definitions, 2 Equity Trading Permits, 3 Organization and
Administration, 6 Business Conduct, Rule 12 Arbitration, and Rule 13
Liability of Directors and Exchange.
    The Exchange proposes the following differences to how it will
function on Pillar as compared to NYSE Arca Equities:
     To be addressed in a separate filing, for securities
listed on NYSE MKT, the Exchange would maintain DMMs. These electronic-
access DMMs would be subject to rules-based heightened quoting
obligations vis-[agrave]-vis their assigned securities. For all
securities that would trade on the Exchange, including UTP securities,
the Exchange would have electronic registered market makers with
obligations similar to the obligations of market makers on NYSE Arca
Equities.
     The Exchange would not offer a Retail Liquidity Program
and related order types (Retail Orders and Retail Price Improvement
Orders).
     The Exchange would offer three trading sessions, but the
Early Trading Session would begin at 7:00 a.m. Eastern Time instead of
4:00 a.m. Eastern Time.
     ETP Holders would communicate with the Pillar trading
platform using Pillar phase II protocols only.
    Subject to rule approvals, the Exchange will announce the
transition of its cash equities trading to the Pillar trading system by
Trader Update, which the Exchange anticipates will be in the second
quarter of 2017.
    Because the Exchange would not be trading on both its current
Floor-based trading platform and the Pillar trading platform at the
same time, once trading on the Pillar trading platform begins,
specified current Exchange equities trading rules would no longer be
applicable. Accordingly, as described in more detail below, for each
current equities rule that would no longer be applicable when trading
on the Pillar

trading platform begins, the Exchange proposes to state in a preamble
to such rule that ``this rule is not applicable to trading on the
Pillar trading platform.'' \12\ Once the Exchange has transitioned to
the Pillar trading platform, the Exchange will file a separate proposed
rule change to delete those current rules that have been identified in
this filing as not being applicable to trading on Pillar. Current
Exchange rules governing equities trading that do not have this
preamble will continue to govern Exchange operations on its cash
equities trading platform.
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    \12\ The Exchange proposes to amend the description of Cash
Equities Pillar Platform Rules, which precedes Rule 1E, to delete
the last sentence, which currently provides that ``[t]he following
rules will not be applicable to trading on the Pillar trading
platform: Rules 7--Equities, 55--Equities, 56--Equities, 62--
Equities, and 80B--Equities.'' As proposed, the inapplicability of
these rules on the Pillar platform would be addressed in the
preamble that the Exchange proposes to add to each of these rules.
The Exchange further proposes to retain Rule 56--Equities when the
Exchange migrates to Pillar, as it addresses the unit of trading for
rights, which are listed on the Exchange.
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Proposed Rule Changes
    As noted above, the Exchange proposes rules that would be
applicable to cash equities trading on Pillar that are based on NYSE
Arca Equities Rules. As a global matter, the Exchange proposes non-
substantive differences as compared to the NYSE Arca Equities rules to
use the term ``Exchange'' instead of the terms ``NYSE Arca
Marketplace,'' ``NYSE Arca,'' or ``Corporation,'' and to use the terms
``mean'' or ``have the meaning'' instead of the terms ``shall mean'' or
``shall have the meaning.'' \13\
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    \13\ Because these non-substantive differences would be applied
throughout the proposed rules, the Exchange will not note these
differences separately for each proposed rule.
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Rule 1E
    As described in the Framework Filing, Rule 1E specifies definitions
that are applicable to trading on the Pillar trading platform. The
Exchange proposes the following additional definitions:
     Proposed Rule 1.1E(a) would define the term ``Exchange
Book'' as the Exchange's electronic file of orders. This proposed rule
is based on NYSE Arca Equities Rule 1.1(a), which defines the term
``NYSE Arca Book,'' with a non-substantive difference to not include
the following phrase in the Exchange's proposed rule: ``Which contains
all orders entered on the NYSE Arca Marketplace.'' The Exchange
believes that this clause is redundant of the description of the
Exchange Book.
     Proposed Rule 1.1E(g) would define the term ``Authorized
Trader'' or ``AT'' to mean a person who may submit orders to the
Exchange's cash equities Trading Facilities on behalf of his or her ETP
Holder. This proposed rule is based on NYSE Arca Equities Rule 1.1(g)
with non-substantive differences to reflect that the Exchange will not
have sponsored participants.
     Proposed Rule 1.1E(j) would define the term ``Core Trading
Hours'' to mean 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. This proposed rule is based on NYSE Arca Equities
rule 1.1(j).
     Proposed Rule 1.1E(k) would define the term ``Exchange''
to mean NYSE MKT. Because the term ``Exchange'' would be defined in
proposed Rule 1.1E(k), the Exchange proposes that Rule 1--Equities
would not be applicable to trading on the Pillar trading platform.
     Proposed Rule 1.1E(m) would define the term ``ETP'' to
mean an Equity Trading Permit issued by the Exchange for effecting
approved securities transactions on the Exchange's cash equity Pillar
trading platform pursuant to Rules 1E-13E. The proposed rule would
further provide that an ETP may be issued to a sole proprietor,
partnership, corporation, limited liability company or other
organization that is a registered broker or dealer pursuant to Section
15 of the Securities Exchange Act of 1934, as amended, and which has
been approved by the Exchange as a member organization. This proposed
rule text is based on NYSE Arca Equities Rule 1.1(m) with non-
substantive differences to specify that an ETP is the permit for
effecting approved securities transaction on the Exchange's cash equity
Pillar trading platform pursuant to Rules 1E-13E. As described in
greater detail below, the Exchange proposes to use ETPs to permission
its member organizations to trade on its Pillar cash equities trading
platform.
     Proposed Rule 1.1E(n) would define the term ``ETP Holder''
to mean a member organization that has been issued an ETP. The proposed
rule would further provide that an ETP Holder would agree to be bound
by the Rules of the Exchange, and by all applicable rules and
regulations of the Securities and Exchange Commission. This proposed
rule is based on NYSE Arca Equities Rule 1.1(n), with a proposed
difference to reference the term ``member organization,'' which is
defined in Rule 2(b)--Equities.
     Proposed Rule 1.1E(p) would define the term ``General
Authorized Trader'' or ``GAT'' to mean an AT who performs only non-
market making activities on behalf of an ETP Holder. This proposed rule
is based on NYSE Arca Equities Rule 1.1(p) without any substantive
differences.
     Proposed Rule 1.1E(u) would define the term ``Marketable''
to mean, for a Limit Order, an order than can be immediately executed
or routed. The proposed rule would further provide that Market Orders
are always considered Marketable. This proposed rule text is based on
NYSE Arca Equities Rule 1.1(u).
     Proposed Rule 1.1E(gg) would define the term ``Official
Closing Price'' as the reference price to determine the closing price
in a security for purposes of Rule 7E Equities Trading. Proposed Rules
1.1E(gg)(1)-(5) would specify how the Exchange would determine an
Official Closing Price in all circumstances, including when the
Exchange is unable to conduct a Closing Auction in one or more
Exchange-listed securities due to a systems or technical issue, and is
based on NYSE Arca Equities Rule 1.1(gg) without any substantive
differences. Proposed Rule 1.1E(gg), together with proposed Rule 7.35E
described in greater detail below, would obviate current Rule 123C--
Equities (The Closing Procedures).\14\ Accordingly, the Exchange
proposes to specify that Rule 123C--Equities would not be applicable to
trading on the Pillar trading platform.
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    \14\ Rule 123C(1)(e)--Equities sets forth how the Exchange
currently determines the Official Closing Price of a security listed
on the Exchange.
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     Proposed Rule 1.1E(rr) would define the term ``security''
and ``securities'' to mean any security as defined in in Rule 3(a)(10)
under the Securities Exchange Act of 1934; provided, however, that for
purposes of Rule 7E such terms mean any NMS stock. This proposed rule
is based on NYSE Arca Equities Rule 1.1(ss) [sic] without any
substantive differences. Because the term ``security'' would be defined
in proposed Rule 1.1E(rr), the Exchange proposes to specify that Rules
3--Equities and 4--Equities, which define the terms ``Security'' and
``Stock'' would not be applicable to trading on the Pillar trading
platform. In addition, because the Exchange would not be trading bonds
on its Pillar cash equities trading platform, the Exchange proposes to
specify that Rule 5--Equities would not be applicable to trading on the
Pillar trading platform.
     Proposed Rule 1.1E(ss) would define the term ``Self-
Regulatory

Organization (`SRO')'' as having the same meaning as set forth in the
provisions of the Securities Exchange Act of 1934 relating to national
securities exchanges. This proposed rule text is based on NYSE Arca
Equities Rule 1.1(ss) without any substantive differences.
     Proposed Rule 1.1E(xx) would define the term ``Trading
Facilities'' or ``Facilities'' to mean any and all electronic or
automated trading systems provided by the Exchange to ETP Holders. This
proposed rule text is based on NYSE Arca Equities Rule 1.1(xx) without
any substantive differences.
     The Exchange proposes to amend Rule 1.1E(hhh) to add the
letter ``E'' to the reference to Rule 7 in this rule.
Rule 2E
    The Exchange proposes to amend Rule 2E to delete the term
``Reserved'' and re-name this rule as ``Equity Trading Permits.'' The
Exchange proposes rules to support Equity Trading Permits (``ETP'') on
the Exchange for trading on the Pillar trading platform that are based
on NYSE Arca Equities Rule 2.
    Currently, Rule 300--Equities governs trading licenses on the
Exchange. Under that rule, a trading license issued by the Exchange is
required to effect transactions on the floor of the Exchange or through
any facility thereof and an organization may acquire and hold a trading
license only if and for so long as such organization is qualified and
approved to be a member organization of the Exchange. The Exchange's
current trading license rule is identical to NYSE Rule 300 and a single
trading license provides an Exchange member organization with the
ability to trade on both the Exchange and NYSE.
    To trade on Pillar, the Exchange proposes that a member
organization would need an ETP.\15\ Accordingly, a trading license
issued under Rule 300--Equities would not permit a member organization
to trade on the Exchange's Pillar cash equities trading platform.
Instead, as proposed, a member organization would be eligible to obtain
an ETP to trade on the Exchange's cash equities Pillar trading
platform. As noted above, member organizations that have been issued an
ETP would be referred to in Exchange rules as ``ETP Holders.'' \16\
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    \15\ The Exchange will file a separate proposed rule change to
specify fees for cash equities trading on NYSE MKT when it
transitions to Pillar.
    \16\ At this time, the Exchange is not proposing rules,
comparable to those in NYSE Arca Equities Rule 2, that specify the
requirements to be approved as a member of the Exchange.
Accordingly, the Exchange proposes that the rule numbers under Rule
2E that would support membership requirements would be designated as
``Reserved.'' Instead, the Exchange's current rules governing the
definition of a member organization and the requirements to be
approved as a member organization would continue to apply.
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    In addition, because the Exchange would operate as a fully-
automated market, the Exchange proposes rules that mirror those of NYSE
Arca Equities with respect to requirements relating to employees of ETP
Holders. Accordingly, ETP Holders accessing the Exchange on its Pillar
cash equities trading platform would have the same employee
registration requirements as NYSE Arca Equities.
     Proposed Rule 2.2E (Qualification of Applicants) would
provide that an ETP may be held by an entity that is approved as a
member organization. This proposed rule is based in part on the first
sentence of NYSE Arca Equities Rule 2.2, which provides that an ETP on
NYSE Arca Equities may be held by an entity that is a registered broker
or dealer pursuant to Section 15 of the Act, as amended, including sole
proprietors, partnerships, limited liability partnerships,
corporations, and limited liability companies. The Exchange would not
include in its Rule 2.2E the text in NYSE Arca Equities Rule 2.2
relating to registered broker dealers because it is duplicative of Rule
2(b)(i), which defines the term member organization on the Exchange.
     Proposed Rule 2.4E (Denial or Conditions to ETPs) would
govern the denial or conditions to ETPs and is based on NYSE Arca
Equities Rule 2.4 without any substantive differences. Paragraphs (a)
and (b) of proposed Rule 2.4E would specify the circumstances when the
Exchange could deny or condition trading privileges on the Exchange,
and these circumstances are identical to those specified in NYSE Arca
Equities Rule 2.4(a) and (b).
    The proposed rule would separately specify the Series 7 Examination
requirement for traders of ETP Holders for which the Exchange is the
Designated Examining Authority. These proposed requirements are
identical to the Series 7 Examination requirements for ETP Holders on
NYSE Arca Equities. The Exchange proposes a non-substantive difference
to paragraphs (c) and (f) of proposed Rule 2.4E to cross-reference Rule
9522 instead of NYSE Arca Equities Rule 10.
     Proposed Rule 2.6E (Revocable Privilege) would specify
that the issuance of an ETP would constitute only a revocable privilege
and confers on its holder no right or interest of any nature to
continue as an ETP Holder. This proposed rule is based on NYSE Arca
Equities Rule 2.6 without any differences. The Exchange also proposes
to add a sub-header to Exchange rules immediately preceding Rule 2.6E
that would provide ``Requirements of Holding an ETP.'' This proposed
text is based on the sub-header before NYSE Arca Equities Rule 2.6 that
provides ``Requirements of Holding an ETP Requirements Applicable
Generally.'' The Exchange proposes an abbreviated form of the sub-
header to eliminate unnecessary text. Because proposed Rule 2.6E,
together with proposed Rule 2.4E, would establish the requirements for
a member organization to obtain an ETP, the Exchange proposes that Rule
300--Equities would not be applicable to trading on the Pillar trading
platform.
     Proposed Rule 2.17E (Activity Assessment Fees) would
specify the Activity Assessment Fees applicable for securities
transactions effected on the Exchange as required by Section 31 of the
Act. This proposed rule is based on current Rule 440H--Equities without
any substantive differences. Specifically, the rule text is based on
Supplementary Material .10, .20, and the last sentence of .30 to Rule
440H--Equities with non-substantive differences to use Pillar
terminology. Proposed Rule 2.17E is therefore designed to retain the
existing requirements relating to Activity Assessment Fees, but use new
rule numbering for trading on the Pillar trading platform that is
consistent with the Framework Filing. The Exchange does not propose to
move rule text based on the first three sentences of Supplementary
Material .30 to Rule 440H--Equities because that rule text is obsolete
as it relates to a temporary program that automatically sunsetted in
2009.
    Because proposed Rule 2.17E would set forth Activity Assessment
Fees, the Exchange proposes that Rule 440H--Equities would not apply to
trading on the Pillar trading platform.
     Proposed Rule 2.21E (Employees of ETP Holders
Registration) would specify the registration requirements for employees
of ETP Holders. This proposed rule is based on NYSE Arca Equities Rule
2.21 without any substantive differences. Accordingly, this rule would
specify employee registration requirements for trading on the Exchange,
including examination requirements, continuing education requirements,
and procedures to register employees.
    Because proposed Rule 2.21E, together with proposed Rule 2.4E,
would specify employee registration

requirements applicable to trading on the Exchange on its cash equities
Pillar trading platform, the Exchange proposes to specify that the
following rules, which govern current trading employee registration
requirements, would not be applicable to trading on the Pillar trading
platform: Rule 345--Equities (Employees--Registration, Approval,
Records) and Rule 345A--Equities (Continuing Education for Registered
Persons). The Exchange also proposes that the requirement for a member
organization that a member organization that conducts a DMM business
has a Series 14A requirement, as set forth in Rule 342--Equities, would
not be applicable to trading on the Pillar trading platform. However,
the Exchange would retain the non-Floor-based Compliance Supervisor
requirements of Rule 342--Equities. Accordingly, a member organization
engaged in a public business in addition to a DMM business must have a
qualified compliance supervisor that has passed the Series 14
Examination, but would no longer need the Series 14A Examination.
     Proposed Rule 2.22E would specify the Exchange Back-Up
Systems and Mandatory Testing Requirements of the Exchange and is based
on Rule 49(b)--Equities without any substantive changes. The Exchange
proposes to move this rule text to Rule 2.22E so that it has the same
rule number as the rules of NYSE Arca Equities. Because member
organizations trading on the Exchange's cash equities Pillar trading
platform would be designated as ``ETP Holders'' in Exchange rules, the
Exchange proposes to use the term ``ETP Holder'' instead of ``member
organization'' in proposed Rule 2.22E.
    The Exchange proposes to designate the entirety of Rule 49--
Equities (Exchange Business Continuity and Disaster Recovery Plans and
Mandatory Testing) as not applicable to trading on the Pillar trading
platform. Because the Exchange would trade in its secondary data center
under the same rules as would be applicable to trading on its primary
data center, the procedures specified in Rule 49(a)--Equities would no
longer be applicable.
     Proposed Rule 2.24E (ETP Books and Records) would
establish an ETP Holder's books and records requirements and is based
on NYSE Arca Equities Rule 2.24 without any substantive differences.
Because proposed Rule 2.24E would establish the same requirements as
set forth in current Rule 440--Equities (Books and Records), the
Exchange proposes that Rule 440--Equities would not be applicable to
trading on the Pillar trading platform.
Rule 3E
    The Exchange proposes to amend Rule 3E to delete the term
``Reserved'' and re-name it ``Organization and Administration.''
Proposed Part I of Rule 3E would be designated as ``Reserved.''
Proposed Part II of Rule 3E would be designated ``Regulation'' and
proposed Part III of Rule 3E would be designated ``Dues, Fees, and
Fines.'' Except as described below, the rules under Rule 3E would be
designated as ``Reserved'' because the subject matter of the NYSE Arca
Equities Rules with corresponding numbers are the subject of existing
Exchange rules that would continue to apply.\17\
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    \17\ NYSE Arca Equities Rule 3 Part I relates to board
committees, which are described in the Exchange's Operating
Agreement, which is available here: https://www.theice.com/publicdocs/nyse/regulation/nyse-mkt/Tenth_Amended_and_Restated_Operating_Agreement_of_NYSE_MKT_LLC.pdf.
NYSE Arca Equities Rules 3.4 and 3.5 relate to the self-regulatory
responsibilities of NYSE Arca for the administration and enforcement
of rules governing the operation of NYSE Arca Equities, its wholly
owned subsidiary, and the delegation of authority from NYSE Arca to
NYSE Arca Equities. Because the Exchange is itself a self-regulatory
organization, these rules are inapplicable. The subject matter of
NYSE Arca Equities Rule 3 Part III is addressed in the Exchange's
Disciplinary Rules and Rule 2B--Equities.
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     Proposed Rule 3.6E (Surveillance Agreements) would specify
that the Exchange may enter into agreements with domestic and foreign
self-regulatory organizations providing for the exchange of information
and other forms of mutual assistance for market surveillance,
investigative, enforcement and other regulatory purposes. This proposed
rule is based on NYSE Arca Equities 3.6 with no substantive
differences. Because this rule covers the same subject matter as Rule
27--Equities, the Exchange proposes that that Rule 27--Equities would
not be applicable to trading on the Pillar trading platform.
     Proposed Rule 3.11E (Fingerprint-Based Background Checks
of Exchange Employees and Others) would establish the Exchange's
requirements for fingerprint-based background checks of Exchange
employees and others. The proposed rule is based on NYSE Arca Equities
Rule 3.11 and Rule 28--Equities, which are identical rules. The
Exchange proposes to move the rule text from Rule 28--Equities to Rule
3.11E so that it has the same rule number as the same subject matter in
the rules of NYSE Arca Equities. The Exchange further proposes that
Rule 28--Equities would not be applicable to trading on the Pillar
trading platform.
Rule 6E
    The Exchange proposes to amend Rule 6E to delete the term
``Reserved'' and re-name it ``Business Conduct.'' The Exchange proposes
rules governing specified business conduct. Except as described below,
the rules under Rule 6E would be designated as ``Reserved.''
     Proposed Rule 6.3E (Prevention of the Misuse of Material,
Nonpublic Information) would establish the Exchange's requirement that
every ETP Holder establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the misuse of material, non-
public information by such ETP Holder or persons associated with such
ETP Holder. This proposed rule is based on NYSE Arca Equities Rule 6.3
without any substantive differences. The Exchange proposes a non-
substantive difference to refer to the Exchange's ``regulatory staff''
instead of ``Surveillance Department.''
     Proposed Rule 6.10E (ETP Holders Holding Options) would
specify an ETP Holder's obligations with respect to trading on the
Exchange when holding any options that are not issued by the Options
Clearing Corporation. This proposed rule is based on NYSE Arca Equities
Rule 6.10 without any substantive differences. Current Rule 96--
Equities (Limitations on Members' Trading Because of Options) sets
forth a requirement similar to proposed Rule 6.10E, but that rule is
only applicable to a member's trading while on the Floor for his own
account or for any account in which he, his member organization, or any
member, principal executive, or approved person of such organization is
directly or indirectly interest. As proposed, Rule 6.10E would set
forth these requirements and they would be applicable to all ETP
Holders. In addition, the Exchange proposes that Rule 96--Equities
(Limitation on Members' Trading Because of Options) would not be
applicable to trading on the Pillar trading platform.
     Proposed Rule 6.12E (Joint Accounts) would describe
requirements relating to joint accounts. The proposed rule is based on
NYSE Arca Equities Rule 6.12 without any substantive differences. The
Exchange proposes a non-substantive difference in that the proposed
rule would not include the phrase ``Application of the System'' because
such terms are not defined on the Exchange. The Exchange proposes that
Rules 93--Equities (Trading for Joint Account) and 94--Equities
(Designated Market Marker's or Odd-Lot

Dealers Interest in Joint Accounts) would not be applicable to trading
on the Pillar trading platform.
     Proposed Rule 6.15E (Prearranged Trades) would prohibit
prearranged trades and is based on NYSE Arca Equities Rule 6.15(b)
without any substantive differences. The Exchange proposes that Rule
78--Equities, which similarly prohibits prearranged trades, would not
be applicable to trading on the Pillar trading platform. The Exchange
would not be adding rule text based on NYSE Arca Equities Rule 6.15(a),
relating to prohibitions on engaging in manipulative practices or
operations, because Rule 6140--Equities already establishes these
requirements.
Rule 7E Equities Trading
    The Exchange proposes additional rules under Rule 7E Equities
Trading.
    As previously established in the Framework Filing, Section 1 of
Rule 7E specifies the General Provisions relating to cash equities
trading on the Pillar trading platform. The Exchange proposes the
following additional rules:
     Proposed Rule 7.1E (Hours of Business) would specify that
the Exchange would be open for the transaction of business on every
business day. The proposed rule also sets forth when the CEO may take
specified actions, such as halting or suspending trading in some or all
securities on the Exchange. The proposed rule is based on NYSE Arca
Equities Rule 7.1 and Rule 51--Equities. The Exchange proposes that
Rule 51--Equities would not be applicable to trading on the Pillar
trading platform. In addition, because the definition of the term
``business day'' in Rule 12--Equities would be redundant of proposed
Rule 7.1E, the Exchange proposes that Rule 12--Equities would not be
applicable to trading on the Pillar trading platform.
     Proposed Rule 7.2E (Holidays) would establish the holidays
when the Exchange would not be open for business. The proposed rule is
based on NYSE Arca Equities Rule 7.2 and Supplementary Material .10 to
Rule 51--Equities, including text that provides that when any holiday
observed by the Exchange falls on a Sunday, the Exchange would not be
open for business on the succeeding Monday, which is in Rule 51--
Equities.
     Proposed Rule 7.3E (Commissions) would establish that ETP
Holders may not charge fixed commissions and must indicate whether
acting as a broker or as principal. The proposed rule is based on NYSE
Arca Equities Rule 7.3 without any substantive differences. Because
Rule 388--Equities (Prohibition Against Fixed Rates of Commission) also
prohibits fixed commissions, the Exchange proposes that Rule 388--
Equities would not be applicable to trading on the Pillar trading
platform.
     Proposed Rule 7.4E (Ex-Dividend or Ex-Right Dates) would
establish the ex-dividend and ex-rights dates for stocks traded regular
way. The proposed rule is based on NYSE Arca Equities Rule 7.4 without
any substantive differences. The Exchange proposes that Rule 235--
Equities would not be applicable to trading on the Pillar trading
platform.
     Proposed Rule 7.7E (Transmission of Bids or Offers) would
establish that all bids and offers on the Exchange would be anonymous
unless otherwise specified by the ETP Holder. The proposed rule is
based on NYSE Arca Equities Rule 7.7 without any substantive
differences.
     Proposed Rule 7.8E (Bid or Offer Deemed Regular Way) would
establish that all bids and offers would be considered to be ``regular
way.'' This proposed rule text is based on NYSE Arca Equities Rule
7.8E. As proposed, the Exchange would not accept orders that, if
executed, would not settle regular way. Accordingly, the Exchange
proposes that Rules 12--Equities, 14--Equities, 73--Equities, which
each specify rules for orders that are not entered ``regular way,''
would not be applicable to trading on the Pillar trading platform.
Currently, the Exchange accepts bids and offers that are not made
regular way only from Floor brokers.
     Proposed Rule 7.9E (Execution Price Binding) would
establish that, notwithstanding Exchange rules governing clearly
erroneous executions, the price at which an order is executed is
binding notwithstanding that an erroneous report is rendered. This
proposed rule text is based on NYSE Arca Equities Rule 7.9 without any
substantive differences. The Exchange proposes that Rules 71--Equities
(Precedence of Highest Bid and Lowest Offer) and 411--Equities
(Erroneous Reports) would not be applicable to trading on the Pillar
trading platform.
     Proposed Rule 7.10E (Clearly Erroneous Executions) would
set forth the Exchange's rules governing clearly erroneous executions.
The proposed rule is based on NYSE Arca Equities Rule 7.10 without any
substantive differences. The Exchange proposes rule text based on NYSE
Arca Equities rather than current Rule 128--Equities (Clearly Erroneous
Executions) because the NYSE Arca Equities version of the rule uses the
same terminology that the Exchange is proposing for the Pillar trading
platform, e.g., references to Early, Core, and Late Trading Sessions.
Accordingly, the Exchange proposes that Rule 128--Equities (Clearly
Erroneous Executions) would not be applicable to trading on the Pillar
trading platform.
     Proposed Rule 7.11E (Limit Up--Limit Down Plan and Trading
Pauses in Individual Securities Due to Extraordinary Market Volatility)
would specify how the Exchange would comply with the Regulation NMS
Plan to Address Extraordinary Market Volatility (``LULD Plan'').\18\
Because ETP Holders would communicate with the Exchange's proposed
Pillar trading platform using Pillar phase II protocols only, the
proposed rule is based on NYSE Arca Equities Rule 7.11(a) rule text
governing Pillar phase II protocols without any substantive
differences.\19\ In addition, the Exchange proposes that it would
include rule text based on current NYSE Arca Equities Rule 7.11(b)(2)
and (b)(5) only as the remaining provisions of NYSE Arca Equities Rule
7.11(b) are obsolete now that the LULD Plan has been fully implemented.
The Exchange proposes that Rule 80C--Equities would not be applicable
to trading on the Pillar trading platform.
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 77679 (April 21,
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order
approving 10th Amendment to the LULD Plan).
    \19\ See Securities Exchange Act Release No. 79688 (December 23,
2016), 81 FR 96534 (December 30, 2016) (SR-NYSEArca-2016-170)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change).
---------------------------------------------------------------------------

     The Exchange proposes to amend paragraph (c)(i) of Rule
7.12E to change the rule cross reference from Rule 123D--Equities to
Rule 7.35E(e). As described in greater detail below, the Exchange
proposes Rule 7.35E to govern its auctions, including auctions
following a trading halt. Accordingly, the procedures for reopening a
security specified in Rule 123D--Equities would not be applicable on
the Pillar trading platform.
     Proposed Rule 7.13E (Trading Suspensions) would establish
authority for the Chair or the CEO of the Exchange to suspend trading
in any and all securities that trade on the Exchange if such suspension
would be in the public interest. This proposed rule is based on NYSE
Arca Equities Rule 7.13 with non-substantive differences to use the
term ``CEO'' instead of ``President'' and to omit a cross reference to
a rule that is not applicable on the Exchange.
     Proposed Rule 7.14E (Clearance and Settlement) would
establish the requirements regarding an ETP Holder's arrangements for
clearing. Because all

post-trade functions on the Exchange's Pillar trading platform would
follow the NYSE Arca Equities procedures for post-trade processing, the
Exchange proposes rules that are based on NYSE Arca Equities rules
governing clearing. Accordingly, the proposed rule is based on NYSE
Arca Equities Rule 7.14 without any substantive differences. The
Exchange proposes that its current rules governing clearing, Rules
130--Equities and 132--Equities, would not be applicable to trading on
the Pillar trading platform.\20\
---------------------------------------------------------------------------

    \20\ See also infra proposed Rules 7.33E (Capacity Codes) and
7.41E (Clearance and Settlement).
---------------------------------------------------------------------------

     Proposed Rule 7.15E (Stock Option Transactions) would
establish requirements for Market Makers relating to pool dealing and
having an interest in an option that is not issued by the Options
Clearing Corporation. The proposed rule is based on NYSE Arca Equities
Rule 7.15 without any substantive differences. Because the proposed
rule covers the same subject matter as Rule 105--Equities, the Exchange
proposes that this rule would not be applicable to trading on the
Pillar trading platform.
     Proposed Rule 7.16E (Short Sales) would establish
requirements relating to short sales. The proposed rule is based on
NYSE Arca Equities Rule 7.16 without any substantive differences.
Because the proposed rule covers the same subject matter as Rule 440B--
Equities (Short Sales), the Exchange proposes that Rule 440B--Equities
would not be applicable to trading on the Pillar trading platform.
     Proposed Rule 7.17E (Firm Orders and Quotes) would
establish requirements that all orders and quotes must be firm. This
proposed rule is based on NYSE Arca Equities Rule 7.17 without any
substantive differences. Because on the Pillar trading platform, the
Exchange would only publish automated quotations consistent with
proposed Rule 7.17E, the Exchange proposes that Rule 60--Equities
(Dissemination of Quotations) would not be applicable to trading on the
Pillar trading platform.\21\
---------------------------------------------------------------------------

    \21\ See also infra proposed Rule 7.36E regarding the display of
orders on the Pillar trading platform.
---------------------------------------------------------------------------

    As noted above, the Exchange will file a separate proposed rule
change to establish rules relating to Market Makers, which will be in
Section 2 of Rule 7E. The Exchange has proposed Rule 7.18E in the ETP
Listing Rules Filing.\22\
---------------------------------------------------------------------------

    \22\ See supra note 10. The Exchange will file an amendment to
the ETP Listing Rules Filing to add rule text for proposed
paragraphs (b) and (c) of Rule 7.18E that would be based on NYSE
Arca Equities Rule 7.18(b) and (c).
---------------------------------------------------------------------------

    Section 3 of Rule 7E sets forth Exchange trading rules for the
Pillar trading platform. As noted above, the Exchange proposes certain
substantive differences to how the Exchange would operate on the Pillar
trading platform compared to how NYSE Arca Equities operates. These
substantive differences would be reflected in the proposed rules
governing Orders and Modifiers and Trading Sessions.
    Proposed Rule 7.31E (Orders and Modifiers) would specify the orders
and modifiers that would be available on the Exchange on the Pillar
trading platform. The Exchange proposes to offer the same types of
orders and modifiers that are available on NYSE Arca Equities, with
specified substantive differences.
    Proposed Rule 7.31E is based on NYSE Arca Equities Rule 7.31 with
the following differences. With respect to Self-Trade Prevention
(``STP'') Modifiers, because the Exchange would be operating on Pillar
phase II protocols only, STPs would be based on the MPID of an ETP
Holder and not on an ETP ID. Accordingly, proposed Rule 7.31E(i)(2)
would not include references from NYSE Arca Equities Rule 7.31(i)(2)
relating to ETPIDs. In addition, Arca Only Orders, which are described
in NYSE Arca Equities Rule 7.31(e)(1), would be named ``MKT Only
Orders'' on the Exchange, as described in proposed Rule 7.31E(e)(1).
The Exchange does not propose any substantive differences to how MKT
Only Orders would function as compared to Arca Only Orders on NYSE Arca
Equities. Next, the Exchange proposes that for Primary Only Day/IOC
Orders, an ETP Holder may specify that an order in NYSE Arca-listed
securities may include an instruction to be routed to NYSE Arca as a
routable order, as set forth in proposed Rule 7.31E(f)(1)(B). Finally,
because when operating on the Pillar phase II protocols, the Exchange
would not accept order types with conflicting order instructions, the
Exchange proposes not to include in proposed Rule 7.31E text based on
Commentary .02 to NYSE Arca Equities Rule 7.31.
    Because proposed Rule 7.31E would govern orders and modifiers, the
Exchange proposes that Rule 13--Equities (Orders and Modifiers) would
not be applicable to trading on the Pillar trading platform. In
addition, references to Trading Collars in Rule 1000(c)--Equities would
not be applicable to trading on the Pillar Trading platform.\23\
---------------------------------------------------------------------------

    \23\ As described in greater detail below, the Exchange proposes
that the entirety of Rule 1000--Equities would not be applicable to
trading on the Pillar trading platform.
---------------------------------------------------------------------------

    Proposed Rule 7.34E would specify trading session on the Exchange.
Similar to NYSE Arca Equities, the Exchange proposes that on the Pillar
trading platform, it would have Early, Core, and Late Trading Sessions.
Accordingly, proposed Rule 7.34E is based on NYSE Arca Equities Rule
7.34, with non-substantive differences. The Exchange proposes one
substantive difference from NYSE Arca Equities Rule 7.34 in that the
Early Trading Session would begin at 7:00 a.m. Eastern Time rather than
4:00 a.m. Eastern Time. Similar to NYSE Arca Equities, the Exchange
would begin accepting orders 30 minutes before the Early Trading
Session begins, which means order entry acceptance would begin at 6:30
a.m. Eastern Time instead of at 3:30 a.m. Eastern Time. These
differences would be reflected in proposed Rule 7.34E(a)(1).
    In addition, because the Exchange would use Pillar phase II
protocols, proposed Rule 7.34E(b)(1) would specify that an order
entered without a trading session designation would be rejected. In
addition, the Exchange proposes that it would not include rule text
based on NYSE Arca Equities Rule 7.34(b)(2) or (3).
    The following proposed rules in Section 3 of Rule 7E would be based
on existing NYSE Arca Equities rules without any substantive
differences:
     Proposed Rule 7.29E (Access) would provide that the
Exchange would be available for entry and cancellation of orders by ETP
Holders with authorized access. To obtain authorized access to the
Exchange, each ETP Holder would be required to enter into a User
Agreement. Proposed Rule 7.29E is based on NYSE Arca Equities Rule
7.29(a), without any substantive differences. The Exchange does not
propose to include rule text based on NYSE Arca Equities Rule 7.29(b)
because the Exchange would not offer sponsored access.
     Proposed Rule 7.30E (Authorized Traders) would establish
requirements for ETP Holders relating to ATs. The proposed rule is
based on NYSE Arca Equities Rule 7.30, without any substantive
differences.
     Proposed Rule 7.32E (Order Entry) would establish
requirements for order entry size. The proposed rule is based on NYSE
Arca Equities Rule 7.32 without any substantive differences. The
Exchange proposes that the current maximum order size references before
subparagraph (a) in Rule 1000--Equities would not be applicable to
trading on the Pillar trading platform.
     Proposed Rule 7.33E (Capacity Codes) would establish
requirements for

capacity code information that ETP Holders must include with every
order. The proposed rule is based on NYSE Arca Equities Rule 7.33
without any substantive differences. The Exchange proposes to use the
title ``Capacity Codes'' instead of ``ETP Holder User,'' for proposed
Rule 7.33E, which the Exchange believes provides more clarity regarding
the content of the proposed rule. The Exchange proposes that the
capacity code requirements in Supplementary Material .30(9) to Rule
132--Equities would not be applicable to trading on the Pillar trading
platform.
     Proposed Rule 7.35E (Auctions) would establish
requirements for auctions on the Exchange. Because the Exchange
proposes to automate all auctions and not have a DMM facilitate such
auctions, the proposed rule is based on NYSE Arca Equities Rule 7.35
without any substantive differences. The Exchange proposes that
paragraph (a)(10)(A), regarding Auction Collars for Trading Halt
Auctions, which is based on a pilot rule of NYSE Arca Equities, would
be in effect until SR-NYSEArca-2016-130 has been approved and a
proposed rule change based on SR-NYSEArca-2016-130 for the Exchange is
effective and operative.\24\ Because proposed Rule 7.35E would govern
all auctions, including the Early Open Auction, Core Open Auction,
Trading Halt Auction, IPO Auction, and Closing Auction, the Exchange
proposes that the following rules, which govern auctions on the
Exchange, would not be applicable to trading on the Pillar trading
platform: Rule 15--Equities (governing pre-opening indications and
Opening Order Imbalance Information), Rule 115A--Equities (governing
the opening process), Supplementary Material .40 to Rule 116--Equities
(governing pair off of MOC and LOC orders at the close),\25\ Rule
123C--Equities (governing the closing process), and Rule 123D--Equities
(governing the opening and trading halts).
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release No. 79705 (December 29,
2016), 82 FR 1419 (January 5, 2017) (SR-NYSEArca-2016-169) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change).
    \25\ As described below, because the Exchange would not have
Floor-based DMMs or trading, the remainder of Rule 116--Equities
would not be applicable to trading on the Pillar trading platform.
---------------------------------------------------------------------------

     Proposed Rule 7.36E (Order Ranking and Display) would
establish requirements for how orders would be ranked and displayed at
the Exchange. The proposed rule is based on NYSE Arca Equities Rule
7.36 without any substantive differences.
     Proposed Rule 7.37E (Order Execution and Routing) would
establish requirements for how orders would execute and route at the
Exchange, the data feeds that the Exchange would use, and Exchange
requirements under the Order Protection Rule and the prohibition on
locking and crossing quotations in NMS Stocks. This proposed rule is
based on NYSE Arca Equities Rule 7.37 with one substantive difference.
Because the Exchange would not be taking in data feeds from broker
dealers or routing to Away Markets that are not displaying protected
quotations, the Exchange proposes that proposed Rule 7.37E would not
include rule text from paragraph (b)(3) of NYSE Arca Equities Rule
7.37, which specifies that an ETP Holder can opt out of routing to Away
Markets that are not displaying a protected quotation, i.e., broker
dealers, or paragraph (d)(1) of NYSE Arca Equities Rule 7.37, which
specifies that NYSE Arca Equities receives data feeds directly from
broker dealers. The subject matter of proposed Rules 7.36E and 7.37E
would address a cross-section of current rules. Accordingly, the
Exchange proposes that the following rules would not be applicable to
trading on the Pillar trading platform: Rule 15A--Equities (Order
Protection Rule), Rule 19--Equities (Locking or Crossing Protected
Quotations in NMS Stocks), Rule 60--Equities (Dissemination of
Quotations), Rule 61--Equities (Recognized Quotations), Rule 72--
Equities (Priority of Bids and Offers and Allocation of Executions),
Supplementary Material .15 to Rule 79A--Equities,\26\ Rule 1000(a) and
(b)--Equities (Automatic Executions), Rule 1001--Equities (Execution of
Automatically Executing Orders), Rule 1002--Equities (Availability of
Automatic Execution Feature), and Rule 1004--Equities (Election of Buy
Minus and Sell Plus).
---------------------------------------------------------------------------

    \26\ As described below, the Exchange proposes that Rule 79A in
its entirety would not be applicable on the Pillar trading platform.
---------------------------------------------------------------------------

     Proposed Rule 7.38E (Odd and Mixed Lot) would establish
requirements relating to odd lot and mixed lot trading on the Exchange.
The proposed rule is based on NYSE Arca Equities Rule 7.38 without any
substantive differences.
     Proposed Rule 7.40E (Trade Execution and Reporting) would
establish the Exchange's obligation to report trades to an appropriate
consolidated transaction reporting system. The proposed rule is based
on NYSE Arca Equities Rule 7.40 without any substantive differences.
Because all reporting of transactions would be automated, the Exchange
proposes that Rule 128A--Equities would not be applicable to trading on
the Pillar trading platform.
     Proposed Rule 7.41E (Clearance and Settlement) would
establish requirements that all trades be processed for clearance and
settlement on a locked-in and anonymous basis. Specifically, proposed
Rules 7.41E(a), (b), (d), and (e) are based on NYSE Arca Equities Rule
7.41(a), (b), (d), and (e) with non-substantive differences not to
include references to sponsored access, because the Exchange will not
offer sponsored access. Proposed Rule 7.41E(c) is based on NYSE Rule
130(b), which reflects the circumstances when the Exchange may reveal
the contra-party identity.\27\ In addition, proposed Commentary .10 to
Rule 7.41E is based on Supplementary Material .10 to Rule 132, defining
the term ``Qualified Clearing Agency.'' The Exchange proposes to define
this term for use in proposed Rule 7.41E(c). Because all trades would
be reported by the Exchange on a locked-in basis, the Exchange proposes
to specify that the following rules relating to clearance and
settlement would not be applicable to trading on the Pillar trading
system: Rule 130--Equities (Overnight Comparison of Exchange
Transactions), Rule 132--Equities (Comparison and Settlement of
Transactions Through a Fully-Interfaced or Qualified Clearing Agency),
Rule 133--Equities (Comparison--Non-cleared Transactions), Rule 134
(Differences and Omissions--Cleared Transactions QTs), Rule 135--
Equities (Differences and Omissions--Non-cleared Transactions (`DKs')),
and Rule 136--Equities (Comparison--Transactions Excluded from a
Clearance).
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release No. 77930 (May 26,
2016), 81 FR 35410 (June 2, 2016) (SR-NYSE-2016-38) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change).
---------------------------------------------------------------------------

    As noted above, the Exchange would not offer a Retail Liquidity
Program when it trades on the Pillar trading platform. Accordingly, the
Exchange would not propose rules based on NYSE Arca Equities Rule 7.44
and proposed Rules 7.36E, 7.37E, and 7.38E would not include cross
references to Rule 7.44. The Exchange proposes that Rule 107C--Equities
would not be applicable to trading on the Pillar trading platform.
    Section 4 of Rule 7E would establish the Operation of a Routing
Broker. Specifically, proposed Rule 7.45E (Operation of a Routing
Broker) would establish the outbound and inbound function of the
Exchange's routing broker and the cancellation of orders and the
Exchange's error account. The proposed rule is based on NYSE Arca

Equities Rule 7.45 without any substantive differences. The Exchange
proposes that Rule 17--Equities (Use of Exchange Facilities and Vendor
Services) would not be applicable to trading on the Pillar trading
platform.\28\
---------------------------------------------------------------------------

    \28\ The subject matter of Rule 17(a)--Equities would be
addressed in proposed Rule 13.2E. On Pillar, the Exchange would not
operate with vendors and therefore would not need a vendor liability
rule, as described in Rule 17(b)--Equities. Current Rule 17(c)--
Equities would not be applicable because it addresses the same
subject matter as proposed Rule 7.45E.
---------------------------------------------------------------------------

    Section 5 of Rule 7E would establish requirements relating to the
Plan to Implement a Tick Size Pilot Program. Proposed Rule 7.46E (Tick
Size Pilot Plan) would specify such requirements. The proposed rule is
based on NYSE Arca Equities Rule 7.46 with a proposed substantive
difference not to include cross references to a Retail Liquidity
Program in proposed Rules 7.46E(c), (d)(1), and (e)(1). The Exchange
also proposes to designate proposed Rules 7.46E(f)(4) and (f)(5)(B) as
``Reserved'' because the Exchange would not support Retail Price
Improvement Orders or routing to Away Markets that are not displaying
protected quotations on Pillar. The remaining differences are all non-
substantive, including using the term MKT Only Order rather than Arca
Only Order. The Exchange proposes that Rule 67--Equities (Tick Size
Pilot Plan) would not be applicable to trading on the Pillar trading
platform.
Rule 12E
    The Exchange proposes to amend Rule 12E to delete the term
``Reserved,'' re-name it ``Arbitration,'' and establish the Exchange's
arbitration procedures. The proposed rule text is based on current Rule
600--Equities, with a non-substantive change to use the term ``ETP
Holder'' instead of ``member organization.'' The Exchange proposes to
move this rule text to Rule 12E so that it has the same rule number as
the arbitration rules of NYSE Arca Equities. The Exchange further
proposes that Rule 600--Equities would not be applicable to trading on
the Pillar trading platform.
Rule 13E
    The Exchange proposes to amend Rule 13E to delete the term
``Reserved'' and re-name it ``Liability of Directors and Exchange.''
     Proposed Rule 13.2E (Liability of the Exchange) would
establish requirements governing liability of the Exchange, including
the limits on liability for specified circumstances. This proposed rule
is based on Rule 905NY, which governs liability of the Exchange for its
options market, and NYSE Arca Equities Rule 13.2 without any
substantive differences. Because this rule would govern liability of
the Exchange, the Exchange proposes that Rule 18--Equities would not be
applicable to trading on the Pillar trading platform.
     Proposed Rule 13.3E (Legal Proceedings Against Directors,
Officers, Employees, or Agents) would establish requirements relating
to legal proceedings against directors, officers, employees, agents, or
other officials of the Exchange. The proposed rule is based on NYSE
Arca Equities Rule 13.3 without any substantive differences.
     Proposed Rule 13.4E (Exchange's Costs of Defending Legal
Proceedings) would establish the circumstances regarding who is
responsible for the Exchange's costs in defending a legal proceeding
brought against the Exchange. The proposed rule is based on NYSE Arca
Equities Rule 13.4 without any substantive differences and Rule 61,
which governs the Exchange's costs of defending legal proceedings for
its options market. The Exchange proposes that Rule 25--Equities
(Exchange Liability for Legal Costs) would not be applicable to trading
on the Pillar trading platform.
Proposed Amendments to the Exchange's Off-Hours Trading Facility
    After the Exchange transitions to the Pillar trading platform, the
Exchange proposes to maintain certain functionality in its Off-Hours
Trading Facility, which is currently described in Rules 900--Equities
through 907--Equities (the ``Rule 900 Series''). Specifically, once
trading begins on its Pillar trading platform, the Exchange proposes
that the only function that would be available on its Off-Hours Trading
Facility would be for ETP Holders to enter aggregate-price coupled
orders.
    The Exchange proposes that new Rule 7.39E would describe this Off-
Hours Trading Facility functionality,\29\ and that the entirety of the
Rule 900 Series would not be applicable to trading on the Pillar
trading platform.
---------------------------------------------------------------------------

    \29\ NYSE Arca Equities Rule 7.39 addresses the adjustment of
open orders, e.g., orders with a good until canceled time-in-force
instruction, due to corporate actions. Because the Exchange does not
propose to have any open orders when trading on the Pillar trading
platform, the Exchange will not adopt rule text based on NYSE Arca
Equities Rule 7.39.
---------------------------------------------------------------------------

     Proposed Rule 7.39E(a) would provide that Rule 7.39E would
apply to all Exchange contracts made on the Exchange through its ``Off-
Hours Trading Facility.'' This proposed rule text is based on the first
sentence of Rule 900(a)--Equities. The Exchange would not include rule
text specified in the second sentence of Rule 900(a)--Equities and text
from Rule 900(b)--Equities through Rule 900(d)--Equities because it
would not apply to the Off-Hours Trading Facility once trading begins
on the Pillar trading platform.
     Proposed Rule 7.39E(b) would establish the definitions for
the Off-Hours Trading Facility. Proposed Rule 7.39E(b)(i) would define
the term ``Aggregate-Price Coupled Order'' to mean an order to buy or
sell a group of securities, which group includes no fewer than 15
Exchange-listed or traded securities having a total market value of $1
million or more. This proposed definition is based on the definition of
``aggregate-price order'' in Rule 900(e)(i)--Equities with a non-
substantive difference to use the term ``Aggregate-Price Coupled
Order'' rather than ``aggregate-price order.'' Proposed Rule
7.39E(e)(b)(ii) would define the term ``Off-Hours Trading Facility,''
to mean the Exchange facility that permits ETP Holders to effect
securities transactions on the Exchange under proposed Rule 7.39E and
is based on Rule 900(e)(v)--Equities with a non-substantive difference
to use the term ``ETP Holder'' instead of ``member or member
organization.'' Proposed Rule 7.39E(b)(ii) would also define the term
``Off-Hours Trading'' to mean trading through the Off-Hours Trading
Facility. This text is based on the second sentence of Rule 900(e)(v)--
Equities. Because the Exchange would only be trading Aggregate-Price
Coupled Orders in the Off-Hours Trading Facility, the Exchange proposes
that Rule 7.39E(b) would not include definitions for ``closing price,''
``closing-price order,'' or ``guaranteed price coupled order,'' which
are defined in Rule 900(e)(ii)-(iv)--Equities.
     Proposed Rule 7.39E(c) would establish that only such NMS
Stocks, as the Exchange may specify, including Exchange-listed
securities and UTP Securities, would be eligible to trade in the Off-
Hours Trading Facility. This proposed rule text is based on Rule 901--
Equities with non-substantive differences to use Pillar terminology to
describe which securities would be eligible to trade in the Off-Hours
Trading Facility. The Exchange would not include rule text from
Supplementary Material .10 of Rule 902, which provides that only the
orders described in Rule 902 are eligible for Off-Hours Trading because
it is redundant of proposed Rule 7.39E(c).
     Proposed Rule 7.39E(d) would establish the procedures for
entering

Aggregate-Price Coupled Orders into the Off-Hours Trading Facility. As
proposed, an ETP Holder may only enter into the Off-Hours Trading
Facility an Aggregate-Price Coupled Order to buy (sell) that is matched
with an Aggregate-Price Coupled Order to sell (buy) the same quantities
of the same securities, including in odd lot and mixed lot quantities.
This proposed rule text is based on Rule 902(a)(iii)--Equities and Rule
902(g)--Equities with non-substantive differences to combine the two
sections into a single section of rule text. The Exchange would not
include rule text from Rule 902(a)(ii) because this specifies a Floor-
based method to enter a coupled-order after the close and therefore
would not be necessary on the Exchange's proposed Pillar trading
system.
     Proposed Rule 7.39E(d)(i) would provide that transactions
effected through the Off-Hours Trading Facility pursuant to Aggregate-
Price Coupled Orders may be for delivery at such time as the parties
entering the orders may agree. This proposed rule text is based on the
first sentence of Rule 902(c)--Equities. The Exchange would not include
the second sentence of Rule 902(c)--Equities in proposed Rule
7.39E(d)(i) because all orders in the Off-Hours Trading Facility would
be Aggregate-Price Coupled Orders and thus subject to proposed Rule
7.39E(d)(i).
     Proposed Rule 7.39E(d)(ii) would provide that ETP Holders
would mark all sell orders as ``long'' as appropriate. This proposed
rule text is based on Rule 902(f)--Equities with a non-substantive
difference to use the term ``ETP Holder'' instead of ``members and
member organizations.''
     Proposed Rule 7.39E(d)(iii) would provide that each side
of an Aggregate-Price Coupled Order entered on a matched basis would be
traded on entry against the other side without regard to the priority
of other orders entered into the Off-Hours Trading Facility. This
proposed rule text is based on Rule 903(b)--Equities and 903(d)(i) with
non-substantive differences to combine those rules into a single sub-
section, use Pillar terminology, and use the term ``matched'' instead
of ``coupled.''
     Proposed Rule 7.39E(d)(iv) would provide that a
transaction described in this Rule would be an Exchange contract that
is binding in all respects and without limit on the ETP Holder that
enters any of the transaction's component orders and that the ETP
Holder would be fully responsible for the Exchange contract. This
proposed rule text is based on Rule 903(c)--Equities with non-
substantive differences to use the term ``ETP Holder'' instead of
``member or member organization.''
     Proposed Rule 7.39E(e) would provide that each ETP Holder
would report to the Exchange such information, in such manner, and at
such times, as the Exchange may from time to time prescribe in respect
of Off-Hours Trading, including, but not limited to, reports relating
to Off-Hours Trading orders, proprietary or agency activity and
activity in related instruments. This proposed rule text is based on
Rule 905(a)--Equities with a non-substantive difference to use the term
``ETP Holder'' instead of ``member or member organization.''
     Proposed Rule 7.39E(f) would provide that each ETP Holder
would maintain and preserve such records, in such manner, and for such
period of time, as the Exchange may from time to time prescribe in
respect of Off-Hours Trading, including, records relating to orders,
cancellations, executions and trading volume, proprietary trading
activity, activity in related instruments and securities and other
records necessary to allow the ETP Holder to comply with the reporting
provisions of proposed paragraph (e) of Rule 7.39E. This proposed rule
text is based on rule 905(b)--Equities with non-substantive differences
to use the term ``ETP Holder'' instead of ``member or member
organization,'' and to eliminate the ``but not limited to'' text.
     Proposed Rule 7.39E(g) would provide that notwithstanding
a trading halt in any security (other than a trading halt pursuant to
Rule 7.12E (Trading Halts Due to Extraordinary Market Volatility)) or a
corporate development, ETP Holders may enter Aggregate-Price Coupled
Orders into the Off-Hours Trading Facility under this Rule. This
proposed rule text is based on Supplementary Material .10 to Rule 906--
Equities with non-substantive differences to cross-reference Rule 7.12E
instead of Rule 80B and to use the term ``ETP Holders'' instead of
``members and member organizations.''
    In addition to the provisions of the Rule 900 Series noted above,
the Exchange would not include rule text from Rule 903(d)(ii)--Equities
and Rule 906(b)--Equities in proposed Rule 7.39E because these
provisions relate to Floor-based use of the Off-Hours Trading Facility,
which would not be available on the proposed Pillar trading platform.
In addition, the Exchange proposes that Rule 7.39E would not include
any provisions from Rule 907, which describes now-obsolete crossing
session functionality.
Current Rules That Would Not Be Applicable to Pillar
    As described in more detail above, in connection with the proposed
rules to support cash equities trading on the Pillar trading platform,
the Exchange has identified current Exchange rules that would not be
applicable because they would be superseded by a proposed rule. The
Exchange has identified additional current rules that would not be
applicable to trading on Pillar. These rules do not have a counterpart
in the proposed Pillar rules, described above, but would be obsolete on
the new, fully-automated trading platform.
    The main category of rules that would not be applicable to trading
on the Pillar trading platform are those that are specific to Floor-
based trading, including requirements relating to DMMs and Floor
brokers. For this reason, the Exchange proposes that the following
Floor-specific rules would not be applicable to trading on the Pillar
trading platform:
     Paragraphs (a), (i), and (j) of Rule 2--Equities
(``Member,'' ``Membership,'' and ``Member Firm,'' etc.) (defining terms
relating to Floor-based trading, i.e., member, DMM, and DMM unit).
     Rule 6--Equities (Floor).
     Rule 6A--Equities (Trading Floor).
     Rule 35--Equities (Floor Employees to be Registered).
     Rule 36--Equities (Communications Between Exchange and
Members' Offices).
     Rule 37--Equities (Visitors).
     Rule 46--Equities (Floor Officials--Appointments).
     Rule 46A--Equities (Executive Floor Governors).
     Rule 47--Equities (Floor Officials--Unusual Situations).
     Rule 52--Equities (Dealings on the Exchange--Hours).
     Rule 53--Equities (Dealings on Floor--Securities).
     Rule 54--Equities (Dealings on Floor--Persons).
     Rule 70--Equities (Execution of Floor broker interest).
     Rule 74--Equities (Publicity of Bids and Offers).
     Rule 75--Equities (Disputes as to Bids and Offers).
     Rule 76--Equities (`Crossing' Orders).
     Rule 77--Equities (Prohibited Dealings and Activities).
     Rule 79A--Equities (Miscellaneous Requirements on Stock
Market Procedures).
     Rule 90--Equities (Dealings by Members on the Exchange).
     Rule 91--Equities (Taking or Supplying Securities Named in
Order).

     Rule 95--Equities (Discretionary Transactions).
     Rule 103A--Equities (Member Education).
     Rule 106A--Equities (Taking Book or Order of Another
Member).
     Rule 108--Equities (Limitation on Members' Bids and
Offers).
     Rule 112--Equities (Orders Initiated `Off the Floor').
     Rule 116--Equities (`Stop' Constitutes Guarantee).
     Rule 117--Equities (Orders of Members To Be in Writing).
     Rule 121--Equities (Records of DMM Units).
     Rule 122--Equities (Orders with More than One Broker).
     Rule 123--Equities (Record of Orders).
     Rule 123A--Equities (Miscellaneous Requirements).
     Rule 123B--Equities (Exchange Automated Order Routing
System).
     Rule 126--Equities (Odd-Lot Dealers General).
     Rule 127--Equities (Block Crossed Outside the Prevailing
Exchange Quotation).
     Rule 128B--Equities (Publication of Changes, Corrections,
Cancellations or Omissions and Verifications of Transactions).
     Rule 131--Equities (Comparison--Requirements for Reporting
Trades and Providing Facilities).
     Rule 301--Equities (Qualifications for Membership).
     Rule 303--Equities (Limitation on Access to Floor).
     Rule 304A--Equities (Member Examination Requirements).
     Rule 440I--Equities (Records of Compensation
Arrangements--Floor Brokerage).
     Rule 1000(d)-(g)--Equities (Capital Commitment Schedule).
    In addition, the Exchange proposes that the following rules would
not be applicable to trading on the Pillar platform.
     Rule 11--Equities (Effect of Definitions) because Rule
1.1E supersedes any description of definitions.
     Rule 23--Equities (New York local time) because all
references to times in the proposed Pillar trading platform rules refer
to ``Eastern Time.''
     Rule 24--Equities (Change in Procedure to Conform to
Changes Hours of Trading) because proposed Rule 7.1E would specify the
hours of the Exchange.
     Rule 86--Equities (NYSE MKT Bonds) because the Exchange
would not trade bonds on the Pillar trading platform.
     Rule 107B--Equities (Supplemental Liquidity Providers)
because the Exchange would not support the Supplemental Liquidity
Provider program on its proposed Pillar trading platform.
     Rule 119--Equities (Change in Basis from ``And Interest''
to ``Flat'') because the Exchange would not trade bonds on its proposed
Pillar trading platform.
     Rule 131A--Equities (A Member Organization Shall Use Its
Own Mnemonic When Entering Orders) because the Exchange would use MPIDs
rather than mnemonics on its proposed Pillar trading platform.
Proposed Deletion of Rules Designated ``Reserved''
    To simplify the Exchange's rules, the Exchange proposes to delete
Equities rules that are currently designated ``Reserved.'' \30\ The
Exchange believes it would reduce confusion and promote transparency to
delete references to rules that do not have any substantive content.
The Exchange further believes that because it is transitioning to a new
rule numbering framework, maintaining these rules on a reserved basis
is no longer necessary.
---------------------------------------------------------------------------

    \30\ See Rules 16--Equities; 20--Equities; 21--Equities
(Disqualification of Directors on Listing of Securities); Rule 26--
Equities (Disqualification of Directors on Listing of Securities);
Rule 29--Equities--Rule 34--Equities; Rule 38--Equities--Rule 44--
Equities; Rule 45--Equities (Equities); Rule 50--Equities; Rule 57--
Equities--Rule 59--Equities; Rule 60A--Equities; Rule 65--Equities;
Rule 69--Equities; Rule 92--Equities; Rule 106--Equities; Rule 107--
Equities; Rule 109--Equities--Rule 111--Equities; Rule 115--
Equities; Rule 118--Equities; Rule 123G--Equities; Rule 124--
Equities; Rule 132A--Equities; Rule 132B--Equities; Rule 132C--
Equities; Rule 305--Equities--307--Equities; Rule 309--Equities;
Rules 314--Equities--318--Equities; Rule 319--Equities; Rule 322--
Equities; Rules 323--Equities--324--Equities; Rule 325--Equities;
Rule 326(a)--Equities; Rule 326(b)--Equities; Rule 326(c)--Equities;
Rule 326(d)--Equities; Rule 327--Equities; Rule 328--Equities; Rule
329--Equities; Rule 343--Equities; Rule 440A--Equities; and Rule
1003--Equities.
---------------------------------------------------------------------------

Section 11(a) of the Act
    Section 11(a)(l) of the Act \31\ (``Section 11(a)(1)'') prohibits a
member of a national securities exchange from effecting transactions on
that exchange for its own account, the account of an associated person,
or an account over which it or its associated person exercises
investment discretion (collectively, ``covered accounts'') unless an
exception to the prohibition applies. Rule 11a2-2(T) under the Act
(``Rule 11a2-2(T)''),\32\ known as the ``effect versus execute'' rule,
provides exchange members with an exemption from the Section 11(a)(l)
prohibition. Rule 11a2-2(T) permits an exchange member, subject to
certain conditions, to effect transactions for covered accounts by
arranging for an unaffiliated member to execute the transactions on the
exchange. To comply with Rule 11a2-2(T)'s conditions, a member: (i)
Must transmit the order from off the exchange floor; (ii) may not
participate in the execution of the transaction once it has been
transmitted to the member performing the execution (although the member
may participate in clearing and settling the transaction); (iii) may
not be affiliated with the executing member; and (iv) with respect to
an account over which the member or its associated person has
investment discretion, neither the member nor its associated person may
retain any compensation in connection with effecting the transaction
except as provided in the Rule.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78k(a)(1).
    \32\ 17 CFR 240.11a2-2(T).
---------------------------------------------------------------------------

    With the proposed transition of the Exchange to a fully automated
electronic trading model that does not have a trading floor, the
Exchange believes that the policy concerns Congress sought to address
in Section 11(a)(1), i.e., the time and place advantage that members on
exchange trading floors have over non-members off the floor and the
general public--would not be present. Specifically, on the Pillar
trading system, buy and sell interest will be matching in a continuous,
automated fashion. Liquidity will be derived from quotes as well as
orders to buy and orders to sell submitted to the Exchange
electronically by ETP Holders from remote locations. The Exchange
further believes that ETP Holders entering orders into the Exchange's
Pillar trading system will satisfy the requirements of Rule 11a2-2(T)
under the Act, which provides an exception to Section 11(a)'s general
prohibition on proprietary trading.
    The four conditions imposed by the ``effect versus execute'' rule
are designed to put members and non-members of an exchange on the same
footing, to the extent practicable, in light of the purpose of Section
11(a). For the reasons set forth below, the Exchange believes the
structure and characteristics of its proposed Pillar trading system do
not result in disparate treatment of members and non-members and places
them on the ``same footing'' as intended by Rule 11a2-2(T).
    1. Off-Floor Transmission. Rule 11a2-2(T) requires orders for a
covered account transaction to be transmitted from off the exchange
floor. The Commission has considered this and other requirements of the
rule in the context of automated trading and electronic order handling
facilities operated by various national securities

exchanges in a 1979 Release \33\ as well as more applications of Rule
11a2-2(T) in connection with the approval of the registrations of
national securities exchanges.\34\ In the context of these automated
trading systems, the Commission has found that the off-floor
transmission requirement is met if an order for a covered account is
transmitted from a remote location directly to an exchange's floor by
electronic means.\35\ Because the Exchange would not have a physical
trading floor once it transitions to the Pillar trading platform, and
like other all electronic exchanges, the Exchange's Pillar trading
system would receive orders from ETP Holders electronically through
remote terminals or computer-to-computer interfaces, the Exchange
therefore believes that its trading system satisfies the off-floor
transmission requirement.
---------------------------------------------------------------------------

    \33\ See Securities Exchange Act Release No. 15533 (January 29,
1979) (regarding the Amex Post Execution Reporting System, the Amex
Switching System, the lntermarket Trading System, the Multiple
Dealer Trading Facility of the Cincinnati Stock Exchange, the PCX's
Communications and Execution System (``COM EX''), and the Phlx's
Automated Communications and Execution System (``PACE'')) (``1979
Release'').
    \34\ Securities Exchange Act Release Nos. 53128 (January 13,
2006) 71 FR 3550 (January 23, 2006) (File No. 10-13 1) (order
approving Nasdaq Exchange registration); 58375 (August 18, 2008) 73
FR 49498 (August 21, 2008) (order approving BATS Exchange
registration); 61152 (December 10, 2009) 74 FR 66699 (December 16,
2009) (order approving C2 exchange registration); and 78101 (June
17, 2016), 81 FR 41142, 41164 (June 23, 2016) (order approving
Investors Exchange LLC registration).
    \35\ See, e.g., Securities Exchange Act Release Nos. 49068
(January 13, 2004), 69 FR 2775 (January 20, 2004) (order approving
the Boston Options Exchange as an options trading facility of the
Boston Stock Exchange); 44983 (October 25, 2001), 66 FR 55225
(November 1, 2001) (order approving Archipelago Exchange
(``ArcaEx'') as electronic trading facility of the Pacific Exchange
(``PCX'') (``Arca Ex Order'')); 29237 (May 24, 1991), 56 FR 24853
(May 31, 1991) (regarding NYSE's Off-Hours Trading Facility); 15533
(January 29, 1979); and 14563 (March 14, 1978), 43 FR 11542 (March
17, 1978) (regarding the NYSE's Designated Order Turnaround System
(``1978 Release'')).
---------------------------------------------------------------------------

    2. Non-Participation in Order Execution. The ``effect versus
execute'' rule further provides that neither the exchange member nor an
associated person of such member participate in the execution of its
order. This requirement was originally intended to prevent members from
using their own brokers on an exchange floor to influence or guide the
execution of their orders.\36\ The rule, however, does not preclude
members from cancelling or modifying orders, or from modifying
instructions for executing orders, after they have been transmitted,
provided such cancellations or modifications are transmitted from off
an exchange floor.\37\ In the 1979 Release discussing both the Pacific
Stock Exchange's COM EX system and the Philadelphia Stock Exchange's
PACE system, the Commission noted that a member relinquishes any
ability to influence or guide the execution of its order at the time
the order is transmitted into the systems, and although the execution
is automatic, the design of such systems ensures that members do not
possess any special or unique trading advantages in handling orders
after transmission to the systems.\38\ The Exchange's Pillar trading
system would at no time following the submission of an order allow an
ETP Holder or an associated person of such member to acquire control or
influence over the result or timing of an order's execution. The
execution of an ETP Holder's order would be determined solely by what
quotes and orders are present in the system at the time the member
submits the order and the order priority based on Exchange rules.
Therefore, the Exchange believes the non-participation requirement
would be met through the submission and execution of orders in the
Exchange's Pillar trading system.
---------------------------------------------------------------------------

    \36\ Id. 1978 Release, supra note 35.
    \37\ Id.
    \38\ 1979 Release, supra, note 33.
---------------------------------------------------------------------------

    3. Execution Through an Unaffiliated Member. Although Rule 11a2-
2(T) contemplates having an order executed by an exchange member,
unaffiliated with the member initiating the order, the Commission has
recognized the requirement is satisfied where automated exchange
facilities are used as long as the design of these systems ensures that
members do not possess any special or unique trading advantages in
handling their orders after transmitting them to the exchange. In the
1979 Release, the Commission noted that while there is not an
independent executing exchange member, the execution of an order is
automatic once it has been transmitted into the systems. Because the
design of these systems ensures that members do not possess any special
or unique trading advantages in handling their orders after
transmitting them to the exchange, the Commission has stated that
executions obtained through these systems satisfy the independent
execution requirement of Rule 11a2-2(T). Because the design of the
Exchange's Pillar trading system ensures that no ETP Holder has any
special or unique trading advantages over nonmembers in the handling of
its orders after transmitting its orders to the Exchange, the Exchange
believes that its Pillar trading system would satisfy this requirement.
    4. Non-Retention of Compensation for Discretionary Accounts.
Finally, Rule 11a2-2(T) states, in the case of a transaction effected
for the account for which the initiating member or its associated
person exercises investment discretion, in general, the member or its
associated person may not retain compensation for effecting the
transaction, unless the person authorized to transact business for the
account has expressly provided otherwise by written contract referring
to both Section 11(a) of the Exchange Act and Rule 11a2-2(T). The
Exchange will advise its membership through the issuance of a
Regulatory Bulletin that those ETP Holders trading for covered accounts
over which they exercise investment discretion must comply with this
condition in order to rely on the exemption in Rule 11a2-2(T) from the
prohibition in Section 11(a) of the Exchange Act.
    In conclusion, The Exchange believes that its Pillar trading system
would satisfy the four requirements of Rule 11a2-2(T) as well as the
general policy objectives of Section 11(a). The Exchange's proposed
Pillar trading system would place all users, members and non-members,
on the ``same footing'' with respect to transactions on the Exchange
for covered accounts as intended by Rule 11a2-2(T). As such, no
Exchange ETP Holder would be able to engage in proprietary trading in a
manner inconsistent with Section 11(a).
* * * * *
    As discussed above, because of the technology changes associated
with the migration to the Pillar trading platform, the Exchange will
announce by Trader Update when rules with an ``E'' modifier will become
operative.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\39\ in general, and
furthers the objectives of Section 6(b)(5),\40\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, to protect investors and the public interest. The Exchange
believes that the proposed rules to support Pillar on the Exchange
would remove

impediments to and perfect the mechanism of a free and open market
because they provide for a complete set of rules to support the
Exchange's transition to a fully automated cash equities trading model
on the Pillar trading platform.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b).
    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Generally, the Exchange believes that the proposed rules would
support the Exchange's transition to a fully automated cash equities
trading market with a price-time priority model because they are based
on the rules of its affiliated market, NYSE Arca Equities. The proposed
rule change would therefore remove impediments to and perfect the
mechanism of a free and open market and a national market system
because they are based on the approved rules of another exchange.
    More specifically, the Exchange believes that the proposed
definitions for Rule 1.1E would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed definitions are terms that would be used in the
additional rules proposed by the Exchange. The Exchange also believes
that proposed Rule 2E would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because it would specify the requirements to obtain an ETP for trading
on the Exchange's Pillar trading platform. In addition, the proposed
rules governing employee registrations would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because they would ensure that employees of broker-dealers that
are members of both NYSE Arca Equities and the Exchange would be
subject to the same registration requirements. The proposed rule change
would therefore also promote just and equitable principles of trade by
requiring the same registration requirements for the same type of
trading on affiliated exchanges.
    The Exchange believes that proposed Rule 3E would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would move existing rules to new
rule numbering that aligns with the Framework Filing rule numbering.
The proposed rule change would therefore promote consistency among the
Exchange and its affiliates and make its rules easier to navigate for
the public, the Commission, and members.
    The Exchange believes that proposed Rule 6E is designed to prevent
fraudulent and manipulative acts and practices and to promote just and
equitable principles of trade because it would establish regulatory
requirements for its ETP Holders. Proposed Rule 6.3E is designed to
prevent fraudulent and manipulative acts and practices because it
addresses the potential misuse of material non-public information and
is based on NYSE Arca Equities Rule 6.3. The remaining rules proposed
for Rule 6E are based on existing Exchange rules and the Exchange
believes it would make its rules easier to navigate to move the text of
these rules to rule numbers consistent with the Framework Filing.
    The Exchange believes that proposed Rule 7E would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would establish rules that would
govern trading on the Exchange, including post-trade requirements, that
would establish the Exchange as a fully automated trading market with a
price-time priority trading model. The proposed rules are based on the
rules of NYSE Arca Equities, and include rules governing orders and
modifiers, ranking and display, execution and routing, trading
sessions, and auctions. The Exchange believes that the proposed
substantive difference that its proposed Early Trading Session would
begin at 7:00 a.m. Eastern Time, rather than 4:00 a.m. Eastern Time,
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because it would provide
transparency of the trading hours of the Exchange when it begins
trading on the Pillar trading platform.
    The Exchange believes that proposed Rule 7.39E, which would govern
the Off-Hours Trading Facility on the Exchange, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would use Framework Filing rule
numbering and Pillar terminology to describe the Off-Hours Trading
Facility that would continue to be available once the Exchange
transitions to Pillar. Proposed Rule 7.39E, which would offer ETP
Holders the ability to enter Aggregate-Price Coupled Orders, is based
on the Rule 900 Series.
    The Exchange believes that proposed Rule 12E would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would move an existing rule to new
rule numbering that aligns with the Framework Filing rule numbering.
The proposed rule change would therefore promote consistency among the
Exchange and its affiliates and make its rules easier to navigate for
the public, the Commission, and members.
    The Exchange believes that proposed Rule 13E would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would harmonize the Exchange's
rules governing liability for its equity market with Exchange rules
governing liability for its options markets, and the rules governing
liability on NYSE Arca Equities. The proposed rule change would
therefore promote consistency among the Exchange and its affiliates and
make its rules easier to navigate for the public, the Commission, and
members.
    The Exchange further believes that it would remove impediments to
and perfect the mechanism of a free and open market and a national
market system to specify which current rules would not be applicable to
trading on the Pillar trading platform. The Exchange believes that the
following legend, which would be added to existing rules, ``This rule
is not applicable to trading on the Pillar trading platform,'' would
promote transparency regarding which rules would govern trading on the
Exchange once it transitions to Pillar. The Exchange has proposed to
add this legend to rules that would be superseded by proposed rules or
rules that would not be applicable because they concern Floor-based
trading. The Exchange also believes that it would remove impediments to
and perfect the mechanism of a free and open market and a national
market system to delete rule numbers that are currently ``reserved''
because it would reduce confusion and promote transparency to delete
references to rules that do not have any substantive content. The
Exchange further believes that because it is transitioning to a new
rule numbering framework, maintaining these rules on a reserved basis
is no longer necessary.
    For reasons described above, the Exchange believes that the
proposal for the Exchange to operate on a fully automated trading
market without a Floor is consistent with Section 11(a) of the Act and
Rule 11a2-2(T) thereunder.
    Finally, the Exchange believes that proposed Rule 2.17E furthers
the objectives of Section 6(b)(4) of the Act,\41\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers, and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers, or dealers. Specifically, proposed Rule
2.17E does not establish a new fee. Rather, the proposed rule is

based on existing provisions of current Rule 440H--Equities relating to
Activity Assessment Fees without any substantive differences. The
Exchange proposes to move the rule text to Rule 2.17E to use rule
numbering for Pillar that is consistent with the Framework Filing, with
non-substantive differences to use Pillar terminology, and not move
obsolete rule text.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is
designed to propose rules to support the Exchange's new Pillar trading
platform, which would be a fully automated cash equities trading market
that trades all NMS Stocks and is based on the rules of NYSE Arca
Equities. The Exchange operates in a highly competitive environment in
which its unaffiliated exchange competitors operate multiple affiliated
exchanges that operate under common rules. By moving the Exchange to a
fully automated trading model that trades all NMS Stocks, the Exchange
believes that it will be able to compete on a more level playing field
with its exchange competitors that similarly trade all NMS Stocks on
fully automated trading models. In addition, by basing its rules on
those of NYSE Arca Equities, the Exchange will provide its members with
consistency across affiliated exchanges, thereby enabling the Exchange
to compete with unaffiliated exchange competitors that similarly
operate multiple exchanges on the same trading platforms.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

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

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2017-01. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2017-01 and should
be submitted on or before March 8, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02990 Filed 2-14-17; 8:45 am]
BILLING CODE 8011-01-P